Brexit finally became a reality on 31 December 2020, as the UK reached the end of the agreed Transition Period after the UK's departure from the EU.
The UK government has heralded Brexit as a "historic opportunity to overhaul our outdated public procurement regime". With the UK government buying almost £300 billion of goods and services from the private sector every year, businesses in the UK and around the world must be asking how the new regime will affect them. How much will the process of government procurement in the UK actually change?
While the UK was an EU Member State, the government procurement process in the UK was based on EU directives-so both the regulatory environment and the practical tendering process was essentially harmonized across the EU.
One immediate change has been that the UK no longer participates in the open tender advertising process through the EU's Official Journal and Tenders Electronic Daily. The UK has started an equivalent system: an e-notification service called "Find a Tender" where UK government contracts above a value threshold are published (lower value contracts are published elsewhere).
In regulatory terms, the UK's procurement rules are largely staying the same-for now. Partly, the short-term status quo is because the UK had traditionally translated the EU's procurement directives into national UK law via national implementing regulations-and those national regulations stay in place despite Brexit.
But going forward, of course, the UK has some degree of freedom to go its own way and do things differently from the EU-although this freedom is not completely unrestricted because the UK is a party to the WTO's Agreement on Government Procurement (the GPA) and must stay within GPA requirements.
Membership to the GPA
Following the WTO's approval on 7 October 2020, the UK joined the GPA as an independent member from 1 January 2021. The GPA-which we've discussed before in a previous alert-is a voluntary trade agreement within the WTO, whereby signatory parties give access to foreign suppliers to their government procurement markets. Maintaining membership gives UK suppliers access to a £1.3 trillion international market, comprising of EU procurement markets as well as other markets (such as the United States, Japan, and South Korea).
However, the UK will have a reduced level of access to EU markets because the scope of activities covered by the GPA is narrower than membership to the EU single market. The UK has tried to address this gap in its trade talks with the EU.
Post-Brexit, non-UK bidders will have similar rights to bid for UK procurement opportunities as before the transition period ended. Bidders from other GPA countries will continue to have rights under the UK procurement regulations as long as the procurement scope is within the relevant GPA schedules. EU bidders will (continue to) have similar but slightly broader rights than other non-UK bidders on the basis of the coverage of the UK-EU trade and co-operation agreement-see below.
The UK-EU Trade and Co-operation Agreement (TCA)
The TCA covers a broader range of EU/UK procurement activity than that provided for under the GPA.
The TCA provisions also add to the UK and EU's existing GPA obligations, e.g., a UK supplier must not be required to demonstrate experience in the territory of the EU (and vice versa) as a condition for participation.
Unlike the GPA-which does not apply to contracts below certain value thresholds-the TCA provides that, when procuring a contract below the relevant financial threshold, the procuring party must treat EU or UK suppliers no less favourably than suppliers from its own country (unless covered by specific GPA exceptions such as security).
Streamlining the national regulatory framework
The UK Government has also published a Green Paper signalling its intention to simplify the existing regulatory framework into a single set of rules for all public contract awards. In doing so, the UK proposes, for example, to reduce the procurement procedures available to buyers from seven to three:
- a new competitive, flexible procedure that gives buyers maximum freedom to negotiate and innovate to get the best from the private, charity, and social enterprise sectors;
- the (existing) open procedure that buyers can use for simpler, "off the shelf" competitions (expanding its availability to suitable defence and security procurements for which this procedure is currently not available);
- a "limited tendering procedure", which will be effectively equivalent to the existing "negotiated procedure without prior publication".
The Green Paper proposes changes within these procurement procedures, including:
- basing the evaluation of bids on the Most Advantageous Tender (MAT) rather than the most economically advantageous to encourage contracting authorities to take a broader view, including social value as part of the quality assessment;
- expanding the grounds on which bidders may be excluded for poor past performance;
- establishing "crisis" as a new ground for using the limited tendering procedure.
There are also plans to reform the legal review system as well as to tackle claims over minor issues that delay contract awards, such as a new fast track system and capping the level of damages available to successful bid protest complainants to a maximum amount equal to legal fees plus 1.5 times their bid costs.
Preparing for the new public procurement regime
While the Green Paper is likely a good indicator of changes to come, the Cabinet Office will still take several months to reflect on the proposed approach before deciding what to put into draft legislation in late 2021 or 2022.
One part likely to stick is the Cabinet Office's emphasis on cutting red tape-a common theme from the current UK government's agenda (in fact, the prime minister recently addressed a conference of 250 industry leaders, inviting them to propose areas where his government can cut bureaucracy). At the same time, the UK has already started to show that, where it can, it is likely to be prepared to dis-align itself with legacy EU rules where it feels that it makes sense to do so.
Even so, the UK's freedom to diverge from EU public procurement rules is somewhat limited by its GPA membership and the TCA. So, while the UK government procurement rules are likely to change, those changes may not be too fundamental.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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