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On appeal from: [2015] EWCA Civ 326

Although the Supreme Court granted the appellants permission to appeal, they unanimously dismissed their appeal regarding a challenge to the allocating provision of childcare accounts and associated services to NS&I, under a pre-existing outsourcing contract with Atos.

The Government announced it would replace tax-relief for employers who contribute to their employees’ child-care costs with a new scheme of tax-free childcare. On 29 July 2014 HM Treasury decided that NS&I, a non-ministerial Government department offering retail savings and investments, would deliver the new TFC policy for HMRC by providing and administering the childcare accounts and supporting services, given its existing contract with Atos for purchase support services including transaction management, printing, accounting, IT and customer services. The appellants argued that this was incompatible with the requirement under EU law that new public services contracts be subject to a tender procedure and sought a declaration that the proposed TFC arrangements were unlawful under the Public Contract Regulations 2006. They were granted an interim order preventing its implementation on 27 October 2014.

In giving the leading judgment Lord Hodge stated that a fresh procurement is not required where the modifications to the contract are not “substantial”. In NSI’s original contract covered operational services to support both NS&I’s existing functions and the expansion of its business to business services. Lord Hodge reasoned that, although contracts may not be designed to avoid EU law obligations, the expansion provided for in this case was within a reasonable compass. It did not alter the essential nature of the operational services provided and included restrictions to maintain the economic balance of the contract and Atos’ profit margin.

He also stated that a new tendering process may also be dispensed with if the proposed contractual variation has been provided for in the initial procurement documents in clear, precise and unequivocal review clauses; this criterion is also satisfied.

For judgment, please download: [2015] UKSC 45
For Court’s press summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch hearing, please visit: Supreme Court website