Variation of Development Agreements – reduced opportunity for procurement challenges
Fri 28 Apr 2017
The limitations faced by third parties intent on stymying development projects, particularly in relation to actions brought on the basis of non-compliance with public procurement regulations, are demonstrated by the High Court’s recent decision in Wylde v Waverley BC  EWHC 466 (Admin).
The case involves a judicial review claim brought by a number of councillors and local residents challenging the Council’s decision to vary a development agreement entered into in April 2003 after a competitive tendering process was undertaken by the Council in the previous year.
The original development agreement contained a viability condition requiring the land value generated to be received by the Council to exceed a minimum value of £8.76 million.
Due to changes in the market, it was realised that unless the condition was varied, the value would not be met and the development would not proceed.
In order to make the redevelopment economically viable, the Council decided to vary the agreement with the developer reducing the minimum land value of £3.19 million.
As a precautionary measure, the council issued a voluntary ex ante transparency (“VEAT”) notice advertising its intention to vary the contract. No responses were received from any economic operator in relation to the VEAT notice.
The claimants argued that in reality, the variation itself amounted to a new contract which would require a formal procurement process in compliance with the Public Contracts Regulations 2015.
The claimants could not bring a claim under the Public Contract Regulations as they were not "economic operators" owed duties under public procurement law.
Section 31 (3) of the Senior Courts Act 1981 provides that in order to bring an application for judicial review, a party must have sufficient interest in the matter to which the application relates.
The court held that the claimants had not been able to demonstrate that they had standing to bring the claim.
Noting the provisions in section 31(3) of the Senior Courts Act 1981, the court emphasised that the claimants must establish a “sufficient” interest so as to entitle a claimant to invoke the court’s jurisdiction.
Applying the test for standing in R (Chandler) v Secretary of State for Children Schools and Families  EWCA Civ 101, the court concluded that the correct approach was to consider the question of standing in the context of the policy aims and objectives of the relevant public procurement rules and their focus on the interests of economic operators. “Standing” is therefore confined to those who could demonstrate that in carrying out a competitive procurement might have led to a different outcome that would have directly impacted them.
Applying the test in Chandler, the court found that the claimant lacked standing because:
1. they had difficulty showing that any competitive tendering exercise for the varied contract would produce a different outcome; the VEAT notice did not demonstrate that there was any competing interest; and
2. they were unable to demonstrate that they would be impacted by the running of a competitive tender process.
The case is of interest because the court’s reasoning suggests that an earlier decision in the high profile case of R (on the application of Gottlieb) v Winchester CC  EWHC 231, which also involved a local councilor challenging a variation to a development agreement in similar circumstances, was wrongly decided. The court noted that the judge’s analysis in Gottlieb was incorrect because it did not take into account the policy, aims and objectives of the Public Contract Regulations 2006.
The restrictive approach taken in Wylde appears to be encouraging news for both developers and public sector authorities involved in high profile, politically sensitive projects at risk of procurement challenge.
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