‘Negotiating the Future’ – a part of ‘UK in a Changing Europe’ – together with the Centre for Competition Policy, and Brexit & Environment have published a very interesting report on 'UK regulation after Brexit' that maps the new regulatory settlement in the wake of the UK’s withdrawal from the EU. The report shows how Brexit has not resulted in significant regulatory divergence except in some areas (such as immigration or agricultural subsidies), how the potential for future deviation from the EU baseline is constrained by the EU-UK TCA and other international treaties, and how the UK regulatory infrastructure is now rather strained and faces significant challenges to ensure the effectiveness of important regulatory areas, in particular concerning environmental protection or the yet to be defined mechanism for the control of subsidies.
I was invited to contribute my analysis of the immediate regulatory changes on procurement (below), which I believe show similar trends to other areas of regulation discussed in the report by leading colleagues. I would recommend reading the report in full to get a good sense of where UK regulation may be headed in the next few years, as well as the more immediate regulatory gaps.
Public procurement regulation
EU public procurement law creates a regulatory regime that is best understood as comprising two tiers. The lower tier is largely procedural and creates specific obligations for contracting authorities running procurement procedures. The higher tier imposes substantive obligations on the member states that aim to ensure the proper functioning of the internal market for public contracts. EU procurement law also creates mechanisms for the gathering and sharing of information across Member States, such as the Single Market Scoreboard and, especially, e-Certis. While the lower regulatory tier is enforced domestically, though preliminary references can be made to the Court of Justice of the European Union for its interpretation of particular provisions, the higher regulatory tier and the system as a whole is monitored by the European Commission.The UK has transposed EU public procurement law through two sets of regulations: one applies in England, Wales and Northern Ireland, the other in Scotland. The UK Government has consistently limited the transposition of EU public procurement rules to a very strict ‘copy-out’ approach to avoid gold-plating, i.e. to avoid going beyond the minimum required by EU rules. The close alignment of UK and EU rules has the benefit of ensuring compliance with the World Trade Organisation Government Procurement Agreement (GPA), of which the UK was, until the end of the transition, a member through its membership of the EU.
What changes after the end of transition?
The UK Government has attempted to keep the regulatory status quo as unchanged as possible. However, since the mechanisms for collaborating with EU member states have disappeared, the UK has introduced secondary rules to replace EU-wide platforms, and to reallocate powers and functions previously assigned to the European Commission. The Public Procurement (Amendment etc) (EU Exit) Regulations 2020 included the creation of a UK e-notification service to replace the current EU-wide publication of procurement notices through the Official Journal of the EU (TED), and the reallocation to the Minister for the Cabinet Office of the powers and functions of the European Commission.
The issue of the platform where contract opportunities are published has become less important in an age of open data, since a common standard will facilitate automated processing. Also, most of the powers of the Commission are limited to adjusting EU rules to changes in the GPA, which the UK will have to carry out as well, and to monitoring compliance with the EU rules. This has probably kept the reallocation of the Commission’s powers to the Cabinet Office relatively unnoticed, although it can result in diminished scrutiny of the exercise of ministerial discretion—which the Covid-19 crisis has already evidenced. The key operational change is the decoupling of the UK from e-Certis and the associated system of European Single Procurement Document (ESPD). The effect will be to raise the administrative costs of EU companies seeking to tender for contracts in the UK and UK companies wanting to tender for contracts in the rest of the EU—although the EU-UK TCA seeks to minimise this impact by providing that ‘procuring entities [should] not require suppliers to submit all or part of the supporting evidence … unless this is necessary to ensure the proper conduct of the procurement’ (Art PPROC.5). This opens the door to mutual recognition of the EU’s ESPD and the UK’s new Single Procurement Document (SPD).
Limited change?
The UK gained GPA membership on its own right on 1 January 2021. To facilitate that process, the UK ‘Government has sought to replicate the EU’s coverage schedules under the GPA … in a form that is as close to the form of the EU’s agreements as possible’. The same strategy has been followed in other bilateral agreements between the EU and third countries, which the UK is also seeking to reproduce. Here, too, the UK Government’s approach is to minimise change, at least as it concerns its access to non-EU procurement markets, and the openness of its own markets to third countries.
The UK’s accession to the GPA already guaranteed a high level of continuity in EU-UK procurement-related trade (safe in utilities and defence)because the EU is also a GPA member. Beyond that, in the Political Declaration, the UK and the EU agreed that they ‘should provide for mutual opportunities in [their] respective public procurement markets beyond their commitments under the GPA in areas of mutual interest, without prejudice to their domestic rules to protect their essential security interests.’
The EU-UK TCA indeed creates GPA+ market access, as detailed in Section B of Annex PPROC-1, including a range of services but with the explicit exclusion of healthcare. That high level of mutual access to procurement markets can only be subjected to future modifications, but not reductions (Art PPROC.15). Crucially, the EU-UK TCA requires national treatment beyond covered procurement for ‘suppliers of the other Party established in [one Party’s] territory through the constitution, acquisition or maintenance of a legal person’ (Art PPROC.13), which effectively ensures a continuation of current requirements for procurement below EU/GPA-thresholds where there is a ‘domestic’ presence of suppliers engaged in EU-UK procurement-related trade. This may however trigger the need to legally incorporate existing business branches on both sides of the Channel, for those suppliers previously relying on general free movement rules.
Any disputes regarding market access will be dealt with by a newly created Trade Specialised Committee on Public Procurement (Art INST.2). The EU and the UK have also agreed to cooperate ‘in the international promotion of the mutual liberalisation of public procurement markets’ (Art PPROC.19), which is more likely to be productive if their own market access commitments remain aligned.
Lastly, there is the issue of the more detailed regulation of public procurement – the lower tier of EU procedural rules or ‘procurement law’. The wording of the commitment in the Political Declaration ‘to standards based on those of the GPA ensuring transparency of market opportunities, public procurement rules, procedures and practices’ had suggested that the UK might move away from the detail of EU procurement law, albeit within the narrow margin of variation allowed by the GPA. The UK Government repeatedly expressed a willingness to reform (and deregulate) UK public procurement law. There is nothing in the EU-UK TCA preventing that, save for some explicit procedural rules eg on the use of electronic means (Art PPROC.3), on selective tendering (Art PPROC.8), or procurement remedies (Art PPROC.11). The UK Government recently published a green paper laying out reform options that will be open to public consultation until early March 2021.
Although the green paper formulates some ambitious proposals and there have been calls from some involved in the shaping of the green paper to introduce a significant reform, it is uncertain whether the UK Government will end up pushing for a model significantly different from the existing one—not least because the green paper follows an ‘EU law+’ approach.(*) The current EU-based regime is highly flexible and the introduction of a radically different set of rules would raise barriers for companies looking to tender across borders. It could also lead to greater divergence between the four nations of the UK, even if the UK Government expects public procurement to be covered by the ‘common frameworks’ that it is developing with the devolved administrations.
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This was not included in the report but, for those interested in the Green Paper, there is further analysis here, here and here.