The Cornwall Council, R (on the application of) v The Secretary of State for Housing, Communities and Local Government [2026] EWHC 1805 (Admin)

[2026] EWHC 1805 (Admin)Case No AC-2025-CDF-000092
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
ADMINISTRATIVE COURT IN BRISTOL
Venue Bristol Civil Justice Centre, 2 Redcliff St, Bristol, BS1 6GRDate 16/07/2026
Before
THE HON. MRS JUSTICE STEYN DBE
Between
THE CORNWALL COUNCILClaimantTHE SECRETARY OF STATE FOR HOUSING, COMMUNITIES AND LOCAL GOVERNMENTDefendant
Philip Coppel KC and Natasha Peter (instructed by DWF Law LLP) for ClaimantJoanne Clement KC and Gethin Thomas (instructed by Government Legal Department) for DefendantHearing Hearing date: 23 June 2026
Approved JudgmentThis judgment was handed down remotely at 10.30am on 16 July 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................THE HON. MRS JUSTICE STEYN DBE

Introduction

[1]This is a claim for judicial review of a decision, taken by the Secretary of State for Housing, Communities and Local Government (‘the Secretary of State’) on 14 May 2025, to claw back £2,121,431.66 awarded to Cornwall Council (‘the Council’) under the European Regional Development Funding (‘ERDF’) framework (‘the Decision’).[2]The Decision was taken by the Secretary of State in her I have used the same pronoun throughout when referring to the Secretary of State, although the identity of the individual holding the office has changed since the Decision was made. capacity as the Managing Authority (or MA) for the ERDF in the United Kingdom (‘UK’). The Decision requires two sums to be clawed back. First, the sum of £2,110,882.18 which was paid by the Council to Costain Jacobs Partnership (‘CJP’) for the purpose of constructing a walking, cycling and horse-riding bridge over the A30 at Chiverton Cross in Cornwall (‘Chiverton Bridge’). The Council made a direct award of the contract to CJP, without advertising the contract, which the Secretary of State determined did not comply with relevant procurement rules. Secondly, the sum of £10,549.48 which was paid by the Council to MWJV Limited (‘MWJV’), in respect of a competitive award of a project management services contract. The invitation to tender for that procurement included a requirement for Cornish sub-consultants which the Secretary of State determined was discriminatory and in breach of the principle of equal treatment.[3]The Decision was taken following an independent audit under article 127 of Regulation (EU) No. 1303/2013 (‘the Common Provisions Regulation’) by the Government Internal Audit Agency (‘the GIAA’) (which was, and was required to be, functionally independent of the Secretary of State), which reported on 15 January 2025 that there had been irregularities arising from breaches of procurement rules by the Council.[4]Permission to apply for judicial review was granted by Jefford J on six grounds (1-5 and 7) and refused on ground 6 (by which the Council alleged an estoppel) by order dated 28 January 2026. The six grounds on which permission was granted are as follows: i) Ground 1: The Decision contained a material error of law in stating that the value of the CJP procurement was above the threshold set out in Directive 2014/24/EU (‘the Directive’) and the Public Contract Regulations 2015 (SI 2015/102) (‘the PCR 2015’). ii) Grounds 2, 3 and 4: In respect of the direct award to CJP, the Secretary of State failed to take into account relevant considerations or alternatively failed to provide adequate reasons in concluding that: a) The Council had not established that CJP was the only supplier capable of providing the relevant works due to genuine technical reasons; b) In the circumstances of this case, the funding deadline of 31 December 2023 was not an adequate justification for the direct award of a contract to CJP; and/or c) The direct award was not justified for exclusive rights reasons. iii) Ground 5: The Secretary of State erred in law in concluding that the requirement in the MWJV procurement for tenderers to identify a minimum of two sub-consultants, one of which must be a Cornish SME, breached the principle of non-discrimination. iv) Ground 7: In respect of the direct award to CJP, the Secretary of State acted unlawfully in proceeding on the basis that the contract for construction of Chiverton Bridge had cross-border interest, and therefore EU Treaty Principles applied.[5]As Grounds 1, 2, 3, 4 and 7 all concern the direct award to CJP, I shall address those grounds before considering Ground 5 which concerns the separate procurement process which led to the award to MWJV. Claimant’s application to amend: proposed Ground 8

Does the Council need permission to amend and permission to seek judicial review?

[6]In its skeleton argument, the Council raised a new allegation that EU law (the Directive, Treaty Principles and the Interpretative Communication Commission Interpretative Communication on the Community law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives (2006/C 179/02). ) did not apply at the point at which the Council made its direct award to CJP, that being after the UK ceased to be a Member State of the European Union (‘EU’) at 23:00 GMT on 31 January 2020 (‘Exit day’): European Union (Withdrawal) Act 2018 (‘the 2018 Act’), s.20(1).[7]In response to the Secretary of State’s objection, the Council raised the issue whether it required permission to amend its Statement of Facts and Grounds. Mr Philip Coppel KC, leading Counsel for the Council, sought to argue that the Council does not need permission to run the point because – as I understood his argument – it had been raised in general terms.[8]There is no basis on which it could sensibly be contended that permission to amend is not required. The argument now sought to be pursued appears nowhere in the Council’s pleaded case. The Statement of Facts and Grounds proceed on the basis that, subject to the Council’s contention that the CJP contract was not of cross-border interest (Ground 7), the law as stated in the Interpretative Communication applied. The Council’s pleaded case is that although the derogations in article 32 of the Directive were not directly applicable to this below threshold procurement exercise, in accordance with the Interpretative Communication, derogations to the same effect (i.e. derogations from the requirement, pursuant to the Treaty Principles, to advertise) were available. The Council’s pleaded contention is that the “technical … reasons” and/or “reasons connected with the protection of exclusive rights” derogations applied (arguments which are consistent with the approach taken by the Council to the procurement exercise and throughout the audit process). The Council’s Reply similarly contains no hint of the argument now pursued.[9]In the circumstances, the Council undoubtedly requires permission to amend to add a new ground and, if granted, permission to seek judicial review on that ground.

The application to amend

[10]The new argument was first raised in the Council’s skeleton argument filed on 1 June 2026. No application notice has been filed. At the outset of the hearing, Mr Coppel stated that if an application was required then he would make one (orally). After he had completed his opening submissions, over the lunch adjournment, the Council provided the Court and the Secretary of State with a document setting out its proposed Ground 8. It is in the following terms: “The Secretary of State’s fallback position (that Treaty Principles of non-discrimination, equal treatment and transparency ‘still apply [to the procurement] by virtue of Ch 6 of the ESIF National Procurement Requirements and Reg 110 of the PCR 2015’ even though that procurement was below the EU threshold) was wrong as a matter of law because those Treaty principles and general principles of EU law were disapplied by:(1) The Freedom of Establishment and Free Movement of Services (EU Exit) Regulations 2019, viz: - Reg 3 (Article 56 and 57: free movement of services) - Reg 4 (Article 18: non-discrimination) and/or - Reg 2 (Article 49: freedom of establishment) and(2) S.5 and Sch 1 paras 2 and 3 of the EU (Withdrawal) Act 2018.” - Reg 3 (Article 56 and 57: free movement of services) - Reg 4 (Article 18: non-discrimination) and/or - Reg 2 (Article 49: freedom of establishment) and

Applicable rules and principles

[11]CPR 54.15 provides:
“The court’s permission is required if a claimant seeks to rely on grounds other than those for which he has been given permission to proceed.”
[12]Practice Direction 54A – Judicial Review provides so far as relevant:
“12.1 Where the claimant intends to apply for judicial review on grounds additional to those set out in the Claim Form, the claimant must make an application to the court for permission to amend the Claim Form. The application should be made in accordance with the requirements of Part 23. 12.2 The application must be made promptly and should include, or be accompanied by, a draft of the amended grounds and be supported by evidence explaining the need for the proposed amendment and any delay in making the application for permission to amend. 12.3 The application, the proposed additional grounds and any written evidence, must be served on the defendant and any interested party named in the Claim Form or Acknowledgement of Service.”
[13]CPR 23.3 provides:
“An applicant must file an application notice unless- (a) a rule or practice direction states otherwise; or (b) the court dispenses with the requirement.” (a) a rule or practice direction states otherwise; or (b) the court dispenses with the requirement.”
[14]The Administrative Court Judicial Review Guide 2025 (‘the Guide’) emphasises these rules in para 10.2, referring at para 10.2.2 to R (AB) v Chief Constable of Hampshire Constabulary [2019] EWHC 3461 (Admin), in which the Divisional Court (Dame Victoria Sharp, P and Lewis J) observed that seeking to add a further ground of challenge in the claimant’s skeleton argument:
“113. …is not an appropriate means of seeking to amend to rely on additional grounds of challenge. The claimant should have made an application to the court, accompanied by a draft of the proposed amendments to the claim form and supported by evidence, explaining the reason for the proposed amendment and any delay in making it: see CPR 17.1 read with PD para 17.1 and CPR 23.6 read with PD23A para 9.1. See further, CPR 8, CPR 54.1, PD54A para 5.6 and CPR 2.3. 114. We must emphasise that it cannot simply be assumed by those engaging in this type of litigation that permission will be given in the absence of compliance with the rules; and in the event, we refuse permission to amend the claim form to include this further ground of challenge for each of two separate reasons. First, the ground of challenge is unarguable. … Secondly, and separately, it would not be appropriate now to allow a challenge to events that occurred over a year or more ago, or to a decision taken in November 2018. The claim form, together with the grounds of claim, are required to be filed promptly and in any event within three months of the grounds of challenge first arising. The claimant did not include this ground in the claim form or in the first detailed set of grounds produced in March 2019 nor in the amended grounds set out in the document dated 14 October 2019. It is too late to raise this matter now.”

The parties’ submissions on the procedural point

[15]Mr Coppel contends that if the Council’s argument is correct it would be unattractive for it to be refused relief based on a pleading point. He submits that in judicial review claims it is natural for the parties’ positions to evolve, as has happened here. The issue was raised three weeks before the hearing, in the Council’s skeleton argument, and the Secretary of State has responded to it in a supplemental skeleton argument. In those circumstances, he submits that the Secretary of State will not be prejudiced by the grant of permission to amend, and so the court should concentrate on the point of substance.[16]Ms Joanne Clement KC, leading Counsel for the Secretary of State, opposes the grant of permission in these circumstances, strongly refuting the suggestion that the Secretary of State is not prejudiced. She submits that the basis on which the Council contends that EU law did not apply when the Council made its direct award to CJP, given the terms of article 138 of the Withdrawal Agreement Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (2019/C 384 I/01). and s.7A of the 2018 Act, only became clear during Mr Coppel’s oral submissions. Ms Clement submits that there is obvious prejudice to the Secretary of State in having to respond to a proposed ground explained and drafted during the course of the morning and lunchtime on the day of the substantive hearing. If I were minded to grant permission, she submits that at the very least fairness would require that the Secretary of State should be given an opportunity to respond in writing following the hearing.

