The National Audit Office, in a report on the 15-year-old Public-Private-Partnership between government and environmental landscapes consortium limited (ELC) due to the unfavourable terms for the former, and contractual breaches.

“The MELP Monitoring Unit, Government’s monitoring arm within this Contract, is understaffed and cannot cope with the administrative and operational burdens associated with this material PPP.  As a result, monitoring is reactionary and Government’s enforcement is weak. In circumstances, Government’s position shifted from one where action could have been initialized to dissolve this PPP Agreement, to one where prolonged weak enforcement implied tacit consent”.

The Auditor General reported that the nearly 15-year-old Public-Private Partnership (PPP) between Government and Environmental Landscapes Consortium Limited (ELC) was in many ways instrumental in bringing about a positive change in the environmental landscape of the Maltese Islands. However, this performance audit noted various issues that questioned the Public Sector’s administrative capacity to negotiate, implement and monitor this contract to ensure a more balanced PPP.  Since the initiation of this Partnership in 2002, Government’s expenditure amounted to over €100 million.

Questions arise regarding the financial and economic considerations revolving around this PPP Agreement. Benchmarking exercises revealed that the contractual rates negotiated are not favourable to Government. Matters could have been exacerbated since neither the original 2002 Agreement nor the two subsequent Contract Extensions were awarded through competitive tendering. 

Despite these contract extensions, the PPP Agreement utilized broad and generic terms to define contractual deliverables. Such circumstances culminated in two disputes between the Parties being referred for arbitration. These contractual deficiencies caused administrative uncertainty and were not conducive to a stronger business relationship between the Parties.

Government did not always reap the full benefits in terms of sites serviced since the footprint capacity of landscaping maintenance as provided for by the Contract remained not fully utilised.  This ultimately led to Government incurring additional expenses as ELC, and to a lesser extent other suppliers, were awarded other contracts where the possibility existed for such works to be undertaken through this PPP Agreement.

To varying degrees, contract implementation was characterised by the Contractor’s non-adherence to contractual provisions. Contractual non-compliance included the Contractor’s failure in seeking authorization from the Malta Embellishment and Landscaping Project (MELP) Monitoring Unit prior to effecting changes in deliverables, as well as, the lack of insurance covering all landscaping operations and a bank guarantee intended to serve as a performance bond.  Furthermore, the PPP Agreement did not clearly specify applicable VAT exemptions on payroll costs. These circumstances highlight that contractual and monitoring mechanisms intended to ascertain that service delivery complies with contractual obligations were not fully operative.

This Report, in its entirety, may be accessed through the NAO website: www.nao.gov.mt, as well as on the NAO Facebook page www.facebook.com/NAOMalta.