The Law Society, R (on the application of) v Legal Services Commission

A contracting authority may reserve a power to amend a public contract. The principle of transparency is not, however, satisfied merely because the contract discloses the power and prescribes procedures for its exercise.

A virtually unlimited power to rewrite contractual terms is incompatible with transparency. It prevents potential providers from identifying their prospective obligations and may deter participation or permit unequal treatment. A right to terminate does not cure that defect where withdrawal is impracticable.

Technical specifications expressed as performance or functional requirements must remain sufficiently precise for an economic operator to determine the subject matter of the contract. An unrestricted power to replace those specifications contravenes Regulations 4(3) and 9(7) of the Public Contract Regulations 2006, even where no conventional competitive tender has occurred.

The Legal Services Commission offered solicitors a Unified Contract for publicly funded legal services. The contract gave the Commission extensive powers to amend its terms, specifications, quality standards and performance indicators unilaterally.

Beatson J declared that those powers were incompatible with Regulations 9(2), 9(4) and 9(7) of the Public Contract Regulations 2006 insofar as they affected technical specifications. He refused relief under Regulation 4(3). The Law Society and Dexter Montague & Partners appealed that refusal. The Commission and the Secretary of State cross-appealed against the declaration under Regulation 9.

The central issue was whether the contractual amendment powers satisfied the procurement-law requirement of transparency, including the requirement that performance or functional specifications be sufficiently precise to identify the subject matter of the contract.

1. The appeals were allowed and the cross-appeal was dismissed. The Unified Contract failed to comply with both Regulation 4(3) and Regulation 9(7) of the Public Contract Regulations 2006.

2. Public procurement rules seek to open contracts to competition through equal treatment, non-discrimination and transparency. Technical specifications must tell potential providers what the contracting authority will require. Transparency also prevents favouritism and arbitrariness and enables procurement procedures to be reviewed.

3. The mere inclusion of an amendment clause and consultation procedure does not necessarily satisfy transparency. The reference to “relevant detailed rules” in Commission v CAS Succhi di Frutta SpA, [2004] ECR I-3801, was not confined to procedural arrangements. Depending on the context, tenderers may need to know the substantive circumstances and parameters governing amendments.

4. The Commission's amendment powers were exceptionally wide. Public-law controls against arbitrary or improper action did not make the contractual obligations transparent. Nor did published reform proposals supply effective limits, because the contractual power extended beyond those proposals. It was, in substance, a power to rewrite the contract.

5. The absence of a conventional competitive bidding process did not remove the problem. Uncertainty capable of deterring potential providers is an unjustified obstacle to opening procurement to competition. A power permitting amendments which may favour some contractors over others may also infringe equal treatment.

6. The suppliers' termination rights did not cure the defect. A provider with a substantial legal-aid practice could not realistically withdraw on short notice when termination required it to cease existing publicly funded work.

7. Amendments to technical specifications may sometimes be necessary, and the court did not determine the degree of specificity required in every case. This contract nevertheless reserved an unrestricted power to introduce or amend performance and functional requirements. A provider therefore could not determine its obligations over the contract period. That was incompatible with Regulation 9(7), while the resulting obstacle to competition also engaged Regulation 9(4).

1. Court of Appeal (Civil Division): The Law Society's and Dexter Montague & Partners' appeals were allowed. The Legal Services Commission's and Secretary of State's cross-appeal was dismissed. The court held that the amendment powers infringed Regulations 4(3) and 9(7) of the Public Contract Regulations 2006.

2. Administrative Court: Beatson J declared the amendment powers incompatible with Regulations 9(2), 9(4) and 9(7), insofar as they applied to technical specifications, but refused relief under Regulation 4(3). He gave corresponding limited judgment on liability for Dexter Montague & Partners.