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Sita UK Ltd. v Greater Manchester Waste Disposal Authority

6 Apr 10 The Greater Manchester Waste Development Authority invited a number of contractors to tender for a £320m waste disposal project in the UK.

The Greater Manchester Waste Development Authority invited a number of contractors to tender for a £320m waste disposal project in the UK. The number of tenderers was reduced to two, a syndicate headed by Sita, the present claimant and Viridor Laing (Greater Manchester) Limited, (VL). Both submitted Best and Final Offers in November 2006, and VL was chosen as the preferred bidder, with Sita as the reserve. VL and GMWDA negotiated towards a final contract. Sita became aware of the contract award when GMWDA issued a press release. Sita contacted GMWDA making a further financial offer based on “today’s Project, including its revised scope of Works and Services”. The action concerned when Sita had had actual or constructive knowledge to challenge the award of the contract and whether its challenge fell outside the 3-month limitation period laid down in the Public Service Contracts Regulations 1993 regulation 32(4).

GMWDA invited a number of contractors to tender for a £320m waste disposal project in the UK. The number of tenderers was reduced to two, a syndicate headed by Sita, the present claimant and Viridor Laing (Greater Manchester) Limited, (VL). Both submitted Best and Final Offers in November 2006, and VL was chosen as the preferred bidder, with Sita as the reserve. VL and GMWDA negotiated towards a final contract. Sita became aware of the contract award when GMWDA issued a press release. Sita contacted GMWDA making a further financial offer based on “today’s Project, including its revised scope of Works and Services”. On 18 April 2009, GMWDA declined the offer and stated that it would be issued “Alcatel” notices later that day. An Alcatel notice is a notice which is required following the European Court decision in Alcatel Austria AG and Others v Bundesministerium für Wissenschaft und Verkehr, Case C-81/98; 28 October 1999. This requires that there should be a procedure which enables a contracting authority’s decision to contract to be reviewed before the actual contract is entered into. That procedure is satisfied by giving notice of an intention to contract (the Alcatel notice) and allowing a period of time to elapse so as to permit the review if the unsuccessful bidder thinks fit to challenge it. When the Alcatel letter was issued, the contract scoring in it was the one Sita had been informed of in 2007, and did not reflect the updated scoring of the new VL bid.

Things were delayed by the credit crunch, but GMWDA finally entered into a contract with VL on 8 April 2009. Sita protested that the correct tendering procedures had not been complied with and it should be allowed back into the bidding process. Sita issued the present proceedings on 27 August 2009, claiming damages from GMWDA for its failure to award it the contract and/ or Sita’s loss of chance and/ or its wasted tender costs.

Not only did GMWDA not accept that Sita had no basis for complaint, it also argued that Sita’s proceedings had been commenced outside the 3 month period stated in the Public Service Contracts Regulations 1993 regulation 32(4).

Sita alleged that GMWDA had failed to identify the most economically advantageous tender as required by regulation 21(1) of the Regulations. Although GMWDA had purported to do so at the first stage, at which VL was identified as the preferred bidder, after that VL’s bid had changed to such an extent that, in the absence of an opportunity for Sita to re-tender, which was not offered to it, it could not be said that VL’s tender was the most economically advantageous. Sita also argued that GMWDA had an obligation to treat both tenderers equally, that GMWDA had failed to provide certain debriefing information when asked to do so, and had failed to act transparently.

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Regulation 32(4), which contains the three month limitation period for commencing an action for alleged breach of duty under the Regulations, also requires the service provider to provide the authority with a “letter of action”, informing it of its intention to commence proceedings. The court may extend the limitation period if it considers that there is good reason for doing so. GMWDA argued that Sita knew, or should have known, of any infringements at the latest by 8 April 2009, and had not established any case for the court to exercise its discretion to extend time. For GMWDA to succeed in this challenge, it faced the difficulty of having to establish not only the facts but also what Sita had known about them. In addition, there was also establishing what Sita ought to have known.

On 27 May 2009, Sita had written a long letter to GMWDA, which subsequent correspondence demonstrated was intended to be the statutory letter before action referred to in Regulation 32(4)(b). The letter itemised Sita’s complaints, and reiterated a request made to GMWDA in a letter dated 18 May requesting for further information about what changes had been made to VL’s bid. GMWDA relied upon the letter of 27 May as evidence that Sita had enough information to commence proceedings, whilst Sita maintained that the letter showed that they did not have adequate information. Further correspondence passed between Sita and GMWDA, all in a similar vein, and each relied upon by each party as supporting their case about Sita’s level of knowledge.

On 25 June GMWDA responded to Sita’s letter of the previous day advising that it was gathering information requested on the previous day and also in a letter dated 12 June. GMWDA said that it hoped to respond by the following week at the latest, and that it did not expect Sita to commence proceedings until the information had been provided. Sita responded on 26 June that, although it accepted that it would be better to wait until it had received the required information, it would have to commence protective proceedings so that GMWDA could not raise the limitation point. It asked GMWDA to confirm by 30 June that it would not to raise the limitation point, and upon receipt of this, Sita said that it would defer the commencement of proceedings.

GMWDA replied on 29 June, said it would not pursue the limitation point in respect of any extra time it takes us to respond beyond 26 June 2009, provided any proceedings which Sita elected to bring were issued no later than five days after GMWDA’s substantive response to Sita’s letter.

GMWDA provided some information and a lot of argument in a letter dated 3 July. Sita argued that this was the earliest date from which the limitation period should be taken as running, because it was only after receiving this letter that it had actual or constructive knowledge of its claim. In a letter dated 6 July, Sita again complained that GMWDA had not provided any information on VL’s bid, including the changes to VL’s bid between January 2000 and April 2008, and asked GMWDA to confirm that it would do so by noon on 8 July, and would also extend its undertaking not to take the limitation point for a further five days to enable Sita consider the information. In exchange, Sita said it would defer court proceedings. If GMWDA refused, it would commence proceedings on the Wednesday. This letter broadened the focus of Sita’s claim to the earlier period of between January 2000 and April 2008, claiming that increases in price in that period were relevant for the purposes of a claim for infringement of the regulations.

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