05/06/2017
A plethora of questions have been raised over the UK’s post Brexit economic future. Numerous conflicting and contradictory opinions have been proffered to find solutions to the issues raised. One such important question is how (if at all) Brexit will change the EU-UK public procurement legal relationship?
The answer will stem from the type of relationship the UK agrees with the EU post Brexit and the extent to which the UK can negotiate access to the free movement of goods, services and capital (although potentially not people) provided by the European single market.
A report produced last month for the European Parliament’s committee on internal market and consumer protection has highlighted four potential future models for the post Brexit EU-UK public procurement relationship.
Public procurement
Public procurement refers to the purchase of goods, works and services by the public sector and entities subject to public sector influence.
Statistics referred to in the report state that the value of EU public expenditure on goods, works and services in 2015 amounted to 13.1% of EU GDP and 13.6% of UK GDP. The value of tenders published on the EU’s electronic database for public procurement represented 3.1% of GDP for the EU and 4.9% of GDP for the UK.
The report stated that the following four models were relevant to future public procurement discussions:
1. The European Economic Area (EEA) agreement
This represents the current EU procurement law, as used by the European Free Trade association (EFTA) states. The report suggests that ::
“it can be assumed that this [model] will not be applied in its entirety, because its application now appears to have been definitively rejected by the UK itself, in rejecting in the Brexit white paper the possibility of free movement of workers and the jurisdiction of the [Court of Justice of the European Union (CJEU)]”.
2. The World Trade Organisation (WTO) agreement on Government Procurement (GPA)
Rules under this model are less stringent than EU law. It has been used by the EU in trading with other countries which are not party to the GPA itself and could therefore be used as a model for an EU-UK agreement. It is not clear whether the UK would need to re-join the GPA after Brexit or if it could continue with its current rights and obligations.
3. EEA-minus
The model uses the EEA Agreement but without all its elements and is similar to that used in the deep and comprehensive free trade agreements between the EU and some neighbouring countries. This approach would maintain EU access to UK markets on the same basis as currently.
4. GPA-plus
The model is based on the GPA with additional provisions and is the approach currently being pursued in negotiations with the US in the Transatlantic Trade and Investment Partnership.
EU law is at the heart of current UK procurement legislation
In the UK, public procurement is governed by the Public Contracts Regulations 2015, the Concession Contracts Regulations 2016 and the Utilities Contracts Regulations 2016, together known as the Procurement Regulations. These regulations implement EU law directives and incorporate EU principles of transparency and non-discrimination.
The government has proposed a Great Repeal Bill which will seek to preserve all UK legislation implementing EU law. Accordingly, the Procurement Regulations could remain in force post Brexit unless and until the government decides to amend or repeal them.
It seems unlikely that the government will abolish procurement legislation on leaving the EU because of the protection the regulations give and the fact that such a move could be viewed as anti competitive and may shut access to markets of other trading nations.
There will however be several Procurement Regulation threads the government will need to detangle post Brexit. The issues to consider include the set threshold levels, the relationship with the Commission and the disengagement of the CJEU.
The withdrawal agreement
The withdrawal agreement will need to consider the consequences of changing from one regime to another, whether permanently or on an interim basis and address the fact that the ultimate shape for the relationship may be undetermined at the time of Brexit.
The report stated that “if the relationship is indeed undetermined when Brexit occurs, it seems likely that the UK’s current procurement regulations transposing the EU regulations will remain in place pending any final determination of that relationship in public procurement.’
Conclusions
One point that can be easily agreed is the statement in the report that
“public procurement is an important area to consider in the Brexit negotiations”.
After that, the future of the EU-UK public procurement relationship remains unclear. At present, it seems unlikely that there will be any significant change in the near future. The most probable outcome, certainly in the post Brexit short-term, is that the Procurement Regulations will be preserved in UK law, allowing the government to further consider any amendments ore reform at a later date.
The extent of any reform will depend on the overall nature of the UK’s continuing relationship with the EU. The closer the relationship remains, the more likely the Procurement Regulations will be preserved as they are. The greatest scope for reform comes with a bilateral trade agreement or a hard Brexit. In such circumstances a retreat to the WTO rules is most likely.
Fisher Scoggins Waters are a London based law firm who are experts in construction, manufacturing and engineering law. If you would like more information or advice about public procurement law and regulations, please phone us on 0207 993 6960.