Issue link: https://maltatoday.uberflip.com/i/453115
maltatoday, WEDNESDAY, 28 JANUARY 2015 13 Business Today T his article will reveal how SMEs try hard to gain access to winning gov- ernment tenders and even after they fail they toil to remain competitive and technically competent to be eli- gible for the next opportunity. It goes without saying that prejudice against newcomers on the market is ingrained in the establishment, which is traditionally cornered by established forms/consultancies. This reigns supreme (particularly for professional services) and many SMEs wait in the eternally re-generating queue to enter the Pearly Gates of accredited firms. In this cognizance one reads about legislation at EU level, which aims to overhaul the current public procurement rules and for the first time sets out common standards on contracts to boost fair competition and ensure best value for money by introducing new award criteria that place more emphasis on environmental considerations, social aspects and innovation. It is hoped that the rules will also make it easier for small and medium-sized firms to bid. A typical case which occurred last year concerns an invitation to tender by WasteServ for the selection of an external auditor to provide audit services for five years. The author applying on behalf of PKF tendered and was the cheapest among five bidders (criteria for selection was exclusively on price). The evaluation committee wrote to PKF on December 1 (some nine months later) informing it that the tender had been cancelled on the grounds that quote:- The economic or technical parameters of the project have been fundamentally altered. Unquote. This is weird. As WasteServ is a limited liability company it is bound to put to tender calls for engaging an auditor to fulfill its statutory audit requirements. PKF appealed to the Public Contracts Review Board (PCRB – members appointed by the government) on January 15, 2015, stating its objection; sensing foul play. The bidder approached the Review panel with its views that as WasteServ is obliged under Companies Act 1995 to submit its accounts for audit then prima facie nothing changed to fuel WasteServ's whimsical cancellation of the tender nine months after its issue and after opening the bids for public display. The argument was made that if the parameters of the tender had fundamentally changed as implied by the contracting authority then the rules state that first it returns unopened all bids and then cancel. Regrettably this was not forthcoming. The underlying binary code to this poor excuse for a cancellation transpired within the first minute of the hearing in front of the review panel chaired by Dr Anthony Cassar (himself a retired auditor). The chairman made reference to a direct order having been awarded, to one of the other bidders in the original public call, and who was not the cheapest bidder therein, at a time when the cheapest bidder and appellant had not yet even been notified of the cancellation, let alone had their opportunity to present their objection. The result was a blatant discrimination among the five bidders – ie, choosing the second cheapest. WasteServ's directors, in an internal resolution, empowered the CEO to issue a direct order on grounds that the service had to cover both a statutory audit and an IT inspection (this was not expressly requested in the tender document). All this therefore without the appellant (in its ranking as cheapest eligible bidder) ever having been asked by the contracting authority whether it had the resources necessary to perform the extended IT inspection at hand, as good ethics would dictate. Very surprisingly the review board's final decision found in favour of the contracting authority, stating that the appellant bidder had signed off a declaration unconditionally accepting the cancellation of the tender and that the direct order was permitted under the relevant regulations. The remorse in the decision statement was merely a board feeling 'perturbed' by the perceived lack of 'prudence' in the contracting authority's behaviour. No word about verification or affirmation, no intervention or even citing of the proper clause in the regulations, that in fact were not seen to have been properly invoked or upheld by the contracting authority or PCRB respectively, as no transparency was offered or sought at any point. The remedy: A mere 'recommended' refund of objection expenses, that can and often is not upheld by the contracting authority under a claim of covering own objection hearing expenses. The public at large may overlook this case, saying that it is not an earth shattering one since the audit budget was under €50,000, but for sake of transparency and good governance why do we bother to appoint review boards when in such a case they simply rubber stamp such jagged inconsistencies. Readers may be interested to know that the senior partner of the preferred bidder happens to represent the government's interests on the board of a leading local bank. Natural justice leads us to believe that transparency needs to be manifested and be seen to be applied in public procurement for professional services. Then it follows that 'the economic or technical parameters of the project' of their intrinsic nature can have no opportunity for 'fundamental alteration' as has been suggested in the cancellation notice and this since the reason upon which the recommendation for cancellation of this tender is based, in its totality lacks any empirical, statutory or other basis that following defensible logic could ever render cancellation of such tender justified. In the face of this, the rule of law will permit no 'economic or technical parameters' that may be conceived by the wildest stretch of the WasteServ's imagination that will, as a result, directly and inextricably contribute to the aggravation of an already defaulting position in breach of the law by the same authority. As PKF is the identified cheapest bidder in a public call for tenders where the subject matter is the performance of a mandatory statutory audit, the purported cancellation of this tender also invariably, directly and inextricably causes the rights of PKF to concurrently be severely breached and prejudiced in what is being perceived to be a discriminatory action against the aggrieved bidder. So the only solution is the tortuous road of court litigation. But the tale of not meeting its public obligations towards auditing has plagued WasteServ in the past under the previous administration. Going down memory lane one reads in the media how the opposition spokesman for the environment, Labour MP Leo Brincat (now himself minister responsible for WasteServ), had published a letter from its former auditors complaining to the former finance minister of having been berated by his former head of secretariat over their audit reports. It was the outgoing auditor who had in fact made reference to numerous shortcomings in their audit of the Wasteserv accounts, especially over an inadequate asset inventory that failed to reconcile a book value of €66 million with the original cost of €86 million. This had allegedly prevented it from issuing an audit opinion on the existence and valuation of the six assets in question. In another instance it was the Auditor General (NAO) who commented unfavorably in a report entitled 'An Analysis of WasteServ Malta Limited's Procurement: A Case Study Perspective'. The main objective of this audit was to determine whether WasteServ Malta Limited (WSM) procurement practices were compliant with and adhered to pertinent public procurement regulations. No wonder that the Auditor General somewhat got hot under the collar. He reported misgivings on a randomly selected five case studies amounting to €34.32 million. In addition to the five case studies, NAO reviewed the appeals lodged by third parties in relation to WSM contracts with the Public Contracts Review Board during the period 2011-2012. One notes that discrepancies on appeals by aggrieved bidders may have been indicative of poor estimate compilation, with insufficient attention directed towards the sourcing of essential market intelligence. The case studies included the construction of a leisure area at the Marsaskala Family Park and the improvement undertaken with respect to millions invested in the Sant'Antnin Waste Treatment Plant and Material Recycling Facility. To conclude, one is saddened to read in the NAO report that out of the 15 appeals lodged against WSM during the period 2011-2012, 10 of these objections were upheld by PCRB. Having sustained sheer injustice the author hopes that WasteServ in the future learns to respect the rules of procurement set by the Director of Contracts and jettisons the style of riding roughshod over bidders. Issuing a direct order to prefer a bidder so very far down the timeline of open public tender proceedings and then waiting three months to cancel the tender on flimsy pretexts is not stuff that brightens our country's zeal for transparency and good governance. As always, the public expects to be adequately served by WasteServ. George M. Mangion is a partner in PKF, an audit and business advisory firm gmm@pkfmalta.com George Mangion WasteServ – changing the goal posts