[Blog] The effect of Brexit on EU Procurement requirements

Brexit

We've been asked about the impact of "Brexit" on UK public procurement legislation. Here is what one of our Procurement Consultancy experts has to say on the matter.

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Q: When Britain exits the EU will the current requirement for advertising contracts in an E.U. publication change? Is there any information available regarding the allocation of contracts and if they’ll be offered to local firms?

I assume that when Britain exit the European Union the current requirement for advertising contracts in an E.U. publication will change, do you have any information yet regarding how contracts will be allocated, will they be offered to local firms now?”

A: There are two aspects to this question. One is around the impact of Brexit.  The other is about ‘offering contracts to local firms’. 

Firstly: Brexit and EU advertising

The assumption is unfortunately not correct. 

It may be the case that we will escape the EU procurement regulations but it is highly unlikely. Much will depend upon the deal that is negotiated with the EU on the terms of our exit from the union. 

What is certain is that public sector procurement will still be regulated. 

For the purposes of the Public Contracts Regulations housing associations (even when acting as managing agents for Private Retirement Leaseholders) are “bodies governed by public law”. Effectively we are considered as public sector in this area.

So, we will be regulated. The only questions are “how” and “to what extent”.  At this point we do not know.

The possibilities are:

  1. The UK will, like some of the non-EU European countries, conclude a general trade agreement with the EU which will almost certainly require us to commit to the EU procurement directives (so nothing will change); OR
  2. We will go it alone, and conclude independent trade agreements with individual EU states on a bilateral basis which will either require us to commit to the EU directives, or to something very similar (so very little will change);

The problem is that the UK wishes to retain free access to the European market, and we are unlikely to be able to do so without committing to most of the rules that govern it.  We do not expect to escape the Public Contracts Regulations.

Even if we do not have to comply with the EU regulations, the probability is that the UK will want to be part of the World Trade Organisation (WTO).  It has its own procurement rules under the Government Procurement Agreement (GPA) which the UK government will still want to be party to because of the global markets it opens up.  Their rules are not only very similar to the EU variety, they are influenced by them.  In reality, again, little will change.

The point that is often not understood is that the Public Contracts Regulations are UK law – not EU law.  They are put in place to comply with EU directives, but the current version of them contains a whole section which is purely derived from the UK government and has nothing to do with the EU.  It is anticipated that the Brexit mechanism will allow for these regulations to stay in place either permanently or for a transitional period – the length of which is open to speculation.

It seems (and we have no specialist insight into the government’s view on this) that Brexit itself will take about two years, and our Procurement experts believe (again without any insider information) that we can expect the Public Contracts Regulations to remain for at least a year or two beyond that.  It is unlikely therefore that there will be any change in the current rules for 3 to 4 years.

We are watching developments and will look at what opportunities they might offer us for working differently in future.

Secondly: offering contracts to local firms

Housing organisations cannot simply offer contracts to specific firms, local or otherwise. 

To ensure a certain amount of competition and to help us prevent any potential fraud, Orbit's our own internal rules require any contract above £30,000 to be tendered. 

We have a duty to obtain the best value for money across all of our operation, and on occasions this does mean using larger contractors – who can cover a larger area at lower cost.   We also need to take into account the back-office costs of managing the service. The more contractors we have, the more management and administration cost has to go into dealing with them, making sure our information on them remains current, running individual tenders and managing individual contracts.

This does not however mean that local contractors are never the answer.  Sometimes they are. 

They do however have to meet our standards for insurance, health & safety (including compliance with various legal regulations) and be able to demonstrate that they have the financial strength and overall resources to deliver the project.

Any project which is subject to the EU rules and advertised, can be accessed by any contractor (including local ones) by registering on www.housingprocurement.com and ensuring that they select the relevant work types.

Where projects are not subject to the EU rules*, and works are not being completed under an existing contract (such as a long term partnering contract) residents are able to nominate contractors to be considered. 

* Those below the threshold values of £4.1m for works and £164k for services – beware some things you think might be works are actually services.

Lesley Mason
Orbit Group Procurement Compliance Manager