A multi-million euro deal to transfer three State hospitals to an obscure private company was “predetermined”, the National Audit Office said.
MaltaToday reports that the NAO said government was reluctant to provide it with a copy of the pre-tender agreement, reinforcing concerns over the “integrity of the eventual concession”. The audit office was referred from one ministry to another when it asked for the pre-tender agreement, with none being able to trace the original or a copy. “This casts a dark shadow on the validity of the concession awarded by government, for in effect, all appears to have been predetermined to ensure an already agreed outcome,” the NAO said.
The Times of Malta said that Vitals Global Healthcare should have been disqualified from bidding for the takeover of three state hospitals, an investigation by the national auditor has found. It said VGH should have been barred because of “collusive behaviour” between the government and the company through a secret agreement made before the tender was even issued.
Newsbook reports that the NAO said hat the due diligence carried out by Government to verify matters relating to the VGH in its capacity and relationship to it as the preferred bidder to run three public hospitals was grossly inadequate.
The Malta Independent reports that significant failures were noted in developments leading to the issue of the RfP. The Health Division was not appropriately involved, with the Energy division driving the process in its stead. The Ministry for Finance was not consulted regarding the disbursement that was to result from the concession, while the authorisation of Cabinet was similarly not sought prior to the issuance of the RfP.
Reactions
Deputy PM and Health Minister Chris Fearne said he was kept in the dark on the deal reached by the government to transfer three public hospitals to Vitals. At the time, he said in a post on Facebook, he was parliamentary secretary for health, but he was never involved in the negotiations.
Fearne said that the NAO report is “worrying”. During the time frame covered by the report he said he was parliamentary secretary, with Konrad Mizzi as Health Minister. “I declare that I was absolutely not involved at all in any negotiations referred to by the NAO.”
Former Minister Konrad Mizzi has taken umbrage at government for not giving the National Audit Office access to an agreement Malta Enterprise signed with some of the Vitals investors. The Former Minister maintained he did nothing wrong when negotiating the privatisation of three public hospitals, despite a damning investigation report by the Auditor General.
Speaking in parliament shortly after the publication of the report, Opposition leader Adrian Delia asked whether the Prime Minister, Finance Minister, Health Minister or Mizzi would be reacting. Replying on behalf of the government, Labour whip Glenn Bedingfield said the report had just been tabled in the House and it was still being reviewed. Delia slammed the government over the report findings.
AD called for criminal investigation of Konrad Mizzi and Joseph Muscat over Vitals deal, with AD chairperson Carmel Cacopardo accusing Konrad Mizzi of ‘shamelessly entering politics to pursue his own private interests’.
The investigation was started at the request of the Medical Association of Malta and the UĦM Voice of the Workers, and the NAO’s report is the first out of a three that the office expects to publish as a result. But the unions emphasised that the first report alone has proven their concerns to be justified. It highlighted that the investigation found that the contract was the result of collusion, and that Vitals did not have the capability to fulfil the commitments it entered into. “This can be seen because no new hall – let alone a new hospital – has been opened, six years after works should have started and three years after they should have been completed,” the unions pointed out.
Consequently, the MAM and the UĦM argued, the government had no other option but to immediately rescind the contract. In doing so, it should also take up Steward’s employees, pay them a decent wage and “give them the peace of mind that they are still waiting for,” the unions said.
Full Statement: The National Audit Office (NAO) was requested by the Public Accounts Committee to audit the concession awarded by Government to Vitals Global Healthcare Ltd (VGH) in relation to the Gozo General Hospital, Saint Luke’s Hospital and Karin Grech Rehabilitation Hospital. The review focuses on the procurement process leading up to the award to the VGH, while the contracts entered into and the eventual transfer to Steward Health Care are addressed in parts 2 and 3, respectively, yet to be issued.
