The government “discriminated in favour” of bidders with diesel engine proposals when it changed the law raising emissions thresholds, according to the European Commission.

The accusation was made in a letter Brussels sent the government last June and which was made public yesterday by Labour leader Joseph Muscat. The multi-million euro tender was eventually awarded to Danish company BWSC, which proposed eight diesel engines for the Delimara power station extension.

The government kept the letter under wraps and the fact that it had been sent was only revealed in The Sunday Times earlier this month.

Dr Muscat demanded the government now publish the reply it had sent the Commission.

The government, however, refused, saying it was normal practice not to publish any correspondence with the Commission while the case was still pending. It insisted the concerns raised by Brussels had been answered.

“The government is open to provide the required information. The Auditor General was given all the information before concluding his independent investigation that lasted 11 months,” the government said in an official statement.

Addressing the press in his office at the Ħamrun Labour headquarters with his leg still in plaster after he fractured his ankle during the Ball of the August Moon, Dr Muscat said European Commission vice president Michel Barnier wrote to the government on June 3 expressing serious concerns about the tendering process.

The letter was the first step in a protracted process that could lead to legal action against the government.

In the letter, the Commission expressed concern over changes to a legal notice that regulated emission levels in January 2008. The changes increased the limit values for diesel powered plants, which, in turn, brought about a change in the technical specifications of the tendering document.

Had the emission levels not been changed, the likelihood was that the diesel engines proposed by BWSC and German diesel-engine company MANN would not have qualified, leaving only Israeli bidder Bateman with its gas powered turbines in the running.

The Commission said the change in technical specifications could constitute a breach of equality and non-discrimination rules and could have violated various other directives.

Brussels also pointed out that the changes in the legal notice had nothing to do with the correct transposition of EU legislation, as the government claimed.

“The government’s excuse was a lie,” Dr Muscat said yesterday, lambasting the Prime Minister for not publishing the Commission’s letter.

For the sake of transparency, Dr Muscat insisted, the government must now publish the reply it sent Brussels.

The Commission also noted that failed bidders were not informed in time by the Contracts Department that the tender was awarded, not giving them sufficient time to appeal as was their right at law. As a result, in this case too, the Commission warned that EU directives could have been broken.

“The government constantly attacked us by saying that none of the failed bidders had appealed. But no one had appealed because no one knew that the tender decision had been taken,” Dr Muscat said.

Sitting next to Dr Muscat, Labour MP Evarist Bartolo said the PL had submitted new information to the Auditor General about the contract awarded to BWSC.

He said that since the Auditor had submitted his report at the end of the investigation he had conducted, the PL had received new information, mostly on the basis of the recent annual general meeting of Mitsui Engineering Shipbuilding Co. Ltd in Tokyo.

Mr Bartolo explained that BWSC Malta was a subsidiary of Mitsui Engineering. So too was MANN, which was runner-up for the Malta contract and which builds power station equipment for BWSC.

Yet, another subsidiary was Sumitomo Bank (SNBC), which, in mid-2005, loaned Enemalta €210 million.

Mr Bartolo said the BWSC scandal was riddled with intrigue and resembled an octopus with many tentacles that, ultimately, led to the same beneficiary.

He noted that audit agency KPMG, which drew up the government report on the power tariffs, was also used by BWSC.

Brussels' concerns

Excerpts from the Commission’s letter to the government, dated June 3, 2010.

On the government’s claim that the legal notice regulating emissions from power stations was changed to comply with European legislation.

“The change in the technical specifications occurred at a very late stage, just few days before the expiry of deadline for the receipt of the final bids so that the deadline for submission of the final offers was extended by four weeks. The change was not necessary to comply with European legislation, the LCPD (Large Combustion Plant Directive), as the Maltese authorities seem to indicate in their reply of July 23, 2009.”

On the change that gave BWSC and MANN, which were competing with diesel engines, a clear advantage.

“The change consisted in the increase of the emission limit values for the diesel plants. This constituted a clear advantage for the bidders that had presented an offer for a diesel powered plant, as the possibility for a plant to produce a higher level of emissions has a clear impact on the costs of such plant. On the contrary, the emission limit values for gas powered plants were not subject to any changes.”

On discrimination

“In the circumstances of the present case, the Commission is of the opinion that the changes in the technical specifications introduced by the awarding authority with regard, in particular, to the emission values for diesel powered plants and occurred at such a late stage of the tender procedure, discriminated in favour of the bidders that presented an offer for a diesel powered plant, at disadvantage of the bidders that had presented an offer for a gas powered plant.”

On the failure of the Contracts Department to directly inform unsuccessful bidders that the tender was awarded, effectively denying them the right to appeal within the stipulated time frame.

“... having the awarding authority failed to effectively and directly inform the unsuccessful bidders about the adoption of the award decision, and therefore to guarantee that the decision can be subjected to effective review, the Republic of Malta could have violated its obligations from article 49 of Directive 2004/17/EC in conjunction with article 1(1) and (3) of directive 92/13/EEC.”