Judge rules procurement claimant was not economic operator at relevant time in dispute over largest ever contract let by council

July 17, 2020

A claimant lacked eligibility as an economic operator at the relevant time and this was sufficient to dispose of its claim against Gloucestershire County Council over the £600m+ procurement of an incinerator, a judge has ruled.

In Community R4C Ltd v Gloucestershire County Council [2020] EWHC 1803 (QB) His Honour Judge Russen QC, sitting as a Judge of the High Court, said a core requirement for a valid claim under Regulation 91 of the Public Procurement Regulations 2015 was missing.

The claimant, CR4C, was seeking damages against Gloucestershire in respect of its alleged breach of the 2015 Regulations and/or directly applicable principles of EU law in relation to a waste disposal contract awarded to UBB Waste Gloucestershire in 2016.

The contract entered into between UBB on 21 January 2016 was described as an “amended and restated contract”, by reference to an earlier contract between the parties concluded on 22 February 2013.

When the 2016 contract was entered into it was given a value of around £613m over 25 years and was described “as the largest contract the Council has ever let”.

The subject matter of the 2013 and 2016 contract was an energy from waste plant at Javelin Park, Haresfield.

Delays caused by the project being called in by the Secretary of State and also by a challenge from Stroud District Council meant that approval for the plant was only given in August 2015.

This meant that the ‘planning permission longstop date’ of 15 February 2015 had passed. As a result the council was required to request a revised project plan from UBB. The terms of that led to the entry into the 2016 contract. Construction of the plant began around November 2016.

CR4C made no complaint about the procurement process adopted by Gloucestershire in relation to the 2013 contract. The pressure group, which did not exist at the time of that initial procurement, said it was set up as an informal association around July 2015. It was formally registered as a society in February 2016.

The claimant contended that the 2016 contract was a new contract in procurement law terms. It argued that:

the amendment of the 2013 contract was material in that it changed the economic balance of the contract in favour of UBB in a manner not provided for by that earlier contract;
the award of the 2016 contract was not within any of the exceptions set out in Regulation 72 of the 2015 Regulations;
there was an obligation upon the council to ensure that such a public contract was only awarded in 2016 following compliance with the rules contained in Part 2 of the 2015 Regulatins.

CR4C was only claiming £350,000 in damages, saying that it was bringing the case “for non-commercial reasons in the public interest”.

These included that it wanted public (judicial) recognition that the council “breached the law, ultimately signing a revised contract unlawfully that cost it some £140-160m more than the competitive result signed in 2013”; and if ultimately a breach of procurement law was found at final trial, there would be a solid basis for the UK Government/Gloucestershire to find that the overpayment to UBB was unlawful State aid.

As CR4C’s claim was not issued until January 2019, it was well outside the 6-month time limit for seeking a declaration of ineffectiveness.

Instead, it sought damages, saying that the council's breach of the procurement rules was sufficiently serious to give rise to an entitlement to damages and that, at the minimum, it lost a significant chance of its tender qualifying as the MEAT and so being awarded an alternative waste disposal contract.

The essence of CR4C's case on this loss of a chance (at least) was that it would have formed a consortium to bid for such a contract with the council. Its alternative proposal would have involved waste disposal through a process known as mechanical biological heat treatment. It named a number of companies that it said would have formed its consortium.

Gloucestershire defended CR4C's claim on a number of grounds. In summary, the grounds of defence were that the Regulation 72 entitled the council to enter into the 2016 Contract without undertaking a new procurement procedure; that CR4C had no standing to bring the claim; that any breach of the Regulations was not sufficiently serious to lead to an award of damages; that CR4C had not lost the prospect of, or a significant chance of being awarded an alternative contract; and that the claim was not brought within the timescale permitted by the Regulations.

HHJ Russen QC was asked to resolve two issues at a preliminary trial:

Limitation; and
Whether CR4C was an economic operator which could have pre-qualified having regard to any selection criteria that could have been imposed upon it by the council pursuant to Regulation 58 of the Regulations.

On the latter issue, counsel for CR4C said it could have and would have formed a consortium able to meet whatever lawful criteria were required.

The competing submission from Gloucestershire’s QC was that CR4C “could not have met the financial requirements for the original PQQ, for the Shadow PQQ or, indeed, any realistic financial requirements” that the council might have lawfully imposed.

HHJ Russen QC said the question he had to decide was whether or not CR4C was an economic operator which could have pre-qualified (judge’s emphasis). He concluded that this should be on the balance of probabilities.

“The nature and origin (in the Defence) of this preliminary issue are such that CR4C is required to establish that it is more likely than not that it could have pre-qualified. The same burden of proof should apply to the other limb of the preliminary issue, which is whether or not CR4C was an economic operator at the relevant time,” the judge added.

HHJ Russen QC found that CR4C had not established on the balance of probabilities that it was an economic operator in mid-January 2016. “Even if I had considered it appropriate to decide that point (as part of the wider preliminary issue) by reference to a lower standard of proof, I would have concluded that CR4C's claim to economic operator status, as at 15 January 2016, was fanciful.”

He also concluded that CR4C had not established on the balance of probabilities that it could have pre-qualified. The judge said the claimant had not done so even by reference to other potential consortium members beyond the identified three.

“That is because the nebulous scope of CR4C's consortium, and its reference to potential consortium members rather than actual ones, inevitably carries through to a lack of commitment on the part of those others, and vice versa.”

On the issue of limitation, HHJ Russen QC said it was only after the abandonment of the council's appeal (in relation to an ICO ruling) that the unredacted version of an EY report was then disclosed and most of the terms of the 2016 contract were made publicly available.

"Only then was CR4C able to see what had previously been masked in relation to the increased costs resulting from the RPP process: specifically the information within Table 9 of the EY Report and the identification of "Nominal All-in Cost" figure of £602m odd (based upon the additional capital contribution of £17m)."

He added: "In my judgment, CR4C did not acquire Sita knowledge for the purposes of a claim in respect of the procurement of the 2016 Contract until 20 December 2018. It follows that the Claim commenced on 18 January 2019 was not barred by the provisions of Regulation 92(2)."

Cllr Nigel Moor, Cabinet member with responsibility for Gloucestershire’s waste services, said: “I am really pleased CR4C’s claim has been thrown out by the High Court, as we expected. The judge clearly states that CR4C did not have the financial standing or proven track record to bid for large scale projects, and rules that, as they did not exist at the relevant time, their case cannot proceed. We said this months ago – this has been a huge waste of everyone’s time and public money. Javelin Park continues to work well - it has stopped household rubbish going to landfill, cut Gloucestershire’s CO2 levels by 40,000 tonnes a year and generates electricity to power thousands of homes.

“As a public organisation, we welcome challenge and scrutiny of our processes and decisions. However, we will always take the necessary steps to make sure the council achieves the best possible deal on behalf of the people of Gloucestershire.”

Responding to the ruling, CR4C said it planned to consult its supporters as well legal representatives before deciding whether to seek leave to appeal so that the case might proceed.

Tom Jarman of CR4C said: “We brought this case in the public interest. It was never about a small damages claim but about ensuring Gloucestershire County Council complies with the law and does not waste taxpayers money. We want £150m back for taxpayers but most of all we want a better environmental outcome for Gloucestershire by seeking a low cost, low carbon, waste treatment option which does not simply burn plastics and other recyclable resources.

"The facts revealed in court and the judge’s decision show that GCC hid a truly astounding increase in costs for years. This itself incurred £100,000’s of taxpayers’ money, using every legal trick in the book. The county’s taxpayers deserve better from their councillors and civil servants. We will continue to go about trying to get their money back.”