NAO: St Vincent de Paul €274 million contract for James Caterers and DB broke law

An investigation by the National Audit Office finds that government breached the law when it awarded a €274 million direct order to a private company for the management of the new blocks at St Vincent de Paul elderly residence

A tender for a new kitchen at SVPR also requested a 'gift', which turned out to be a 500-bed extension to the elderly residence. The company that won that tender was eventually given a direct order for €274m to manage the new blocks seen here on the right.
A tender for a new kitchen at SVPR also requested a 'gift', which turned out to be a 500-bed extension to the elderly residence. The company that won that tender was eventually given a direct order for €274m to manage the new blocks seen here on the right.

A €274 million management contract awarded by direct order at St Vincent de Paul breached the law, a National Audit Office investigation found.

The contract was awarded by negotiated procedure in November 2017 to a consortium made up of James Caterers and the DB Group. The same companies had already won a separate bid to build a new kitchen at SVPR and construct an extension.

In a damning 177-page report, the NAO said that SVPR, a government institution for the elderly, the Ministry for Family and Social Solidarity and the Department of Contracts “acted in breach of legislative provisions” when they sanctioned a negotiated procedure for the management of the new blocks on the basis of urgency.

Key findings:

  • Family Ministry, Department of Contracts and St Vincent de Paul breached the law when awarding €274m contract by negotiated procedure
  • No urgency existed to justify the negotiated procedure instead of a competitive tender
  • Government is paying substantially higher rates per bed for the SVPR extension than it pays to buy beds from the private sector
  • SVPR did not seek clearance from Finance Ministry for management contract
  • Contract was not sanctioned by Cabinet

The NAO said no urgency existed since the new blocks were still under construction and there was ample time to issue a competitive tender. Furthermore, no adequate documentation was found supporting the decision, “detracting from the transparency that should characterise public procurement.”

“The actions were in breach of the Public Procurement Regulations, thereby possibly leading to the invalidity of the procurement undertaken,” the NAO said.

But “aggravating matters” was the commitment to a disburse hundreds of millions of euro in public funds without SVPR seeking the required budgetary clearance from the Finance Ministry.

“Worse still is that a commitment of this magnitude and importance was entered into without the sanction of Cabinet or the parliamentary secretaries directly responsible for SVPR,” the NAO said.

The NAO investigation was requested by the Opposition members on parliament’s Public Accounts Committee in 2018 after the Government Gazette published the award of a direct order to the tune of €273,649,698.

A kitchen and a ‘gift’

The contract came at the tail end of a controversial process that started in November 2015 when a call for tenders was issued for the provision of comprehensive services at SVPR.

The tender was for the construction of a new kitchen at the residence and provision of catering services, but it also included an unspecified additional investment that the bidders had to propose for free.

This unspecified ‘gift’ that bidders were expected to suggest was given significant weighting in the award of the tender.

However, despite this being described as critically important and innovative, the NAO said it was unable to determine how the ‘additional investment component’ in the tender originated.

The report said: “This Office has reservations as to why no parameters that were to guide potential tenderers formulate the additional investment that was to be provided were set. The NAO maintains that this omission allowed for the distortion of the level playing field that should be ensured in public calls for tender…”

Two bidders responded to the call – JCL and MHC Consortium, made up of James Caterers and the DB Group; and CCE Joint Venture, an offshoot of the Vassallo Group.

JCL and MHC were eventually awarded the tender, having proposed as a ‘gift’ the construction of two new blocks at the residence and the receipt of annual cash payments for 10 years. Two appeals lodged by the losing bidder were rejected.

The offer made by the JCL and MHC consortium was of €15.7 million for the catering aspect and €29.3 million for the additional investment.

However, subsequent negotiations saw SVPR request the construction of four blocks instead of two. The additional blocks were to replace the annual cash payments and the construction had to be completed within the first three years of the contract.

The NAO said that the change in terms accelerated the delivery of beds at SVPR but gave rise to obligations since the additional investment was contingent on government awarding the management of the new blocks to the consortium.

“This obligation not only put an added onus on government, in that it now had to enter into negotiations for the provision of this service, but also rendered it at the willing mercy of the consortium in that government could not explore more advantageous ways of managing the additional blocks,” the NAO noted.

Inflated bed prices

However, the audit also found that prices per bed quoted by the consortium for the management contract were substantially inflated when compared to beds for the elderly that government was buying from the private sector.

The NAO found that a discounted price agreed with the JCL and MHC Consortium saw government agree to a €99.17 daily per resident per occupied bed and €92.39 daily per resident per available bed.

Rates paid by government to private contractors at the time stood at an average of €51.06 per occupied bed night for persons with a high dependency. The highest daily rate paid by government to a particular home was €63 per occupied bed night.

In November 2020, when the blocks were formally handed over the rates were revised upward to €118.44 and €110.35 for occupied and unoccupied bed nights, respectively.

A comparative exercise carried out by the NAO showed that the average daily rate charged by service providers under the Buying of Beds Scheme in 2020 found that the average daily rate for a highly dependent resident per occupied bed was €65.13 in homes.

The NAO commented that this was a “significant discrepancy, which detracts from the value for money sought by the SVPR”.

Read the full NAO report below: