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Procurement – variations to existing agreements

Stephen Matthew 2 – 5

No recourse families – case law update

Ros Foster 6 - 8

A brief guide to the new Public Contracts Regulations 2015

Emma Graham 9 - 17

The Data Protection Act 1998 (‘DPA’)

Megan Larrinaga 18 - 20

Access to justice

Sarah Hooton 21 - 22

Devolution… and the evolution of combined authorities

Angela Konteas 23 - 26

The articles in this newsletter are for general information only. They do not represent legal advice. You should always

take legal advice before pursuing any course of action discussed in this newsletter. If you would like to instruct any of

our lawyers on any matter please call +44 (0)115 976 6000.

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When does a variation go too far?

A perplexing area of procurement law has been the question of whether a variation to an existing agreement

is material to the point of requiring a fresh procurement? The recent decision in the High Court in Gottlieb v

Winchester City Council ([2015] EWHC 231(Admin)) (‘Winchester’) highlights the problem, particularly in the

context of development agreements.

Many commercial agreements will contain change control terms, particularly long term service contracts.

Development agreements have tended to include variation clauses – but unlike a change control designed to

enable new or extra services, these often trigger Deeds of Variation (i.e. a change to the written terms of

the original agreement). Anyhow, the challenge of spotting the difference between a variation that does

trigger procurement law, and one that does not, remains.

The Winchester case gives a useful steer, but is unlikely to be the end of the story.

The law so far

It is worth pointing out that the Public Contracts Regulations 2015 (which came into force on 26 February

2015) (‘2015 Regulations’) expressly recognised the legitimate modification of contracts without the need

for a new procurement procedure. This is set out in regulation 72. This regulation will become the starting

point for current and future questions on the subject. Any modification to an existing contract would be

governed by this regulation (regardless of the fact that the contract being varied pre-dates the 2015

Regulations); although arguably any variation under serious consideration prior to 26th February might not

(and would be governed by case law).

Importantly, under regulation 72, modifications are allowed where there are “precise and unequivocal

review clauses” in the contract documents providing for modifications (including to price). The key proviso is

that the modifications do not alter the overall nature of the contract. The regulation goes on to govern how

additional services can be justified where there are economic or technical grounds, or where a change of

contractor would cause “significant inconvenience or substantial duplication of costs for the contracting

authority”. Modifications can also be made where the need for the modification is unforeseen, but (i) the

modification is not altering the overall nature of the contract, and (ii) any increase in price is not exceeding

50% of the value of the original contract. In addition, modifications that are not ’substantial’ are allowed,

but this is then defined by a series of (largely subjective) tests.

So far so good – but the Winchester case pre-dates the 2015 Regulations, and was therefore decided largely

by reference to case law.

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The leading case on variations is, of course, Case C–454/06 Pressetext [2008] ECR I-4401. Amendments to a

contract may be regarded as being material when the amendments introduce terms which, had they been

part of the original procurement, would have allowed for other bidders to express interest or win the

tender. Equally, an amendment may be material when it extends the scope of the contract considerably, or

where it changes the economic balance of the contract in favour of the contractor. The essential test is

whether the variations “are materially different in character from the original contract and, therefore,

such as to demonstrate the intention of the parties to renegotiate the essential terms of that contract”.

Subsequent case law has developed this theme, touching on whether or not there is a real, as distinct from

hypothetical, distortion of competition, and whether there is or is not a cross-border interest involved. The

essential challenge for lawyers, at least since Pressetext, has always been whether the amendments to the

contract are so material as to require a fresh procurement exercise – often a difficult test to apply in the

real world.

What happened in the Winchester case?

The facts of the case are not particularly unusual. The council owned land and entered into a development

agreement with a developer in December 2004. No procurement exercise was carried out at the time that

agreement was entered into – in hindsight an erroneous position in procurement law terms (and in the

judgement of the court). The agreement provided for a mixed use scheme with the usual set of obligations

on both sides to obtain planning and implement the development. The agreement did recognise the potential

need for variations to the scheme, with certain variations requiring council approval. Financial arrangements

were put in place under the agreement, including for payments by the developer to the council, as well as

profit sharing.

The original agreement was varied on a number of occasions, and then further variations agreed in the

course of 2014. Certain variations in particular were highlighted - the affordable housing requirement,

removal of the requirement to procure the construction works by competitive tender, replacement of a bus

station and various civic uses for additional retail space.

A judicial review challenge was brought by a Winchester City Councillor (and leader of a campaign against

the development). Mrs Justice Lang, applying the principals of Pressetext, decided that the decision to vary

the development agreement was unlawful in the absence of a fresh procurement exercise. The variation

showed the council’s intention to renegotiate its essential terms and change the economic balance of the

contract in favour of the developer.

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What points come out of the case?

First, the case is notable for finding that where the court is looking at a contract of this kind, the

commercial value of the varied contract will be assessed by reference to the potential returns to be

obtained from third parties, not just the council. In short, the financial terms between the parties are not

the only consideration.

Second, the judge distinguished the approach taken in the case of Edenred (UK Group) Limited v HM

Treasury [2015] EWHC 90(QB) where it was held that the variation would not be material for the purposes of

Pressetext test unless evidence showed that “there would be someone else who would have been ready,

willing and able to bid, who would have wished to have done so if the opportunity had been made clear,

but who did not do so because it was not.” In the Winchester case, given there had not been a previous

tendering exercise, the claimant could not identify any actual or potential bidders who had been

disadvantaged. Mrs Justice Lang held that the claimants had satisfied the court that, on the balance of

probabilities, a realistic hypothetical bidder would have applied, had the scheme been advertised on its new

terms. There was no requirement to identify actual potential bidders for this purpose.

