Issue link: https://maltatoday.uberflip.com/i/1510560
3 maltatoday | SUNDAY • 29 OCTOBER 2023 NEWS the word go. But what were the other red flags along the way that led to the an- nulment of the entire concession? A missing memorandum of un- derstanding Between 2017 and 2018, one of the VGH investors submitted doc- uments in court while filing two warrants of prohibitory injunction to prevent the sale of VGH Ltd to Steward Healthcare. One of the documents presented was a mem- orandum of understanding be- tween the key shareholders. In this document, it appeared that they had entered into an agreement with the government to build and develop a "world class healthcare facility" in Gozo. This document was signed in November 2014, predating the request for proposals issued by the Maltese government in March 2015. Yet, what was outlined in that agreement overlaps heavi- ly with the eventual concession deal. It described a partnership involving the takeover of the Gozo General Hospital, the building of a medical college, and the potential acquisition of St Philip's Hospital or St Luke's Hospital. According to the NAO, this doc- ument shows that the concession was pre-agreed, and the procure- ment process undertaken was "a superficial exercise leading to an already determined outcome". Subjective evaluation criteria The NAO had also remarked on the evaluation criteria used to as- sess the bids received. The criteria were given from the outset, but the NAO said they "did not pro- vide a sufficiently robust mecha- nism to determine which propos- al best met government's stated needs". The office said that the evalu- ation criteria was too subjective, "allowing for considerable in- terpretation in the allocation of marks". Apart from this, the term set for the concession was also deemed too short by the NAO. "Good practice dictates that the term be determined by allowing a sufficient period for the con- cessionaire to recover the invest- ment made and register a reason- able profit. In this case, no such analysis was undertaken, with the term, and its subsequent option to extend, set arbitrarily." All bids disqualified Only three bids were submitted for the concession, including that of VGH. But beyond that, the two other bids were disqualified on the grounds of administrative non-compliance and other seri- ous shortcomings. This left little competition for VGH to secure the tender. VGH was the only company to provide an obligatory bid bond. In the case of Image Hospitals, one of the three bidders, the cop- ies of the bid were marked and signed incorrectly. A business plan was not provided either. The other bidder, BSP Investments Ltd, did not provide a financial proposal, copies of the bid, nor a business plan. No business expertise VGH was set up in Malta a few months before the request for proposals was published. The company was fully owned by Bluestone Special Situation 4 Ltd, forming part of Oxley Group. When submitting their bid, the companies had to provide expe- rience of their professional and technical qualifications, as well as management experience. But the business experience cited by the VGH was not attributable to it, but rather to the Oxley Group or partners. The NAO flagged that the Oxley Group had undertaken healthcare projects in the past, but these were not related to hospital manage- ment. "This Office maintains that the only relevant operational and management experience cited was limited to two of the VGH's key staff, that of the CEO and the pro- ject director." Contractual deviations Several points were changed between the initial request for proposals and the final contrac- tual framework. These included extensions to the temporary em- phyteutical term, the ground rents payable, and the occupied areas within the sites. These deviations and inclusions in the contracts changed the scope of the concession, according to the NAO, and altered the risk for the Maltese government, as well as the profitability of the project. "Graver still was the govern- ment's failure to consult with crit- ical stakeholders. This omission resulted in the concession failing to meet its intended objectives, be it the health-related improve- ments originally envisaged and the classification of the concession as off-balance sheet, which failure implied that the VGH's capital expenditure on the project was registered on the government's accounts," the NAO said. The NAO said the Labour ad- ministration quickly revised VGH's deliverables, in a way that was "consistently adverse to gov- ernment, with a significant re- duction in services without any change in the compensation due". Most glaring was a mismatch of labour resources allocated to the VGH by the government with the charge that was to be recovered. The discrepancy arising from this mismatch was borne by the gov- ernment. Missed milestones Several milestones were laid out in the concession agreement. These milestones, including the renovation of Gozo General Hos- pital, were to be reached by 31 De- cember 2018. None of the mile- stones were reached by VGH by the time the concession was trans- ferred to Steward Healthcare. The NAO blamed these short- comings of the investors' inability to secure financing. "All VGH's commitments regarding the en- visaged improvements to infra- structure and services were ren- dered unattainable in view of this failure." But the government allowed these failures to slide. Instead, government representatives kept endorsing waivers to the financ- ing requirement, "perpetuating the failure that this concession came to represent", the NAO said. The next steps? The courts have annulled all contracts tied to the concession, but there could be movements once the magisterial inquiry into the deal is concluded. It was Repubblika that in 2019 asked for an inquiry into the transfer of three public hospitals to VGH to establish whether min- isters Edward Scicluna, Chris Car- dona and Konrad Mizzi, as well as Technoline managing director Ivan Vassallo had given the VGH investors unfair advantage in the contract's selection process. At first, Magistrate Claire Sta- frace Zammit upheld Repubbli- ka's request. But Mr Justice Gio- vanni Grixti later overruled the go-ahead, saying that the facts brought to court were simply a collection of journalistic opin- ions and blogs which Repubblika chose to cobble together. Repubblika's lawyer, Jason Az- zopardi, subsequently filed a sec- ond application in 2019, alerting the court that the day after the NGO had formally requested the inquiry, "Tumuluri placed nine of the previously hidden Jersey com- panies involved in the Vitals Glob- al Healthcare (VGH) concession's web of offshore companies and contracts into liquidation." In requesting the inquiry, the Repubblika lawyer asked the inquiring magistrate to issue, amongst other things, an urgent European Investigative Order, to preserve the evidence and avoid the stultification of any eventual magisterial inquiry. EIOs are legal instruments meant to facilitate cross-border evidence-gathering in criminal investigations. Once issued by a judicial authority in an EU mem- ber-state, the issuing country is empowered to make use of evi- dence gathered during criminal investigations carried out in other EU member-states. It does not look like the EIO was issued, however. In a clamorous twist to the saga, Joseph Muscat's house in Burmar- rad was searched by the police in January 2022 on order of the in- quiring magistrate. By then, it had been revealed by the media that Muscat had re- ceived overseas consultancy pay- ments after he left politics from a company with links to Steward Healthcare. Subsequently, it was revealed that Muscat had also received payments from a Swiss company Accutor that was origi- nally called VGH Europe. Muscat has denied any wrong- doing, insisting the work was le- gitimate and is accounted for. Four years on from the filing of Repubblika's request for the inquiry, the conclusion of this process is now understood to be close at hand, the likely time frame being described as "weeks." red flags of the hospitals scandal Three public hospitals, including St Luke's, were granted on concession to the obscure VGH, which went on to transfer the arrangement to Steward Health Care. Armin Ernst (inset) had first worked for VGH, left and returned as CEO of Steward to help them acquire the doomed concession. The contract has now been cancelled by the Maltese courts.