The parties’ submissions on the merits of proposed Ground 8

[17]The Council submits that with effect from 1 January 2021, the 2018 Act created a new body of “retained EU law” by preserving EU-derived UK law and by converting the existing body of “direct” EU law into UK law: ss.2-4 of the 2018 Act. At the time of the direct award to CJP, the duty to interpret domestic law so far as possible in a manner consistent with EU law applied only to domestic law passed or made before 31 December 2020, and only if that domestic law is either unmodified after that date or modified with the intention that the interpretative obligation will continue to apply: s.6 of the 2018 Act.[18]The Procurement Act 2023 and the Procurement Regulations 2024 came into force on 24 February 2025. But it is common ground that as the procurements in issue in this claim commenced under the PCR 2015, it is those regulations that are relevant to the Decision. While the PCR 2015 was made before 31 December 2020, it has subsequently been modified by various pieces of primary Trade (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) Act 2024. and secondary The Public Procurement (Amendment etc) (EU Exit) Regulations 2020 (SI 2020/1319); The Public Procurement (Agreement on Government Procurement) (Thresholds) (Amendment) Regulations 2021 (SI 2021/1221); The Public Procurement (International Trade Agreements) (Amendment) Regulations 2023 (SI 2023/484); The Public Procurement (Agreement on Government Procurement) (Thresholds) (Amendment) Regulations 2023 (SI 2023/1117); and The Retained EU Law (Revocation and Reform) Act 2023 (Consequential Provision) Regulations 2024 (SI 2024/80). legislation, none of which express an intention that the interpretative obligation will continue to apply.[19]The Council further relies on regulations 2, 3 and 4 of The Freedom of Establishment and Free Movement of Services (EU Exit) Regulations 2019 (SI 2019/1401) (‘the 2019 Regulations’) for the proposition that at the time of the direct award to CJP, any rights and obligations derived (directly or indirectly) from Articles 18, 49, 56 and 57 of the Treaty on the Functioning of the European Union had ceased to be recognised and available in domestic law.[20]On the basis of these provisions, the Council contends that the Secretary of State made an error of law in determining that the direct award to CJP breached the Treaty Principles of transparency, non-discrimination and equal treatment because those principles did not apply.[21]The Secretary of State submits that the proposed new ground is hopeless because the Council has failed to understand the distinction between “retained EU law” and “relevant separation agreement law”.[22]In short, the Secretary of State submits that the Treaty principles formed part of retained EU law as a result of s.4 of the 2018 Act. The 2019 Regulations were made under s.8(1) of the 2018 Act to modify retained EU law so that the freedoms and principles set out therein would not form part of retained EU law as of Exit day (which has had various dates, eventually being set at 31 January 2020).[23]However, the UK and the EU also concluded negotiations on the Withdrawal Agreement in October 2019. Article 138(1) of the Withdrawal Agreement provides: “In respect of the implementation of the Union programmes and activities committed under the MFF 2014-2020 or previous financial perspectives, applicable Union law, including the rules on financial corrections and on clearance of accounts, shall continue to apply to the United Kingdom after 31 December 2020 until the closure of those Union programmes and activities.” (“MFF” is the “Multi-Annual Financial Framework” of which the ERDF formed part.)[24]The Secretary of State submits that the clear effect of article 138 of the Withdrawal Agreement is that EU law remains applicable after 31 December 2020 in relation to the UK’s participation in the ERDF until the closure of that fund on 31 December 2023.[25]Section 7A of the 2018 Act, which was inserted by s.5 of the European Union (Withdrawal Agreement) Act 2020 (‘the 2020 Act’), gives effect to the Withdrawal Agreement in domestic law. It created a new category known as “relevant separation agreement law”: s.7C(3). Article 138 forms part of relevant separation agreement law. Consequently, all law and rules, including procurement rules, that applied to the ERDF prior to Exit day continued to apply in domestic law until the closure of the 2014-2020 ERDF programme on 31 December 2023.[26]The Secretary of State submits that the 2019 Regulations, concerned as they are with retained EU law, have no impact on relevant separation agreement law, and the contrary contention is unarguable.[27]In his oral submissions, Mr Coppel accepted the distinction drawn by the Secretary of State between retained EU law and relevant separation agreement law; that article 138 is part of relevant separation agreement law; and that article 138 is given effect in domestic law by s.7A of the 2018 Act. But he maintained that it does not have the effect that EU procurement law (including the Treaty Principles and Interpretative Communication) continued to apply to the ERDF until the closure of the programme, contending that article 138 is not concerned with individual procurements within particular departmental programmes but only to the totality of expenditure by the UK.

Should permission to amend be granted?

[28]In my judgement, the application to amend must be refused because it is procedurally defective and made far too late: i) The Council has not filed an application notice seeking permission to amend, contrary to the requirements of CPR 23.3 and para12.1 of PD54A. ii) The Council has not filed any evidence explaining the need for the proposed amendment or the delay in making the application, contrary to the requirements of para12.2 of PD54A and para 10.2.2 of the Guide. iii) The application to amend has not been made promptly, contrary to para 12.2 of PD54A and para 10.2.2 of the Guide. Far from it. The application has been made during the course of oral submissions on the day of the substantive hearing, with the draft of the proposed new ground being produced shortly before the hearing resumed at 2pm. iv) CPR 54.5(1) provides that a claim form must be filed promptly and in any event not later than 3 months after the grounds to make the claim first arose. This time limit is relevant when considering an application to amend the Statement of Facts and Grounds which were required to accompany (or be included in) the claim form (PD54A, para 4.2): see R (AB) v Chief Constable of Hampshire Constabulary [2019] EWHC 3461 (Admin), [114]. The Decision was made on 14 May 2025. The application to amend has been made more than 10 months after the end of the 3-month ‘long-stop’ period for bringing a claim. There is no reason it could not have been made when the claim was filed, or when the Council filed its Reply on 14 July 2025, or in any event long before the day of the substantive hearing. v) By the proposed new ground the Council seeks to rely on a fundamentally different argument to those raised in correspondence prior to the commencement of proceedings (although I note that, in any event, no pre-action protocol letter was sent) or at any time during these proceedings until the point was raised in the Council’s skeleton argument. Even then, the Council made no application to amend. vi) The Secretary of State has reacted impressively swiftly to the Council’s changing case. Nonetheless, it is obvious that if I were to grant permission the Secretary of State would be prejudiced by the lack of any opportunity to respond by way of summary or detailed grounds of defence, and by the fact that it was necessary to formulate oral submissions hastily, during the course of the hearing, without any proper opportunity to take instructions or for reflection. A further opportunity to respond in writing would have been an inadequate substitute. vii) Mr Coppel’s submissions on this procedural issue are fundamentally at odds with the need for procedural rigour in judicial review which has been emphasised in para 2.1 of the Guide and the authorities cited therein: see, e.g., R (Dolan) v Secretary of State for Health and Social Care [2020] EWCA Civ 1605, [2021] 1 WLR 2326; and R (Dalton) v Crown Prosecution Service [2020] EWHC 2013 (Admin), [2020] 1 WLR 5329, Andrews J, [10]-[12]. Far from being unattractive to reject the amendment on procedural grounds, to do otherwise would be contrary to the overriding objective of dealing with cases justly and at proportionate cost, including enforcing compliance with rules and practice directions and ensuring the case is dealt with expeditiously and fairly.[29]In addition, I agree with the Secretary of State that the provisions on which the Council relies in proposed Ground 8 are irrelevant because they are concerned with retained EU law rather than separation agreement law. As the Council accepts, article 138 of the Withdrawal Agreement is given effect in domestic law by s.7A of the 2018 Act, and it is part of separation agreement law. Section 7C incorporates the obligation imposed by article 4 of the Withdrawal Agreement that provisions of the Withdrawal Agreement which refer to EU law or concepts “shall be interpreted and applied in accordance with the methods and general principles of Union law” and the provisions in the agreements referring to EU law or concepts or provisions thereof “shall in their implementation and application be interpreted in conformity” with CJEU judgments handed down before IP Completion Day, and CJEU judgments handed down thereafter shall be given “due regard”: see Judicial Review Principles and Procedure (2nd ed., 2026), Moffett, Auburn and Sharland (‘Moffett et al’), para 4.78.[30]Mr Coppel’s interpretation of article 138 of the Withdrawal Agreement is untenable. The ERDF is a Union programme under the MFF 2014-2020, and the direct award to CJP was an activity committed under that programme. The Common Provisions Regulation lays down common rules applicable to, among other funds, the ERDF. The funded procurements were the means by which the programme was implemented and eligible expenditure incurred, and such operations were required to comply with applicable Union law and national law relating to its application: article 6 of the Common Provisions Regulation. Article 143(1) of that Regulation provides:
“The Member States shall in the first instance be responsible for investigating irregularities and for making the financial corrections required and pursuing recoveries.”
The Secretary of State’s decision to claw back funds due to (alleged) irregularities was a “financial correction” within the meaning of article 138. Unsurprisingly, article 138 provided that, in continuing to spend EU funds (including those distributed under the ERDF programme) after the UK left the EU, public authorities were required to comply with EU law, including EU procurement law and the principles of non-discrimination, equal treatment and transparency. Article 138 has been incorporated in domestic law. Accordingly, I would also refuse permission to amend on the basis that the proposed new ground is not arguable. The facts

The A30 Project

[31]National Highways (formerly Highways England) awarded a contract to CJP on 31 March 2020 for major road widening works to the A30, developing the single carriageway between Chiverton Cross and Carland Cross roundabouts into a dual carriageway, along with other associated road infrastructure improvement works (‘the A30 Project’). Part of the funding for the £330 million A30 Project was derived from an ERDF grant, comprised of £8 million towards development costs and £12 million allocated for the construction phase. The construction phase started in March 2020 with the main dual carriageway opened to traffic on 24 June 2024.

The MWJV Framework Agreement

[32]On 19 June 2018, the Council issued an invitation to tender for the Cornwall Built Environment Professional Services Framework (‘BEPS Framework’) contracts. Lot 2 was for project management and design services, in respect of numerous local projects provided by the Council pursuant to its capital programme. The value of the contract was up to £120 million. The Council undertook a competitive tender exercise.[33]Paragraph3.7.1 of the invitation to tender provided that a Tenderer was required to identify in its tender any services for Lot 2 (if any) which it intended to provide through sub-consultants. Paragraph3.7.2 of the invitation to tender (‘the Sub-Consultant Term’) provided:
“For each Services element to be provided in this manner, the Tenderer shall identify in its response to question 2 of the Lot 2 Quality Questions a minimum of two Sub-Consultants, one of which must be a Cornish SME, which will be utilised to provide the Services. The identity of Sub-Consultants nominated shall be inserted into Schedule 27 of the Framework Agreement.”
[34]The Council received two bids, one from MWJV and one from Kernow Construction Consultants JV. Both bidders provided such lists of sub-consultants, although MWJV (which is itself a Cornish SME) indicated that it would deliver project management directly, and identified Cornish sub-consultants for five of the other six disciplines, omitting to do so in respect of building surveying.[35]MWJV was the highest scoring bidder, and so was awarded the contract.

The Trail and Chiverton Bridge

[36]At the same time as the A30 Project was ongoing, the Council, using mainly National Highways-designated funds, was undertaking the Saints Trails programme which involved the construction of a number of trails in Cornwall, including a trail from St Agnes to Threemilestone (‘the Trail’). The proposed Chiverton Bridge was to connect the two halves of the Trail which extend either side of the A30 at the former Chiverton junction of the A30 with the A390.

Outline Application for European Regional Development Funding

[37]On 6 September 2019, the Ministry of Housing Communities and Local Government (‘MHCLG’), in its capacity as Managing Authority for the ERDF, published a call inviting outline applications by 25 October 2019 for funding to support the delivery of Priority Axis 7: Sustainable Transport in Cornwall & the Isles of Scilly of the ERDF operational programme, and respond to the local development need set out in the Cornwall and the Isles of Scilly Integrated Investment Strategy. The call required projects to plan to complete delivery of activity by the end of June 2023. The total funding available was £5 million.[38]On 25 October 2019, the Council submitted an outline application for an ERDF grant for the Trail, including Chiverton Bridge (‘the Outline Application’). The Outline Application proposed implementation of Chiverton Bridge (“subject to main A30 dualling construction programme”) by December 2022, and financial completion in June 2023. The Council stated in the Outline Application that its procurement strategy was to make “an Internal Direct Award (IDA) to Cormac Solutions Ltd … to meet the delivery objectives against a challenging programme with numerous landowners and challenges of resources with both the A30 Carland Cross to Chiverton and the A30 St Austell Link Road major construction projects anticipated to be on the ground at the same time”. In other words, in October 2019, the Council proposed to rely on the Teckal exemption Case C-107/98. to make a direct award for construction of the whole Trail to a wholly owned subsidiary (Cormac Solutions) of a company owned by the Council (Corserv Ltd).[39]The Council were notified on 14 February 2020 that the Outline Application had been selected to progress to submission of a full application “subject to the conditions set out in Annex A being met in full”. Annex A included the following:
“Applicants should note that procurements will be tested in detail in the lifetime of a project and by different independent bodies. In the event of non-compliance an irregularity will be declared, and a financial penalty will be imposed in line with EU guidance. This can be up to 100% of the irregular procurement expenditure. The managing authority therefore recommends that applicants seek appropriate legal and/or technical advice to ensure compliance.”

