An Evaluation and Adjudication committee concluded in 2015 that the corporate structure of Vitals Global Healthcare was “well-suited” to take over the concession for Gozo General Hospital, Karin Grech Hospital, and St. Luke’s Hospital.

The conclusion is just one of the details to emerge from the Procurement Evaluation Report drafted by the committee in June 2015, where VGH were recommended as the preferred bidders for the 30-year concession.

It is a significant one given how VGH’s structure – it is a shell structure owned by another company which is in turn owned by a private equity fund based in Singapore and administered by another company with no real medical experience – has raised a multitude of questions since they won the concession and then unceremoniously departed just two years later, handing it over to Steward Heathcare.

The report was made public by Opposition Leader Adrian Delia on Saturday after it was submitted in court during a case Delia opened so to have the contract axed. He said that nothing was carried out as was proposed, with the people ending up paying millions of euros to Steward in exchange for nothing.

Nexia BT partner was on Evaluation Committee

The report shows that the Evaluation and Adjudication Committee was made up of three people.  Engineer James Camenzuli chaired the committee, while Robert Borg and Manuel Castagna were the other two members.

Castagna is of particular note – he is a partner at Nexia BT, the firm involved in the Panama Papers scandal having set up secret Panama accounts for former Minister Konrad Mizzi and former Prime Minister Joseph Muscat’s Chief of Staff Keith Schembri, accounts which the duo took control of in the same month this report was issued.

It is yet another major project where a member of Nexia BT sits on the Adjudication committee: Brian Tonna – who had set up the aforementioned companies – sat on the committee which granted the tender for the gas-fired power station to the Electrogas Consortium – one of the directors of which, Yorgen Fenech, currently stands accused of being the mastermind behind the murder of journalist Daphne Caruana Galizia.

The request for proposals was issued by Projects Malta, meaning that the board was formed by that entity.  The minister responsible for Projects Malta at the time was Konrad Mizzi.

Three bidders for concession: one proposed “tried and tested” alternative

The report shows that there were three bidders for the services concession for the “redevelopment, maintenance, management, and operation of the sites at St Luke’s Hospital, Karin Grech Rehabilitation Hospital, and Gozo General Hospital”, and that Charles Grixti was engaged as a technical consultant to assist in the technical evaluation of the bids.

These three companies were Vitals Global Healthcare, Image Hospitals, and BSP Investments Limited.

Image Hospitals failed both the eligibility and the technical requirements, with the board noting that the company did not submit a bid bond, did not include a business plan, did not include a version submitted in a computer readable format, and that some of the copies submitted were differently signed than the original.

The BSP Investment Limited bid meanwhile did not fit the requirements of the request for proposals either, but a covering letter which came with the bid acknowledged this and stated that the submission aimed to bring to the attention of Projects Malta “a tried and tested model which is different from what is currently being proposed”.

Exactly what that tried and tested model is is not included in the report, with the committee simply stating that it does not have the remit to examine alternative models to the one specified in the request for proposals and so had to deem the bid as technically non-compliant.

This left VGH as the only bidder, and the committee found itself satisfied with both the bid’s eligibility compliance and its technical compliance. 

What did VGH have in mind?

In its analysis on the technical compliance of the VGH bid, the committee shows the various ambitious plans that the company had for the three hospitals.

The committee noted that the plans are based on “the present inefficiencies” of healthcare in Malta and Gozo and how to improve it.

“The way the services in Gozo are being proposed aims to make the new facilities an independent healthcare service provider with a modern set-up and all the support services to run independently of Mater Dei Hospital”, the report reads.

Indeed, a Trauma Centre with a trained trauma team and modern ambulatory service, an ICU, a CCU, an air ambulance, a large hyperbaric chamber, along with all the facilities “of an acute hospital supported by the investigative services” – which includes CT scan, MRI scan, U/S scan, Interventional Radiography, Breast Imaging and Biopsy, PET scan, and BMD scan.

They also proposed to introduce a hospital management system that includes electronic medical records and HR modules, while also proposing that St. Luke’s Hospital would be based on rehabilitation, a trauma unit, three surgery theatres, and medical tourism.

