No answers on WastServ €1 million contract which blew up to €30 million

Following the revelation of a number of irregularities in the financial and technical management of Malta's waste management agency, WasteServ, by the Auditor General, the agency has refused to answer a set of questions MaltaToday sent on Thursday.

WasteServ falls under the political responsibility of Resources Minister George Pullicino, who has so far refused to carry political responsibility for the agency's failings. In the 2013 Budget, the agency was allocated €37 million.

The Auditor General's report said that an audit of capital and recurrent expenditure incurred by WasteServ revealed long delays, substantial cost variations on capital projects and a lack of transparency. The damning report said that the inadequacy of the overall internal controls was a major concern.

Among the various shortcomings highlighted by the Auditor General's Audit Report for 2011, the most blatant one concerned a contract which was initially valued at just over €1 million and was later changed into a €29 million contract without the approval of the Finance Ministry.

Following a number of phone calls with WasteServ's Public Relations Officer Gillian Zammit, MaltaToday informed the agency that it was not physically possible to attend for a meeting with the Board of Directors at such short notice and demanded that answers are sent by email as is normal practice.

The only forthcoming reply read: "WasteServ notes that in respect of a number of questions sent to its attention yesterday it has sought, in the best interest of proper clarification, a meeting with your journalist for which Company senior officials were prepared to be present."

Zammit's reply added: "Given also that the journalist could not make it at short notice an alternative meeting date was set for tomorrow - 8 December - notwithstanding this being a public holiday. Whilst noting that the meeting was cancelled a short while later, the Company still seeks eagerly the setting up of such a meeting on another suitable date where details of the nature requested, together with any supplementary questions would be addressed."

WasteServ's directors include PN candidate and Executive Council president Marthese Portelli and former PN youth section president Mathieu Cilia.

In March 2011, the ministry awarded Mathieu Cilia a one-year €32,191 contract as the ministry's "projects coordinator". Cilia stepped down as president of the PN's youth organ in June 2010. He held the post for five years. Cilia, a canvasser for Pullicino, has also held other posts within the ministry and was responsible for the events celebrating the reopening of St George's Square in 2009. 

Other board members include Chairman Ben Farrugia, Vice Chairman William Spiteri and directors Isabelle Borg, Gabriella Cuschieri and Peter Perotti.

The Auditor General's Report

Moreover, an audit of capital and recurrent expenditure incurred by WasteServ revealed long delays and substantial cost variations on capital projects.

The report pointed out that a lack of transparency and non-compliance with procurement regulations was also noted, and the inadequacy of the overall internal controls was a major concern.

These shortcomings prompted Labour MP Leo Brincat calling for the resignation of Resources Minister George Pullicino and WasteServ's Board of Directors, however the minister retorted by attacking Labour's credentials in waste management without replying directly to the calls for his resignation.

In its 13-page report on WasteServ, the National Audit Office pointed out that on 31 January 2008, the WasteServ Board of Directors approved the issue of a tender for the provision of personnel services, for sites managed and operated by the waste management agency, at an estimated value of €1,111,529.

This estimate included the cost of salaries, overtime, social security contributions, as well as the contractor's commission.

Following consultation with the Financial Management & Monitoring Unit, the Director General of Budget Affairs approved the request on 4 April 2008. However, it was stressed that the procurement of these services should not constitute recruitment of personnel. The Director General also advised WasteServ to re-consider the contracted period since "a six month period is rather a short period in order to receive for more favourable offers".

A tender was awarded for the provision of labour supply in respect of Waste Sorters, Operators, Drivers and semi-skilled General Duty Personnel as well as Executive staff, for sites and offices managed and operated by the agency.

The sub-contracted employees were subject to the same conditions and salary package as their counterparts directly employed by the agency. Following the award of the tender, the contract was then signed on 25 June 2010, with a value of approximately €2,375,000, for a period of one year from the date of signature.

On 1 November 2011, an Addendum to the Contract was signed, wherein substantial changes were endorsed. The value of the contract was reduced to €1,600,000, but specified that it only covered the commission element and the period was extended for a further three years, and the amount of personnel that could be engaged was set at a maximum of 350.

Consequently, NAO pointed out that the contract conditions following the signing of the Addendum, compared to the original proposal approved by the Director General which stipulated that the six month period was increased to four years and the value of €29,186,207 for the four years of the contract, including remuneration and commission, contrasted sharply with the amount of €1,111,529 originally approved. Additionally, the report said that the Director General's approval for these changes was not sought and neither was the latter updated with the respective changes.

The unanswered questions

MaltaToday is informed that the contract was awarded to JF Security & Consultancy Services Ltd owned by Peter Formosa.

Among the questions which WasteServ failed to answer, MaltaToday asked whether the €29 million contract was awarded to JF Security & Consultancy Services Ltd and demanded a detailed account of what services is the company providing and how many workers were employed under the contract's conditions.

MaltaToday also asked whether the Auditor General's report findings were correct.

WasteServ were also asked whether there is any justification for the contract extension and increase.

In one of its replies to Labour's calls for Pullicino's resignation, the Resources Ministry said that the increase was due to wages, bonuses and allowances which were not taken into account in the initial stages.

MaltaToday asked whether this means that the service provider was not paid for wages, bonuses and allowances when the initial €1 million deal was signed.

Finally, WasteServ was asked for its reaction to Labour's call for a resignation of the Board of Directors due to what was described as "widespread shortcomings" at the agency.