Campus Hub audit: ‘Serious doubts’ on tender process fairness

NAO investigation of university campus hub concession awarded to Vassallo Builders finds nothing illegal but casts doubts on whether process respected ‘free competition’ • Former rector defends tender process, says advice came from Projects Malta

Former rector Juanito Camilleri
Former rector Juanito Camilleri

An audit of the University of Malta’s tender award for the development of a campus hub to Vassallo Builders has raised “serious doubts” on fairness in the process.

The National Audit Office said the university should have entrusted the 2015 tendering process to the Department of Contracts. The report was tabled in parliament last week.

The award of the concession was made through a Request for Proposals (RFP) issued by the UOM, then led by former rector Juanito Camilleri. The RFP attracted only one bid from Campus Residence Malta Ltd, a subsidiary of Vassallo Builders.

But “multiple changes” to original plans made after the concession was awarded, including the incorporation of the medical school in one of the blocks and an increase in commercial space “raise serious doubts about fair competition.”

The NAO also lamented the absence of consultation at the initial stage of the project noting that this led to the criticism of various aspects of the project by students and academics.

Department of Contracts would have done it better

The concession for the campus hub consisting of student residences and various amenities including retail, a food court and an underground car park over a floor area of 80,709sq.m was awarded to Vassallo Builders Group Ltd for 60 years in return for an annual ground rent through a Public Private Partnership (PPP) venture.

According to the NAO the tendering process complied with the legislative framework regulating public procurement and the project largely made economic and financial sense especially in view of the fact that the university was precluded by budgetary constraints from auto financing the project.

But the decision to issue an RFP meant that the University of Malta had “forfeited the opportunity of benefitting from the expertise of the Department of Contracts”.

According to the NAO the Department of Contract ’s expertise would have contributed towards more safeguards for and stakeholders’ interests as would have broadened the competitive element surrounding this concession, possibly attracting international interest in the project.

“Moreover, through this approach, publication of the RfP was mainly limited to local sources, thus not ensuring widespread exposure overseas,” the report states.

During the audit the university insisted that its former Director of Procurement had discussed this project with the Department of Contracts which had referred them to the government’s privatisation unit MIMCOL for assistance. However, when further queried by the NAO, the university was not able to support this statement with the appropriate documentation and audit trail of such discussions.

On its part the Department of Contracts insisted “that it was neither involved nor granted its approval for the UOM to receive competitive bids relating to this concession”. Moreover, the Contracts Department denied referring the University to MIMCOL for assistance.

The NAO identified several short comings in the RFP including the absence of a right of appeal clause, a standard clause which “should always be included in a tendering document”. This clause safeguards bidders’ interests and ensures that a fair tendering process is carried out.

Neither did the RFP specify the minimum ground rent to be paid by potential bidders to the university which was only established when the deed was signed in 2019. The deed sets out the yearly ground rent at €150,000 annually for the first three years and increases through an “escalation” formula in subsequent years.   

Moreover, no provision was made for clawback provisions through which the University would benefit from a share of the profits generated throughout the entire lifetime of the concession. Instead, the university had opted for “a secure income stream rather that profit sharing,” in a way that if the project registered a loss, it would still have an income stream. However, the NAO contends that securing a secure income stream and securing a share in profits “are not mutually exclusive”.

Lost consultation report

The report also laments no formal public consultation and broad discussion with major stakeholders prior to the issue of the Request for Proposals which eventually led to student protests related to car park fees.

The report refers to the criticism made by students and academics on various aspects of the project. The report attributes this to the fact that “stakeholders were not kept fully abreast of major developments and the project” and to the absence of an Environmental Impact Assessment that triggers an automatic public consultation process.

The report also reveals that a detailed project financial evaluation was only carried out as part of the tender evaluation process rather than at the project inception stage. The university argued that, at the preliminary stage of this project, it sought consultancy services with respect to the project’s viability of the proposed approach. Nonetheless, by the time of drafting its report, the NAO had not received from the UOM the ensuing consultancy report, stating that it was lost during the transfer of the Malta University Holdings Company (MUHC) offices from Lija to Campus Hub.

