Council fends off CoA challenge by unsuccessful bidder for recycling contract

June 23, 2011

Hertfordshire County Council has defeated an appeal by an unsuccessful bidder for a multi-million pound contract to operate its household waste recycling centres.

In J Varney & Sons Waste Management Ltd v Hertfordshire County Council [2011] EWCA Civ 708, the bidder (Varney) asked the Court of Appeal to overturn the decision of Mr Justice Flaux in the High Court.

There were three grounds of appeal, namely that:

The council had failed to disclose the criteria, sub-criteria and weightings which would be applied when determining which of the tenders was the most economically advantageous
The council applied criteria, sub-criteria and weightings which were inconsistent with the information which it had disclosed
Mr Justice Flaux had wrongly held that Varney had failed to bring its claim within the time limit imposed by regulation 47(7) of the Public Contracts Regulations 2006.

Varney’s basic grievance was that it had been led to believe by the ITT that “staffing levels proposed by tenderers would play a very significant part in the evaluation of tenders”.

It claimed that as a result it had proposed high levels of good quality staff for each site, when in fact the council went on to give very little significance to staffing levels in its marking of the tenders. As a result, Varney had overpriced its bid and stood little chance of winning the tender.

The company made four technical submissions. These were that:

Regulation 30 of the 2006 Regulations required a contracting authority to disclose to tenderers in advance of tenders being submitted the criteria which will be used for evaluating tenders and the weightings to be accorded to those criteria (unless, which was not suggested in this case, it is "not possible" to provide weightings)
The obligation of transparency in regulation 4(3) required a contracting authority to disclose to tenderers in advance of tenders being submitted the sub-criteria which would be used for evaluating tenders and the weightings to be accorded to those sub-criteria
Disclosure of criteria and sub-criteria did not consist merely of stating relevant matters in the ITT. Criteria and sub-criteria must actually be identified as such
A corollary of the obligation to disclose criteria, sub-criteria and weightings was that a contracting authority must actually apply the criteria, sub-criteria and weightings which it has disclosed.

Varney argued that Hertfordshire had failed to comply with any of these principles. It also argued in relation to the time limit issue that time did not start until there had been a breach of the Regulations by the council, and that Varney knew or ought to have known of the breach. It was not until the company was informed by the council of the reasons for the rejection of its tender that time began to run, and the proceedings were brought within the time limit.

Hertfordshire argued that Mr Justice Flaux had reached the right conclusions for the reasons he gave. These were that:

The return schedules concerning the standards of service which were expected did not constitute award criteria but sub-criteria. The award criteria were ‘customer satisfaction’ and ‘price’ and the return schedules were not separate principles or standards or tests but no more than sub-sets of those principles or standards or tests
The council was entitled not to identify sub-criteria and disclose their weightings provided that certain conditions set out in the ECJ case of ATI EAC v ACTV Venezia were satisfied
Those conditions were satisfied in this case. The disclosure of sub-criteria and their weightings would have made no difference to the preparation of tenders
The defects in the ITT alleged by Varney were evident when it was published, and it could then have brought proceedings against the council, well before the date when it did in fact bring proceedings.

Giving the unanimous judgment of the Court of Appeal, Lord Justice Stanley Burnton considered the judge's basic finding that the return schedules related to sub-criteria rather than criteria.

The appeal court judge said: “In the present case, the criteria for the award of the contract were identified by the council in the contract notice as price and customer satisfaction. To require such matters such as the return schedules and their weightings, to be identified at such an early stage would be a significant imposition on contracting authorities.

“The matters referred to in the return schedules were relevant to the criteria identified in the contract notice. They were identified in advance, in the ITT: Mr Varney knew that the information sought by the schedules was to be used in awarding the contracts.”

Lord Justice Stanley Burnton said the judge had correctly held that the schedules were sub-criteria, and that therefore there was no absolute requirement that their weightings be specified in the ITT. He added that there was no breach of the principles of equality and transparency, and that every tenderer was given the same information.

“It was obvious to Mr Varney that the information required by the return schedules would be used to decide on the award of the contracts,” the Court of Appeal judge said.

Lord Justice Stanley Burnton also cited Mr Justice Flaux’s finding that Varney’s tender was unaffected by the fact that the return schedules were not identified as criteria or sub-criteria and the bidder did not know the weightings to be attributed to them.

“Specifically in relation to staffing levels, which was the subject of his major complaint, he [Varney] accepted that the staffing levels he put in his tender were unaffected by how the tenders were marked," the judge said. "There was no evidence that any other tenderer's bid had been affected by the fact that the return schedules were not identified expressly as sub-criteria and their weightings not identified in the contract documents.”

The Court of Appeal judge went on to cite a paragraph of Mr Justice Flaux’s judgment, which said:  "… in reality it was perfectly obvious that the award criteria were going to be marked by reference to the information provided in response to the return schedules and if any of the tenderers had wanted clarification of that or of what marks would be attached to each return schedule, they would surely have asked. Accordingly I am satisfied that this is a case where, within the ATI principle, there was no requirement to disclose in advance the sub-criteria or the weighting attached to each of them, because such disclosure could not have affected the preparation of any of the tenders. In the circumstances, the council was not in breach of the obligation of transparency in that regard."

Lord Justice Stanley Burnton said these were findings of fact “that have not been, and could not be, challenged”. The Court of Appeal judge said it followed that he would reject Varney’s case that the council was in breach of the regulations – Hertfordshire did not act in breach of regulation 30.

He added that, had he had reached the contrary conclusion, he would have had great difficulty in seeing how, on the facts found by Mr Justice Flaux, that breach could have led to any loss on the part of Varney. However, that issue was not before Mr Justice Flaux and the Court of Appeal.

Lord Justice Stanley Burnton said these conclusions meant it was unnecessary to address whether Varney had issued proceedings within the applicable limitation period.

Philip Hoult