Full Application for European Regional Development Funding

[40]The Council submitted a full application on 19 June 2020, indicating a financial completion date in March 2023 and a practical completion date in June 2023 (‘the original Full Application’). At that stage, Chiverton Bridge was no longer part of the Council’s ERDF application. The original Full Application stated:
“This route will ultimately include a new Walking Cycling and Horse rider (WCH) bridge crossing the A30 at Chiverton. Due to the overlap with the main dual carriageway scheme the bridge would be implemented as a later phase, currently anticipated in late 2023, but both the Council and Highways England remain committed to its delivery.”
In the interim, a crossing was available via existing byways and the road bridge at Kea Downs Road.[41]In late November 2020, the Council discussed re-adding Chiverton Bridge to the application, after another scheme dropped out making more funding available. The Managing Authority agreed to extend the project timeline to 31 December 2023. On 2 December 2020, the Council submitted a revised Full Application including Chiverton Bridge. The Council’s Major Transport Scheme Lead indicated that he considered Chiverton Bridge had to be implemented by CJP as part of or alongside the A30 Project, but a key issue remained the “procurement route” to ensure it was “ESIF / OJEU compliant”.[42]On 27 January 2021, the Managing Authority advised the Council that their application was successful. The total project cost for the Trail was £6,448,070 and the ERDF funding approved, in principle, was £5,158,456. Annex A to the letter included a number of pre-contract conditions, one of which required the Council to provide further detail on the proposed procurement approach.

The Council’s Project Procurement Strategy Report

[43]In response, on 6 February 2021, the Council shared with the Managing Authority its Project Procurement Strategy Report which stated:
“CJP have been appointed as the main contractor for the A30 Chiverton to Carland improvements and are due to be on site from Autumn 2020 until December 2023 with the works fully open in 2023-2024. The A30 works in the Chiverton area include lowering the main carriageway by approx. 2m with significant earthworks and adjustment to the adjacent embankments in the area where the bridge would be located. This makes it exceedingly difficult for another contractor to be engaged to work in the same area, although not impossible and would be subject to agreement of HE. However the dualling works will have an impact on timings for the bridge construction and there is potential for the Council to incur a very large amount of risk/cost if we are to appoint another contractor and they caused any delay to the A30 works. There would be a need to work with [CJP] to align the projects, particularly with regard to the earthworks and traffic management regimes for potentially competing projects.” (Emphasis added.)
[44]The procurement options identified in the strategy report were a competitive tender on the open market, an internal direct award to Cormac Solutions or a direct award to CJP as a single supplier. The Council noted that a competitive tender would allow it: “to get a view of the market and potentially develop a relationship with a new supplier which can be used on future projects however the process would take time and potentially add cost and would not negate the potential issues in delaying or impacting the dualling of the A30 leaving Cornwall Council open to a significant risk of incurred damages. Given the size and complexity of the works required it is hard to know at this time how attractive this would be to the open market and how easy it would be to provide VFM [value for money] for the Council”.[45]The report stated that appointing Cormac Solutions via an internal direct award would provide the Council with “an exemption from complying with EU Procurement requirements” but “this option would not negate the potential issues in delaying or impacting the dualling of the A30 and would still leave Cornwall Council open to a significant risk of incurred damages”.[46]The Council’s Project Procurement Strategy Report recommended the use of a “Regulation 32 Single Supplier exemption” for a direct award to CJP, noting that this would provide:
“a relatively quick way to appoint the contractor especially given they will be on site and working anyway. This approach has potential cost savings in economies of scale and construction activities such as traffic management and site compounds as well as protecting Cornwall Council from any of the risk associated in negatively impacting and delaying the site.”

The Funding Agreement

[47]On 22 February 2021, the Managing Authority approved an ERDF grant of £5,158,456 for the Trail, conditional on the Council entering into a written funding agreement. The Deed of Grant (comprising the Funding Agreement) was executed on 24 March 2021. In the Funding Agreement, 31 December 2023 was both the financial completion date and the practical completion date.[48]Clause 10.1 of the Funding Agreement provides:
“10.1 General (a) The Grant Recipient must comply and secure compliance with the Structural and Investment Funds Regulations and the Grant Recipient hereby warrants that it shall not act or omit to act in any way that may cause the Grant Recipient, a Delivery Partner or the Secretary of State to breach the Structural and Investment Funds Regulations. (b) Further to clause 10.1(a) the Grant Recipient shall ensure that in accordance with Article 6 of Regulation 1303, the Project complies with applicable European Union law and the national law relating to its application.”
[49]Clause 12.1(p) identifies as an “Event of Default” the occurrence of “any Irregularity on the part of the Grant Recipient has been identified in connection with the Project, or the European Commission or any other Regulatory Body otherwise requires the Secretary of State to recover any amount paid under this Funding Agreement.” Under clause 1:
“Irregularity means any breach of European Union law, or of national law relating to its application resulting from an act or omission by a Grant Recipient or a Delivery Partner (and/or its agents and subcontractors), which has, or would have, the effect of prejudicing the budget of the European Union by charging an unjustified item of expenditure to the budget of the European Union.”
[50]Pursuant to clause 12.3, where the Secretary of State determines that an Event of Default has or may have occurred, the Secretary of State may, by written notice to the Grant Recipient, take actions including requiring “the Grant Recipient to repay to the Secretary of State the whole or any part of the amount of Grant previously paid to the Grant Recipient”. Repayment is required within 20 working days and liability to meet such a demand “shall be enforceable as a contractual debt”: clause 12.7.

Single Tender Justification Form (Annex 2)

[51]Over a year later, following the conclusion of the Council’s internal decision-making processes, on 7 April 2022, the Council submitted to the Managing Authority the Single Tender Justification Form (i.e. the form at Annex 2 to the ESIF National Procurement Requirements) proposing a direct award to CJP of a contract to design and build Chiverton Bridge. The single justification ticked the box which stated:
“There is only one supplier capable of providing the relevant goods, works or services due to technical, artistic or copyright reasons.”
The Council did not rely on “extreme urgency”.[52]In response to the request for details as to why a direct award was justified, the Council appended its “technical case” dated 6 January 2022 (‘the Technical Case’) and internal legal advice dated 19 January 2022 (‘the Legal Advice’).

The Technical Case

[53]The Technical Case was prepared by the Council’s Project Manager for Finance and Commercial Services. It bears the title:
“Chiverton Bridge Justification as to why a Direct Award to the Costains Jacobs Partnership (the Contractor appointed by National Highways to design and construct the A30 Carland Cross to Chiverton Widening Project) is the only feasible procurement option in view of funding constraints”
(emphasis added).[54]The Technical Case noted that the procurement options were a single supplier direct award to CJP, open tender, or an internal direct award (IDA) to the Council’s in-house contractor, Cormac Solutions. The Technical Case stated:
“Although the open tender or IDA option would provide absolute comfort that the procurement arrangement complies with the National Procurement Guidelines, such arrangements could not deliver the Chiverton Bridge in a safe manner and in the same working space as the ongoing A30 project, and in the same construction period as the A30 project to achieve the ESIF funding deadline date.” (Emphasis added.)
[55]The Technical Case noted, under the heading “Procurement Risk”, that the value of the contract was below threshold so the Council did not need to comply with regulation 32 but that the requirements for below threshold contracts “‘mirror’ the over threshold requirements for a Reg 32 exemption, and as such the proposal will need to satisfy the same reasons for awarding without competition i.e. a Single Supplier Exception”. The Technical Case noted that the Managing Authority “will not provide an acceptance” of the single tender justification form, and so there would be an ever present risk of “funding clawback should an auditor later consider that there has been a non-compliance with European Commission requirements”.[56]Addressing the “reasons why it is not possible to engage another contractor to undertake these works given the overlap with the A30 construction and funding constraints”, the Technical Case stated:
“the programme for Chiverton Bridge is already significantly behind the overall programme for the A30 widening, and in particular, the construction of the nearby bridges for that project. The optimum time that the bridge would be constructed is now, along with the currently ongoing construction of the other A30 bridges. This delayed delivery will make the integration of the Chiverton Bridge in to the A30 project a retro-fit, so therefore more difficult. Although the detailed design for the A30 works is almost complete, the scale and associated complexity of the A30 works will require design support throughout the construction period. Managing the late inclusion of Chiverton Bridge in to the A30 design and construction in a way that also enables the programme for Chiverton Bridge to still be embedded into the evolving construction of the main A30 scheme will be difficult. Utilising the pre-existing design team who already have familiarity of the A30 design, along with the A30 construction programming team would be key to achieving this. With CJP having control of the site within which the bridge is located, and potentially still undertaking works to the main carriageway and Chiverton Junction until December 2023, then it is not possible to provide access to another contractor until the A30 works are complete. As stated previously, the funding deadline of December 2023 does not allow for the bridge works to be undertaken later. Therefore, if the Council cannot gain access to the construction site for another contractor until a time that is too late to deliver the bridge and meet the ESIF deadline, the engagement of CJP is then the only practical delivery option that would complete the bridge construction before the funding expires.” (Emphasis added.)
[57]Under the heading “Design”, the Technical Case stated that using the CJP design team “would greatly reduce the opportunity for abortive design works, construction complications and programme delays” in view of their detailed knowledge of the A30 site, the A30 design and the bridge proposal. “If a separate consultant was procured to design the bridge, they would need to consult extensively and liaise with CJP to affect the finalisation of the bridge design and incorporate it into the pre-existing design for the main A30 scheme”. A key consideration was the “design interface” between the lowered A30 in the location of the bridge, requiring the construction of an approach embankment close to the A30 cutting slope. There was a resulting “design risk if a separate designer/contractor delivered the bridge with design liabilities that would be difficult to resolve within the available programme.” The Technical Case advised that disruption “would be minimised” if the required ground site investigation and other surveys “were programmed by the A30 contractor”.[58]Under the heading “Construction and Road Safety”, the Technical Case identified “clear benefits of appointing the A30 contractor to construct Chiverton Bridge”, stating:
“A single contractor delivering both the A30 and the Chiverton Bridge would provide the best assurance that this can be achieved to ensure the safety of construction operations during the works period while safely maintaining traffic flows on the strategically important A30 Trunk road. Using a separate contractor to construct the bridge would potentially jeopardise both road safety and the safety of construction operations. … If a separate bridge contractor was involved then an extremely high level of coordination between both parties would be required to achieve a safe traffic flow arrangement that would still enable both the A30 and bridge construction works to be achieved. … With CJP’s focus primarily being on the delivery of the c.300M A30 project, it is extremely unlikely that any diversion from this to participate in engagement with a separate contractor for the c.£3M bridge would enable the delivery of the bridge by the ESIF deadline date.”
[59]The Technical Case described the management of interfaces, including the coordination of earthworks and fill materials from both the A30 Project and the bridge, as “extremely difficult or almost impossible to achieve if two contractors were working on the same footprint”.[60]It also suggested that the required level of coordination with a variety of organisations, including regulatory bodies, would be difficult to achieve, increasing “the risk that stakeholder liaison requirements and approvals could be missed”.[61]The Council’s Technical Case concluded:
“Due to the programme constraint set by the funding, the ongoing A30 works and the programme for these works, traffic management and construction working area requirements of the A30 dualling scheme, only a single contractor (the A30 contractor) could undertake the additional construction operations to deliver the Chiverton Bridge project in a safe manner and in the same working space, and in the same construction period to achieve the funding deadline date. Although a tender process could be completed, the coordination between two contractors to deliver the bridge in the same programme as the A30 scheme, especially with regard to construction safety, highway safety, liaison with regulatory bodies and coordination of statutory undertakers, to achieve the same 31st December 2023 deadline date would not be possible as the site will be under the control of the A30 contractor. If the Council cannot gain access to the construction site for any other contractor until a time that is too late to deliver the bridge and meet the ESIF deadline, then the engagement of CJP is the only practical delivery option that would complete the bridge construction before the funding expires.”

