Procurement and Brexit – What are the Implications?

19/04/2016

Prior to Great Britain joining the European Community (EC) in 1973, there was little in the way of regulation around procurement law in the UK.  With June 23^rd fast approaching, are we about to turn back the clock and return to a time of fairly unregulated procurement policies if Britain chose to exit the EU?  Or, as appears to be the case in most regulations in the case of a Brexit, is nothing much likely to change procurement wise if Britain wants to continue having free access to the EU market?

The Appetite for Challenge

In the early seventies, public bodies faced few challenges to their procurement decisions.  This has now changed, and most providers take for granted that they can question a decision that they believe was made unfairly.  This in turn keeps public bodies on their toes and committed to following correct practices and procedures when procuring goods and services.

Reducing Procurement Regulations

David Cameron has made clear that one of the key negotiation points between Britain and the EU is the reduction in red-tape, allowing for greater competitiveness across all sectors. Many suppliers would welcome a review of the Public Contracts Regulations 2015 if Britain voted to leave the EU, given the low thresholds under the Regulations; which is as little as £113,057 for the procurement of supplies and ‘Part A’ services by Central Government bodies.

However, this may not be as simple as it first appears.  Until negotiations are complete and a plan is made for new procurement rules (if they are to be amended), the status quo will have to stay in place.  This is not likely to happen in a hurry, not only because the legislative process inherently takes time, but because Britain is likely to still engage in EU trading through the European Free Trade Association, World Trade Organisation and bilateral trade agreements, all of which will take many years to negotiate and finalise.

The other point to make is, if the regulations were to change, although the frameworks for tender put together by public sector bodies could be streamlined to bring down the cost of participation, the process would still be subject to judicial review.  It is difficult to see how major changes could be implemented, given that the framework and review process would need to remain in place.

Speaking of organisations such as the European Free Trade Association, it should be pointed out that members are bound by EU rules on public procurement.  If Britain were to leave the EU, its ability to influence regulation and procedure would be severely curtailed, but the most likely scenario is that EU rules would still apply to most areas of procurement.

EU procurement market backlash?

Some commentators have noted that the EU has long desired to close off access to EU procurement contracts from companies residing in states that do not provide reciprocal and enforceable access to their own public procurement markets.  In March 2012, the European Commission tabled a proposal for a regulation giving to it the right to block access to EU public procurement markets for foreign firms originating from countries not delivering enough “reciprocity.”  This was blocked by a variety of countries, with the UK being one of the most vocal opponents.

If Britain were to leave the EU and this concept was tabled again, there is a good chance that without Britain’s voting power, it may be passed.  To avoid this situation damaging British companies’ ability to access the EU procurement market, the Government is likely to put in place a similarly reciprocal and enforceable regime, which would be, you guessed it, similar to what is in place now.

Conclusion

Despite all the media dramatics around a Brexit and the fallout it may have on the British economy, for the procurement market at least, things are unlikely to change dramatically, and any movement towards tweaking the regulations to suit UK businesses more favourable are likely to occur slowly, giving the market ample time to adjust.

We will watch with interest and keep you posted.