How will Brexit impact Public Procurement in the UK?

On 5 September 2018, the House of Commons issued a 17 page Briefing Paper discussing the impact of Brexit on the UK public procurement sector. A brief summary of the findings is set out below.

The Current Regime

At present, UK public procurement is largely governed by EU rules deriving from Treaty principles and EU Directives (implemented into domestic law under a series of UK regulations). The effect of this regime is that:

• public procurement opportunities must be advertised where they might be of cross-border interest; and
• procurement opportunities must be open to suppliers located in other EU Member States.

The implementing UK regulations regulate the procedures to be followed, the selection and award criteria to be used and how procurement decisions may be challenged. EU rules currently apply to all EEA countries under the EEA Agreement.

By virtue of its EU membership, the World Trade Organization (WTO) General Procurement Agreement (the GPA) as well as trade agreements with certain third countries that govern public procurement (for example, the EU-Canada Trade Agreement) apply to the UK.

Post Brexit

Immediately after Brexit, existing UK Regulations on procurement (which implement EU Directives) will continue to apply. The European Union (Withdrawal) Act 2018 preserves “EU-derived domestic legislation”; this would include the UK Regulations applicable in respect of procurements above certain thresholds (e.g. the Public Contracts Regulations 2015). However, there is ambiguity around the future applicability of the Treaty principles in cases where these Regulations do not apply. It is expected the Withdrawal Agreement (currently being negotiated) will contain a transition period until the end of 2020. During this time, it is anticipated that EU law will continue to apply in the UK – including in relation to procurement. After this, there will be more freedom for the UK to devise its own procurement rules.

The GPA

After Brexit, procurement obligations will be governed by international agreements to which the UK is party. The UK Government is taking steps to ensure the UK preserves its involvement in the GPA by securing independent membership on the same terms that currently apply. While the GPA is expected to apply, mutually opening up much of the larger public procurement opportunities in the UK and EU, it covers only some of the EU access that the UK currently enjoys and vice versa.

Under the GPA, many large public sector procurement opportunities must be opened up to suppliers in countries party to the Agreement. Its focus is on larger procurement opportunities above certain thresholds – covering the procurement of goods and services by government as well as other public sector bodies (coverage can vary by party, depending on the commitments made by that party under the Agreement). This procurement must be subject to open, fair and transparent conditions of competition.

The GPA provides for equal treatment of potential suppliers from countries party to the Agreement as well as setting minimum standards regarding national procurement procedures and providing for transparency of procurement related information.

Parties to the agreement must have a “domestic review mechanism” allowing suppliers to take a challenge where they believe the GPA has been breached. Such challenges are currently brought in the High Court under the UK Regulations. At international level, parties may avail of the WTO dispute settlement mechanism, where they believe another party has violated their obligations under the Agreement.

Trade Agreements

Some trade agreements include commitments to open public procurement markets, beyond the scope of the GPA. It is likely these EU negotiated trade agreements will cease to apply to the UK after Brexit. The UK Government is currently seeking ways of maintaining continuity in trade arrangements with these third countries.

Further commitments could be made as part of a UK-EU trade agreement or other arrangement between the UK and the EU. This could potentially offer access to markets that would not otherwise be open to the UK under the GPA. One option is a "UK-EU procurement agreement" which would continue to apply the EU procurement Directives, maintaining EU access to above threshold UK markets on the same basis as at present as regards scope of coverage, award procedures and remedies. The common advertising system could also easily be retained.

Another option is the "GPA plus" approach, whereby access is governed primarily by the GPA and supplemented by additional rules (on coverage, award procedures and remedies) to address the most important gaps between the EU and their GPA systems.

Scope for change

Procurement laws and obligations could be changed through UK legislation. The UK will have a choice about the extent to which it opens its public procurement market to suppliers in other countries. It may choose to open all (or part) of its market to foreign suppliers in exchange for UK suppliers having access to foreign markets through agreements with the EU and other countries. The benefits of such policy would have to be carefully considered against the potential drawbacks. While such international agreements would likely offer greater value for the UK public sector (by opening the market to competition) as well as the opportunity for UK businesses to sell to the public sector in other countries, there is a trade-off to these benefits as the UK’s ability to support domestic suppliers would be significantly reduced.

At present, responsibilities for procurement are generally either devolved or set at EU level. Post Brexit, there is potentially a greater role for devolved administrations to shape public procurement rules and policy. The UK Government hopes to establish a procurement “framework” with the devolved administrations setting out a common approach to governance.

Summary

Post Brexit, UK regulations on procurement will continue to apply. There will be greater scope for the UK to set its own public procurement rules. This freedom to set procurement policy may be restricted by any international agreement that the UK chooses to enter. The UK is expected to remain a party to the GPA on the same terms that it currently holds under EU membership. In addition to this, further commitments could be made as part of a UK-EU trade agreement or another arrangement between the UK and the EU.

The full report is accessible here

For further information contact Anna-Marie Curran, Vincent Power, Alan McCarthy or Micaela Diver of A&L Goodbody’s EU Competition & Procurement team.

Date Published: 18 September 2018