Third, the court rejected the argument that the applicant, Mr Gottlieb, was not entitled to relief since he

was not an economic operator with an interest in the operation of procurement law. This is important – in

reinforces the view that breach of procurement law can be used as a basis for judicial review.

What are the lessons?

Regulation 72 of the 2015 Regulations will be the test going forward. It will also tend to drive more precise

drafting of the terms of any long-term commercial agreement, the change control mechanism in particular.

Even with “clear, precise and unequivocal review clauses”, or where a modification is not ‘substantial’, a

variation to an existing agreement still cannot be assumed to be safe from challenge, particularly where

these go to the heart of the original deal and fundamentally shift the balance in the economic relationship

between the parties.

In the context of development agreements, where variations of this kind have been notoriously difficult to

justify, there may be a point of no return. In other words, it may be safer to start again and run a

procurement exercise to choose a new development partner. The procurement history to the agreement may

be important – was there a procurement exercise to choose the original developer for example?

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Winchester are considering their way forward, including the possibility of an appeal, and take slight comfort

from the fact that the scheme has planning consent and remains viable. However for others, there may be a

feeling of ‘there but for the grace of… etc’ about this case.

Stephen Matthew | +44 (0)20 7871 8505 | stephen.matthew@brownejacobson.com

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Decisions by local authorities not to give or to terminate accommodation and/or support to no recourse to

public funds (‘NRPF’) families are often the subject of challenge by way of judicial review. The basis for

these challenges has changed from standard Wednesbury/Tameside unreasonableness/irrationality grounds

over recent years. As the courts have developed a robust approach to such challenges, recognising that

decisions made on assessment pursuant to Section 17 Children Act 1989 were matters of evaluative judgment

on the part of professional social workers1, and that social workers were required to draw inferences from

failures to co-operate2, claimant lawyers have looked for different legal avenues by which these decisions

can be attacked.

Two areas currently ripe for challenge are: (i) levels of subsistence; and (ii) adequacy of the accommodation

provided, including decisions to locate families many miles away from the authority’s area. Recent case law

has provided some assistance in relation to these issues.

Subsistence payments

In PO v Newham London Borough Council [2014] EWHC 2561 (Admin) (‘Newham’), the policy of Newham as to

the subsistence payments made to NRPF families was subject to successful challenge by way of judicial

review. The policy provided for some payments to be made at child benefit levels and contained other

provisions as to payments for the adults of the family and for additional children (for whom payments were

made at a rate significantly lower than the equivalent child benefit rates). The Newham policy (which was

unpublished) was held to be unlawful.

The policy was criticised by the judge on a number of grounds. First, and perhaps most significantly to other

local authorities, the judge held that the use of child benefit rates as the basis for determination of

subsistence payments was unlawful. Child benefit rates were not calculated as a means by which the

subsistence needs of destitute children could be met “it is not a benefit designed to meet the needs which a

child has for support in financial terms”. Child benefit was not means tested and as such was not calculated

with reference to whether there was any other income available to the family to meet the children’s needs.

Further, the judge considered the rates paid to asylum seeking families to meet their “essential living

needs” and concluded that the difference between those rates and child benefit rates was so significant that

no reasonable authority could have based its assessment of what was appropriate to meet the subsistence

needs of a destitute child on the amounts payable in respect of child benefit.

Second, the policy was held to be deficient in its application of child benefit rates. Additional payments

made in respect of the adults of the family meant that those families received less than if each person were

1 R(G) v Southwark LBC [2009] UKHL 26. 2 MN & KN v Hackney LBC [2013] EWHC 1205 Admin.

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paid at child benefit rates, certain subsequent children of the family received less than half the child benefit

rate, and families with two parents received less than lone parent families. The judge held that there was

no rational way by which the payment of £15 per adult could be derived from child benefit rates. In those

respects the policy was held to be irrational.

Third, Newham were criticised for not publicising the policy (the claimants were only provided with a copy

during the disclosure that occurred during the course of the litigation). It is an established principle of public

law that where decisions are to be made in accordance with a policy those affected are entitled to have

sight of that policy.

The judgment is of significance as many local authorities use child benefit rates as the basis for subsistence

payments for NRPF families, in addition to other payments such as travel allowances to enable children to

get to school (as were paid to the claimants in Newham and the meeting of all outgoings relating to the

accommodation provided. It is important to note that, whilst the judge was critical of the Newham policy,

the judgment is not the victory for claimants that may have been feared.

In a number of respects the claimants were unsuccessful, and there were particular features of the Newham

policy that drove the decision to find that policy unlawful. Further, the judge did not find that either asylum

support rates or mainstream benefit rates were necessarily the appropriate measure for subsistence

payments and, whilst the need for some support for the adults of the family was held to be appropriate this

was expressly limited to the minimum necessary to avoid a breach of European Convention on Human Rights.

This case was followed by Mensah v Salford City Council [2014] EWHC 3537 (Admin), in which the claimants

challenged the authority’s policy of benchmarking payments to NRPF families against payments made by the

Secretary of State to destitute asylum seekers. The claim was unsuccessful. The court recognised that the

decision as to the amount needed to make suitable provision for children in need was uniquely one for the

local authority and that there was nothing inherently unlawful about one public authority having regard to

the level of subsistence payments fixed by another public authority as being necessary to avoid destitution.

The court also held that, in calculating the amount needed to meet the risk of destitution, the council could

have regard to its own economic resources.

