Coronavirus and the implications for Local Government FAQs
Last Updated: 16:16, 24th July 2020
The Coronavirus and its fall-out is giving rise to the need to adapt the way in which local authorities currently work to meet the unique challenge the pandemic presents. In this, the first of a regular set of FAQs, we highlight the key legal changes and advice that has been issued in the areas of governance, procurement and state aid to assist local authorities, and those that work with them, navigate these rapidly changing and disorientating times.
Q1. Do we have to continue to hold physical meetings in order to make binding decisions of the Authority?
A1. Not necessarily. The new Local Authorities and Crime Panels (Coronavirus)(Flexibility of Local Authority and Police and Crime Panel Meetings) (England and Wales) Regulations 2020 have now come into force. These provide that Local Authorities can hold meetings remotely, including:
- by telephone conferencing;
- live webcast; and
They remove the requirement to hold Annual Meetings and allow press and public access through remote means. These apply to Counties, Districts, Combined Authorities, Parish Councils and Joint Committees. These are particularly important due to the need to hold Annual Meetings during the spring period. We are also aware that a number of Authorities have arrangements in place to delegate various decisions to officers “in consultation” with key members.
Responsible contractual behaviour
Q2. Can we continue to enforce contracts where their performance has been adversely affected by the Coronavirus emergency?
A2. New guidance issued by the Cabinet Office on responsible contractual behaviour in the performance and enforcement of contracts impacted by the COVID-19 emergency asks for an ‘extraordinary response’ from Local Authorities. In recognition of the difficulties faced by parties performing contracts during the COVID-19 emergency, the Government is asking for the public sector to demonstrate “responsible and fair” contractual behaviour. The guidance states this can be achieved through parties:
- responding to issues in the performance of contracts in a reasonable and proportionate manner;
- acting in a co-operative spirit; and
- aiming to achieve practical, just and equitable contractual outcomes which take into account the impact on other parties and the availability of their financial resources, alongside the protection of public health and the national interest.
Although this guidance does not override any legal, contractual or other obligations already imposed, areas where the Government “strongly encourages” responsible and fair behaviour from the public sector include:
- allowing extensions of time or alternative performance and compensation;
- requesting and making payments;
- making claims for force majeure or frustration;
- making claims for damages or breach of contract;
- initiating or continuing insolvency proceedings;
- enforcing termination provisions;
- making, and responding to, contract variation requests;
- commencing, and continuing, formal dispute proceedings; and
- enforcing judgments.
With the aim of having fair and equitable outcomes at a time where contracts are being materially impacted by the Coronavirus pandemic, the Government also suggests that parties resolve contractual issues through methods such as negotiation, mediation or alternative dispute resolution; rather than seeing these escalate into formal disputes. Obviously this is guidance rather than the Law, and a judgement will have to be made in individual cases in light of resources, priorities, contractual duties and State Aid restrictions.
Q3. Are there are relaxations to the Public Procurement Regime, given the current Coronavirus crisis?
A3. The New Procurement Policy Note responding to COVID-19 (PPN 01/20) issued by the Cabinet Office provides some useful guidance. To some degree, it repeats what the current law is in terms of when Direct Awards can occur, i.e. due to extreme urgency, where there are exclusive rights, or where there is a Call-Off from an existing Framework. It also explains the arguments where it may be acceptable to award a contract directly, rather than going through the usual Competitive Process – for example, the novel situation in which we find ourselves, the impossibility of complying with the timescales set out within the Public Contracts Regulations 2015 and finding the situation is beyond the control of Contracting Authorities. There is a requirement to provide a written justification explaining why the General Procurement Requirements have not been followed on this occasion.
The guidance notes that in spite of the ongoing need for “value for money”, there may be circumstances in which higher prices may be paid than might normally be the case.
Q4. What position does the European Commission take?
A4. The Commission has issued its own guidance on the application of the Public Contracts rules in the current circumstances entitled, Guidance from the European Commission on using the public procurement framework in the emergency situation related to the COVID-19 crisis. The guidance emphasises that all of the tools necessary to procure quickly already exist within the existing rules. In the final paragraph of the Guidance it emphasises that although using the negotiated procedure without prior publication may meet immediate needs, it should only be used as a means of covering the gap “until more stable solutions can be found, such as framework contracts for supplies and services, awarded through regular procedures (including accelerated procedures)”.
Q5. A supplier has asked whether any change can be made to our usual payment arrangements because of the cash flow situation that the supplier finds itself in?
A5. Yes, PPN 02/20 encourages Contracting Authorities to assist Suppliers who might be at risk. In particular, Suppliers should be paid as normal, even if service delivery is delayed or disrupted. This should apply until at least the end of June, and that payment measures are put in place to support Supplier cash flow, including by:
- payment in advance;
- prepayment (traditionally something which is regarded as totally unacceptable in the Local Authority sphere);
- payment based on previous invoices if there are problems in getting current invoices/monitoring data delivered; and
- ensuring that invoices are paid immediately on receipt,
in order to maintain cash flow in the supply chain and to protect jobs.
