The shortcomings identified by the Auditor General in the procurement of legal services by the Privatisation Unit between 2008 and 2013 are being addressed, the Ministry for Investment said in reaction to a report laid on the table of the House on Monday.

The National Audit Office report highlighted the fact that during the period under review, the services of three legal firms were procured for four privatisation processes. The cost of services rendered by the three legal firms totalled €470,979.

Of that amount, 73 per cent of the total fees went to one legal firm alone – Fenech & Fenech Advocates, the ministry pointed out.

The NAO report said that of particular concern was the fact that “the decision with regard to the legal firm chosen for the procurement of legal services during the privatisation process of the Malta Shipyards Limited was taken following a meeting with the Minister of Finance and the Minister for the Infrastructure”.

It said that the point of contention in this regard further intensified when considering that the same agreement with Fenech & Fenech Advocates was extended to encompass the Ricasoli Tank Cleaning Facility privatisation process and the yacht marinas’ privatisations.

Furthermore, no formal letter stating the terms of engagement was drawn up and signed by former Privatisation Unit officials, Mimcol or Fenech & Fenech Advocates.

With regard to the legal assistance provided with respect to marinas privatisation, the chosen legal firm was Mamo TCV, which at the time was Transport Malta’s in-house law firm. Although the assigned work was deemed an extension of the firm’s in-house engagement, the NAO report stated that the rates payable to Mamo TCV for legal work related to the privatisation “were revised upwards”.

In its report the NAO also noted “a general lack of clarity” in the delineation of responsibility between the unit and Mimcol with respect to the privatisations under analysis.

Different parties involved assuming that the other party was responsible

It said this was mainly manifested in the payment processes reviewed, which lacked a coordinated system of invoice endorsement, key in ensuring the appropriate disbursement of funds.

NAO considered the system of checks employed as “weak”, with different parties involved “assuming that the other party was responsible for specific processes and tasks”.

Furthermore, NAO noted that there did not exist a clear responsibility with regard to the issuance of the letter of engagement to firms engaged to provide legal services. In view of the conclusions and recommendations made by the NAO in its report, the ministry, together with Mimcol and the current Privatisation Unit officials, acknowledged that the state of affairs described required the various shortcomings to be addressed.

The ministry has stated on previous occasions that the former Administration’s methods of procuring legal services left much to be desired and that new, more transparent procurement procedures were to be followed.

A number of shortcomings of the previous administration in relation to procurement processes had already been addressed by the current administration, it added.

One of the initiatives taken by Mimcol was that of appointing a procurement committee composed of the deputy chairman of Mimcol, its in-house lawyer and members of management. The committee was responsible for all procurement issues relating to Mimcol.

The aim of this committee was to safeguard the procurement processes and in the coming days it would also evaluate the recom-mendations highlighted in the NAO report.

It noted that the NAO had highlighted the fact that during the privatisation processes reviewed, the delineation of responsibility between Mimcol and the Privatisation Unit was not always clear and this led to certain shortcomings in the procedures applied.

Before the publication of the latest report, the government had already started addressing some of the issues arising from this lack of clarity. As part of this review exercise, it was decided that the Mimcol chairman and the members of the board should no longer be appointed as members of the Privatisation Unit board, contrary to the practice exercised by the previous administration.

Concluding, the statement said the government has also separated the role of the Privatisation Unit from that of MIMCOL. As a first step in this direction, the government has relocated the premises of the Privatisation Unit to an alternative location outside of the MIMCOL premises.