Performance audit: Landscaping Maintenance through a Public-Private Partnership

The Auditor General reported that the nearly 15 year-old Public-Private Partnership (PPP) between
Government and Environmental Landscapes Consortium Limited (ELC), was in many ways instrumental
in bringing about a positive change in the environmental landscape of the Maltese Islands. However, this
performance audit noted various issues that questioned the Public Sector’s administrative capacity to
negotiate, implement and monitor this Contract to ensure a more balanced PPP. Since the initiation of
this Partnership in 2002, Government’s expenditure amounted to over €100 million.

Questions arise regarding the financial and economic considerations revolving around this PPP
Agreement. Benchmarking exercises revealed that the contractual rates negotiated are not favourable
to Government. Matters could have been exacerbated since neither the original 2002 Agreement nor
the two subsequent Contract Extensions were awarded through competitive tendering.

Despite these contract extensions, the PPP Agreement utilized broad and generic terms to define
contractual deliverables. Such circumstances culminated in two disputes between the Parties being
referred for arbitration. These contractual deficiencies caused administrative uncertainty and were not
conducive to a stronger business relationship between the Parties.

Government did not always reap the full benefits in terms of sites serviced since the footprint capacity
of landscaping maintenance as provided for by the Contract remained not fully utilised. This ultimately
led to Government incurring additional expenses as ELC, and to a lesser extent other suppliers, were
awarded other contracts where the possibility existed for such works to be undertaken through this PPP
Agreement.

To varying degrees, contract implementation was characterised by the Contractor’s non-adherence to
contractual provisions. Contractual non-compliance included the Contractor’s failure in seeking
authorization from the Malta Embellishment and Landscaping Project (MELP) Monitoring Unit prior to
effecting changes in deliverables, as well as, the lack of insurance covering all landscaping operations
and a bank guarantee intended to serve as a performance bond. Furthermore, the PPP Agreement did
not clearly specify applicable VAT exemptions on payroll costs. These circumstances highlight that
contractual and monitoring mechanisms intended to ascertain that service delivery complies with
contractual obligations were not fully operative.

The MELP Monitoring Unit, Government’s monitoring arm within this Contract, is understaffed and
cannot cope with the administrative and operational burdens associated with this material PPP. As a
result, monitoring is reactionary and Government’s enforcement is weak. In circumstances,
Government’s position shifted from one where action could have been initialized to dissolve this PPP
Agreement, to one where prolonged weak enforcement implied tacit consent.