Local Government Lawyer Home Page

Sharpe Edge Webpage Banner

Welcome to Sharpe Edge, Sharpe Pritchard’s local government legal hub on Local Government Lawyer.

Sharpe Edge features news, views and analysis from our team of specialist local government lawyers working at the heart of the latest legal developments. Sharpe Edge platform is also the only place where local government lawyers can get e-access to two law books by our Head of Local Government Rob Hann: The Guide to Local Authority Charging and Trading Powers (‘LACAT’) and The Guide to Local Authority Companies and Partnerships (‘LACAP’).



Slide background

Teckal and Beyond….

Icons CourtIn this article Rob Hann, Sharpe Pritchard’s Head of Local Government, takes a look at what isn’t covered in the recent Green Paper on Transforming the UK’s Public Procurement rules, namely the exception contained in regulation 12 of the Public Contracts Regulations 2015 (PCR 2015), commonly referred to as the Teckal exemption and asks whether Teckal is ‘fit for purpose’ in a post Brexit, post pandemic environment?

The Green Paper on Transforming Public Procurement (‘the Green Paper’) followed hot on the heels of the UK’s exit from the European Union. It contains a smorgasbord of radical reforms and interesting ideas aimed at speeding up the procurement process, simplifying rules and placing value for money at the heart of the new regime.

But big changes of the kind contemplated will take significant time to implement - anything from 12 months to two years. The message meanwhile seems to be ‘business as usual’. Carry on using the PCR 2015 subject to a few essential ‘tweaks’ e.g. where to advertise and where to lodge a procurement challenge.

However, clients want to know not only what comes within the procurement rules but also, what is excluded from them? The Green Paper contains no mention of the narrow exemptions from the procurement rules currently found in Regulation 12 PCR 2015, (still commonly referred to by the names of the cases that spawned these exemptions – namely the “Teckal” and “Hamburg” exceptions). A follow up article will explore the Hamburg exception.

This may simply be because there is no intention to make any changes to them given the long, winding road it took to establish and consolidate these case law made exceptions into mainstream EU legislation. If correct, this is disappointing and an opportunity missed to examine the impact and fitness for purpose of the Teckal and Hamburg governance structures, in a post-Covid, post-Brexit environment.

As lockdown measures are gradually lifted, local authorities across the UK will be intimately involved in helping local economies to recover and regenerate following the most catastrophic impact on business and communities in living history. They will need to be fleet of foot, commercially aware and alive to new ways of working to secure additional sources of inward investment and funding. New alliances need to be forged - not only by and between public bodies - but also across the public, private and third sector divides.

Unfortunately, fear of falling foul of the procurement rules have driven local authorities down very specific and insular paths when they have sought ways to break out of the confines of traditional local authority direct service delivery.

There are no records which state definitively how many wholly owned Teckal companies have been set up by local government in the UK, but the numbers must, by now, run into hundreds. Teckal companies have become the ‘go to’ first choice for local authorities seeking to explore the boundaries of trading, whilst simultaneously delivering a major service back to their ‘parent’ LA owner(s). Whilst this approach undoubtedly has merit, it also has limitations and complexities, some of which are only now becoming apparent as income streams dry up, available LA subsidy shrinks, and alternative investment sources (such as from the private sector) are banned (assuming Teckal compliance remains a priority).

Many well-intentioned, innovative public-to-public, pan-local government and cross agency initiatives have floundered on Teckal/Hamburg rocks. Brexit could have provided the opportunity to chart a new route through dangerous (procurement challenge) waters. The UK Government could have sought to better define when and how public bodies can link up with each other to drive down costs, to deliver better public services or by joining up and collaborating across traditional service or sector boundaries (using companies or not). If a teckal company is owned by several local authorities, for example, compliance problems and complexity increases.

If there is no Government intention to revisit these exceptions, then how do local authorities adapt permitted structures to meet concerns around LA owned companies which only now are beginning to surface?

