Regulaton & Policy
Professor Sue Arrowsmith on Brexit – What Happens To Public Procurement?

In part 1 of our article about Professor Sue Arrowsmith’s session at the recent Leicester Law School Socially Sustainable Public Procurement event, we looked at her history of “sustainability” in public procurement, and some of her thoughts about the care needed in using such criteria in public procurement decisions.

She pointed out that there are different ways to achieve the sustainability goals; set aside contracts, using contract conditions, or award criteria. She pointed out that conditions must be realistic if they are to be included in the contract, so, using award criteria might be more flexible and allows suppliers to decide exactly how to achieve outcomes.

The 2014 EU directives saw sustainability as a key objective; even where there was not a substantial change, they set the tone for sustainable procurement to be more acceptable. But EU law does still place some limits on what can be done as well as setting some obligations (e.g. mandatory exclusions for corruption). The Commission still has some fears – perhaps well-founded –  that these policies will lead to discrimination e.g. authorities may use “sustainability” considerations to favour local suppliers unfairly. So, there is also the clear and fundamental principle that policies and evaluation criteria must be related directly to the contract and how it is performed.

The legal position in these matters is somewhat complicated. So, in the UK we have national law, such as the Equality Act, or the Public Services (Social Value) Act of 2012. But even where they put in place some sustainability-related regulations, they are still over-ridden by EU law. Restrictions also still come from Thatcher’s Local Government Act of 1988 – then we have newer laws which impose duties.

Which took her nicely onto Brexit, and what it might mean to all this. The honest answer, Arrowsmith said, is that nobody knows! In the first half of 2019, procurement regulations will be converted into UK law, but the “European Court of Justice interpretations will still be applicable”. There might have to be some adaptations e.g. can UK bodies still use OJEU for advertising?

What happens next will depend on the negotiations with EU on trade and the WTO (world trade organisation) situation. So, the UK won’t get rid of regulations until we know what will replace them. But unless we have a transition agreement our UK suppliers might not have any enforcement rights when bidding for EU contracts, so the UK might remove the rights of foreign firms – but in practice, Arrowsmith suspects, contracting authorities are “unlikely to stop looking for the best suppliers”.

There will then be three main options. The EEA or similar – the “Norway option” if you like – has now been pretty much ruled out by the new UK Cabinet. A “bespoke option”, based on the existing EU rules but with some variation is, she thinks, quite likely. The third option, based around the GPA option (WTO) would be slightly more straightforward than the EU bespoke.

Or we could start from a totally blank canvas, and design our own system, but that seems unlikely, she believes. If the freest possible trade with the EU is the aim, that could take in elements of the current single market rules. Given that the EU likes procurement to be included in every trade agreement, this area will be a priority for EU. If the UK doesn’t see this as one of our biggest negotiation issues, we might agree to keep pretty much same rules. And unlike third party countries like Vietnam coming into a new trade agreement, we can’t exactly argue that we can’t cope with the rules, given we already follow them!

There may be some debate around issues like TUPE that are not strictly part of the procurement regulations, but do have a big impact on the practicalities of public procurement. But the general feeling is that in this case and others like it, there is no huge appetite for change.

Procurement below the threshold might be an issue for negotiation. Could we open it up e.g. for favouring local suppliers? There might also be more freedom for devolved authorities (Scotland and Wales) – but “local preference” could be bad news and economically unhelpful if it created a sort of protectionism within the UK. The UK government might well wish to stop this happening.

The GPA option, based on the WTO system, governs relationships with US, Canada, and other third-party countries. It involves open markets, transparent award procedures, and remedies for suppliers. We are likely to rejoin this whatever happens in EU negotiations. It doesn’t cover below threshold or hard defence items and is less detailed and more flexible than EU regulations, but has similar principles. In terms of sustainability issues, WTO still requires it to be linked to the contract. But there might be more flexibility around labour issues e.g. enforcing minimum wages.

So, lots of questions still to be answered on Brexit and its effect on public procurement; but don’t hold your breath, is perhaps the most pertinent summary after Arrowsmith’s excellent session.

Voices (2)

  1. Digby Barker says:

    I don’t think the Government will see fiddling with the UK’s current Public Procurement regime as a priority other than where changes becomes necessary in order to reach acceptable agreements on the many more important Brexit issues such as Trade negotiations.

  2. Digby Barker says:

    I can’t see the Government having the time to fiddle with the current Public Sector Procurement Regime any time soon other than to the extent necessary to achieve its priority Brexit objectives in, for example, the international Trade context.