What does Brexit mean for public procurement?

Britain has been in the vanguard of drafting and implementing procurement rules. So don’t expect too many changes to the machinery post-Brexit, says Kuldip Dhanoya.

Kuldip Dhanoya

As we continue to grapple with the practical ramifications of the EU referendum decision, one of the questions being asked – admittedly for the most part by procurement practitioners – is how the Leave vote will impact the UK’s approach to public procurement?

In the short term, we expect very little to change. So we are unlikely to expect to see an end to OJEU notices any time yet. Until its exit, the UK remains a member of the EU, which requires its continued compliance with EU procurement directives and their implementation into domestic legislation.

As it currently stands, the main procurement regulations within the UK will remain the Public Contracts Regulations 2015 and the more recently implemented Utilities Contracts Regulations 2016 and Concessions Contracts Regulations 2016. Unless repealed by Parliament, these will continue to regulate public purchasing for, at the very least, the period during which the UK negotiates its exit from the EU.

In the longer term, the extent to which those regulations are changed post-Brexit will depend on the outcome of the UK government’s negotiations with the remaining EU member states. In practice, if the UK wishes to continue to trade with the EU on preferred terms, part of that arrangement will inevitably require it to respect the single market and subsequently adhere to an EU driven procurement regime.

So, like Norway, the UK may look to become part of the European Economic Area (EEA), which would keep it in the single market, but which will also bind it to existing EU procurement directives.

Alternatively, should it not join the EEA, then still, by virtue of any ongoing participation within the World Trade Organization’s Government Procurement Agreement (GPA), the UK may have an ongoing obligation to continue to regulate public procurement in some form of GPA-compliant manner.

Either way, public procurement regulation, in some guise or another, is very likely to be here to stay.

How the process works

• Public procurement is the process by which public sector organisations buy goods, works or services from third-party suppliers. It can range from routine day-to-day supplies to complex spends such as large scale infrastructure, major IT or organisational change initiatives.
• The underlying aim of public procurement is to ensure competition, which is viewed as a key factor in achieving the twin objectives of accountability in the spending of public money and transparency in decision-making. Those objectives have been underpinned by a succession of EU directives which look to abolish barriers to trade and promote a single market, in particular by ensuring non-discrimination on the grounds of nationality.
• Those directives have been implemented into UK domestic law through regulations: these set out the procedures and practices which public bodies must comply with when conducting procurements for works, services and supplies over a specific financial threshold. The legal framework, as set out within the regulations, is designed to ensure that all public contracts over these financial thresholds are awarded transparently, without discrimination, as well as ensuring that all potential suppliers are treated equally.

The real question, however, is whether – given the wider market uncertainties –there is, in practice, any real incentive for the UK government to tamper with the UK procurement regime, at least for the foreseeable future?

First, changing UK procurement legislation would be complex and time-consuming, given the number of public sector and industry bodies the government would need to consult with. Second, it is doubtful whether, in practice, there would really be any appetite for a second round of consultation, given the lengthy EU-wide consultation process which culminated in the relatively recent adoption of the current EU procurement directives.

We also need to bear in mind the UK’s approach to implementing the EU procurement directives, which went beyond the minimum requirements imposed by those directives; the opportunity was taken up by the government to include additional UK-specific rules on advertising on Contracts Finder, use of the Cabinet Office standard PQQs and the incorporation of rules on below threshold procurements.

On this basis alone, replacing the current UK public procurement regime would most likely be a relatively low priority for any government looking to address the overall consequences of Brexit.

It is therefore safe to conclude that, given the ongoing scrutiny of public spending, and the pressure to use public funds effectively and efficiently, even if the current domestic procurement regime was further modified to remove additional red tape, the principles which underpin the EU procurement regime of securing value for money through the holding of some form of competition are likely to remain.

But, in view of the considerable work the UK government has put into securing its priorities within the current EU procurement directives, is there any real incentive for it to look to make any immediate changes?

In reality, the key driver for any foreseeable changes is more likely to be the extent to which those domestic rules require, or merit, revision to reflect the outcome of negotiations around the UK’s exit from the EU. This will no doubt depend on the ensuing relationship between the UK and the EU and, more specifically, the extent to which the UK will be able to maintain access to the internal market, post-Brexit.

Kuldip Dhanoya is senior associate with Nabarro LLP