Early Learning & Childcare Agreements as “Public Contracts” Only on Uptake, but Procurement Time Limits Run from Sufficient Knowledge (Not Disclosure of Contract Terms)

Case: St Margarets Nursery LTD against City of Edinburgh Council (Outer House, Court of Session)
Citation: [2026] CSOH 37
Judge: Lord Lake
Date: 8 April 2026

1. Introduction

This procurement challenge arose from the City of Edinburgh Council’s decision not to renew an existing Early Learning and Childcare Agreement (“ECLA”) with a nursery provider (the pursuer), and from the Council’s move to enter new ECLAs with other providers. The pursuer alleged breach of the Public Contracts (Scotland) Regulations 2015 (“the 2015 Regulations”), seeking (i) an ineffectiveness order under Regulation 91(6), and (ii) declarator and damages.

The Council’s core defence was jurisdictional: ECLAs were said not to be “public contracts” because, when concluded, they imposed no enforceable obligation on a provider to deliver services (funding would only flow if parents later selected the provider and a place was offered and accepted).

Three issues were debated:

  • Scope: do ECLAs fall within the 2015 Regulations as “public contracts”?
  • Time bar: were the non-ineffectiveness remedies raised within Regulation 88’s 30-day period?
  • Title and interest: did the pursuer have sufficient title and interest to seek ineffectiveness and related relief?

2. Summary of the Judgment

  • Applicability: The court held that an ECLA, when first entered into, is not yet a “public contract” because it does not (then) impose legally enforceable reciprocal obligations. However, once a place is offered and taken up, enforceable obligations arise (provider delivers to the National Standard; Council funds), and the arrangement then has the character of a regulated contract. On a relevancy basis, the pursuer’s procurement argument was not bound to fail.
  • Time limits: Despite the above, the action was dismissed because the claims other than ineffectiveness were time-barred under Regulation 88: the court found the pursuer ought to have known the grounds by end of May 2025; service on 31 July 2025 was outwith the 30-day period; no extension was justified.
  • Title and interest: The court would not have dismissed on title/interest at debate; Regulation 87’s duty being owed to “economic operators” and factual disputes prevented disposal on relevancy.
  • Outcome: Action dismissed on the Council’s time-limit plea.

3. Analysis

3.1 Precedents Cited (and Their Role)

(A) “Pecuniary interest”, reciprocity, and enforceability

  • Helmut Müller GmbH v Bundesanstalt für Immobilienaufgaben (Case C-451/08) 2010 3 CMLR 18
    Central propositions adopted: EU procurement rules apply only to contracts for “pecuniary interest”; the contractor must undertake to carry out the works/services in return for consideration; and the relevant obligations must be legally enforceable.
  • Remondis GmbH & Co KG Region Nord v Hannover EU:C:2016:985
    Used to reinforce that a public contract is synallagmatic—reciprocal obligations on both sides are “an essential element”.
  • Tax-Fin-Lex doo v Ministrstvo za notranje zadeve (C-367/19) EU:C:2020:685; [2021] PTSR 453
    Although consideration need not be monetary, the CJEU emphasised that public contracts “necessarily result in the creation of legally binding obligations on both parties… legally enforceable.” The court in the present case relied on this to underline that procurement law is not triggered by aspirational arrangements lacking enforceable commitments.
  • R (Midlands Co-Operative Society Ltd) v Birmingham City Council [2012] EWHC 620 (Admin), [2012] EuLR 640 and Ocean Outdoor UK Ltd v Hammersmith and Fulham LBC [2019] EWCA Civ 1642, [2020] PTSR 639
    Treated as applications of the same “assumption of obligations” requirement; they did not materially alter the controlling principles.
  • Professional Game Match Officials Ltd v HMRC [2024] UKSC 29, [2024] ICR 1480
    Cited in argument; in this decision it plays, at most, a contextual role: it is consistent with the focus on legal enforceability and the identification of contractual obligations (though the procurement analysis here was driven primarily by the EU procurement authorities and Faraday).

