Ruth Smith and Tom Benjamin give five reasons why Brexit is unlikely to spell the end of procurement regulation in the UK.
Renegotiated deal in hand, David Cameron has returned from Brussels to a mixed reception. The growing clamour for so-called ‘Brexit’ from senior Conservative cabinet ministers, and Boris Johnson, has added an urgent reality to the possibility of the UK severing its ties with the European Union.
Between now and 23 June, the country will be turning its mind to the effect that Brexit would have on lives, livelihoods and business. Some may think it could be a time to rejoice at the prospect of bidding farewell to a procurement regime often dubbed as “inflexible, complex and onerous”, whilst public sector procurement teams and lawyers may be wondering about the future security of their jobs. But it's neither time to rejoice or worry: whatever the decision on Brexit, it looks as though the current landscape of public procurement regulation, at least in the short to medium term, is here to stay.
Here are five reasons why public procurement cynics should hold off on the champagne orders and why public procurement teams and lawyers ought not to be losing sleep.
1. The EU regime is, for the most part, transposed directly into UK law
Whilst the EU Treaty and EU Procurement Directives would no longer apply in the UK, an ‘out’ decision would have no impact on the validity of the UK legislation put in place to transpose those directives (i.e. the Public Contracts Regulations 2015 and the soon to come into force Utilities Contracts Regulations 2016 and Concession Contracts Regulations 2016). Instead, there is likely to be a drawn-out process of repeal and reform in sectors in which the UK has traditionally been dissatisfied with the EU position. Wholesale reform of the public procurement regime is unlikely to be top of the government’s list.
2. The UK had a procurement regime before joining the EU
There was no single regulatory framework prior to the European system, but other regimes existed (including compulsory competitive tendering for local authorities) together with public bodies’ own internal rules and policies for regulating their procurement processes. These rules existed to achieve best value for money in the use of public funds, and to ensure accountability, probity and decisions free from bias. With the potential for judicial review where a public authority’s decision making was flawed or biased, the old pre-EU practices had all the carrots and sticks of an effective regulatory regime. The only issue was a lack of consistency, which has since been corrected by legislation. So even if existing UK procurement legislation were to be repealed it is highly likely that another, similar regime might take its place.
3. The public sector is a slow mover
Although the global market has advanced significantly since the UK’s pre-EU regime, the underlying principles of achieving value for money and accountability in public authority decision-making remain the same. These principles are now entrenched in a public sector which has, over time, become hardened to the arguably burdensome EU procurement regime. It is unlikely that authorities would quickly embrace an unregulated, or indeed an under-regulated, regime.
4. The UK’s appetite for procurement regulation
Despite being against ‘gold plating’, the UK’s approach to implementing EU law (and particularly EU procurement law) has gone beyond the minimum requirements imposed by the parent directives. Examples of this include:
- in the NHS – the NHS (Procurement, Patient Choice and Competition ) (No 2) Regulations 2013 which add further regulation to the procurement of NHS healthcare services by NHS England and Clinical Commissioning Groups;
- the Public Contracts Regulations 2015 and the additional rules in Part 4 concerning, amongst other things, advertising on Contracts Finder; use of the Cabinet Office standard PQQ and rules relating to sub-threshold contracts; and
- the Small Business, Enterprise and Employment Act 2015, which gives ministers the power to impose duties on authorities relating to their procurement processes and to investigate the processes of authorities.
So there is strong evidence the UK has a healthy appetite to regulate in this field, most recently illustrated by the Procurement Policy Note issued by the Crown Commercial Service. The PPN (an extract of which appears below) reminds authorities of their international obligations when tendering public contracts and expects public procurers to apply the same standards to suppliers both within and wholly outside the EU:
“Public procurement should never be used as a tool to boycott tenders from suppliers based in other countries, except where formal legal sanctions, embargoes and restrictions have been put in place by the UK Government. There are wider national and international consequences from imposing such local level boycotts. They can damage integration and community cohesion within the United Kingdom, hinder Britain’s export trade, and harm foreign relations to the detriment of Britain’s economic and international security.”
5. The regime still applies to EEA members
If the UK were to adopt the Norwegian model following an ‘out’ vote, it would become a member of EFTA and the EEA. The UK’s obligations as members of the EEA would include the adoption of the EU procurement rules. The difference, and big disadvantage with this model, would be UK’s loss of its place at the negotiating table when it came to future revisions of the EU procurement rules.
No one really knows the consequences of an ‘out’ decision on 23 June. What we do know is that the referendum would only be the start and nothing would change overnight. The UK would have its work cut out in re-negotiating its trading relationship with Europe and other trading partners. The process of reform would be a gradual one, and it could be quite some time before the regulation of public procurement found itself on the parliamentary agenda.