Contracting with local authorities

• Local government functions — local authorities may only act where they have a power (they can act) or a duty (they must act) set out in legislation.

• Different forms of local authority — not all local authorities are the same:

• Unitary authorities have all local government functions;
• County councils and district councils operate in two-tier areas and split functions between them – so in a county, there will be a number of districts/boroughs;
• Borough councils are a type of district council and have the same functions – the difference is that the Chairman is called Mayor (but is not a directly elected mayor);
• Parish councils (which are sometimes called town councils) are the lowest tier of local government and not all areas have them. They only have limited functions;
• Combined authorities are a relatively new form of local government and operate at a regional level. They are in addition to, and do not replace, the other local authorities in the same area.

• Who makes the decisions? — the decision making power can be held by different individuals and groups. Most local authorities operate an executive model led by either a leader, who is elected by the councillors, or a directly elected mayor. Most decisions made by a local authority will be executive decisions. A few decisions (e.g. the budget) must be taken by the councillors all acting together. Most decisions are taken by:

• Groups of councillors sitting as the cabinet/executive or as committees;
• A directly elected mayor;
• Individual councillors; or
• Employees/officers of the council.

• Factors to be taken into consideration when making decisions — local authority decision-makers are bound by rules on pre-determination and pre-disposition. They should make decisions based on all of the relevant factors and not irrelevant matters. Above all, decision makers must act reasonably. Failure to comply with these rules could mean that the decision can be challenged through judicial review.

• Timescales for making decisions — time can be an issue in any large organisation, and local authorities are no different. The time needed to follow decision-making processes and the added pressure of budget cuts on local government should be taken into account. You should make provisions for extra time to be built into your own plans from the outset, to allow for any delays in decisions and document preparation.

• Duty of care — local authorities owe a duty to their council tax payers in how they spend public money. In addition, they have further duties when spending public resources or selling public assets:

• Public procurement – local authorities must comply with their own standing orders (usually called the Contract Procedure Rules) and, above certain thresholds, public procurement law – in particular, the Public Contracts Regulations 2015. These rules significantly limit the ability of local authorities to negotiate contracts. If you are tendering and have any concerns, raise them during the process and not after it.
• State aid – except in particular circumstances, these EU rules prevent state subsidies where the subsidy is given to anybody who is putting goods and services on the market (it does not have to be for profit). The subsidy could be cash, or it could be selling an asset for less than its market value. If you are receiving grants, loans or assets from a local authority, ask the authority about state aid. If the rules are not complied with, then the aid will have to be repaid with interest.

• Transparency — authorities are required to publish data on expenditure and are subject to the Freedom of Information Act 2000. If you are dealing with a local authority and want something to remain confidential, then you will need to raise this with the authority at an early stage – ideally before you disclose any information.

• Transfer of local authority staff — if you are contracting with a local authority and the transaction is likely to result in the transfer of local authority staff (or those previously employed by a local authority), then you will need to factor in either continued membership of the Local Government Pension Scheme or make an alternative pension provision. Whilst the terms of the Local Government Pension Scheme have changed, they remain significantly better than many private sector pensions. By offering continued membership or an alternative, this could have cost implications for you.

Further information

If you would like further information in regards to dealing with local authorities, then please contact Olwen Dutton.

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