Out-Law Analysis 3 min. read
04 Dec 2023, 9:58 am
There is a lot of legislative development to keep abreast of in these areas, and we highlight some of the more important changes here.
We have commented on the challenges to the industry caused by lack of progress in relation to long-term planning in infrastructure procurement. The new UK Procurement Act 2023 is expected to come into force in October 2024. It makes numerous changes to the public procurement rules, many of which will be welcomed by the construction sector as improving at least shorter-term visibility.
For example, there promises to be an increased visibility of contracting authorities’ pipelines of work: larger contracting authorities will need to publish a “pipeline notice” at the start of the financial year, setting out any contracts worth at least £2m that they intend to procure over the next 18 months.
Contractors should also anticipate that procurement processes may be structured differently, as contracting authorities will have more freedom to design a process that meets their needs under the new “competitive flexible procedure”. Whilst this new flexibility could lead to some interesting innovation when procuring construction contracts, firms will need to play close attention to the rules of any new processes as they may not follow traditional formats.
The UK construction sector was one of those which continued to attract competition law scrutiny during 2023. Recent investigations, ongoing legislative reform, and the UK government’s strategic steer to the Competition and Markets Authority (CMA), all point towards competition policy and enforcement as being likely to significantly impact all sectors, including construction, well into 2024 and beyond.
In 2023, the CMA fined 10 demolition and asbestos removal services firms almost £60 million for their involvement in bid-rigging activities in breach of competition law. Two of the businesses have launched appeals against the level of fines imposed. In line with the growing enforcement trend, the CMA also secured the disqualification of four company directors.
The CMA and European Commission also launched dawn raids and parallel investigations into suspected infringements of UK competition law and EU competition law in relation to the supply of chemical admixtures and additives for use in concrete, cement, mortars, and related construction products. Competition authorities in Turkey and the US are also undertaking similar investigations.
The CMA launched a housebuilding market study in early 2023, following UK government requests for competition in the sector to be reviewed. The market study is due to be completed in February 2024 and the CMA has identified some provisional competition concerns that could lead it to investigate the sector in more depth. Areas of focus to date include new build estate management, and land banks and planning rules. The CMA may consider a range of options going forward, including recommending legislative changes, or launching an in-depth market investigation that would continue into 2024 and beyond.
There can of course be legitimate and beneficial industry collaboration, and there is useful new guidance on that. Continuing UK legislative and policy reforms will shape how the CMA applies and enforces competition law across all sectors, including construction, throughout 2024. Updated CMA guidance has been published which helps businesses that are actual or potential competitors to lawfully cooperate in areas such as joint bidding and subcontracting, as well as in relation to environmental sustainability agreements. The Digital Markets Competition and Consumers (DMCC) Bill, introduced into parliament in April, will bring about important changes to UK competition law, including stronger investigatory and enforcement powers, and higher penalties for breaching competition and consumer law, and for non-cooperation with CMA investigations.
New post-Brexit legislation took flight in 2023 in relation to local authority subsidies: to control the balance between their positive effects and the influence that they can potentially have on competition and international investment. Businesses involved in projects with a subsidy need to consider the possibility of challenge, and mitigate that risk.
The UK's Subsidy Control Act 2022 came into effect in 2023. Before granting a subsidy, public authorities now have an obligation to self-assess and determine whether the subsidy will be compliant with subsidy control requirements, including a set of so called “subsidy control principles”.
There is no prior notification obligation or a regulatory clearance system under UK law, unlike under the EU state aid regime. At the same time, the CMA has an advisory role in relation to certain high-value subsidies, certain types of subsidies, and subsidies that relate to certain sensitive sectors.
Businesses can challenge the award of a subsidy to a competitor through an application for judicial review to the Competition Appeal Tribunal and we are beginning to see the first of these challenges coming through, with a significant increase in cases expected during 2024 – reinforcing the need to plan how to navigate these risks on projects with subsidies
01 Dec 2023