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pr200551en

PR200551en

25/03/2020

PRESS RELEASE BY THE NATIONAL AUDIT OFFICE: The disposal of the site formerly occupied by the Institute of Tourism Studies

Auditor General Charles Deguara presented the National Audit Office (NAO) report titled ‘The disposal of the site formerly occupied by the Institute of Tourism Studies’ to the Speaker of the House of Representatives Anġlu Farrugia.


In November 2015, Projects Malta Ltd issued a request for proposals (RfP) for the design, build and operation of a mixed tourism and leisure development in St Julian’s on the site occupied by the Institute of Tourism Studies. In February 2016, the Seabank Consortium, the sole bidder, was nominated the preferred proponent with its €17,000,000 bid. Negotiations ended in January 2017, with Cabinet endorsing the €56,000,000 value established by Deloitte who assisted Government in this respect. On 1 February 2017, the Commissioner of Land and the dbSG, the company formed by the Consortium, entered into a deed for 99 years. Although the Planning Authority approved the application by the dbSG in September 2018, the Court of Appeal deemed the permit null in June 2019. In July 2019, the dbSG submitted a fresh application for excavation works while the original application was still active. The National Audit Office (NAO) was requested to review this disposal by the Public Accounts Committee in March 2017. The audit commenced in January 2019. These are the main conclusions.

In terms of governance, the origin of the decision to dispose of the site remained unclear, which was of grave concern given the nature of the land that was to be disposed of. No information supporting this decision or who was involved was provided, with the Office of the Prime Minister and the Ministry of Tourism each assigning responsibility to the other. The NAO considered the decision to dispose of the site as inappropriately prioritised over the relocation of the ITS, when the inverse should have happened. The false sense of urgency that drove Government to dispose of the site, despite that no alternative premises had yet been secured for the ITS and that the lack of a development masterplan for the area, was of concern. In terms of transparency, concerns arose with respect to the information disclosed in the RfP. Although the residential component of the project was key in securing its viability, this element was given limited exposure. Another element verified was whether the provisions of the Public Procurement Regulations were adhered to in the transfer. Projects Malta Ltd intentionally classified the transfer as a concession but failed to obtain the authorisation of the Department of Contracts prior to the publication of the RfP. This omission casts doubt on the regularity of the RfP.

Lengthy negotiations with the Consortium resulted in a significantly higher value for the site. While negotiations are not ordinarily undertaken after the award of a tender, this was not specifically precluded by law. Nevertheless, major concerns emerged with respect to the Negotiation Committee, with certain members failing to provide any input. Furthermore, no records of negotiations were made available, which constrained the NAO from establishing a comprehensive understanding of the negotiation process and grossly detracted from the expected level of governance.

The NAO’s valuation of the site as at 2016, estimated at €67,000,000, differed with that determined by Government, that is, €56,000,000. The deed allowed for the adjustment of the value of the site based on the approved extent of development. The application for development submitted and approved in 2018 represented a significantly downscaled project, with one residential tower instead of two and a reduction in the hotel element. In consideration of these revisions, the NAO established a land value of €45,000,000. The Office’s valuation of €45,000,000 corresponded with the valuation that was to be derived through the application of the parameters stipulated in the deed. The reduction in value was mainly attributable to the reduced extent of development and a substantial increase in development costs between 2016 and 2018. 

This Office considered the relocation of the ITS as inappropriately planned, with timeframes set for the vacation of its campus unrealistic, hence necessitating relocation to alternative temporary premises. The direct cost to Government of the refurbishment of the temporary Luqa campus was €2,000,000, while the permanent relocation to the Smart City campus was estimated at €80,000,000. The NAO noted that the Government Property Department was absent from the process that led to the disposal of the site, despite that the Department was the government entity mandated to dispose of public land. Projects Malta Ltd assumed control over the process in its stead. Another concern identified related to the disjointed and fragmented approach to the development of the area, with the cumulative effects of all the developments overlooked in their piecemeal approval.

The full report and the abridged version may be accessed by visiting our website www.nao.gov.mt or on its Facebook page www.facebook.com/NAOMalta.