Court of Appeal dismisses procurement claim over delivery of tax-free childcare

The Court of Appeal has rejected a claim that the Government’s proposed arrangements for the delivery of tax-free childcare breach domestic and EU public procurement legislation.

The case of Edenred (UK Group) Ltd v HM Treasury & Ors [2015] EWCA Civ 326 relates to the Government’s decision to give HM Revenue & Customs overall responsibility for tax-free childcare (TFC), with HMRC in turn using National Savings & Investments (NS&I) for its delivery.

NS&I will provide TFC – with a value of approximately £160m over five years – by amendments to its outsourcing contract with Atos IT Services UK.

The Government did not invite any competitive tenders for the delivery of TFC. Edenred, one of the providers of the current 'Employer Supported Childcare' scheme, subsequently brought a claim alleging that the proposed arrangements were in breach of the Public Contracts Regulations 2006 and in breach of Article 56 of the Treaty on the Functioning of the European Union.

Mrs Justice Andrews rejected Edenred’s claim in the High Court. Following an expedited hearing, the Court of Appeal has now also dismissed its challenge.

Giving the judgment of the court, the Chancellor Lord Justice Etherton agreed with Mrs Justice Andrews that a memorandum of understanding (MoU) between HMRC and NS&I was not a public contract within the 2006 Regulations.

Lord Justice Etherton also said he did not accept that proposed amendments to the Atos contract for the provision of services relating to the TFC scheme engaged the 2006 Regulations.

“It is clear from….the court's judgment in Pressetext that an amendment may not be regarded as constituting a material change, and so amounting to the offer or award of a new contract, for the purposes of the 2004 Directive and the 2006 Regulations if it was provided for in the terms of the initial contract,” he added.

Lord Justice Etherton said he considered the change provisions in the Atos contract to be “sufficiently clear, certain and precise in anticipating and embracing the proposed amendments for the TFC scheme that the proposed amendments are not properly to be regarded as constituting the offer or award of a new public contract”.

The proposed amendments to the Atos contract in respect of the provision of outsourced services for NS&I to fulfil its obligations to HMRC under the MoU fell “clearly and squarely” within the scope of what was anticipated and intended to fall within the contractual change provisions in the Atos contract, he found.

“The amendments relate to new B2B services for central government, which will be implemented by the outsourced services which were the very subject of the Contract Notice and the original Atos contract,” Lord Justice Etherton said.

“The proposed amendments are not, therefore, from a Pressetext perspective, materially different in character from the original Atos contract and do not extend the scope of the Atos contract considerably to encompass services not initially covered contract such as to demonstrate, in either case, the intention to renegotiate the essential terms of the contract and to offer or award a new contract.”