The Legal Advice

[62]The Legal Advice addressed the procurement risk of making a direct award to CJP. The legal adviser noted that although the proposed direct award was sub-threshold, the Council “must respect the Treaty principles”. She noted that generally, for contracts of this value, in order to comply, a tender process should be undertaken. But “in rare cases it is recognised that advertisement is not possible (inter alia) due to technical or exclusive rights issues”. If making a direct award, the Council would have to lodge a single tender justification form, to support compliance with the Treaty principles, which would be “rigorously reviewed on audit”.[63]The Council was advised that it “will need to show a near technical [im]possibility of another contractor undertaking these works”, and that only CJP could produce what is required, rather than focusing on advantages and efficiencies in having the same contractor. The Legal Advice summarised the “applicable technical reasons” (drawn from the Technical Case) and advised that it was “likely that if this is set out comprehensively, the ESIF requirements to include the Treaty Principles, will be met”. The legal adviser noted that she had advised “obtaining external independent confirmation to support the Council in terms of its technical justification e.g. consultant with technical project management type experience” to “bolster the Council’s position further … and … provide the Council with professional indemnity insurance against risk of claw back”.[64]The Legal Advice suggested that there were “likely to also be exclusive rights arguments”, as the Council was not a party to the contract for the A30 Project. But the legal adviser observed that “some further expansion and justification would be required to rely on this argument”, and she noted that “the auditor may reject some of the Council’s reasoning, particularly on exclusive rights, that only one contractor is viable”, in circumstances where “National Highways have not been able to confirm that they would only allow a single contractor on site to undertake the bridge work”.[65]The legal adviser was not convinced that the case for urgency under regulation 32(2)(c) was made out, given the timescales involved in the Council considering its position and the possibility of the Council running an accelerated process, nor that the events were unforeseeable.[66]The Legal Advice noted that the rate of correction would be 100% of the funding in the event that it was found “the contract notice was not published in accordance with the relevant rules”. A direct award was “not risk free”, given in particular the risk of claw-back, and the Council was advised to “put any necessary contingencies in place, including potential re-allocations of funding and budget”. Contemporaneous advice to the Council’s Directors Leadership Team and Investment and Commercial Board stated:
“Therefore, there is a risk of ESIF funding clawback in the sum of £2,677,649 (100% of the ESIF Funding value for the bridge…) should an auditor later consider that there has been a non-compliance with European Commission requirements. Should the project be progressed then this risk will be allowed for within the management of the overall capital programme by way of a risk pot.”
[67]The legal adviser noted that the Council had discounted the publication of a Voluntary Ex Ante Transparency (VEAT) notice, given the risk the Council would have to “create an even more robust technical argument” to counter any interest or challenge forthcoming.

Direct award to CJP

[68]On 26 July 2022, the Council entered into a contract with CJP for the construction of Chiverton Bridge, with a completion date of 30 November 2023. This was a direct award. The contract was never advertised and, as a result, no other companies were given an opportunity to bid for it.

Article 125 On the Spot Verification Visits

[69]Article 125 of the Common Provisions Regulation requires the Managing Authority to undertake management verifications of operations. These verifications include both administrative checks of claims submitted by beneficiaries and “On-the-Spot Verification Visits” (‘OTSV’), which are carried out at project level. However, as Mr David Read stated in his evidence:
“an OTSV is not an external audit and does not constitute a definitive determination of compliance for the purposes of the programme as a whole. The MA’s verification activity does not replace the independent audit functions required under the EU regulatory framework, which are carried out by the GIAA.”
[70]On 14 February 2019, following an OTSV of the MWJV procurement, the Managing Authority issued a report which did not raise any issue concerning the Sub-Consultant Term.[71]On 19 September 2023, an OTSV was conducted by the Assurance Team of the Managing Authority, who provided a report one week later. The Assurance Team considered that the procurement process for the contract to design and build Chiverton Bridge was compliant and no financial correction was required. However, the Managing Authority made clear that an article 127 audit by the GIAA may result in a different conclusion being reached.

Article 127 audit by the GIAA

[72]The GIAA is an executive agency of HM Treasury, and an expert body which acts as the UK Government’s primary provider of independent audit services. In accordance with the requirements of the Common Provisions Regulation, the GIAA was the body designated, in England, to perform the function of an audit authority independent of the Managing Authority and grant recipient for the ERDF 2014-2020 Programme.[73]The selection of projects for article 127 audit was not discretionary. Each year, the GIAA selected a statistical sample of operations from expenditure declared to the Commission.[74]On 30 September 2024, the GIAA notified the Council of a planned article 127 audit of the Saints Trail programme (‘the A127 Audit’). As part of the A127 Audit, the GIAA examined the procurement route adopted for the construction of Chiverton Bridge and the invitation to tender for the BEPS Framework. The Managing Authority’s role during the A127 Audit was to act as the coordinating body between the GIAA and the Council, and to assist those two bodies to understand each other’s perspective.[75]The GIAA provided its draft report to the Managing Authority on 13 November 2024. On 19 November 2024, the Managing Authority informed the Council that the GIAA’s draft report contained three provisional findings, relating to the procurement of the CJP contract, the procurement of the MWJV contract, and matters relating to conflicts of interest. At this stage, the concern regarding the MWJV contract related to the audit trail for the competitive process rather than the Sub-Consultant Term. The Managing Authority passed on the GIAA’s requests for information and responses and secured an extension of time for the Council to provide them.[76]On 6 December 2024, the Council provided its response to the GIAA’s draft report (‘the Response to the GIAA’s draft audit’). On 20 December 2024, the Managing Authority relayed further requests for clarification from the GIAA to the Council regarding the direct award to CJP, to which the Council responded on 7 January 2025 (‘the Response to the GIAA’s queries’).[77]On 8 January 2025, the Managing Authority informed the Council that the GIAA had identified a separate issue with the Sub-Consultant term. The Council responded to the query raised on 13 January 2025.

The Audit Report

[78]The GIAA’s final article 127 audit report (‘the Audit Report’) is dated 15 January 2025 and it was issued on 17 January 2025.[79]First, the GIAA concluded that the direct award to CJP was not justified. The Audit Report stated:
“The [Council’s] justification to use a STA [i.e. Single Tender Action] is ‘There is only one supplier capable of providing the relevant goods, works or services due to genuine technical, artistic or copyright reasons’. The [Council] obtained legal advice and completed a technical document explaining the justification for procuring through a Single Tender Action. There is also the Tender Evaluation & Whole Scheme Analysis. However, the supporting documentation does not fully justify there is only [one] supplier, as follows: Cornwall Council technical document – • ‘the engagement of CJP is then the only practical delivery option that would complete the bridge construction before the funding expires’. • Two contractors working on the same footprint is ‘extremely difficult or almost impossible’, however this is given the ‘tight deadline for the completion of both projects’. • ‘a tender process could be completed … [however] to achieve the same 31st December 2023 deadline date would not be possible as the site will be under the control of the A30 contractor’. Tender Evaluation & Whole Scheme Analysis – • This report explains that to install the bridge ‘there are no specific restrictions to using CJP for this project. … CJP are the preferred supplier given their involvement in the overall design of the A30 dualling project’. Therefore, the reason for using CJP is the ESIF funding deadline and their involvement in the A30 dualling project, which are not STA justifications.”
However, the supporting documentation does not fully justify there is only [one] supplier, as follows: • ‘the engagement of CJP is then the only practical delivery option that would complete the bridge construction before the funding expires’. • Two contractors working on the same footprint is ‘extremely difficult or almost impossible’, however this is given the ‘tight deadline for the completion of both projects’. • ‘a tender process could be completed … [however] to achieve the same 31st December 2023 deadline date would not be possible as the site will be under the control of the A30 contractor’. • This report explains that to install the bridge ‘there are no specific restrictions to using CJP for this project. … CJP are the preferred supplier given their involvement in the overall design of the A30 dualling project’.[80]The GIAA recommendation was that an irregularity for the total value (100%) of the CJP contract be raised because the single tender action process was not justified and, as “there was no advertisement” this was analogous to “irregularity type 1 lack of publication in the ESIF National Procurement Requirements”.[81]Secondly, the GIAA concluded that restrictive criteria were unjustifiably used in the MWJV procurement. The Audit Report stated:
“The terms of the Invitation to Tender (ITT) for The Cornwall Council Built Environment Professional Services Framework 19th June 2018 requires where a tenderer intends to provide any service through sub-consultants to identify a minimum of two and ‘one of which must be a Cornish SME’ (para 3.7.2 ITT). The framework does not permit to ‘enter into Supply Chain frameworks with Sub-Consultants that were not submitted as part of the Consultant’s tender for this Framework’ (para 16.22). There were two bids for the framework, which included lists of sub-contractors respectively for the winning bidder MWJV and the other bidder KCCJV. Interestingly the winning bidder MWJV doesn’t list a Cornish sub consultant for the Building Surveying sub-consultant service, yet still won without fulfilling the selection criteria. Recommendation The AA will raise an irregularity under ERDF procurement irregularity type 10, use of restrictive criteria including regional or local preferences, rate of correction 25%.”
Recommendation

Payment Recovery Request

[82]Under articles 122 and 143 of the Common Provisions Regulation, where the Audit Authority identified an irregularity in a sampled operation, the Managing Authority was required to examine the findings; provide the beneficiary with an opportunity to respond; determine whether expenditure was irregular; and apply an appropriate financial correction where required.[83]In his witness statement, Mr David Read, the Head of Programme Delivery at the MHCLG states:
“The MA [i.e. Managing Authority] does not have discretion to ignore a substantial irregularity identified by the GIAA, that it then concludes was irregular. Ultimately, the MA has to reach its own view but – as is unsurprising – it takes seriously the conclusions of the GIAA, which is the expert body in this field. When the MA concludes that there is an irregularity, it has no discretion not to claw back: its obligation is to protect EU funds and ensure that only regular expenditure is declared.”
[84]On 17 January 2025, the Secretary of State raised a Payment Recovery Request with the Council, requiring payment within 30 days. Mr Read states:
“The MA issued its payment recovery request on the same date as the final audit report was issued because it had formed its own assessment of the findings, following receipt of the GIAA’s draft report. The Article 127 audit process had also occurred right at the end of the ERDF programme’s life, with a result that there was something of a time premium in processing the results of the audit.”

The Council’s response to the Audit Report

[85]On 21 January 2025, the Council wrote to the Secretary of State that it did not accept the GIAA’s findings. The Secretary of State invited the Council to submit any formal representations within the existing 30-day period specified in the Demand Notice. The Council did so, providing a formal response, disagreeing with the GIAA’s findings, on 14 February 2025 (‘the Audit Response’).

