TM refuses to answer on harbour ferry concession extension, citing contract review
Transport Malta has refused to answer questions about the controversial three-year extension given to a harbour ferry operator, citing the fact that the contract is currently under review.
Government recently gave an extension to Marsamxetto Steamferry Services Limited after the company, a joint venture between the Zammit Tabonas and the Bianchi Group, filed a claim for compensation.
The company claimed that it did not manage to recoup the investment it made when it was awarded the original concession in 2012 due to Transport Malta’s failure to build the required infrastructure and a court case that had been launched by water taxi operators. It also recently cited the Covid-19 pandemic as another factor for loss of business.
The extension, however, is only effective once passenger numbers return to pre-Covid figures and the company has been given the right to reduce the frequency of trips due to decreased demand.
The Malta Independent on Sunday reached out to the respective authorities to find out why the concession was extended without a public call and why the private company was being given special conditions.
Transport Malta said that “since the matter is currently under review by the Public Contracts Review Board (PCRB), the Authority is not in a position to reply to the matters raised”.
Challenge by competitor
The contract review was launched in light of a challenge filed by Supreme Travel, which had also been interested in providing harbour ferry services. The company is contending that the extension to the original concession is not valid in terms of law and should therefore be deemed ineffective. A decision of this sort will only give current operators an advantage over potential competitors, it argued.
Supreme Travel also said that it was not aware of the date of when the said extension was formalized and neither was it aware of the terms and conditions. In addition, nothing was ever published or made available for scrutiny.
It said government was bound to issue a new tender when the original eight-year concession expired, but this never occurred.
Supreme Travel said that “when we spoke to Transport Malta to check when the tender will be issued, we were told that government decided to renew the contract to the same operators without issuing a tender”.
“This decision was based as compensation for the ongoing Covid-19 pandemic as the situation has led the business to suffer a great loss. However, one would argue that all companies in the sector are feeling the negative effects of the Covid-19 pandemic, so why give special conditions to this particular company?”
Supreme Travel also said that as “compensation” the start of the three-year extension will only occur once passenger numbers return to pre-Covid figures.
Since it will be the company that decides when pre-Covid figures are reached, the extension will likely go beyond the three years, having no set timeframe, it said.
Supreme Travel claimed that it is not right that government decided to extend the public concession without considering other operators.
When looking at the total number of passengers carried by Marsamxetto Steamferry Services Ltd, figures show that in both 2018 and 2019 the operator saw close to 1.5 million passengers per year. However, in 2020, the operator suffered a great loss as these figures drastically decreased to 406,783 passengers.
Extension ‘justified’, Marsamxetto says
Marsamxetto’s lawyers, however, have said that Supreme’s arguments are “unfounded in fact and in law.”
“The Contracting Authority had clear and justifiable reasons to request that Marsamxetto keeps providing scheduled ferry services during a Covid pandemic and enters into an addendum settling a hefty claim through a reasonable extension of the existing term. The Authority has therefore acted in the best interests of the general public as it is bound to do,” they argued.
From the letter and documents submitted in reply, it emerged that Marsamxetto had first asked for the extension in 2017. It had stated, in a letter written to then Transport Malta CEO James Piscopo, that the service suffered losses due to various issues including the fact that TM had failed to build four landing places, as stipulated in the original concession. As such, trips had to be cancelled during bad weather.
The company had initially asked for an extension of 15 years. This, it said “would be justified on the basis of the losses suffered and that such extension is necessary for the operator to recoup investments planned to perform its obligations”.
In return for such an extension, the operator proposed that it would invest €5m in marine related operations including a brand-new additional vessel on the Sliema side, two or three electric vans that will be used to connect the Three Cities route to the Sliema route and the installation of a lift on the Marsamxetto side.
Company had asked for 15-year extension
This proposal for an extension was then updated in October 2019 since by that time the Authority had started the necessary infrastructure for the installation of the landing places. The extension was later granted in March 2020 by Transport Malta, for another three years.
In reply to a parliamentary question posed by PN spokesperson Mario Galea, Infrastructure Minister Ian Borg had confirmed the signing of the addendum and explained the Contracting
Authority’s rationale behind the agreement.
Minister Borg explained that by means of the contract with Marsamxetto Steamferry Services, the Authority had undertaken to honour obligations including building a number of landing places as set out in the said service contract. Since the Authority did not honour their obligations in a timely manner, the Authority had decided to extend the contract to avoid the claim for damages. The request had been approved by Cabinet, Borg said.