Strategic partnerships and development agreements: what will the court have to say on procurement law compliance?

A case is currently progressing through the courts, which seeks to challenge the award of a Development Agreement (DA) following the award of a Strategic Partnering Agreement (SPA). At present, the issues relate to technical procurement law matters but this is a key case to watch for contracting authorities should this progress to trial on the substantive issues. In particular, there are a number of existing and planned regeneration, de-carbonisation and development arrangements within the public sector which could be impacted by any judgment which may be handed down in due course.

Background

Brookhouse Group Ltd (Brookhouse) and Lancashire County Council (the Council) jointly owned a site within a regeneration area, with the Council owning 71% and Brookhouse 29%. In 2012, the Council commenced a competitive tender procedure in respect of the regeneration of public sector assets across Lancashire. A contract notice was published both in the Official Journal of the European Union and advertised on the Council's website on 8 March 2012.

The procurement was conducted using the competitive dialogue procedure under the Public Contracts Regulations 2015 (PCR). The deadline for requests to participate was 12 April 2012. Brookhouse wrote to the Council to express its interest in the competition after the deadline had expired, so the Council responded stating that it was unable to consider Brookhouse as part of the tender process. This decision was not challenged.

The original contract (a SPA) was awarded to Eric Wright Group Ltd (EWG) and was entered into on 20 December 2013. The SPA offered a form of exclusivity to EWG; the details of which have not yet been considered by the court. On 29 July 2022, the Council entered into a DA to carry out the regeneration works with Maple Grove, a wholly owned subsidiary of EWG. The Council did not publish a contract award notice but did expressly notify Brookhouse about the DA just a few days after the agreement was entered into. Brookhouse initially engaged in correspondence with the Council regarding the DA and the Council provided reasons why it considered no competition was required by way of a response to Brookhouse's informal challenge. Brookhouse formally challenged the award of the DA by issuing proceedings in January 2023 and seeks a declaration of ineffectiveness (DoI) in respect of the DA.

Summary of the issues before the court

It is the Council's case that it entered into the DA pursuant to the terms of the SPA with EWG (in particular the exclusivity provision(s)) and therefore that no competition pursuant to the PCR was necessary or required. The Council sought to rely on Regulations 93(5)(b) of the PCR to limit the time for bringing a DoI challenge to 30 days rather than 6 months, meaning that Brookhouse's claim was out of time. Brookhouse disagreed and argued that the notice provided to it was not sufficient to reduce the time limit.

Regulation 93 limits the time within which DoI proceedings may be started; paragraph (5)(b) reduces the time limit to 30 days when the contracting authority (in this instance the Council) has informed the economic operator (Brookhouse) of the conclusion of the contract and a summary of the relevant reasons.

The key issues the court was required to consider are whether:

1. The 30 day time limit (under Regulation 93(2)(a) PCR) applied to Brookhouse's challenge
2. Whether the Council had provided a summary of "relevant reasons" pursuant to Regulation 55 PCR.

Summary of the court's findings on each issue

The court found that:

1. Regulation 93(2)(a) did not apply
2. The reasons provided by the Council did not comply with Regulation 55(2).

The court said that the shorter time limit can only apply where a contract award notice (CAN) is issued, or relevant reasons are provided alongside the notification of conclusion of the contract. For the latter, the relevant reasons must be those that would be required under Regulation 55 i.e. must be provided to a candidate or tenderer (meaning there should have been competition and there had not here) and must not simply be a written response to a challenge (which had been the case here).

The Council's argument that the time limit was reduced to 30 days was rejected on the basis that:

1. The Council's proposed interpretation ignored the proper construction of Regulations 93 and 99 PCR
2. There are sound policy reasons behind the construction of Regulations 93 and 99 PCR i.e. contracting authorities cannot seek to 'hide' a direct award from the wider market for tactical reasons, as appears to be the case here. The court said this is a flagrant breach of the wider principles of transparency, fairness, and equal treatment
3. The obligation is to provide the "relevant reasons" voluntarily and not on request (only the latter had happened here) and the "relevant reasons" are those required under Regulation 55 PCR
4. Regulation 55 PCR requires that information related to why the candidate or tenderer has been unsuccessful must be provided, not information as to why there was no competition – only the latter had happened here and so this was not the required information for the purposes of Regulation 55 PCR.

The court also opined that:

1. There had been no competition for the DA, so Brookhouse was not a "candidate" for the purposes of the award of the DA and for the purposes of interpreting Regulation 55 PCR. In addition, the Council could not rely on the previous procurement for the SPA (in 2012) to establish that Brookhouse was a candidate as it had not participated in that process and had been informed of the reasons for that.
2. Although the SPA was awarded under Public Contracts Regulations 2006, the court applied the PCR to the award of the DA.
3. The changes to wording in the Procurement Act 2023 (PA 2023) i.e. to remove reference to "relevant reasons" means that the PA 2023 is "plainly different". This is a strong indication from the court that similar proceedings under PA 2023 may be decided differently i.e. the court may have found in the Council's favour under PA 2023.

Based on the above, the court found that the applicable time limit for Brookhouse to challenge was six months, meaning that Brookhouse's claim was in time. The case is still ongoing in respect of the substantive issues, and we look forward to the court's judgment in due course.

Application and key takeaways

Although the issues to date (as set out above) relate to technical procurement law matters, the judgment and guidance of the court on the substantive issues i.e. whether the DA was compliantly awarded or should be subject to a DoI will be important for contracting authorities.

There are a number of existing projects which are structured in the same or a similar way to the arrangements in this case and there is an increasing trend for de-carbonisation projects and other similar projects to adopt this approach. This is a key case to watch for existing projects where subsequent contracts are yet to be entered into and for the planning and design of similar future projects.

In the meantime, in respect of similar partnership style projects, it would be prudent for contracting authorities to consider publishing a CAN for subsequent contracts entered into on reliance of a historical procurement process. Had the Council published a CAN in respect of the DA in this case, the time limit for challenge would have been reduced to 30 days and Brookhouse's claim would have been out of time.

Our expert procurement team are on hand to provide advice, if required.