NAO slams ‘opaquely concealed’ VGH negotiations and ‘inconsistent’ testimonies

“The general opacity that characterised the negotiation process limited the verification of that asserted, while the inconsistencies noted in testimonies provided to this office remained a concern,” the National Audit Office’s (NAO) says in its report on the Vitals Global Healthcare (VGH) concession.

This is taken from a segment of the extensive report published last week flagging the main issues the NAO found in the negotiations leading to the 2015 deal, and in which it repeatedly observed that it was “unable to audit” the negotiation process due to failures in basic governance and transparency.

“The information made available to the NAO was severely limited. As a result, it was not possible for this office to understand how key changes to the concession came about, the precise role played by those involved in negotiations and whether critical changes were appropriately endorsed,” the report says, describing this as a “failure on all counts” which gave rise to “the NAO’s gravest concerns”.

The report also attempts to make sense of conflicting versions of events not just from key figures in the selection committees and related sub-committees overseeing the details of the deal but also of inter-ministerial disputes related to “parallel” negotiations happening between VGH and the office of the prime minister.

There were two main committees set up for the negotiations with VGH: the steering committee and the negotiation committee. Both failed to submit adequate documentation of their meetings for scrutiny through the NAO probe.

Besides the inconsistent testimonies and record-keeping, the NAO also slams the failure of individuals involved in the committees to submit requested information on the letters formalising their appointments, as well as their failure to submit declarations on any conflict of interest.

A direct line to OPM

The NAO attributed its failure to adequately scrutinise the deal to two critical issues seen in each committee: the lack of documentation kept by the negotiation committee, and the steering committee’s failure to provide oversight for the negotiations. The NAO described these shortcomings as “a severe failure in governance”.

The negotiation committee was obliged to provide testimony because of its failure to document its work. Another contradiction in this committee’s statements was in the provision of technical expertise which would inform the design of the requirements for the concession.

While the committee had stated that VGH would be supported by Partners HealthCare International, the CEOs contradicted themselves when denying they had any role in the negotiations leading up to the deal.

As for verifying the rationale behind crucial aspects of the deal including commercial clauses included in the contract and positions of compromises reached through the negotiation process, the NAO maintained that “the dearth of information made available precludes this office from establishing an understanding of the work of the committee in this regard”.

Health Minister Chris Fearne had also claimed that the tourism ministry, then headed by Mizzi, as well as the office of the prime minister, had held “parallel negotiations” with VGH, and said VGH went directly to the OPM during negotiations to bypass the ministry for health as well as the ministry for finance in order to “push forward its interests”.

The NAO later described Mizzi’s proximity to the deal, even when portfolios were shifted around following his move to the ministry for tourism, as “anomalous”.

Representatives of the finance ministry repeatedly told the NAO that they were excluded from the concession negotiations, with the ministry’s parliamentary secretary stating that the ministry “was never involved, briefed or consulted” in the process.

The negotiation committee also claimed that it had solicited the advice of the office of the attorney general before signing the deal. However, despite the NAO’s request to both the office of the attorney general as well as the office of the prime minister for a copy of this advice, the attorney general provided limited documentation which could not be used to verify the content of this advice. The office of the prime minister stated that this same advice “could not be traced”.

Hospital CEOs’ conflict of interest

The steering committee involved the direct participation of disgraced former Health Minister Konrad Mizzi as well as officials from his secretariat, the permanent secretary for the same ministry’s energy branch, officials of Projects Malta and ‘outsourced’ third parties.

These third parties included the director of Innovative Architectural Structures, an engineering firm known particularly for its work on major projects like the Fenech family’s Quad Towers; a partner from Labour’s auditors, RSM Malta; Mizzi’s personal lawyer Aron Mifsud Bonnici; and the CEO of Beat Ltd and another friend of Mizzi’s, David Galea. Besides chairing the steering committee, Galea had also been tasked with reviewing the same deal he had approved through one of the many direct orders his firm received from government.

While the steering committee did provide some records of their meetings, the NAO said the parliamentary secretary for the ministry of health had claimed that he was only invited to one of these meetings.

On that one occasion, the permanent secretary claimed that he had expressed reservations which were not documented in the minutes, and was no longer invited. The minutes kept by the committee, however, seem to indicate his attendance on more than one meeting, leaving the NAO unable to determine which version of events was correct.

The steering committee also set up a ‘technical workstream’ subcommittee, which was meant to establish the “health service requirements sought by government through this concession”. The subcommittee consisted of the CEOs of Karin Grech Rehabilitation Hospital and Gozo’s General Hospital and a consultant orthopaedic surgeon from Mater Dei.

While the CEO of Beat Ltd insisted that this subcommittee had negotiated directly with VGH, the CEOs of the two hospitals “denied any direct interaction with the concessionaire and indicated that they were not aware of having formed part of a committee or structure that negotiated the health service requirements of the hospitals they represented”.

The NAO also took the CEOs to task over their possible conflict of interest due to the fact that they were later engaged by VGH as their employees, with both denying that such a conflict of interest existed. This also jars with the Beat Ltd CEO’s claim that the subcommittee was supposed to oversee negotiations, when two of three members claimed they were not involved altogether.

The NAO noted that correspondence reviewed in relation to the deal further contradicts the CEOs’ claims, with clear indications that “they were well aware of the fact that their involvement and contributions were directly related to the setting of health services requirements in connection with the concession”.