(B) Contingent obligations and “not yet” a public contract: the importance of Faraday

  • R (Faraday Development Ltd) v West Berkshire Council [2018] EWCA Civ 2532, [2019] PTSR 1346
    This was the decisive analogue. In Faraday, the initial agreement did not yet bind the developer to do works, but it contained defined terms under which binding obligations would crystallise later (upon exercise of an option/notice), with no procurement process possible at that later stage. The Court of Appeal required the arrangements to be viewed “as a whole” and asked whether, at entry, the authority had done all it needed to do to procure a future regulated contract.

Lord Lake applied Faraday to ECLAs:

  • Before uptake: no obligation on the provider to take any child; no “public contract” yet.
  • On uptake (place offered and accepted): reciprocal enforceable obligations arise (service delivery; funding), so the arrangement then resembles a regulated contract.
  • Procurement significance: because no further procurement step exists after the ECLA is awarded, entering into ECLAs may (depending on full facts) amount to having “done all” needed for a regulated contract to arise later—raising a potentially actionable procurement breach if the award of ECLAs was not competitively procured.

(C) Time limits: “knew or ought to have known”

  • SITA UK
    Cited for the principle that time runs once the claimant knows facts “which clearly indicated, though need not absolutely prove, an infringement” and has enough to take an informed view.
  • Mermec UK Limited v Network Rail Infrastructure Limited [2011] EWHC 1847 (TCC)
    Emphasised that knowledge of “basic facts” leading to a reasonable belief in a claim is sufficient—time does not wait for full proof.
  • Nationwide Gritting Services Limited v The Scottish Ministers [2013] CSOH 119
    Adopted in Scotland to focus on whether the tenderer has sufficient information to commence proceedings (supporting a practical, not perfectionist, threshold).
  • Brookhouse Group Ltd v Lancashire County Council [2024] EWCA Civ 717, [2024] PTSR 1513
    Relied on by the pursuer to argue time runs only after reasons are communicated; Lord Lake rejected that broad reading for non-ineffectiveness remedies, holding the focus is knowledge “from any source”, not whether the authority supplied reasons.

3.2 Legal Reasoning

(A) When does an ECLA become a regulated “public contract”?

The court’s reasoning is structured around enforceability and reciprocity:

  • No enforceable duty at signature: at the point of concluding the ECLA, the provider is not obliged to deliver services to any child, or any number of children, because service delivery depends on later parental choice and acceptance of a place.
  • Enforceable obligations on uptake: when a place is offered and taken up, the ECLA framework makes the provider’s National Standard delivery obligations operative and makes the Council’s funding obligation operative.
  • “As a whole” procurement analysis: adopting Faraday, the court treated the ECLA as an arrangement that can be “not yet” a public contract at entry, but which is designed so that a public contract will materialise later without any further procurement step by the authority—raising a serious question of procurement compliance at the point the ECLA is awarded.

Notably, the court repeatedly framed its conclusion at this stage as one of relevancy: it was enough that the pursuer’s case was not bound to fail on scope.

(B) Time bar: why the action failed despite a potentially arguable procurement point

The court then separated remedies and applied Regulation 88:

  • Ineffectiveness: the Council did not argue the 6-month time limit for ineffectiveness was missed (and the court proceeded on that basis).
  • All other remedies: a strict 30-day clock runs from when the economic operator first knew or ought to have known that grounds arose.

Applying the “sufficient knowledge” test, Lord Lake held:

  • The Council’s 18 February 2025 letter (non-renewal notice) did not supply sufficient knowledge of new awards.
  • A publicly available committee Report (available from 14 March 2025) indicated: all ECLAs would end on 12 August 2025; new ECLAs would be offered only to providers meeting specified National Standard criteria; and (critically) the narrative suggested no procurement exercise had been run.
  • The committee Minute of 1 May 2025 added little substantively but showed the matter was publicly considered.
  • The Council’s letter dated 2 May 2025 (received 5 May) explicitly referred to having “made the necessary arrangements for the procurement of a new ELC partnership” and to excluding providers not meeting specified criteria—triggering a reasonable need for the pursuer to inquire further.

Even though there was no proof the pursuer actually read the Report/Minute, the court held that by end of May 2025 the pursuer ought to have known the grounds (allowing a margin for straightforward inquiries). Service on 31 July 2025 was therefore out of time.

