Carillion and the policy of re-pricing contracts

Somehow I missed this excellent blogpost by Peter Smith last week about the Public Administration and Constitutional Affairs Committee hearing on public sector outsourcing. The whole thing is worth reading, but here's an interesting bit:

"Asked about contracts that are in difficulties, “we have re-priced in some case” says Manzoni. He then backs off somewhat and says “we have to be careful with regulations”. Really? Tell us more, do explain where you have broken the law!  “Several I can think of where a re-pricing has taken place, where we have got it wrong”."

I do not fully agree with Peter's immediate conclusion of illegality. It may be that what is meant in this context is that the service delivery changed and as such the prices changed as well. This would be legal (within the limits provided for in the Regulations). Even a pure price change might be legal if it met the three criteria mentioned by Peter in his post and present in Article 72 of Directive 2014/24/EU:

(i) the need for modification has been brought about by circumstances which a diligent contracting authority could not foresee;
(ii) the modification does not alter the overall nature of the contract;
(iii) any increase in price is not higher than 50 % of the value of the original contract or framework agreement. Where several successive modifications are made, that limitation shall apply to the value of each modification. Such consecutive modifications shall not be aimed at circumventing this Directive;
 

The burden of proof for the conditions to be met remains with the contracting authority, so in this case evidence would have to be provided that a diligent contracting authority could not foresee the need to increase the price. An of course, the more times the repricing happens to any given contracting authority the less likely it is the test will be met. But who would put forward a complaint even it that was the case? 

In the bigger picture, this is yet another example of what I have been harping for years: the price of regulatory focus in the procedure has moved the pressure points (corruption/illegalities/violation of competition etc) to other areas of the system, namely contract performance and pre-tender launch. 

It is also evidence of the winner's curse at play, but we have known that for ages.