State school transport suppliers ‘bullied’ ministry into substandard deal

Audit warns that education ministry's negotiating tactics in 2011 had led to a substandard long-term deal for the provision of state school transport 

The seven-year contract is set to expire at the end of the 2017/18 scholastic year
The seven-year contract is set to expire at the end of the 2017/18 scholastic year

The seven-year contract with five transport operators negotiated by the last Nationalist administration has come under fire from the National Audit Office, which warned that the deal did not give the state value for money.

The agreement was signed in December 2011 between the education ministry, back then run by Dolores Cristina, and five school transport services providers – with the Unscheduled Transport Service Consortium (UTS) and COOP Services Ltd (COOP) entrusted with 96% of the total routes, with Transport for Disabled Persons (TDP), Peppin Transport Ltd and Paramount Garage serving the remaining 4% of routes.

The deal cost the government around €6.1 million per year, meaning that it would have forked out €42.7 million by the time the contract expires at the end of the 2017/18 scholastic year.

However, the NAO criticised the education ministry for only commencing the procurement process one month before the 2011/12 scholastic year, warning that it allowed the suppliers to bully the ministry into accepting their demands by threatening to withdraw from negotiations and therefore not provide their services to students if their requests were not met.

Indeed, it noted that the “generally overbearing conduct” of suppliers and the education ministry’s “overall weak approach” led to the significant forfeiture of value for money in the acquisition of state school transportation services.

“The ministry’s original intention of not re-securing this service through a competitive tender, as dictated by the principles of good governance, but rather to adopt a faster, less competitive procurement approach after the expiration of the previous agreement, contributed to this result,” it said. “This original intention led to the procurement process being initiated only around one month before the commencement of a new scholastic year, thereby limiting significantly the time at the Ministry’s disposal to re-secure the service.

“This consideration put the Ministry in a disadvantageous position from the start, and enabled the suppliers to further extend their adopted hardline approach, particularly through their threats of withdrawing from negotiations and not providing the service if their requests were not met.”

The NAO also observed that the process was further undermined by instances which hinted at the existence of inter-supplier collusive behaviour.

“When faced with this conduct, the NAO however noted that the Ministry largely projected an underlying sense of resignation, which further strengthened the suppliers’ bargaining position.”

The audit office said that the ministry had ended up compromising on contractual conditions in an attempt to push down the suppliers’ original asking price. This resulted in the disproportionate reduction in the expected quality of service - such as waiving the requirements for passenger seatbelts and a performance guarantee, together with the downward revision of contractual service levels when compared to the collective marginal 4% negotiated decrease in price.

In 2011, education minister Evarist Bartolo, who was back then shadow education minister, had pledged that a future PL government would not bind itself to such a seven-year contract.

“It is not acceptable that the contract to be signed with is only with a few large operators, because it creates a monopoly situation and excludes the element of competition which could be offered to smaller operators,” he said.

Bartolo: ‘Future contract will offer value for money’

Evarist Bartolo reacted by pledging that the future contracts that will be negotiated for the provision of state school transport will offer value for money.

“We have taken note of the points mentioned by the NAO and have taken all necessary steps, including legal ones, to ensure that the non-favourable terms in the current contract will be minimised,” the education minister said.

“Negotiations for the new contract will take place reasonably and will offer better value for money.”

He added that he has appointed a working group to evaluate the NAO report and draft a set of negotiating guidelines for the future contract.  

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