In this post, Michael Bowsher Q.C. of Monckton Chambers assesses the public procurement provisions in the new UK-EU Trade and Cooperation Agreement.
Once upon a time Brexiteers dreamt of the abandonment of most or all procurement law, and certainly anything with a whiff of the EU about it. Let’s see what they’ve done about that in the EU-UK Trade and Cooperation Agreement. I should emphasise that this is early days with this text, and I am sure there are many nooks and crannies I have not yet worked out. All comments and corrections are very gratefully received!
The text of the EU-UK Trade and Cooperation Agreement is dated on 24th December 2020 and became generally available on 26th December. I’m going to refer to the Agreement as “the TCA” until we discover what we’re supposed to call it. If you need to refer to the other relevant documents on the EU-UK relationship you’ll find them set out here, including a link to the TCA.
Overview of the TCA’s procurement provisions
There only 11 pages specifically addressing the relationship between UK and EU procurement law in the TCA: see here.
We cannot yet be certain about the legal effects of this agreement as we must await the proceedings in Parliament later this week and confirmation from the EU institutions. The intended position within the EU seems to be that the agreement will have provisional application until the end of February so that the European Parliament can review it, but we can assume that there is more fun ahead. There always is with EU trade agreements!
A preliminary review of the EU-UK TCA suggests that there will be a number of ways in which EU procurement law, and EU law more generally will have a direct impact on procurement in the EU. A few immediately stand out. First, there is the case of Northern Ireland where a number of provisions will have interesting cross-border ramifications. Second, and relatedly, state aid law will have a continued place to play in regulating government spending or support and that will have an inevitable impact on procurement. Finally, EU law is likely to be immediately effective on procurements in the UK arising out of EU programmes in which the UK continues to be a participant.
It is certainly not an original thought on my part, but the immediate impact of the EU-UK TCA seems to be to lock the EU and UK into numerous complex legal and institutional relationships which will substantially limit the action of each, and at least to some degree will create the framework in which a degree of regulatory competition will operate. Procurement will certainly be an area in which one can expect that the UK will seek to reform within the tight constraints imposed by the GPA and the EU-UK TCA, but will find that it is tied back in a number of respects. The extent of these ties will flow from analysis of all the above elements.
Detailed assessment of the TCA provisions
I am going to try to work out the meaning and intent of the provisions in the TCA dealing with procurement. That involves some cross reference with the terms of the WTO Government Procurement Agreement (the “GPA”). I do not propose to comment on the text much as that will require further thought.
The public procurement provisions in the TCA are in two parts, in Title VI: Public Procurement and the separate annex, ANNEX PPROC-1: Public Procurement. You can find these sections at page 148 and page 775 of the currently published text. The numbering in the current text is said to be provisional. Each section is currently internally numbered, so provisions on procurement are Article PPROC.1 etc. No doubt this will change.
Article PPROC.1 states the objective. Perhaps in light of some of my comments this year about trade forming an unduly narrow basis for procurement law (see, for example, here), it is significant that the objective is not confined to guaranteeing access to participation in public procurement, but also refers to enhancement of transparency of public procedures.
Article PPROC.2 starts by defining what range of procurement is covered by the TCA. Generally, the TCA adopts the content and language of the GPA and builds on that. This can give rise to a double confusion. First, GPA terms are not the terms we are used to in our day-to-day legal environment, and, second, GPA terms are used and then in at least one place given different meaning from that used in the GPA.
So “covered procurement” for the purposes of the TCA includes everything covered by the GPA under Article II GPA as well as procurement listed in section B of Annex PPROC-1. I am a little uncertain about how precisely this will work out as the TCA refers to the Annexes of each Party (EU and UK) to Appendix I to the GPA, but the UK’s Annexes have not yet been published and the EU’s is out of date. One possibility would be that the WTO arrangements and the TCA are to be based on the out-of-date lists for the EU and UK currently on the WTO website for the EU, but it seems odd to start so far out of date! Given that the notes in Annex PPROC refer to various UK Annexes to the GPA, I think we can assume that this material has been drafted by reference to various documents that exist but are not yet in the public domain.
Covered procurement for the TCA is much broader than that provided for under the GPA. Section B of the Annex PPROC-1 brings procurement by utilities into the scope of the TCA. At first reading it would seem that this covers more or less exactly the same scope as is covered by the Utilities Contracts Regulations 2016.