Accommodation

In R (C, T, M & U) v London Borough of Southwark [2014] EWHC 3983 (‘Southwark’) a NRPF family was

accommodated in bed and breakfast accommodation above a pub for a period of six months. The suitability

of that accommodation was challenged. On the one hand, the property was overcrowded and infested with

rodents and the family were required to share kitchen and bathroom facilities. The overcrowding was

affecting the health and wellbeing of the children. On the other, the children were able to attend school and

play with neighbouring children and the accommodation was clean and well-ordered and in the family’s

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preferred area. The judge held that the provision of the accommodation was not unlawful given the positive

aspects and the background of a chronic shortage of more suitable accommodation.

It was ultimately agreed that the family should be moved to Rochdale. An argument that the council should

have carried out a fresh assessment before relocating the family was also unsuccessful. The judge held that

such an assessment would have been unnecessarily bureaucratic given that the move had been undertaken

with the consent and co-operation of the mother who was a good parent capable of making decisions in the

best interests of the children.

Conclusion

The cases above show judges continuing to afford deference to the views of social workers and to recognise

the limited resources available to local authorities. Subsistence payments must be calculated with reference

to need, but the court has expressed support for and understanding of the need for some kind of systematic

process by which such calculations can be made. Provision of accommodation will often be difficult but

provided the competing interests are properly balanced (as in the C case (Southwark)) challenges by way of

judicial review will be less likely to proceed. Moving families out of an authority’s area and away from

established networks is something that many local authorities are having to consider, but this in turn gives

rise to potential legal and practical difficulties as demonstrated by the case referred to above.

Ros Foster | +44 (0)20 7337 1015 | Ros.Foster@brownejacobson.com

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On 17 April 2014, a new EU public procurement directive (the ‘Directive’) was adopted by the European

Commission and came into force. All EU member states must implement the Directive into national law

within two years of the date of adoption and the UK has fulfilled its obligation with time to spare.

The Directive has been transposed into UK law by Statutory Instrument 2015/102 the Public Contract

Regulations (the ‘2015 Regulations’), replacing the Public Contract Regulations 2006 (the ‘2006

Regulations’). The 2015 Regulations largely came into force on 26 February 2015, with a few exceptions

where commencement will be staggered; the last part of the regulation to come into force, relating to e-

procurement, will be in October 2018.

The main purpose of the EU public procurement regime is to open up the public procurement market to

competition and ensure the free movement of supplies, services and works within the EU. The EU rules

reflect and reinforce the value for money focus of the UK government’s public procurement policy. The

Directive is intended to simplify the EU public procurement regime, make it more flexible and improve

efficiency in public spending. It is also intended to allow the strategic use of public procurement to address

new challenges, for example, fostering innovation, increasing access for small and medium-sized enterprises

(SMEs), respecting the environment, and achieving other societal goals.

We explore the main aspects of the 2015 Regulations below.

Engaging with the market pre-procurement (regulation 40)

Contracting authorities have traditionally been nervous about engaging with the market prior to commencing

a procurement process. This is in large part due to the uncertainty around the extent to which this was

permissible under the old regime. The 2015 Regulations seek to clarify this area of the law. They provide

that market consultations are permitted to assist the ‘preparation of procurement’ and to inform economic

operators of ‘procurement plans and requirements’. Contracting authorities may seek advice from, for

example, independent experts, authorities or market participants “provided such advice does not have the

effect of distorting competition and does not result in a violation of the principles of non-discrimination

and transparency”. In particular, the contracting authority must take appropriate measures to ensure that

competition is not distorted where a bidder or an undertaking relating to that bidder has advised the

authority or otherwise been involved in the preparation of the procurement procedure.

This provides helpful clarification that direct engagement with individual market participants is permissible

before going out to procurement providing certain safeguards are put in place. It ties in with recent

attempts by the Cabinet Office to encourage pre-procurement market engagement. For some good examples

of market engagement exercises see the Cabinet Office’s Procurement Policy Note 04/12.

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New rules on contract award procedures (regulations 25 to 32)

Under the 2006 Regulations, the open and restricted procedures (the most commonly used procedures for

straightforward procurements) were freely available. The competitive dialogue procedure was available for

‘particularly complex contracts’, so long as certain strict conditions were satisfied and the use of the open

or restricted procedures did not allow the award of the contract. Lastly, under the 2006 Regulations the

negotiated procedure was only to be used in ‘exceptional circumstances’ where a separate set of strict

conditions could be satisfied.

Under the 2015 Regulations, all of these procedures have been retained but with some changes and a new

‘innovation partnership’ procedure has been introduced. The minimum timescales that apply to each

procedure have also been reduced by about a third.

The open and restricted procedures continue to be freely available but with reduced timescales and there is

a new accelerated open procedure which can be used by contracting authorities in cases of urgency. This

means that where a contracting authority can duly substantiate a state of urgency which renders

impracticable the normal time limit, it can reduce the period for receipt of tenders to a minimum of 15 days

when using an open procedure or to 10 days in a restricted procedure.

The conditions that must be met for using the competitive dialogue and negotiated procedures are now the

same for both and have been relaxed. They can arguably be used going forward for anything that is not ‘off

the shelf’. The 2015 Regulations acknowledge the need to provide for wider access to negotiations when

running a procurement process and therefore leave it up to contracting authorities to decide which

procedure to use. The new competitive dialogue procedure expressly allows for negotiations with the

preferred bidder providing no material changes to the contract are made. Interestingly, the negotiated

procedure does not expressly permit post-tender negotiations so query whether the competitive dialogue

procedure will become the procedure of choice for complex procurements going forward. Various safeguards

have been added to the negotiated procedure to make it more structured and formalised compared to the

old regime.

