Gowling WLG partner Robert Breedon offers his insight to In-procurement magazine into what UK procurement law looks like after Brexit. He discusses the options available to the UK after Brexit and the significance the vote could have on procurement law.
Following the UK's vote to leave the European Union (EU) in June, there is much debate on whether the Government will pursue a 'soft' or 'hard' Brexit. The approach adopted will, of course, be politically driven but the chosen route will impact on a number of areas currently subject to EU-based legislation including the UK's current public procurement laws. It is now very well documented that the process surrounding the UK's exit from the EU is likely to take up to two years from the triggering of Article 50. For the short term therefore, we are unlikely to see any significant change in our public procurement laws: the current suite of Regulations comprising the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016 and the Concessions Contracts Regulations 2016 will continue to regulate UK public purchasing for some time.
Indeed, any medium term changes to domestic legislation will need a positive decision by Parliament: UK law derived from EU legislation will not be repealed simply by virtue of the UK leaving the EU (such laws will continue in force by virtue of The Great Repeal Bill).
But what about the post-Brexit position?
The options available to the UK upon leaving the EU include the following:
- Return to membership of the European Economic Area (EEA) and sign up to the European Free Trade Agreement (EFTA). This has been described as the 'Norwegian Model' and would allow the UK to negotiate stand - alone trade agreements with non-EU countries and to come out of the scope of some EU policy areas such as agriculture and fisheries. From a procurement law perspective however, it would mean retaining the existing EU procurement law principles of transparency, equal treatment and non-discrimination;
- Join EFTA (alongside Norway, Switzerland, Iceland and Lichtenstein) but not the wider EEA. This has been described as the 'Swiss Model'. This would entail greater freedom under a framework of separately negotiated bilateral trade agreements combined with limited access to the single market. As part of the deal for access to the single market, the UK is likely to have to accept the principles of free movement and the existing principles underlying EU procurement law.
These first two options are typically referred to as 'soft Brexit'. At this point both of these options are looking very unlikely. Norway will probably block the UK's accession to EFTA and the EU is highly unlikely to repeat the suite of bilateral deals that it has with Switzerland.
Other options being discussed include:
- Exit from the EU and the single market. Under this approach the UK could seek to rely upon existing rules for the World Trade Organisation (WTO) and, specifically, the WTO's Government Procurement Agreement (GPA). As an autonomous signatory to the GPA (rather than through its current EU block membership), the UK would need to comply with the GPA's overriding principle of non-discrimination which requires members not to treat any trading partner less favourably than any other unless covered by a separate free trade agreement (see the final option below). The other requirements of the GPA include: following transparent and impartial procurement procedures; rules on the exclusion of bidders; requirement for technical specifications; and obligations to provide information to unsuccessful bidders. If that all sounds rather familiar, it is because our current EU-based procurement law is required to comply with the GPA;
- A further option is to seek to negotiate a new free trade agreement (FTA) with members of the EU. This would be a completely new and bespoke arrangement and the extent to which the UK will be able achieve the desired access to the single European market will be a matter for negotiation. Critics of this approach have pointed to the enormous difficulties of seeking to negotiate a trade deal that preserves all the advantages of the free market without any of the current rules or costs of such access. There is, of course, no guarantee that a new FTA could be negotiated or, indeed, how long it may take. Commentators have pointed to the EU's FTA with Canada which has taken seven years to negotiate and sign; ratification of that deal is expected to take another two years.
Whilst there are a number of valid criticisms of the current EU procurement regime and a desire on the part of some to seize the opportunity to re-write the rules, this desire for change needs to be tempered by the following:
- The difficulties highlighted by the above options and the reality that the final arrangement is highly likely to involve adherence to an EU driven procurement regime or, at the very least, adherence to equivalent principles under the GPA;
- A very different public procurement regime runs the risk of reduced investor confidence in the UK public contracting market: will tenderers for large, public contracts rue the loss of current well-established procurement practice and possibly feel that they have a reduced ability to challenge procurement decisions if they have been treated unfairly?
- The UK has a track record of going beyond the minimum requirements set out in current EU law and the GPA: for example, UK specific rules for advertising on Contracts Finder and the incorporation of the 'Lord Young rules' on below threshold procurements;
- Even in the absence of specific procurement law, the underlying principles of public law suggest that UK Courts will be keen to apply a general duty of fairness and equal treatment on contracting authorities;
- There will, quite rightly, be ongoing scrutiny of public spending and the benefits of securing greater value for money through some form of competition will remain.
In light of the above, it is suggested that reform of the UK public procurement regime is likely to be a low priority for the Government as it seeks to deal with the overall consequences of Brexit. As noted above, any changes to the UK regime will require a positive decision on the part of the Government. As such, it is far more likely to be the case that changes to domestic procurement legislation will be driven by the need to reflect the outcome of the Brexit negotiations and, specifically, the extent to which and the terms on which the UK is able to maintain access to the single market. Whatever route is chosen for the UK's exit from the EU, changes to our public procurement landscape are not expected to be significant and are far more likely to be a consequence of reacting to a wider political solution rather than being an end in themselves.
This article was written by partner Robert Breedon and originally appeared in the January edition of In-procurement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.