Bidding for European Government Contracts post Brexit (Part 2)

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Continuing the second half of yesterday's post from Ammar Al-Tabbaa's, partner at gunnercooke and procurement law specialist. 

... In view of the UK’s recent decision to leave the EU, the proposal (International Procurement Instrument ([PI]) now assumes a greater significance. The UK will become a ‘third country’ for the purposes of the IPI once the terms of the EU exit agreement come into effect. More to the point, there is likely to be a hiatus, potentially of several years, between such exit and either the entry into force of a UK-EU FTA or the UK negotiating access to the WTO (and subsequently the GPA) on terms that are acceptable to the other members.

By way of example, the Comprehensive Economic Trade Agreement between Canada and the EU (CETA) has taken seven years to negotiate, and in all likelihood two more to be ratified, i.e. a nine-year process overall.  Work on a UK-EU equivalent can only begin in earnest once the UK has formally exited the EU, undertaken sufficient work within the different government departments to identify its preferred and fall-back positions on all the relevant issues, recruited the necessary expert trade negotiators, and so on. Even if the UK-EU negotiations progress more quickly than anticipated, it will still be a process of years rather than months.

In light of the above, it would appear reasonably clear that if the UK were to maintain its domestic public procurement rules, i.e. the Public Contracts Regulations 2015, as they are currently, thereby continuing to afford equal treatment to EU bidders, then there is no issue. There would be absolutely no reason for the Commission to conclude that UK practices are in any way restrictive or discriminatory towards EU-based bidders.

There are various reasons to conclude that rewriting the public procurement rules will not be a legislative priority post Brexit given what else will need to be done and how busy the parliamentary draftsmen are likely to be. However, there may well be those who consider that leaving the EU provides the perfect opportunity to implement a ‘Buy British’ policy, and that government should be making a more concerted effort to look after the interests of local firms. A legislative move in that direction could well bring the UK within the scope of the IPI and the possible application of a price penalty, thereby making it harder for UK firms to bid successfully for government contracts across the remaining 27 EU countries.

This is therefore likely to be one of the many complex and nuanced trade-offs that the UK will have to weigh up and negotiate after Brexit, with different parts of the UK business community lobbying for different outcomes depending on how international their customer base is. No doubt our politicians and their advisors will be investigating other jurisdictions for examples of how a workable balance in the area of reciprocal market opening might be struck.

In the US, for example, the Buy American Act 1933 requires federal departments and their agencies to buy US-manufactured goods where they are available and not disproportionately more expensive than imported alternatives. The duty to comply with the Act is waived, however, in respect of all goods which are covered either by the terms of the GPA or by any bilateral FTA between the US and another country. The net result is that the US federal government is, as a matter of law, required to favour domestic providers only to the extent that doing so would not put it in breach of its international treaty obligations. Conceivably, we could move to a similar situation in the UK at some point, assuming of course that we arrive at a future relationship with the EU which does not entail membership of the EEA.

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