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27.10.17

Public procurement under Brexit

Professor Sue Arrowsmith, director of the Public Procurement Research Group at the University of Nottingham and author of a report for the European Parliament on Brexit and procurement, analyses how public procurement is expected to change as we leave the EU.

As with so many aspects of Brexit, we simply don’t know yet what its long-term impact will be on public procurement. In fact, we know little more now than we did at the time of the referendum, as the serious discussions on our post-Brexit trade relationship with the EU are yet to get underway.

What we can say, however, is that change – if it comes at all – is a long way off. Anyone hoping come March 2019 for a simple and streamlined procurement system, or freedom to support local SMEs or use fair wages clauses, will certainly be disappointed. Following the prime minister’s suggestion of a two-year transition period after withdrawal, we can expect nearly four more years of the status quo at the very least. And if at the end of the transition period there is still no final deal, almost certainly the current regulations will remain until it is clear what (if anything) will replace them.

All the commission has said officially so far (in a position paper in September) is that it expects that award procedures begun under the current rules will continue under those rules – pretty limited and uncontroversial!

Potential outcomes

At one end of the spectrum, we could end up with an EEA-type agreement, under which the UK applies the single market legislation almost exactly as now. This would mean not only the procurement regulations, but also other legislation affecting public contracts, such as TUPE. The main difference would be that we would have much less say over the rules. Given the UK’s past influence – for example, in bringing competitive dialogue and rules on framework agreements into the EU system – this could be a big loss.

This does not seem likely, however, given that it involves payments to the EU, free movement and accepting the jurisdiction of the Court of Justice, which the government has ruled out.

More likely is a more limited agreement than the EEA, but one which still includes the current public procurement rules. It is likely that access to public tenders will be high on the EU’s wish list, given that it now includes this in all its trade agreements. Recent agreements with Canada, Singapore and others fall far short of creating the kind of single market the EU has, but it is notable that all of them still include provisions on procurement.

Mostly, the award procedures and remedies required by these agreements follow those of the World Trade Organization’s Government Procurement Agreement (GPA), which are more flexible and less bureaucratic than those of the EU. An approach based just on the GPA is also a possibility for the UK, and would be welcomed by many if it leads to less red tape. The GPA also does not cover low-value contracts, potentially allowing this procurement to be used to support local enterprise, although a good case can be made for an ‘internal’ UK free trade regime for such procurement to avoid the economic damage that such policies might cause.

The EU’s preference, however, is clearly to base its trade agreements on the EU’s own rules where possible. This has already happened in agreements with the Ukraine and others, and the EU has pushed for some EU-type provisions in the TTIP negotiations with the US (although without success). While it is unrealistic to expect, say, Canada, Singapore or the US to go along with this, the situation of the UK – which already applies these EU rules – is rather different. So it may well be that the EU’s own regime will be used even outside an EEA-type agreement.

In theory, it is also possible that the UK will not commit to any trade agreements on procurement, either with the EU or other trading partners, and will be free to design its own regime. This seems highly unlikely, however – not only will this almost certainly not be an option on the table from the EU, but it would cut off UK industry’s own access to significant foreign markets.

In summary, it will be business as usual for public procurement for next few years. Further, while in the longer term there are prospects for a more flexible system, whether this will ever happen and what form it might take are still largely matters for speculation.

FOR MORE INFORMATION

 W: www.tinyurl.com/Public-Procurement-Nottingham

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