In addition, a range of services that are currently out of scope of the EU’s GPA annexes are brought into the scope of the TCA. These overlap with but do not correspond directly to the services covered by the light touch regime, as defined in Schedule 3 to the Public Contracts Regulations 2015. Consistently with the usage in the GPA the numerical references to the categories used are to the UN Central Product Classification rather than the EU Common Procurement Vocabulary, so there will be some checking across as to what is or is not covered. The list in the TCA includes telecommunications related services and real estate services. I may have got this wrong, but the “other business services” referred to seem include things like credit collection, telephone answering, translation, mailing list compilation and mailing and interior design. Broadly speaking, health related services are not covered.
It would be interesting to know how this range of services were identified, and in particular to understand what the parties thought the economic significance of this arrangement is expected to be. Unfortunately, one would have to see the parties’ own internal trade flow modelling to understand that.
Article PPROC.3 to Article PPROC.8 Having stated the scope of public covered, the following articles identify certain additions to the parties’ existing GPA obligations. First there are provisions on e-procurement. There is a limit imposed on the amount of information that is required to be provided with a tender to show that the tenderer is not to be excluded under Regulation 57 of the Public Contracts Regulations 2015, or its equivalent in other UK regimes, or in EU countries, as well as constraints on the application of conditions for participation and registration systems.
Article PPROC.8 establishes the important baseline that for selective tendering (any process in which qualified suppliers are invited to submit a tender) the procuring entity must invite enough bids to ensure genuine competition, without affecting operational efficiency of the procurement system. This maintains the starting point for tenderer selection that the opportunities for such competition should be kept open. Markets should not therefore be closed simply by narrowing all tender processes to one or two bidders.
Article PPROC.9 retains the right of a procuring entity to look at the impact of any subsidy in supporting the submission of an abnormally low tender. This reflects the concerns reflected in the recent EU Commission White Paper on foreign subsidies which placed particular emphasis on the impact of subsidy on procurement. On that see the recent zoom event we ran at King’s with George Washington University here (with materials also available at that link) as well as the blog post I contributed to on that topic here.
Article PPROC.10 retains the role of environmental, social and labour considerations in procurement decisions, as long as they are compatible with the rules established elsewhere in Articles PPROC.1 to 11. This keeps in play all the difficult questions we continue to grapple with as to how and how far these matters should be incorporated into procurement decision making. Given the sorts of ongoing initiatives I referred to in yesterday’s blog, this may raise interesting questions in UK law, and in consideration as to how far UK and EU law may or will diverge. A topic I will come back to is how far this provision cross-refers to the Level Playing Field provisions in Title XI of the TCA which set out an intricate procedure to tie the UK into the EU’s position on labour, social, environmental or climate protection standards. For some first thoughts on that by others see here.
Article PPROC.11 is a long provision dealing with domestic review procedures and has to be read against the backdrop of Article XVIII of the GPA dealing with Domestic Review Procedures. From the UK side, it is plain that this text was prepared with an eye on the UK’s plans for procurement law revision in mind and I propose to devote some separate space addressing this provision with the discussion in the UK’s current consultation as they clearly dovetail together. The structure set out here looks rather like the Competition Appeal Tribunal and if procurement law review is going to become a forum for reviewing the strengths and weaknesses of that tribunal we are going to need to clear space for more than a few blog entries!
The next chapter of this part of the TCA includes two provisions, Article PPROC.12 and 13, under the general heading “National treatment beyond covered procurement”. This innocuous little passage introduces an obligation in any national procurement to treat EU and UK providers no less favourably than a provider from the relevant state would be treated. This covers all procurement, even if not covered by the Articles PPROC.1 to 11, unless covered by specific GPA exceptions such as security. This means that to the extent that a procurement process is set up for, say, a health related service which is not covered by the list identified in Article PPROC.2, the process must be set up so that an EU provider is treated no less favourably than a UK provider. I need to think this through a little further, but at first blush it seems to mean that wherever there is public procurement it will end up being offered on a cross border basis. The nebulous problems of the “sufficient cross border interest” test return?
The next chapter includes Articles PPROC.14 to 16 and covers modification and rectification of the provisions. Rectification seems to mean something more like “correction to keep up to date” rather than an English law notion of rectification. I am sure that these provisions are important, but we have enough to do thinking about the new regime without worrying how it might change – for the moment. So, I will leave that for another day.
UK Procurement 1st January 2021
So. we leave the EU legal world this coming Friday and the first question will be what law covers public procurement from then. The TCA will, of course, need reflecting in domestic law. Aside from that, there are some other notable developments.
