I had the pleasure of participating in last night's seminar on Brexit and Public Procurement, which was part of the Brexit Seminar Series 2016/17 organised by the Centre of European Law of King's College London. There was interesting discussion of the WTO GPA, UNCAC and UNCITRAL model law requirements and the possibilities they bring after Brexit, including a rather subtle argument why the UK may retain its condition of party to the WTO GPA on the basis of its final provisions in its Article XXII--which I either did not fully understand, or really do not see working out.
However, there was also a good measure of wishful thinking based on the opportunities that dropping the 'straitjacket of the EU single market approach' to procurement regulation could provide, as well as the possibilities that Brexit would bring in order to mend a system that is broken (with reference to both EU public procurement and State aid law), and which covers up an anti-British bias that can only get worse in the future if the Commission manages to adopt its 'Fortress Europe' strategy. I guess that, after this, my remarks (see presentation below) came in as a minoritarian and pro-EU reaction to these arguments. The rest of this post provides a synthesis of the arguments I made.
In order to counteract some of the arguments being made and, hopefully, to put the issue into broader perspective, I focused my remarks around whether the reform of [British] procurement regulation is feasible or a utopia (which links to my broader ideas on the difficulties of reimagining public procurement regulation). I broke this down in four parts: (1) the unavoidable costs of adopting a distinct 'Very British Model' (borrowing this label from Sarah Hannaford QC); (2) what is likely to happen with the Public Contracts Regulations 2015 immediately after Brexit; (3) what level of coordination between UK (Eng) and EU law should be achieved in the future; and (4) what can and should realistically be done to further reform (UK) public procurement law in the future.
1. On the unavoidable costs of a Very British Model, I guess that the simple insight I was trying to stress was that having diverging regulatory regimes increases the cost of doing business for companies aiming to serve markets where different procurement regimes apply. From the perspective of British companies (particularly SMEs, which PM May seems to be intent on actively supporting), this de facto makes it more difficult for them to export to the EU if they get used to a different domestic regulatory regime.
This can in turn result in a change of supply chains where EU 'importers' acquire the goods (works less well for services) from UK manufacturers and then sells them to the public sector in the rest of the EU, which will require the creation of commercial mark-ups / margins that may well wipe out any financial advantage derived from the taking of the Sterling, as well as any increases in productivity in the future.
Moreover, a Very British Model that significantly deviated from the current EU system would create a significant barrier for cross-border collaboration with other public buyers in the EU (which was mentioned could be particularly relevant in terms of defence procurement, given recent policies to boost EU's military capabilities through a joint defence fund), but also with potential third countries (eg Canada). It would also make negotiations to gain (or retain) membership of the WTO GPA and to subject internationally funded (large infrastructure) projects to the revised Very British System because international partners may need to be convinced that, though different, that new system complied with their requirements. If nothing else, this will be a drain of international and trade negotiators' time and energy.
2. On the likely immediate future of the Public Contracts Regulations 2015, it is hard to make a forecast. Short of their total repeal and the creation of a massive regulatory vacuum in the control of public expenditure in the UK (which I do not think likely, and certainly hope not to be pursued), the PCR2015 are likely to stay in the books for a while (with or without Great Repeal Bill).
It is possible that the UK Government is tempted to chop bits of them off the statute book. Either suppressing the remedies they create for non-domestic bidders, as suggested by Prof Arrowsmith, and which I consider a daft strategy--for the lack of a better term--because it will not only alienate foreign bidders and international trading partners, but also be easy to circumvent through formal submission of tenders by UK-based entities. Or else shooting holes in the PCR2015 to get rid of parts that may be considered particular examples of bar procurement regulation (say, the use of self-declarations in the form of the ESPD). That would diminish the consistency of the regulatory system and could create undesirable effects.
Overall, as I said before, in the short run, the would be better off by completely keeping the status quo ante Brexit (including remedies for international tenderers and investors) if it wants to preserve its (diplomatic) options of a swift conclusion of procurement-related trade agreements, as well as preventing disruption in investment and infrastructure projects.
3. On the desirable level of coordination between future UK rules and EU public procurement law, including the CJEU case law, I submitted that, regardless of the formal legal obligations to comply with CJEU case law under EEA or other types of agreements, from a normative point of view and at least for as long as the law on the books reads the same way (ie up and until there is a repeal and substitution of the PCR2015), UK law should continue to be substantively coordinated with EU public procurement law.
For two reasons. First, because deviations will create the same additional costs of doing business indicated above (1). And, second, because on the whole (and I am not one to cosy up to the CJEU), I consider that its public procurement case law has been progressive and positive, and helped shape a regulatory system that is massively misunderstood and misconstrued, particularly but not only in the UK (more below).
4. On the productive ways in which [British] public procurement can be reformed in the longer run, I took the seemingly radical view that legal reform should not be the main focus and that there are more pressing issues that can only be sorted out with significant investment (which, of course, triggered the reaction from the floor that 'it ain't gonna happen' in this context and with the massive black hole that Brexit will create in the UK's public finances between now and, at least, 2021). I also stressed that the UK had shown no regulatory creativity whatsoever in the transposition of the 2014 Public procurement package, which indicates that there is a lack of direction and strategy on which to build a significant reform of the current system.
I stressed that most of the complaints against the EU public procurement rules coming from the business community, and particularly SMEs, would equally exist with any regulatory regime that imposed any level of red tape on businesses because that is, quite simply, in the nature of things. Same goes for the criticisms from the public sector. Of course, the existing rules are perfectible (topically, on the need to reform the Remedies Directive), but no system will ever be perfect and there is a level of discomfort with public procurement rules that needs to be accepted as trade off for the anti-corruption and pro-competitive / value for money results they achieve.
Additionally, significant problems of legal certainty and difficulties in the coordination of different sets of procurement rules are exclusively a domestically created issue. For example, the difficult coordination of general procurement rules under the PCR2015 and those applicable to healthcare procurement in the context of NHS England are a UK problem that can, and must, be resolved domestically (see eg here, with a focus on conflicts of interest).
Moreover, I also stressed that the EU public procurement rules are greatly misunderstood and construed as imposing a tight straitjacket on both procurers and businesses. That is simply not the case, particularly after the revision of the 2014 Public procurement package, which has created enormous spaces for administrative discretion and negotiations--that have in turn triggered the need, more than ever, for a competition-oriented interpretation and implementation of the rules.
My view, and I am happy to expand it, is that properly understood and applied, the current EU rules allow for all the goals I have so far heard businesses and public sector officials indicate they want from a revised [British] public procurement system--except those linked to a protectionist industrial policy, which are economically unwise and undesirable in any case.
The real problem is that an improvement of procurement practice requires three main (and very expensive) changes: (a) a serious investment in technology and the effective roll out of eProcurement; (b) significant investment in human capital and the upgrade of the public sector skill set (particularly in non-legal aspects linked to market intelligence and procurement best practice, along the same lines stressed by the European Court of Auditors in the context of EU institutional procurement); and (c) significant investment in strengthening the public oversight powers of entities such as the National Audit Office and the Office for Budget Responsibility (on the worrying contrary trend, see here) so as to reduce the dependence on (and incentives for) private litigation as the only (meaningful?) check on the way procurement is carried out.
Overcoming this problem requires investment and long-term planning. Two things that seem to go against the very grain of the Brexit process. So, overall, I would not hold my breath. I would more generally not expect any significant change in the way procurement is carried out in the UK in the short to medium term, which in itself can create problems in the longer run.