Local government reorganisation: Key legal and procurement issues for public sector teams

Authorities should establish a comprehensive contract register identifying:

• Contract values and expiry dates

• Extension options

• Termination rights

• Key performance risks

• Critical suppliers

• Dependencies between contracts

• Procurement pipelines

• Data impacts

The Local Government Association has emphasised the importance of creating a unified contracts register and spend baseline to identify duplication, critical contracts and opportunities for consolidation. They also provide a checklist for key matters.

Contract mapping is particularly important where multiple predecessor authorities may have separate contracts for similar services, technologies or operational functions. Without a clear understanding of inherited arrangements, new authorities may encounter service duplication, increased costs and conflicting contractual obligations.

Procurement teams face difficult decisions during the transition period. Authorities must determine whether to:

• Proceed with a new procurement

• Extend an existing arrangement

• Modify a contract

• Delay procurement until the new authority is established

Long-term procurements can present particular challenges. Authorities may be reluctant to commit successor organisations to lengthy contractual arrangements where service models, budgets and administrative boundaries remain uncertain. Equally, repeated extensions may create value-for-money concerns and procurement law risks.

Each decision should be supported by:

• A documented business case

• Appropriate governance approvals

• Consideration of procurement legislation

• Assessment of future organisational requirements including additional requirements that may be required following vesting day

Authorities should avoid adopting a blanket approach and instead evaluate each procurement on its own merits.

LGR frequently generates requests to vary existing contracts. Service boundaries may expand, operational models may change, IT licensing requirements may increase, data sharing may be required between split organisations following boundary adjustments and mobilisation periods may require adjustment.

However, authorities must be cautious when relying on contract modifications to accommodate organisational change. Procurement legislation imposes restrictions on modifications that materially alter the scope, value or economic balance of a contract.

Legal and procurement teams should assess:

• Whether a proposed change constitutes a permitted modification

• Whether the modification could be considered substantial

• Whether transparency requirements apply

• Whether a new procurement exercise may be required

Authorities should maintain a clear audit trail documenting the rationale for each decision and the legal basis for any modification. This remains particularly important under the transparency-focused regime introduced by the Procurement Act 2023.

Contracting models may change between authorities and smaller council requirements may become redundant necessitating termination of some contracts.

Legal and procurement teams should assess:

• Whether break clauses are included in contracts

• Whether the termination carries additional risk

• Whether timelines and notice periods can be accommodated

• Whether a new procurement exercise may be required

Authorities should maintain a clear audit trail documenting the rationale for each decision and the legal basis for termination.

Governance arrangements often present one of the most overlooked risks during reorganisation.

Authorities may be operating under interim arrangements whilst simultaneously preparing for the governance structures of the successor authority. Questions frequently arise regarding:

• Officer delegations

• Member approvals

• Contract standing orders

• Financial regulations

• Scheme of delegation changes

• Joint decision-making arrangements

Poor governance during the transition can expose authorities to challenge and delay critical projects.

Accordingly, governance frameworks should be reviewed early, with clear guidance issued to officers regarding approval routes and decision-making responsibilities. The alignment of constitutional arrangements and commercial governance has been identified as a key component of successful LGR programmes.

Reorganisation can create uncertainty for suppliers.

Questions commonly arise regarding:

• Payment arrangements

• Contract ownership

• Future procurement opportunities

• Service redesign proposals

• Contract extensions and renewals

Proactive supplier engagement can help alleviate concerns and maintain market confidence. Authorities should consider developing consistent messaging across predecessor organisations and ensuring suppliers receive timely information regarding planned changes. The LGA has highlighted the value of coordinated supplier engagement and consistent commercial practices during transition.

Many LGR programmes involve service redesign, outsourcing, insourcing or consolidation of service delivery models. These changes can trigger complex employment law considerations, including the potential application of TUPE.

Key areas requiring attention include:

• Workforce data collection

• Employee liability information

• Mobilisation planning

• Consultation requirements

• Risk allocation in contracts

• Service continuity planning

• Data sharing requirements

Legal, HR and procurement teams should work collaboratively to ensure employment-related risks are identified at an early stage and appropriately reflected within procurement documentation and contractual arrangements.

Authorities frequently inherit different ICT systems, data management processes and contractual arrangements.

Early consideration should be given to:

• Data sharing requirements

• Information governance frameworks

• Cybersecurity obligations

• Software licensing arrangements

• Records management

• Data protection compliance

Failure to address information governance issues early in the transition can create operational challenges and compliance risks long after vesting day.

Whilst much attention focuses on transition, authorities should also consider the opportunities created by reorganisation.

New unitary councils may benefit from:

• Rationalised supplier portfolios

• Consolidated procurement activity

• Consistent governance arrangements

• Increased purchasing power

• Better contract management oversight

• Improved service integration

The most successful reorganisations are likely to be those that view procurement and commercial functions not merely as a compliance exercise but as a strategic enabler of transformation.