Blog: Friday 17th July - Bevan Brittan: A stitch in time saves nine……

Kuldip Dhanoya, Partner

A stitch in time saves nine……

In my new capacity as the Head of Central and Local Government at Bevan Brittan, I had the pleasure of attending the LGA Annual Conference last week during a few very sunny days in Bournemouth. And no, I wasn’t lured by the beautiful beach although it did look very tempting!

But the heat was not the only ‘hot topic’ amongst delegates; inevitably Local Government Reorganisation also featured heavily. There is clearly a lot of structural upheaval for local authorities and I’m sure colleagues don’t need me to remind them of those challenges. But, as a procurement lawyer by trade, one question that I was faced with consistently was “how do we reconcile our existing contract portfolios?”

There is of course a practical, strategic and procurement law angle to this exercise.

·       Practical steps: we know that predecessor Council’s will need to build a single, reconciled contracts register. This will need to be predicated on robust individual contract audits and may result in a number of immediate procurement decisions needing to be made. For example, you may well find that some essential contracts may be expiring during the transition resulting in the need to put in place measures to bridge service delivery in the short term. This may well be achievable through short term extensions, or call offs under suitable framework arrangements.

·       Strategic considerations: there will inevitably be a multitude of issues that come to light during the process of developing a reconciled register. For example, you may identify duplication in service provision, to the extent that more than one supplier is providing the same (or similar services) within the new unitary boundary. Those contracts may also include disparate provisions in terms of contract lengths, performance metrics or pricing structures, in which case, some form of aggregation may feel like a very attractive option. In other cases, there may be a need to split (or disaggregate) contracts that cover a wider geographical area which, going forward, will be divided across two or more new unitary authorities. It’s safe to say that there will be a myriad of operational challenges facing local authorities when looking to reconcile those existing contract portfolios.

·       Procurement: it will be no surprise to you when I say that procurement law will not give you carte blanche to reconcile your contract portfolio as you may necessarily desire, but there are a number of provisions that it is worth putting on your radar. For those contracts entered into prior to 24 February 2025, any contract changes you may look to make will still be governed by Regulation 72 of the Public Contracts Regulations 2015 and there are a number of ‘safe-harbours’ which may prove helpful:

Ø  The de minimis safe harbour: this would allow small value changes so may be useful if you need to implement a minor expansion to bridge service gaps during or after transition;

Ø  The 50% cap on value safe harbours: these may prove helpful for larger, structural expansions where services may be scaled up to cover a wider area, although there are specific grounds for their use such as ‘unforeseeable circumstances’ or a need for ‘additional works, services or supplies’ and the cap in terms of the value of the change would apply;

Ø  The ‘clear and unequivocal’ review clause safe harbour: this may be available if parties have already catered for the reorganisation by drafting a clear and unambiguous review clause in the original tender documents. Rather helpfully the 50% cap does not apply but it does require considerable clarity around the scope of the review clause; and

Ø  The non-substantial modifications safe-harbour: this may also be useful if you can satisfy the three tests namely that the change (i) would not have affected the outcome of the original contract award (ii) it does not shift the economic balance in favour of the supplier (iii) must not change the overall scope of the contract considerably or render the contract as materially different in character to the one originally awarded.

Should you have entered into your contract post 24 February 2024, then of course the Procurement Act will apply and helpfully that includes similar provisions, albeit it includes the new ground relating to a ‘materialisation of a known risk’ which may well become useful tool going forward.

So, having hit you with a mix of issues and potential solutions, what is my key recommendation? The final ministerial decisions are due to be announced imminently. If you haven’t started already, rationalising your contract portfolio’s is an exercise you need to start immediately as it will take time, resource and strategic input. My second suggestion? If this issue affects you and you are attending the LLG & AMO Monitoring Officers Conference in London, then please do come over to our exhibition stand and we’d be very happy to carry on the conversation!

by Kuldip Dhanoya, Partner