The Decision

[86]Mr Read is responsible for overseeing the Ministry’s decision-making processes relating to the ERDF Programmes, and has been involved in managing ERDF Programmes since 2011. Although he had been aware of the A127 Audit process and the GIAA’s draft and final reports, Mr Read had no active involvement in this matter until early April 2025 when he assigned to himself the task of considering the Council’s response to the Audit Report.[87]Mr Read states:
“As a consequence of my experience, over a 15 year period involved in ERDF funding, I have considerable experience in reviewing and scrutinising project plans, proposals and designs for major infrastructure projects. I have reviewed and assessed many dozens of projects of this kind. This has included detailed discussion of project coordination and programme management including, on occasion, disputes in relation to those matters. I would estimate that I have had detailed insight into at least 20 substantial infrastructure projects and at least half a dozen major road projects in the last 15 years, as well as hundreds of projects of other kinds. I brought that experience to bear when assessing the issues set out below. The other aspect of my experience that is relevant to this case is my experience of the approach that the European Commission and European Court of Auditors (‘ECA’) takes when assessing ERDF funding irregularities. I knew from a number of disputes with the Commission and ECA that they take an exacting approach to these matters. … I came to the case fresh. … I independently reviewed the material submitted together with the documentation previously provided during the audit process and the information available to MHCLG in relation to the project. This included project documentation, internal reports produced by [the Council], correspondence relating to the procurement approach adopted, and the explanations provided by [the Council] in response to the Article 127 audit finding. … I was personally responsible for preparing and issuing the MA’s final decision letter dated 14 May 2025. I carefully reviewed, from scratch, the relevant background documents, and the Council’s representations and supporting evidence.”
[88]In the Decision, the Secretary of State maintained that the justification for the direct award to CJP was insufficient. The Council’s references to tight deadlines did not constitute “adequate justifications for bypassing competitive tendering processes”. Moreover, the evidence that CJP was “the only supplier capable of completing the works within the timeframe” was insufficient. The Council’s own Tender Evaluation & Whole Scheme Analysis confirmed that CJP was the preferred supplier due to its involvement in the A30 Project, “not due to any technical exclusivity of it being the only supplier”. Having referred to CJEU case-law, the Decision continued:
“… the Council has not discharged the burden of proving that technical reasons made it absolutely necessary for the contract to be awarded to CJP and to none other. The reasons given are potential delay, existing contractual obligations, but the Council’s own documents show that other contractors could have possibly undertaken the works. Furthermore, the justification based solely on ESIF funding deadlines and CJP’s involvement in the A30 project does not meet the requirements for a single tender award under EU procurement rules. The single supplier route (Regulation 32) can only be justified where there is a genuine technical or operational requirement that limits the availability of other suppliers, which has not been adequately demonstrated in this case.”
[89]In respect of the MWJV procurement, the Secretary of State maintained that the Sub-Contractor term was discriminatory. The Decision stated:
“The Public Services (Social Value) Act 2012 does not override procurement rules. Instead it requires contracting authorities to consider how their procurement could improve the economic, social and environmental well-being of the area pre-procurement. The Act works in conjunction with procurement legislation, not in opposition to it. It does not affect the requirement for public bodies to comply with public procurement legislation and treat all contract bidders equally. The requirement for at least one Cornish SME as a sub-contractor in the procurement process could be considered to violate the principles of non-discrimination and equal treatment. While the rule does not explicitly exclude non-Cornish companies, it places them at a disadvantage, particularly those without local networks in Cornwall. This indirectly discriminates against businesses outside the region and could have deterred them from bidding.”
[90]Having referred to further CJEU cases, the Decision concluded that the inclusion of the Sub-Consultant Term:
“constitutes an irregularity under EU law, irrespective of whether the winning bidder, MWJV, complied with the criterion or not. The mere existence of such criteria could have deterred potential bidders without Cornish sub-contractors, thus restricting competition.”
[91]In view of the assessed irregularities, the relevant funds were not released by the European Commission to the UK. If the sums are not re-paid by the Council, they would have to be met from within the Secretary of State’s budget. The legal framework

Overview of the ERDF Scheme

[92]When the UK was a Member State of the EU, it enjoyed access to grants made from the European Structural and Investment Funds Growth Programme (‘ESIF’). For the 2014-2020 funding period, ESIF combined three separate European Funds, namely, the ERDF, the European Social Fund and part of the European Agricultural Fund for Rural Development. The total ERDF fund for England (there being separate funds for the other nations of the UK) for the 2014-2020 funding period was €3.6 billion. That sum had to be supplemented by national public and private funds.[93]The ERDF 2014-2020 Programme operated within a detailed regulatory framework established by the Common Provisions Regulation and Regulation (EU) 1301/2013 (‘the ERDF Regulation’) which came into force on 20 December 2013. The relevant grant programmes were EU-wide but each Member State was responsible for choosing which projects to finance, and for administering the programme in its own territory. From the outset, the ERDF Regulation provided that expenditure would only be eligible for contribution from the ERDF if it had been incurred by a beneficiary and paid by 31 December 2023: article 65. However, it was not necessary for projects themselves to be completed by that date.[94]Article 6 of the Common Provisions Regulation provides:
“Operations supported by the ESI Funds shall comply with applicable Union law and the national law relating to its application (‘applicable law’).”
[95]The Directive sets out requirements for procurement of public contracts over a certain value: article 4. It includes a requirement to publish a call for competition (i.e. to advertise) before awarding public contracts. Article 32 of the Directive permits a contracting authority to depart from the usual obligations of open competition and transparency in the specific cases set out therein. Article 32(2) provides:
“The negotiated procedure without prior publication may be used for public works contracts, public supply contracts and public service contracts in any of the following cases: (a) where no tenders or no suitable tenders or no requests to participate or no suitable requests to participate have been submitted in respect to an open procedure or a restricted procedure, provided that the initial conditions of the contract are not substantially altered and that a report is sent to the Commission where it so requests. … (b) where the works, supplies or services can be supplied only by a particular economic operator for any of the following reasons: (i) the aim of the procurement is the creation or acquisition of a unique work of art or artistic performance; (ii) competition is absent for technical reasons; (iii) the protection of exclusive rights, including intellectual property rights; The exceptions set out in points (ii) and (iii) shall only apply when no reasonable alternative or substitute exists and the absence of competition is not the result of an artificial narrowing down of the parameters of the procurement. (c) in so far as is strictly necessary where, for reasons of extreme urgency brought about by events unforeseeable by the contracting authority, the time limits for the open or restricted procedure or competitive procedures with negotiation cannot be complied with. The circumstances invoked to justify extreme urgency shall not in any event be attributable to the contracting authority.” (Emphasis added.)
(i) the aim of the procurement is the creation or acquisition of a unique work of art or artistic performance; (ii) competition is absent for technical reasons; (iii) the protection of exclusive rights, including intellectual property rights;[96]Recital 50 of the Directive is relevant to the interpretation of this article. It states:
“Where the situation of exclusivity is due to technical reasons, they should be rigorously defined and justified on a case-by-case basis. They could include, for instance, near technical impossibility for another economic operator to achieve the required performance or the necessity to use specific know-how, tools or means which only one economic operator has at its disposal. Technical reasons may also derive from specific interoperability requirements which must be fulfilled in order to ensure the functioning of the works, supplies or services to be procured.”
[97]The UK implemented the Directive via the PCR 2015. Regulation 32(2) of the PCR 2015 is in substantively the same terms as article 32(2).[98]If a contract is below threshold, but has cross-border interest, “the contracting entities concluding them are, none the less, bound to comply with the fundamental rules of the Treaty, in general, and the principles of non-discrimination on the ground of nationality, in particular”: see e.g. Teleaustria v Telekom Austria AG (C-324/98), [60].The principle of non-discrimination implies “an obligation of transparency” which “consists in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of procurement procedures to be reviewed”: Teleaustria, [61]-[62]; R (Chandler) v Secretary of State for Children Schools and Families [2009] EWCA Civ 1011, [27].[99]In the Interpretative Communication, the Commission summarises the case law of the CJEU and suggests best practices. The Interpretative Communication states: “2.1.1 Obligation to ensure adequate advertising According to the ECJ, the principles of equal treatment and of non-discrimination imply an obligation of transparency which consists in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the market to be opened up to competition. The obligation of transparency requires that an undertaking located in another Member State has access to appropriate information regarding the contract before it is awarded, so that, if it so wishes, it would be in a position to express its interest in obtaining that contract. … the only way that the requirements laid down by the ECJ can be met is by publication of a sufficiently accessible advertisement prior to the award of the contract. This advertisement should be published by the contracting entity in order to open the contract award to competition. … 2.1.4 Procedures without prior publication of an advertisement The Public Procurement Directives contain specific derogations allowing, under certain conditions, procedures without prior publication of an advertisement. The most important cases concern situations of extreme urgency due to unforeseeable events and contracts which may, for technical or artistic reasons or for reasons connected with the protection of exclusive rights, be executed only by one particular economic operator. In the view of the Commission, the relevant derogations may be applied to the award of contracts not covered by the Directives. Therefore, contracting entities may award such contracts without publishing a prior advertising, provided they meet the conditions laid down in the Directives for one of the derogations.” (Original emphasis.)[100]The relevant requirements were summarised in the ESIF National Procurement Requirements. Paragraphs 2-3 warned that in the ERDF 2007-2013 programme, failure by grant recipients to comply with Public Procurement Law and the Treaty Principles was the leading cause of clawback of funding, with up to 100% of the grant being recovered, depending on the characteristics of the breach. Ground 1: threshold error (CJP contract)

The error

[101]The Directive sets out requirements for procurement of public contracts over a certain value. The Directive applied, in the years 2022-2023, to procurements for public works contracts with a value (net of VAT) of €5,382,000 or more: see article 4(a) of the Directive, as amended by article 1(a) of Commission Delegated Regulation (EU) 2021/1952. In domestic law, this was given effect, in respect of procurements for public works contracts in the same period, by article 5(1)(a) of the PCR 2015 which provided that Part 2 applied to “procurements with a value inclusive of VAT estimated to be equal to or greater than” £5,336,937.[102]It is common ground that the value of the CJP procurement was £2,638,602.27, which is below the relevant threshold. In the Audit Report, GIAA accepted that the CJP procurement was “below threshold” and based its recommendation that the direct award to CJP was not justified on its consideration of the Treaty Principles.[103]However, the same is not true of the Decision which included the following passage:
“The European Structural and Investment Found (ESIF) procurement requirements clearly set out that the selection process must adhere to i) Public Procurement Law, ii) Treaty principles, or iii) National Rules, as appropriate. Specifically, the Public Sector Procurement Directive 2014/24 and the Public Contracts Regulations 2015 (PCR 2015) provide a harmonised set of procurement rules aimed at ensuring equal opportunities for businesses across Europe. The PCR 2015, under Part 2, is applicable to contracts above the EU threshold, which is the case here. For contracts below threshold, the Treaty Principles of non-discrimination, equal treatment and transparency still apply by virtue of Chapter 6 of the ESIF National Procurement Requirements and Regulation 110 of the PCR 2015. Therefore, the procurement process followed by the Council is subject to these principles, regardless of the contract’s value.” (Emphasis added.)
[104]As is clear from the underlined words, the Decision unambiguously asserted that the CJP procurement was above the threshold. Mr Read acknowledged in his witness statement, and Ms Clement conceded on behalf of the Secretary of State, that that was an error. The assertion in the Secretary of State’s Summary Grounds of Defence(settled by different leading Counsel) that the Secretary of State “did not proceed on the basis that the contract was above the threshold” was irreconcilable with the terms of the Decision and ought not to have been made. However, it was corrected in Mr Read’s witness statement and the Secretary of State’s Detailed Grounds of Defence. Mr Read explained that at the time he believed the CJP procurement was above threshold because “I understood that the entire value of the trail project was relevant to the threshold”. That was an error of law. The focus in the Directive and the PCR 2015 is on the value of the procurement in question which, in this case, was significantly below the relevant thresholds.

