Contracts director says no 'political pressure' was made

A legal report commissioned by the Foundation for Medical Services' adjudication board on the Lm25 million medical equipment contract for the new hospital in Tal-Qroqq had concluded that Hospitalia's bid was "conditional" as the offer was subject to the foundation accepting amendments to the original tender document.

The FMS later recommended that Hospitalia, a German company, should be awarded the tender, a recommendation that was overruled by the director general of contracts, who opted for the Italian consortium Inso.

The legal report, drawn up by Judge Godwin Muscat Azzopardi, was circulated at yesterday's nine-hour long marathon hearing of the appeals proceedings initiated by Hospitalia and Simed, another bidder, against the director of contracts' decision.

The legal report had recommended that Hospitalia should have been formally asked to withdraw their conditions to amend the tender. However, the FMS had decided to proceed with the adjudication of the tender and the issue had not been clarified with Hospitalia.

The director general of contracts, Joseph V. Spiteri, who was a leading witness, also called Hospitalia's bid a "conditional offer" because their bid made it clear that their offer was subject to FMS accepting amendments to the tender documents. Under Maltese law, Mr Spiteri said, this was not allowed.

He said that Hospitalia made the condition that specific changes will be made to the tender document, including who was liable for damages in case of delays in the supply of equipment. Mr Spiteri said the legal experts had advised that Hospitalia should be asked to withdraw their amendments. Instead, Mr Spiteri said, FMS decided to proceed and therefore it had ignored this issue.

Mr Spiteri said that the decision to overrule the recommendation made by FMS to propose Hospitalia was not related to the issue of Hospitalia's "conditional offer". He said the department of contracts decided to award the contract to Inso because it had a much cheaper offer: "We are talking of several millions of euros... we are not talking of cents here". He explained that the criteria used by the department of contracts was that the lowest bid should be awarded the contract provided it is in line with the tender document specifications. Asked whether Simed's lower alternatives were considered, Mr Spiteri said that for an alternative to be considered, the bidder had to make that alternative very clear.

Joe Fenech, one of the lawyers representing Simed, remarked that the legal and financial aspects of the alternatives were taken into consideration and that only the technical aspect of the alternatives of Simed were not taken into account. To this, Mr Spiteri asked Dr Fenech whether he was sure that SECTA, a British consultancy firm appointed by the adjudication board to tackle the technical aspect of the procerss, did not rule out Simed's alternatives.

Dr Fenech replied that SECTA's representatives had testified under oath that they had received instructions from FMS not to take alternatives into account. Dr Fenech said that the FMS chief executive later denied that SECTA were given such instructions. Mr Spiteri insisted that the contract was awarded to Inso because they were the cheapest as regards the equipment being quoted.

Asked by Dr Fenech whether the changes introduced by Inso, when the process was in the hands of the department of contracts, were acceptable in terms of law, Mr Spiteri said the tender document allowed for clarifications to be made. Asked by Dr Fenech whether Inso were allowed to change - not just clarify - their bid, Mr Spiteri admitted that Inso were allowed to make changes which amounted to around three per cent of their bid.

Mr Spiteri categorically denied that he had received any "political recommendation" as to which consortium should be awarded the tender. He also denied that there could have been political pressure to award the contract to Inso, because of Malta's pending financial treaty with Italy.

In his testimony, FMS chief executive Emanuel Attard said that the adjudication board had a problem to adjudicate the tender on all criteria because of certain shortcomings by all the bidders. For this reason, Mr Attard explained, the FMS decided to find a level playing field upon which it could adjudicate the tenders. He said that the level playing field established by the adjudication board was to base their assessment on the tender base cost.

Dr Fenech asked Mr Attard from where did he get the authorisation to decide to go against the tender document by only taking into account the tender base cost. But Mr Attard pointed out that the decision was taken by the adjudication board, of which he was a member. He also stressed that the duty of the adjudication board was to adjudicate the tender in a fair way.

Asked whether he remembered that Hospitalia - which were recommended by FMS to be awarded the tender - had not quoted for the annual running costs of the equipment (consumables) even if this was mandatory, Mr Attard reaffirmed that all bidders failed to supply some information requested.

Chris Attard Montalto, the FMS medical equipment manager, said that the cost of consumables was an important part of the tender as the running cost could be very high. Mr Attard Montalto also confirmed that the bidders were free to give alternatives provided that they work out the computations themselves and provide the figures.

Kenneth A. Bonnici, a director of Grant Thornton, whichh were entrusted with the financial assessment of the bids, confirmed that Simed, the Dutch bidder recommended by FMS as runners up, had presented different alternatives in their bid.

He said he had estimated that Simed's cheapest alternative would have cost €6.3 million less.

Joe Zarb Adami, chairman of the medical equipment committee and the chairman of St Luke's Hospital's Anaesthetic Department, said that consultations on the medical equipment needed by his department had started "but, all of a sudden, for reasons I do not know, they had stopped". Dr Zarb Adami said that there were divergences between the equipment recommended by the hospital and that included in the tender.

"For instance, we recommended that there should not be any central units in the Intensive Care Unit because we wanted nurses to stand near patients. However, the medical equipment in the tender included central units."

He said that as "an end-user" who would be using the equipment for many years, he believed he should have been consulted.

"In the past we were consulted. When we were not consulted, it has proved to be very costly." In February last year, five contractors submitted their tender: the Italian INSO had submitted a tender valued at E64.8 million; the German firm Hospitalia, a tender valued €73.5 million; the Dutch Simed International, a tender valued at E74.8 million; Sagexport's tender was valued at €87 million and Siemens made an offer valued at €90 million. In May last year, the FMS had recommended to the director of contracts to award the contract to Hospitalia.

But last December, the director of contracts had announced his intention to award the contract to INSO. Both Simed International and Hospitalia appealed against the decision of the director of contracts. According to the technical report prepared by SECTA, the INSO tender was difficult to evaluate due to the number of instances of lack of technical information.

The next session in the appeal proceedings is scheduled for July 29.