There is also to be a more flexible procedural regime for sub-central contracting authorities (non-central

government bodies). These authorities will be able to use a prior information notice (PIN) as a call for

competition in restricted and negotiated procedures provided certain conditions met (type and timing of PIN

and start of tender process) and can limit the competition for contracts covered by the PIN only to those

who expressed an interest in the PIN. Also, when using the restricted procedure, such authorities will be

able to agree to the time limit for receipt of tenders with bidders (there being a default period of 10 days

where no agreement is made).

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No more Part A and Part B services (regulations 74 to 76)

The 2006 Regulations contained an exhaustive list of Part A services which were subject to the full rigour of

the EU rules and a non-exhaustive list of Part B services that were subject to the EU rules only to a limited

extent. Most importantly, there was no duty to advertise Part B services contracts. A duty to advertise such

contracts could only have arisen under the general Treaty principles where the contract is of ‘certain cross

border interest’.

The 2015 Regulations provide that all services over the applicable EU financial thresholds will be subject to

the full rigour of rules unless they fall within the list of services at Schedule 3. These concern social, health,

education, and certain other services (note that the list is not identical to that which was included under the

Part B services category in the 2006 Regulations).

A special light-touch regime will apply to contracts for Schedule 3 services with a value over €750,000.

Whilst there will be a requirement to publish an Official Journal of the European Union (OJEU) Notice to

advertise such contracts, no detailed procedures or time limits are specified in the 2015 Regulations.

Public-public contracts (regulation 12)

The 2015 Regulations clarify the circumstances in which a contract awarded by a contracting authority to

another legal person will genuinely be an ‘in-house’ award and will not fall within the scope of the

Regulations. It does this by codifying the ‘Teckal’ line of case law with some additions. A contract between a

contracting authority and another legal person will fall outside the scope of the Regulations where:

the contracting authority exercises over the legal person concerned a control similar to that which it

exercises over its own departments (need to demonstrate a decisive influence over both strategic

objectives and significant decisions of controlled legal person);

more than 80% of the activities of that legal person are carried out in the performance of tasks

entrusted to it by the controlling contracting authority or by other legal persons controlled by that

contracting authority; and

there is no direct private capital participation in the controlled legal person.

The 2015 Regulations permit Teckal to apply in reverse allowing the controlled body to award public

contacts to the controlling body and also horizontally between two controlled bodies.

The 2015 Regulations also set out the conditions which must be met to take advantage of the ‘inter-

authority cooperation’ exemption which derives from the Commission v Germany line of case law. This

allows contracting authorities to co-operate in carrying out jointly their public service tasks where the

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arrangement is governed solely by considerations in the public interest, without the participation of a

private sector party. A contract will be exempt where it is concluded exclusively between two or more

contracting authorities and where:

the contract establishes or implements a co-operation between the participating contracting

authorities with the aim of ensuring that public services they have to perform are provided with a

view to achieving objectives they have in common;

the implementation of that co-operation is governed solely by considerations relating to the public

interest; and

the participating contracting authorities perform on the open market less than 20% of the activities

concerned by the co-operation.

Contracts reserved for mutual organisations (regulation 77)

The mutualisation agenda has been given very high priority by the UK government. The Cabinet Office has

developed a number of support tools for mutuals and has launched various mutual pathfinder projects. The

essential features of a mutual are:

employees have ownership rights or a high level of input into the management and governance of the

organisation;

the main aim of the organisation is to provide services for the public good rather than making profit

for individuals; and

at least some of the profits are reinvested into the organisation to improve service delivery.

There is no explicit exclusion for awarding contracts to mutuals under the old regime. However, the 2015

Regulations allow certain qualifying services (broadly health, social, cultural and linked administrative

services) to be reserved for mutuals that meet the certain cumulative conditions.

To qualify to participate in the reserved competition, the mutual cannot have been awarded a contract for

the same services by the same contracting authority within the last three years. Furthermore the maximum

term of the contract to be awarded cannot exceed three years. There is still a requirement to advertise such

contracts in the OJEU where the contract value exceeds the relevant EU financial threshold (note that the

higher threshold of €750,000 is likely to apply for these types of contract).

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Selection criteria (regulation 57)

The 2015 Regulations expand upon the list of mandatory exclusion grounds by adding convictions for child

labour and other human trafficking offences and failure to pay taxes and social security contributions where

this has been established by a binding legal decision.

They also introduce new discretionary exclusion grounds such as where a bidder “has shown significant or

persistent deficiencies in the performance of a substantive requirement under a prior public contract…

which led to early termination of that prior contract, damages or other comparable sanctions”.

A bidder can also be excluded where it has undertaken “to unduly influence the decision-making process of

the contracting authority, to obtain confidential information that may confer upon it undue advantages in

the procurement procedure or to negligently provide misleading information that may have a material

influence on decisions concerning exclusion, selection or award”. With regard to non-payment of taxes, it is

interesting to note that where a binding legal decision is not in place, a bidder may still be excluded if the

contracting authority can demonstrate by other appropriate means that a bidder is in breach of its tax

payment obligations. Will contracting authorities be confident enough to exercise this discretion without a

binding legal decision in place?

Under the new regime contracting authorities must consider mitigating circumstances allowing bidders to

avoid exclusion, including exclusion on mandatory grounds, where sufficient measures have been put in

place by the bidder concerned to demonstrate its reliability (‘self-cleaning’). These measures must be

evaluated “taking into account the gravity and particular circumstances of the criminal offence or

misconduct”. The 2015 Regulations also introduce maximum periods of exclusion (five years for mandatory

exclusion cases and three years for discretionary exclusion cases).

