Mansfield District Council v Secretary of State for Communities and Local Government

Where a grant agreement requires compliance with procurement requirements, failure to follow an express advertising requirement constitutes a breach capable of supporting recovery of grant payments, unless waiver is established.

For contracts below the regulatory threshold, the grant recipient must consciously assess whether there is a realistic prospect of cross-border interest. That assessment must be made before the contract is awarded and supported by an appropriate audit trail. A later justification cannot cure the omission. Selectively approaching potential contractors does not necessarily satisfy the transparency obligation.

The claimant received European Regional Development Fund grants for two town-centre improvement projects. The defendant decided to recover part of the grants because the claimant had awarded the contracts without the advertising required by the grant documentation and, in the defendant’s view, by EU procurement law. The claimant challenged the decision, alleging breach of contract, waiver, legitimate expectation and disproportionality.

The contracts were below the threshold of the Public Contracts Regulations 2006. The central issues were whether the claimant had breached the contractual and EU procurement requirements and whether a 25% claw-back was proportionate.

1. Claim dismissed. The grant agreements required compliance with the applicable EU procurement requirements and the EMDA tendering requirements. The claimant had not advertised the proposed contracts in the manner required by the local guidance. That was a breach of the Deeds of Grant. No waiver had been established, so the contractual right to recover the grant arose.

2. For below-threshold contracts, the relevant principles of transparency and equal treatment apply where there is a realistic prospect of cross-border interest. The grant recipient must make a conscientious assessment of that possibility at the material time. Relevant matters include the subject matter, estimated value, sector and geographic location. The claimant had made no such assessment and retained no audit trail.

3. The claimant’s selective approach to contractors did not remedy the failure. The court adopted the conclusion that contacting a number of potential tenderers is insufficient where active advertising is required. An ex post facto assertion that foreign contractors would not have been interested could not cure the omission.

4. The court declined to decide more generally whether the existence of cross-border interest is an objective question for the court or whether the court’s role is limited to reviewing the decision-maker’s assessment. That issue did not arise because no assessment had been made and there was no evidence on which to evaluate the prospect of cross-border interest.

5. The 25% claw-back was lawful and proportionate. The applicable guidance did not provide for a reduction in the particular circumstances, namely a below-threshold contract awarded without adequate competitive tendering and without advertising. The defendant’s decision was therefore not amenable to interference.