CKS is pleased to release our second Brexit impact analysis, concerning EU businesses’ participation in UK tenders.
This article will consider how European businesses’ participation in UK public procurement tenders may change in the wake of a deal or no deal Brexit, identify the positives and limitations of legislative changes from TED to GPA, and finally offer CKS’s analysis and next-step advice for concerned businesses and stakeholders.
Public procurement contracts are central to Member State economies, playing an important role in certain sectors and providing effective competition across the Single Market. To ensure a level playing field is maintained, where businesses and their rights are protected, the European Union enshrines certain values into the Treaty on the Functioning of the European Union (TFEU) to ensure equal treatment, mutual recognition, proportionality, transparency and non-discrimination. All public procurement procedures must uphold such values whilst complying with EU law, particularly in reference to the freedoms established in the Single Market.
The UK public procurement market is the largest in value EU-wide, its system spending approximately EUR 316 billion annually and makes up 14% of its GDP, offering EU businesses a financially opportunistic market with lots of possibilities to engage.
A no deal Brexit could threaten the foundation of such business participation opportunities, and the legal principles that uphold them. This means that protection may change; and accessibility to British tenders for European businesses, alongside legal representation by the European Court of Justice (ECJ), may be threatened. Equally, British companies who participate in European public tenders are just as interested in benefiting from the legal protections that come from the principles that underpin European public procurement markets, which ultimately brings EU and UK businesses closer together in trying to find workable solutions.
What will change after Brexit? Deal or no deal
CKS estimates that if Brexit occurs with a deal, little will change in terms of current legislation and online tendering application processes, at least until December 2020. Current public procurement regulations will continue to apply unamended during the implementation period, and contracts would be conducted as normal.
This outcome unfortunately seems unlikely. Following negotiation failures between the UK and the EU, CKS advises stakeholders to anticipate a no deal Brexit, encouraging worst case scenario preparation in advance.
What will a hard Brexit mean for EU businesses participating in British public tenders?
A no deal Brexit means that the UK would leave the European bloc without a transition period, ceasing to be an EU member state, and severing its ties to the Single Market. As a result, the UK’s status would change to that of a “third country” and all relevant procurement processes, protections and liberties would change with it. Contracting authorities, therefore, may no longer have access to the EU Publications Office and the online supplement to the Tenders Electronic Daily (TED), and any tendering with British contracts will be done through the World Trade Organization (WTO) Agreement on Government Procurement system, more commonly known as GPA. This has been confirmed by relevant institutions.
According to the British government, cooperation via the WTO offers a strong alternative to the EU’s equivalent. It is insisted that as other countries freely trade in public procurement markets through GPA. Brexit is reduced to a simple shift of the online tendering process from TED to GPA, and any disruption would be limited to EU companies having to sign up to the new UK e-notification site.
Whilst the approach of the UK government remains optimistic, CKS has identified several other issues facing EU companies in the case of a no deal Brexit.
It is possible that the regime of public procurement and the values of the EU concerning transparency, equality and non-discrimination have been transferred into UK law, the political turbulence of what equality means in a no-deal Brexit could be far from straightforward. Businesses should take extra care in understanding their rights to protections when participating in UK tenders after Brexit. As a third country, the UK will no longer be held to the same legal scrutiny as is imposed through EU membership, therefore the scope of legal protection from the European Court of Justice (ECJ) when trading with the UK is currently unknown. This could be direct, for example issues stemming from loss or delay of payments, or indirect, via exclusionary and protectionist approaches which may lead to discrimination and unfair competition.
Another important issue to consider is the restrictions brought by GPA governance practices and sector participation. The GPA does not have a centralized governance enforcement system, such as the European Commission, which means that enforcement of principles is weaker and less regulated. Secondly, and most importantly, the GPA excludes certain sectors and others are significantly limited, notably private utilities and the defense sector. Any EU companies participating in such sectors are encouraged to review to what extent these limitations will affect their tendering opportunities in Britain if these anticipated changes come into fruition.
Shared principles
Written evidence submitted to the House of Lords confirmed that “bilateral UK-EU procurement-related trade represents 15% of the total value of all UK procurement, amounting to approximately 2.5% of GDP”, showing a strong economic link between the UK and the EU.
At CKS we assess that principles based on transparency and equality will always remain advantageous for the UK, regardless of economic and political status, therefore a willingness to succeed in facilitating EU companies to UK tenders remains a high priority for the British. This further reassures businesses across Europe who will want to continue to participate in public procurement markets.
Next steps : Recommendations from CKS to businesses based in mainland Europe
To conclude, public procurement as a practice may not change, as the act of international public tendering will continue between the EU and the UK; public procurement regulations that will reflect the UK’s new status, could.
CKS strongly advises that in the wake of a no deal Brexit, all companies tendering with the UK should sign up to UK’s new e-notification site as soon as information becomes available, whilst also ensuring an EORI number, as mentioned in our first article. As always, anticipating a worst-case scenario will allow for better preparation in the event of a no deal Brexit.
Graphic 1: UK Tender Profile (Public Procurement)
Source: EU Commission
