It was the government which “perpetuated” the failure of Vitals Global Healthcare to fulfil its commitments in relation to the takeover of three state hospitals, the National Audit Office has said in a new, scathing report on the awarding of the concession which also strongly criticised Konrad Mizzi for refusing to meet with the office to answer questions about the deal.

In what is the second part of an audit into the awarding of a concession for three hospitals – St. Luke’s, Karin Grech, and Gozo General Hospitals – to Vitals Global Healthcare, the NAO listed a raft of concerns that they had on the contractual framework of the deal.

The Minister responsible for the project back then was Konrad Mizzi, and the NAO lamented how he had once again totally ignored requests for a meeting.

“The NAO made several attempts to meet with Konrad Mizzi, which requests remained unaddressed. The gravity of this failure was rendered evident in the NAO’s report through the pivotal role played by Mizzi in this concession,” the NAO said.

“His failure to attend to the several requests made by the NAO was deemed a serious shortcoming in terms of the level of accountability expected of a former minister of government and in terms of the standard of good governance that ought to have characterised a project as material and as important to the national health services as was this,” the NAO added, sparing no punches.

The first area of concern, the NAO said is on the negotiation process between the government and VGH, “which process remained opaquely concealed to the NAO due to the lack of documentation kept and conflicting accounts provided by those involved.”

The lack of visibility provided further case for concern when it came to considering the deviations or inclusions of new things in the contract which changed the concession’s scope, the NAO said.

Graver still was the government representatives’ failure to consult with critical stakeholders, the NAO continued.

“This resulted in the concession failing to meet its objectives, be it the health infrastructure improvements and the classification of the concession as off-balance sheet, with the VGH’s capital expenditure on the project registered on the government’s accounts,” the NAO added.

The way the project was run, with the Energy Division within Konrad Mizzi’s Ministry for Energy and Health overseeing the capital investment and with the Health Division within the same ministry tasked with operational management created “ideal grounds” for VGH to “capitalise on the government’s weaknesses,” the NAO said.

The audit found that “none of the major concession milestones was achieved when the concession was under the VGH’s control.”

It described VGH’s inability to secure financing as a crucial shortcoming which ultimately resulted in all the subsequent failures registered in this concession by the government, and rendered all of VGH’s commitments to infrastructural and service improvements impossible to attain.

“Instead, the government’s representatives, while bypassing Cabinet, endorsed multiple waivers of the requirement to secure financing, thereby perpetuating the failure that this concession came to represent,” the NAO said.

The NAO said that “significant concerns” emerged in its review of the contractual framework regulating the concession.

In the Services Concession Agreement, critical departures between that originally stated in the Request for Proposals (RfP), that subsequently contracted and later amendments effected substantially altered the government’s control over the completion of the concession milestones, the NAO said.

“The changes effected consistently favoured the VGH’s interests, with the government rendered powerless in holding the concessionaire accountable,” it said.

Although the government established the health deliverables expected of the concession through the Health Services Delivery Agreement, these were quickly revised, it continued.

“The revisions were consistently adverse to the government, with a significant reduction in services without any change in the compensation due and an increase in the number of beds guaranteed for use by the government coupled with a corresponding increase in the amount payable.”

Furthermore, the Labour Supply Agreement stipulated that the government employees to be deployed with the VGH as leased resources were to continue benefiting from the same conditions of work as public officers and public servants.

“However, of note to the NAO in its review of this agreement was the government’s ill-preparedness for this concession. Most glaring was the mismatch of resources allocated to the VGH by the government with the charge that was to be recovered. The discrepancy arising from this mismatch was borne through public funds,” the NAO said.

The NAO also established that no valuation of the sites was undertaken by the government prior to their transfer through the Emphyteutical Deed.

Concerns also emerged on the mismatch between the 30-year concession period and the potential 99-year title granted over the sites and whether the government will realise the economic benefits envisaged through their continued use for medical tourism.

This is the second part of an audit into the concession awarded to VGH – a concession which was transferred to Steward Healthcare barely two years into its existence.

The first part of the audit was published in July 2020 and found that VGH should have been excluded from the selection process for the concession to the “collusive behaviour” and that the deal was pre-determined for VGH to win.

 

A third part of the audit, which is yet to be published, will address the transfer of the concession to Steward Health Care.