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EU strikes new blow for councils’ construction

Bureaucratic EU rules designed to encourage fair competition are forcing councils to go through a costly procurement process which is scuppering vital new regeneration projects.

BPF chief executive Liz Peace will call for clarity tomorrow, when she speaks at a seminar on regeneration funding held at the law firm DLA Piper, 3 Noble Street, London EC2V 7EE from 2.45pm.

EU legislation requires all contracts from the public sector which are valued above a certain threshold to be published in the Official Journal of the European Union (OJEU) in order to ensure a transparent and fair procurement process.

But following a landmark decision by the European Court of Justice (The Roanne Case), many local authorities are adopting an overly cautious interpretation of the EU procurement rules. Many councils are now too afraid to proceed with development agreements and are re-tendering projects. In the case of new development opportunities, some councils are choosing to go through the lengthy and bureaucratic process just to be on the safe side.

With the regeneration sector already on its knees due to the current financial turmoil, the BPF wants clarity on how the OJEU process should work to avoid unnecessary and expensive procurement.

Usually the council will choose its development partner through an informal selection process where a number of developers are invited to express an interest. Occasionally a council may directly nominate a development partner without a selection process; where, for example, that developer controls the majority of a proposed development site.

If OJEU procedures are not clearly understood they have the potential to delay or even halt large-scale urban regeneration projects. Local authorities and developers will be extremely wary of proceeding with development unless they know they are not infringing EU procurement directives.

The BPF is keen to explore what can de done to solve the problem, to ensure that regeneration projects are not unduly delayed.

Guidance should make clear the circumstances in which a partnership between a local authority and a developer might require a tendering process via OJEU.

It should spell out that there should be no need for a tendering process when the local authority effectively has only one credible prospective partner, eg by virtue of the partner owning a substantial amount of land within the development area. The guidance should also make it clear that there should be no need for a tendering process in circumstances where the bidding costs would be so disproportionate as to deter any credible partners from coming forward.

Liz Peace, chief executive of the BPF, will say this after:

“In the current economic climate there are few developers that can afford to get involved in a costly tendering process. If the knock on effect of the Roanne case is to cause unnecessary re-tendering and an expensive procurement process then this is to the detriment of regeneration in the UK.

“We need clarity from the UK Government or even the EU as to what kind of project should go down the OJEU route. Local authorities need to be given the confidence that they won’t be caught out if they sign an agreement with a developer.”

Examples of the problem:

It has been brought to the attention of the BPF that a number of regeneration / development projects have been delayed / scrapped because of problems relating to OJEU procedures. For reference, we have attached some background press from the two leading property industry trade magazines. (Please see atached PDF)

Problems with a deal between Hines and Birmingham City Council over the Wholesale Market in Digbeth.

Kingston Council terminated an agreement with Hammerson about the redevelopment of Eden Quarter - a retail led mixed-use development in surrey town centre (Property Week, 18 March 2008).

Land Securities Stratford Island regeneration project, a mixed-use extension to a shopping centre) has now been sent out to tender by the London Borough of Newham and the London Thames Gateway Development Corporation.

Problems with a deal between Eastbourne Borough Council and Lend Lease about the regeneration of the town centre (Regeneration and Renewal, 2 May 2008).

These are just a few examples of projects that have been experiencing problems in the light of the Roanne Case, many more exist.

Download

Press coverage from Property Week and Estates Gazette

Liz Peace's presentation 'The Post Roanne World'