The medical school quandary

The auditor also refers to the lack of consultations with the Mater Dei Hospital (MDH), especially since the land earmarked for the project had planning restrictions limiting its use to education and health.

The insufficient consultation and coordination with the hospital had a significant effect on the completion of the project due to a dispute with government over the relocation of the medical school to the campus hub.

This is because the development permit allocates one of the blocks in the campus hub for the construction of the medical school. According to the NAO this implies that the university allowed for a contract variation that went outside the scope of the RfP for a university residence and community complex.

Through such a contract variation the university “has encroached on the principle of fair competition as, at RFP stage, bidders were not aware that six levels in one of the blocks could cater for the medical school”.

This also implies that potential bidders were not able to anticipate the possibility of generating revenue through the leasing of space within the Campus Hub to accommodate the medical school. This situation arose because “neither government nor university have issued a separate call for bids to relocate the medical school”.

This quandary meant that the medical school remained incomplete by the end of 2022 when the NAO report was finalised.

The car park quandary

The UOM had requested potential bidders to submit a financial option for the lease of underground car parking spaces to cater for the university’s needs.

The Vassallo Group offered to allocate 140 parking slots at the lease rate of €1,060 per slot per annum, increasing annually by the rate of inflation. But the contract signed in May 2019, did not include any such provisos.

The lease of such parking spaces was to be negotiated and concluded directly between the successful bidder and the Ministry for Education.  But no such agreement was ever reached.

The Auditor General concluded that this situation could have been averted through proper planning during the competitive bidding stage.

Juanito Camilleri: Projects Malta suggested RFP tendering process

Speaking to MaltaToday former rector Juanito Camilleri insisted that his role in the project ended in June 2016 after his term as rector ended just after the preliminary agreement with Vassallo Builders was signed. This means that subsequent changes, which according to auditor departed from the original RFP, happened at a later stage.

He explained that in 2013 faced with the imminent expiry of the lease on the university residence in Lija, the university under his tenure had bought  land  which previously  housed the Calamatta Garden Centre, to house the new residential quarters. The  land was bought with government funding following a deal in which the university relinquished its rights on the medical school located in St Luke’s hospital, granted to it by the British colonial authorities.

Camilleri strongly denied that the request for proposal was issued in the absence of consultation pointing out that the university council, which includes all stakeholders including student, academic representatives and government representatives, including the permanent secretary, was constantly involved in the process.

“I assure you that the rector cannot take any major decisions of such a financial magnitude without the prior approval of the University council,” Camilleri said.

He also insisted that the Education Ministry was also constantly kept abreast both before and after the change in government in 2013. Moreover, it was the Education Ministry which had instructed the university to seek advice from Projects Malta, the government entity responsible for private public partnerships. It was Projects Malta which advised the university to issue a request for proposals, Camilleri added.

In its report the NAO did not refer to any role played by Projects Malta but stated that the university had claimed that it had sought the advice of the government’s privatisation unit Mimcol, which in turn denied any involvement.

Camilleri had no issue with the advice that was given to the university by Projects Malta, insisting that it made sense to issue such a call since they were looking for an operator who had to create an innovative economic model to recover the substantial investment made over a number of years, only to have it returned to the university when the 60-year lease expires.

“I would have preferred to have more bidders and not just one as that would have given us a wider choice but everyone could apply for the RFP and I cannot understand why the auditor is saying that international bidders were excluded as anyone could see the RPF.”

While pointing out that he had no further role in the project after his term as rector expired, he is sure that the subsequent changes “would have surely followed an economic logic” adding he had full trust in his successor Alfred Vella who is also accountable to the university council.

He also said that his vision for the project was that of turning the university into a living hub on a 24 hour and 365 days basis. While admitting that some of the commercial development “does not reflect what he had in mind” and that he would have liked to see a book shop and university pubs, which could also be a venue for student gigs, overall, the project is in line with the original vision.