Public Procurement & Brexit

What consequences might Brexit have on public procurement, in or out?

Whether you sit on the in or out side of the Brexit campaign, you may well be thinking the media has been full of hot air regarding the UK’s future in the European Union.

With a referendum possible as early as June 2016, it is about time people started thinking pragmatically about the effect Brexit would have on industry. So, what would Brexit mean for the construction industry in the context of public sector procurement?

Whether you have been on the employer or land owner side or the contractor or development side of a large scale public sector development, you will likely be aware of just how costly and complex the mandatory tender process can be. You might be forgiven for thinking that the cost savings accrued fall far short of the collective amount spent on the tender process in professional fees.

This process has been a European Union level requirement for public sector project procurement since 2004, for any project of more than a modest size (as low €135,000 under the more recent 2015 regulations, depending on who you are supplying).

But would things change in this arena if the UK was to withdraw from the European Union? What if it were to stay?

Out

Given one of David Cameron’s aims in on-going negotiations is to improve competitiveness by reducing the burden of excessive regulation, the Public Contracts Regulations 2015 may well be in the crosshairs should the UK leave. However, the answer is not so straightforward.

First, if the UK withdrew from the Union, regulations and statute deriving from Union law will have to remain in force until replaced or amended; else a void would be left in regulation. The real question is, if the Public Contracts Regulations were in the crosshairs, how high up the Conservative agenda are they? The legislative process takes time, and there may no longer be a Conservative Prime Minister in office by the time aim is moved away from the headline grabbing issues.

Second, what will replace our membership? The UK would likely seek to join the European Free Trade Association, which is bound by EU rules on public procurement. In other words, the UK would still have to abide by the regulations, but would have very limited input next time the regulations are up for discussion.

Finally, even if the Public Contracts Regulations 2015 were to be replaced, what would they be replaced with? Public sector bodies would still likely be required to have their own tender framework in place. Whilst such framework might be less costly to take part in, decisions would still be subject to appeal by way of Judicial Review.

In summary, very little is likely to change.

In

Perhaps counter intuitively, the best place for the UK to be in order to achieve a reduction in red tape may be within the Union, renegotiated or otherwise.

In an open letter last week, Donald Tusk, the President of the European Council, pledged:

“On competitiveness, the draft Decision of the Heads, together with a more detailed European Council Declaration and a draft Commission Declaration, will set out our commitment to increase efforts to enhance competitiveness. We will regularly assess progress in simplifying legislation and reducing burden on business so that red tape is cut.”

Whilst it would be dangerous to speculate whether public procurement would be included in this ‘simplification’, it may be the best hope for those unhappy with the status quo.

Mark Clinton, Partner at Thomas Eggar, a trading style of Irwin Mitchell LLP.

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