Specifically, the emphasis placed on control and ownership to secure Teckal exempt status, coupled with the fact that many of these companies are managed by senior officers and/or councillors who are either employed by or have other roles and responsibilities within the LA, creates the potential for conflicts of interests.

Fundamentally, at the heart of the Teckal compliance rules there lies a conflict: To achieve Teckal exempt status, the company must effectively be a department of the parent LA. But to comply with Company law statutory duties, directors of companies must act bona fide for the benefit of the company they serve. If a director of a Teckal company is also (say) an employee of that company’s owner, conflicts between such roles arise and, in some cases, can lead to major problems with decision-making, corporate governance and personal or professional conflicts of interest.

Corporate governance issues in the context of local authority owned companies have hit the headlines recently (although not necessarily in the context of Teckal companies) see (https://localgovernmentlawyer.co.uk/governance/396-governance-news/44598-lack-of-adequate-governance-arrangements-and-institutional-blindness-led-to-council-energy-company-losing-over-34-million-report-finds).

In response to a report into the failure of the Robin Hood Energy company (a wholly-owned LA company), the secretary of state for the environment Robert Jenrick MP raised the spectre of new legislation governing LA interests in companies. However, this is a notoriously difficult area to regulate, as successive Governments over many years have discovered.
Instead, better guidance and targeted help to local authorities around some of the real dilemmas faced by them when they seek to use of wholly owned companies might be more effective.

Here are some suggestions:

• Be aware of and download the Lawyers in Local Government’s (‘LLG’) Code of Practice for LA companies. This is an excellent piece of work containing real, practical help for anyone involved in this area.
• There is a need for a comprehensive national or regional training programme perhaps sponsored by BEIS and DCLG aimed specifically at upskilling a cadre of serving and experienced LA officers in the skills of managing companies.
• To avoid conflicts of interest with officers/members of a parent authority wearing different hats as directors of controlled companies’ LA’s could consider making company boards more independent and ‘arms-length’ from their controlling authority. ‘One approach could include appointing some directors from other local authorities who have no direct connection to the parent authority, perhaps on a reciprocal basis?
• Alternatively, injecting new skills and experience and an independent mindset onto the boards of LA owned companies might be achieved - again with a bit of help from the central bodies - by creating a recruitment platform where such LA directorships/non-executive director opportunities could be advertised? This might appeal to recently retired local authority officers who have significant skills to offer; or it could appeal to the many entrepreneurs with commercial skills who may be out of work following the pandemic and who would have experience to bring to the boards of such LA companies?

With careful attention to detail around powers to appoint and remove directors and the Teckal tests, the exemption should not be affected by these alternative arrangements (although it would need careful planning, drafting and legal advice).

If, as suspected, there are no changes to the exceptions planned or proposed, the public sector seems destined to be stuck in the Teckal groove for years to come. That leaves working within the rules to fit the Teckal template whilst seeking ways to modify management structures so that more appropriate corporate governance arrangements for wholly owned companies can be put in place.

Rob Hann is Head of Local Government at Solicitors Sharpe Pritchard and author of the Guide to Local Authority Companies and Partnerships 2020. He can be contacted through the new local government lawyer sponsored platform Sharpe Edge here. In a follow up article, Rob will explore public to public partnerships forged using the Hamburg exception.

For further insight and resources on local government legal issues from Sharpe Pritchard, please visit the SharpeEdge page by clicking on the banner below.

sharpe edge 600x100

This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email This email address is being protected from spambots. You need JavaScript enabled to view it.




LACAT BookFREE download!

A Guide to Local Authority Charging and Trading Powers

Written and edited by Sharpe Pritchard’s Head of Local Government, Rob Hann,

A Guide to Local Authority Charging and Trading Powers covers:

• Updated charging powers compendium          • Commercial trading options

• Teckal ‘public to public’                                    • Localism Act


LACAT BookAvailable to buy:

A Guide to Local Authority Companies and Partnerships

An invaluable, comprehensive toolkit for lawyers, law firms and others advising
on or participating in Local Authority Companies and Partnerships”

- Local Authority Chief Executive


  More Articles

<a href=

Levelling up – A new opportunity for further devolution in England?

