The National Audit Office (NAO) has said that it was requested by the Public Accounts Committee to audit the concession awarded by the government to Vitals Global Healthcare Ltd (VGH) in relation to the Gozo General Hospital, Saint Luke’s Hospital, and Karin Grech Rehabilitation Hospital.
The first part of this audit, issued in July 2020, focused on the procurement process leading to the award of the concession to the VGH.
This part of the Office’s audit focuses on the negotiations leading to entry into the concession contracts, a review of this contractual framework and its implementation until the transfer to Steward Health Care. The third part, yet to be published, addresses the transfer to Steward Health Care.
The NAO said that ”concerns arise on the negotiation process between the government and the VGH, which process remained opaquely concealed to the NAO due to the lack of documentation kept and conflicting accounts provided by those involved.’
It noted that ”the lack of visibility provided further cause for concern on consideration of the deviations or inclusions in the contracts that changed the concession’s scope altered the risk level retained by either party or bore impact on the level of operational and financial feasibility, as well as the profitability of the project when compared with the Request for Proposals (RfP).”
The Office stated that graver still was the government representatives’ failure to consult with critical stakeholders. This resulted in the concession failing to meet its objectives, be it the health infrastructure improvements and the classification of the concession as off-balance sheet, with the VGH’s capital expenditure on the project registered on the government’s accounts.”
According to the findings of the Audit, ”the dichotomy characterising this project, with the Energy Division within the Ministry for Energy and Health overseeing the capital investment and the Health division within the same Ministry tasked with operational management, created ideal grounds for the VGH to capitalise on the government’s weaknesses.”
”This allowed for the concession to remain unimplementable,” it said, ”an insurmountable challenge and irreparable situation for the government to manage, whose administrative and political weaknesses were readily exploited by the VGH.”
The Office went on to say that ”none of the major concession milestones were achieved when the concession was under the VGH’s control. The VGH’s inability to secure financing was the crucial shortcoming on which rested all subsequent failures registered in this concession by the government.”
All the VGH’s commitments regarding the envisaged improvements to infrastructure and services were ”rendered unattainable in view of this failure,” it said.
The Office also stated that, ”the government’s acquiescence to the evident inadequacies of the VGH reflected ineffectiveness, mirroring the VGH’s failure to deliver on its commitments. Instead, the government’s representatives, while bypassing Cabinet, endorsed multiple waivers of the requirement to secure financing, thereby perpetuating the failure that this concession came to represent.”
”Significant concerns emerged in the NAO’s review of the contractual framework regulating the concession. In the Services Concession Agreement, critical departures between that originally stated in the RfP, that subsequently contracted and later amendments effected substantially altered the government’s control over the completion of the concession milestones.”
The Office also found that, ”the changes effected consistently favoured the VGH’s interests, with the government rendered powerless in holding the concessionaire accountable.”
Although the government established the health deliverables expected of the concession through the Health Services Delivery Agreement, ”these were quickly revised,” it said.
The NAO added that ”the visions were consistently adverse to the government, with a significant reduction in services without any change in the compensation due and an increase in the number of beds guaranteed for use by the government coupled with a corresponding increase in the amount payable.’
The Labour Supply Agreement stipulated that the government employees to be deployed with the VGH as leased resources were to continue benefiting from the same conditions of work as public officers and public servants.
However, of note to the NAO in its review of this agreement was ”the government’s ill-preparedness for this concession. Most glaring was the mismatch of resources allocated to the VGH by the government with the charge that was to be recovered. The discrepancy arising from this mismatch was borne through public funds.”
The NAO established that ”no valuation of the sites was undertaken by the government prior to their transfer through the Emphyteutical Deed. Concerns emerge on the mismatch between the 30-year concession period and the potential 99-year title granted over the sites and whether the government will realise the economic benefits envisaged through their continued use for medical tourism.”
The NAO said that it ”made several attempts to meet with Konrad Mizzi, which requests remained unaddressed. The gravity of this failure was rendered evident in the NAO’s report through the pivotal role played by Mizzi in this concession.”
”His failure to attend to the several requests made by the NAO was deemed a serious shortcoming in terms of the level of accountability expected of a former minister of government and in terms of the standard of good governance that ought to have characterised a project as material and as important to the national health services as was this,” the NAO said.
The full report and the abridged version may be accessed by visiting our website www.nao.gov.mt [1] or through the Office’s social media http://www.facebook.com/NAOMalta [2]
Photo by Anthony Zammit