Judgments
J Varney & Sons v Hertfordshire County Council [2010] EWHC 1404
16/06/10
Jason Coppel, instructed by Michael Krantz of DMH Stallard, appeared for the Claimant in a challenge to a tender process brought under the Public Contracts Regulations 2006.
J VARNEY & SONS v HERTFORDSHIRE COUNTY COUNCIL
In J Varney & Sons v Hertfordshire County Council [2010] EWHC 1404 (QB) (16 June 2010), the High Court (Flaux J) has handed down an important judgment on several aspects of the Public Contracts Regulations 2006 (SI 2006/5, “the Regulations”).
The Claim, brought by a disappointed tenderer for public services contracts to manage Household Waste Recycling Centres provided by the Council, was for breach of the Regulations, alternatively breach of an implied contract, by various acts of the Council in the course of the tender procedure. All but one of the Claimant’s complaints was rejected.
Transparency
The Claimant complained that the Council had failed to disclose, and to identify as criteria or sub-criteria, matters which would be taken into account when evaluating tenders, and also their weightings. The Court held that the Council had failed to identify that certain “Return Schedules” which tenderers were required to complete had the status of sub-criteria, and their weightings, but that this did not amount to a breach of the Regulations, because it could not have affected the preparation of tenders. The Court relied on the case of ATI –EAC, hitherto regarded as an exception to the principle that sub-criteria weightings should be disclosed, as also permitting, in certain circumstances, the withholding of sub-criteria themselves (§§93-108 of the judgment).
Time limits
The Court also held that the Claimant’s transparency claim was time-barred, even though it had been brought within three months of the application of the undisclosed sub-criteria and weightings. The Court considered the recent judgment of the ECJ in Uniplex, and rejected the Claimant’s submission that, under Uniplex, time could not start to run until a tenderer is told of the reasons for its exclusion from a tender process (§§119-120). It applied a time limit of three months from the date of actual or constructive knowledge of the infringement of which complaint is made and held that time started to run from the date on which the Council published its Invitation to Tender (“ITT”), since it was obvious from the ITT that the Council had not identified sub-criteria and their weightings (§118). That finding – which has general significance for other transparency claims - was made notwithstanding that time would thereby start to run against the Claimant well before the breach of which it actually uncomplained (being the application of undisclosed sub-criteria and weightings).
Financial capacity as an evaluation criterion
The Court held, in accordance with the ruling of the European Court of Justice in Lianakis and Commission v Greece, that the Council had impermissibly used a selection criterion – the financial stability of tenderers – at the stage of evaluating tenders. However, it called into question the extent of the prohibition laid down in Lianakis, by ruling that financial stability was not completely irrelevant to the question of which tenders were most economically advantageous and that it was not necessarily unlawful for financial stability to be considered at the evaluation stage (§129). But an authority which is going to do that must identify financial stability as a factor to be taken into account in its ITT (§130).
Acceptance of abnormally low tenders
The Claimant alleged that the Council had accepted tenders which were “abnormally low” in the sense of being priced at a level which was insufficient to cover tenderers’ costs and to enable adequate levels of service to be provided. It relied on the recent High Court decision in Morrison Facilities Services Ltd v Norwich CC where it was held to be seriously arguable, for the purposes of granting an injunction, that a contracting authority had a duty to investigate, and potentially to reject, abnormally low tenders. The Court held that the claim found to be arguable in Morrison was unfounded: the Regulations only require a contracting authority to investigate a tender which appears to it to be abnormally low and which it proposes to reject for that reason (§§152-159). It was recognised – in accordance with the judgment of the General Court in TQ3 Travel Solutions – that a tenderer could complain that an authority had made a manifest error when deciding whether or not a tender was “abnormally low” and so whether or not to investigate it – but this had to be decided on the material which was available to the authority at the time. On the facts, there was no manifest error in this case (§§160-179).
Variation of contract
The Claimant alleged that the Council had not enforced contractual obligations which had been undertaken by one of the successful tenderers as a result of the terms of its tender. This complaint reflected a common concern of disappointed tenderers, that their rivals have made promises in order to win contracts which they do not intend to keep. The Court held that this complaint could only succeed if non-enforcement had been such that there had been a material amendment to an essential condition of the contract between the Council and that tenderer (§210), and that there had been no such variation (§§211-225).
Complaint was also made that the Council had varied the terms of a bonus scheme contained in the contract in order to make it more favourable to tenderers. This complaint was also rejected on the facts: although increased bonuses had been paid for a time, this was not pursuant to a formal change in the contract (§§226-229). Significantly, the Court also held that even if there had been a variation of contract, in contravention of the principles in Pressetext, an aggrieved third party could take action to reverse the variation but could not claim damages on the basis that the contracting authority had been obliged to re-tender a contract if it wished to bring about a significant variation of it (§§230-231).
Marking challenges
The Court rejected various challenges to the marking of tenders, applying the “manifest error” test which had been established in the Letting International case. But although the test is a familiar one, the Court added the important caveat that what had to be shown was that the mark awarded by the authority under a particular head was manifestly wrong; it was not sufficient to demonstrate that the reasoning of the authority for awarding that mark was manifestly wrong, or that there had been an inconsistency of approach between tenderers, if the Court considers that a defensible outcome was reached (§193).
Implied contract
The Court held that the Claimant could not mount an alternative claim based on an implied contract between the Council and tenderers who participated in the tender process. This alternative claim was primarily intended to avoid any difficulties with time limits under the Regulations. The Court followed Lion Apparel v Firebuy in ruling that the detailed statutory scheme contained in the Regulations excluded the implication of any contract (§§223-225).
Permission to appeal
Permission to appeal was refused.
JASON COPPEL
who was Counsel for the Claimant
List of cases
Lianakis (C-532/06, [2008] ECR I-251)
Commission v Greece (C-199/07, judgment of 12 November 2009)
ATI-EAC (C-331/04 [2005] ECR I-10109)
Letting International Ltd v London Borough of Newham [2008] BLGR 908
Uniplex (C-406/08, 26 January 2010)
Morrison Facilities Services v Norwich City Council [2010] EWHC 487 (Ch)
TQ3 Travel Solutions (Belgium) v Commission (T-148/04, [2005] ECR II-2627)
Pressetext (Case C-454/06 [2008] ECR I-4401)
Lion Apparel Systems v Firebuy [2007] EWHC 2179
