Following the UK's vote to leave the European Union, we consider the potential implications for procurement law in the UK to be minimal in the near term. Post Article 50 negotiations, for reciprocity reasons, and to avoid any risk of losing its legitimacy in international trade, the UK will seek to have equivalent legislation in place.
The Treaty on the Functioning of the European Union and a number of EU Directives regulate public sector and utility purchasing procedures, requiring transparency of contract opportunities, and equal treatment of those bidding for them. These rules have force in the UK through implementing legislation enacted for England, Wales and Northern Ireland, and separate implementing legislation in Scotland. The European Union (Withdrawal) Bill will have the effect of retaining the legislation on the statute books post-Brexit, until a decision is made to retain, amend or repeal them.
A broad discretion for contracting authorities to make direct contract awards could certainly speed up the procurement process, but requiring contractors to compete in an impartial process can generate better value for money and more innovative approaches to the final project. Equally, to repeal national procurement laws will leave tenderers without the ability to challenge public and utility procurement decisions, if they feel they have been treated unfairly in the process - potentially leading to reduced investor confidence in the UK government contracting market.
But it is issues beyond Europe that are likely to have the greatest impact on the post-Brexit approach to regulating procurement activities. Whether we take a 'hard' or 'soft' Brexit route, EU procurement law is based on the World Trade Organisation's plurilateral Government Procurement Agreement (GPA). In the absence of multiple bilateral trade agreements (with individual EU states and other major trading nations), the UK is likely to become an autonomous member of the WTO (rather than through its EU block membership) and sign up to the GPA. If a state is party to the GPA, its procuring entities (in specified sectors listed in the GPA 'coverage schedules') must treat suppliers from states who are also signatories to the Treaty, no less favourably than domestic suppliers, and suppliers of any other signatory to the GPA. This includes following transparent and impartial procurement procedures, as set out in the GPA. Though more comprehensive in certain areas, the EU procurement rules are required to incorporate those set out in the GPA. As an individual GPA signatory, procurement rules developed in the UK will be subject to the same requirement.
From a continental Europe perspective, depending on the post Brexit route chosen, the UK may not in future be able to follow updates and amendments to the existing EU procurement Directives. This will make life more complicated for clients with pan-European government contracting businesses, because assumptions on how a tender should run in the UK may not hold true, since the EU would no longer be the single reference point for national procurement laws.
Significant change to the UK procurement rule, risks compromising current well established procurement practice and investor confidence. EU procurement rules are tried and tested (and very recently reviewed prior to publication of the 2014 Directives (2014/23/EU, 2014/24/EU and 2014/25/EU). Developing countries working up procurement legislation for the first time will very often adopt EU procurement principles within their own bespoke framework, and organisations such as the World Bank will not finance projects within those countries unless transparent and impartial processes are in place. The UK response, earlier this year, to the EU International Procurement Instrument - that UK contracting authorities should treat suppliers from outside the EU and GPA countries in the same way as EU and GPA suppliers - indicates that post-Brexit the UK will seek equivalence, rather than difference, in its procurement policy and legislation.
Procurement law will not be subject to any Brexit specific amendments until after the UK formally leaves the EU. In the period leading up to that time, public sector purchasers and businesses involved in government contracting might:
- Identify those areas of procurement procedures which do not work well. The government's Mystery Shopper service provides a route for suppliers to raise concerns about public procurement practices.
- Identify those areas which do work well. Were there to be any change to procurement law going forward, UK common law would require that it be based on an implied duty to treat bidders for public contracts fairly and equally. Equally, the statutory duty to advertise on Contracts Finder is premised on the need for transparency to maintain a vibrant supply chain. Which of the current rules support those principles? Could the less regulated approach included in the Utilities procurement rules, or the 'light touch regime' deriving from the 2014 EU procurement directives, provide adequate regulation? Where the public sector procurement rules are currently more prescriptive, to what extent do they enhance the procurement procedure?
Should procurement legislation be subject to review post-Brexit, these are the type of issues which would be open to discussion in any consultation supporting the review.
For a more detailed analysis of the issues, please contact the authors or your usual DLA Piper contact.