The Supreme Court has today handed down its judgment in Edenred (UK Group) Ltd and another v HM Treasury and others  UKSC 45. The case is the first appellate decision on the new Public Contracts Regulations 2015, and breaks important new ground in relation to contract change provisions and the Pressetext material variation test now contained in Regulation 72.
The case concerns the delivery of a Government tax incentive for working parents, Tax Free Childcare (‘TFC’), which involves parents setting up accounts to make childcare payments, into which HMRC would make top-up payments of 20% of the total amount held. In July 2014 the Government announced that National Savings & Investments (‘NS&I’) would operate childcare accounts and that the existing public contract between NS&I and its outsourcing provider, Atos IT Services (UK) Ltd, for back office services would be varied to add the c. £133m of services necessary to operate TFC. That contract had been tendered in 2011-2013 for services worth £660m, but with a statement in the OJEU notice that NS&I intended to expand its services over the contract lifetime, with the total back office services rising potentially up to £2bn. The Appellants, suppliers of accounts under the existing Government childcare scheme, argued that the addition of the services necessary for TFC would be a material variation of the NS&I contract.
Dismissing the appeal, the Supreme Court has held that the proposed variation would not extend the contract to encompass services initially covered, and so would not be a substantial variation prohibited by reg. 72(8)(d). In the Court’s view, the facts that the additional services fell within the (broad) description of back office services in the original OJEU notice, and within the aspirational contract value stated in that notice, and that Atos was required to perform the new services if requested to do so meant that new services could be contracted for without extending the scope of the contract. Given that, it was not necessary to decide whether the Court of Appeal’s conclusion that the contract change clauses in the NS&I contract were sufficiently clear, precise and unequivocal was correct, but that was an issue which was not acte clair.
The case has potentially significant implications for contracting authorities, giving them much greater freedom of action in relation both to contractual variation generally, and to awarding contracts for services of indeterminate size. It also raises, but does not answer, the important question whether contract change clauses can be utilised to make fundamental changes to public contracts and if so how detailed must be the provision which they make in advance for such changes.