First, there are the domestic Regulations amending retained EU law (as to which see this blog post by my colleague Jack Williams) insofar as it affects procurement law. My colleague Khatija Hafesji wrote about the relevant procurement regulations when they were in draft (see here). The relevant regulations, the Public Procurement (Amendment etc.) (EU Exit) Regulations 2020, were made on 19 November 2020 and cover the Regulations dealing with the core public sector regime as well as utilities and concessions. Changes are made to the Defence Regulations in a separate measure. Scottish regulations were made on 22 December 2020 (see here).
These changes to the legislation give effect to departure from the EU in a context in which, simultaneously, the UK becomes a separate member of the WTO Government Procurement Agreement.
The regulations make little substantial difference in the law, beyond the changes necessary to reflect departure from the EU legal environment (like changing where notices are published). There are a few oddities in the text but it may be that we don’t need to dwell on them if they relevant only to some transitional posture being adopted by the UK government.
There are then further questions about how to interpret UK procurement legislation that were prepared as implementation of EU measures. What assumptions are to be made about legislative intent if legislation that gave effect to EU measures is now effectively re-legislated through these specific EU Exit provisions? What relevance is the historic EU background? For example, there will continue to be an obligation to comply with obligations of equal treatment and non-discrimination in Regulation 18 of the Public Contracts Regulations 2015, but what does that mean when those obligations become pure domestic law obligations rather than implementations in domestic law of an EU law obligation? This involves questions about the correct approach to legislative interpretation, and the continuing indirect effect, if any, of EU legislation. These questions also involve careful consideration of the meaning and effect of EU retained law in the context of procurement law.
Second, there has been a flurry of activity in UK Procurement Law and Policy Despite everything else, there has been a considerable amount of new content with a direct and immediate impact on UK procurement policy. These are some of the key additions to thinking on public procurement law and policy.
The Outsourcing Playbook was updated in June: see here. It is now joined by its sibling, the Construction Book produced in December: see here.
New plans for improved platform procurement are being trialled: see here.
Changes have been made to the content and effect of guidance on procurement of social value in the context of public procurement: see here.
New Guidance on Bid Evaluation has been set out by Cabinet Office here.
The Government also produced a detailed consultation paper in December setting out proposals for procurement law reform here. The consultation closes on 10 March 2021. There is a lot to comment on in that document and I will return to it, particularly now that we seem to have the UK-EU context for the operation of that law in place.
Conclusion
As already noted, this is my first skate through the TCA, so do please point out all that I have missed or mistaken. As may have been expected, this section of the TCA seems to go a long way to maintaining something approaching the status quo while leaving a measure of elbow room for legal reform within the UK and it may be that the constraints on the UK’s action are not that much greater than would have flowed from GPA membership anyway. However, it also seems clear that there are a number of features of this part of the TCA which ensure that the UK and EU are going to be locked into an eternal dialogue on certain key aspects of procurement law and policy, particularly given that both parties are going to want to be seen to be using procurement to press forward with social policy and climate change agendas over the next few months and years.
Earlier versions of two blog posts that became this blog post are available on Michael’s procurement law blog at: https://mostlyprocurement.typepad.com/my-blog/.
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A first class effort to cover this very complex waterfront – many thanks!
It would be particularly helpful if you could apply your expertise to a particular type of public procurement that in my view could be of immense significance to a country’s (eg UK) or the EU’s future prosperity. I use a UK example but the question arises much more widely.
Successful development and use of novel technology-based methods is a key factor in future productivity, employment, social welfare etc. My example:
The UK’s NHS is among the world’s largest employers and among the world’s largest suppliers in its field, but relatively weak in its use of management systems, as opposed to medical applications. The UK government seeks to make a major forward step, investing £billions through an entity called “NHS Improvement”. Earlier efforts in this direction have wasted £billions through failures in public procurement, which actively prevent the kinds of alliances between user and supplier that have yielded success in fields such as banking in the UK and defence in the USA, where cooperation has yielded a market lead for the both buyer (as a user/exploiter of technology to deliver innovative and cost-effective services) and provider (now supplying innovative products to the world market, based on the learning and development gained through the cooperation).
Hitherto, EU public procurement rules have inhibited such active collaboration between supplier and user. The user cannot cooperate with a particular supplier in specifying what is delivered, either prior to procurement or during a multi-year scheme that should evolve collaboratively as the available technologies improve and as both parties gain greater understanding of the opportunities and the needs.
Question: is it inevitable that either EU, UK or GPA will and must always inhibit such cooperations between government users and private sector suppliers, with only ‘consultants’ really making an gains?