By: Paul Emanuelli
This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its March 2020 report entitled The Disposal of the Site Formerly Occupied by the Institute of Tourism Studies, Malta’s National Audit Office (NAO) found that weak negotiation planning in a flawed Request for Proposals (RFP) process compromised the government’s ability to obtain a favourable outcome in the disposal of a major government asset. The report dealt with the sale of a government building previously used by the Institute of Tourism Studies (ITS) and the unnecessary urgency that compromised the government’s ability to realize appropriate competition and appropriate returns for the sale of the building:
In the NAO’s opinion, the decision to dispose of the site was inappropriately prioritised over the relocation of the ITS, when reason would dictate that the inverse should have happened. The false sense of urgency that drove Government to dispose of the site, despite the fact that no alternative premises had yet been secured for the ITS and that the development masterplan for the area had not yet been set, was of concern. The evidence reviewed by this Office indicates that the relocation of the ITS was a secondary effect of the decision to dispose of its premises, with no reference to the plan to relocate the Institute featuring in any strategic document or policy related thereto. Further shortcomings in terms of governance were that the basis of the decision to relocate was not supported by any analyses, while Government failed to involve the ITS Board of Governors in a key strategic decision such as this.
The NAO also raised concerns over the lack of transparency in the RFP process used to sell the building, noting that the failure to promote the residential component of the project, which was key to its financial viability, undermined broader interest in the bidding opportunity:
The second element reviewed by the NAO related to whether the principles of transparency and equity, and equal treatment to all potential bidders, were assured in the processes that led to the transfer. An element of concern in terms of transparency arose with respect to the information disclosed in the RFP. Although the residential component of the project was key in securing the viability of this project, this element was given limited exposure. Instead of being given the prominence this component warranted, which would have contributed to the generation of interest in the project and ultimately been of benefit to Government in maximising revenue, this information was relegated to a detail in information made available by Projects Malta Ltd, which information was to be disclosed once interest in the RFP had been registered.
The report also raised concerns over a subjectivity of the evaluation criteria used by the evaluation team, noting that only one bid was received, which compromised the ability to compare competing offers:
The NAO considered the evaluation criteria somewhat subjective, failing to specify in sufficient detail the basis for the allocation of marks and only providing a high-level overview of the criteria of adjudication. In response to queries raised by this Office, the Chair Evaluation Committee stated that he was not involved in determining the criteria and that the subjectivity inherent in the evaluation process was countered through the consensus reached by all members. On the other hand, the former Executive Chair Projects Malta Ltd indicated that the criteria had been set by the Advisor OPM. However, the former Executive Chair Projects Malta Ltd maintained that he had reviewed the RFP prior to its issuance and had considered the evaluation criteria adequate. Nonetheless, he did not anticipate that the RFP would only attract one bid, which rendered the process of evaluation more challenging as there were no comparators. A conflicting account was provided by the Advisor OPM, who claimed that he was not involved in setting the evaluation criteria, yet contended that such criteria were not a requirement of the Disposal of Government Land Act.
The NAO also raised concerns over how the government conducted its negotiations with the proponent, noting that the negotiation committee and its chair played a negligible role in the dealings and that they had to be supported by the Prime Minister’s Office and external consultants:
Nevertheless, major concerns emerge with respect to the role played by the Negotiation Committee. The NAO’s attention was drawn to the fact that the input of the Chair Negotiation Committee and one of its members was negligible. This shortcoming was partly mitigated by the Advisor Office of the Prime Minister, who was a member of the Negotiation Committee, and who assumed a disproportionately prominent role to compensate, and partly through the exceptional input of Deloitte in services provided to Government.
The NAO also raised transparency concerns due to the lack of record-keeping during the negotiations process, which resulted in the failure to implement proper governance standards for the major project:
Similarly significant was the fact that no records of negotiations undertaken were made available, which constrained the NAO from establishing a comprehensive understanding of the negotiation process. This shortcoming in the workings of the Negotiation Committee grossly detracted from the expected level of governance that was to regulate such a process. This concern arises not only in respect of the meetings held by the Negotiation Committee, but also extends to others held with various Ministers of Government towards the end of the negotiation process.
As this report illustrates, imposing artificial urgency on complex procurement projects can compromise the disclosure of material project information and the formulation of sound evaluation criteria, while also undermining market interest in responding to an opportunity and resulting in weak project governance during evaluations and contract negotiations. Project teams would be well served to build enough time into their project timeframes to allow for the proper execution of their objectives in accordance with appropriate public sector governance standards.