As for selection criteria more generally, the main categories of technical and professional ability and

economic and financial standing have been retained. With regard to the latter, contracting authorities will

not be able to impose a turnover requirement that exceeds twice the estimated contract value except in

duly justified cases because of the specific risks involved. For all selection criteria, it is clarified that any

requirements must be related and proportionate to the subject matter of the contract.

Award criteria (regulations 67 to 69)

The award of all public contracts must now be to the most economically advantageous tender identified on

basis of either ‘price’ or ‘cost’ using a ‘cost-effectiveness’ approach e.g. life-cycle costing.

There is an expanded non-exhaustive list of award criteria which includes reference to qualitative,

environmental and social criteria and innovative characteristics. It has also been clarified that the award

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criteria must be linked to the subject matter of the contract. This may include factors relating to the

production process, trading or a specific process for another stage of the life-cycle.

The 2015 Regulations put to rest the Lianakis debate concerning whether ‘experience’ can ever be used as

an award criterion. It provides that award criteria may comprise ‘organisation, qualification and experience

of staff assigned to performing the contract where the quality of the staff employed can significantly impact

the level of performance of the contract’.

Changes to existing contracts (regulations 72 and 73)

The issue of when a change to a public contract is a ‘material’ one triggering a duty to re-advertise the

contract is a constant bugbear for contracting authorities. The 2015 Regulations codify many of the different

principles that arise out of the case law and provide much more certainty in some areas. All of the principles

set out in the commonly cited Pressetext case have been included and a few specific exemptions are set out.

The 2015 Regulations provide that a new procurement is required only if a contract modification is

substantial and sets out four cases in which a modification is deemed to be substantial i.e. where the

change:

would have allowed for the admission of other candidates/acceptance of another offer;

would have attracted additional participants in the original procurement;

alters the economic balance of the contract in favour of contractor; or

considerably extends the scope of the contract.

The 2015 Regulations provide the following safe harbours so that if the change falls within any of them, it

will be permitted:

where the modifications, irrespective of their monetary value, have been provided for in the initial

tender documents in a clear, precise and unequivocal review clause/option;

where additional works, services or supplies by the original contractor have become necessary and a

change in contractor cannot be made for economic or technical reasons and would cause significant

inconvenience or substantial duplication of costs for the contracting authority (any increase in price

must be limited to 50% of original contract value – applies to each successive modification);

where the modification is required due to unforeseen circumstances, so long as the modification

does not alter the overall nature of the contract and any increase in price is limited to 50% of

original contract value;

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there is a replacement of the contractor due to the exercise of a review clause/option or to

universal or partial succession following corporate restructuring providing the original pre-

qualification questionnaire (PQQ) criteria still fulfilled and no other substantial modifications are

made; or

where the value of the modification is (a) below the EU financial thresholds; (b) below 10% of the

original contract value for service and supply contracts and below 15% of the original contract value

for works contracts; and (c) does not alter the overall nature of the contract.

This is another example of where the 2015 Regulations have tried to codify the existing law. However, it

only captures a snapshot of the case law as it currently stands. The courts have applied many different tests

to assess whether a change is material. This is because quite often, none of the existing tests that have been

developed are relevant to the particular facts of the case before the court. Contracting authorities should be

mindful that further refinements of and additions to the material change tests are likely to be developed by

the courts going forward. The case law will still be very relevant therefore.

SMEs (regulations 46 and 59)

The 2015 Regulations include various new initiatives aimed at increasing small and medium-sized enterprise

(SME) access to public procurement.

It is proposed to put in place a ‘European Single Procurement Document’ which can be used to self-declare

that an entity meets certain selection criteria and none of the exclusion grounds apply. This is to prevent

SMEs being required to provide certificates and other documents at the outset (although the contracting

authority may still request certificates or other documents at any later stage of the process).

Contracting authorities will be invited to divide public contracts into lots or else will need to provide a

specific explanation to bidders as to why lots are not being used. It will also be possible to limit the number

of lots that a bidder can tender for and the number of lots that can be awarded to any one bidder.

The 2006 Regulations did not really address subcontracting issues in any substantive way. The 2015

Regulations contain a number of provisions in relation to subcontracting. For example, direct payments to

subcontractors can be requested by the subcontractor where the nature of the contract allows.

Framework agreements and dynamic purchasing systems (DPS) (regulations 33 and 34)

The 2015 Regulations clarify rather than change the existing rules on framework agreements. They state that

contracting authorities are to be clearly identified in the call for competition. They also clarify that a multi-

supplier framework agreement may provide for both direct call-offs and mini-competitions provided this is

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set out in the tender documents. The choice of call-off route actually used must be based on ‘objective

criteria’.

The DPS provisions have been revised to make them much more user friendly. Suppliers no longer have to

submit an indicative tender to be admitted to the DPS. They must simply satisfy the specified selection

criteria to be admitted to the DPS and the contracting authority only has to invite the list of pre-qualified

suppliers to tender for specific contracts (it does not have to issue another OJEU Notice as under the current

regime). This is a helpful simplification that should make a DPS a more attractive option moving forward.

E-procurement (regulation 22)

The 2015 Regulations further the Commission’s objectives in relation to the use of electronic procurement

across the EU.

Contracting authorities are to offer unrestricted and full direct access free of charge by electronic means to

the procurement documents from the date of publication of the contract notice. It is not yet clear whether

all procurement documents need to be made available at the outset of the procurement and it is hoped that

some clarification is offered by the Cabinet Office in this respect.

All notices will be required to be transmitted electronically and contracting authorities must in due course

allow electronic submission of tenders and requests to participate (there will be an extended transition

period for such requirement – until October 2018 for most contracting authorities).

There are some exceptions to the mandatory use of electronic communications e.g. where it would require

specialised tools or file formats not generally available in all member states or where there are specified

legitimate reasons not to request electronic means of communication.

