Menu

Advertise your development projects or risk losing some of your grant funding

Men at work road sign Print publication

29/08/2014

Mansfield District Council v Secretary of State for Communities and Local Government [2014] EWHC 2167

Background

The framework for public procurement is currently set out in the Public Contracts Regulations 2006 (the Regulations) and contracts which are above the current financial thresholds of the Regulations must be advertised in the Official Journal of the European Union. Contracts which are below the financial threshold are not covered by the full Regulations.

However where a contract is likely to attract cross border interest, then the contract is subject to the principals of equal treatment and non-discrimination on the grounds of nationality and transparency. Unless there is an exemption, this will also mean the contract is required to be advertised and tendered fairly.

Relevant Facts 

Mansfield District Council (MDC) received grant money from the European Regional Development Fund (ERDF) for two development projects relating to town centre improvements. The value of the contracts totalled £900,000 and was therefore well below the threshold of the Regulations.

The grant from ERDF was conditional on MDC complying with EU procurement requirements at all times. In addition a set tendering procedure was specified by ERDF.

MDC used a national online database (Constructionline) to identify a list of contractors, whom they approached directly to request the selected contractors submit tenders. MDC did not advertise the two contract opportunities specifically on their website or on Constructionline.

The Secretary of State for Communities and Local Government claimed that MDC was in breach of the grant agreement, as it had failed to advertise the two contracts and was therefore in breach of EU Law. The Secretary of State therefore informed MDC of the decision to claw back 25 per cent. of the grant funding.

MDC brought an action refuting the Secretary of State’s decision.

Judgment

The High Court referred to the judgement of R (Chandler) v Secretary of State for Children, Schools and Families and Others ([2009] EWCA Civ 1011) where the Court of Appeal held that a contracting authority must still apply the principles of non-discrimination and transparency before awarding a contract, even where the Regulations do not apply, where there is a reasonable prospect of cross border interest.

The High Court found no evidence that MDC had considered the prospect of cross border interest in the two projects and concluded that this failure to assess was itself a breach of EU procurement requirements. If MDC had found there to be cross border interest, this would have imposed a need for an accessible advertisement of the contracts, prior to the award of the contract. It was not enough to contact a number of potential suppliers, even if this included cross border suppliers as this would be too selective and exclude new entrants to the market.

Conclusion

This ruling highlights the high level of demand the Regulations place on contracting authorities and shows that the onus is on a contracting authority to ensure processes are correct and regulations are complied with. It also highlights the risk of not complying with the obligations of grant agreements and the risk of claw back associated with breach.

Contracting authorities should therefore consider whether there is likely to be cross-border interest in every project. In this case it seems to be something that did not even cross MDC’s mind: even though there was “no evidence to suggest that there is anything about the works within the curtilage of a remote branch station in Nottinghamshire that would have attracted foreign companies” they should still have considered it.

Any procurement which is likely to have cross border interest should be advertised, even where it may be under threshold.