In J Varney & Sons Waste Management Ltd v Hertfordshire County Council [2010] EWHC 1404 (QB) (Varney) the High Court of England and Wales (Mr. Justice Flaux, Queen's Bench Division, 16 June 2010) dealt with some issues arising in two actions by the claimant company (Varney) seeking damages under Regulation 47(6) of the Public Contracts Regulations 2006 for breach by the defendant County Council of its obligations or, alternatively, damages for breach of an implied contract. Varney was one of a number of unsuccessful tenderers for contracts for the operation of household waste recycling centres in Hertfordshire over a five year period from 2008 to 2013. Varney was in fact the incumbent operator at three of those sites. A tender for the contract to operate all but one of the eighteen sites was awarded. Varney's claim centred on the tendering process and alleged a number of aspects in which the Council was supposedly in breach of the Regulations with regard to obligations of transparency, equal treatment and non-discrimination.

Varney's allegations covered a wide range of aspects of the processing of the procurement and prompted some interesting guidance from the Court.

  1. 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;
  2. the Council had applied criteria, sub-criteria and weightings which were inconsistent with the information which it had disclosed;
  3. the Council had decided which contracts should be awarded to which tenderers by applying an overriding criterion of financial strength or stability and therefore used a qualification criterion at the award stage;
  4. the Council negotiated with tenderers after tenders had been marked and before deciding which tenderer should be awarded which contract;
  5. the Council officers did not treat tenderers equally when applying the criterion of financial stability, but chose to ignore the directions of its own Corporate Services Department in the case of two bidders;
  6. the Council erroneously accepted tenders as "Most Economically Advantageous" which included prices which were abnormally low and not sustainable over the life of the contracts;
  7. the Council was guilty of various inconsistencies and manifest errors when marking the tenders;
  8. the Council failed to enforce the commitments made by the winning bidder when it succeeded in winning its contracts; and
  9. after the contracts had been in operation for nine months, the Council changed important terms in the contracts regarding the Recycling Incentive Bonus Scheme (RIBS) thereby enabling contractors, who earned substantially more money on the contracts, and this was relied upon by Varney as evidence in support of its allegation at vi., above, but also as the basis for the second claim.

The Court (Mr Justice Flaux), considering allegations by the incumbent Varney that the tender of the Preferred Tender was abnormally low (there was a 30% price differential between it and the next) held that it was "well agruable" that there was a positive duty on an awarding authority in relation to suspect tenders. However, there was no general duty to investigate "suspect" tenders and it was appropriate to adhere to the wording of the Regulations. The practice dictated that a reasonable assessment ought to be undertaken and implied that this encapsulated a duty to identify any such tender, allow its bidder to demonstrate the reasonbleness of the tender and to consider that information together with any response offered by the bidder before making a decision.

In the course of his judgment, Mr. Justice Flaux reviewed many of the leading legal cases on transparency including ATI EAC v ACTV Venezia [2005] ECR 1-10109, Lianakis v Municipality of Alexandroupolis [2008] ECRI-251, Letting International Ltd v Newham LBC [2008] EWHC 1583 (QB) (Silber J) and a number of the cases reviewed in the English Court of Appeal decision in R (Law Society) v Legal Services Commission [2007] EWCA Civ 1264 noted previously in On Track, as well as the Judgment of the English High in Lion Apparel Systems Ltd v. Firebuy Ltd [2007] EWHC 2179 (Ch).

However, the Court differentiated between award criteria and subcriteria in relation to documents described as "Return Schedules". At paragraph 88, Mr Justice Flaux stated, by reference to the Letting International Case that, an award criterion of "Compliance with Specification" was somewhat broad and vague and he understood readily how the judge in Letting considered that the Method Statements in that case, which were much more specific, were distinct award criteria. Mr. Justice Flaux then proceeded to conclude that standards or tests in the present case as to "Customer Satisfaction" and "Price" on the Return Schedules were not separate principles or standards or tests but no more than subsets of those principles or standards or tests. He further stated at paragraph 89 that it was clear from both the Letting case and the Lianakis decision of the European Court of Justice that,

"where there are undisclosed criteria and weightings for those criteria, the Directive and the Regulations require a strict approach to be taken to the obligation of transparency. Thus, it would be no answer to a claim that there had been a failure to disclose expressly that the Return Schedules were award criteria but it must have been perfectly obvious that the Return Schedules were going to feature in the assessment of the tenders or that they were going to be marked."

Effectively, this encapsulates the principle that just because a tenderer is asked to provide information does not mean that the tenderer is thereby made aware that the information will be used as, or for purposes of, an award criterion if that is not otherwise made obvious.

At paragraph 90, Mr Justice Flaux stated that if the Return Schedules had been award criteria,

"it does not seem to me that it would be an answer to the lack of transparency to say that the ITT stated in terms "any queries arising from the tender documents which may have a bearing on the offer to be made should be raised" enabling any prospective tenderer to enquire as to the status of the Return Schedules and what weighting they would be given. It seems to me that that seeks to pass responsibility to the tenderer for a matter which on this hypothesis would have given rise to an anterior obligation on the Council."

However, turning to the Return Schedules 1-15 and whether they breached the obligation of transparency, Mr. Justice Flaux said of them at paragraph 93:

"the obligation of transparency in relation to prior disclosure of those subcriteria and the weighting attached to them is qualified in a way in which disclosure of the award criteria themselves is not. This is apparent from the judgment of the European Court of Justice in ATI EAC v ACTV Venezia SpA [2005] ECR I-10109."

Insofar as this might imply that a lesser standard of disclosure might apply to subcriteria than award criteria it may be queried whether it is compatible with modern law including not merely ATI itself but also the later judgment of the European Court of Justice in Lianakis. The general principle in modern cases is that where a non-disclosure, whether of a criterion or a subcriterion or their respective weightings, might affect how a tender might be compiled then such disclosure ought to be made. Perhaps this will become clearer in later cases.

In general, the statements are very helpful and unexceptionable save possibly as to the implication of a lesser standard in respect of subcriteria.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.