Brexit - Business as Usual, not Procurement Panic

Following the result of the EU Referendum on Friday, here in the Mills and Reeve procurement team our thoughts have quickly turned to the likely implications for public procurement.

Given that our public procurement rules implement European Directives on public procurement utilities and concessions contracts there is the potential that the decision to Leave could eventually bring far-reaching changes in our field. As a starter for ten out of many possible examples:

  • the obligation since April 2016 to run an OJEU competition for clinical health services over a certain threshold is a product of an EU directive. It would in theory be open to a government to amend our regulations and remove this obligation reversing the trend towards increased private sector delivery of healthcare services;
  • the official procurement processes come down to us via the EU Directives. In principle a government could legislate to remove the obligation to follow one of these in favour of a more flexible regime;
  • the government could alter the respective thresholds at which the obligation to advertise a contract and run a competition bites; or
  • in theory at least it could even abandon the regulation of public procurement altogether!

That said we think we are likely to see Business as Usual rather than any immediate change at least in the short to medium term. And although the Law Society of Ireland says it has received a surge in applications from UK lawyers to work in its jurisdiction due to fears about Brexit here at Mills and Reeve we are not yet consulting the 'situations vacant' pages. Here is why.

Even the most cursory look at the fast developing news stories of recent days illustrates the fact that the process of withdrawing from the EU will be complex and will not happen overnight. Indeed some more sceptical commentators are questioning whether Brexit will ever come to pass at all. There is a two year period following triggering under Article 50 of the exit process for the UK to reach its 'divorce settlement' with the EU around how to untangle the status quo.

Separately from that it may take us a much longer period to agree a framework upon which our future relationship with the EU will be based. It will take time for us to negotiate new trade deals with and outside of the EU (particularly if our potential trading partners want to see the terms of the 'divorce settlement' with the EU before reaching any agreement with us on future trade deals).

Even once we have withdrawn our Public Contracts Regulations 2015 Utilities Contracts Regulations 2016 and Concessions Contracts Regulations 2016 (and their Scots equivalents) are pieces of UK legislation that unless and until amended or repealed will stand perfectly well on their own account as our public procurement regime. Not forgetting too that the UK has had its own home-grown procurement law regime dating back to long before the European regime was adopted.

Of course once we have left the EU our legislature may amend or repeal our procurement regulations. That said given that the priorities of the post-Brexit parliament (and the newly established Brexit Unit headed up by Oliver Letwin) are very likely to be elsewhere unravelling the tangle web of our relationship with Europe we think we are unlikely to see major legislative change to procurement law in the short to medium term especially as we have already been through a major legislative change in 2015 and 2016.

Also our current membership of the Agreement on Government Procurement (GPA) is by virtue of the our being part of the EU but even once we Leave (and our membership of the GPA ends) we anticipate that in forging any trade details the UK would likely look to becoming a member of the GPA in its own right. The significance of this for procurement is that the GPA imposes similar obligations to the EU Directives; another reason not to throw away your copy of the procurement rules just yet. Of course if the country does a Norway-style deal we will need to continue to abide by the EU procurement law regime.

Our final reason for our view there is no need for procurement teams to expect major change is that the UK government has historically had a healthy appetite for legislating in our field sometimes going beyond or 'gold plating' the requirements of the EU Directives. See for example Part 4 of the Public Contracts Regulations 2015 and its obligations around use of Contracts Finder and the regulation of the PQQ stage. These measures stem from the so-called 'Lord Young' reforms and are designed in particular to increase opportunities for small and medium sized entities a major policy objective of this government and one that seems unlikely to change. Another example of this is the fact that while one of the core EC Treaty principles is 'transparency' the government has domestically been pursuing a parallel transparency agenda for a considerable time now. Even as an ex-Member State it is almost certain that principles of transparency/equal treatment/value for money are still likely to remain high up in the UK's priorities in any new framework for public sector contracting.

Having said all that there is no doubt that we are in a period of dramatic change in the country's political and economic direction and it is clear there is considerable uncertainty around its effects in the medium and longer term both in our field and more widely.

The detailed implications of Brexit will vary depending on whether you are a contracting authority or supplier and for suppliers depending on the size of the business whether your usual market is within the UK or within the EU but as yet it is too early to say what these are in any detail. We can expect an onslaught of policy development and/or consultation from the government in due course and we'll be scrutinizing this and blogging on any developments relevant to our field.

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