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Procurement

Brexit: the end of public procurement rules or business as usual?

The UK exited the EU on 31st January 2020. The transition period in the Withdrawal Agreement ended on 31st December 2020. Existing EU Treaties, EU free movement rights and the general principles of EU law now no longer apply in relation to the UK. EU regulations only continue to apply in UK domestic law (by virtue of the European Union (Withdrawal) Act 2018) (WAA) to the extent that they are not modified or revoked by regulations under that Act.

The EU and the UK negotiating teams have agreed the terms of a detailed post-Brexit Trade and Cooperation Agreement (TCA) which has been given effect from 1st January 2021.

This article sets out the implications of Brexit on public procurement, now that the transition period has ended.

The immediate impact of Brexit on public procurement in the UK

Procurement law in the UK is generally set out in the following statutory instruments:

  • Public Contracts Regulations 2015 (and the Public Contracts (Scotland) Regulations 2015 in Scotland);
  • Utilities Contracts Regulations 2016 (and the Utilities Contracts (Scotland) Regulations 2016 in Scotland);
  • Concession Contracts Regulations 2016 (and the Concession Contracts (Scotland) Regulations 2016 in Scotland); and
  • Defence and Security Public Contracts Regulations 2011.

Each of these sets of Regulations pre-existed the UK’s exit from the EU, and are based on the overarching EU Procurement Directives which they implemented into UK law at the relevant time. Each set of Regulations continues in force today, and none have been repealed in full as a consequence of Brexit.

Clearly each set of Regulations has had to be updated in light of the fact that the UK is no longer an EU Member State. Accordingly, various consequential amendments have been made to the Regulations, including, for example, removal of references to notices being published in the Official Journal of the EU (OJEU), financial thresholds being set at an EU level, the use of the ‘European Single Procurement Document’ and e-Certis etc. However, the substantive provisions of each of these sets of Regulations essentially remain as they were when the UK was a member of the EU and, as such, for the most part, it is very much ‘business as usual’ when it comes to public procurement in the UK. So at least in the immediate term, contracting authorities/utilities in the UK will still have to advertise their procurements, follow the procedures that are set out in the Regulations (e.g. open, restricted, competitive dialogue, competitive procedure with negotiation, etc.) and observe key principles such as transparency, equal treatment and non-discrimination.

One important change which has been brought about as a direct result of Brexit, and is worth noting by both procurers and bidders, is the fact that UK contracting authorities/utilities can no longer discharge their transparency obligations by advertising their contracting opportunities via the OJEU. Instead, the UK Government has introduced its new ‘Find a Tender Services’ or FTS and all notices required to be published under the Regulations must be published here from the end of the transition period.

Procurement processes initiated before the end of the transition

It is also worth noting that, under the terms of the WAA, the pre-existing EU rules as they were up until the end of the transition period apply up to the point of contract award for any procurement processes initiated before the end of the transition. This means, for example, that some complex procurements which typically involve a lengthier timetable (e.g. competitive dialogue, competitive procedure with negotiation or innovation partnership) could be governed by EU rules well into 2021 or possibly beyond. The EU rules will also apply to all framework agreements, and any call-off contracts made under them awarded (or being awarded) before the end of the transition period. As frameworks can (as a general rule) last for up to four years (eight years in the context of Utilities), it is clear that the EU laws will have at least some relevance for the foreseeable future.

What is the relevance of the WTO’s Government Procurement Agreement?

In the longer term, as the UK is no longer a member of the EU it will have the ability to shape its own procurement rules to suit its individual circumstances and political priorities. Indeed, as discussed in more detail below, the Government has already set out its initial proposals for “radical change” to the procurement rules.

However, we know for certain that any new rules to be introduced in the UK will have to be robust enough to comply with the UK’s obligations as a member of the WTO’s Government Procurement Agreement (GPA) and will not, therefore, represent the entirely de-regulated environment that some may have preferred.

