Court battle looms over Merseyside tender

The authority is facing a legal challenge from Covanta Energy Limited which had been vying with the SITA UK consortium for the work until SITA was announced as preferred bidder in April 2013.

Now, High Court papers have been served on the authority by Covanta which is challenging the preferred bidder decision. Covanta is asking the court to order the authority to set aside the decision not to award the contract to Covanta UK and requiring it not to enter into a contract with SITA without further opportunity for tenders to be submitted.

The submission to the Court, which runs to 109 pages has been prepared by lawyers Pinsent Masons and makes a number of detailed claims covering the bidding process. The documents says that the Defendant (Mersyside RWA) evaluated certain aspects of the claimants tender as being fundamentally unacceptable and relied upon that evaluation as justifying the rejection of the Claimants tender regardless of its score.

Regret

Carl Beer, chief executive of the Merseyside RWA noted: “MWDA regrets this action by Covanta. Whilst it is appreciated that an unsuccessful bidder will naturally be disappointed at the outcome, MWDA has conducted an extensive and fair procurement process over several years and is confident that the most economically advantageous solution has been selected for Merseyside.

“MWDA therefore rejects the challenge made by Covanta and intends to vigorously defend the claim brought against it.”

Mr Beer added that the authority and its advisors were working hard “to meet the deadline for the submission of the defence papers to rebut the legal challenge from Covanta.”

[Note: Merseyside Recycling and & Waste Authority, MRWA, is the new name for the Merseyside Waste Disposal Authority, MWDA, which formally awards the contract]

Finance

At the heart of Covantas case appears to be the issue of finance. Its submission to the court covers long discussions between the two parties over the finance structure. And, Covanta claims that the cost of its tender over the term of the contract would be 200 million cheaper than SITAs. This is linked in part to the size of the plant which was planned with three streams totalling 850,000 tonnes capacity per annum. Covanta would hold a 125 year lease from Peel and the third line could be used on a commercial basis.

Covanta said it could offer a lower monthly unitary charge to Merseyside WRA because it would own the facility at the end of the contract and continue to exploit it commercially.
Bids went in in June 2012 with the decision made in April 2013. The situation was complicated by the fact that at a late stage Defra withdrew PFI credits for the project. Merseyside RWA is also known to have taken a considerable time assess the bids for its residual waste contract to ensure that it had followed the process correctly.

Scores

The High Court papers noted that Merseyside WRA had told Covanta that it had failed to achieve the minimum score of 25% in two of the Evaluation core criteria (Legal and contractual and overall integrity).

The Covanta energy from waste facility was proposed for a site at Peel Holdings Ince Park development, nine miles east of Chester, and would have been the flagship facility for the site. In the wake of the apparent loss of the contract and the decision to give SITA preferred bidder status, Covantas operations in the UK effectively imploded in the wake of a lack of contract success. Managing director Malcolm Chilton left and Covantas American parent resolved to sell or shut the UK business down. It is unclear how many staff are left in the company with a spokeswoman unable to comment today.

Councillors

Peel has some support in the region with local politicians aware that SITA UKs plan is to send the residual waste for energy recovery on Teesside by rail while the Covanta plan would have created construction jobs and the operation of a new plant. Politicians spoken to by letsrecycle.com had a mix of views with some recognising that the rail route offered by SITA would be environmentally friendly while others were concerned about the loss of a local facility should Covanta not proceed with the Ince Park site.

However, the decision could put some members of the recycling and waste authority at odds with local councillors on their own member authorities and this may colour wider support for Covanta’s move. Nevertheless, local Ellesmere Port MP Andrew Miller has stepped into the debate, saying: I am concerned that we risk missing a really significant opportunity for my constituency and benefits for the regional economy. Trucking Merseysides waste across the country to Teesside for treatment is, to say the least, counter-intuitive.

Mr Miller’s comments were higlighted on Friday by the chairman of Peel Holdings, John Whittaker. Mr Whittaker said: “I would normally never comment on a public tendering process, especially where a Peel business has a vested interest. However, the ramifications for the North West economy of this contract going outside the region are so important that I felt I had to speak out. Over time, our planned joint venture at Ince Park, Ellesmere Port with Covanta has the scope to create over 2,000 construction jobs and up to 3,000 operating jobs. There would be half a billion pounds of US investment in just the first phase and enough clean electricity to meet 16% of the North West’s sustainable energy target. Furthermore, I understand that Covanta would save the Authority more than 210m over and above the SITA bid, over the life of the contract.”

Manchester

Peel Holdings has past links with legal challenges over major waste treatment contract decisions. When the Greater Manchester Waste Disposal Authority contract was awarded to Viridor, a challenge was mounted by SITA concerning late changes to the contract process. However, SITAs case was eventually dismissed as being out of time, (see letsrecycle.com story).

Ironically, in its bid for Manchester, SITA was also working with Peel Holdings. Nor is Peel inexperienced in High Court actions: last month it was in the High Court challenging a Lancashire council over a planning decision for a shopping centre. And, it was also in the news last month when it faced controversy as Margaret Hodge MP chair of the House of Commons public accounts committee claimed the company had not paid sufficient corporation tax which was countered by the Peel Group.