SITA has lost its battle against Greater Manchester Waste Disposal Authority (GMWDA) after the High Court ruled on 29 March 2010 that its claim was out of time.
The four day hearing was to determine whether SITA had started its legal challenge against GMWDA in time or not. SITA argued that the three month time limit on starting a challenge could not have started to run until it knew sufficient detail about the way GMWDA had conducted the process. GMWDA argued that SITA had been told sufficient facts to start time running by 8 April 2009 at the latest. The judge, Mann J, agreed with GMWDA and found that 8 April was the date that SITA “knew enough about the facts to conclude that there had been a prima facie infringement”. SITA’s claim (brought on 27 August 2009) was therefore out of time and was struck out.
The statutory framework in England and Wales currently prescribes that claims must be brought promptly and in any event within three months from the date when grounds for bringing the proceedings first arose. The court has a discretion to extend the three month period where there is good reason to do so. This provision has been modified and clarified by the recent decision of the European Court of Justice in Uniplex (UK) Limited v NHS Business Services Authority (C-406/08). The essence of that decision was that:
- the “promptness” requirement is contrary to EU law; and
- the limitation period can only start from the date on which the complainant knew or ought to have known that there had been a breach of the rules.
Mann J applied the law as clarified by Uniplex and therefore considered the date by which SITA had the requisite knowledge of the alleged breach. The three month period would start to run from that date and not from the date of the actual infringement.
The SITA case concerned a tendering process for a PFI project to provide waste disposal facilities for Greater Manchester. The project is the largest waste disposal project to have been awarded in the UK. The negotiated procedure was used. A number of bidders were invited to tender including Viridor Laing (VL) and SITA. Both submitted Best and Final Offers and these were assessed in accordance with prescribed criteria by GMWDA. In January 2007, GMWDA announced that VL was its preferred bidder and that SITA would be its reserve bidder.
After VL was appointed as preferred bidder, the project materially changed shape as GMWDA decided to pursue an un-costed alternative proposal for the disposal and use of refuse-derived fuel at a site run by a third party chemical company. Substantial negotiations took place between GMWDA and VL.
A standstill period was run in April 2008 during which time SITA became aware that an alternative option had been adopted. The judge accepted that at this point, SITA strongly suspected that there had been material changes to the original tender.
The contract was not actually awarded until 8 April 2009, almost a year later. On that day, GMWDA announced the new contract in a press release. The press release confirmed that the project would trigger a £640m construction programme (compared with earlier figures of £300m - £330m) and that the contract would be worth £3.8bn to VL, compared with earlier figures of around £3bn. This was significantly more expensive than SITA’s original bid which was for £3.3bn.
Shortly after that press release (which SITA saw) SITA wrote to GMWDA alleging that there had been a breach of the procurement regulations. This was the first in a series of important letters from SITA to be scrutinised by the court as indicative of the state of SITA’s knowledge about the alleged breaches. The purpose of this correspondence from SITA was primarily to try to obtain further debrief information from GMWDA, including a copy of the contract entered into, so that SITA could satisfy itself as to whether there had indeed been any breaches and the extent of those breaches. In doing so, SITA summarised GMWDA’s breaches as it saw them which were broadly:
- failure to provide sufficient debriefing information;
- wrongly entering into a contract with VL in breach of the Regulations;
- wrongly allowing VL to improve the terms of its offer;
- wrongly changing specifications and changing the allocation of risk; and
- acting in breach of the over-riding obligations of fairness and equal treatment. The increase in price was also an important factor. GMWDA in turn engaged in correspondence with SITA and provided some more information.
SITA, whilst it remained dissatisfied with the level of information provided by GMWDA, issued proceedings on 27 August 2009. GMWDA applied for SITA’s claim to be struck out on the basis that it had been brought out of time.
Mann J, applying the Uniplex decision, considered what degree of detail of knowledge is required to start the limitation clock running. He concluded that “the standard of knowledge ought to be a knowledge of facts which apparently clearly indicate, though they need not absolutely prove, an infringement”.