PPN02/20 contains provisions with regard to interim payment terms. This encourages Authorities to assist Suppliers who need contractual relief to avoid business interruption and sets out a form of “Interim Payment Agreement” based on interim data and allowing interim payments. This allows for such things as a Certificate of Costs and verification of work but on this basis allows for interim payments.
As a quid pro quo, Suppliers continuing to be paid in full must ensure that staff on the contract are retained and paid in full, including paying full sick pay as set out in the agreement.
The PPN states that,
“There are a range of ways to support Suppliers in maintaining cash flow during this period. Contracting Authorities can continue to pay at usual Contractor rates, or consider other options such as payment against revised / extended Milestones or timescales, interim payments, forward ordering, payment on order or payment in advance / prepayment. Risks associated with advance or prepayment should be carefully considered and documented ”.
Q6. We are worried that we will be breaching the State Aid Regime by giving support to local businesses. Have the rules been relaxed at all?
A6. Yes, to some degree. With effect from 19th March, within a Communication entitled, Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (since updated/extended on 4th April 2020) special arrangement have been put in place, namely that the Framework identifies a number of different permissible measures as follows:
- direct grants, selective tax advantages and advance payments, up to EUR 800,000 to a company to address its urgent liquidity needs;
- State guarantees for loans taken by companies from banks, to ensure banks continue to provide loans to the customers who need them;
- subsidised public loans to companies, i.e. loans with favorable interest rates to help businesses cover immediate working capital and investment needs;
- Safeguards for banks that channel State aid to the real economy, in particular support for small and medium-sized companies.
- targeted support in the form of deferral of tax payments and/or suspensions of social security contributions;
- targeted support in the form of wage subsidies for employees;
- support for Coronavirus related research and development (R&D);
- support for the construction and upscaling of testing facilities; and
- support for the production of products relevant to tackle the Coronavirus outbreak.
Aid granted under the Framework must comply with the following conditions:
- the aid does not exceed EUR 800,000 per undertaking in the form of direct grants, repayable advances, tax or payments advantages;
- the aid is granted on the basis of a scheme with an estimated budget;
- the aid may be granted to undertakings that are not in difficulty and/or to undertakings that were not in difficulty on December 31, 2019, but that faced difficulties or entered into difficulty after this date as a result of the COVID-19 outbreak;
- the aid is granted no later than December 31, 2020.
For example, in the UK context, there is a scheme for “expanded retail discount” giving rate relief to retailers, the Small Business Grant Fund and the Retail, Hospitality and Leisure Grant Fund. Authorities are initially receiving payment from BEIS, but the Government wants Local Authorities to start paying these grants to businesses direct as soon as possible. The European Commission have indicated their intent to approve individual schemes as quickly as possible during the crisis. Further details of the schemes approved for the UK, so far, can be found here.
Q7. We are not able to collect all waste being left by householders outside their homes. Is any help being provided?
A7. you will already be aware that HM Treasury has promised £1.6 billion for local authorities. In addition, on the 17th April, CIWM in partnership with WRAP and other leading public and private sector organisations, launched WasteSupport. This is a new, free online platform which provides a fully searchable sharing forum. The platform allows local authorities to link up with private sector contractors that have resources to spare; they can indicate when they need service capacity support, as well as other vital resources, such as PPE or vehicle maintenance engineers. On the private sector side, commercial waste collection firms with surplus capacity are able to advertise the services they can supply – as CIWM says: “enabling this ‘virtual marketplace’ to facilitate sharing at a time when it’s needed most”. See our Coronavirus Waste and Renewables Update for more information.
We are keen to keep in touch and hear how clients are maintaining operations during this unprecedented time. We will keep this note up-to-date, periodically adding and amending it as new information, guidance and legislation is brought into force.
Q8. Are Local Authorities allowed to reopen Leisure Centres, what are the restrictions?
A8. Yes, with effect from 25th July, sport and gym/leisure facilities are allowed to reopen. The guidance was last amended on 23rd July. The guidance includes a range of recommendations in terms of how to maintain social distancing and hygiene, for example limiting customers, suggesting a 3m2 zone around swimmers, encouraging people to arrive “activity ready”, signage, 1-way routes and limiting the size of group activities.
We are aware that there has been some dispute over the extent and duration to which Local Authorities are required to compensate providers of local facilities with concession agreements for “lost income” claims after lockdown . Authorities may need to take advice as some guidance provided may advocate a more generous approach than others.
If you would like to talk through the consequences for your business, please email us and one of our team will get in touch.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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