Auditor General indicates collusion in Vitals hospital agreement

In a highly critical report on the Government’s contract with Vitals Global Healthcare for the management of three hospitals, Auditor General Charles Deguara said, inter alia, that he found evidence indicating collusion between those acting on behalf of the Government with the investors of VGH, thereby making the whole process questionable, regardless of whether the process complied with the government’s procedural and regulatory requirements. The report was placed on the table of the House by Speaker Anġlu Farrugia.

The Auditor General found a serious lack of governance and integrity in the procedures used by the government in the award of this hospital concession to Vitals. In a 200 plus page report, Auditor Deguara expresses concern that an agreement was allegedly made with a number of VGH’s investors before the tender was issued, and this in his view was reason enough for the disqualification of VGH from the tenders.

The report states that the overlap between this agreement with VGH and the concession was clear and raised serious doubts and concerns upon the integrity of the eventual concession. He goes on to say that the Audit Office’s concerns increased in light of the Government’s failure to provide the Auditor’s Office with a copy of the agreement.

Mr Deguara says his office has noticed significant shortcomings in the processes that led to the issuing of the tender. He notes that the Health division in the Ministry of Energy and Health was not involved as expected, as the process was led by the Energy division. The report also points out that the Ministry of Finance was not consulted on the financial obligations that the government would have entered into through the agreement. He also says that even the authorization of the Cabinet was not requested before the issuing of the tender.

The Auditor states that of greater concern, in terms of governance, was the fact that no ministerial authorization was requested or provided in connection with this concession, which he said would therefore result in an anomalous scenario where three public hospitals were granted for operation by third parties without anyone actually assuming responsibility for this decision.

The Auditor mentions that the feasibility study lacked an independent analysis. He notes that there were several shortcomings in the tender, the most significant of which was the subjectivity of the evaluation criteria. He says that although the tender submitted by VGH met the requirements set by the Government, he is of the opinion that the tender was strong in form but lacking in substance.

The Auditor goes on to note that report made at the request of the public accounts committee raises serious concernsabout VGH’s documentation as proof of access to funding. He states that a letter issued by the Bank of India sanctioning the financing for “Malta Healthcare Projects” and submitted by VGH was dated 13 March 2015, two weeks before the call for tenders was issued.

The Auditor stated that he considered this letter proof of VGH’s prior knowledge of the planned project and proof of collusion with the Government or its representatives. Other notable shortcomings identified by the Auditor relate to the professional and technical elements of Vitals’ offer. Among others the auditor says that it was evident that the time periods indicated by VGH for the redevelopment of the hospitals were unrealistic. Similarly, the projections on medical tourism were overly ambitious considering that it was revenue projected from this source that was to make the project feasible.

The report states that the tender from VGH was assessed by the Evaluation Committee in terms of its commercial, technical and financial strength, and the degree to which it exceeded the minimum requirements specified in the call for tenders. He states that this evaluation lacked a critical analysis, with several parts of the evaluation report being a repetition of VGH’s offer. The Auditor concluded that the marks given in this process were not entirely merited. The report also expresses concern about the evaluation of VGH’s Financial Health Committee, Vitals’ professional and technical qualifications.

The report states that these considerations must be considered in a much more significant context related to the integrity of the entire procurement process. The Auditor noted that evidence indicating collusive action between parties acting on behalf of the Government with investors of VGH made the whole process suspect, regardless of whether the process complied with procedural and regulatory requirements.
The Auditor’s Office concluded that the audit by the Government of VGH as the preferred bidder for the management of the public hospitals was inadequate.

Auditor Deguara explained that this report only dealt with the procedures for granting the concession for the management of St. Luke’s Hospital, Karen Grech and the Gozo General Hospital and that two more reports were still pending from his Office on the eventual transfer to Steward Health Care.

See reactions below:

Konrad Mizzi appeals to Government to publish Vitals Agreement

Chris Fearne maintains he had no involvement in Vitals Agreement

UPDATED: Adrian Delia asks whether Government will be explaining Vitals Contract