Rob Hann explores the Government's 'levelling up' policy and looks at whether it is an opportunity for further devolution in England.
<a href=

Time limits for commencing proceedings in procurement challenges

Colin Ricciardiello discusses a landmark procurement challenge judgment on the time limit for commencing proceedings.
Icons Hazard

The Revised National Planning Policy Framework: Better design, greener outcomes?

Alastair Lewis and Sarah Wertheim outline the latest National Planning Policy Framework changes and explain how future developments will be impacted by the new rules.
<a href=

Loose talk costs money: Oral agreement to forego liquidated damages was valid

Michael Comba outlines and analyses a contract dispute resolution: Mansion Place Ltd v Fox Industrial Services Ltd [2021] EWHC 2972 (TCC)
<a href=

Procurement reform – an update

Radhika Devesher and Natasha Barlow provide a summary of the proposed and enacted changes to the UK procurement regime post-Brexit.
Icons Court

The Public Procurement Review Service Report: Procurement Pitfalls and How to Avoid Them

Juli Lau and Beth Edwards examine some of the most common procurement pitfalls and provide a checklist of points for local authorities to bear in mind in order to avoid costly errors.
<a href=

JCT Dispute Adjudication Board Rules: a case of “three’s a crowd”?

Peter Jansen who specialises in construction law and dispute resolution, examines the roles and functions of the JCT’s Dispute Adjudication Board and highlights some key considerations for parties planning to adopt the Rules in their JCT contracts.
<a href=

The Electric Vehicle Revolution or…

Emily Knowles discusses new legislation on the requirement of electric vehicle charging points, and its potential impact on the Electric Vehicle Revolution.
<a href=

Consultation on the Electronic Communications Code – What’s Changing?

Lillee Reid-Hunt outlines the legislative changes to the Electronic Communications Code.
Icons Court

You Must Adjudicate First NEC3 imposes obligation to adjudicate first before commencing court proceedings.

Michael Comba discusses NEC3 imposing an obligation to adjudicate first before commencing court proceedings.
Icons Court

Rocking aground the Christmas tree

Clare Mendelle and George Dale discuss and solve a common construction scenario, looking at the position under the Contract, and how the Employer should deal with the Contractor's request.
Icons Hazard

Adequacy Decision Granted to the UK

Charlotte Smith considers two recent adequacy decisions and explains how this affects existing data practices.
<a href=

Managing employees with long COVID and employees who have anxiety about returning to the office

Julie Bann and Victoria Smith consider how Long Covid may be treated under existing employment laws and provide compliance guidance for employers.
<a href=

Environment Act 2021: What Does it Mean for Waste Authorities?

Sally Stock, Juli Lau, Ellen Painter and Beth Edwards discuss notable changes made to the Environment Bill 2021-2022, which received Royal Assent on the 9th November.
<a href=

ESG and its relevance to the public sector

Peter Collins and Sydney Chandler discuss the growing importance of Environmental, Social, and Governance criteria in public procurement.
<a href=

JCT 101: Time and Punishment

Rachel Murray-Smith, Clare Mendelle and Laura Campbell discuss a common Construction scenario regarding the Practical Completion of a project, and the position under the unamended JCT DB 2016.
Icons Court

The importance of due process, communication and fairness in employee conduct investigations – what you need to know.

