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A flawed process - Mario de Marco

Photo: Darrin Zammit Lupi

Photo: Darrin Zammit Lupi

On July 30, 2015, the Opposition members of the Public Accounts Committee and the Shadow Minister for Energy wrote to the Auditor General and requested that he investigates matters relating to the Electrogas power station.

We asked the auditor to focus on two aspects, namely whether the adjudication process that led to the selection of Electrogas followed the principles of good governance and whether the new power station was a good deal for the Maltese taxpayer.

Our request was formulated into very specific questions. Last week the Auditor General, in a 600-page report, provided the answers to our questions. His conclusions tally with the concerns expressed by the Opposition over the past months and years.

In his damning report, the Auditor General concluded that the adjudication process that led to the selection of Electrogas was a flawed one. He also concluded that taxpayers are being fleeced to the tune of tens of millions of euros every year.

We did not ask the Auditor General to state whether the power station deal was tainted with corruption. That’s the role of other institutions, including the police, which unfortunately are failing to carry out their role or are dragging their feet to the detriment of a thorough investigation.

The report drawn up by the Auditor General, together with the revelations we had over the past weeks, make it more imperative for these institutions to give this matter the attention it deserves.

In our letter to the Auditor General we asked whether the persons adjudicating the bid carried out a due diligence on the bidders particularly on Gasol, one of the lead partners. As stated by the Auditor General, the financial reports of Gasol “clearly indicated the existence of a material uncertainty that cast doubt on Gasol plc’s ability to continue as a going concern, a risk amply identified by the auditors of Gasol plc”.

The Auditor General found “no indication that a comprehensive due diligence review of the two qualified bidders was undertaken during the request for proposals evaluation process. The financial aspect of the due diligence process was not sufficiently robust and deemed inadequate by the Office given the materiality of the project”.

The auditor’s report specifically states that the financial difficulties of Gasol were not considered during the adjudication of bids. One of the largest, if not the largest government tenders, was awarded without a due diligence exercise on the bidders and the technical insolvency of the lead member was all but ignored by the adjudicating board. Incredible but true.

We asked the Auditor General to state whether the State guarantee offered to Electrogas constituted unfair advantage. Without the State guarantee of €360 million, Electrogas would not have been able to raise the necessary finance to carry out the project.

It was not possible for the Auditor General to determine whether the selected model chosen by Enemalta is the best option for Malta

The Auditor General arrived at the same conclusions as the Opposition, namely that no mention of this guarantee was made during the request for proposals stage. This guarantee substantially altered the nature of the tender, rendering it more advantageous to the final two bidders.  The Auditor General deemed this as a significant shortcoming in ensuring the required fairness of the procurement process. This is a serious matter. Any serious deviation from the tender conditions normally leads to the cancellation of the tender.

Finance Minister Edward Scicluna not only approved this guarantee but back then repeatedly defended this State guarantee which was severely criticised by the Opposition. The Auditor General states clearly that this guarantee “was irregular in terms of the guidelines applicable at the time, for the guidelines did not contemplate assistance provided directly to private enterprises by way of security”.

The guarantee exposed the government to risks which could have resulted in “serious repercussions”. Scicluna went against the very regulations that he, as Minister of Finance, is meant to protect.

We also asked the Auditor General to investigate the process through which Gasol was allowed to leave the winning consortium. The NAO found that “the departure of Gasol plc was in breach of the contractual obligations in force at the time”.

The Auditor General, while examining the points put forward by the Opposition, found clear instances of unequal treatment of the bids received by Enemalta. The Auditor General commented that Enemalta went ahead with the project without considering any alternative models for electricity generation.

The absence of detailed analysis, clearly illustrating the costs and benefits of the different options for electricity generation, meant that it was not possible for the Auditor General to determine whether the selected model chosen by Enemalta is the best option for Malta.

The Auditor General’s report is a damning certificate on Enemalta, on the government and more specifically on Ministers Konrad Mizzi and Edward Scicluna. The former was the driver and the latter was the facilitator.

The findings of these reports have to be seen moreover within the wider picture of secret offshore companies being set up at the time that were meant to funnel millions of euros in commissions. The administrative and technical shortcomings pinpointed by the Auditor General, seen in this light, take on a much more sinister outlook.

The Opposition will over the coming days be exposing more of the Auditor General’s findings. But this is not a battle that we should be fighting on our own. Our constituted bodies, particularly the organisations representing the business community, employers and employees must not only take note of this report. They should publicly denounce the way the process was handled. 

The time for sitting pretty is now over.

Mario de Marco is a Nationalist Party MP.

This is a Times of Malta print opinion piece

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