Update from AD below: The National Audit Office (NAO) has completed an audit on 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, following a request by the Public Accounts Committee.

It said that this part of 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.

In a statement, it said that, “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 added that its “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,” stated that NAO.

It stressed that “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 NAO also highlighted the fact that 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, it said, “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,” said the NAO.

It went on to say that, “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,” the NAO said. “Of grave concern to the NAO was documentation submitted by the VGH as proof of access to finance.”

It pointed out that “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,” the NAO said.

Other notable shortcomings identified by the NAO related to the professional and technical elements of the bid by the VGH, it said.

“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,” said that NAO. “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 time-frames 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. The NSO said that, “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.”

The NAO said that, “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 said.

The NAO maintained 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.”

The NAO concluded by saying that, “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.”

The Report may be accessed by clicking here, or through the Office’s social media.

Update: Konrad Mizzi and Joseph Muscat should undergo a criminal investigation over the Vitals deal, says AD.

Following the publication of the NAO report on the Vitals deal, AD Chairperson Carmel Cacopardo said in a statement that, “the Auditor’s report on the Vitals public hospital concessions concludes very clearly that there was collusion between government and the company.”

He argued that, “it is clear that the concessions were knowingly and purposely designed such that public assets were milked by Vitals to make huge gains, a classic case of public loss and private gain.”

“It is also now more than obvious that PL star candidate and minister Konrad Mizzi was afforded a free rein to collude with and favour private companies at the expense of the Maltese government and the state,” he added.

Cacopardo stressed that, “the report strengthens the conclusion of many that Konrad Mizzi shamelessly entered politics to pursue his own private interests.”

He went on to say that, “Joseph Muscat and the Labour Party are guilty of gross negligence, because they failed to take timely action against Konrad Mizzi.”

“Both Konrad Mizzi and Joseph Muscat should immediately undergo a criminal investigation,” stated Ccopardo. “It’s already late.”

Photo by Anthony Zammit

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