12 July 2016 #Public Procurement
Public procurement is one of the areas of UK law most exposed to the consequences of the UK’s decision to leave the EU. The present UK regulations, principally found in the Public Contracts Regulations 2015, the Utilities Regulations 2016 and related regulations, are the implementation into UK law of a series of EU directives. True, the UK had a hand in their formulation and a degree of discretion over the manner of their implementation into UK law. However, they are also the type of legislation that many “Brexiters” took most offence over. Some saw them as dictats from unelected EU officials in the European Commission telling public authorities in the UK how to administer and award public contracts.
The content of the current rules have certainly not escaped criticism, with many viewing them as expensive, time-consuming and unnecessarily bureaucratic. During the referendum it was argued by some in the Leave Campaign that EU procurement rules cost the UK taxpayers £1.6 billion a year and wasted 1.9 million days in red-tape delays. Whether those statistics are true remains a matter of debate. As it happens, the European Commission’s own report on procurement within the EU cited the UK’s procurement regime as the longest and most expensive of any Member State, apart from Greece and Malta, so perhaps the UK’s implementation of the regulations should take some of the blame.
Of course, rules on public procurement are not a unique feature of EU law, and any modern state needs rules to determine how valuable contracts are awarded to prevent abuse and corruption. Without confidence that public contracts are awarded fairly, the risk is that foreign businesses will be discouraged from investing in the UK.
As yet, the timeline for service of notice under Article 50 of the Lisbon Treaty triggering the UK’s exit from the EU has not started. We would expect the current rules to remain in place for the near future at least. Beyond that the future of the procurement regime is less certain, and will depend largely on the deal the UK government negotiates with the EU for its continued membership of the single market, if that is where the nation’s future lies. The simple answer is that we do not know what decisions the UK government will make in the coming months and years and what terms the EU will be prepared to offer the UK. If the deal negotiated involves the UK continuing to have full access to the single market then, in all likelihood, the current regime would remain in place. Equally, Norway’s relationship with the EU, which is often used as an example of how the UK might be positioned post-Brexit, is conditional upon Norway complying with much of EU legislation. This includes the procurement directives so again little would change if this were the outcome.
More difficult to predict is the situation if the UK decides not to continue its membership of the single market, perhaps because the political cost of signing up to the principle of freedom of movement of workers is too high. This raises as many questions as it answers. Does the UK want to restrict its public procurement just to companies based in the UK, notwithstanding that this might reduce competition and increase prices payable by public authorities for their goods and services? Do we want to inhibit UK businesses the opportunity of bidding for overseas public contracts?
If the UK is to negotiate a series of bilateral agreements with current EU Members States, although the Procurement Directive would not be mandatory, it is likely that something similar would be put in place. What about the rest of the world? There is already in place the Government Procurement Agreement (the GPA), a product of the World Trade Organisation involving 46 of the largest global economies and to which the UK is currently a party by virtue of their EU membership. This opens up procurement markets to signatories of the GPA but, not surprisingly, contains reasonably detailed procurement rules, not dissimilar to those in the EU Directive.
Although the precise future of public procurement in the UK is uncertain, there will always be a set of rules which govern how public contracts are awarded in the UK. If the UK wants to continue accessing foreign procurement markets and allowing foreign businesses to compete in its own market, then it is likely that those procurement rules will be identical to or at least very similar to those presently in place.