Brexit should not trigger an overhaul of public procurement rules in the UK, despite criticism of the existing regime by a senior UK government adviser.

Dominic Cummings has claimed the central government procurement regime is "complex, slow and wasteful", that it "favours large established companies with powerful political connections" and is so "horrific for SMEs to navigate" that "few can afford even to try to participate".

The basis of public procurement rules in the UK is rooted in EU law, and Cummings has stated that "Brexit means the entire legal basis for procurement is changing". Scrapping rules on public procurement post-Brexit would be the wrong move, however. It would not result in major projects being delivered faster and at lower cost, and it would put the UK at odds with the prevailing international trends.

Despite this, some change would help change perceptions about the public procurement regime.

Nicolson Wendy

Wendy Nicolson

Legal Director

While there is clear merit in maintaining a clear framework for governing the award of public contracts post-Brexit, there are some changes the UK government could make to change negative perceptions of how the regime works.

The public procurement regime

The central purpose of the public procurement regime is to open up competition by enabling businesses equal opportunities to access public contracts.

A number of pieces of legislation encompass the UK's public procurement framework. The Public Contracts Regulations 2015 implement the EU's Public Sector Procurement Directive in England, Wales and Northern Ireland, with separate regulations applying in Scotland. Further rules apply to utilities and concession contracts, as well as to defence and security contracts.

Currently, as a member of the EU, the UK is subject to the overarching EU legislation, but that situation will change when Brexit happens.

Last year the UK government confirmed public procurement regulations in the UK would remain largely unchanged in the event of a 'no deal' Brexit, but a subsequent change of prime minister and the outcome of last month's General Election has changed the political landscape and arguably makes it more likely that the UK will diverge from the EU's public procurement framework after it exits its membership of the EU. The comments made by Dominic Cummings, published prior to him taking on his role as a major influencer within government, only add fuel to speculation about reform, particularly given his more recently stated desire to hire new project managers in a bid to improve government. 

The global public procurement market

There are many benefits that derive from the public procurement regime, including the size of the public procurement market.

There are substantial opportunities available to businesses in the UK, the EU and the additional 19 signatories to the World Trade Organisation’s Government Procurement Agreement (GPA). Signatories include Australia, Japan and Canada with China, Jordan and Russia among other countries in the process of acceding to the GPA.

The GPA procurement market has opened procurement activities worth an estimated $1.7 trillion annually to international competition. The global trend is for greater access to public procurement markets, not less, and it is likely to form a precondition to most trade agreements that the UK seeks to negotiate post-Brexit.

Other positives of public procurement

The public procurement rules in place in the UK address the risk of cementing cosy buyer-seller relationships which could stifle innovation and impact the quality of public services. It is important that contracts are re-tendered regularly to reflect the current trends in the market and ensure that public money is not wasted unnecessarily where services can be delivered at the same standard at reduced cost.      

Public procurement can also be a vehicle for challenging international crime, especially in under-developed countries, as it promotes transparency and reduces corruption. It can also create opportunities and lift people out of poverty by helping businesses and entrepreneurs to access game-changing contracts in their domestic jurisdiction and overseas.    

Dispelling the myths of public procurement

There are three common myths that are perpetuated about public procurement – that it exposes public services to risk, excludes SMEs, and is expensive. None of those myths are true if the rules are followed correctly.

The case of Carillion was an example of how things can go wrong when critical public contracts are awarded to entities in a precarious financial situation. However, public procurement law is designed to ensure that companies that win public contracts are able to perform those contracts without running into financial difficulties that could potentially undermine the delivery of taxpayer-funded projects or services.

The selection questionnaire used by contracting authorities facilitates the rigorous assessment of the bidders’ financial position. The codification of outsourcing best practice in the UK government's Outsourcing Playbook has also encouraged contracting authorities to learn lessons from previous mistakes to protect critical public services.  

Public procurement rules are also designed to be an enabler for SMEs to win more public contracts, not a barrier.

Public procurement law specifically permits suppliers to form consortia to meet the selection criteria. The current procurement regime strikes a balancing act between avoiding another Carillion scenario, by incorporating financial testing, and ensuring that smaller businesses are able to access public procurement opportunities.

In 2018, the UK government highlighted figures from 2015/16 which it said showed it spent £5.6 billion directly with small businesses, and £12.2bn in total where sub-contracting arrangements were taken into account. The Cabinet Office at that stage set a target of achieving 33% of its procurement spend with small businesses by 2022.

The charge that public procurement is expensive is also misleading.

Public procurement exercises can be burdensome but, provided they are conducted correctly, they enable contracting authorities to identify the ‘most economically advantageous tenderer’ to award the contract. This ensures that taxpayers receive value for money and a high standard of public services. Public procurement would be cheaper if more time was spent on forward planning and staff are trained to deal with potential situations that could lead to costly litigation arising. 

Some changes post-Brexit would be welcome

While there is clear merit in maintaining a clear framework for governing the award of public contracts post-Brexit, there are some changes the UK government could make to change negative perceptions of how the regime works.

One change that should be explored is modernising public procurement law to ensure it better reflects the realities of the 21st century. In this respect there have already been positive soundbites from the government in relation to the importance that should be placed on social value questions in the evaluation criteria. Public procurement can also be used as a tool to combat the climate emergency by assessing suppliers’ environmental credentials at the selection questionnaire stage as well as considering potential environmental benefits of the contract at the award stage.

Further measures could also be taken to beef up the powers of the Public Procurement Review Service, which is a body that sits within the Cabinet Office and enables suppliers to raise anonymous concerns about poor procurement practices.

Improving the PPRS' powers would serve to ensure that there is a robust deterrent to discipline contracting authorities that are cutting corners or abusing their powers. This is vital for smaller businesses that often do not have the resources or funds to pursue an expensive procurement challenge.

Under a revamped regime, the PPRS should regularly publish black lists and award ‘gold stars’ to punish and reward procurement behaviour amongst contracting authorities.

Wendy Nicolson and Jonathan Taylor are specialists in public procurement law at Pinsent Masons, the law firm behind Out-Law.