Public Procurement

7 October, 2016
by: Cripps Pemberton Greenish

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When do the EU public procurement rules apply?

 

West Berkshire Council wanted to do something about a run down area of Newbury, the London Road Industrial Estate. It did not itself have the wherewithal or expertise to regenerate the area. So it entered into a development agreement with a developer, St Modwen.

 

The development agreement required the developer to put together a professional team, to come up with proposals and budgets. The developer was granted options to draw down land owned by the authority – so, having done the preliminary viability work, the developer had the choice as to whether it wanted actually to carry out the development.  If it exercised an option, then it would be under an obligation to carry out the relevant development.

 

In negotiating the development agreement, the authority did not follow the EU procurement rules for procuring contracts for public works above a certain value. Those rules are designed to ensure fair competition.  If the rules apply, proposed contracts have to be advertised in the Official Journal of the European Union.  Procedures for awarding contracts are required to be fair and transparent. The rules are complex and can be time consuming.

 

An aggrieved developer challenged the award of the development agreement[1].  The EU rules should have been followed, it said.  The developer was being required, albeit indirectly, to carry out public works.  In reality, having spent time and money in putting together the development proposals, it was inconceivable that the developer would not go ahead and carry out the development.

 

Not so, said the authority. The developer was not actually required to carry out any works. It would only carry out works if it chose to do so, by exercising one or more of its options to acquire land from the authority.  The developer may have a financial commitment to the scheme but ultimately market conditions and viability would determine whether the developer undertook any works, it was its choice.

 

The court agreed with the authority. It was in the developer’s own hands as to whether or not it carried out any work.  The authority was free to enter into a contract such as this that avoided the EU procurement requirements.

 

It is interesting to note that neither the EU Directive nor the Public Contracts Regulations 2015 contain any general anti avoidance provisions that may have tripped the authority up.

 

[1] R (on the application of Faraday Development Ltd) v West Berkshire Council [2016] EWHC 2166 (Admin)