Government ministries failing to meet public procurement standards – NAO

Several government ministries and entities are failing to abide by public procurement regulations, according to the National Audit Office.

In its annual report for 2022, the Auditor General noted several weaknesses in the government’s financial controls. These included limited internal controls, failure to adhere to public procurement rules, and a lack of an audit trail and standard operating procedures.

One of the biggest offenders was the Building and Construction Authority, which relied on unapproved direct orders while standard operating procedures on procurement and payroll processes were not yet in place.

The NAO noticed that the authority was splitting its direct orders of under €10,000 into various amounts in order to bypass procurement regulations. Only direct orders exceeding €10,000 would need approval from the direct orders section within the Ministry for Finance and Employment.

In 2022, one company engaged to perform audits on method statements was awarded six direct orders amounting to €59,550 – all without the necessary approval of the ministry.

Another two companies were paid €70,743 and €62,191 by the authority, each time without approval from the ministry.

The authority also paid €210,691 to a communication services company during 2021 and 2022 because it had no internal staff to do the job. However, the NAO said that no approval was sought and a formal contract was not in place up until June 2022. “[This made it] impossible for the NAO to verify whether the rates charged in the sampled invoices were correct,” the report says.

The Ministry for Gozo was also guilty of “habitual bypassing of procurement regulations” in a similar manner. The NAO noted that the ministry was acquiring cleaning, security, consultancy, project management and clerical services through direct orders split into several contracts.

The NAO found frequent use of negotiated procedures in the Active Ageing and Community Care Department, as well as the continuous renewal of contracts. This hindered fair competition, according to the audit office.

The NAO also flagged standing procurement irregularities by the Housing Authority when organizing promotional events. Quotations for these services were only obtained from three suppliers, meaning the authority may have been missing out on more competitive solutions, the NAO said.

The audit office also flagged an employment contract the authority held with a legal advisor. The advisor was paid around €100,000 in legal fees, and €14,000 in professional fees. According to the NAO, the agreement “lacked detail as to what additional work was expected from the incumbent and on what basis the professional fees were to be charged, as well as on the chargeable hourly rate”.