No deal Brexit | UK government sets out changes to regulated procurement regime

Written on 4 Feb 2019

On 13 December 2018, the Cabinet Office laid a draft Statutory Instrument (The Public Procurement (Amendment etc.) (EU Exit) Regulations 2019), which will come into force on exit day. The aim of this SI is for the procurement regulations (public; utilities; concessions) to reflect the UK’s status as a third country at the same time as ensuring that they continue to facilitate a functioning UK internal market and comply with the requirements of the GPA, which the UK intends to join in its own right after exit.

Key amendments are as follows:

  • Contracting opportunities that would have been advertised in the OJEU will be advertised in a new e-notification service (this is separate from any obligation on UK Contracting Authorities to publish information on Contracts Finder, which will continue to apply). This is intended to reflect the publication requirements in the GPA.
  • The new e-notification service will have forms that are different to those that are currently required in the OJEU.
  • UK Contracting Authorities must give Economic Operators from countries that are party to the GPA (which includes all Member States) as at the point of Brexit the same access and remedies that they currently enjoy, for a period of eight months (this eight month timeline is in step with the meeting schedule of the GPA Committee). If the UK accedes to the GPA, further amendments will be required to reflect the UK’s commitments to Economic Operators in GPA states.
  • Contracting Authorities no longer need to have recourse to 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.
  • The regulations as amended by the SI will apply prospectively even to procurements that are already underway on exit day. There are some exceptions to this set out in the Schedule to the SI that apply to prevent goalposts being moved that would, or could, produce unfairness.
  • The threshold values for procurements are now set in sterling. The Minister for the Cabinet Office will review thresholds every two years to ensure they correspond to the relevant thresholds in the GPA.
  • The SI gives the Minister for the Cabinet Office powers to disapply some of the international provisions that currently apply where a contracting authority has a right to refuse to award a contract to a bidder that does not comply with international social, environmental and labour laws.
  • In relation to procurements in the defence sector, the PCR will continue to not apply to contracts that fall within the Defence and Security Public Contracts Regulations 2011 (“DSPCR” – see below). In addition, to ensure that the derogation in Article 346 of TFEU (which allows a Contracting Authority to derogate from Internal Market rules when their essential security interests are at stake) has the effect to continue to override the obligation to comply with the PCR. The whole text of Article 346 is now included in the PCR.
  • As it would not make sense for Contracting Authorities to provide remedies for breaches of “enforceable EU obligations”, the PCR has been amended (Regulation 89) to refer to any retained EU obligation that is saved under section 4 of the European Union (Withdrawal) Act 2018.

The DSPCR are being amended by a separate SI (the Defence and Security Public Contracts Regulations (Amendment) (EU Exit) Regulations 2019). The Ministry of Defence has produced the explanatory memorandum. The SI inserts the text of Article 346 TFEU into Regulation 6 to ensure that the DSPCR can still be disapplied to the extent necessary to protect the UK’s essential security interests. Other amendments to the DSPCR reflect those made to the other procurement regulations.

As Economic Operators established in the UK will have the same status as all other suppliers based in a third country with which the EU does not have any agreement providing for the opening of the EU procurement market, a number of other consequences for these Economic Operators flow, including the following:

  • Under the Utilities Directive 2014/25/EU, tenders may be rejected if the proportion of the products originating in third countries with which the EU has not concluded an agreement ensuring comparable and effective access for EU undertakings to the markets of those third countries, exceeds 50% of the total value of the products constituting the tender. Even where such offers are not rejected, they will not lead to the award of a contract if there are equivalent offers with less than 50% of the products originating in third countries.
  • UK Economic Operators may be prevented from bidding for defence and security contracts in the EU, as Member States retain the power to decide whether suppliers from third countries can participate in their defence and security procurement procedures.
  • In addition, EU Member States will no longer be under the obligation to recognise security clearances obtained by Economic Operators in the UK, even where they could consider them as equivalent to their national security clearances. This may lead to the exclusion of suppliers relying on a UK security clearance in EU Member States’ defence and security public procurement procedures.