Materiality

[105]The question is whether the error was material and so rendered the Decision unlawful. Where one of the reasons given for a decision is bad, the decision can still stand if the court is satisfied that the decision-maker would have reached the same conclusion without regard to that reason: see Simplex GE (Holdings) Ltd v Secretary of State for the Environment [2017] PTSR 1041, Staughton LJ at 1061H. As Ryder LJ observed in Singh v Secretary of State for the Home Department [2017] EWCA Civ 362, [2017] 1 WLR 4340, at [35]:
“The mere presence within the decision of an immaterial error of law does not make the decision itself one which is to any extent unlawful…”

The parties’ submissions

[106]The Council contends that the Secretary of State’s submission that the error was immaterial downplays the centrality of the error. The obligations in Part 2 of the PCR 2015 apply only to above threshold procurements: regulation 5. For a below threshold procurement, only regulations 109-112 of the PCR 2015 apply. Nothing in those regulations imposes an obligation to advertise, or to publish an opportunity that is not advertised.[107]The Council refers to the GIAA’s draft Audit Report of 13 November 2024 which described determination of whether the procurement was above or below threshold as “a key consideration”. The Council contends that, where the threshold was not exceeded, Annex 2 (the Single Tender Justification Form) to the ESIF National Procurement Requirements only had to be completed for direct award of contracts in “rare cases”. The basis for this contention was following passage from chapter six of the ESIF National Procurement Requirements:
“How to apply the Treaty Principles 16. Contracts within the scope of the interpretative communication are required to apply ‘a degree of advertising sufficient to enable the … market to be opened up to competition and the impartiality of procedures to be reviewed’. In practical terms this means that the offer must be advertised on a forum allowing interested operators from other Member States to consider bidding and that the information in the advertisement must be sufficient to be reviewed, i.e. the advertisement sets out the specifications and the process that will be used to evaluate the bid. It is recognised that in rare cases an advertisement is not possible due to extreme urgency due to unforeseeable events or technical, artistic or exclusive rights issues. In such circumstances, the ESIF grant recipient should complete the form at Annex 2. 17. The Interpretative Communication does not set out how the opportunity is to be advertised, except that the scope of the advertising needs to be appropriate. As a guide, the department expects the following requirements to be followed for all contracts subject to the Treaty Principles: Value of contract Minimum Procedure Advertising Required £0-£2,499 Direct award None £2,500-£24,999 3 written quotes or prices sought from relevant suppliers of goods, works and services None £25,000 – Relevant public Contracts Regulations threshold Formal tender process in line with the Interpretative Communication and the relevant guidance set out below 1) Advertised on Contracts Finder, and 2) the opportunity is advertised on the ESIF grant recipient’s website for a reasonable time period.”
[108]The Council further contends that the error was material because the Treaty Principles only apply to below threshold procurements if they are of cross-border interest and that the Interpretative Communication had to be taken into account but did not prescribe a rule.[109]The Secretary of State submits that the error was immaterial because the Decision was expressly made on two alternative bases. The first basis was erroneous. But the second basis was premised on the alternative (correct) assumption that the contract was below threshold. The Decision made clear that the fundamental requirement to advertise the contract, to promote competition, applied whether the contract was above or below threshold. If it was below threshold, the obligation to advertise applied pursuant to the principles of non-discrimination, equal treatment and transparency. The Council could only derogate from that fundamental requirement if it could come within any of the exceptions in regulation 32 of the PCR 2015, which applied by analogy pursuant to the Treaty Principles, if the contract was below threshold: Interpretative Communication, para 2.1.4.[110]Ms Clement acknowledged that if, for example, the adequacy of the means or content of an advertisement had been in issue, then whether the value of the contract was above or below the threshold might have been a material factor in the assessment. But here there was a direct award without any advertisement at all. The Decision was clear that it made no difference whether the contract was above or below the threshold as the obligation to advertise unless the Council could establish a derogation applied was the same.[111]In the alternative, the Secretary of State submitted that the court should refuse relief pursuant to s.31(2A) of the Senior Courts Act 1981.

Decision on Ground 1

[112]This is a paradigm example of a case in which the error – wrongly believing the contract was above threshold – was immaterial. The Decision expressly addressed the below threshold position. This was not a case where the reasons were intertwined and so an error undermining one reason infected the other. On the contrary, the second basis for the decision in respect of the CJP contract was premised on the opposite (and correct) assumption that the contract was below the threshold.[113]In his witness statement, having acknowledged his error, Mr Read said that he did not consider the threshold position to be “a particularly significant point”. The “critical point” that he was trying to make was that “the threshold issue made no difference to the outcome: the Treaty principles and derogations would apply in any event”. This is not ex post facto rationalisation. On the contrary, it is precisely the point made in the Decision itself.[114]The Council’s contention that there was no obligation to advertise a below threshold contract, and so no need to establish a derogation, is not pleaded and, in any event, it ignores the applicability and effect of the principles of non-discrimination, equal treatment and transparency, as established by the case-law of the CJEU and summarised in the Interpretative Communication.[115]The reference to the threshold being a key consideration in the draft Audit Report takes the Council’s argument nowhere. The Council’s assertion that, where the threshold was not exceeded, Annex 2 only had to be completed for direct award of contracts in “rare cases” is a clear and obvious misreading of the passage from the ESIF National Procurement Requirements quoted above. Chapter six focuses on the application of Treaty Principles to below threshold contracts. The guidance makes clear that the derogations (for extreme urgency, technical, artistic or exclusive rights issues) will only apply in “rare cases”, and whenever an ESIF grant recipient relies on such a derogation it should complete the form at Annex 2 (as the Council did here). The issue of cross-border interest is raised directly by Ground 7 and I address it in that context.[116]Accordingly, I conclude that the Secretary of State’s mistaken understanding that the CJP contract was above the threshold was not material and does not vitiate the Decision. Grounds 2, 3 and 4: relevant considerations/reasons (CJP contract)

The parties’ submissions

[117]The Council submits that in determining that it had provided “insufficient justification for Single Supplier Procurement” of the Chiverton Bridge contract, the Secretary of State either must have failed to take into account all the material provided by the Council in three documents:(i) the Response to the GIAA’s draft audit;(ii) the Response to the GIAA’s queries; and(iii) the Audit Response, or she failed to provide adequate reasons for the Decision.[118]The Council contends that these materials amply demonstrated that it would have been a near technical impossibility for any other contractor to construct Chiverton Bridge, that the ERDF deadline compelled completion of that project by 31 December 2023 in order to benefit from an ERDF grant; and that CJP’s role as the contractor on the A30 Project, and the unavoidable physical inter-relationship between the carrying out of that project and construction of Chiverton Bridge, meant that any other contractor for the latter contract would have incurred costly work scheduling and other conflicts.[119]The Council contends the Decision failed to grapple with these well-founded points. The Decision is irreconcilable with the Secretary of State having read and understood the Council’s representations, and so it should be inferred that the Secretary of State failed to take into account the material in the Council’s three response documents. The Council contends that Mr Read, who drafted the Decision, failed to pick up the many references to the Chiverton Bridge contract being under threshold, and so his evidence as to the “detailed consideration” he gave to materials, and the “careful review” he undertook, cannot be relied on.[120]The Council’s Audit Response demonstrated that the CJP award fell squarely within the technical reasons derogation. The Council’s materials showed that it was a “near technical impossibility” for another contractor to achieve the required performance. In reaching the contrary conclusion the Secretary of State must have failed to take these materials into account or misunderstood them. The Council also contends that reliance on the Tender Evaluation & Whole Scheme Analysis was misplaced as that document was not relevant to the question whether the award to CJP was a technical necessity.[121]The Council submits that due to the cessation of European funding following the UK’s exit from the EU, the Chiverton Bridge project had to be completed by 31 December 2023 to benefit from an ERDF grant. The Council contends the timeframe was entirely external to the Council, being imposed as a result of the decision by the UK to leave the EU, yet the Secretary of State took no account of the critical ERDF deadline. The Decision failed to make any mention of exclusive rights and so must have failed to take into account the Council’s reliance on that derogation.[122]The Council’s alternative submission is that the Secretary of State failed to give adequate reasons for rejecting the Council’s reliance on the technical derogation, the ERDF deadline, and exclusive rights in the Decision. The Council contends that this was a case in which the reasons were required to go into greater detail because the decision was one which may have an adverse impact on the body or person to whom it relates (R (MN) v Secretary of State for the Home Department [2020] EWCA Civ 1746, [2021] 1 WLR 1956, [242]) and there had been engagement between the decision-maker and the person to whom the decision relates (R (Inclusion Housing Community Interest Company) v Regulator of Social Housing [2020] EWHC 346 (Admin), [79]; R (All Saints Academy, Dunstable) v Ofsted [2024] EWHC 1792 (Admin), [126], [128]). The Secretary of State failed to explain why the Council’s points were invalid or fell short of persuading her.[123]The Council invited me to disregard the additional reasoning given by Mr Read in his statement, relying on two authorities from the Court of Appeal, namely, R v Westminster City council ex p. Ermakov [1996] 2 All ER 302 and R (United Trade Action Group Ltd) v Transport for London [2021] EWCA Civ 1197, [2022] RTR 2, [124], as well as several High Court decisions.[124]The Secretary of State’s key point in response to the allegation of failure to take into account relevant considerations is that it is clear from the Decision letter itself that the Secretary of State had carefully reviewed the material submitted by the Council. Mr Read has confirmed in his evidence that he carefully reviewed the materials submitted by the Council, before and after the GIAA’s Audit, and he took into account the representations made by the Council when drafting the Decision letter. In the absence of any application to cross-examine Mr Read, his evidence should be accepted, and it follows that the allegation of failure to take into account the three documents identified by the Council is unfounded.[125]As regards the adequacy of the reasoning, the Secretary of State draws attention to authorities on the approach to reading and reviewing decisions letters, and on the requirement to give reasons: Wokingham Borough Council v Secretary of State for Housing, Communities and Local Government [2019] EWHC 3158 (Admin), [19]; Clarke Homes Ltd v Secretary of State for the Environment (1993) 66 P & CR 263, at 271-2, [2017] PTSR 1081, 1089H; and South Buckinghamshire District Council v Porter (No. 2) [2004] UKHL 33 [2004] 1 WLR 1953, [36]. The Secretary of State contends that the court should be slow to intervene, and recognise and respect that in making the Decision expert and technical judgement, on a matter within the decision-maker’s area of expertise, has been brought to bear: R (Valero Logistics UK Ltd) v Plymouth City Council [2021] EWHC 1792 (Admin), [72]; R (Ross) v Secretary of State for Transport [2020] EWHC 226 (Admin), [2020] PTSR 799, [77].[126]The Secretary of State submits that the Decision must be read with benevolence, and in a fair and straightforward manner. Contrary to authority, the Council seeks to impose an unrealistic, overly legalistic standard to an administrative decision letter. The Secretary of State was not required to set out in detail the voluminous representations, nor dissect every point advanced by the Council. The Decision met the relevant standard in that it was intelligible, adequate, and sufficient to enable the reader to understand why the matter was decided as it was and what decisions were reached on the important controversial issues. Moreover, the burden of satisfying the Secretary of State that a derogation from a core requirement of EU law, namely advertising so as to create competition, rested with the Council, and it is well established that the derogations are strictly interpreted.[127]The Secretary of State submits that Ground 3 is advanced on the false premise that the 31 December 2023 deadline was imposed “as a result of the decision by the UK to leave the European Union”. Rather, the deadline for incurring the costs of all works funded by the 2014-2020 ERDF programme was set as 31 December 2023, for all Member States, from the outset, a decade in advance. It did not arise as a result of the UK’s exit from the EU. Ms Clement contends any time pressures that the Council was facing were of its own making.[128]As regards the exclusive rights derogation, the Secretary of State submits that it was addressed in a manner that was commensurate to the extent of the Council’s reliance upon it.

