Editorial: Curbing abuse in public procurement

The public procurement market is a major channel through which perverse political and business connections can be exploited. The scale of public resources allocated through these markets is enormous. Public procurement abuse must be curbed. It’s crucial to highlight how favouritism operates in public procurement. When government entities, politicians and public officials share ties to the same political party, contract overpricing and lower-quality goods, services and works become inevitable. It is always the public that suffers from abuse and corruption in public procurement.

The Malta Chamber has renewed its calls for sweeping reforms of Malta’s public procurement framework, in light of claims of political interference in the publicly listed Malita Investments.

The chamber has been pushing the government to reform procurement systems since 2021. Nothing much has been done since then.

When answering questions from Times of Malta about the massive debts accumulated by Malita, the Housing Minister Roderick Galdes said Malita “is financially capable of resolving or managing its own financial affairs”.

The various “red flags” raised in this notorious project include allegations of political interference by former Malita chair Marlene Mizzi, the resignation of the executive chair, Johan Farrugia and the resignation of the lead architect, who also served as the project’s coordinator, from both roles in October.

Contractor Vella Falzon Group, which has taken legal action against the company to recover money it believes it is owed, claims that Prime Minister Robert Abela and Galdes continue to maintain “absolute silence” whenever it attempts to obtain further information about what will happen to payments for the project.

Clearly, there is little, if any, political will to hardwire integrity in the public procurement system. A de facto legal and political immunity seems to be enjoyed by those responsible for manipulations in the public procurement process.

The chamber argues: “If public procurement is not conducted transparently, efficiently and fairly, it undermines trust in institutions, distorts competition, discourages reputable operators and can result in significant waste or misuse of public funds.”

Public procurement remains one of the government’s most vulnerable activities to corruption. In addition to the volume and size of transactions and the financial interests at stake, corruption risks are exacerbated by the complexity of the process, the close interaction between public officials, politicians and businesses, and the multitude of stakeholders.

It is time to curb abuse with more political determination and action. As the chamber has rightly pointed out, the public procurement system must be reformed on principles of integrity, transparency, stakeholder participation, and effective oversight and control.  The government must no longer hide behind the support of party loyalists appointed to boards of public entities, who often fail to assert their professional independence.

As Malita is a publicly listed company, the finance minister has so far resisted Galdes’s attempts to bail out the company with taxpayers’ money.

Despite the risk that some small investors may lose their money, the government must not breach state aid rules or create moral hazard by condoning abuse.

As integrity risks exist throughout the public procurement process, a holistic approach to risk mitigation and corruption prevention is needed. Focusing integrity measures solely on one step in the process may increase risks in other stages. For instance, administrative compliance measures during the bidding phase do not eliminate the risk of political interference in the process.

The government must always put the public’s interests before political expediency and reform the public procurement system in line with the chamber’s recommendations and the EU’s best-practice guidelines.