Lancashire CC wins appeal over procurement breach ruling

Lancashire County Council has successfully overturned a ruling that it was in breach of procurement regulations when it awarded a contract to manage all 23 of its household waste recycling centres.

The case of Lancashire County Council v Environmental Waste Controls Limited [2010] EWCA Civ 1381 centred on the local authority’s award of the contract to SITA UK, even thought EWC’s tender was significantly lower.

EWC argued before Judge Hegarty QC, sitting as a Deputy High Court judge, that the council had not evaluated the tenders in the manner required by the Public Contract Regulations 2006.

The judge rejected most, but not all, of the allegations. He concluded that:

• The challenge to the detailed assessment of EWC’s bid against the individual parameters promulgated in the ITT “fails in the sense that no serious or manifest error has been shown to have affected any specific aspect of the assessment process, save to a very limited degree which could not have affected the outcome”
• Lancashire was, however, in breach of duty for failing to observe the principles of equality, non-discrimination and transparency imposed by regulation 4(3) of the 2006 Regulations “in that it took into account concerns as to EWC’s financial standing and the price at which it had tendered which it ought not to have taken into account” in assessing the competing bids
• This was likely to have influenced the assessment process and rendered it unfair “resulting in serious and manifest error”
• EWC had suffered loss and damage in the form of the loss of a real or substantial chance of being the successful tenderer. The judge assessed the chance which was lost at 50%
• EWC had a private law cause of action for damages under regulation 47 of the 2006 Regulations
• Damages fell to be assessed by reference to the profits EWC would have made if it had been awarded the contract. The judge assumed that the contract would have been for a period of three years and would not have been extended to five years.

Before the Court of Appeal, Lancashire challenged the judge’s conclusion that it took into account concerns about EWC’s financial standing when considering the competing bids.

The council argued that the judge had applied the wrong test when deciding that those concerns had been taken into account. It also challenged the soundness of the conclusion he had reached on the basis of his findings of fact. They would also have challenged the finding of loss and damage, and the assessment of the lost chance at 50%.

The Court of Appeal upheld Lancashire’s challenge. Giving the lead judgement, Lord Justice Pill rejected the council’s submission that the judge had applied the wrong test in law as to whether the appellant had taken into account considerations as to EWC’s financial standing.

However, Lord Justice Pill also said: “In the context of a carefully devised selection procedure, which relied on awarding marks on each of the relevant considerations, a procedure operated by honest and efficient witnesses who knew which considerations were relevant and which were irrelevant, and when the case that they were influenced by irrelevant considerations was not fully put to them when they gave evidence, the judge was not, in my judgement, entitled to conclude that the procedure was infected by reliance on an irrelevant consideration.

“In finding that [LCC] took into account concerns as to [EWC’s] financial standing and the price at which it had tendered, the judge erred in law.”

Agreeing, Lord Justice Jackson said: “It frequently happens that judges, tribunal members and other decision makers are aware of facts which, from a common sense point of view, are relevant (and possibly even important) but which they are not permitted to taken into account.

“The decision maker is human. The best that he or she can do is to embark upon an objective assessment, consciously focusing upon the matters which he or she is required or permitted to consider and consciously putting out of his or her mind the other matters. If the decision maker does that, any court or higher court reviewing the decision should not embark upon the question whether subconscious influences were at work, as EWC contended in this case.”

The Lancashire Telegraph has reported EWC boss Bill Edwards saying that he would look to take the case to the Supreme Court.