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The ‘ineffectiveness’ of a public contract & the jurisdiction of the PCRB


Gauci-Maistre Xynou (Legal | Assurance)

Author:
Dr. Joseph Bugeja

The Facts

On the 28 April 2017, the Ministry for Transport and Infrastructure issued the “Request for proposals for a Public Services Concession Contract for the provision of passenger and vehicle ferry services between Malta and Gozo”.  

On 13 June 2017, Gozo Channel (Operations) Limited issued the Preliminary Market Consultation inviting economic operators to submit offers to the same Gozo Channel (Operations) Limited.  Virtu Holdings Limited submitted its offer and the Evaluation Committee expressed its views that its offer was the most advantageous offer and technically compliant.

Following the cancellation of the call for offers of 28 April 2017, the Ministry for Transport and Infrastructure issued another call for offers on 26 January 2018. This call consisted of offers for transport services between Cirkewwa and l-Imgarr and between Belt Valletta and l-Imgarr, as per the first offer, as well as for a fast ferry service between other localities in Malta.  Thus, Gozo Channel (Operations) Limited re-issued the Preliminary Market Consultation inviting economic operators to submit offers together with the same Gozo Channel (Operations) Limited.

Virtu Holdings Limited and Islands Ferry Network Limited subsequently submitted their offers.

By letter dated 13 April 2018, Gozo Channel (Operations) Limited informed Virtu Holdings Limited that its offer had not been accepted and that Islands Ferry Network Limited was the preferred bidder. Subsequently, Gozo Channel (Operations) Limited and Islands Ferry Network Limited signed a charterparty agreement  whereby Islands Ferry Network Limited obliged itself to lease with payment a fast ferry to Gozo Channel (Operations) Limited in the eventuality that it is awarded the contract of the Ministry for Transport and Infrastructure.


The Objection before the Public Contracts Review Board

By letter dated 20 April 2018 Virtu Holdings Limited filed an objection to the PCRB requesting the cancellation of the decision given that Gozo Channel (Operations) Limited did not have:

i)The technical capabilities to meet the requirements set (directly or indirectly) by Gozo Channel (Operations) Limited;

ii)The necessary experience to meet the requirements set (directly or indirectly) by Gozo Channel (Operations) Limited;

iii)The necessary economic standing to meet the requirements set (directly or indirectly) by  Gozo Channel (Operations) Limited

On 31 August 2018, the PCRB decided that Gozo Channel (Operations) Limited’s Preliminary Market Consultations was not an offer for a public contract that falls within the remit of the Public Procurement Regulations and that therefore the PCRB did not have the jurisdiction to decide on the objection. In fact, the PCRB opined that “the invitation issued by Gozo Channel (Operations) Limited should have been designated as a “Call for Interest” to participate and not a “Preliminary Market Consultation”, the latter of which caused a confusion of interpretation of the action taken by the same in seeking a partner for the fast ferry service. This Board would respectfully emphasize the fact that, under normal circumstances, a “Preliminary Market Consultation” is issued by a contracting authority and this Board has established that Gozo Channel (Operations) Limited cannot be regarded as the contracting authority but rather as a prospective bidder for the concession”.   The PCRB decided:

i)“does not uphold Virtù Holdings Limited’s preliminary plea to suspend this board's decision to this appeal, pending the reply to the letter sent to the Director of Contracts by the Appellants;

ii)upholds Gozo Channel (Operations) Limited’s preliminary pleas, in that:

  • Gozo Channel (Operations) Limited is not the contracting authority in this appeal;
  • the “Preliminary Market Consultation” issued by Gozo Channel (Operations) Limited to seek a partner does not constitute any form of public procurement;
  • the Public Procurement Regulations do not provide remedies to be heard by this board in respect of “Preliminary Market Consultations”;
  • concludes that the sole objective for the issue of the “Preliminary Market Consultations” by Gozo Channel (Operations) Limited does not constitute a direct objective to represent a call for a tender or a call for concession”

 

The decision of the Court of Appeal

Virtu Holdings Limited appealed the decision of the PCRB dated 31 August 2018.  (Virtu Holdings Limited (C30642) v Gozo Channel (Operations) Limited (C76704) u Islands Ferry Network Limited (C85742) ghal kull interess li jista’ jkollha Appell Numru 290/2018).

The Court of Appeal provided guidelines to the PCRB which ultimately has jurisdiction to consider and decide about it. The Court of Appeal noted that there were still open issues, namely   Islands Ferry Network Limited’s affirmation that   Virtu Holdings Limited had not proved that Islands Ferry Network Limited did not satisfy the requisites  requested by Gozo Channel (Operations) Limited, and that on the contrary, all the depositions of the Evaluation Committee confirmed that Islands Ferry Network Limited satisfied all the points requested by Gozo Channel (Operations) Limited, and that compared with Virtu Holdings Limited, Islands Ferry Network Limited was the most attractive and advantageous offer.  Therefore, the Court of Appeal held that these issues do not constitute the merits of the procedure before the Court of Appeal, but that these issues have to be considered by the PCRB now that it had been established that the PCRB has jurisdiction to hear the objection of Virtu Holdings Limited.

