The Malta Independent 28 September 2020, Monday

VGH should have been disqualified: NAO finds proof of collusion in hospitals deal

Tuesday, 7 July 2020, 16:37 Last update: about 4 months ago

The hospitals privatisation deal was predetermined, the National Audit Office said, adding that documents provide "proof of collusion with government or its representatives."

VGH had won the concession to run three state hospitals, St Luke's, Karin Grech and the Gozo General Hospital, but the concession was later transferred to Steward Health Care.

The NAO said its immediate concern was the agreement that parties representing Government reportedly entered into prior to the request for proposals (RfP) with a subset of the investors of the VGH.

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"The overlap between this Agreement and the concession was clear and created major doubt and concern regarding the integrity of the eventual concession."

The NAO's said its concerns were heightened in light of Government's reluctance to provide it with a copy of the agreement.

"This Office is of the opinion that this Agreement provided grounds for the disqualification of the VGH from the RfP."

Significant failures were noted in developments leading to the issue of the RfP. The Health Division was not appropriately involved, with the Energy division driving the process in its stead. The Ministry for Finance was not consulted regarding the disbursement that was to result from the concession, while the authorisation of Cabinet was similarly not sought prior to the issuance of the RfP.

"Of greater concern in terms of the governance of the process was that no ministerial authorisation was sought or provided in relation to this concession, resulting in the anomalous scenario where three public hospitals were conceded for operation by third parties without anyone actually assuming responsibility for this decision."

 

"This Office is of the opinion that this Agreement provided grounds for the disqualification of the VGH from the RfP."

 

The feasibility assessment, which ought to have established the basis for Government's decision to concede the hospitals was bereft of any form of independent analysis or critical thought. Furthermore, several shortcomings were noted in the design of the RfP, most significant of which was the subjectivity of the evaluation criteria and the term set for the concession, which should have been established based on analysis and not in the arbitrary manner that it was.

The NAO said that, although the bid submitted by VGH satisfied all the requirements set by Government, it is of the opinion that "the bid was essentially robust in form but flawed in substance."

Of grave concern to the NAO was documentation submitted by VGH as proof of access to finance.

"A letter issued by the Bank of India sanctioning funding for the 'Malta Healthcare Projects' and put forward by the VGH in respect of the bid was dated 13 March 2015, that is, well before the publication of the RfP on 27 March 2015. This Office deemed this document as definite evidence of the VGH's prior knowledge of the planned project and proof of collusion with Government, or its representatives."

Other notable shortcomings identified by the NAO related to the professional and technical elements of the bid by the VGH.

The NAO noted that the business experience cited by the VGH was not attributable to it, but to the holding company Oxley Group or its strategic partners, or to partners that the VGH had involved in the project. Of note was that the experience cited for Oxley Group mainly related to real estate investment trusts and funds, asset management and financing.

"Evident was that the timeframes committed by VGH for the redevelopment of the hospitals were overly ambitious and unrealistic. Similarly, overly ambitious were the projections made with respect to medical tourism, particularly when one considers that it was the revenue forecasted from this source that was to render the project feasible."

 

"This Office deemed this document as definite evidence of the VGH's prior knowledge of the planned project and proof of collusion with Government, or its representatives."

 

The bid by the VGH was assessed by the Evaluation Committee in terms of its commercial, technical and financial strength, and the degree to which it exceeded the minimum requirements specified in the RfP.

The NAO said it is of the opinion that the evaluation carried out was lacking in terms of critical analysis, with several parts of the evaluation report merely a restatement of the bid by the VGH.

"Furthermore, the NAO maintains that the marks assigned in relation to the technical and operational component of evaluation were not entirely merited. Concerns emerge in the Evaluation Committee's assessment of the financial soundness of the VGH, its professional and technical qualifications and management experience, the key financial assumptions that underpinned the viability of the project and cost comparisons between rates proposed and actuals incurred by Government."

Although the shortcomings identified by the NAO in relation to the evaluation process remain, these must be acknowledged in terms of the broader and far more significant concerns relating to the integrity of the entire procurement process.

"The evidence indicating collusive action between the parties acting on behalf of Government with the investors of the VGH renders the entire process dubious, irrespective of whether the process was in adherence with procedural and regulatory requirements."

The NAO maintained that, beyond the assertion of compliance to administrative requirements and the determination of whether the technical criteria set out in the RfP were met and to what extent, it is reasonable to expect that the process of evaluation would include an element of due diligence on any bidder.

"This Office is of the opinion that the due diligence carried out by Government to verify matters relating to the VGH in its capacity and relationship to it as the preferred bidder to run three public hospitals was grossly inadequate."

 

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