2.22 In the full specification, which the Agency issued to potential bidders in April 1997, the Agency specified that they would take the majority shareholding in the joint venture company. Only then did the procurement team consider the implications of the Agency having control over the joint venture company. A review found that:
■ the joint venture company was likely to be classified as a public sector body because effective control of it would lie with the Agency and, as such, the company would have to be established as a non-departmental public body; and
■ a joint venture company, as a public sector body, would be subject to the normal range of Government accounting policies and requirements, which potential private sector partners had indicated they did not find compatible with the pursuit of commercial enterprises.
2.23 The Agency realised that establishing the joint venture company as a public sector body would introduce further delays to the procurement. They considered that such delays put at risk their ability to retain the interest of the remaining bidder. Rather than take this risk the Agency decided to hold a non-controlling, 30 per cent, interest in the joint venture company and to secure the protection they needed through contractual provisions.
2.24 The Agency learnt from their legal advisors that this decision constituted a change to the partnership that was material to the procurement from the time when the full specification was issued in April 1997. To comply with procurement regulations the Agency, in September 1997, offered the six potential bidders who had received the full specification, the opportunity to respond to the change. None of the five that had withdrawn decided to take up this opportunity. Reviewing the control of the joint venture company, advising the potential bidders about the change including inviting those that had left the competition to re-enter and awaiting the responses delayed the procurement by four months (Appendix 3).