Three of the biggest projects overseen by the Labour government have now been found to have serious governance shortcomings by the auditor general, although next to no action has been taken on any of his findings over the years.

The publication on Tuesday of a damning report by the National Audit Office (NAO) into the maligned awarding of three hospitals to be run by an unknown company is the latest in a series of damning reports.

These include one about the power station project in 2018 and another published this year about the ITS land deal.

All the deals have a common factor – former minister Konrad Mizzi – as well as a familiar cast of other characters including Nexia BT and Beat Ltd, two firms with close ties to Mizzi.

The Vitals deal: pre-agreement

The auditor general said Vitals Global Healthcare should have been disqualified from the hospitals tendering process completely, having signed a pre-agreement with the government before the tender was even published.

The government refused to provide the auditor general with a copy of the pre-agreement.

It was also found during the audit that the Finance Ministry, headed by Edward Scicluna, was not consulted regarding the payment that was to result from the concession. 

The authorisation of Cabinet was similarly not sought prior to the issuance of the request for proposals for the project.

What were the reactions?

The government says political responsibility has already been assumed for the VGH deal through Mizzi’s sacking last month in the wake of the Montenegro scandal.

“This government will be ensuring competitive processes in future, and that shortcomings identified by the NAO will not be repeated,” Prime Minister Robert Abela's office said.

“This is the spirit of the important reforms this administration is carrying out on good governance."

Abela said on Friday that the mysterious agreement signed between the government and VGH prior to the tender was nowhere to be found.

He insists a distinction should be drawn between contracts: that signed with VGH should have no bearing on the talks with the current concessionaires, Steward Health Care.

Power station deal: Non-compliant bid

An investigation into the government’s power station project was started in November 2018, soon after Yorgen Fenech, one of the power station’s directors, was revealed as 17 Black’s owner.

17 Black was set to secretly channel up to €2 million into offshore structures set up by Konrad Mizzi and former OPM chief of staff Keith Schembri.

The auditor general found the bid Fenech was involved in did not comply with minimum requirements needed to win the lucrative contract on “multiple instances”.

Shortcomings were also found in the funding guarantees submitted by Electrogas as well as a €20 million shortfall in the required total investment and “limited evidence” of firm commitment from suppliers to provide gas during the term of the project.

The auditor general found that last-minute changes to the contract terms “drastically altered” the nature of the contractual relationship that was to be entered, rendering the risk to revenue for the selected bidder inexistent.

The auditor general said all risk was transferred to Enemalta and the government, which were obliged to buy 85 per cent of the annual contract quantity of either power or gas, irrelevant of requirements. 

It was in Enemalta’s interest to disclose all conditions favourable to the prospective bidders to encourage competitive tensions between companies bidding for the contract, the NAO said. 

The NAO also noted that no mention of the government loan guarantee subsequently given to Electrogas was made in the request for proposals or selection process.

What were the reactions?

Konrad Mizzi portrayed the auditor general’s findings as confirmation that the evaluation process was “fair and transparent”.

He said the auditor general’s findings rubbished claims by the opposition that the process was corrupt.

The government claimed that only a number of “minor administrative shortcomings” were identified by the auditor general, and the Electrogas bid represented the cheapest and most advantageous offer to consumers.

Calls for Enemalta to renegotiate the contracts with Electrogas in a bid to gain more advantageous electricity tariffs have so far fallen on deaf ears.

The ITS land deal: Unorthodox disposal 

The VGH report was the second major probe released by the auditor general, following a report published in March about the ITS land deal.

In that report, the auditor general questioned the regularity of the site’s transfer from ITS to the db Group.

db Group’s Silvio Debono was known to have been eyeing the site for years and the government has faced accusations that the deal was tailor-made for him. 

The auditor general flagged “unorthodox disposal” of the land without the government property division’s involvement.

The NAO said in its report that the government’s failure to identify who issued instructions to dispose of the site is a “gross shortcoming in governance”, with the tourism ministry indicating it was the prime minister’s office who initiated the disposal. 

The prime minister’s office in turn negated its involvement in the process, the NAO said.

What were the reactions?

The prime minister has said the government will rely on the auditor general’s conclusions, which stated that the price paid by db Group for the site was in line with market values.

db Group has since presented scaled down plans in a bid to quell criticism about the project.

Malta’s powerful development lobby pounced on the auditor general’s findings, insisting the government should seek advice to reverse the deal.

Malta Developers Association director-general and former PN MP Marthese Portelli had told Times of Malta the manner in which the process had been handled left much to be desired in terms of governance, as highlighted by the findings of the National Audit Office’s investigation.

“Any deal which does not benefit the common good, including any deal which allowed or allows for change from original uses, should be looked into properly and the government should seek legal advice on how such properties which were disposed of in this way can be retracted in the best interest of the country,” Portelli said.