Beyond establishing any new authority, the LGR process will demand a substantial investment of time and resources to ensure the smooth transfer of day-to-day operations and minimise any impact on service delivery. 

In this Passle series ‘LGR practicalities’,  we break down the practical realities of LGR and how to approach dealing with it, looking at procurements, companies, property and ongoing litigation.

In this Passle, we focus on the impact of LGR on contracts. 

Managing contracts effectively requires rigorous auditing and systematic information gathering. The new or continuing authority must identify and plan for all contracts that will be in place on vesting day. Essential information – grouped by service area includes:

• the scope of the contract – including whether there will be multiple contracts with the same scope post vesting day;
• financial implications – what does it cost now and in the future;
• whether there are outstanding disputes;
• whether contracts have an option to extend before vesting day;
• what contracts are due for re-procurement before vesting day;
• what the contract says about change of identity of contracting authority (noting that this will not prevent statutory vesting); and
• whether any variation will be needed to the contract to make it work post vesting day – this is likely to be most relevant where there will be multiple authorities benefitting from the contract post vesting day. If the intention is to disaggregate, then that may require extensive variation.

If a contract/service area is not to be disaggregated on vesting day, then the new authorities will need to consider how they will work together to manage the contract and document this in a section 16 agreement. This could involve the contract vesting in just one authority for the benefit of both of them in a ‘hosting arrangement’. Contract management could take place under a joint committee, be delegated to one authority or via more informal joint working arrangements. The arrangements must be clearly documented to ensure that the parties act consistently and that ongoing risk and liability are managed.

If contracts are to be disaggregated, then this might be achieved through entering into mirror contracts based on the original. However, keep in mind that this approach is at greater risk of the contractor seeking to introduce other changes or additional costs for managing two contracts. 

If the LGR arrangements necessitate changes to the contract, such modifications must be authorised in accordance with standing orders and public procurement law.

Before vesting day, authorities should:

• consider writing into new contracts a simple LGR clause that requires the contractor to provide support and enter into any documents required to give effect to LGR (at no additional cost). A central message to existing contractors needs to be that LGR does not – in and of itself – entitle them to renegotiate any terms of the contract; and
• develop template communications with existing contractors to keep them informed as to what is happening, why and what the impact is for them.

The Transfer Regulations (potentially coupled with a section 16 agreement) will vest contracts and so there is not usually a strict need for any separate assignment or novation. However, authorities may wish to consider entering into a novation before vesting day (to take effect on that day) for particularly high-value/high-risk contracts. If variations are required, then the novation and variation could be wrapped up into one document.

The transfer of functions is effected by statutory transfer but as this LGR Practicalities blog series demonstrates, there is a lot of due diligence and thought needed about how services will be delivered post vesting day to be able to implement LGR successfully. It can be a daunting task and one that has to take place in a short time period to ensure effective transfer. 

Next steps

Our team at Anthony Collins is well versed in the issues arising from LGR and can assist authorities (whether predecessor, continuing or new) with the process including due diligence and implementation. Please contact us for more information.