Editorial | Some businesses more equal than others

Public spending plays an important role in the economy and serves as a stimulus to growth. The quarterly review of the Central Bank of Malta shows that in the last quarter of 2019 government final consumption increased by 9.2% when compared to the previous year. Private final consumption grew by 3.8%.

In that same quarter, the last ‘normal’ quarter before the COVID-19 pandemic struck, government final consumption contributed 1.6 percentage points to GDP, while private consumption contributed 1.8 percentage points.

It is within this context that public procurement, which constitutes an important component of public expenditure, must always be carried out in the most transparent manner possible.

For starters, government must always ensure that the goods and services it acquires from the market provide value for money. After all, the expenditure is coming from taxpayers and government has a duty to use these funds judiciously and in the public interest.

Secondly, public procurement processes must be efficient, transparent and ensure a level playing field for all potential suppliers.

Unfortunately, public procurement has found wanting on several counts over the years, especially when it involved lucrative tenders.

The latest investigation by the National Audit Office on the St Vincent de Paul extension flags serious shortcomings on a massive €274 million management contract.

The original tender was already questionable when government issued a call for the construction of a new kitchen at the home for the elderly and asked bidders to propose an unspecified ‘gift’ in their offer.

The NAO remarked that this unorthodox approach, which was described as innovative within government circles, was not documented and so it remains unclear what the motivation was.

To make matters worse, this ‘gift’ was given substantial weight when the bids were analysed.

The lack of parameters to determine what government wanted or had in mind with this ‘gift’ leaves the whole thing open to speculation, especially in view of what happened after the tender was awarded.

The winning bidder proposed a two-block extension to SVPR, which would provide much-needed beds at the facility. There is nothing to suggest that government should not have issued a separate tender for such a facility or included outright in the kitchen tender.

It now appears that this ‘innovative’ arrangement was nothing more than a way of awarding the winning bidder a separate direct order worth €274 million for the management of the new blocks.

The NAO did not mince its words. The direct order for the management contract was in breach of the law since there was no urgency to justify the negotiated approach adopted by SVPR to award the contract.

A bigger failing was that of the Department of Contracts, which is supposed to oversee public procurement processes, and how it allowed this multi-million-euro contract to go-ahead.

Given that the new blocks still had to be built, government had enough time to issue a competitive tender for management services but the manner in which the original ‘kitchen’ tender was crafted meant government was caught in an alleyway it could not back out of as it pleased.

The NAO also said that political oversight was missing.

All this leaves a very bad taste. It reinforces the perception that some businesses are more equal than others and that some of the large public projects may have been crafted in such a way as to benefit the chosen few.