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Guidance on ESS' SIMS Contract Renewal

on Thursday, 16 December 2021.

Education Software Solutions Ltd (ESS) recently took the decision to change the renewal term for its SIMS Annual Entitlement contracts from one year to three years.

The decision is particularly problematic for schools and trusts where a three year renewal term does not align with their long term MIS strategy but also gives rise to potential public procurement issues.

We've set out the below guidance on some of the key questions that have arisen for those schools and trusts that are affected by this.

Please note though that this is general guidance only based on ESS' standard SIMS Annual Entitlement contract (ie which is renewed on 1 April each year). There are nuances to the contractual position and the options available and recommendations may differ for each school and trust.

We would advise that any school or trust that is affected by this issue seek legal advice and we would be very happy to discuss your ESS SIMS contract and specific circumstances with you.

Does ESS Have the Right to Vary the Renewal Term From One Year to Three Years?

Yes. Under the standard SIMS Annual Entitlement contract ESS has rights to vary the contract terms for any renewal term (including the duration of the renewal term) and to terminate the contract on giving 90 days' written notice before 1 April 2022 (ie on or before 31 December 2021). ESS has confirmed that no school or trust will be automatically moved onto a three year renewal term and that they are free to accept or reject the three year renewal contract. However ESS will not be offering one year contracts for its core SIMS products and has stated that any contract that is not renewed will expire on 31 March 2022.

There are possible legal arguments to challenge the right to terminate the contract on 90 days' notice and the three year renewal term as being unfair and anti-competitive. This is however a complex legal area which would need further detailed legal consideration (see further comments below).

Are There Any Public Procurement Implications in Accepting the Three Year Contract?

For those schools and trusts that are subject to the Public Contracts Regulations 2015 (ie the maintained schools and academies), the change to the renewal term to three years is likely to be considered a 'material' change to the contract. Whilst there are justifications for material changes, for example where the need for modifications has been brought about by circumstances which the school/trust could not have foreseen, the increase in price must not exceed 50% of the value of the existing contract. For large trusts with multiple schools, the three year renewal term may also take the total contract value over the procurement threshold of £213,447*. It is likely that any such schools and trusts affected by this issue will need to re-tender the contract and accepting the three year contract renewal term would risk the school / trust being in breach of the procurement regulations. In the event of a successful challenge, the contract could be declared ineffective and the school or trust could be fined.  

As compliance with the procurement regulations is an issue for the school/trust, arguing that the extension would be contrary to the procurement regulations does not necessarily provide a reason to force ESS to accept a one year renewal term. This does of course put schools/trusts in an impossible position as they risk either being in breach of the procurement regulations or left without a critical business system. This is one of the factors that would need to be considered in determining whether it is unfair and / or anti-competitive (see further comments below).

Is There Any Scope to Challenge the Three Year Renewal Term?

It is possible that ESS' conduct constitutes an abuse of a dominant position and may infringe competition law. This is however a complex legal area and further investigation and analysis would be required in order to come to a clearer view on whether there is a credible argument of infringement.

In summary, it would be necessary to demonstrate that:

  • ESS has a dominate position of the relevant market - ESS clearly has a large share of the UK market for management information software used by schools but detailed analysis would be needed to define the relevant market and determine ESS' market share.
  • ESS has abused that dominant position by engaging in methods other than those used by businesses in normal competition, so as to harm the functioning of effective competition - ESS' conduct may be considered abusive on the basis that:
    • the three year contracts ‘foreclose’ a sufficient part of the market to its rivals, including new entrants with innovative new solutions and services
    • the imposition of a three year term is ‘unfair’ as it limits the ability of trusts/schools to choose their MIS provider and exposes them to the risk of financial penalties and litigation for infringing the public procurement regulations

What Action Should Schools/Trusts Take at This Stage?

We would advise that any school or trust that does not wish to accept the three year renewal term notify ESS as soon as possible (but in any event before 31 December 2021) and make clear that they wish to renew the contract for a further one year only. If ESS continue to refuse to accept a one year renewal term following collective pressure from the sector, schools and trusts will then need to consider whether to further challenge ESS's actions.

In their update issued on 7 December entitled 'Clarity for the future', ESS reaffirmed that renewing SIMS for a three-year term requires 'express consent', so no schools will find themselves locked into this unknowingly. ESS also confirmed that schools can renew their SIMS contract 'at any point up to or including 31 March 2022', though this would of course involve signing up to the three-year term.

On that basis, for those schools/trusts that would prefer not to sign up for three years, it would seem sensible to use the time between now and March 2022 to look into possible alternatives, including the potential for challenge as referred to below. If there turns out to be no other option than to remain with SIMS then this action can be taken at a later date.  

How Can VWV Help?

  • Contract Review - We can review your SIMS Annual Entitlement contract and related SIMS software licences and provide tailored advice to any school/trust that is affected by this issue. There are various nuances to the contractual position and our advice will depend on a school's/trust's contract and specific circumstances eg whether they are on the most recent contract terms, if expiry of the Annual Entitlement terminates support and maintenance services only or the underlying SIMS software licences as well, and a school's/trust's long term MIS procurement strategy.
  • Competition Infringement / Challenging ESS - The principal objective is to obtain a prompt settlement with ESS withdrawing its threats to impose the three-year contract term. We would be happy to carry out further investigation and analysis on whether ESS' actions infringe competition law and the options available to schools/trusts to challenge ESS, and then engage directly with ESS to reach an amicable resolution. If this fails to resolve the issue further action could include issuing letters before action, making a complaint to the CMA or commencing litigation and seeking interim remedies such as injunctions.

  • Collective Group Action - We are considering how we might support a collective group action to challenge the three year renewal term. Given the similar position each school/trust is in and the remedy being sought, collective group action is certainly a possibility however it is not straight forward and would require careful consideration by each school/trust. There are nuances to the contracts and commercial position for each school/trust, cost and risk implications and it may not be in all schools/trusts interests to publicly challenge the three year renewal term. It is also unclear how the funding of such a group action would operate and whether participants would be compelled to continue contributing proportionally to the as-yet unknown final total costs, and if not, the consequences of withdrawing from the action both for the entity leaving and those remaining. The potential sharing of the liability for ESS's legal costs, in the scenario where the action was unsuccessful, would also need to be considered.

If you would like any further advice on the SIMS contract renewal or if you'd like to speak directly with a member of our Academies and Schools team please contact James Barr on 07393 149 979, alternatively please complete the form below.

* Procurement threshold as from 1 Jan 2022 inclusive of VAT

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