High Court Ruling Clarifies What Constitutes Material Changes To A Contract

• Jurisdiction: European Union
• Law Firm: Gowling WLG
• Subject Matter: Government, Public Sector, Government Contracts, Procurement & PPP
• Author: Mr Christopher Brennan
• Published date: 10 July 2023

The recent case of James Waste Management LLP v Essex County Council [2023] EWHC 1157 (TCC) deals with the issues surrounding the ability for contracting authorities to make changes to contracts. In the case, James Waste Management LLP brought a claim against Essex County Council. The claimant alleged that the council had breached the Public Contracts Regulations 2015 (PCR) in modifying its agreement with Veolia, so as to allow Veolia to take waste to a new disposal facility elsewhere in Essex and change the basis of charging. The arguments made by James Waste concerned Regulation 72 of the PCR - James Waste contended that these changes amounted to a substantial modification of the contract, making it materially different. In view of this, it argued that the County Council should have re-advertised the contract and run a new procurement.

James Waste's claim was unsuccessful - the decision handed down by judge Waksman J in the High Court decided that the changes did not render the contract materially different.

In this article, we take a closer look at the PCR, the provisions it sets out for the modification of contract and framework agreements and what the key learning points are from this latest procurement decision.

What constitutes a "safe harbour" in allowing contract modifications?

Under the current law dealing with modifications of public contracts, Regulation 72(1) provides a list of six "gateways" (sometimes called "safe harbours") that allow contracts and framework agreements to be modified without a new procurement procedure. For each permitted gateway, however, the regulation clearly sets out specific circumstances that need to be met. Judge Waksman J held that these gateways should be interpreted narrowly, as they are derogations from the general rule in Regulation 72(9) that modifications are impermissible. The judge further held that there is no reverse burden of proof imposed upon a contracting authority who invokes the gateways, despite the fact that the gateways constitute derogations.

James Waste argued that the change brought about a "considerable" extension to the scope of the contract under Regulation 72(8)(d), and that the change was therefore substantial. It argued that any extension that has the value of (not much) more than the operative threshold for engagement of the PCR is enough to be "considerable". Waksman J, however, held that a "considerable" extension of the scope under Regulation 72(8)(d) should be interpreted in a...