Lord Young Reforms (Part 4)

Lord Young of Graffham, Enterprise Advisor to the Prime Minister, has produced a series of reports

looking at how to improve SME involvement in public procurement in particular with a view to reducing the

red tape they face when tendering for public contracts. The 2015 Regulations have enshrined his

recommendations which distinguish the UK Regulation from the Directive.

The key reforms are detailed below:

Below threshold procurements shall no longer include a PQQ stage. Lord Young said “PQQs have been

found to be onerous by small businesses, often imposing more than 40 pages of questions before

they can be considered for bidding for a contract.”

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Above threshold procedures, where PQQs are used, should comply with Crown Commercial Service

(CCS) guidance.

Public contracts which are advertised should also be advertised on Contracts Finder, within 24 hours

of the initial advert being made available. The 2015 Regulations dictate that there are contracts

below EU procurement thresholds which are also required to be advertised (contract value above

£10,000 for central government and £25,000 for non-central government authorities). Award

opportunities below threshold which are not required to be advertised are those which are only

being made available to a closed group of suppliers under a framework or DPS. If the procurement

was to establish a framework or DPS, the requirement to advertise would apply.

More rigorous rules are in place to ensure contracting authorities pay invoices for undisputed sums

within 30 days, which SMEs will undoubtedly appreciate.

Guidance

There is some guidance to be issued by the CCS, specifically in relation to the Lord Young reforms. Some of

the guidance was not available at the time of writing this guide but the wording of the 2015 Regulations

obliges contracting authorities to have regard to any guidance published in relation to matters under Part 4.

Guidance which has already issued includes direction on the PQQ stage and qualitative selection (and also

contains a standardised model form of PQQ), the payment of undisputed invoices within 30 days and the

need for transparency when publishing on Contracts Finder. Keep an eye out for further guidance in the

coming months!

We hope you find this brief guide helpful.

Emma Graham | +44 (0) 0115 948 5641 | emma.graham@brownejacobson.com

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Disclosure to regulators and other statutory bodies

Regulators and other statutory bodies often have wide ranging powers to obtain information from a variety

of sources including NHS trusts and local authorities if they consider the authority has information which will

assist with the fitness to practise or other investigation that the regulator is conducting. For example, the

Health and Care Professions Council (the professional regulator of social workers) and other health care

regulators can “require any person who is in his opinion able to supply information or produce

documents…to supply such information or produce such a document.”3 In similar vein authorities often

receive requests from the police for personal data in reliance on Section 29 of the DPA which disapplies the

non-disclosure provisions of the DPA in relation to information that is necessary for the detection or

prevention of crime or the apprehension or prosecution of offenders.

Though such provisions are wide ranging they are often tempered with an accompanying provision which

states (taking the HCPC as a typical example) “nothing shall require or permit any disclosure of information

which is prohibited by or under any other enactment.”4 The DPA regulates the processing of personal data

and any request for information must be considered with the provisions of the DPA in mind. Where the

processing of personal data will be in contravention of any of the provisions of the DPA, the information

cannot be required pursuant to any power to obtain information. We have seen a number of requests from

the police and statutory regulators which request significant amounts of sometimes confidential information

with little explanation as to why the information requested is relevant or necessary for the purposes of their

investigation.

These requests for information often require a delicate balancing exercise to be undertaken by the authority

receiving the request. On the one hand there is a wish to assist the regulator or statutory body in their

investigation and on the other the authority needs to bear in mind its obligations as data controller and,

where appropriate its obligations of confidentiality to patients, service users and employees. Not disclosing

the information requested may lead to an allegation that the authority is obstructing a statutory

investigation and disclosing too much information may lead to a complaint to the Information Commissioner

of a DPA breach and/or a claim for compensation pursuant to Section 13 of the DPA.

The first data protection principle provides that personal data should be processed fairly and lawfully and, in

particular shall not be processed unless at least one of the conditions in Schedule 2 is met. In the case of

sensitive personal data, at least one of the conditions in Schedule 3 needs to also be met in respect of the

3 See for example Article 25 (1) of the Health and Social Work Professions Order 2002. 4 Article 25 (3) of the Health and Social Work Professions Order 2002.

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processing5. In determining the issue of fairness authorities need to have regard to the issues of necessity,

proportionality and whether disclosing the information requested is justifiable in the circumstances.

Lawfulness requires consideration of all relevant statutory provisions including the Human Rights Act 1998.

Common law duties of confidentiality may be lawfully breached where necessary in the public interest.

In deciding whether information requested should be disclosed, authorities should consider whether they

have been provided with sufficient information to determine why, or the extent to which, the information

sought is relevant and necessary for the purposes of the investigation, whether disclosure would be fair and

lawful in the circumstances and whether any of the exemptions in the DPA are engaged. Even where

disclosure is permitted, the authority needs to be mindful to disclose the minimum necessary to achieve the

requester’s legitimate purpose in making the request and to be mindful of the rights of third parties whose

personal data may be included in the information sought.

Our information law team receives a number of requests from a wide variety of public bodies for assistance

in determining whether information requested should be disclosed including:

a) a school which received a request from the police for all the records of a pupil to assist with an

investigation. There was no information on why this information was necessary and therefore we

advised the school to request further information from the police as to why all the pupil’s records

were considered to be necessary to assist the investigation;

b) a request from a clinical commissioning group (CCG) to distribute the GP records of a child for the

purposes of a statutory (domestic homicide) review. We advised that despite the purposes of the

review it was neither necessary or proportionate for all the records to be distributed to the parties

involved in the review and the report prepared by the GP summarising the relevant content of the

records was sufficient to satisfy the purposes of the review;

c) a request to a CCG from a healthcare regulator for wide ranging information in relation to a number

of employees who were the subject of fitness to practise investigations. We advised that there was

insufficient information to justify providing all the information requested.