In applying this test, Mann J acknowledged that it was clear that a lot of the detail could not have been known to SITA at the time, and much of the detail on which SITA would obviously wish to rely (for example the content of various evaluations and assessments) was only revealed by GMWDA at a late stage and long after 8 April. However, on the facts, Mann J established that upon the release of the 8 April press notice, SITA “knew enough about the facts to conclude that there had been a prima facie infringement of the Regulation …. The attempts to present the correspondence as requests for further information in the face of an uncertain position fail”.
Mann J did not consider that there was any good reason to exercise his discretion to extend the time in this instance.
SITA’s case has therefore been stopped in its tracks although the judge did grant permission to appeal.
The decision is important because it demonstrates the speed within which a bidder must bring a court challenge even when it does not know for sure that there has been a breach. Whilst Uniplex provided important clarification on when the clock starts ticking (i.e. from the date of knowledge of the breach), the SITA case provides guidance on the degree of knowledge required to start the clock ticking.
SITA knew the bare facts which on the face of it gave rise to a strong suspicion that the Regulations had been breached, but the further information it was asking GMWDA to provide was all certainly relevant to its potential claim. Counsel for SITA highlighted the dangers of bringing a speculative claim which later turns out to be unfounded, from which possible costs consequences may flow. Mann J, however, did not agree that this claim would have been speculative and considered that it could have been briefly particularised “pending disclosure”. Further, it was noted that claimants often start actions (and are expected to start actions, for limitation purposes) at a time when their knowledge is incomplete and when detail is not known. Mann J confirmed that he did not see why claims under the Procurement Regulations should be any different.
In the past, many claimants avoided unnecessary costs by issuing a claim form (i.e. taking it to court to be stamped) but holding off actually serving it on the defendant until as much as four months later. This allows a claimant to “stop the clock” for the purposes of limitation, but avoid setting the proceedings in motion until later.
Following implementation of the Remedies Directive, in order to start proceedings within the three month time limit, it is necessary to issue and serve the court claim. Hence, following the SITA decision, bidders wishing to challenge will need to consider the following key points:
- knowledge of facts which apparently indicate an infringement will start time running for the purposes of the three month time period;
- for procurements started before 20 December 2009, a claim form can be issued prior to the end of the three month period, and then not served until up to four months later;
- for procurements started on or after 20 December 2009, a claim form can be issued prior to the end of the three month period but must also be served within the three month period;
- starting proceedings after this time runs the risk of those proceedings being commenced “out of time”.
Action points for bidders
The moral of the story for disgruntled bidders is to act quickly where there is a reasonably clear indication of a possible breach. A prudent course of action is to press the contracting authority hard for further information and (at least for procurements started before 20 December 2009) write a pre-action letter without delay. However, where there is a genuine suspicion based on the facts that there has been a breach, a potential claimant should not allow gaps in its knowledge or a slow response from the contracting authority to delay the issue of a claim form.
For contracting authorities the case is at first sight promising as it places considerable time pressure on a potential claimant and should discourage claimants from engaging in lengthy and ongoing fishing expeditions with a view to bringing a claim. However, if a contracting authority does not wish to face court action it should be prepared to disclose information to a disgruntled bidder swiftly to persuade the bidder of the robustness of its procurement process.
The Remedies Directive “front loads” debriefing obligations and introduces the prospect of signed contracts being set aside where a serious flaw has occurred and a contracting authority has failed to observe the standstill obligations (which may include a failure to comply with debriefing obligations during the standstill period).
Of general interest, and what will now not be addressed on the facts of this case (unless the appeal is successful) is the question of when changes to contract terms amount to a material change, so that a decision to award a contract to a particular bidder can or should be rewound. Based on the Pressetext test, if the change would have lead to different results at PQQ or evaluation stage or if the tender would have attracted a different set of bidders, then it is likely to be material and affect the transparency and fairness of the process.
Over the past couple of years, the changes which tend to cause the biggest concern have been changes in funding terms. In the current financial climate, there are a number of changes taking place at late stages in tender processes which arguably are changes which affect all bidders equally and do not disadvantage one bidder over another. Bidders should be alert to any changes so that they can raise and act upon any concerns at an early stage.