The energy ministry last year engaged a legal adviser through a law firm at the rate of €170 per hour, excluding VAT, the Audit Report tabled in parliament yesterday shows.
In a section on non-compliance with public procurement regulations, the audit office said that the ministry engaged a legal advisor to provide legal services in connection with the establishment of a Maltese company to which the assets and liabilities of Enemalta Corporation were to be transferred.
A Letter of Engagement dated 2 January 2014 was issued and signed for the provision of such services, at the hourly rate of €170, excluding Value Added Tax (VAT).
A superseding Letter of Engagement for the provision of additional services, dated 12 March 2014, was then issued and signed at the reduced rate of €156 per hour (VAT excl.).
Internal correspondence within the ministry revealed that a draft Engagement Letter for the provision of legal services was available on 3 December 2013, which was prior to the request for approval for the engagement of this service provider.
In fact, correspondence with the Direct Orders (DO) Section within the Ministry for Finance (MFIN) requesting the approval of such engagement, was dated later, on 6 December 2013.
"To this effect, the National Audit Office may conclude that the Ministry had
already made commitments with the legal firm in question, before forwarding a DO request. This practice is not in compliance with MFIN (Finance Ministry) Circular No. 3/2013 – ‘Public Procurement Regulations – Direct Orders’," the audit office said.
The energy ministry was advised to set a maximum threshold for such services, since the proposed rate of €170 (VAT excl.) was deemed to be ... quite substantial and ...could spiral out of control
In a reply from the finance ministry dated 10 December 2013, the ministry was requested to justify recourse to a direct order, as well as the choice of this service provider.
Moreover, the energy ministry was advised to set a maximum threshold for such services, since the proposed rate of €170 (VAT excl.) was deemed to be “… quite substantial and ... could spiral out of control”.
In its counter-reply, besides providing the reasons for resorting to a direct order, the energy ministry stated that, “... this is an average rate charged for the services of the top notch in respect of professionals and juniors working on this assignment”.
The ministry also stated that the legal firm would be asked to forecast the hours of work required on a monthly basis in order to ensure that expenses are kept in check.
"Notwithstanding this statement, no evidence was traced, showing that the monthly forecasts which the service provider was to provide to the Ministry,
were actually submitted for verification."
An approval ‘in principle’ was granted to the energy ministry on 14 January 2014 to place a direct order with the supplier in question, at an hourly rate of €170 (VAT excl.). However, the finance ministry strongly opined that a maximum value for these services should be negotiated. The energy ministry was urged to request a definite approval from the finance ministry once the actual cost was known.
The energy ministry still endorsed the Draft Agreement with the supplier on 11 February 2014, which did not make any reference to either a maximum value to be paid for the services provided, or an engagement period.
The same issue re-emerged with the second, superseding Letter of Engagement with this legal advisor, dated 12 March 2014.
The audit office said it had also noted that the energy ministry's formal approval was dated 11 February 2014, whereas the signed Letter of Engagement was dated 2 January 2014, thereby implying that negotiations with the service provider were already underway prior to the formal approval.