After some years of debate, the uncertainty surrounding the application of the Public Contracts Regulations 2006 to development agreements between public authorities and developers has been largely resolved by the recent case of R (on the application of Midlands Co-Operative Society Ltd) v Tesco Stores Ltd, in which the High Court considered when the Regulations (which set down the EU public procurement rules and their application to public contracts) will apply.
A development agreement must contain a legally enforceable commitment to execute works for the public authority as part of the agreement. A mere intention to enter into a works contract is not enough. Such commitment is likely to render the agreement a ‘public works contract’ (rather than a simple land disposal) meaning that if it is of sufficient value, the public authority would need to run a public procurement tender process in order to let the contract.
The High Court also made clear that in order to establish whether a public procurement tender process is needed, the whole of the arrangement between the public authority and the relevant contractor needs to be considered. The Regulations are still likely to apply in cases where a sale of land is accompanied by a separate agreement with the contractor to carry out development works.