Acerbic procurement rules at Central Bank of Malta

It's crucial that the adherence to EU public procurement rules centres around effective enforcement in all public entities, and it is surprising how in practice one meets instances where the monitoring of such implementation is tweaked, particularly in contract implementation.

This is not in the true spirit of EU rules and in the past attempts were made to revise EU procurement rules so as to ensure better transparency and good governance. Karel De Gucht, European Commissioner for Trade, said: "I am a firm believer in making sure trade flows freely and government procurement must be an essential part of open trade markets worldwide. It's good for business, good for consumers and brings value for money for taxpayers.

"This proposal will increase the leverage of the European Union in international negotiations and with our partners to open up their procurement markets for European companies. I am confident that they will then get a fair opportunity at winning government contracts overseas and so generate jobs."

Such transparency is vital to all bidders to government tenders but of course it is always the SMEs which suffer most when they try to participate in the inner list of accredited larger suppliers.

It comes as no surprise that Chris Cardona, Minister for the Economy, Investment and Small Business, was reported to have outlined‚ "boosting transparency (and) removing (unnecessary) red tape" as the government's prerogative in this commitment for the betterment of the Maltese economy.

The reader may well ask if this article intends to recount particular instances where transgressions in procurement rules occurred and in fact details on such an instance are being explained in more detail. It was on 6 June 2013 - quoting Tender No: 4/2013, Survey on Household Finance and Consumption in Malta - which was issued under the auspices of the Central Bank of Malta (hereinafter CBM).

Despite the cheapest bidder (an SME) having a bid price of €37,000, the tender was awarded to an alternate bidder at a quote of €93,263, nearly three times the amount of the cheapest bidder. In the interim, an appeal was lodged and rejected, yet the star fact here is that the winning bidder's bid price was kept under lock and key by CBM until after the finalisation of the appeal procedure which culminated in a report by the CBM appointed Independent Objections Officer (a retired ex-employee of CBM who is appointed and paid by the bank, details which obscure the perception of independence and impartiality).

The effects of this case were various and namely that the complainant was deprived of properly founding its appeal without such price, despite having amply communicated the essential need for this information as a proper basis to its appeal.

This had to be submitted within a window of ten days. Transparency rules at such a noble financial institution dictate that at least the Independent Objections officer will be confided the winning bidder price but this did not happen with the invariable effect that the same could not therefore be included in any weight or measure (albeit the same could potentially have had significant impact on the resulting decision) into the Independent Objections Officer's report or review.

In fact, the conclusion of the Central Bank's appeal report as drawn up by the Independent Objections Officer stated, inter alia, that 'the procedures and measures applied by the Central Bank in evaluating and awarding Tender No 04/2013 are adequate and appropriate in accordance with the Bank's policies and procedures', leaving the complainant without recourse to justice because the appeal had now been concluded.

The remarks that can be surmised from this lack of transparency towards SMEs are various and mostly go against the spirit of the law Small Business Act promulgated in 2011. One can reason that as the complainant was cheapest bidder and lost, then the cause of being disqualified by the evaluation committee was invariably in terms of technical competence, an area that continued unjustifiably (to date) to be discredited despite the applicant having brought forward sufficient evidence on various occasions of its requisite capacity and skill.

However, requests for clarifications and reasoning that led to complainant's remarkably low score in the technical ambit were not met, to date and all throughout the appeal. It is a feeling of deja vu when SMEs try to break through the circles which in the past were always patronised by the well-connected.

Many letters sent to the governor asking the true reason why the applicant was disqualified went unanswered. So where can SMEs possibly find redress, if faced with such a tight situation?

One can look to the board of directors who are each jointly and severally responsible for the policy and general administration of the affairs and business of the Central Bank of Malta, except in relation to the functions imposed, and the exercise of powers conferred, on the Bank by or under the Treaty on the Functioning of the European Union (the Treaty) or the protocol on the Statute of the European System of Central Banks (ESCB) and of the European Central Bank (ECB) annexed to the Treaty. The Board consists of a Governor, a Deputy Governor and three other members. The Governor has the sole responsibility for the performance of the functions imposed, and the exercise of powers conferred, on the bank by or under the treaty and the statute. The governor and the deputy governor are responsible for the day-to-day management and operations of the bank in accordance with the policy of the board and are answerable to the board for their acts and decisions. The governors are appointed by the President of Malta, acting on the advice of the Prime Minister. The other board members are appointed by the Prime Minister.

Both the governors and the other board members are appointed for a term of five years but are eligible for re-appointment. The bank is accountable to the House of Representatives and the governor may be requested to report once every six months on the conduct of the bank to the Public Accounts Committee (or another committee) of the House of Representatives and to provide such committee with any information deemed necessary.

Having such a formidable code of governance one would expect that fairness and transparency rules would have prevailed particularly at a time when government bodies are reminded to do more with less.

The situation at hand is such that an SME, which having the support of quality people and partners, has dutifully gone through the proper channels, attended the necessary meetings, offered its submissions, brought in its clarifications, quoted a fair price and substantiated sufficient technical competence tests and is still unaware why this has happened.

It asked the Department of Contracts being the local procurement specialist for guidance in relation to the appeal procedure on procurement grounds with CBM, and the DOC simply reproduced extracts of the procurement regulations and noted that CBM was not listed in Schedule 1 of the PPR, implication being that CBM was not subject to the procurement regulations or the DOC's guiding hand. ,

And this, despite CBM being rightly able opt to be regulated by DOC standards nonetheless (as it in fact did with regards to the OPM circular on sub-contracting effective 1 July 2013 and despite the tender in question having been issued prior to said effective date).

It is most surprising that while during the appeal meeting the representative of the SME was notified that the top ranking procurement policy of CBM encourages new and small entities to be given a fair chance on the basis of impartiality and a sought after maintained quality in work performed, none of this featured in the single communication received from the governor which reiterated the Complaint Officer's finding that CBM had acted in accordance with its procedures and therefore found against complainant bidder.

The complainant bidder feels that the government entity should lead by example, more so when this concerns public funds. Thus irony is felt where during a time of excessive deficit mechanism imposed by the commission and thus the finance minister is scraping the barrel to trim expenses to reduce the deficit under the 3% benchmark, a bank under his own ministry spends on an ECB tender three times more than the lowest bid. In this ambit, this does not appear justified and has left an aftertaste that begs transparency and simplification.

The bid price was competitive yet it was rejected. The appeal was handled by the procurement staff which were obviously not impartial and they appointed a retired CBM official to discuss the issue. While one may appreciate that the Ministry keeps its stance respecting monetary independence with CBM, this is a survey mandated by ECB and for fairness sake, complainant has submitted a competitive tender with technical competence backed by a trusted economist and an IT firm with years of experience.

The question is, why should bidders have to fight such matters in the courts, straining resources and possibly waiting years to obtain redress, that by then would be nothing short of a pyrrhic victory anyway? In investing substantially into increasing its competences and reach through experience the complainant SME epitomises the 'Think Small First' slogan, egging it to be better employed in practice by giving the small entities a shot at swinging the club once in a while.

Marilyn Mifsud is a lawyer at PKF Malta, an audit and business advisory firm [email protected]