On 23 August 2018, the UK Government began publishing technical notes on the effect of a no-deal Brexit. These notes are intended to provide guidance to citizens, businesses, public sector bodies and Non-Governmental Organisations in the United Kingdom on how to prepare for the possibility of the UK leaving the EU next March without concluding a Withdrawal Agreement. It is expected that around eighty technical notes will be published in total. Over the next two months SPICe Spotlight will provide analysis and comparative information on a number of these. The first blog provided an overview of the UK Government’s Preparations for a no-deal Brexit.
This blog examines the implications of a no-deal Brexit for public procurement policy.
Public procurement – the current rules
Public procurement policy across the UK is currently governed by EU rules. The EU rules govern how works, goods and services are procured. The EU’s Treaty on the Functioning of the European Union sets out four key fundamental principles that underpin the public procurement regime across the EU—
- Equal treatment: everyone must be treated equally and given an equal chance of winning a contract, and the procurement processes must be fair.
- Non-discrimination: public bodies must not discriminate between individuals or businesses on the basis of the EU Member State in which they are located.
- Transparency: public bodies must ensure that their procurement and contracting processes are clear and transparent, and contract opportunities should generally be advertised.
- Proportionality: public bodies have a duty not to include contract requirements and terms that are disproportionate to the size or value of the contract.
As long as there is a certain EU cross-border interest in the subject of the procurement, public sector bodies are obliged to consider these principles throughout their procurements, at whatever value, regardless of whether the full EU procurement rules apply. Further rules apply where the value of a procurement exercise is above EU set thresholds and all procurement opportunities that fall within the scope of the EU procurement directives are advertised on the Official Journal of the European Union (OJEU) via Tenders Electronic Daily (TED).
The EU’s procurement regime is outlined in various procurement directives including Directive 2014/24/EU on public procurement and repealing Directive 2004/18/EC and Directive 2014/23/EU on the award of concession contracts.
Procurement policy in Scotland
The procurement policy landscape in Scotland is based on the “Scottish Model of Procurement”, which is focussed `on “the best balance of cost, quality and sustainability”. A range of legislation and guidance underpins the approach to public procurement in Scotland:
- The Procurement (Scotland) Reform Act 2014 and associated regulations and guidance sets out a range of principles and duties on contracting authorities, as well as governing the regime for certain contracts above below EU Thresholds.
- The Public Contracts (Scotland) Regulations 2015 transpose the EU Public Contracts Directive into Scots Law, and govern the regime for all public contracts above the EU thresholds.
Implications of a no-deal Brexit
In the event the UK leaves the EU having finalised a Withdrawal Agreement, a standstill transition period will begin which will last until the end of 2020. This would mean that Scotland’s public procurement regime would essentially stay the same until then with EU rules continuing to apply.
However, if the UK leaves the EU without finalising a Withdrawal Agreement, the UK will immediately leave the EU’s public procurement regime. Despite this, the laws governing public procurement won’t immediately change because the European Union (Withdrawal) Act ensures continuity of Scots and UK law by copying over all EU law on exit day. The UK Government has stated that changes to “procurement rules will be made via amendments to existing legislation, to ensure continued operability” but Scottish regulations covering procurement policy should largely remain the same on the day after Brexit.
On 13 September the UK Government published a technical note outlining the implications of a no-deal Brexit for public procurement policy.
In the event of a no-deal Brexit, the key change to public procurement rules for contracting authorities will be that they would need to ensure their contract notices are published on a newly established UK e-notification service rather than OJEU/TED. The new service will be established in time for exit day. In addition, contract opportunities in Scotland will continue to be advertised on Public Contracts Scotland.
The key change for suppliers wishing to bid for public contracts in the UK is that they will be able to access contract opportunities on the new UK e-notification service. However, for service providers wishing to bid for public service contracts within the EU, the EU’s guidance states that in the event of no-deal UK entities would cease to be eligible as Union entities for the purpose of participating in EU procurement procedures. The guidance adds that unless otherwise provided for by the legal provisions in force, tenderers from the United Kingdom could be rejected. The EU’s specific guidance on Brexit and public procurement makes clear that as of exit day, in the event there is no transition period:
Economic operators from the United Kingdom will have the same status as all other economic operators based in a third country with which the EU does not have any agreement providing for the opening of the EU procurement market. They shall therefore be subject to the same rules as any third country tenderer.
The EU’s rules with regards to public procurement and third countries could have implications for UK bidders for contracts in the purchase of supplies by entities operating in the water, energy, transport and postal services sectors and the defence sector.
The WTO Agreement on Government Procurement
The UK Government’s technical note also states that the UK is also aiming to accede to the WTO Agreement on Government Procurement (GPA). The UK currently participates in the GPA by virtue of its EU membership.
The aim of the GPA is to open up access to government procurement markets among its parties. There are currently 19 parties comprising 47 WTO members whilst another 10 WTO members are in the process of acceding to the GPA.
The Trade Bill which is currently going through the UK Parliament includes provisions to give UK Ministers powers to implement the Agreement on Government Procurement as an independent member instead of as part of the EU.
The WTO website sets out the rules that underpin the GPA:
The text of the Agreement establishes rules requiring that open, fair and transparent conditions of competition be ensured in government procurement. However, these rules do not automatically apply to all procurement activities of each party. Rather, the coverage schedules play a critical role in determining whether a procurement activity is covered by the Agreement or not. Only those procurement activities that are carried out by covered entities purchasing listed goods, services or construction services of a value exceeding specified threshold values are covered by the Agreement.
Negotiation of the coverage schedule with regards to public procurement will form one aspect of the UK’s negotiations with other WTO members as it leaves the EU.
Procurement policy in the longer term
Whilst the procurement regulations will continue to apply after the UK has left the EU, in the longer term leaving the EU may provide opportunities for different approaches to procurement policy. This will in part depend on the future relationship negotiated between the UK and the EU and also on any other bilateral trade agreements the UK chooses to enter into.
Public procurement policy has also been identified by the UK Government as a policy area where legislative common UK frameworks might be necessary.
Iain McIver, SPICe Research