Construction and EU Procurement in No-Deal Brexit – has the government provided clarity? By Kathrine Eddon and Michelle Essen
On 29 March 2019 at 11pm UK-time the UK is expected to leave the EU. The construction industry has been feeling the impact of Brexit for some time now, and still has ongoing concerns about, amongst other things, skill and labour shortages, the increasing price of materials, and potential import and export tariffs.
Another area of concern for the construction industry has been how the system of advertising UK contracts for works, goods and services to EU companies would work post-Brexit and how businesses in the UK construction industry would be able to continue to bid for work, goods and services in Europe. This is important because many UK construction and consultancy businesses benefit and need to continue to benefit from smooth and open working relationships with EU businesses.
The government’s position
As part of the government’s contingency planning for a ‘no-deal Brexit’, the UK Cabinet Office released guidance entitled ‘Accessing public sector contracts if there’s no Brexit deal’, which sets out how works, goods and services can continue to be accessed across the UK and EU in the event of the UK leaving the EU without an agreement in place.
The Government has followed this by laying before Parliament on 13 December a draft set of Regulations to cover changes which will need to be made to the existing procurement Regulations (Public Contracts Regulations 2015, as well as those on utilities and concession contracts) on exit day in the event of a no-deal Brexit. The effect of the draft Regulations would be in essence to maintain the status quo in terms in the UK procurement regime, with some ‘tidying-up’ to reflect the exit from the EU. For example, the Cabinet Office would set the financial thresholds for the Regulations to apply, not the Commission. Provisions relating to State aid and e-Certis have also been removed.
The current system
At the moment, UK public bodies and authorities can procure certain works, goods and services for construction projects, including from EU businesses, by advertising them on the Official Journal of the European Union (OJEU) via Tenders Electronic Daily (TED). Equally, UK contractors, consultants, manufacturers and other construction businesses can bid to provide works, goods and services to EU public bodies through OJEU via TED.
This means that, for example, a UK public authority procuring specialist offshore trenching and vessel services for a government-funded offshore renewables project can receive tenders from specialist construction companies throughout the EU. It also means that UK companies, for example a UK architectural business, can tender for a commission to design a high profile development project in Spain on the same basis as companies based in other EU member states.
But post-Brexit, without a deal, this position would change.
The government’s plans if there’s a no-deal Brexit
The government’s guidance and the draft Regulations, along with the draft explanatory memorandum on those Regulations, show that there will be a number of changes to the procurement regime in the UK if there’s a no deal Brexit:
First, the UK is aiming to join the World Trade Organization (WTO) Agreement on Government Procurement (GPA). The GPA is an international trade deal that the UK currently participates in by virtue of its EU membership, but in a No-Deal Brexit world the UK will need to become a member itself. The draft Regulations would give suppliers from countries party to the WTO Government Procurement Agreement on exit day (and so including EU member states) the right to access the UK market for an eight month period, before the UK is anticipated to join the GPA in its own right.
Second, the UK is developing a UK e-notification service to replace OJEU / TED. From exit day all new contract notices will be posted on there which it refers to as ‘a replacement UK-specific e-notification service’. The guidance states that the requirement to advertise, and ability to access, other current UK domestic systems will remain e.g. Contracts Finder, MOD Defence Contracts Online, Public Contracts Scotland, Sell2Wales and eTendersNI.
So, has the government provided clarity?
In part, yes. The government has set out in the draft Regulations as to what changes it sees as necessary to the procurement regime if there’s a no-deal Brexit.
However, there is still a number of gaps. The explanatory memorandum says there are some ‘deficiencies’ in the draft Regulations still to be fixed (without stating what those are) which need further review and discussion. There’s also no certainty as to whether the draft Regulations will ever come into force, if the UK leaves with a deal, or what further changes may be made to the final version.
UK public authorities, construction companies, construction industry professionals and other construction industry businesses may also be concerned that, during a period in which they dealing with other challenges that may arise for their businesses due to Brexit (such as skill and labour shortages) they will potentially also have to familiarise themselves with a new UK e-notification service in a very short space of time.
One thing is clear though, with no Withdrawal Agreement (yet) in place and with the Brexit date looming in a matter of weeks, UK public authorities and the construction industry will need as much guidance and certainty as possible before exit day on 29 March.
Kathrine Eddon is Head of Public Procurement and Michelle Essen is Managing Associate in Construction at Womble Bond Dickinson. Womble Bond Dickinson is a transatlantic law firm with more than 1000 lawyers based in 27 UK and US office locations. The firm has a particular focus on 11 key sectors: Energy & Natural Resources, Financial Institutions, Healthcare, Insurance, Manufacturing, Real Estate, Retail & Consumer, Transport, Logistics & Infrastructure, Pharmaceuticals, Biotechnology & Life Sciences, Technology and Private Wealth.
For more information, please see www.womblebonddickinson.com/uk