J Varney & Sons Waste Management Ltd v Hertfordshire Council

[2011] EWCA Civ 708

HCC published an OJEU contract notice indicating that it was seeking service providers for contracts for the operation of 18 Household Waste Recycling Centres. Varney, who was the operator at three of the sites, submitted tenders for contracts to operate 17 of these sites. The tender notice indicated that the award criteria would be (i) price 65% and (ii) customer satisfaction 35%. Tenderers were required to submit a number of return schedules, providing details of the services and service levels that the tenderer would provide in a number of areas and the prices to be charged. However Varney was unsuccessful coming either fourth, fifth or sixth and brought claims from HCC for alleged breach of the 2006 Regulations.

At first instance the claim was dismissed. Varney’s main complaint 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. In consequence, Varney’s tender proposed high levels of good quality staff for each site - with a consequent increase in price - yet, in the event, staffing levels were given very little significance by HCC when it came to marking tenders. As a result, Varney had little chance of winning any tender, since it overpriced its bid.

Varney submitted that HCC was required 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. Further, the obligation of transparency required HCC 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. The disclosure of criteria and sub-criteria does not consist merely of stating relevant matters in the ITT. Criteria and sub-criteria must actually be identified as such. Finally, having disclosed the criteria, sub-criteria and weightings, HCC must have actually applied them.

HCC said that the return schedules concerning the standards of service which were expected did not constitute award criteria but sub-criteria. The award criteria were "price" and "customer satisfaction." 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 importance of this distinction, according to HCC, was that it meant that in accordance with the European Court decision of ATI EAC v ACTV Venezia, HCC was entitled not to identify sub-criteria and disclose their weightings.

This was provided that the sub-criteria:

  1. do not alter the criteria for the award of the contract set out in the contract documents;
  2. do not contain elements which, if they had been known at the time the tenders were prepared, could have affected that preparation; and
  3. were not adopted on the basis of matters likely to give rise to discrimination against one of the tenderers.

HCC said that these three conditions were satisfied in this case. The disclosure of sub-criteria and their weightings would have made no difference to the preparation of tenders. LJ Stanley Burton agreed noting that:

"…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."

In the view of the CA, 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. Varney knew that the information sought by the schedules was to be used in awarding the contracts. The Judge at first instance had correctly held that the return schedules were sub-criteria. This meant that there was no absolute requirement that their weightings be specified in the ITT. There was no breach of the principles of equality and transparency, and that every tenderer was given the same information. It was obvious to Varney and everyone else that the information required by the return schedules would be used to decide on the award of the contracts. Further, 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.

The CA agreed with the Trial Judge’s comment that:

"… 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."

Finally, it should be noted that HCC also argued that the defects in the ITT alleged by Varney were evident when the ITT was published. Varney could and should have brought proceedings against HCC well before the date when it did in fact bring proceedings. Remember the strict 3-month time limit for bringing claims. A tenderer cannot necessarily wait until it has become a disappointed tenders before bringing a claim. The key date is when the tenderer had knowledge of the information in question.