The Auditor General "did not come across any hard and conclusive evidence of corruption" in the inquiry concerning the tender issued by Enemalta Corporation for the supply of a new power generating plant at Delimara.
However, he complained of "the lack of cooperation from certain stakeholders who contended that they could not recall certain events or information" and questioned the undue haste with which the agreement was signed.
In a report laid on the Table of the House of Representatives yesterday, the auditor said that "a case in point is Mr J. Mizzi, local representative for the tenderer awarded this contract (BWSC), who was considered one of the key players throughout this inquiry. Although summoned by the National Audit Office on three separate occasions, he repeatedly cited lack of memory when asked certain questions".
The inquiry was called by Parliament's Public Accounts Committee to investigate whether tender procurement procedures had been regular and relative regulations adhered to, following allegations of bribery and corruption made in the media and claims of irregularities levelled by the opposition. The decision to award the €210 million extension of the Delimara power station to the Danish company BWSC has proved highly controversial also due to the use of heavy fuel oil which environmentalists say will cause pollution.
In his report, the Auditor General noted that Enemalta chairman Alex Tranter had declared a conflict of interest, especially since, in his private capacity, he had business links with the local company entrusted with civil works in one of the bids under consideration (which eventually was selected and agreement signed with).
"It was noted that the chairman, prior to his declared conflict of interest, had appointed the members on the evaluation and adjudicating committees responsible for the evaluation of tenders. Notwithstanding this, the chairman failed to inform his minister to approve or otherwise the appointment of these committees following his (chairman's) declared conflict of interest," the Auditor said.
"Considering the circumstances of this case it is felt that it would have been more prudent and appropriate had the Enemalta chairman resigned from his post at the time when he had declared a conflict of interest. This would surely have eliminated the extensive controversies which arose at a later stage, especially in view of the fact that the local company with whom the chairman had declared having professional connections with was actually sub-contracted the civil works of this tender."
The auditor said that he had identified various cases of administrative shortcomings, especially on the part of Enemalta Corporation and the Department of Contracts. In a number of instances, this was due mostly "either to lack of experience in the procurement process adopted during this tender and/or insufficient coordination between the two entities, both considered as key stakeholders in the procurement process".
Following are some of the main conclusions referred to in the report:
• Enemalta Corporation failed to directly inform the unsuccessful bidders of the outcome of adjudication as clearly established in the Invitation to Tender. This gave rise to the claim made by (another company) Bateman that the appeal facility was thus effectively denied to any bidder wishing to appeal from such decision.
• The selection of Lahmeyer International, through a direct order, as an independent consultant leaves much to be desired especially when one keeps in view that (a) it is presently blacklisted by the World Bank; (b) it had been previously engaged in a joint project with BWSC (one of the bidders on which Lehmeyer International is supposed to have drawn up an independent analysis); and (c) the agent of the company which eventually won this tender, had also worked as Lahmeyer's agent up to 2007.
Once the original tender specifications referring to emission levels were changed through the legislative amendment made in January 2008, the decision by Enemalta Corporation and the Director of Contracts to continue with the ongoing tender is questioned by the National Audit Office. With the benefit of hindsight, it is felt that much of the controversy surrounding this tender could have been avoided had the tendering process been stopped and reissued to reflect such change in specifications.
The decision by Enemalta Corporation to go for a prototype combination instead of the required "tried and tested" as clearly stipulated in the Invitation to Tender is considered to have put the corporation in a position of very high risk.
The Director of Contracts could have carried out the role stipulated by the pertinent legislation in a more proactive manner. This is evident when the Department did not vet the Request for Proposals and the ITT documents before these were published. Lack of involvement by the Director of Contracts occurred also in the final contract, which was subject to heavy changes brought about through negotiations, before this was signed.
The Director of Contract's late decision to change the tendering model used from negotiated procedure to the three-package model was ill-timed. This was because, by the time the bidders were made to re-submit their financial offer, Enemalta had already evaluated the original financial offers, negotiated these with the bidders and had even selected a preferred bidder.
Once Enemalta realised, after the submission of the technical bids, that its original specification for tried and tested combinations of equipment that are compliant with emission legislation did not exist in the case of DECC engines, the corporation brought on board the services of a consultancy firm. The firm, Lehmayer International, declared prototype combinations, to date untested as one complete unit, to be plausibly able to comply. Although the consultant's advice was qualified, Enemalta went ahead and declared the DECC combinations as technically compliant.
The Auditor's Report includes a number of recommendations put forward by his office with the principal objective of improving the procurement process.
These are the main recommendations:
• There needs to be a more collaborative and co-operative attitude especially between Enemalta Corporation, as the contracting authority, and the Department of Contracts, as the regulator of the tendering process. This necessitates that the latter in particular is adequately resourced so as to be in a position to perform its challenging role in an effective manner.
• More extensive consultation with relative stakeholders is required, possibly even at the planning stage of such complex projects, thus possibly avoiding unnecessary confrontation and allegations at the tendering and implementation phases.
• Rules and regulations must be rigorously applied and followed without exception or fail. Quoting reasons of urgency does not per se provide the necessary authorisation for not following such rules and regulations.
• Contracting agencies must ascertain that optimal value for money has been attained even after choosing the preferred bidder. Value for money essentially means that prices being ultimately quoted are in line not only with competing bids, but also in relation to prevailing market prices. Such scrutiny and safeguard, which is applied by various contract departments, entities and agencies in other countries, is obviously meant to ensure that public funds are used in the best manner possible.
• Due monitoring is necessary to ensure the highest levels of transparency, fairness and integrity when identifying and appointing independent evaluators whose findings and recommendations may have a direct bearing on final adjudication, as in this particular case.
The Auditor General emphasises that "cases of potential conflict of interest must be duly managed to ensure full transparency, fairness and equity in the procurement process and all decisions related thereto.
"In certain cases, this may necessitate the resignation of officer/s involved in the best long-term interest of both the person/s as well as the public entity involved."
The auditor said even the experience of other countries showed that a certain degree of controversy seemed to surround major public procurement projects.
"However, ultimately, the most economic, efficient and effective use of taxpayers' monies is of concern to all Maltese citizens. There is therefore the need to continuously strive to improve the public procurement process in Malta, especially through ongoing training and development of personnel working in this area on the emerging procurement practices and procedures both locally as well as within the European Union."
He recommends the immediate transposition of and EU Directive aimed at improving the effectiveness of review procedures concerning the award of public contracts.
He concluded that only through such improvements in the public procurement process could "a high degree of trust in the fairness, transparency, value for money and equity of local public procurement be guaranteed".
In a reaction to the Auditor-General's report, the Finance Ministry said that after a long and detailed investigation, no evidence of corruption had been found, even though the opposition had been alleging such corruption for more than a year.
The ministry said the opposition had presented no evidence to back its allegations. Neither had it presented any evidence to the House Public Accounts Committee, presided by Labour MP Charles Mangion.
"The opposition was once more, interested only in mud-slinging and that the country would not to have the power supply it needs for Maltese families and industry."
It said it would evaluate the recommendations which the Auditor-General had made.