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

FREE DOWNLOAD

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

BUY NOW

  More Articles

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.
Icons Court

Big Problems Need Radical Solutions – Time to Play Monopoly with District Heating?

Steve Gummer examines how local authorities might make district heat networks a reality.
<a href=

The Judicial Review and Courts Bill

The Judicial Review and Courts Bill was introduced to the House last week on 21 July 2021. William Rose and Anna Sidebottom discuss the potential impact of the bill.
<a href=

Liquidated damages and termination

Clare Mendelle, Francesca Gallagher and James Goldthorpe provide an outline of the Supreme Court's recent decision in Triple Point Technology vs PTT Public Company Limited.

Mandatory Vaccination for Care Home Workers in England

The Government has announced that people working in care homes in England must be fully vaccinated against Covid-19 from October 2021, unless they have a medical exemption, write Rachel Murray-Smith and Francesca Gallagher.
Icons Court

Transparency in Procurement: Procurement Policy Note (“PPN”) 07/21

Julie Lau, Clare Mendelle and Beth Edwards outline the new regime for publishing procurement notices post-Brexit
Icons Court

When procurement law and contracts for interests in land meet

Colin Ricciardiello provides a case law update examining cases that have examined the overlap between a requirement to procure and a contract for the disposal of an interest in land.
tb w74 h74 crop int a734a5aec8e0dcb7849ee8ebeb84a53d

UK granted data protection adequacy decision

Charlotte Smith summarises the new data protection adequacy decision.

First Impressions on the New Subsidy Control Bill

Last week the Government published its new Subsidy Control Bill. The Bill represents a significant shift in the way in which subsidies are assessed and also provides some clarity about the regime that will replace the EU State aid regime, writes Peter Collins.
Icons Court

Managing new enforcement powers for councils under the Traffic management Act 2004

Rob Hann considers the recent legislative changes to traffic management in England, including the introduction of Clean Air Zones and widening local authorities enforcement powers for moving traffic offences.
Icons Court

Implementing Net Zero: Taking account of Carbon Reduction Plans in the Procurement of Major Government Contracts

The Government recently published the Procurement Policy Note 06/21. This will require suppliers bidding for major government contracts to provide a Carbon Reduction Plan at the selection stage and commit to achieving Net Zero by 2050, writes Clare Mendelle and James Goldthorpe.
tb w74 h74 crop int a734a5aec8e0dcb7849ee8ebeb84a53d

Public Procurement Update June 2021

On 3 June 2021, the Government issued the National Procurement Policy Statement (NPPS), and the associated Procurement Policy Note (PPN). George Dale explains what each document does.

What a bind: Section 106 planning obligations where there are multiple land interests

Rachel Lee and Christos Paphiti consider whether the case of R (on the application of McLaren) v Woking Borough Council impacts upon local planning authorities (LPAs) ability to properly consider the land interests and parties as regards to performance of specific obligations.
Icons Court

The use of experts only works when everyone plays by the same rules

Colin Ricciardiello looks at the use of expert witnesses in the wake of an important recent decision.
Icons Court

Unlawful Award of Contract

The High Court has ruled that the Minister for the Cabinet Office, Michael Gove, broke the law by giving a contract to a market research company, Public First, who are run by long-time associates of his. Anna Sidebottom, Francesca Gallagher and Clare Mendelle report.
Icons Date

Time after time: extending time for determination of a prior approval application

Rachel Lee and Christos Paphiti examine the time period for determination of Prior Approval (‘PA’) applications and explore how a local authority can extend the time period for determination.
Icons Date

The Cram Slam – Part 26A Restructuring Plans and Commercial Leases

David Nelson looks at the impact on landlords of a controversial High Court decision to allow a restructuring plan for a chain of health clubs.
Icons Court

The limits of an adjudicator's jurisdiction

Dr Paul Hughes and Anna Sidebottom look at the effect of Prater v Sisk [2021] on the ability of an Adjudicator to rely on previous 'out of jurisdiction' decisions between the same parties
Icons House

The Queen’s Speech and Judicial Review

Colin Ricciardiello looks at the likely effects of the government's proposed changes to the judicial review process.
Icons House

