MWDA contract with SITA on hold until trial

Artist’s impression of SITA’s Teesside facility

The Merseyside Waste Disposal Authority (MWDA) has been ordered by the High Court to delay from entering into its resource recovery contract with waste management company SITA until spring 2014. The order results from a legal challenge from rival bidder Covanta claiming MRWA’s decision-making process was ‘flawed’.

The MWDA (the statutory name of the Merseyside Recycling and Waste Authority (MRWA)) chose SITA SEMBCORP UK (SITA) – a consortium led by SITA UK – as preferred bidder for the 30-year Merseyside and Halton Waste Resource and Recovery Contract in April 2013, thought to be worth £1.18 billion. 

The SITA bid included the construction of an energy-from-waste (EfW) incineration facility, comprising a plant capable of producing combined heat and power (CHP), at the Wilton International site in Teesside.  

Legal challenge

However, rival energy company Covanta UK, the UK arm of American firm Covanta, lodged a legal challenge against the MRWA over its decision to award preferred bidder status to SITA SEMBCORP UK.

The legal challenge submitted by Covanta’s lawyers to the High Court in Leeds outlined concerns with MRWA’s decision process, saying it was ‘flawed’ and did not take into consideration the economic savings of the Covanta bid. Further, Covanta claimed that its bid – to build an incineration facility with Peel Environment (a subsidiary of the Peel Group) – was £200 million cheaper than the winning bid, and would offer better value to the local area, as the facility was to be built in Ellesmere Port. 

MWDA’s decision process was also questioned by Liverpool Mayor, Joe Anderson, who said: “I feel the city and the wider city region has had a massive opportunity for major infrastructure investment snatched from its grasp and hundreds of potential jobs which we desperately need have gone to the North East.  

“I want to understand…how it can be more environmentally friendly and more cost effective to ship the waste of Merseyside all the way to Teeside some 150 miles away rather than dispose of our own waste locally.”

High Court ruling

The High Court yesterday (26 September), ruled in Covanta's favour and granted an injunction preventing MWDA from entering into its contract with SITA until there has been a trial to hear Covanta's claim that the procurement process was legally flawed. The court made provision for an ‘expedited trial’, which is expected to take place in April and May 2014.

Speaking at court, Mr Justice Coulson said that MWDA had properly accepted ‘for the purposes of the injunction application’ that Covanta's claim raised ‘serious issues to be tried’.

The judge added that as the procurement had ‘already taken six or seven years’, this further ‘short delay’ in achieving higher diversion from landfill would have a ‘modest’ impact on the environment.

Covanta has now been asked by the court to provide a ‘Parent Company Guarantee’ to MWDA should their legal challenge ultimately be unsuccessful.  This means that Covanta would have to pay for the delay caused by the interim injunction and their legal challenge.

MWDA ‘strongly rejects’ Covanta allegations

Speaking after the hearing, MRWA Chief Executive Carl Beer, said: “We are grateful for the clarification from the court and will now [be] making the required preparation for our full case to be heard as soon as possible.

“The authority regrets that Covanta has decided to pursue litigation. MWDA will be vigorously defending the claim brought against it. Our detailed defence strongly rejects the various allegations [that] have been made by Covanta, and sets out the significant risks to which Covanta’s solution could have given rise for MWDA if it had been taken forward. The defence also details the serious concerns which were raised by MWDA prior to Covanta choosing to submit its bid.

“MRWA will continue to defend the action until the case is resolved and intends in due course to recover its legal costs of defending the claim from Covanta”.

Covanta Energy has said it is unable to comment further on the judgement until the final written judgement is received, ‘within the next two weeks’.

Read more about Covanta's legal challenge.