Decision

[129]As the Secretary of State observed, the Council’s case is in part pleaded on the basis that the conclusions reached in the Decision were “wrong”, and at various points in the skeleton argument the same merits challenge is pursued. Mr Coppel sensibly did not pursue the point orally and I can deal with it shortly. It is trite that such an approach is wrong in law. It is not for the court, on a claim for judicial review, to provide an appeal against the merits of a decision, or to decide whether the public body’s view was ‘correct’, in the sense of according with the court’s own evaluation of the underlying merits of the matter: see, for example, R (Houreua) v Secretary of State for Foreign and Commonwealth Affairs [2019] EWHC 221 (Admin), [2019] 1 WLR 4105, Singh LJ and Carr J, [326]; and Moffett et al, para 18.12. A decision is unlawful if it is beyond the range of reasonable decisions open to the decision-maker, but that was not a ground of challenge pursued by the Council at any stage.[130]A public body must, when making a decision, have regard to any consideration which it is obliged to take into account, whether expressly or implicitly by legislation or because it would be irrational not to take it into account. Conversely, a public body must not have regard to any consideration which it is obliged not to take into account, whether because the irrelevant consideration is expressly or implicitly identified by legislation or because no reasonable public body could consider it as part of a rational assessment of the matter to be decided. Falling between relevant and irrelevant considerations are those considerations which it is permissible, but not mandatory, for a decision-maker to take into account.[131]The Secretary of State did not take issue with the contention that she was required to consider each of the documents submitted by the Council when making the decision, and so I address these grounds on the assumption she was obliged to (albeit not by legislation). However, I note that the pleaded claim focused on the alleged failure to take into consideration the Audit Response, not the Response to the GIAA’s draft audit or the Response to the GIAA’s queries.[132]The Secretary of State was not required in the Decision to identify each and every document that had been considered. Nevertheless, the Decision identifies that it is a response to the Council’s Audit Response, and makes specific reference to points raised in the Audit Response, such as in response to the Council’s reliance on Commission v Italy (Case C-385/02). The contention that the Secretary of State failed to consider the Audit Response is hopeless on the face of the Decision.[133]Mr Read gave evidence that when he became involved in early April 2025, prior to the Decision, he independently and carefully reviewed all the material submitted during the audit process, as well as information available to MHCLG in relation to the project (see paragraph 87 above). He said that he considered the Council’s reliance on the technical derogation “particularly carefully because it was the main argument relied on” by the Council. His evidence is that he carefully considered the detailed explanations provided by the Council, including in the Audit Response and the Council’s Technical Case. In relation to the deadline, Mr Read said, “I was aware that [the Council’s] central point in its representations was that it would not have been possible, or would have been nearly impossible, to complete both the A30 works and the Chiverton Bridge works by 31 December 2023 if a competitive procurement process had been undertaken”. He refutes the Council’s contention that the funding deadline was not considered, saying that he did consider it and understood it but did not find it a sufficient justification for a direct award. Mr Read said, “it is not correct to say that I failed to take account [of], or misunderstood, the detailed materials submitted by [the Council]. I had read them all carefully beforehand, and fully took them into account”.[134]There is no basis to doubt Mr Read’s evidence. It is consistent with the Decision which expressly refers to the Council’s “supporting documentation”, makes specific reference to and quotes from the Technical Case and refers to the Councils Tender Evaluation & Whole Scheme Analysis. Although the Council contends the latter document is irrelevant, the fact that it was referred to in the Decision strongly supports Mr Read’s evidence that in reviewing this matter from scratch he did not even limit his inquiry to the documents submitted during the course of the audit, but went above and beyond in reviewing all relevant documents the MHCLG held on the matter.[135]The fact that Mr Read mistakenly understood the CJP contract to be above threshold is not supportive of the Council’s argument. He did not fail to spot the references in the Council’s documents to it being below threshold. Rather, he believed they were wrong as he understood that the entire value of the trail project was relevant to the threshold. His understanding may have been informed by reg.6(6) of the PCR 2015 which provided that:
“A procurement shall not be subdivided with the effect of preventing it from falling within the scope of [Part 2], unless justified by objective reasons.”
Whatever the basis for his understanding that the procurement was above threshold may have been, the Secretary of State accepts it was an error. Such an error of law is not indicative of a lax approach. Nor does it provide any proper basis for asking the court to reject Mr Read’s unequivocal evidence as to the matters he considered.[136]I also reject the contention that the Secretary of State had regard to an irrelevant consideration in taking into account the Tender Evaluation & Whole Scheme Analysis. The fact that it was not a document on which the Council relied in support of its argument that the technical reasons derogation applied is neither here nor there. It was entirely rational, at least, to take the view that this document was evidence of the Council’s recognition, earlier in the process, that CJP was not the only supplier capable of providing the works on genuine technical grounds, but was the preferred supplier due to its involvement in the A30 Project, and therefore it was relevant to the Decision.[137]Accordingly, I reject the contention that the Secretary of State failed to take into account relevant considerations or took into account irrelevant considerations.[138]The question whether reasons are adequate is context-specific. In South Buckinghamshire District Council v Porter (No. 2), Lord Brown said this at [36]:
“The reasons for a decision must be intelligible and they must be adequate. They must enable the reader to understand why the matter was decided as it was and what conclusions were reached on the ‘principal important controversial issues’, disclosing how any issue of law or fact was resolved. Reasons can be briefly stated, the degree of particularity required depending entirely on the nature of the issues falling for decision. The reasoning must not give rise to a substantial doubt as to whether the decision- maker erred in law, for example by misunderstanding some relevant policy or some other important matter or by failing to reach a rational decision on relevant grounds. But such adverse inference will not readily be drawn. The reasons need refer only to the main issues in the dispute, not to every material consideration. They should enable disappointed developers to assess their prospects of obtaining some alternative development permission, or, as the case may be, their unsuccessful opponents to understand how the policy or approach underlying the grant of permission may impact upon future such applications. Decision letters must be read in a straightforward manner, recognising that they are addressed to parties well aware of the issues involved and the arguments advanced. A reasons challenge will only succeed if the party aggrieved can satisfy the court that he has genuinely been substantially prejudiced by the failure to provide an adequately reasoned decision.”
[139]Those observations were made in the context of a planning case, but as Chamberlain J observed in the Inclusion Housing case at [77], “that passage has been applied generally in public law cases, both in and outside the planning and environmental field”. See, too, the wide range of cases in which it has been applied identified in Moffett et al, para 11.51, fn.155.[140]In Clarke Homes Sir Thomas Bingham MR emphasised at 1089H:
“…the central issue in this case is whether the decision of the Secretary of State leaves room for genuine as opposed to forensic doubt as to what he has decided and why. This is an issue to be resolved as the parties agree on a straightforward down-to-earth reading of his decision letter without excessive legalism or exegetical sophistication.”
[141]Here, the decision whether to claw back over £2 million would have an obvious and significant impact on the Council’s resources. But the context is not comparable to MN, in which the Court of Appeal held that “a high quality of reasoning is required in a conclusive grounds decision”, rights under article 4 of the European Convention on Human Rights (which prohibits slavery and forced labour) being in issue. Nor does the fact the parties had engaged in prior correspondence require greater particularity in the reasons. In my judgement, this aspect of the Council’s submission is based on a misreading of both the Inclusion Housing and All Saints Academy cases. The point both Chamberlain J and Cavanagh J were making in those cases was, as Lord Brown had said in the passage quoted above, that the court has to be mindful of the audience for the decision. Brief reasons which might be unintelligible to a stranger to the matter, may be entirely intelligible to parties who are well aware of the issues and arguments advanced.[142]An important part of the context was that the Council had already engaged in the audit process, which had resulted in the independent auditor making findings of irregularities, and issuing the Audit Report which explained GIAA’s findings. The Council took issue with the Audit Report and the Secretary of State was not bound to reach the same conclusion as the GIAA. But the view of the independent auditor was an important consideration, not least given the strict approach to derogations taken by the CJEU, the exacting approach of the European Commission to funding irregularities, and the burden on the Council to establish that a derogation applied.[143]The obligation to comply with the requirement of transparency was explained. The Decision referred to Chapter 6 of the ESIF National Procurement Requirements where the advertising requirements are set out (see paragraph 107 above).[144]The reasons given in relation to the technical reasons derogation are clearly adequate. The point was made, citing relevant authority, that the Council bore the burden of proving that for genuine technical reasons it was absolutely necessary for the contract to be awarded to CJP and none other because CJP alone was capable of undertaking the works. Despite their own internal legal advice suggesting that the Council should obtain an independent expert report, the Council did not put forward any independent report but instead relied on its own Technical Case. The primary response in the Decision was that reliance on the ESIF funding deadline, in combination with CJP’s involvement in the A30 Project, did not amount to a genuine technical reason for making a direct award.[145]The point was short and simple. It did not require further elaboration. The contention that CJP was the sole supplier on technical grounds was inextricably linked with the Council’s reliance on the ERDF deadline. However, if time concerns could be relied on merely because the end of the funding window is approaching, a window which had been set a decade earlier for all Member States, the derogation where strictly necessary for reasons of extreme urgency brought about by events unforeseeable by the contracting authority would be wholly undermined. As the Decision explained, the CJEU’s case-law makes clear that derogations are to be interpreted strictly and apply only in exceptional circumstances. That being so, the Secretary of State took the same view as the independent auditor: reliance on the ERDF deadline in combination with CJP’s status as the contractor on the A30 Project was insufficient to demonstrate that the genuine technical reasons derogation applied.[146]A secondary point made in the Decision was that, in any event, the Council had not discharged the burden of demonstrating that CJP was the only supplier capable of completing the works prior to expiry of the ERDF deadline. The Decision relied on the insufficiency of the Council’s internal Technical Case as well as the earlier Tender Evaluation & Whole Scheme Analysis which undermined the Council’s argument. The Decision did not address the detail of the Council’s arguments in support of the technical reasons derogation regarding scheme design, programme management, health and safety/construction and design management, wider scheme construction set-up, statutory undertakers, contract requirements, control and exclusive rights, and delay damages. In my judgement, this does not render the reasons inadequate given that this was an alternative, secondary reason: in reality, all the reasons relied on were tied up with reliance on the ERDF deadline. The Secretary of State was entitled to take the view that reliance solely on an internal technical document, containing many assertions unsupported by evidence, was simply not enough to establish a genuine technical reason for derogating from the obligation to advertise a public works contract.[147]As regards the exclusive rights derogation, the Council’s Response to the GIAA’s draft audit suggested only that it “potentially” had an exclusive rights argument “due to the contractual structure”. At that stage, the Council said there were “likely to be exclusive rights arguments” and it reserved its right to rely on such arguments. Again, in the Response to the GIAA’s queries, the Council’s internal legal adviser said “There are also likely to be exclusive rights arguments. It would also have been a National Highways decision to allow another contractor to work on their site concurrently whilst their own project was on-going”. In the original Legal Advice, the same legal adviser had made clear that the lack of any confirmation from National Highways that they would only allow a single contractor on site to undertake the bridge works undermined reliance on an exclusive rights argument, and that “some further expansion and justification would be required” to rely on this derogation.[148]Despite the tentative way in which the argument had been put, without providing any further evidence, in the Audit Response the Council asserted that CJP would have had the exclusive right to site access pursuant to its contract with National Highways. This argument was based on an assertion that under that contract (which was not provided):
“CJP would have had (1) an entitlement to unimpeded access to the site on which it was due to carry out the construction works, and (2) an obligation to carry out the construction works in accordance with the contract programme (failing which it would have been subject to delay liquidated damages).”
[149]The Decision did not address this derogation separately. It was addressed only to the limited extent that the Decision referred to the Council’s reliance on “existing contractual obligations”, cited the “challenge of two contractors working on the same footprint” and relied on the Council document confirming “there were no specific restrictions to using CJP”. In my judgement, the Secretary of State’s reasons in this regard were not inadequate given(i) this derogation, too, was inextricably linked to the ERDF deadline and so the Secretary of State had already answered the point;(ii) the Council’s reliance on exclusive rights had been consistently tentative and firmly subordinate to its primary case that technical reasons applied; and(iii) although the Council more firmly relied on exclusive rights in the Audit Response, its contentions were mere assertions which were not backed up by evidence (e.g. of the contractual rights CJP was said to have) and were inconsistent with the striking lack of confirmation from National Highways that it would not allow access to a second contractor to undertake work on the Chiverton Bridge.[150]In assessing the adequacy of the reasons given in the Decision, I have not had regard to the additional explanation given by Mr Read. While I consider his evidence admissible to show what materials were considered, the focus of a reasons challenge inevitably has to be on the Decision itself. Nor, given my conclusion that Grounds 2, 3 and 4 fall to be dismissed, is it necessary to determine whether s.31(2A) would have applied if any of those grounds had succeeded. Ground 7: cross-border interest (CJP contract)