The Court of Appeal dismissed the preliminary exceptions of Islands Ferry Network Limited, upheld the appeal of Virtu Holdings Limited, revoked the decision of the PCRB and referred back the acts of the case to the PCRB to consider and decide on the objection of Virtu’ Holdings Limited

The Court’s Considerations

Following the referral by the Court of Appeal, the Public Contracts Review Board (PCRB) delivered its decision on 30 August 2019.  The PCRB noted that following the Court of Appeal’s decision, the Preliminary Market Consultation (PMC) published by Gozo Channel (Operations) Limited is to be regarded as a tender document, whilst at the same instance Gozo Channel (Operations) Limited is to be deemed as the Contracting Authority.  The PCRB reiterated that the PMC issued by Gozo Channel (Operations), specifically referred to the fact that, the prospective partner must have the necessary experience, expertise and resources to provide the services (Fast Ferry Services) as duly requested in the ‘Request for Proposals’ (RFP) issued by the Ministry for Transport, Infrastructure and Capital Projects.

The PCRB noted that the processing of the offer of Islands Ferry Network Limited by Gozo Channel (Operations) Limited consisted of two main deficiencies namely that:

  • “Signing of the contract prior to the decision of the Public Contracts Review Board in respect of application filed by Virtu Ferries, in breach of regulation 277(3)(a), and
  • The Authority requested a partnership whilst the offer submitted by Islands Ferry constituted a subcontracting arrangement.

Hence, a change of goal posts at the very start of the evaluation process.”

The PCRB reached the following conclusions:

i)That the contracting authority failed to abide by the principle of self-limitation, by processing an offer which had to be an offer for a partnership, whilst, in actual fact accepting an offer that was a subcontracting arrangement;

ii)That the agreement signed between Gozo Channel (Operations) Limited and Islands Ferry Network Limited breached the Public Procurement Regulations and declared same to be ineffective;

iii)Gozo Channel (Operations) Limited established that during the evaluation process, the Authority applied a weighting principle of 25% to technical and 75% to financial aspect, stating that the weighting adopted by the Authority was not sufficient and proportional enough to establish which offer was fully compliant with the technical specifications and conditions as duly requested in the RFP;

iv)The Evaluation Committee did not delve into a satisfactory level of assessment with regard to the technical aspect of the offers.

v)The Evaluation Board did not attribute the expected importance to the technical aspect and the relative consequences of failing to abide by the maritime regulations, which are enforced to ensure proper certification and safety, at sea.

vi)The technical specifications and conditions, as laid down in the RFP should be technical specifications and conditions of this PMC which the Bidder must satisfy, in all respects, to be eligible for the award of the tender, without any compromises.

Following the abovementioned conclusions, the PCRB did not uphold the Contracting Authority’s decision in the award of the tender; directed the Authority to appoint a new Evaluation Committee (with two members having a technical standing and well versed in maritime activities and regulations); stated that the weighting of the evaluation process should reflect more prominently the technical compliance aspect; and that the new Evaluation Committee shall carry out an in-depth assessment of the two shortlisted offers namely, those of Islands Ferry Network Ltd and Virtu Holdings Limited to arrive at a fair and transparent conclusion in their deliberation; and that now that both competing offers are  public,  both offers are to be reassessed on their present merit.

The GMX Commentary

The main issues of this case comprised whether the Preliminary Market Consultations was an offer for a public contract that would fall under the remit of the Public Procurements Regulations and ergo’ whether the PCRB had the jurisdiction to hear the objection.  In its first decision, the PCRB held that the Public Procurement Regulations do not provide remedies with respect to Preliminary Market Consultations.  Furthermore, the PCRB held that the Gozo Channel (Operations) Limited is not to be considered as the contracting authority.

Interestingly, the Court of Appeal did not enter into the merits of the PCRB’s decision, but rather decided that the PCRB had the jurisdiction to   hear the objection filed by Virtu Holdings Limited, and to this effect referred back the acts to the PCRB.

Having established the vires of the PCRB by the Court of Appeal, the PCRB decided that the Preliminary Market Consultations is to be regarded as a tender document and that Gozo Channel (Operations) Limited is to be deemed as the contracting authority.  The PRCB also established that the agreement signed between Gozo Channel (Operations) Limited and Islands Ferry Network Limited was “ineffective” in terms of the Public Procurement Regulations. The PRCB also commented on the importance of technical specifications and the financials surrounding the offers, and their importance for the evaluation process, namely to verify whether a tender is compliant or not.

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