November 4, 2019

Infrastructure procurement in the UK: where next after a Brexit?

The United Kingdom Government has released (4 September 2019) new guidance on public procurement processes in the U.K in the event of a "no deal" Brexit. How would the procurement of major infrastructure in the U.K be affected, and what can contractors and authorities do now to prepare?

Public procurement processes are often criticised by contractors for being time consuming, bureaucratic and expensive. The U.K Government considers that potential reform of the rules is one of the potential benefits of any withdrawal of the U.K from the institutions of the European Union. 

However, in its most recent guidance, published on 4 September 2019, the Government has confirmed "business as usual" in relation to public procurement. This means that the current regime, including the competitive dialogue process which is commonly used in infrastructure procurement, will continue to apply in the UK – at least in the short term.

The extent of any changes to UK public procurement law will depend on the type of Brexit which occurs. A Brexit which sees the U.K, for example, joining the European Economic Area or the European Free Trade Association would likely see the U.K be required to comply with existing and future EU legislation in the field of public procurement.

If the U.K's withdrawal from the EU is cancelled or delayed, the current regime will of course continue to apply. If the U.K leaves the EU under some form of managed withdrawal agreement, such an agreement will contain provisions dealing with public procurement. The current draft withdrawal agreement (at Title VIII) confirms that the existing EU rules will apply until the end of any transition period, and to any procurement process started during the transition period.

In the event of a so-called "hard" Brexit, where the U.K leaves all of the institutions of the European Union without a managed withdrawal agreement, the U.K has put in place amendment regulations which seek to ensure continuity of the existing legislative framework.

What about a "no deal"?

In a so-called "no deal" situation, the U.K would apply to join the World Trade Organisation (WTO) Government Procurement Agreement (GPA). Once completed, suppliers from the U.K would be able to bid into EU contract opportunities under the terms of the GPA. In the very short term, there is the risk that EU member states seek to exclude U.K suppliers from EU procurements before their rights are enshrined under the GPA.  In contrast, the U.K has already legislated to allow suppliers from GPA members (including the EU) to bid into the U.K procurement processes for a fixed period of 8 months after the exit date.

In any event, it may be more difficult practically for U.K suppliers to participate in or deliver EU procurement projects, depending on the extent of any tariff/non-tariff barriers, immigration or other barriers to trade which could be imposed by the U.K leaving the EU's internal market.

The main practical change for the public sector will be that contract notices and other notices will not be sent to the Official Journal of the European Union.

The U.K Government has intimated that it is keen to maintain access to public procurement markets across the EU for U.K contractors and that EU contractors should be able to continue to access U.K opportunities. Longer term, it is currently not clear what the U.K Government would choose in terms of a new public procurement regime. Possible options include:

Maintain the current regime. This has the advantage of being known and understood by U.K contracting authorities and contractors, and would involve minimal change and disruption to public sector supply chains in the short term. It is also possible, depending on the terms of any exit, that the EU seeks to require the U.K to maintain the existing regime as a transitional step until new arrangements are agreed or as a requirement of any future co-operation arrangement. The EU has required compliance from other non EU member states in relation to procurement, for example in the Ukraine/EU collaboration agreement.

Amend the rules to simplify and seek to speed up procurement. This could involve merging the different rules for public contracts, concessions and utilities into one set of rules, freeing up use of the negotiated procedure still further and removing some of the more onerous procedural obligations on contracting authorities.

A "no deal" Brexit would create a range of potential uncertainties in relation to public procurement, including the jurisdiction of the Court of Justice of the European Union in procurement disputes.

What is the WTO Government Procurement Agreement?

The GPA is a "plurilateral" agreement, which means it is voluntary for WTO members to accede to it. It is formed of two sections, being the Agreement (which sets out the obligations to open up public procurement markets and to ensure base levels of transparency) and market access through "schedules of commitments". The GPA will only apply to the relevant parts of the member's economy listed in the country's schedules.

There is unlikely to be significant immediate impact from the U.K's accession to the GPA.  The EU is a member of the GPA and all member states take advantage of it via their EU membership. The EU public procurement rules embody many of the principles of the WTO GPA but develop these rules in many areas. It is possible that, in due course, the U.K makes a policy decision to reform its rules to align these further with the WTO GPA as part of an overall simplification programme.

What can be done now?

Many contracting authorities (and suppliers) are making changes to their template public contracts in light of Brexit uncertainty. These changes are being made to tender documents –for example, to confirm that the procurement will continue regardless of the Brexit negotiations – as well as template contract terms and conditions. These changes include provisions to manage the risk of adverse changes in law affecting delivery of the contract; carving out Brexit as a force majeure event; or seeking to limit the contractor's ability to increase prices due to Brexit. There is no "one size fits all" for such provisions and each should be assessed on a case by case basis.

The U.K Government has published guidance to the public and private sectors on public procurement. The launch of the Find a Tender system has been confirmed, and which will replace the Tenders Electronic Daily system in the U.K in the event of a no deal Brexit.

For more information or advice, please contact David Hansom via david.hansom@clydeco.com or your usual contact at Clyde & Co.