EU vote may alter rules of public procurement

The UK would have reduced influence if it goes it alone, suggests Lynsey Brown

IT may not represent the highest profile issue of the current EU debate, but the outcome of June’s in/out referendum could have a significant impact on how procurement is legislated in Scotland and the rest of the UK.

Public procurement rules, currently based on EU directives, are a major issue for public sector bodies and all organisations who supply works, goods and/or services to them. According to the Scottish Government, public spending in areas such as health and education services amounts to over £10 billion per year north of the Border. Given this significant expenditure, there has been a growing focus to ensure robust guidelines are in place to ensure procurement is both fair and cost-effective.

In recent years, a series of reforms have been introduced in Scotland which, incorporating EU rules, aim to drive up procurement standards to ensure better value for money for the taxpayer. New EU rules on procurement introduced this month have prompted another review of procedures.

Given the current guiding hand of Europe in shaping our rules, a vote to leave the EU could therefore, in principle, lead to major changes in how we manage procurement here.

It is easy to forget the UK had a procurement regime before joining the EU. There was, however, very little national legislation with public bodies simply regulating themselves through their own formal tendering process.

World trade has progressed significantly and it is unlikely that public bodies or contractors conditioned by a heavily regulated EU procurement regime could or, indeed, would want to revert back to that unregulated approach.

It is more likely the UK and Scottish governments would adopt similar channels of procurement which would mirror, to an extent, the rules and regulations already in place. Whilst EU directives would no longer apply here in the event of a Brexit, the legislation already in place to transpose those directives would continue to have effect.

In reality it is likely that both the UK and Scottish governments would leave this legislation largely unchanged, at least in the short to medium term, and might even choose to adopt any further changes coming from Europe on a voluntary basis.

Whether changes to the procurement rules could be introduced over the longer term would depend on any post-exit settlement achieved as the UK would still wish to maintain some form of a continued relationship with the EU. There is the possibility that, like Norway, Liechtenstein and Iceland, a newly-independent UK could become a European Free Trade Association (EFTA) member and join the European Economic Area (EEA).

As an EFTA member, however, the UK would have reduced influence in terms of procurement as it would be required to continue applying the existing EU directives but, as a non-member state, would have no influence in the creation, amendment or applicability of these rules. This outcome would certainly contradict the argument that leaving the EU would give the UK increased control over such policies.

The likelihood is that, in the event of a Brexit, we would look to the Swiss model in determining key legislative areas like procurement law. Switzerland is a member of EFTA but not the EU or the EEA and therefore is not bound by the ties of the Brussels-led procurement regime. Instead, it conducts its relationship with the EU on the basis of bilateral sectoral agreements. In terms of procurement regime, Switzerland extends the rules imposed on it by virtue of its membership of the World Trade Organisation to all public sector procurement and some private sector bodies.

While this model provides Scotland and the rest of the UK with a clear reference point, the result of June’s referendum will determine whether this will need to be a consideration for Westminster and Holyrood.

• Lynsey Brown is a Senior Associate at CMS