The Subsidy Control Bill

Ryan Copeland and James Hughes analyse the main provisions of the Subsidy Control Bill announced in the recent Queen’s speech.
Icons Court

Councils unable to hold meetings remotely from 7th May

Radhika Devesher considers the fallout from the High Court's decision that online council meetings cannot continue past 7th May and outlines the practical steps that councils can take to ensure that the decision-making process is not adversely affected.
Icons Court

You can’t claim that! Court finds exclusion clauses work just like any other clause

The recent case of Mott MacDonald Limited v Trant Engineering Limited serves as a timely reminder that exclusion clauses in construction contracts can and do work and will be enforced by the courts to prevent what may otherwise be valid claims write Clare Mendelle and James Goldthorpe.
Icons Date

Sparks Flying: Increasing Network Connectivity For Tenants

Lillee Reid-Hunt, James Nelson and Natasha Barlow look at the potential impact of The Telecommunications Infrastructure (Leasehold Property) Act 2021 on reducing delays in the installation of telecommunications equipment to leasehold properties.
Icons House

Subcontract held to govern works commenced before execution

Clare Mendelle and James Goldthorpe examine a case which considered which terms governed liability for works carried out prior to the execution of a contract.
Icons Court

No overlap between substance and jurisdictional issues

Clare Mendelle and James Goldthorpe examine the implications of Ex Novo Limited v MPS Housing Limited [2020] EWHC 3804 (TCC)]
Icons Court

Home is where the heart is

Bernadette Hillman and Christos Paphiti outline the new permitted development right and what it means for the property sector and planners
Icons Date

Can a worker get paid for sleeping?

Some jobs such as care workers, security guards and nightwatchmen require the individual to work night shifts where they may, with the approval of their employer, sleep during some or all of the shift, but nevertheless remain on standby during that time.
Icons Date

Can you decline to sponsor skilled workers under the new immigration rules?

Is there an obligation to consider resident workforce prior to employing migrants? Julie Bann and Aleksandra Wolek report.
Icons House

The Long Goodbye to the PFI

Rob Hann, Sharpe Pritchard’s Head of Local Government takes a look at the House of Common’s Public Account Committees’ recent report into the pending expiry of PFI contracts which contains some interesting recommendations….
Icons Court

Changes to the Electronic Communications Code

The Department for Digital, Culture, Media and Sport has commenced a consultation on changes to the Electronic Communications Code 2017 (the “Code”). James Nelson, Lillee Reid-Hunt and Natasha Barlow report.
Icons Court

The Heat Networks (Scotland) Bill

Until last week the heat network sector in Scotland was not specifically regulated. The recent Heat Networks (Scotland) Bill seeks to rectify this by creating a regulatory framework and licencing system designed to encourage the increased use of heat networks.
Icons Date

A step in the right direction

Rob Hann and Juli Lau outline Sharpe Pritchard’s response to the Government’s Green Paper on reforming the ‘outdated’ public procurement regime.
Rob Hann

Life on the Edge!

This week sees the launch of Sharpe Edge – the home of Sharpe Pritchard on Local Government Lawyer. We have created Sharpe Edge for local authorities who are looking for ways to help their communities rebuild and regenerate following the devasting impact of the Covid-19 Pandemic.
Icons Court

Jurisdiction Clauses & Enforcing Adjudication Decisions

The case of Motacus Constructions Ltd v Paolo Castelli Spa [2021] EWHC 356 (TCC) confirms adjudication’s status as an interim-binding measure and reinforces its importance as a dispute resolution forum in the construction industry.
Icons Date

Procurement in an Emergency – Requirements for Transparency

Public procurement has never had such a high profile as it has in recent months and most especially since the decision in Good Law Project and Others v Secretary of State for Health and Social Care ([2021] EWHC 346 (Admin)). However, in practice, has anything changed?
Icons Court

Disallowed Costs, Definitions and Default

The recent case of ABC Electrification Limited v Network Infrastructure Limited [2020] EWCA Civ 1645 saw legal practitioners jousting over the definition of a solitary word – namely, “default”. In this case regarding the scope of ‘Disallowed Costs’ in a common rail industry contract, the Court of Appeal issued a stark reminder to contractors that the meaning of individual words can be the difference between millions of pounds.
Slide background