The parties’ submissions

[151]The final basis on which the Council challenges the clawback in respect of the CJP contract is that the Secretary of State unlawfully failed to consider or determine whether the procurement in respect of the construction of Chiverton Bridge had cross-border interest. The Council contends that it did not and so the Treaty Principles were inapplicable.[152]Although the Council did not, at any stage during the procurement or audit processes, or in the Audit Response, suggest that there was no cross-border interest, the Council submits that the burden was on the Secretary of State and she failed to discharge it. The Council contends for a distinction between the position at the start of the procurement process, when the grant recipient is “strongly encouraged” to investigate the issue and submit form Annex 3, and the audit stage.[153]The Council relies on footnote 30 in the ESIF National Procurement Requirements which states:
“In Commission audits, the burden of proof lies on the Commission to demonstrate that there would have been cross border interest.”
[154]The Council submits this is confirmed by the Annex to the Commission Decision laying down the guidelines for determining financial corrections to be made to expenditure financed by the Union for non-compliance with the applicable rules on public procurement (14 May 2019), which sets out the Commission’s guidelines on penalties for procurement irregularities in ERDF contracts (‘the COCOF Guidelines’). Paragraph 1.2.3 of the Annex states:
“Existence of a certain cross border interest For the purpose of assessing the existence of a certain cross border interest in contracts not subject to the Directives, the Commission carries the burden of proof, taking into account the jurisprudence of the European Court of Justice. In this context, it is first necessary to determine whether there are factual elements that would in conjunction substantiate cross border interest, including the following: (i) the subject-matter of the contract, (ii) its estimated value, (iii) the technical requirements of the contract, (iv) the geographic location of the place of performance, (v) evidence of tenders from other Member States or expressed interest by economic operators from a different Member State.”
[155]The “jurisprudence” referred to in the first paragraph quoted above is identified in footnote 11:
“See judgment C-507/03 Commission v Ireland, 2007 ECR I-1977, paras 32 and 34. See also cases C-412/04 Commission v Italy [2008] ECR I-619; joined cases C-147/06 and C-148/06, SECAP SpA and Santorso Soc v Commune di Torino [2008] ECR I-3565.”
[156]The Council submits that, by analogy, when an audit is undertaken by the national authority, the burden of proof falls on the managing authority, here the Secretary of State. The Secretary of State’s failure to engage with this issue is fatal to the Decision. Further, the Council submits that the procurement would not have generated cross-border interest, relying on the witness statement of Mr Rick Clayton, Major Transport Lead for the Council, given in these proceedings, in which he states the contract: “related to low value works located in a remote part of the UK and concerned the delivery of site-specific infrastructure works. In those circumstances, it is not apparent how the contract could realistically have been of cross-border interest, or likely to have attracted bidders form outside of the UK given its remote nature”.[157]Ms Clement submits the Council’s argument is ambitious given that it had never, at any stage, suggested it did not have a cross-border interest. The Secretary of State submits that the COCOF Guidelines, which address the burden of proof placed on the European Commission by the CJEU when the Commission is itself determining whether there has been an irregularity, have no application. This was not a Commission audit. Nor did the GIAA and the managing authority have analogous powers to the considerable investigative powers of the Commission.[158]In domestic law, the Secretary of State submits, the ESIF National Procurement Requirements squarely put the onus on the grant recipient to explain proactively, before the relevant contract is awarded, why (if it be the case) it says that a project does not have a cross-border interest. The grant recipient is required to submit an Annex 3 form, setting out its assessment of why there is no cross-border interest: ESIF National Procurement Requirements, chapter 6, paragraphs 12-15. That guidance also reflects the position adopted by Foskett J in Mansfield District Council v Secretary of State for Communities and Local Government [2014] EWHC 2167 (Admin), [41].[159]In this case, the Council did not submit an Annex 3 form before directly awarding the CJP contract. It proceeded throughout on the basis that there was a cross-border interest and that the Treaty Principles applied. That was precisely why the Council sought to bring itself within one of the permitted derogations from the requirement to advertise. The Council never contended in any of its representations to the GIAA, or to the Secretary of State, including in the detailed Audit Response, that there was no cross-border interest. In these circumstances, the Secretary of State submits that it was not unlawful to proceed on the basis that the Treaty Principles applied.[160]If, contrary to her primary submission that it was for the Council to raise this issue, and provide evidence, there was an error on the part of the Secretary of State in not addressing it, Ms Clement contends that it was not a material error as the Secretary of State would inevitably have concluded that the contract was of cross-border interest, and so the Decision is not vitiated, or relief should be refused pursuant to s.31(2A). She relies on the evidence of Mr Read that in the light of “the overall value and complexity of the works, the integration with a nationally significant infrastructure scheme, and the absence of any evidence demonstrating that the opportunity would have been of interest only to purely local market” he would have concluded there was cross-border interest.[161]In response, the Council submits that as the ESIF National Procurement Requirements and the COCOF Guidelines were published after Mansfield they supersede that case. Mr Coppel said that the Council did not address cross-border interest because initially the contract was thought to be above threshold, and subsequently it was unnecessary to do so because the Council considered derogations were applicable and so the existence, or not, of cross-border interest was academic.

Decision

[162]It is wholly unsurprising that the Decision did not address the question whether the CJP contract was of cross-border interest given that it was not a live issue.[163]The Interpretative Communication notes that a contract may not be of interest to economic operators in other Member States “because of special circumstances, such as a very modest economic interest at stake” (original bold emphasis). It states: “It is the responsibility of the individual contracting entities to decide whether an intended contract award might potentially be of interest to economic operators located in other Member States. In the view of the Commission, this decision has to be based on an evaluation of the individual circumstances of the case, such as the subject-matter of the contract, its estimated value, the specifics of the sector concerned (size and structure of the market, commercial practices, etc.) and the geographical location of the place of performance.” (Original emphasis.)[164]Chapter six of the ESIF National Procurement Requirements states:
“13. ESIF grant recipients are strongly encouraged to investigate whether their contract will be of cross border interest at the start of any procurement process. Those wishing to make the argument should complete the form at Annex 3, prior to letting the contract, and submit this to the relevant Department. 14. The evaluation as to whether a contract may generate cross border interest must be made by the ESIF grant recipient, taking into account the individual circumstances of the case, such as the subject matter of the contract, its estimated value, the specifics of the sector concerned (size and structure of the market, commercial practices), the geographic location of the place of performance and relevant market information. 15. The assessment of the existence of cross border interest must be taken prior to letting the contract and therefore to be valid, the form must be signed and dated. The reasons why the ESIF grant recipient believes there is no cross border interest should be set out alongside relevant supporting evidence.”
[165]While grant recipients were “strongly encouraged” to investigate the issue, if they wished to assert that a contract was not of cross-border interest they were required to complete the form at Annex 3, and provide supporting evidence. The Council did not do so. If the Council had considered that there was no cross-border interest, the point would not have been academic: it would have been an alternative basis, advanced logically prior to its reliance on derogations, on which the Council would have contended advertising was not required.[166]The Decision was made in response to the Council’s contention that the GIAA’s Audit Report was flawed. The Decision therefore addressed the matters raised by the Council both in the GIAA audit process and in the Council’s Audit Response. Wholly absent from any of the representations made by the Council was any suggestion that the CJP contract had not been of cross-border interest. Indeed, the Council’s representations as to the applicability of derogations were implicitly premised on there being cross-border interest.[167]I reject the Council’s contention that, in these circumstances, the Secretary of State was nonetheless required to address the question of cross-border interest, and that the Decision is unlawful for failure to do so. This was not a Commission audit. Neither the COCOF Guidelines nor the CJEU jurisprudence underlying them, impose any burden on the Secretary of State to raise unilaterally the question whether a contract has cross-border interest. Although Mansfield was decided before the COCOF Guidelines were published and concerned a decision made before the ESIF National Procurement Requirements came into force, the CJEU case-law on which para 1.2.3 of the Annex to the COCOF Guidelines was based had been decided, and Foskett J considered the ESIF National Procurement Requirements on the basis that it reflected EU law. I therefore reject Mr Coppel’s attempt to distinguish Mansfield. As a matter of domestic law, the onus was on the Council to raise, at least, the contention that there was no cross-border interest.[168]Moreover, even if there were a legal burden on the Secretary of State to establish the existence of cross-border interest, there would have been an evidential burden on the Council to raise it as a live issue. The Council cannot sensibly contend that the Decision was unlawful for failure to address an issue it never raised, never relied on, and in respect of which it never adduced evidence despite the obligation to do so before awarding the contract.[169]I also accept Mr Read’s evidence that if the issue had been raised he would have concluded that the contract was of cross-border interest. While his reasoning on this issue is subsequent to the Decision, that is a consequence of the fact that it was not a live issue. If I had found an error in failing to address cross-border interest, I would have refused relief pursuant to s.31(2A) as the outcome would have been the same if he had addressed it. Ground 5: Discriminatory criteria (MWJV procurement)

The parties’ submissions

[170]The single ground of challenge to the smaller clawback in respect of the MWJV procurement is that the Secretary of State erred in law in concluding that the Sub-Consultant Term breached the principle of non-discrimination. The Council contends that the Sub-Consultant Term was not discriminatory because all bidders had the option to deliver the contract directly, in which case they would not need to identify any Cornish sub-contractor, or they could form a consortium. And, in any event, any bidder would have had access to the same sub-contractor market in Cornwall as any other bidder. There was no evidence when the Secretary of State made her decision that any deterrence had taken place, or that the Sub-Contractor Term was likely to result in such deterrence.[171]The Council contends that Commission v Italy (C-360/89), on which the Secretary of State relied in the Decision, does not assist because it related to a different and more draconian tender criterion in a different context. The constraint here was a light one and the Council had put forward a clear objective justification, namely that its aim was to comply with its duties under the Public Services (Social Value) Act 2012.[172]The Secretary of State submits that the Sub-Consultant Term was a classic example of an unlawful criterion, relying on Commission v Italy (C-360/89) (‘Commission v Italy (4)’) and Commission v Denmark (C-243/89). By requiring potential tenderers wanting to provide services through sub-consultants to identify at least one Cornish SME, the Council disadvantaged non-UK tenderers. That is because UK tenderers are, self-evidently, much more likely, compared to non-UK tenderers, to have the necessary local networks to identify and negotiate with Cornish subconsultants.[173]The Secretary of State contends that in focusing on whether actual detriment has been suffered the Council is applying the wrong legal test. In accordance with Commission v Italy (4), the question is whether the relevant criterion “essentially” favours domestic sub-contractors. It is common ground that contracting authorities have a margin of discretion in adopting award criteria, but that does not permit them to breach the core principles of equal treatment and non-discrimination: EVN AG v Austria (C-448/01), [39].

Decision

[174]The principle of non-discrimination on grounds of nationality is one of the most fundamental principles of EU law. In Commission v Italy (4) the court found that a rule that the successful tenderer should reserve 15% to 30% of the relevant public works to sub-contractors whose registered offices were in the region where the works were carried out was unlawful. The court found that although the criterion applied without distinction to all Italian and foreign companies, “it essentially favours those established in Italy”, as “such undertakings are much more likely to carry on their main activity in the region of Italy where the works are to be carried out than undertakings established in the other Member States” ([12]). In Commission v Denmark, a rule requiring tenderers to ensure that Danish materials and labour would be used “to the greatest possible extent”, although not setting any mandatory minimum level, was held to be indirectly discriminatory.[175]There is no duty in the Public Services (Social Value) Act 2012 that required the Council to adopt a criterion in the invitation to tender for a public services contract potentially worth £120 million which indirectly discriminated against undertakings from other Member States. Moreover, there is a close parallel between the Council’s reliance on that Act and Italy’s unsuccessful argument in Commission v Italy (4) that its criterion was intended to offset certain disadvantages encountered by SMEs. The court held that such matters could not override the principle of non-discrimination ([14]).[176]The Secretary of State made no error of law in concluding that a term which required tenderers to identify at least one Cornish sub-contractor for each of seven disciplines (and only to use the identified sub-contractors), unless and to the extent the tenderer chose to deliver a particular service directly, breached the principles of equal treatment and non-discrimination. She was entitled to conclude that bidders with existing local networks, who would have been overwhelmingly likely to be based in the UK, were in a superior position to identify appropriate local sub-consultants, make contact with them and negotiate the terms necessary to make a competitive bid. The independent auditor, GIAA, had reached the same conclusion, to which the Secretary of State was entitled to give weight. The Sub-Consultant Term was a classic example of a discriminatory criterion in an invitation to tender and the Secretary of State made no error in so concluding.

Conclusion

[177]For the reasons that I have given, I refuse permission to amend to add Ground 8 and dismiss the Council’s claim on all grounds.