SVP €274M CONTRACT

Falzon ‘convinced’ internal scrutiny will be carried out

Social solidarity Minister Michael Falzon said today he is convinced that “internal scrutiny” will be carried out into a highly irregular €274 million Saint Vincent de Paul contract.

The contract was given to a consortium formed by James Caterers Ltd and a subsidiary of the db Group in 2017, for the provision and servicing of 500 beds at the elderly care home.

The Auditor General has expressed doubt on whether the contract “secured value for money” and also found that no political authorisation to enter into a negotiated procedure with the consortium was requested from and provided by the Parliamentary Secretaries involved.

Falzon was responsible for the elderly sector until last year’s reshuffle, when care homes were transferred under the responsibility of Michael Farrugia. Both ministers have passed the buck when asked who will be shouldering the political responsibility.

Quizzed by journalists on Thursday, Falzon said, “the report is what it is. Like any other report it will be scrutinised internally.”

Falzon said he had not had “the luxury of analysing the report” before it was tabled in Parliament on Wednesday but said “the government will take any steps that are deemed necessary.”

Asked if the contract will be cancelled, Falzon said this was not his decision to make. The sector no longer falls under his portfolio and he was not involved in the entire process, he continued.

He said that that the project was very much needed since it had effectively doubled the bed space at Saint Vincent de Paul.

“Without it, the elderly situation would have exploded. I understand that the wellbeing of the elderly might not be the NAO’s main concern. This is an innovative concept, and we will see how it works. But I am convinced that an internal scrutiny will be carried out.”

Asked who will shoulder political responsibility, he said he can only speak on his own behalf.

“There was no political interference on my part. The report makes it clear that the mechanism that should have been used by the government was in fact used and there was no political interference.”

Asked to explain the fact that the deal never went up before the Cabinet, Falzon said he cannot answer on issues he was not involved in.

He insisted he is no longer responsible for the sector. Pressed on the matter, Falzon said: “as journalists who have access to the NAO report from beforehand, how is possible that you do not know who is responsible for a sector?” The National Audit Office has expressed doubt on whether a €247 million tender awarded to a consortium to manage four blocks at Saint Vincent de Paul secured value for money.

The NAO also found that no political authorisation to enter into a negotiated procedure with the consortium was requested from and provided by the Parliamentary Secretaries involved.

The report, tabled in Parliament on Wednesday, looked into the tender awarded in 2017 to the JCL (James Caterers Limited) and MHC (Malta Healthcare Company, a subsidiary of db Group) Consortium for a 500bed extension at the Luqa nursing home. The contract was awarded following a negotiated procedure.

The construction of these blocks was linked to an additional investment valued at €29 million that the consortium was to provide, at no cost to SVP, in relation to a separate tender for comprehensive services, that also comprised the provision of catering and the construction of a kitchen. The contract relating to the tender, also entered into on 14 November 2017, was valued at €57,000,000.

‘Fallacious’ concept

In its report, the NAO said it noted irregularities in its review of this procurement process, most serious of which are those relating to the concept of an additional investment, the legal basis of the negotiated procedure, the absence of authorisation and concerns on failure to secure value for money.

“The NAO was unable to determine how the additional investment component originated, notwithstanding that this was an innovative requirement of the call for tenders for comprehensive services. This Office has reservations as to why no parameters that were to guide potential tenderers formulate the additional investment were set. This concern assumes greater relevance given the disproportionate weighting that this was assigned in the evaluation criteria.”

“The concept of an additional investment at no cost to the contracting authority, as applied in this case, is fallacious, for in a transaction of significant value with commercial interests, nothing is ever secured for free,” the NAO said.

“Bidders could recover the additional investment by factoring this cost into the pricing for the provision of meals or through other related agreements.”

‘Urgency’ claim not justified

The office also said that the basis cited as justification authorising the negotiated procedure was in breach of legislative provisions, “thereby possibly leading to the invalidity of the procurement undertaken.”

Authorisation was sought by the SVP, endorsed by the Ministry for the Family and Social Solidarity (MFSS) and granted by the Department of Contracts (DoC) on the basis that competition was absent for technical reasons and for reasons of extreme urgency.

But the NAO said there existed no technical reasons that precluded competition since the management of these blocks could have been undertaken by other operators.

“Notwithstanding reference to urgency, this was not justified as the blocks were to be under construction for at least 18 months, during which the SVP could procure these services through an open procedure.”

No political authorisation

Conspicuously absent was any political authorisation endorsing Government’s commitment to a project of over €274,000,000 and entered into directly with the JCL and MHC Consortium.

The agreement for the management of the additional blocks was not brought to the attention of Cabinet despite its materiality and the project’s national importance.

The NAO concluded that no political authorisation to enter into a negotiated procedure with the Consortium was requested from and provided by the Parliamentary Secretaries involved.

“Considering the extent of the project, its materiality, its significance due to the increase in capacity of existing facilities, and that negotiations had been underway for several months, the NAO deems incredulous how this project did not draw the attention of the Parliamentary Secretaries responsible for the SVP.”

Even if the project was not referred to the Parliamentary Secretaries for their authorisation, their failure to enquire as to the regularity of this procurement is in clear breach of their duty arising from the political post held, it said.

Value for money?

Of concern to the NAO is that the MFSS, the SVP and the DoC pursued the offer by the JCL and MHC Consortium and assigned it the management of the new blocks without adequate consideration.

The Consortium offered a discount on costs incurred by the SVP determined through an independent analysis.

“This Office maintains that this should have been determined prior to any decisions made, rather than when the decision to assign the management to the Consortium had been taken. No analysis as to what Government was charged for highly dependent residents in other care homes was undertaken. The rate charged by these homes was significantly lower than that of the Consortium, €99.17 daily per resident per occupied bed. The average daily rate that Government was paying private contractors for persons with a high dependency in 2016 was €51.06. In November 2020, that is, by the handover of the blocks, the rate charged by the Consortium was revised to €118.44, as against the average of €65.13 charged under the Buying of Beds Scheme. This difference raises doubt whether value for money was secured.”