East Wick and Sweetwater – Modifications to Development Agreement

London Legacy Development Corporation (LLDC) entered into a Development Agreement (DA) with East Wick and Sweetwater Projects (Holdings) Limited on 27 February 2015 for the development of the site known as East Wick and Sweetwater in the Queen Elizabeth Olympic Park, Stratford, London. The DA was varied by a supplemental agreement and deed of variation dated 14 July 2016, a deed of variation dated 26 July 2016, a deed of variation dated 15 December 2017 and a deed of variation dated 21 December 2018. The parties have entered into a further deed of variation and ancillary documents to amend the DA to incorporate various modifications including the following: (i) Reduction in share of returns payable to LLDC; (ii) A private unit by private unit overage provision for further payments to LLDC above the fixed returns for sales of private units; (iii) Simplifications to the arrangements governing LLDC’s share of Private Rental Sector revenues whereby 16% of the Private Rental Sector units in Phases 2-7 are owned outright by LLDC; (iv) Modifications to termination payments to cover costs incurred; (v) Introduction of tighter development milestones requiring specified delivery by the Contractor in respect of each of the phases; (vi) “Golden Brick” arrangements in respect of blocks containing 100% affordable housing units or 100% private rented units; and (vii) the removal of Phase 6 from the DA.

LLDC considers that the modifications have been brought about by circumstances which a diligent contracting authority could not have foreseen, they do not change the overall nature of the contract and the price has not increased by more than 50% of the value of the original contract. The modifications have been brought about as a result, inter alia, of adverse market conditions which have been caused in part and exacerbated by the COVID-19 pandemic. LLDC therefore considers that Regulation 72(1)(c) of the Public Contracts Regulations 2015 applies.

Furthermore, LLDC considers that the modifications are not “substantial” for the purposes of Regulations 72(1)(e) and (8). The modifications do not render the contract materially different in character from either the original DA or the immediately preceding version. Whilst some of the modifications when considered alone are in the Contractor’s favour, LLDC has sought to counterbalance this with modifications in its own favour, so that the effect on the overall economic balance is neutral. LLDC therefore considers that Regulation 72(1)(e) also applies. As a result, LLDC considers that the modifications may be made without a new procurement procedure.