5 Section 29 DPA provides an exemption to the requirement that processing be fair and lawful but conditions of Schedule 2 (and 3 if applicable) must still be satisfied.

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Ultimately each request must be considered on its own merits and there will be a number of factors which

will impact on the extent of disclosure if any information can be disclosed at all.

Megan Larrinaga | +44 (0)20 7871 8504 | megan.larrinaga@brownejacobson.com

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As we move forwards into 2015, ‘access to justice’ remains a significant issue in the field of employment

law.

Whilst most HR professionals have been aware of a decrease in tribunal claims for some time, in December

2014, the Ministry of Justice published figures highlighting again the extent of the drop in tribunal claims

that has occurred. For the period July to September 2014, there were 61% fewer claims than in the

corresponding period in 2013. Whilst this may be relied on by some as evidence that the fee regime has

worked to weed out malicious or weak claims, for others it suggests that fees are deterring would-be

claimants from asserting their employment rights.

As we approach the general election, the issue of fees is likely to rumble on. The Liberal Democrats have

already called for an urgent review into tribunal fees and the Conservatives have agreed to a review,

although no details of the same have yet been set. Labour has pledged to “reform the employment tribunal

system to ensure workplace justice is affordable” but has not gone so far as to confirm it would abolish fees

altogether. The Green Party has proposed widespread changes to the tribunal system whilst UKIP has

proposed changes to employment law as a whole; however it is not clear at this stage how either party views

the issue of fees.

There have also been discussions about whether control over fees in Scotland would be devolved; if so,

although the policy on fees would be subject to the governing party at the time, some political parties have

already criticised the fees regime and indicated an intention to abolish them.

Concerns had also been raised that the government’s proposed reforms to judicial review set out in the

Criminal Justice and Courts Bill would significantly limit the ability of individuals and organisations to

challenge the legality of public authority decision-making. Concessions were made by the government to its

proposed reforms in January which give the judiciary greater discretion to hear cases even where it is said

that the alleged defect would not have made a difference in the individual’s case. When considering and

approving the government’s concessions, the House of Lords referred to the government’s stated intention

of the reforms being to strike out judicial reviews which raise “relatively minor procedural defects”; the

House of Lords therefore suggested that any other cases would be outside the legislative aim and could be

heard in the normal way.

Whilst judicial review is not used that often in an employment context, there have still been some

significant judicial reviews over the years including challenges to the Sex Discrimination Act 1975, to the

Employment Equality (Age) Regulations 2006 and to the unfair dismissal compensation cap. The most obvious

recent challenge is that raised by UNISON in respect of tribunal fees.

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UNISON’s second application for judicial review was dismissed on 17 December 2014 with comments that the

claims were of a general nature and lacked concrete examples of specific individuals. The court held that

although the tribunal statistics demonstrated that fees had impacted on workers’ willingness to bring claims,

they did not prove that any workers were unable to bring claims. In respect of UNISON’s claim of indirect sex

discrimination, the court held that it had failed to show a prima facie case of discrimination and that the fee

regime as a whole was justified and proportionate to any discriminatory effect.

UNISON were, however, granted leave to appeal to the Court of Appeal and has indicated that it does plan to

appeal. There also remains the possibility of a test claim by an actual disadvantaged claimant.

Lastly, the Ministry of Justice has announced increases in fees for money claims in the civil courts. These

increases came into force on 9 March 2015. Whilst the majority of employment claims are dealt with by

tribunals, there are still some employment claims which may be brought in the civil courts. The fees will

remain unchanged for money claims from £1 to £9,999; increase to 5% for claims from £10,000 to £199,000

(with a 10% discount for claims filed electronically); and increase to £10,000 for claims for £200,000 or

more. Concerns have been raised by the Law Society, Civil Justice Council and some senior judges that

these proposed increases would have a detrimental effect on access to justice and the Law Society has now

issued a pre-action protocol letter as the first step to obtaining a judicial review of the increases.

The spotlight therefore remains on the issue of fees and access to justice and no doubt more will be heard as

we move towards the forthcoming election.

Sarah Hooton | +44 (0)115 976 6033 | Sarah.Hooton@brownejacobson.com

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Devolution of powers continues to gain momentum, with this week’s announcement that £6bn of health and

social care budget is to be devolved to Greater Manchester6. A handful of other local authorities have

followed suit, although none yet matching the scale of the Greater Manchester deal, and still more are

forming alliances and looking to travel the same route.

The government’s preferred model for local government devolution is the combined authority (CA)7: a

separate legal entity formed by two or more local authorities collaborating to promote economic growth

across their combined wider area. These governance structures were created by the local democracy,

Economic Development and Construction Act 2009 (the 2009 Act), the relevant provisions of which are

currently under review as part of a government consultation. More on this below.

The 2009 Act gives power for CAs to be established in England only (although Wales is developing its own

approach)8 and there is no provision for public bodies other than local authorities to become part of a CA.

Functions and responsibilities

The functions of the CA are specified in the order at the time it is set up. This may include responsibility for

the economic development role of the constituent local authorities as well as the functions of an Integrated

Transport Authority and Passenger Transport Executive9.

CAs have a general power of competence, introduced by the Localism Act 2011, similar to that available to

fire authorities. This confers power on the CAs to do anything it considers appropriate for the purposes of

carrying out its functions. A key restriction for CAs is that they are not permitted to provide statutory

services on a commercial basis10.

