Procurement in a nutshell – procurement law post Brexit
25th November 2016
Following the referendum decision for the UK to leave the European Union, SPS Consultancy Services conducted a survey investigating the opinions of procurement professionals as to what should be the way forward for the public procurement regulations within the UK.
The majority opinion favoured reform of the public procurement regime, as opposed to retaining the rules as they are or scrapping regulation altogether.
This update explores the survey results, in particular considering whether the hopes for reform can be met by the Government in the post-Brexit procurement era.
The question and respondents
The main survey question was: “Should the Public Procurement Directives continue to be applied [in the UK] if/when the UK decides to leave the European Union?”. Respondents were able to able to opt for yes, no, or for reform of current regulation, and give reasons for their answers in each case.
The survey ran from 12 to 26 July 2016 and involved 134 participants. The participants spanned all regions from the UK except Northern Ireland. 75% of the participants were from local government, with 25% comprising civil government, housing associations, NHS Trusts and Higher Education.
27% of respondents were in favour of procurement regulation continuing to apply in its current form. The top reasons given for this answer included the enforcement of good practice and introducing competition to UK markets.
15% supported the discontinuation of procurement regulation in the UK. This group viewed the rules as a burdensome, adding cost without delivering any value and creating too much delay within the procurement process.
58% favoured procurement law reform. A variety of reasons were given, concerning:
- proportionality – deterring companies from making spurious applications by making them liable for financial compensation;
- thresholds – increasing thresholds, in particular for services and supplies to remove the need for EU-wide competition;
- localism – affording more flexibility in the decision-making of public bodies;
- eliminating conflict – to allow for wider consideration of other national or local initiatives including social value, encourage the participation of small firms and to improve transparency; and
- commercialism and deregulation – achieving these aims through the use of plain language, simplified advertising and fewer forms.
The main theme drawn out of the survey results was pragmatism. The focus for those in the reform camp seemed to be making public procurement regulation work for UK interests. Respondents showed support for EU policies, such as transparency, as well as domestic policies (social value and regional devolution) but want to eliminate inflexible elements derived from EU law, particularly bureaucracy.
In light of the results, the survey response paper goes on to address the question of how it considers a “successful and modern public sector commercial contraction operation” should look post-Brexit and what it considers “government negotiators [should] look for when reviewing…the Public Contract Regulations 2015 and reformulating their policy stance”.
It makes a number of recommendations in accordance with the concerns expressed by the survey participants and in keeping with the desire for pragmatism.
The scope for reform
However, reform of the procurement regulations post-Brexit is not a straightforward matter. It is crucial to subject the discussion to an important reminder: how procurement will be regulated following Brexit is linked to the question of what trade deal the UK will negotiate with the EU.
The following is a brief outline of four possible trading options and the (likely) procurement consequences:
- European Economic Area (EEA) membership aka the “Norway option”
UK membership of the EEA would entail retention of the public procurement legislation, with minor technical adjustments to reflect the UK’s new status.
- The “bespoke option”/the “Switzerland option”
This second model would involve more negotiation than the first. It is not possible to predict entirely what this would encompass. Generally however, the EU’s policy is to allow access to procurement on the basis of a regime that is designed largely on its own, with little allowance made for a less stringent transparency process.
- The “General Procurement Agreement (GPA) option”
An agreement based on the GPA could lead to restricted application of the procurement rules for utilities, defence and concessions and more flexibility in the design of transparent award procedures.
- The ‘freedom option’
A final possibility is that the UK fails or chooses not to commit to commit any trade agreement. The UK could start with a blank canvas or choose to adapt the current regime as it sees fit.
The selection of which public procurement model the UK will take forward post-Brexit depends entirely on the outcome of the political negotiations which will precede the withdrawal.
The ability to reform the UK public procurement regime in accordance with the wishes of procurement professionals is just one of a range of options, the selection of which rests on an uncertain political fate.
Why is this important?
The survey has given an indication of consensus amongst procurement professionals (albeit on a small scale). It is an important message that lobbying to make the voice of the profession heard by government is vital.
However, the hope of pragmatic reform must be balanced with the realism of the chance of an unfavoured outcome based on the political and economic factors influencing the deal that will ultimately be struck between the EU 27 and the UK.
2016 has been a year of unpredictable and unprecedented political change which has created an uncertain future for procurement regulation in the UK.
It cannot yet be said with any degree of certainty whether the Government can and will deliver on the hopes of reform of procurement professionals.
How can I find out more?
If you have any queries on the issues raised or on any aspect of procurement, please contact us via our procurement hotline on 0191 204 4464.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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