The GPA is a non-mandatory, plurilateral agreement under the auspices of the WTO which commits members to open up their public procurement markets to bidders from other member countries. There are now 21 signatories to the GPA, covering 48 countries, including the EU, US, Canada, Japan and New Zealand. The UK has always been a member of the GPA, by virtue of its membership of the EU; however, from 1 January 2021, it is now a member in its own right.

The GPA contains surprisingly rigorous rules on how procurements must be carried out, including requirements to act transparently, not to discriminate on grounds of nationality, to advertise procurement opportunities, etc. However, the Agreement is generally less prescriptive than the EU rules and will allow the UK greater flexibility when revising its procurement regime in the future. Some high level observations in this regard include:

  • The GPA does not cover defence procurement or concessions and as such these markets could see greater liberalisation.
  • Whilst the GPA does establish certain procedural rules for procurement processes, such as ‘open tendering’, ‘selective tendering’ and ‘limited tendering’, these are far less numerous and detailed than the corresponding procedures in the EU rules. As such, there will be greater flexibility for the UK to streamline and simplify the number and nature of the procedures available to contracting authorities/utilities.
  • The GPA requires the implementation of a remedies regime but does not go into the same level of detail as the EU rules in this regard, meaning that the extent to which procurements can be challenged and/or the remedies available to a potential challenger may be limited over time.

What does the TCA say?

As a starting point, the TCA affirms the position that, as members of the GPA, UK and EU public procurement markets will be opened up to bidders from each other’s jurisdictions to the extent covered by the GPA.

Additionally, however, and in line with the statement made by both sides in the non-binding Political Declaration accompanying the Withdrawal Agreement to go “beyond” the commitments set out in the GPA, the TCA brings within its scope other markets/contracts which would otherwise be excluded under the GPA. These include:

  • Procurements conducted by privately owned utilities operating by way of special and exclusive rights;
  • Procurements connected with the production, transport or distribution of gas or heat or the supply of gas or heat to such networks; and
  • Procurements for certain services, including:
    • Hotel and restaurant services;
    • Food serving services;
    • Beverage serving services;
    • Telecommunication related services;
    • Certain real estate services;
    • Certain other business services; and
    • Education services.

Whilst some of the above may appear to be relatively trivial, others e.g. procurement by private utilities and procurement relating to telecommunication and education services, are more significant and demonstrate the willingness of the parties to open up their respective markets to wider competition.

What changes are likely in the longer term?

As already noted, now that the UK has emerged from the transition period, it is free to diverge from the EU-based rules it currently follows, provided of course that any new system complies with its obligations under the GPA and other relevant bilateral arrangements including the TCA. Indeed, Lord Agnew (Minister of State for the Cabinet Office) has stated that “The end of the Transition Period provides an historic opportunity to overhaul our outdated public procurement regime”. Accordingly, a Government Green Paper was released on 15 December 2020 with several fairly radical proposals for reform, including:

  • Introducing new principles of “value for money”, “the public good”, “integrity” and “efficiency”;
  • Combining the legislation covering public contracts, defence, utilities and concessions procurements into a single uniform set of rules;
  • Condensing the current spectrum of procurement processes into three simple procedures;
  • Widening the scope for authorities to exclude bidders on the basis of poor past performance and establishing a debarment “black-list”;
  • Reforming the rules on framework agreements, dynamic purchasing systems and qualification systems;
  • Overhauling the way in which bidders are informed of decisions through a procurement, including removing the requirement for a written debrief at the conclusion of a procurement; and
  • Reforming the legal challenge process, including potentially introducing a tribunal system to deal with specific/discrete issues.

These proposals for reform are out with the scope of this article; however, we intend to prepare various briefings on them in due course. Please do keep an eye on our website for more information.

Is there anything you should consider right now?

For the time being, and until the proposals in the Green Paper are finalised and implemented, the rules largely remain unchanged.

The key thing now for both procurers and bidders alike to manage is access to the Government’s FTS portal. Whilst the notices themselves are very similar in form to the ones previously used, there will be a need to set up new accounts and, if you’re a bidder, ensure that you have appropriate searches in place to monitor opportunities.

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