The Localism Act also allows the transfer of any public function to CAs by an order of the Secretary of State,

although no such orders have yet been made. Whilst some authorities have lobbied to allow CAs to take over

additional functions, such as waste management, the government is determined to resist ‘function creep’

and maintain focus on the strategic remit of CAs11.

6 http://www.england.nhs.uk/2015/02/27/greater-manc-funding/ 7 Government’s response to the Heseltine review (page 39) 8 http://www.theplanner.co.uk/news/big-role-for-welsh-city-regions-in-local-government-reform-white-paper and http://www.bbc.co.uk/news/uk-wales-politics-30400073 9 S104 of the Local Democracy, Economic Development and Construction Act 2009 10 S9 of the Localism Act 2011 11 DCLG ‘Proposal to use a Legislative Reform Order to give local authorities greater flexibility in forming a combined authority or economic prosperity board’ (page 25)

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Benefits Part of the process for establishing a CA requires the councils concerned to meet a statutory test which

includes demonstrating that the CA is likely to deliver the following benefits12:

improve the effectiveness and efficiency of transport in the area

improve the exercise of statutory functions relating to economic development, regeneration and

transport in the area

improve the economic conditions in the area.

The CA is also a key requirement for the devolution of resources, enabling local authorities to access

significant national funding and investment through the government’s City Deal initiative.

In Greater Manchester’s case, currently at the forefront of devolution, the City Deal negotiated with the

government included an ‘earnback’ model which allows the retention of a proportion of business rates to be

invested in infrastructure13. The deal has recently been significantly expanded to include, among others, the

following resources:

a consolidated multi-year transport budget

responsibility for franchised bus services, train stations and ‘smart ticketing’

a housing investment fund of £300m over 10 years

£6bn allocated for health and social care.

Additional powers will include devolved business support budgets, power to restructure further education in

Greater Manchester, joint commissioning with DWP of the next stage of the Work Programme and full control

over the health and social care budget. Subject to the introduction of primary legislation it is intended that

Greater Manchester will also, in 2017, have to elect a mayor who will preside over regional issues and

policies such as transport, social care and housing as well as police budgets, absorbing the role of the Police

and Crime Commissioner14.

12 S110 of the Local Democracy, Economic Development and Construction Act 2009 13 http://www.agma.gov.uk/gmca/city-deal-announcement/ 14 Greater Manchester Agreement: devolution to the GMCA & transition to a directly elected mayor

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Issues

The existing statutory provisions under the 2009 Act have been considered an unnecessary burden on local

authorities who want to form a CA15. For example, CAs cannot include an area which does not share a

boundary with the other local authorities and is therefore geographically detached from the region. Some

CAs have worked around this using the concept of ‘associate membership’ which allows local authorities to

work together notwithstanding geographical constraints, albeit such membership has no legal status16.

Another issue is that smaller districts, concerned about having decisions forced upon them by the more

powerful CA, can throw a spanner in the works if they refuse to participate as a CA cannot include only a

part of a local authority’s area. This happened recently with Erewash Borough Council17 which had concerns

about how decisions on housing and planning would be taken if it joined the Derby and Derbyshire CA,

although this has since been resolved18.

Government consultation

The above issues are addressed to some extent in the government’s consultation. The government proposes

to amend the 2009 Act, via a Legislative Reform Order, on the basis that some provisions are obstacles to

efficiency, productivity or profitability as well as being an administrative inconvenience. The consultation

closed on 26 January 2015 and, at the time of writing, the government has not yet published its response19.

In summary, the proposed changes would:

1. Allow local authority areas that do not share a boundary to participate. CAs will also be allowed in a

‘doughnut shape’ where there is a district within the area that does not wish to join. Both situations

would be subject to further conditions designed to ensure the arrangements are practical,

convenient and in the interest of improving efficiency and economic conditions.

2. Introduce additional flexibility to allow a county council to join and delegate functions to a CA

where some but not all of the district councils in the area agree to join the CA.

3. Simplify the process for making changes to an existing CA such that changes to their constitution,

functions or funding will require unanimous consent from all councils concerned, rather than the

current position where a CA must undertake the same process as required when forming a new CA.

15 DCLG ‘Proposal to use a Legislative Reform Order’, as note 6 above (para 31) 16 SN06649 on Combined Authorities, as note 4 above (page 4) 17 http://www.bbc.co.uk/news/uk-england-derbyshire-31460253 18 http://www.bbc.co.uk/news/uk-england-derbyshire-31598890 19 https://www.gov.uk/government/consultations/proposals-to-amend-legislation-relating-to-combined-authorities-and-economic-prosperity-boards

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Conclusion

As well as Greater Manchester CA which was established in 2011, a number of other CAs are already up and

running having been established in 201420:

Sheffield City Region CA

North East CA

Liverpool City Region CA

West Yorkshire CA.

A large number of local authorities across England are reported to be at various stages of collaboration with

Nottinghamshire and Derbyshire taking the lead, each aiming for parliamentary approval of their respective

CAs by 30 March 201521.

Amid the critics on one side of the so-called ‘super councils’ for being undemocratic and those on the other

side, including the LGA, claiming the government’s proposals do not go far enough, the trend in favour of

CAs seems to continue22. Whether the Greater Manchester model is replicated across other areas remains to

be seen, but the appeal of local economic decision-making at a time of austerity seems undeniable.

Angela Konteas | +44 (0)115 976 6097 | angela.konteas@brownejacobson.com

20 SN06649 on Combined Authorities, as note 4 above (page 1) 21 http://www.bbc.co.uk/news/uk-england-31664504 22 LGA response to consultation on proposal (page 1)