Gottlieb, R (On the Application Of) v Winchester City Council

Changes to a public contract require a new procurement procedure where, assessed against the contract as originally made, they are materially different in character and demonstrate an intention to renegotiate essential terms. In a development or concession contract, economic benefit includes potential profits from third-party transactions. Evidence of actual alternative bidders is helpful but unnecessary; a realistic hypothetical bidder may suffice. A broad variation clause does not avoid procurement obligations unless its scope and operation were transparently stated. Substantial renegotiation which increases profitability and removes material obligations is unlawful without a fresh procurement exercise.

The claimant, a Winchester resident and councillor, sought judicial review of the Council’s decision of 6 August 2014. The decision authorised extensive variations to a 2004 Development Agreement for a mixed-use city-centre redevelopment, including changes to affordable housing, civic facilities, retail space, the bus station, construction procurement and the development site.

The original agreement had been entered into without a procurement exercise. Permission was limited to whether the 2014 variations required a new procurement procedure under Directive 2004/18/EC and the Public Contracts Regulations 2006, and whether relief should be withheld.

1. The claim succeeded. The Council’s decision to authorise the variations without a fresh procurement procedure was unlawful.
2. The applicable test, derived from Pressetext, was whether the varied contract was materially different in character from the original contract, demonstrating an intention to renegotiate its essential terms. The examples in Pressetext were illustrative rather than exhaustive.
3. Potential profitability was relevant. For a development or concession contract, commercial value could arise from profits obtained from third parties, as well as from the financial terms between the authority and developer. Actual alternative bidders need not be identified. The claimant had to establish, on the balance of probabilities, that a realistic hypothetical bidder would have applied had the varied opportunity been advertised.
4. The variations were material. They removed or reduced affordable housing and civic amenities, replaced a bus station with substantially greater retail opportunity, enlarged the site, relaxed competitive tendering for construction and increased the developer’s potential return. Together they made the scheme viable where the parties regarded the original terms as unviable and materially increased its commercial attractiveness.
5. The contractual variation provisions did not alter the result. Their broad and unspecific terms did not tell economic operators what changes might be accepted or on what basis. They therefore failed the transparency requirement and could not operate as a carte blanche to avoid procurement obligations.
6. The breach was serious and substantive. The claimant had sufficient interest as a resident, council tax payer and councillor, and the court declined to withhold relief. The decision authorising the variations was quashed.

First-instance judicial review in the High Court (Administrative Court). The judgment does not state any subsequent appellate decision.