Spurned rubbish suitor loses fight

By WAYNE THOMPSON

A French suitor spurned in its desire for a piece of Auckland City's $100 million in rubbish contracts has lost a court claim of unfair treatment by the council.

Onyx Group asked the High Court to award $9.5 million damages for lost profits after disputing the Auckland City Council's rejection of its tender for the eastern city rubbish collection two years ago.

The company's tender for the seven-year contract was about $36.5 million - compared with the successful bid of more than $40 million from Auckland Waste.

The council was swayed by disposal discounts that would apply if it accepted the combined tender of Auckland Waste and partner Metropolitan Waste, which wanted the western and central contracts.

Metropolitan Waste is an Auckland company and Auckland Waste was a joint venture by EnviroWaste, which runs Auckland landfills and at the time was a partly owned subsidiary of Infrastructure Auckland, and Brambles, a subsidiary of an Australian company.

Onyx, a subsidiary of Veolia Environment, a French company that operates in 48 countries and has a $12 billion annual turnover, argued that the council went outside the scope of its rules to allow the combined tender.

The council was obliged to give other tenderers an opportunity to match the rival's proposal.

Onyx also said the council used a formula to evaluate the price of each tender that was illogically and fatally flawed, and was like comparing apples with pears.

But Justice Mark O'Regan, in a reserved decision, dismissed Onyx's claims and awarded the council costs.

He said the council's tender rules gave it discretion to evaluate the non-complying joint tender without advising other tenderers.

Any process contract between the council and Onyx would not have required the council to notify others of that decision, and give others a chance to match it.

Justice O'Regan said evidence showed some concerns - both within the council's tender evaluation panel and the review panel of staff and independent professionals - about evaluating the joint proposal. Legal advice was obtained.

Onyx said the panels' report to the council tenders committee did not inform it that the proposal was a non-conforming tender.

The company maintained that if a more logical price formula for scoring tenders had been used, its tender would have won.

The council's risk manager had raised the issue of the existing pricing formula, which had led to choosing the "most expensive option" even after allowing for a discount.

The council stuck to its formula after seeking advice from experts in handling complex tenders, such as Transfund New Zealand and the engineering firm Meritec.

Justice O'Regan said the council was entitled to take that advice.

This had an impact on Onyx's prospects, particularly when combined with other aspects of the process that appeared to be unusual.

But he did not accept that the use of the price formula would have breached any process contract.

Onyx chief executive Mike Huddlestone declined to comment on the judgment.

A council executive, Cameron Parr, said the ruling "vindicates our management of the tender process, the robustness of our tendering conditions and the legal advice we received".

The decision was described by the council's lawyers, Simpson Grierson, as important for all local authorities as it would make future challenges more difficult.

It preserved the council's flexibility in managing tenders to get the best results on behalf of ratepayers.

A rising mountain

New Zealanders produce a lot of rubbish - enough to fill a rugby field piled more than 30 storeys high every month.

In the year to June 2001, Aucklanders put out an average of 801kg of rubbish each, compared with a New Zealand average of 350kg and an average for the developed world of 500kg.