Public Procurement – Legal Ruling against Winchester Council, You Can’t Vary a Contract THAT Much!

A legal judgement affecting the beautiful and ancient city of Winchester has some implications that procurement people generally should note.

Although technically we might see this as a "concession" in public procurement terms rather than a straightforward procurement, the implications carry across.

A redevelopment of the city centre, opposed by many on aesthetic and design grounds as well as because of the commercial issues, has been halted after a judicial review. At a hearing in the High Court, the judge said that the council broke procurement laws by renegotiating and agreeing new and different terms with the preferred developer rather than holding a new competition. As bdonline reported;

“Judge Dame Beverley Lang blasted the council for committing a serious breach of the procurement rules when it appointed Henderson to develop the 3ha Silver Hill site on renegotiated terms, including dropping the affordable housing element and increasing the number of shops.”

There was opposition to this locally for obvious reasons; as well as the artistic issues, the developer appeared to be getting major concessions from the council, although some commentators have noted that opposition has also come from other property developers who have their own eyes on the opportunity. However, they are in effect potential suppliers, who are quite within their rights to complain about a dodgy procurement process!

The case goes back years, and when Henderson took over the original developer who went bust, they decided the scheme was not viable and wanted to drop the plans for a new bus station and reduce the number of affordable houses provided. But the judge said that the changes were radical enough to mean that this was in effect a new requirement, and the whole tender should have gone back to the market. As the judge said:

“The council’s failure to follow an open, competitive, transparent and non-discriminatory procurement process for such an important contract, at any stage, casts real doubt on whether the scheme proposed by the developer is the best scheme on the best terms available… In my judgment, the council has committed a serious breach of the procurement regime, which is both substantive and procedural in nature. This is the second occasion upon which it has committed such a breach in the lifetime of one contract. It would be an exceptional course to allow its unlawful decision to stand…”

Nicely put, your ladyship! She did also point out that the original development agreement should have been competed back in 2004, but it is “now too late to challenge the lawfulness of the Development Agreement on this basis.” That decision not to run a competition then was based on dodgy legal advice, she says – I wonder who gave that?

But the main point to note for everyone in public procurement is around how much a contract can change before it needs to be re-competed. The judge, quoting extensively from Professor Sue Arrowsmith’s excellent book “The Law of Public and Utilities Procurement,” decided that the changes here mean that it was “materially different in character from the original contract.”

This shows that we need to be careful where the contracting authority wants to make significant changes between awarding the contract, and the actual delivery of the goods, services, or works. Now everyone knows that some minor changes are inevitable in major contracts; I don’t think that we will suddenly see challenges based on small changes in volume for instance, or the tweaking of the specification for an IT system before it is delivered.

But where the change is substantial enough to draw public attention to it, or attract challenges form unhappy potential suppliers, then this adds to the case law around such cases. And if you are into this sort of thing (and let’s face it, who doesn’t love a 35 page legal judgement), you can read all the details here. Approved-Judgment--R--Gottlieb--v-Winchester-CC

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