On 1 July 2015, the Supreme Court rejected an appeal by Edenred (UK Group) Limited against HM Treasury regarding proposed changes to an existing public contract with competitor Atos, to allow the inclusion within the scope of Atos’s contract the new government tax free childcare scheme. Edenred claimed that failure to advertise this procurement was a breach of the public procurement rules. Although the contract had originally been awarded under the Public Contracts Regulations 2006, the Supreme Court applied the provisions of the new 2015 Public Contracts Regulations as the proposed date the amendment would take effect was after the new regulations came into effect. The ruling also clarified when contracts may be amended during their term, without running a new tender process.

On 26 February 2015, the Public Contracts Regulations 2015 came into force, implementing the 2014 EU Public Contracts Directive and replacing the 2006 Regulations. The current case had been launched prior to the coming into force of the new regulations. However the Supreme Court decided that it was appropriate to apply the new regulations with regard to the appeal by Edenred against HM Treasury’s decision to allow National Savings and Investments (NS&I) to run the new government tax-free childcare scheme (TFC) via its existing contract with Atos, as it was due to be introduced in autumn 2015. The Supreme Court believed the 2015 Regulations were the correct Regulations to apply in preference to the 2006 Regulations as the variation in question would occur after the coming into force of the 2015 Regulations.

The TFC scheme proposes to replace the existing government tax scheme providing tax relief to employers intending to support the costs of their employee’s childcare. The mechanism used to implement the TFC scheme will be HMRC entering into a memorandum of understanding with NS&I, setting out the requirements for the standard to which the services must be provided. NS&I will therefore amend their contract with Atos to include such requirements.

Regulation 72 of the 2015 Regulations lays out six situations in which a contract for public services may be varied without having to issue a new tender for the public procurement, two of which were applied in this case. The Supreme Court considered whether the variation of the contract was substantial to constitute a new contract, which it was not, and whether the modifications were provided for in ‘clear, precise and unequivocal review clauses’ in the initial procurement documents, which was the case.

Applying the 2015 Regulations, the Supreme Court dismissed the appeal stating that the amendments to the existing services contract were not substantial and satisfied the ‘clear, precise and unequivocal’ criterion. The case is a reminder to draft clear but flexible terms when initially procuring, allowing both the contracting authority and the contractor maximum flexibility during the term of the contract.

Edenred (UK Group) Ltd and another v HM Treasury and others [2015] UKSC 45