The National Audit Office questioned the lack of documents concerning the 2015 negotiations for a new public transport service provider, with the Auditor General saying that he could not give the process a thumbs up as a result.
Auditor General Charles Deguara has presented the performance audit report to the Speaker of the House of Representatives Anġlu Farrugia on Tuesday.
This audit reviewed the procurement of the Scheduled Public Bus Service in Malta and Gozo to determine whether the resulting agreement was secured in a manner which conformed with the principles of good governance and transparency.
The deal between the government and foreign company Autobus de Leon was signed in 2015, and is worth around €430 million. It will run until 2030.
The major shortcoming which the NAO noted was the lack of documentation related to the negotiation phase of the contract.
“While acknowledging that the related evaluation report and forwarded ancillary documents present a general view of the main considerations of this process, NAO is however concerned by the significant gaps in the forwarded documentary evidence relating to the Committee’s review of the submitted bids,” the NAO said in a statement issued with the full 42-page report.
“Amongst others, NAO was provided with practically no documentation related to the negotiation phase of this process,” the office commented.
“While this Office could not pinpoint any significantly concerning outcomes from this process, it is still concerned with the fact that it was not forwarded with a complete documented audit trail,” the statement continues.
The NAO expressed its belief that such a situation impeded it from assessing whether these negotiations were conducted thoroughly in accordance with the principles of good governance or otherwise and whether Government could have achieved a better deal with the selected bidder.
In this review, the NAO noted that the scoped procurement process was conducted with a sense of urgency which generated “obvious and otherwise avoidable risks to a sector that carries significant social and financial materiality.”
It was also noted that, while it was commendable that Government had a set preferred direction to favour any bidders who offered to acquire the operating company in full (that is, with all its assets and liabilities), the review shows that the weighting mechanism stipulated in the Expression of Interest (EOI) was not designed to include reasonable quantification of this favourability but rather opted for absolute preference.
This review also showed that prospective bidders were provided with draft financial statements of the operating company they were invited to procure rather than audited accounts, and that these drafts were presented halfway during the bidding phase.
“Considering that TM refused to extend the EOI submission deadline when asked to do so by prospective bidders in view of this delay, it is noted that this resulted in a drastic reduction in the time during which the latter could formalise the financial element of their bids,” the NAO said.
The NAO said it was also concerned with the lack of clarity in Government’s intention to deal with major line items in the operating company’s balance sheet at EOI stage, which items could have significantly affected the company’s capital.
“These shortcomings may have negatively influenced the attractiveness of this acquisition and possibly hindered the Authority from receiving additional (possibly advantageous) offers,” it said.
Documentation reviewed by the NAO also suggested that the negotiation phase with the preferred bidder started before the latter was formally confirmed by the evaluation committee.
“Though the singularity of the bidder under the preferred option (that is, to acquire the operating company in full) mitigates NAO’s concern in this respect, it still believes that the specific requirement stipulated in the EOI for negotiations to be initiated after the selection of the bidder, should have been followed.”