Landscaping consortium breached contract several times, Auditor General finds

Auditor General finds contractual breaches in ELC partnership which should have led to contract termination

The government could have pulled out of its public-private partnership with the Environmental Landscapes Consortium (ELC) as a result of several contractual breaches, but a weak and understaffed monitoring unit resulted in “tacit consent”.

The public-private partnership (PPP) between the government and the consortium responsible from landscaping Malta’s roundabouts and public gardens has been in place for 15 years, despite the negotiated contractual rates that the NAO described as “not favourable to government”.

The government’s expenditure since the initiation of this partnership in 2002 amounted to over €100 million.

A performance audit carried out by the National Audit Office on the PPP questioned the public sector’s administrative capacity to negotiate, implement and monitor the contract.

The NAO conceded that the ELC was instrumental in bringing about positive change, but questions arose on how the original 2002 agreement – and the two subsequent contract extensions – were not awarded through competitive tendering.

“Government did not always reap the full benefits in terms of sites serviced since the footprint capacity of landscaping maintenance as provided for by the Contract remained not fully utilised,” the National Audit Office said.

“This ultimately led to government incurring additional expenses as ELC, and to a lesser extent other suppliers, were awarded other contracts where the possibility existed for such works to be undertaken through this PPP agreement.”

According to the NAO, the contractor also failed to adhere to contractual provisions: contractual non-compliance included the contractor’s failure in seeking authorisation from the Malta Embellishment and Landscaping Project (MELP) monitoring unit prior to effecting changes in deliverables, as well as, the lack of insurance covering all landscaping operations and a bank guarantee intended to serve as a performance bond.

Furthermore, the PPP agreement did not clearly specify applicable VAT exemptions on payroll costs. “These circumstances highlight that contractual and monitoring mechanisms intended to ascertain that service delivery complies with contractual obligations were not fully operative,” the audit found.

The NAO found the monitoring unit to be “understaffed” and unable to cope with the administrative and operational burdens.

“As a result, monitoring is reactionary and Government’s enforcement is weak. In circumstances, government’s position shifted from one where action could have been initialized to dissolve this PPP agreement, to one where prolonged weak enforcement implied tacit consent,” the NAO stated.

A representative random sample comprising 76 out of a population of 1,682 landscaped sites across Malta and Gozo showed that 62 (82%) were well maintained. The main problems with the remaining sites related to littering and over-grown weeds. This audit also noticed that the quality related to the maintenance of landscaped sites improved considerably over the past two years.

Upgrading of existing landscaped areas and new projects, involving costs of around €400,000 annually, were delivered, generally, in accordance with contractual obligations and MELP’s approval.