Material Change to Specification Is It Dangerous?

What happens if you change your specification and its a material change after the tender has been issued?

What happens if our requirements change during the course of a procurement?

Any change to the specification must not be a material change.

The acid test is would a supplier who made a decision not to submit a tender or an expression of interest do so had the proposed change been in the tender at the beginning? If the answer is yes then this is classified as a material change. In this scenario, the best option is to stop the procurement and start again with the new requirement included.

Let’s review whats allowed in The Public Regulations 2015 and  some case law (National Savings & Investments (NS&I) and Atos IT Services Limited (Atos) ) on Material change

Regulation 72(1)(e) (non-substantial variation) of PCR 2015 states that

“Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Part in any of the following cases:

…(e) where the modifications, irrespective of their value, are not substantial within the meaning of paragraph 8”. Regulation 72(8) states that, inter alia, “a modification of a contract or framework agreement during its term shall be considered substantial for the purposes of paragraph 1(e) where… (d) the modification extends the scope of the contract or framework agreement considerably”.

On application of Regulations 72(1)(e) and 72(8) to the facts of the case, the court found that Edenred’s argument that the amendments to the Contract included services which were not originally contemplated and which amounted to a material change did not satisfy the requirements of Regulation 72(8). This was on the basis that:

  • the OJEU Notice set out the intention to expand the B2B Services up to a maximum value of £2bn
  • the advertised contract and related procurement documents envisaged and catered for an expansion of the services as was being contemplated and further stated that the winner of that contract (namely Atos) should be capable of providing such additional services in the future
  • the original procurement process and ultimately the contract awarded to Atos in 2013 was unchallenged, and
  • “contract documents” should include reference to all tender documents, which included the OJEU Notice, where the potential expansion of services was unequivocally set out.

The court also applied Regulation 72(1)(a) which states that

“where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses or options, provided that such clauses (i) state the scope and nature of the possible modifications or options as well as the conditions under which they may be used, and (ii) do not provide for modifications or options that would alter the overall nature of the contract or framework agreement…”.

The Supreme Court held that the change provisions in the Contract were sufficiently clear to meet these criterion, namely that they restricted the additional services to the B2B Services outlined in the OJEU Notice and also set out some guiding principles for the inclusion of the new services in the Contract so as to restrict any increase in Atos’s profit margin and to prohibit changes to risk allocation under the Contract. This, in turn, satisfied Regulation 72(8)(c) in relation to a change in the “economic balance” of the parties under the Contract.

Can contracting authorities protect themselves from a challenge for material change by including all potential future changes and additional services which may be required in the OJEU Notice?