Malta: A Lesson In Public Procurement In The Maritime Sector

Last Updated: 5 September 2019
Article by Ann Fenech

On the application of Virtu Holdings Ltd ( Virtu), the Public Contracts Review Board (PCRB) last week annulled the decision of Gozo Channel Ltd (Gozo Channel) which had selected the company Islands Ferry Network Ltd (Islands Ferry) as its partner for the provision of fast ferry services between Malta and Gozo following the publication by Gozo Channel of a Preliminary Market Consultation (PMC). The PMC stated that Gozo Channel wanted to participate in a competitive tender issued by the Ministry of Transport for a public service concession contract for the provision of passenger and vehicle ferry services between Malta and Gozo (the Tender). The PMC further stated that Gozo Channel was looking for a partner with whom to submit the bid for the tender which had the necessary experience, expertise or resources to provide fast ferry services and that any interested party was expected to prove to Gozo Channel that it was in a position to meet the applicable specifications and requirements and criteria applicable to the fast ferry services as required by the Tender.

The PCRB decided that the evaluation committee appointed by Gozo Channel had not satisfactorily considered the technical aspects and had not attributed the expected importance to the technical aspect of the offers before it, nor considered the consequences of failing to abide by the maritime regulations which are there to ensure proper certification and safety at sea. The PCRB emphasized that the technical specifications and conditions, as laid out in the Request For Proposal issued by the Ministry for Transport, to which the PMC referred, had to be the technical specifications and conditions for the PMC which the bidders had to satisfy in all respects, for them to be eligible for the award of the tender without any compromises.

The Board therefore directed Gozo Channel to appoint a new evaluation committee, two members of which must have a technical background and be well versed in maritime activities and regulations, for the purposes of re assessing the two shortlisted offers of Islands Ferry Network Ltd and Virtu Holdings Ltd to arrive at a fair and transparent conclusion int heir deliberation.

Virtu Holdings Ltd had applied to the PCRB requesting it to order Gozo Channel Ltd to eliminate Islands Ferry Network Ltd from the tender process on the basis that it did not possess the technical capabilities, the expertise or the necessary economic standing to meet the requirements stipulated in the Tender to which the PMC had referred.

Gozo Channel Ltd had defended this case principally on the basis that the Public Procurement Rules do not apply to Preliminary Market Consultations; that the Preliminary Market Consultation did not involve public procurement and that Gozo Channel was not a contracting authority. The PCRB in fact decided on the 31st August 2018 that Gozo Channel was not a contracting authority and that the PMC did not constitute public procurement and the public procurement regulations did not provide remedies to be heard by the PCRB in respect of Preliminary Market Consultations. The PCRB therefore stopped short of deciding the merits.

Virtu appealed to the Court of Appeal. It pleaded before the Court of Appeal that given that it had been proven during the deliberations before the PCRB that Gozo Channel Ltd was indeed a contracting authority and it had entered into a charter party for the charter of a fast ferry with Islands Ferry Services, it had thus procured a service from Islands Ferry Ltd and that it was remarkable how it could possibly be considered that the conclusion of a charterparty with Islands Ferry paid by public funds did not amount to a public procurement. On the 11th March 2019 the Court of Appeal confirmed that Gozo Channel acted in the capacity of a contracting authority and that the charterparty concluded between Gozo Channel and Islands Ferry providing for the payment of hire by Gozo Ferry to Islands Ferry for the charter of the vessel was indeed procurement. The fact that the coming into force of the charter was conditional upon Gozo Channel winning the main tender was irrelevant since if Gozo Channel did win the main tender that contract with Islands Ferry was binding. The Court added that it would be very easy indeed for contracting authorities to evade the procurement rules altogether if the Court were to allow the argument that there was no procurement merely because it was subject to a suspensive condition. The Court of Appeal therefore held that the PCRB did indeed have jurisdiction over the merits of the case because this was public procurement and that the PCRB should consider and decide on the merits of the case.

The case therefore went back to the PCRB for a decision on the merits and after considering the evidence before it, the PCRB agreed with Virtu and annulled Gozo Channel's selection of Island Ferry Services for the provision of the fast ferry services. In a separate decision the PCRB also annulled the charterparty between Islands Ferry and Gozo Channel.

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