NAO claims collusion between government and investors of VGH

Tista' taqra bil- Malti.

A review of the tender process on the concession agreement awarded to Vitals Global Healthcare shows that 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 report was published by the National Audit Office, NAO.

The NAO was requested by the Public Accounts Committee to audit the concession awarded by Government to Vitals Global Healthcare Ltd, VGH, in relation to the Gozo General Hospital, St Luke’s Hospital and Karin Grech Rehabilitation Hospital.

This part of the review focuses on the procurement process leading up to the award to the VGH, while the contracts entered into and the eventual transfer to Steward Health Care are addressed in parts 2 and 3, respectively, yet to be issued.

In its conclusions the NAO said that it was evident that the timeframes committed by VGH for the redevelopment of the hospitals were overly ambitious and unrealistic.  Similarly, 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 is also 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.

Of 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. The overlap between this agreement and the concession was clear and created major doubt and concern regarding the integrity of the eventual concession, said the NAO.

The report also makes reference to the Government’s reluctance to provide the NAO with a copy of the agreement which according to the National Audit Office provided grounds for the disqualification of the VGH from the RfP.

The following failures were noted in developments leading to the issue of the RfP;

  • The Health Division within the Ministry for Energy and Health (MEH) 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
  • 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.
  • The feasibility assessment, which ought to have established the basis for the Government’s decision to concede the hospitals was bereft of any form of independent analysis or critical thought.

Several shortcomings were noted in the design of the RfP

The NAO said that the subjectivity of the evaluation criteria and the term set for the concession, should have been established based on analysis and not in the arbitrary manner that it was.

Although the bid submitted by VGH satisfied all the requirements set by Government, the bid was essentially robust in form but flawed in substance, according to the NAO.

The review of the tender process posed grave concern to the NAO in relation to the documentation submitted by the VGH as proof of access to finance. The report refers to 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. The NAO noted how that was well before the publication of the RfP on 27 March 2015. Thus, the NAO 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.

It was 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 also that the experience cited for Oxley Group mainly related to real estate investment trusts and funds, asset management and financing.

Concerns over the bid assessed by the Evaluation Committee

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. In this Office’s opinion, 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 in relation to the evaluation process remain, the National Audit Office stated that these must be acknowledged in terms of the broader and far more significant concerns relating to the integrity of the entire procurement process.