Drawing the Office’s immediate concern in this regard was the Agreement that parties representing Government reportedly entered into prior to the request for proposals (RfP) with a subset of the investors of the VGH. The overlap between this Agreement and the concession was clear and created major doubt and concern regarding the integrity of the eventual concession. The NAO’s concerns are heightened in light of Government’s reluctance to provide this Office with a copy of the Agreement. This Office is of the opinion that this Agreement provided grounds for the disqualification of the VGH from the RfP.
Significant failures were noted in developments leading to the issue of the RfP.
The Health Division within the Ministry for Energy and Health (MEH) was not appropriately involved, with the Energy division driving the process in its stead.
The Ministry for Finance was not consulted regarding the disbursement that was to result from the concession, while the authorisation of Cabinet was similarly not sought prior to the issuance of the RfP.
Of greater concern in terms of the governance of the process was that no ministerial authorisation was sought or provided in relation to this concession, resulting in the anomalous scenario where three public hospitals were conceded for operation by third parties without anyone actually assuming responsibility for this decision.
The feasibility assessment, which ought to have established the basis for Government’s decision to concede the hospitals was bereft of any form of independent analysis or critical thought. Furthermore, several shortcomings were noted in the design of the RfP, most significant of which was the subjectivity of the evaluation criteria and the term set for the concession, which should have been established based on analysis and not in the arbitrary manner that it was.
Although the bid submitted by VGH satisfied all the requirements set by Government, this Office is of the opinion that the bid was essentially robust in form but flawed in substance. Of grave concern to the NAO was documentation submitted by the VGH as proof of access to finance. A letter issued by the Bank of India sanctioning funding for the “Malta Healthcare Projects” and put forward by the VGH in respect of the bid was dated 13 March 2015, that is, well before the publication of the RfP on 27 March 2015. This Office deemed this document as definite evidence of the VGH’s prior knowledge of the planned project and proof of collusion with Government, or its representatives.
Other notable shortcomings identified by the NAO related to the professional and technical elements of the bid by the VGH. This Office noted that the business experience cited by the VGH was not attributable to it, but to the holding company Oxley Group or its strategic partners, or to partners that the VGH had involved in the project. Of note was that the experience cited for Oxley Group mainly related to real estate investment trusts and funds, asset management and financing.
Evident was that the timeframes committed by VGH for the redevelopment of the hospitals were overly ambitious and unrealistic. Similarly, overly ambitious were the projections made with respect to medical tourism, particularly when one considers that it was the revenue forecasted from this source that was to render the project feasible.
The bid by the VGH was assessed by the Evaluation Committee in terms of its commercial, technical and financial strength, and the degree to which it exceeded the minimum requirements specified in the RfP. In this Office’s opinion, the evaluation carried out was lacking in terms of critical analysis, with several parts of the evaluation report merely a restatement of the bid by the VGH. Furthermore, the NAO maintains that the marks assigned in relation to the technical and operational component of evaluation were not entirely merited. Concerns emerge in the Evaluation Committee’s assessment of the financial soundness of the VGH, its professional and technical qualifications and management experience, the key financial assumptions that underpinned the viability of the project and cost comparisons between rates proposed and actuals incurred by Government.
Although the shortcomings identified by the NAO in relation to the evaluation process remain, these must be acknowledged in terms of the broader and far more significant concerns relating to the integrity of the entire procurement process. The evidence indicating collusive action between the parties acting on behalf of Government with the investors of the VGH renders the entire process dubious, irrespective of whether the process was in adherence with procedural and regulatory requirements.
The NAO maintains that, beyond the assertion of compliance to administrative requirements and the determination of whether the technical criteria set out in the RfP were met and to what extent, it is reasonable to expect that the process of evaluation would include an element of due diligence on any bidder. This Office is of the opinion that the due diligence carried out by Government to verify matters relating to the VGH in its capacity and relationship to it as the preferred bidder to run three public hospitals was grossly inadequate.
Government of Malta / Malta Independent / Times of Malta / Newsbook / Maltatoday
