The Supreme Court ruling in the Edenred case on 1 July, provides an answer to the query we posed in June's Procurement Pulse - where a contract is signed before the Public Contracts Regulations, 2015 (PCR'15) came into force, and varied post PCR'15, is the scope of variation subject to regulation 72 PCR'15, or to analysis in accordance with Pressetext related case law? PCR'15 remains ambiguous on the point, but from our review below, you will see that case law now supports Crown Commercial Service guidance on amendments to contracts. We also review a case on service concessions, and some of the latest PPNs to be issued by Cabinet Office.

Edenred (UK Group) Limited v HM Treasury [2015] UKSC 45

You will remember that this case involved an existing contract between Atos and NS&i, where NS&i outsourced computer services relating to its business operations. Part of the NS&i business is to provide (business-to-business or B2B) services to other government departments. The Contract Notice for the outsourcing contract made it clear that NS&i intended to extend that part of its business, and expand the outsourcing contract accordingly. When NS&i did that as a consequence of agreeing with HMT to establish and manage the bank accounts required for HMT's new Tax-free Childcare scheme, the resulting variation to the contract with Atos was challenged as a material change that should have been advertised as a contract in its own right. Lord Hodge acknowledged that regulation 118(5) confirms that PCR'15 does not affect contracts awarded pre 26 February 2015, but treated the variation as an issue autonomous from the Atos contract itself, and tested the validity of the variation by reference to PCR'15. As well as this point of interpretation, Lord Hodge looked You will remember that this case involved an existing contract between Atos and NS&i, where NS&i outsourced computer services relating to its business operations. Part of the NS&i business is to provide (business-to-business or B2B) services to other government departments. The Contract Notice for the outsourcing contract made it clear that NS&i intended to extend that part of its business, and expand the outsourcing contract accordingly. When NS&i did that as a consequence of agreeing with HMT to establish and manage the bank accounts required for HMT's new Tax-free Childcare scheme, the resulting variation to the contract with Atos was challenged as a material change that should have been advertised as a contract in its own right. Lord Hodge acknowledged that regulation 118(5) confirms that PCR'15 does not affect contracts awarded pre 26 February 2015, but treated the variation as an issue autonomous from the Atos contract itself, and tested the validity of the variation by reference to PCR'15. As well as this point of interpretation, Lord Hodge looked at the following grounds for permitted variation:

  • whether the modification, irrespective of its value, was "substantial" in the context of regulation 72(1)(e) and (8) - in particular whether the proposed modification extended the scope of the contract considerably. Lord Hodge was confident that the contract notice for the Atos contract would have left potential bidders in no doubt that it might be extended to cover further B2B services, and that the scale and nature of NS&i's aspirations for developing B2B services was "within a reasonable compass". 
  • whether provisions in the Atos contract for determining the terms of any B2B extension, were clear, precise and unequivocal - as required by regulation 72(1)(a). Lord Hodge looked at the indexation and change control provisions in the Atos outsourcing contract, but pointed out that the "nature of the review clauses which the regulation covers is open to debate". As the variation would be permitted under 72(1)(e), there was no need to review 72(1)(a), but the judge did not consider the nature of the review clauses to be "acte clair" - i.e. had there been no other ground on which to justify the variation, he may well have referred the question as to whether regulation 72(1)(a) was satisfied, to the European Court. 

Case C-269/14 Kansanelakelaitos v Suomen Palvelutaksit ry 21 May 2015

The Finnish social security office directly awarded a framework contract to the Finnish taxi union, to provide taxi services for those assured for medical treatment under the Finnish social security system. The award was challenged. The Finnish social security office maintained that the services constituted a concession, and that it was not therefore subject to the procurement rules. For centrally reserved taxis, drivers received part of the fare from the social security office, and the balance from the patient. For taxis not reserved through the central system, patients paid the driver in full and then sought reimbursement from the social security office. The ECJ held that for a concession to exist, the taxi firms must be exposed to the vagaries of the market - risk of competition from other operators, that the supply of services will not match demand, that those liable will be unable to pay for the services, that the costs of operating the services will not be met by revenue or the risk of liability for harm or damage resulting from an inadequacy of the service. The ECJ observed that the taxi companies were exposed to the risk of non-payment, and management of individual taxi drivers, but that it was for the national court to determine whether all or a significant share of the risk of providing taxi services had been transferred to the taxi union. The Concessions Directive (2014/23/EU) is yet to be implemented in the UK. Until that time service concessions are not regulated by the current procurement rules. Once the Directive is implemented, service concessions (and works concessions) must comply with a "procedural guarantee" that they will be let in a way which ensures transparency and equal treatment of bidders.

PPN 09/15 on assisting with procurement investigations

To strengthen the Cabinet Office Mystery Shopper service (where suppliers can query or complain about procurement practices), section 40 of the Small Business and Enterprise Act, 2015 requires contracting authorities to produce evidence regarding any query or complaint within 30 days of any notice issued by the Mystery Shopper team.

PPN 11/15 on acceptance of unstructured electronic invoices by central government authorities - 22 June 2015

Central Government and its arm's length bodies must accept unstructured electronic invoices submitted by suppliers on or after 30 June 2015. If any current contracts prohibit use of e-invoicing or explicitly or implicitly require invoices only in paper form, in–scope organisations should, if feasible, amend those contracts to remove those restrictions. Future contracts with suppliers must not prohibit e-invoicing, or include terms which implicitly or explicitly require invoices only in paper form. Much of the challenge with this area of procurement is in interpreting the terminology used. This document issued by the Working Group for the European Forum on e-invoicing is helpful.

Definitions for e-invoicing

PCR'15 Statutory guidance on paying undisputed invoices in 30 days down the supply chain

Continuing the theme of efficient payment practices, this guidance derives from the domestic provisions set out in part 4 of PCR'15. Regulation 113 requires contracting authorities to ensure that every public contract they award contains provisions pursuant to which invoices must be paid no later than the end of a period of 30 days from the date on which the invoice is regarded as valid and undisputed. Equivalent provisions must be included in supporting sub-contracts. Model terms are set out in Annex 1 to the guidance, though alternative wording can be used if the same outcome is achieved. In accordance with regulation 113(6), if no suitable provision is included in a relevant public contract, the terms set out in regulation 113(6) will be implied into the contract.