Long term contracts including development agreements often require modification to deal with changing circumstances. Despite this, the scope of contract variations is restricted when the agreement has been publicly procured. However, the recent Edenred case (Edenred (UK Group) Ltd v Her Majesty’s Treasury & Ors [2015] UKSC) provides useful guidance to those designing projects where change is anticipated and greater flexibility is required.
The Supreme Court in Edenred makes it clear that:
Authorities may, in certain circumstances, alter contracts to extend the scope of the goods, works, services to be provided.- Includes additional goods, works or services of the same nature and type as those originally procured.
- The changes must have been included in the procurement documentation (and tenderers made aware that they may be required to deliver the services during the term).
When preparing project documentation Authorities must think carefully about future requirements or potential change to requirements and policies and should not assume that the specification is a living document that can be changed at will and will evolve during the contract term. Where flexibility is required the Authority should build this into the original specification and other procurement documentation. A procurement exercise can cover ‘optional’ services and the Authority is not required to actually purchase such services from the provider. The Authority can chose whether to take up the optional services at a later date during the contract term.
Built to Last
Where greater flexibility is required the Authority should consider building this into the original specification and other procurement documentation.
- A procurement exercise can cover ‘optional’ services and the Authority is not required to actually purchase such services from the provider. The Authority can choose whether to take up the optional services at a later date during the contract term without risk that the change will be deemed material.
- The Edenred case also confirms that Authorities should consider the total value of goods works, and services that may be required under the contract during the term and include this in the estimated contract value at the outset of any procurement. If an Authority sets an estimated contract value range, with an upper limit covering both core and additional services, this will provide useful evidence that the additional works, goods and services were envisaged by the original contract.
- However, the contract value alone is unlikely to be enough to demonstrate that the additional services, goods or works of a different type or nature were encompassed by the original contract.
The exact wording of the published procurement documentation, including the specification, is key to defending a procurement challenge to contract variations and it is vital that the requirements published during the procurement are complete and are drafted so as to cover all potential works, goods and services which the provider may be called upon to provide during term. In practice, this will mean that the more the tender documentation can do to anticipate changes which may be made to a scheme, the less risk there will be where those anticipated changes are made. Even so the scope must be clear and have limits – Edenred is not authority for an open ended tender exercise and open ended future changes.
Click here to read our detailed note of the case.
