The auditor general was given almost no documents on the negotiations between the government and the foreign company which won the national bus service contract eight years ago, leaving him unable to give the process a clean bill of health.
Auditor General Charles Deguara on Tuesday presented a detailed performance audit report to speaker Anġlu Farrugia, looking into the €430 million deal to run Malta's national bus system.
The audit reviewed the 2015 contract signed between the government and Autobuses de Leon, the operators of Malta’s national bus service, which will run until 2030.
The NAO was tasked with looking into whether the deal was struck in a manner that "conformed with the principles of good governance and transparency".
'Practically no documentation'
In the 42-page report, the NAO complained that it was provided with “practically no documentation” related to the negotiation phase of the contract.
“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 auditor said.
The NAO said 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 the government could have achieved a better deal with the selected bidder".
A sense of urgency
The NAO also found that the procurement process was conducted with a sense of urgency which generated obvious and otherwise avoidable risks to a vitally important sector.
The review also found that prospective bidders were provided with draft financial statements rather than audited accounts and that these drafts were presented halfway during the bidding phase.
The NAO also raised concerns about “the lack of clarity” in the government’s intention to deal with major line items in the operating company’s balance sheet.
These items, the NAO said, 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 better, offers.
Documentation reviewed by the NAO also suggests that the negotiation phase with the preferred bidder started before it was formally confirmed by the evaluation committee.
The NAO said it believes that the specific requirement for negotiations to be initiated after the selection of the bidder should have been followed.
What deal are we talking about?
In January 2014, the government and the then-service operator of the national bus service Arriva reached an agreement for them to pull out.
Within the same month of this agreement, Transport Malta issued an expression of interest calling for offers to be submitted from parties interested in acquiring the operating company (in full or part thereof) as well as the exclusive concession rights to operate the bus service in Malta and Gozo.
A new agreement between Transport Malta and the current operator was signed in January 2015 and covers the provision of the service in question up to January 2030.
This contractual service is expected to cost the government more than €430 million over the contract’s 15-year duration.