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A B C D E F G H I J K L M N O P R S T V W Y

Further guidance on development agreements

Further guidance on development agreements

Wednesday 5th October 2016

Public Procurement Law Update

As a general rule, while the simple sale and purchase of land are exempt from the application of public procurement law, most development agreements between contracting authorities and the private sector are classified as ‘public works contracts’ and are accordingly governed by the Public Contracts Regulations 2015 (PCR 2015). The recent case of Faraday v West Berkshire Council provided further guidance as to when development agreements are not public contracts, and thus fall outside the parameters of the PCR 2015.

In Faraday, the council directly entered into a development agreement which required the production of a development plan for the regeneration of an industrial estate. It chose not to comply with the requirements of PCR 2015 because it decided that the contract was not a public contract. Faraday opposed the award of the development agreement to the successful bidder and applied for judicial review, stating that the council had failed to comply with the PCR 2015.

Faraday argued that the main object of the contract was the design and execution of works, in turn rendering the development agreement a public works contract. The court considered the test for defining a public contract. A development agreement will be defined as a public contract if its ‘main object’ corresponds with the definition of a public works, services, or goods contract. It must also include an obligation on the developer to carry out that main object. Faraday’s argument was ultimately rejected because there was no legal obligation requiring the successful bidder to execute any works or to redevelop the land.

Faraday also claimed that the council exercised ‘decisive influence’ over the type or design of the work, which case law has previously established as being an influential factor in determining whether an agreement constitutes a public works contract. This argument was rejected on the basis that the development agreement did not require the works to adhere to requirements set out by the council.

It was therefore held by the court that the development agreement did not constitute a public contract and was therefore not caught by the PCR 2015. Faraday’s challenge was dismissed.

This case is important because it highlights the importance of a contracting authority’s duty to ensure that close attention is paid to the PCR 2015 when entering into and drafting public contracts. Failure to comply with public procurement legislation could open the door to costly legal challenges and potential liability. By careful design, however, development agreements can avoid being defined as public contracts and thus fall outside the scope of the PCR 2015.

You can read more about our public procurement services by visiting our public procurement page.

If you have any queries regarding development agreements, or public procurement law in general, please do not hesitate to contact Michael.


Michael Winder

Associate, Commercial team
Tel: 0151 600 3085
Email: michael.winder@brabners.com

 

Michael Winder is a  member of the Procurement Lawyers' Association