The defendant county council awarded V Ltd a contract for a term of eight years and five months to manage domestic waste recycling centres, to haul waste between sites and to manage the council’s five waste transfer stations. Approximately eight years into the contract, the parties agreed a modification to allow the council to send waste to a sixth waste transfer station for the remaining five months of the contract. Since the additional waste transfer station was not owned by the council, the modification required a different fee structure. While the general rule, as set out in regulation 72(9) of the Public Contracts Regulations 2015, was that a new procurement procedure was required for modifications of a public contract, regulation 72(1)(a)–(f) set out exceptions to that rule. The council contended that the modification to the contract was not substantial and was therefore within regulation 72(1)(e). The claimant, who had a separate contract for the disposal of waste and had been negatively affected by the modification, brought a claim for breach of the 2015 Regulations. It contended that the non-substantial exception did not apply because the modification had the characteristics of substantiality set out in regulation 72(8)(a), (b)(ii), (c) and (d), namely it: (a) rendered the contract materially different in character, (b) introduced conditions which, had they been part of the initial procurement, would have allowed for the acceptance of a different tender, (c) changed the economic balance in favour of the V Ltd, and (d) extended the scope of the contract considerably.
On the claim—
Held, claim dismissed. Since they amounted to derogations from the general rule set out in regulation 72(9), the provisions in regulation 72 (1)(a)–(f) of the Public Contracts Regulations 2015 should be interpreted narrowly, but not so narrowly that they were deprived of any real meaning. The substantiality characteristic in regulation 72(8)(b)(ii) was established if it was shown that there was real prospect, as opposed to a fanciful one, that a different tender would have been accepted. That notional procurement was to be assessed as at the time when the original contract was procured, not as at the date of modification. The economic balance question in regulation 72(8)(c) required a consideration of the contract as a whole. Where the modification required a different payment mechanism from original contract, reasonable compensation was the appropriate yardstick by which to judge a price increase. The fact that an extension had a value of more than the operative threshold for engagement of the 2015 Regulations did not necessarily mean that it was “considerable” within the meaning of regulation 72(8)(d). That none of the factors taken individually or collectively rendered the modified contract materially different from the original. The claimants had not established that there was a real prospect that another bidder would have won the putative counterfactual procurement. The modification was not such as to change the economic balance in favour of V Ltd. Finally, there was no basis for concluding that the modification considerably extended the scope of the contract. Accordingly, the modification was not substantial and had been lawfully made without a new procurement process (paras 44–45, 53, 116, 124–127, 145, 146, 149, 159, 164–165, 187, 188, 285).
Per curiam. (i) An authority wishing to invoke one or more of the exceptions to modification of a contract without a new procurement procedure under regulation 72(1)(a)–(f) does not bear the burden of proof in relation to it (paras 53, 69).
(ii) There might be a de minimis rule that means that some small price changes are acceptable even if they alter the balance of the contract slightly in favour of the contractor, at least where there is good reason to make such change (para 167).
Nigel Giffin KC and Stephen Kosmin (instructed by Nexa Law Ltd) for the claimant.
Azeem Suterwalla (instructed by Essex Legal Services, Chelmsford) for the council.