Julie Bann and James Hughes discuss the importance of fairness in employee conduct investigations, taking a look at the London Borough of Hammersmith and Fulham -v- Mr S Keable case.
<a href=

Becoming More Inclusive: VAT and Public Procurement

Juli Lau, Natasha Barlow and Beth Edwards examine the recently published Public Procurement Regulations 2021, focussing upon amendments to the thresholds within various procurement regimes.
<a href=

The LADs are Alright

Laura Campbell discusses liquidated damages in construction contracts, focussing upon the long-running Triple Point saga which ended in the Supreme Court this year.
<a href=

Procurement Policy Note 08/21

Juli Lau and Beth Edwards outline Procurement Policy Note 08/21, recently published by the Cabinet office.
Icons Court

Hard Times: Improving Air Quality with Clean Air Zones

Rob Hann and James Goldthorpe examine the introduction of Clean Air Zones to improve air quality across the UK.
<a href=

Autumn Budget Spending Review 2021 – What Public Bodies Need To Know

Rob Hann and James Hughes examine the Autumn Budget Spending Review 2021, looking at what Public Bodies need to know.
<a href=

Net Zero – What’s new for local authorities?

Steve Gummer and Sophie Drysdale look at two major climate publications: the Heat and Buildings Strategy and the Net Zero Strategy.
Icons Hazard

Jumping to conclusions: Final Statements, liquidated damages and material breaches of natural justice

Michael Comba looks at a recent Technology and Construction Court case that provides useful guidance on the JCT’s procedural requirements on disputing Final Statements.
Icons Court

Three times one equals one: Several disputed payment applications amount to a single dispute

Michael Comba considers a case in which the High Court dismissed an employer’s argument that an adjudicator lacked jurisdiction because the referral concerned three separate payment applications and, therefore, comprised three separate disputes.
<a href=

Warm feelings or hot air: the Heat and Buildings Strategy and Heat Networks

This week the government published its Heat and Buildings Strategy (Strategy). This contained vital innovations and essential step changes in terms of how heating is provided, writes Steve Gummer.
<a href=

Procurement reforms: update from Cabinet Office

Rob Hann, Nicola Sumner and Juli Lau assess the Cabinet Office's update on the progress of the government's public procurement reforms.
Icons Court

Bond, Performance Bond. Delivering value for the Public Sector?

Justin Mendelle examines whether public sector clients achieve value for money from the provision of performance bonds.
Icons Hazard

Not so personal messages: R. (on the application of Good Law Project Ltd) v Secretary of State for Health and Social Care and Abingdon Health Plc [2021] EWHC 2595 (TCC)

Nicola Sumner, Juli Lau and Beth Edwards look at The Good Law Project's challenge of the direct award by the Secretary of State for Health and Social Care of three contracts for the production and supply of rapid Covid-19 antibody tests (the “Contracts”).
<a href=

Insolvency – Termination and Beyond

Rachel Murray-Smith and Clare Mendelle consider the potential warning signs of, and the compliant manner for dealing with, contractor insolvency.
Icons Court

Settlement agreements – waiving Personal Injury claims

In the case of Farnham-Oliver v RM Educational Resources LTD, the Queen’s Bench Division of the High Court allowed a Personal Injury claim (“PI claim”) to be pursued by an employee against his former employer despite the parties signing a Settlement Agreement in respect of an Employment Tribunal claim on the same issue. Julie Bann and James Hughes report.
Icons Hazard

Mandatory Vaccination for Care Home Workers in England – Update

Rachel Murray-Smith and Francesca Gallagher look at the detail of the government's guidance on compulsory vaccination for care staff.
<a href=

Make your mind up! Liquidated Damages clause upheld despite Employer’s challenge

In the recent case of Eco World Ballymore (EWB) v Dobler[1] , an Employer took the unusual position of challenging their own entitlement to liquidated damages (LDs) on the ground that the LDs provision constituted an unenforceable penalty clause. Clare Mendelle and James Goldthorpe investigate.
<a href=

Are Collateral Warranties Construction Contracts? Timing is Key.

Clare Mendelle and Anna Sidebottom examine the recently decided case of Toppan v Simply[1], which has provided guidance on when collateral warranties may be considered “construction contracts” under the Housing Grants, Construction and Regeneration Act 1996 and so give the warranty holder the right to adjudicate.
Icons Court

Climate emergency or climate catastrophe?

Rob Hann asks how central & local government departments and councils can work together more effectively to combat the challenges to achieve net zero by 2050.
Slide background