Q&As

If a contractor to a public contract awarded under the Public Contracts Regulations 2015 later merges with a third party, can the contracting authority novate the contract to the new entity? Are there any specific regulatory requirements or best practices for contracting authorities in this situation? Do the same rules apply for contracts awarded under the Public Contracts Regulations 2006?

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Produced in partnership with Jack Eustice and Rebecca Rees of Trowers & Hamlins LLP
Published on LexisPSL on 18/05/2017

The following Public Law Q&A produced in partnership with Jack Eustice and Rebecca Rees of Trowers & Hamlins LLP provides comprehensive and up to date legal information covering:

  • If a contractor to a public contract awarded under the Public Contracts Regulations 2015 later merges with a third party, can the contracting authority novate the contract to the new entity? Are there any specific regulatory requirements or best practices for contracting authorities in this situation? Do the same rules apply for contracts awarded under the Public Contracts Regulations 2006?
  • Modification of public contracts
  • Treatment of novation under the Public Contract Regulations 2015
  • Contracts procured under the Public Contracts Regulations 2006
  • Further reading

If a contractor to a public contract awarded under the Public Contracts Regulations 2015 later merges with a third party, can the contracting authority novate the contract to the new entity? Are there any specific regulatory requirements or best practices for contracting authorities in this situation? Do the same rules apply for contracts awarded under the Public Contracts Regulations 2006?

In answering this Q&A, we have limited our research to cover public procurement under the Public Contracts Regulations 2015, SI 2015/102 (PCR 2015).

Modification of public contracts

A merger situation may result in the identity of a contractor being amended, requiring agreements with that contractor to be novated to a new vehicle. In the case of a public contract, replacement of the contractor will be treated as a modification of the contract for the purpose of the PCR 2015, SI 2015/102. Under these rules, substantial modification to a public contract may, in effect, result in the award of a new contract which requires a new public procurement process to be undertaken.

A ‘substantial’ modification in this context is defined in PCR 2015, SI 2015/102, reg 72(8) as one which:

  1. renders the contract materially different in character

  2. would have affected the candidates selected or tender awarded or attracted additional participants in the procurement

  3. changes the economic balance in favour of the contractor in a way which was not provided

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