Performance audit: Provision of residential long – term care for the elderly through contractual arrangements with the private sector

A performance audit focusing on the Zejtun, Mellieha, Roseville and Casa Leone Homes showed that the prevailing disequilibrium between the demand and supply of government-funded residential Long-Term Care (LTC) services for the elderly led the Department for the Elderly (DfE) to engage into contractual relationships with the private sector through private public partnerships (PPPs) and the ‘Buying of Beds’ scheme. However, in some cases, there was scope for securing more favourable terms and ensuring a higher degree of contractual compliance by the respective Home operators. 

These contractual arrangements were undertaken in an environment where various regulatory and policy limitations exist, such as those relating to care within the community. These circumstances precluded the more accurate projections of future needs, the development of new services and attracting more private sector investment in such a critical social dimension.

Citing urgent demand pressures, on a number of occasions, the DfE was constrained to enter into direct negotiations with suppliers. Although catered for in the Public Procurement Regulations, such circumstances stifle the potential benefits of competitive tendering. Competitiveness related issues become more exacerbated as a major supplier has been entrusted with the management and operation of over three quarters of the LTC beds pertaining to the PPPs and ‘Buying of Beds’ scheme.   

The PPP financing arrangements regarding the construction works at the Zejtun and Mellieha Homes resulted in the DfE incurring estimated effective annual interest rates that substantially exceeded interest rates at the time of signing these contracts in 2003 and 2007, that could have been obtained through Government Stocks borrowing. Opportunities to secure more favourable operational rates were similarly not always fully exploited as implied by the wide-ranging charges incurred at the four sampled Homes. Operational concerns also arose, as strong indications exist that the number of carers and nurses provided by Home operators fall short of contractual obligations. 

Both the PPPs and ‘Buying of Beds’ scheme have their benefits and disadvantages and can be realistically considered in future policy developments. However, the full potential of increasing and extending collaboration with third parties remains dependant on three core factors. Firstly, a robust policy and regulatory framework has to be solidly in place. Secondly, the governmental entities responsible for implementing, nurturing and monitoring collaborative agreements with third parties must have the adequate organizational structure and capacity in place to enable effective handling of the various complexities involved. Thirdly, such initiatives must comply with sustainability criteria in terms of encouraging further and more diverse private investment.