Central Bank procurement: transparency is key

The Central Bank does not seem to have an independent appeal structure as is customary at the director of contracts.

Editorial note:

The author represented one of the tenderers, which launched an objection procedure on the award of the Central Bank tender.

Amidst ongoing scandal such as that pertaining to Enemalta and now Mater Dei, the writer can tell his own tale of intrigue which has hit an SME last month. The case involves procurement and more accurately Tender No 4/2013: Survey on Household Finance and Consumption in Malta, issued by the Central Bank of Malta in June 2013.

The procurement department received three bids but finally decided to award the tender to EMCS (€93,263) at three times the cheapest bid (€37,000) without justified reasons for refusal to the cheapest bidder. Despite an appeal process that left pretty much all to be desired, such reasons of refusal which are every bidder's basic right were only to be purported to be offered to the appellant SME in open press last Sunday and this only following some releases of appellant's own whereby the demand for such reasons and the injustice of their denial until that point continued to be driven home.

Given that the CBM survey tender was awarded to EMCS, where the wife of the Deputy Governor works, and the CBM tender issued two years ago was also awarded to the same EMCS, this exposes a blatant conflict of interest that arises as a matter of fact. In addition, this clearly acts to defy the Central Bank's chief dictum of awarding tenders to different and new entities, thereby giving new entities a chance and avoiding stagnating quality levels, as expressed by CBM complaints officer to SME during appeal meeting, In an article published in It-Torca dated 1 December 2013 that 'at no stage was the Deputy Governor involved in the evaluation process'. While not surprising, however this does not add or remove to the conflict of interest which was, is and continues to be seen to subsist. Stating in words that the Deputy Governor was not involved where this is not supported by facts, does not add anything to independence and transparency which was seen to be lacking.

Conflicts of interest are to be disclosed from the outset, and should have so been disclosed when the appellant SME was informed of the rejection, and not now, through the press and only as a retaliation once the conflict of interest was made reference to by the appellant SME. An article on It-Torca published last Sunday bore a bold title referring to CBM Governor reading 'Lest niehu gurament li ma sar ejn hazin' ('I am prepared to swear under oath that no irregularities took place').

Grudgingly, not even a sworn declaration can help erase a conflict of interest for this is a matter of fact, which therefore only action can remedy. In reality it does not much matter whether the Deputy Governor was involved or not, for what does matter in terms of conflict of interest is the perception, and this lingers on.

For transparency's sake, tenders were given to firms with family connections under the previous administration: is it now being condoned under the present administration?

In its defence, the SME cites an article published on the Malta Independent on 1 December 2013, where the Central Bank published the names of appellant and ridiculed it for its recruiting of B.Com under graduates to carry out the survey as 'not acceptable to the evaluation panel as it could compromise the quality and quantity of the fieldwork'. At no time during the clarification meetings did the officials from the procurement section inform the aggrieved SME that undergraduates are not fit for this task. The SME asked CBM and got no response regarding whether it had any alternative to the use of B.Com undergraduates, given that it was rumored that the previous survey was conducted by retired persons or busy housewives with little financial or digital qualifications. The SME wrote many times to the Central Bank Governor Josef Bonnici, who never bothered to answer clarification letters during or post adjudication but took offence when facts were released to the press.

He found time to write a press release to It-Torca and Malta Independent last Sunday (1 December). In the governor's own words, 'what is required in such surveys are experienced and skilled interviewers who are able to put respondents at ease to obtain accurate replies given the delicate and sensitive issues discussed in the survey'. He also contradicts himself by saying the SMEs signed a declaration not to do subcontracting but at the same time he refers to recruitment of B.Com students on a subcontracting basis. The prejudice against the SME was highly evident such that after assuring CBM in writing that a joint venture with a specialist firm of qualified economists run by Gordon Cordina together with Access Point an IT company was signed to guarantee quality control on data collection/cleaning, the governor conveniently omitted this important fact in his press release.

While noting that the above is rather a contradiction since the only purpose for such experienced skill being identified is the ability to relax survey respondents, the cheapest bidder SME wishes to clarify a few things. Firstly, that its proposal included also internal recruits from its own Statistics department, a fact conveniently omitted above. Secondly, that never during any of the meetings held did CBM state its intention regarding nature of interviewers or that the use of graduates and undergraduates would lead to disqualification of the bidder, who for records' sake was backed up by a joint venture team assuring quality assurance purposes and IT back-up ensuring the pristine and timely delivery of the tender assignment. CBM did not award points to this, in fact technical competence was downgraded to 12% marks. It only noted that under graduates had exams, to which the SME reiterated that any slack in February could be amply made up in the other six months of the tender, alongside their offer to assign regular staff as further guarantee.

There was nothing in the tender documents which prohibited graduates and near graduates from being engaged in the carrying out of the envisaged computer based survey, which presupposed good computer skills and which B.Com students were more than properly equipped to handle. At proposal stage the SME already had 31 skilled applicants in waiting, and among whom were persons with experience in carrying out former research work with EMCS (which list included retired housewives with limited computer literacy).

Despite the claims made above, at no point did CBM reveal how the EMCS survey awarded previously was conducted, and similarly neither has it been evidenced that EMCS are utilising specialists or full-time professionals any more 'experienced and skilled' than those offered by the cheapest bidder. And in the light that the cheapest bidder offered de facto persons who did research work for EMCS in the past, whichever way you slice it, the Central Bank is running out of justifications for awarding the tender to EMCS at three times the cheapest bid in the €90,000 region.

Central Bank does not seem to have an independent appeal structure as is customary at the director of contracts. It appointed a retired manager to hear the two sides but never informed the said manager with the price and convictions that EMCS won the tender. One can judge how impartial can this ex-employee act when he is paid by CBM itself! The SME had no choice but to repeat its grievances to this manager who confessed that he was not informed of the rankings given to EMCS and so could not understand how the choice was made at three times the cheapest bid. The SME has also written under protest to the Director-General of the European Central Bank and they referred the matter back to the procurement agent in Malta since this is not a matter of monetary policy - an area in which the CBM is constitutionally protected from any interference from third parties. It is no consolation to read in official bank journals about its unending quest for achieving the highest level of transparency and good governance in all its procurement activity when once again this offers merely words that find no tangible effort addressing their realisation.

As always the proof of the pudding is in the eating and in our opinion the taste is far from agreeable.

George M. Mangion is a partner in PKF an audit and business advisory firm

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