(C) No extension of time

The pursuer argued for a pragmatic extension (including reference to pre-action correspondence) and that it would be anomalous to leave only the “more drastic” ineffectiveness remedy. The court rejected these submissions:

  • The letter-before-action point was not causative of missing the deadline on the court’s timeline.
  • The availability of a longer time bar for ineffectiveness did not justify extending the shorter period for other remedies; Faraday was cited for the proposition that the 30-day limit is not switched off merely because ineffectiveness is sought.
  • No other compelling ground for extension was established.

(D) Title and interest

Although ultimately academic, the court’s approach is important. The Council argued there was no competitive harm and no pleaded loss. The court held that, given Regulation 87’s duty owed to “economic operators” and live factual disputes (including whether the pursuer would have been excluded lawfully), title and interest could not be defeated at debate on relevancy.

3.3 Impact

(A) Substantive procurement classification of ECLAs (and similar “opt-in” public schemes)

The opinion provides a structured way to analyse arrangements where:

  • the authority sets up an agreement with providers,
  • no provider is bound to perform at the moment of signature, and
  • performance (and payment) depends on later third-party choices (here, parents selecting a provider and taking up a place).

The court’s key contribution is to reconcile the enforceability requirement (Helmut Müller, Remondis, Tax-Fin-Lex) with Faraday’s “arrangements as a whole” approach: an agreement can be outside procurement rules at signature (no present obligation) but still be attacked as an unlawful procurement strategy if it is the decisive step that ensures a regulated contract will arise later without any further procurement opportunity.

(B) Remedial strategy: strict separation of time limits by remedy

The decision is also a cautionary tale: even if ineffectiveness remains in time, damages/declarator may be lost unless raised within 30 days of sufficient knowledge. Claimants must therefore protect all remedies early, rather than assuming the ineffectiveness timetable will “carry” ancillary claims.

(C) Practical governance consequences for Scottish contracting authorities

Authorities using partnership/commissioning models in childcare (and potentially other public services with user choice) should anticipate that:

  • the absence of an immediate duty to perform may not immunise the scheme if the authority has effectively “procured the result” in advance,
  • documentation describing the scheme (committee reports/letters describing procurement arrangements) may start limitation time running for challengers, and
  • if the authority’s model is intended to culminate in enforceable service delivery and payment on uptake, procurement compliance risk should be assessed at the point providers are admitted to the scheme.

4. Complex Concepts Simplified

  • “Public contract” / “for pecuniary interest”: not just any public funding arrangement. Procurement rules typically require a bargain: each side is legally bound to do something in exchange for consideration (money or something else of value).
  • “Legally enforceable obligations”: the authority must be able to sue for performance (or equivalent legal remedies) if the contractor does not do what it promised. If the contractor can simply “walk away” with no breach, there may be no regulated contract yet.
  • “Synallagmatic”: a reciprocal contract—obligations on both sides (provider delivers services; authority pays).
  • “Not yet a public contract” (the Faraday idea): an agreement can be non-procurement at signature but still be problematic if it locks in a later enforceable contract without any chance for a lawful procurement competition at that later stage.
  • Regulation 88 knowledge test: time starts when the claimant knows (or should know) enough basic facts to form a reasonable view there is a breach—waiting for the full contract paperwork or the authority’s legal reasoning may be too late.

5. Conclusion

  • The court accepted, in principle, that ECLAs may fall within the procurement regime once a place is offered and taken up, because enforceable reciprocal obligations then arise.
  • Applying R (Faraday Development Ltd) v West Berkshire Council, the court treated the ECLA structure as potentially capable of being an unlawful procurement technique if it is the decisive step by which the Council ensures a regulated contract will materialise later without further procurement.
  • The pursuer nevertheless lost because the non-ineffectiveness claims were time-barred: Regulation 88’s 30-day limit ran from when sufficient knowledge existed (or should have existed), not from disclosure of the new contract template or the Council’s legal position.
  • The decision underscores both (i) the procurement-law sensitivity of “framework/partnership + user choice” models, and (ii) the unforgiving procedural discipline required to preserve remedies.