OPM persisted with hospitals deal despite Malta Enterprise flagging critical risks with investors, fresh NAO probe shows

Critical risks flagged by Malta Enterprise in a due diligence of investors that eventually obtained a concession to run three public hospitals were ignored by the government.

The damning information emerges from a fresh probe by the National Audit Office on the Vitals Global Healthcare hospitals deal.

The latest 19-page addendum to the original report concerns a memorandum of understanding that economy minister Chris Cardona had signed with foreign investors in October 2014, five months before the government eventually issued an international request for proposals.

The addendum was tabled in parliament on Tuesday afternoon.

Cardona told the NAO that a due diligence that Malta Enterprise had undertaken with respect to the investors, had a negative outcome, which led the agency to revoke the MOU.

Cardona also told the NAO that he was not privy to the basis of the negative outcome, adding this was confidential information that Malta Enterprise was prohibited from disclosing under the Business Promotion Act, unless otherwise instructed by the Prime Minister or by Court order.

“Despite the lack of visibility afforded to this Office regarding the nature of the negative outcome of the due diligence, the NAO’s concerns emerge when one considers that, irrespective of the critical risks flagged, government opted to persist in negotiations with investors that, for the most part, remained unchanged when bidding in reply to the request for proposal,” the NAO said.

Fingers are pointing at Keith Schembri's role in securing the VGH hospitals concession deal

Keith Schembri and OPM

But significantly, Cardona’s testimony shifts the onus of responsibility for the hospitals deal onto the Office of the Prime Minister and Keith Schembri, the former chief of staff for Joseph Muscat.

Attempts by the NAO to source information from Schembri proved futile and the OPM did not retain records in relation to the MOU.

“Enquiries with the former chief of staff OPM [Keith Schembri] proved to no avail and therefore this office was unable to determine how contact between government and the investors was established and how negotiations between the two parties ensued… Despite the NAO’s efforts at deciphering the active role played by the OPM, this remains obscure,” the NAO said.

Cardona told the NAO he was requested to sign the MOU on behalf of government but his ministry had no involvement in the identification of the hospitals concession project, the investors and the feasibility of the venture.

The former minister said the MOU was signed at the Office of the Prime Minister.

The MOU is dated 10 October 2014 and extended to February 2015 after which it would expire unless extended or both parties finalised a deal.

Malta Enterprise was tasked to carry out a due diligence of the investors and its involvement in the MOU was only to ensure that the construction of a medical school in Gozo was in line with what the agency had agreed with Bart’s Medical School. 

The government issued an international request for proposals in March 2015 on the basis of a proposal that was similar to that outlined in the MOU. The process was handled by Projects Malta, an agency under Konrad Mizzi’s wing.

The tender was eventually awarded to VGH, which comprised the investors that originally appeared on the MOU.

Public procurement process to give concession semblance of regularity

The MOU was not provided to the NAO by government in its original investigation on the VGH tender award, which was tabled in parliament earlier this month. The MOU was eventually passed on to the NAO after Prime Minister Robert Abela ordered it to be found.

"the public procurement process was undertaken to lend the award of the concession a semblance of regularity and propriety when in fact the outcome of the process was a given" NAO

The NAO had concluded that the VGH hospitals concession agreement was a done deal, even on the strength of the MOU that government had entered into with some of the investors.

In its fresh report, the NAO expressed “grave concerns” on the design of the RFP, more so after reviewing the MOU.

“The review of the MOU and the clear links that emerge between this and the RFP, render the likelihood that the RFP was designed with a pre-determined outcome in mind all the more probable. In the NAO’s opinion, the public procurement process was undertaken to lend the award of the concession a semblance of regularity and propriety when in fact the outcome of the process was a given,” the NAO concluded, reaffirming its original findings.

Read the NAO's addendum below: