Procurement Bites: Government defeat over cancellation of its BSF scheme

The government was recently defeated in the High Court over the way it scrapped part of England's school building programme.  The Education Secretary's decision to axe Buildings Schools for the Future (BSF) projects in six local authority areas was ruled unlawful as he failed to consult on it.  The challenge related to the revamp or rebuild of 58 schools which, if allowed to go ahead, would have cost the government £1bn.  In five of the six council cases, the failure was "so unfair as to amount to an abuse of power" according to the judge, Mr Justice Holman.
 
Waltham Forest Council, Luton Borough Council, Nottingham City Council, Sandwell Council, Kent County Council and the London Borough of Newham sought a judicial review on the grounds that the way various BSF projects had been cancelled was arbitrary and legally flawed.  Mr Justice Holman found that the Education Secretary's decision was only unlawful as Michael Gove had failed to consult the Councils on stopping BSF projects in their areas.  The Judge was damning about this failure to consult and stated that "however pressing the economic problems, there was no overriding public interest which precluded consultation or justifies the lack of any consultation".  Mr Gove must now look at these decisions to cancel BSF projects with an open mind and take representations from the relevant Councils. 
 
There are some very positive points contained in the judgment, though, for contracting authorities which need to cancel public projects for financial reasons in the challenging current economic climate:

• Mr Justice Holman found that the Secretary of State's decision to end the BSF programme was rational and the claimants had no legitimate expectation of receiving funding. The Judge said that he was "absolutely clear that the decision is not open to legal challenge on a discrete ground of irrationality, however that argument is developed or put" and he agreed that nothing which the Department for Education or Partnerships for Schools had done in respect of these local authorities went "so far as to create a legitimate expectation that any given project would definitely proceed".
• The Judge did not order a reinstatement of funding for any BSF project, nor did he order payment of compensation to any of the claimant local authorities. Instead, he merely concluded that the Secretary of State must give each of the local authorities a reasonable opportunity to make representations and with an open mind pay due regard to any representations that they may make. Crucially, Mr Justice Holman said that provided Mr Gove discharges his duties in this way "the final decision on any given school or project still rests with the Secretary of State and that he "may save all, some, a few, or none". The Judge concluded that "no one should gain false hope from this decision".
• Finally, Mr Justice Holman made it clear that any other local authority, outside of the claimant group, would be too late to apply for a separate judicial review on this matter. Clearly, then, speed remains of the essence for disappointed tenders who wish to challenge any decision to cancel a public project.

View the judgment here.

This Procurement Bites update contains summaries of complex issues and should not be relied upon in relation to specific matters. We recommend that you take legal advice on particular matters and we will be happy to assist. If you would like further information on the topics discussed above, please contact: Carol McCormack, Head of Projects, or Jason Phelps, Head of Procurement, on 01392 688 688.