Brexit and public procurement

18.02.19

The Scottish Government has recently produced draft Regulations on the post-Brexit future of public procurement in Scotland, and have laid the draft Public Procurement etc. (Scotland) (Amendment) (EU Exit) Regulations 2019 (the “Amending Regulations”) (and a supplementary set of Regulations amending those further) before the Scottish Parliament for approval.

The Amending Regulations are subject to approval by affirmative resolution of the Parliament, under Schedule 7 to the European Union (Withdrawal) Act 2018 (the “2018 Act”). For more on the process for making statutory instruments to prepare the UK for Brexit, see our recent updates here and here.

The Amending Regulations principally amend the Public Contracts (Scotland) Regulations 2015, the Utilities Contracts (Scotland) Regulations 2016, and the Concession Contracts (Scotland) Regulations 2016 (together the “Procurement Regulations”).  Much of this legislation comes from EU Directives and many of the proposed changes are therefore of a technical nature (e.g. removing references to “Member States” and EU institutions). The Amending Regulations also amend the Procurement Reform (Scotland) Act 2014 (the “2014 Act”), which principally applies to contracts below the level at which the EU rules apply.

Similar draft Regulations (and supplementary Regulations to those) have been published by the UK Government in respect of the equivalent Public Contracts, Utilities and Concessions Regulations that apply to the rest of the UK.  Two accompanying UK Government guidance documents on the post-Brexit future of public  procurement (including utilities procurement) set out what is planned if the proposed Withdrawal Agreement is approved and, alternatively, in the event of a ‘no-deal’ Brexit. The latter document replaces the now-withdrawn technical notice on accessing public-sector contracts. The symmetry between the UK and Scottish approaches to amending the respective procurement rules clearly indicate a desire to maintain a harmonised approach in each part of the UK.

The guidance on procurement under the Withdrawal Agreement makes clear that the existing rules would continue in effect for the duration of the proposed transition / implementation period, which would end on 31 December 2020 (or later if the period was extended).

What are the proposed changes?

On 23 January 2019 the Scottish Government published a procurement guidance note, very much like the UK Government’s technical notices.  The note on “Procurement legislation in Scotland in the event of a ‘no-deal’ Brexit” explains the changes to public procurement legislation that the Government proposes to introduce in the event that the UK leaves the EU without an agreement.

Together with the policy note accompanying the Amending Regulations, the guidance provides an overview of what would be changed and why. The key message of the guidance is that the changes “would not fundamentally change the process of advertising and awarding public contracts” (including financial thresholds, the basic requirements to advertise contacts and observe minimum timescales, and follow rules on technical specifications and award criteria). However, there are some changes to the status quo that are worth mentioning.

Publishing procurement notices after Brexit

After Brexit (or at the end of a transition period, if one is agreed), the requirement to send notices to the EU Publications Office for publication in the Official Journal of the European Union (OJEU) via Tenders Electronic Daily will be replaced by a requirement to register with and publish procurement notices on a new UK e-notification service.

Contracting authorities using third party “e-Senders” to submit all of their notices to the Publications Office should be able to continue to do so, as many e-Senders have confirmed that they will integrate their services with the new UK e-notification service before 29 March 2019.

Scottish contracting authorities will still have to publish their contract and award notices on the Public Contracts Scotland (PCS) website, per section 22 of the 2014 Act, even if they also have to appear on the new UK service. It would seem sensible for PCS and the new UK service to communicate with each other so opportunities can appear on both, but it remains to be seen how that relationship might work.

The thresholds above which contracts will be subject to the Procurement Regulations will be reviewed by the Scottish Ministers every two years, to keep them in line with the international Government Procurement Agreement.

Assessing tenders after Brexit

The amendments replace the requirement on authorities to accept the European Single Procurement Document (ESPD) by deleting the word “European”, but there is otherwise no change to the obligations on authorities in respect of the document. The intention therefore appears to be that the ESPD will be replaced by a new UK / Scottish Single Procurement Document that authorities will have to accept.

The amendments also remove the requirement that UK contracting authorities primarily require the types of certificate and evidence covered by e-Certis, the EU’s online database that lists the eligibility criteria and documentary evidence needed in each EEA country to take part in public procurement.

EU and other non-UK businesses accessing Scottish contract opportunities after Brexit

At present the duties under the Procurement Regulations and the 2014 Act are owed to economic operators who are nationals of EU or EEA countries. Post-Brexit, however, the Amending Regulations will restrict that requirement so the duties are principally only owed to economic operators from the UK or Gibraltar.

The duties under the Procurement Regulations will also be owed to economic operators from countries that are signatories to the World Trade Organisation’s Government Procurement Agreement (the “GPA”) (which the UK intends to join in its own right after leaving the EU), in respect of contracts to which the GPA applied immediately before Brexit. This will include EU Member States. However, if the UK has not joined the GPA within 18 months of exit day (extended from eight months by the supplementary Regulations, perhaps indicating less optimism about how quickly GPA membership might be achieved), the rights and remedies for bidders from GPA signatory countries provided by the Amending Regulations will lapse.

The Amending Regulations do not replicate this obligation towards GPA countries in the 2014 Act, meaning that duties in respect of contracts below the EU / GPA thresholds will only be owed to UK and Gibraltar businesses.

UK businesses accessing contract opportunities in the EU after Brexit

UK and Scottish suppliers will still generally be able to access contract opportunities in the EU after Brexit, even in the event of a no-deal Brexit, though there would be no automatic extension of the status quo for UK bidders akin to the 18-month period the UK plans to put in place.

If the UK joins the GPA (as noted above) then bidders from the UK will be entitled to the same rights and remedies as bidders from EU Member States, in respect of contracts above GPA thresholds. Otherwise they will have the same status as a tenderer from any other non-EU country, with which the EU does not have an agreement on access to the EU procurement market. The EU has historically been very open to non-EU (and non-GPA) businesses seeking to supply EU public bodies, though in recent years there have been proposals to restrict bids from third countries in order to incentivise those countries to open up their own markets to EU bidders.

The EU’s guidance document on public procurement can be accessed here.

Procurements in progress at the point of Brexit

The Schedule to the Regulations contains a number of transitional provisions for procurements that are already underway at the point of Brexit, including that the changes would “apply prospectively even in relation to procurements which had commenced before the amendments came into force” (para. 2(1)). For example, any post-Brexit notices published in respect of procurements commenced pre-Brexit would need to be published on the new UK service.

The transitional provisions in the Schedule are particularly complex, so contracting authorities should be aware of the potential difficulty of managing procurement exercises that might ‘straddle’ Brexit. If the authority has a choice in the matter it may be more straightforward to delay commencing a procurement exercise until after Brexit, to ensure the rules do not change halfway through the process. However, timing may not always allow for that. Authorities should therefore ensure they understand the potential changes to the rules before embarking on a procurement that might not conclude until after Brexit has taken place.

You can visit our Brexit Hub for regular updates on Brexit related issues, including our checklist of key questions businesses should be asking themselves to assess how ready they are for Brexit.