Five in twenty five: Procurement case law update - spotlight on the recent National Lottery and Parking Eye cases
For this edition of our 5 in 25 webinars, we are taking a brief pause on our journey through the lifecycle of a procurement under the Procurement Act 2023 (the Act), to stop to consider two very recent procurement law cases. These cases - which will be of interest and practical significance to all procurement law practitioners and suppliers alike are:
- the National Lottery case – and its implications for contract variations; and
- the Parking Eye case – the first case heard under the Act with some potentially far-reaching implications for procurement challenges.
Key questions and answers
Please note that although the information in our our 5 in 25 webinars and FAQs was correct at the date of recording, this is an area of law subject to development and change.
Do check if in doubt as to the latest position - you can email [email protected].
Please note that the responses provided represent the general views of the public procurement team at Mills & Reeve, however they should not be relied on or treated as a substitute for specific advice relevant to a particular scenario/matter. If you require specific legal advice, our procurement team would be happy to discuss this further with you.
In this note reference to a “Regulation” is to the Public Contracts Regulations 2015 unless otherwise specified. A reference to the “Act” is to the Procurement Act 2023 and to a “section” is to a section within the Act.
FAQs
In simple terms it means that the supplier is getting a “better deal” following the modification than it was getting originally when the contract was first signed. If a supplier provides more or different services for a longer period, but at the same profit margin, then this will not usually be a change in the economic balance – even though of course the total amount paid to the supplier under contract has increased.
Interestingly, the Act employs the same concept of “economic balance” in section 74 – which deals with modifications – but did not take the new legislative opportunity to define it any further. This leaves us with the meaning developed in case law to date, including in National Lottery as discussed in our webinar. That is, looking at the overall “deal”, and testing whether in the round this is a better deal than the original.
The Commission did not attempt to rely on the “additional services” (Regulation 72(1)(b)) exemption in its modification notice – but only on (Regulation 72(1)(c) (“unforeseeable circumstances”) and (e) (“non-substantial modification”). We of course aren’t privy to the Commission’s thinking here, but we imagine, since the contract was simply going to continue to be performed while the litigation was continuing, there may well have been difficulties with showing that any truly “additional” services had “become necessary”, as is required under Regulation 72(1)(b). In other words, this was a “more of the same, just for longer” type extension (as opposed to an “add in a wholly new type of service” type extension).
!he Parking Eye case – the first case heard under the Act - is illustrative here of how the court is not afraid to look at the wording of the Act with “new” eyes where appropriate and where the wording/approach in the Act has moved away from the wording/approach of the Regulations.
Modifications are dealt with in the Act at section 74 and in schedule 8. While many of the Regulation 72 safe harbours also appear in schedule 8 to the Act, they are sometimes expressed differently.
For example, under Regulation 72(1)(a) a modification must be “clearly, precisely and unequivocally” provided for in the contract. Under the equivalent under the Act, it must be “unambiguously provided for” in the contract and tender notice. In Regulation 72(1)(c) there must be a “need for [a] modification” – whereas there is no reference to the modification being “needed” in the equivalent under the Act.
The Act also has new definitions in section 74 of “below threshold” and “substantial” modifications, which are the same ideas as under the Regulations but are written in different language.
Finally, there are three wholly new “safe harbours” in schedule 8 – for materialisation of a known risk, for urgency and protection of life and for defence contracts in certain specific circumstances.
This means that in some areas previous case law may not be applicable – this will be where the wording or concept in the Act does not mirror what is in the Regulations. Where the wording/concept is identical or substantially the same, then we can expect case law under the Regulations on that point to also carry weight under the Act.
It is possible that the claim may be settled out of court or may proceed to full trial. The purpose of the automatic suspension hearing is not to “get into” the detail of the claim, so we do not as yet have much sense of its merits, but as with most procurement claims it looks like the substantive complaint is around equal treatment, transparency and evaluation breaches. We don’t necessarily agree with the assumption that the courts are reluctant to “get into” looking at evaluation issues – the line of case law on evaluation does show that – at least where there has been manifest error and/or equal treatment/transparency breaches, the courts have shown themselves very willing to “get stuck in” and re-evaluate to a different outcome.
The judgment explains that the existing contract has already been extended beyond the extension options contained within it, and that it is the subject of another extension now - meaning there is no question that the Trust would be left with no parking services at all as a result of this suspension. The Trust tried to argue that any extension made to “keep the lights on” via the current contract during the suspension period could itself be the subject of a challenge, but the court was not persuaded by this, noting that there has never been a challenge, let alone a successful challenge, to an extension made for the purposes of maintaining a service pending resolution of an automatic suspension. See paras 66 and 67 of the judgment.