Chandler, R (on the application of) v Secretary of State for Children, Schools and Families

An arrangement under which a public authority reimburses only the genuine costs of providing services, without conferring remuneration or another sufficiently direct pecuniary benefit, is not a public contract for pecuniary interest. The provider must also offer the relevant services on a market whose participants intend to profit.

Treaty duties of transparency and non-discrimination arise outside the procurement legislation only where there is at least a realistic prospect of interest in the specific contract from another member state. That prospect requires evidence and cannot be presumed.

A person who is not an economic operator may seek judicial review of procurement unlawfulness where the person is affected in an identifiable way. Standing does not arise where procurement law is invoked merely to pursue an objection unrelated to competitive procurement.

The Secretary of State approved University College London’s expression of interest in sponsoring an Academy school in Camden. The proposed Academy trust would receive grants covering capital and current expenditure, but the arrangements were intended to permit only reimbursement of costs and no profit or retained surplus.

A parent challenged the approval by judicial review, contending that the public procurement regime required a competition and that the proposed arrangements engaged the Treaty duties of transparency and non-discrimination. Forbes J dismissed the claim in [2009] EWHC 219 (Admin).

The appeal raised whether the proposed sponsorship was offered “on the market” and constituted a contract “for pecuniary interest”; whether there was a realistic prospect of cross-border interest; and whether the parent had standing to advance the procurement challenge.

1. Appeal dismissed. The proposed arrangement was outside the public procurement regime. A public contract must be for pecuniary interest. The corresponding requirement for consideration in the Public Contracts Regulations 2006 must be construed compatibly with that expression in Directive 2004/18.

2. An arrangement providing only genuine reimbursement of costs, without remuneration or another benefit from the contracting authority, is not for pecuniary interest. Commission v Italy established this principle even though the payments there exceeded actual expenses and therefore constituted consideration. The Secretary of State had to ensure that the accounting arrangements were realistic and did not conceal a profit. Reputational advantage was not pecuniary, while any possible benefit to UCL’s charitable status was too indirect and remote.

3. A service is offered “on the market” where participants intend to profit from contracts to provide similar services. A market also requires several persons offering similar services. Commercial activity in another field is irrelevant, and fee-paying independent education is a separate market from providing expertise to operate a maintained school. The proposed Academy sponsorship therefore did not satisfy this requirement.

4. The court assumed, without deciding, that Treaty principles could apply even if the Directive’s definitions were not fulfilled. Those principles required at least a realistic prospect of cross-border interest in the specific contract. Cross-border interest could not be presumed and required an evidential basis assessed when the contract was to be made. The only identified overseas organisation had shown no interest in the Camden proposal. The duties of advertising, transparency and non-discrimination were therefore not engaged.

5. The standing issue was academic but was determined briefly. The proposition that procurement breaches can give rise only to private-law claims went too far. A person who is not an economic operator may seek judicial review where procurement non-compliance affects that person in an identifiable way, including where competition might have produced a different outcome directly affecting that person. Grave public-law unlawfulness might also justify relief.

6. The appellant nevertheless lacked standing. Her purpose was to oppose Academy schools, rather than to vindicate an interest in observance of procurement law. Using the procurement regime for that purpose fell outside the proper function of public-law remedies. No preliminary reference was required because existing Court of Justice authority supplied sufficient guidance.

1. Court of Appeal (Civil Division): The appeal was dismissed in [2009] EWCA Civ 1011. The proposed cost-reimbursement arrangement was outside the procurement regime, no realistic prospect of cross-border interest was established, and the appellant lacked standing.

2. High Court, Administrative Court: Forbes J dismissed the judicial review claim in [2009] EWHC 219 (Admin), holding that the proposed sponsorship was not an economic operation or contract for pecuniary benefit and that the claimant lacked standing.