 “The Evaluation and Adjudication Committee also noted that VGH are well-prepared to commence immediate execution of the project and have the required skill-sets and relationships with third parties who will assist in implement [sic] the project already in place”, the report reads.

The report reads that VGH would have invested a total of €179.2 million across the three hospitals: €122.8 million at Gozo General Hospital, €51.4 million at St. Luke’s Hospital, and €5 million at Karin Grech Hospital.

70% of the source of the funds - €125 million – is listed as being a bank loan, while another 23% - €41.5 million – is listed as coming from “equity injections”. A further €10 million would come from a helicopter finance lease, and the remaining €2.7 million would come from “operations”.

Committee gives bid 88/100 score, finds that corporate structure is “well-suited” to operation

The points for the bid were divided into four stages: 5 points were on offer for the general bidder information, 25 for technical and operational information, 35 for the business plan, and another 35 for the financials of the proposal.

The VGH bid was given a total score of 88 out of 100.

On the first stage – that of the general information of the bidder – the committee concluded that VGH’s “corporate structure is well-suited to an operation of this nature”, and found that its parent company had experience in “various sizeable projects”.  This was enough to give VGH the full 5 points on offer in this stage.

On the technical and operational side, the committee concluded – amongst other things – that “the bidder has shown operational experience in businesses that they invested in” and that “the operational experience can be identified by number of years they have been involved in any business they have invested in”.

They wrote that the CEO of the company – who was Armin Ernst at the time, now Steward Healthcare CEO – has “ample experience” which will lead to him being able to deliver and operate the project.

All in all, the bid garnered 21 points out of the 25 on offer for this stage.

VGH business plan indicated that it would reach net income in 2019

The committee described VGH’s financial plan as one which shows “profitability and sustainability throughout the 30 year concession period”.

They wrote that “based on the financial model, net income is foreseen to be generated from 2019 (4.5 years after initial operation) onwards, for which dividends, equivalent to the minimum of 90% profit after tax on total cash available for distribution are forecasted to be declared and paid.”

The income statement results for a 30 year period based on the financial model provided shows that the total income would have been that of €5.1 billion throughout that period, with a net contribution of €2.2 billion, an Earnings before interest, tax, depreciation and amortization (EBITDA) of €886 million, and a profit of €427.9 million which would turn into one of €23.9 million after tax and after appropriation of dividends.

Medical tourism was predicted to be 43% of the total income by the end of the concession period, up from 13% at the beginning.

VGH’s presented business plan, which also included marking on planned medical facilities and the proposal’s design concept and readiness to project – where the committee said that “the bidder has clearly indicated that the project will be delivered in time as per the request for proposals”, garnered 32 marks out of 35.

With 30 points out of 35 meanwhile, VGH’s bid did very well in the financial sector as well.

Here the committee noted that VGH planned to have paid its €125 million bank loan by July 2022, seven years after the July 2015 drawdown date.  The loan, the proposal states would be subject to 6% annual interest starting from January 2017.

UBS and RHB Bank in Singapore are both listed as having been interested in financing the loan.

Meanwhile the committee also verified VGH’s proof of funds, which were listed as $30 million held in the Bank of India in March 2015, and $56.6 million held in the account of Ambrish and Jyotsna Gupta at Merrill Lynch.

With the financial proposal, the committee also notes that the pricing per day for equivalent services is less than what the government is currently spending, and that the annual increase on government beds is not more than 3%.

With all of these points in mind, the Evaluation and Adjudication Committee recommended the granting of the preferred bidder status to VGH on the basis that the information that it had presented satisfied the administrative, technical, and financial requirements of the RFP.

The tender was indeed granted to VGH later that year, but did not come anywhere near to lasting the full 30 years: the concession was sold to Steward Healthcare in 2017 after VGH failed to raise the required finances to carry out their promises.

The National Audit Office is currently probing the deal, having first been requested to do so in 2016, and a court case started by Opposition Leader Adrian Delia in February 2018 for the revocation of the contract is still ongoing.