Kathrine Eddon and Michelle Essen of Womble Bond Dickinson (Head of Public Procurement and Managing Associate in Construction, respectively) assess the impact of a no-deal Brexit on the construction industry.
In nearly six months’ time, on 29 March 2019 at 11pm UK-time to be more exact, the UK is expected to leave the EU.
The construction industry has already started to feel the impact of Brexit, and has ongoing concerns about, amongst other things, skill and labour shortages, the increasing price of materials, potential import and export tariffs.
Another area of concern for the construction industry has been how the system of advertising UK contracts for works, goods and services to EU companies would work post-Brexit and how businesses in the UK construction industry would be able to continue to bid for work, goods and services in Europe. This is important because many UK construction and consultancy businesses benefit and need to continue to benefit from smooth and open working relationships with EU businesses.
The government’s position
While the government continues to negotiate with the EU, in the hope of reaching agreement on a number of key points in the next few months, it is also starting to prepare for a “no-deal Brexit”.
As part of that, a couple of weeks ago the UK Cabinet Office released guidance entitled “Accessing public sector contracts if there’s no Brexit deal” which sets out how works, goods and services can continue to be accessed across the UK and EU in the event of the UK leaving the EU without an agreement in place.
The current system
At the moment, UK public bodies and authorities can procure certain works, goods and services for construction projects, including from EU businesses, by advertising them on the Official Journal of the European Union (OJEU) via Tenders Electronic Daily (TED). Equally, UK contractors, consultants, manufacturers and other construction businesses can bid to provide works, goods and services to EU public bodies through OJEU via TED.
This means that, for example, a UK public authority procuring specialist offshore trenching and vessel services for a government-funded offshore renewables project can receive tenders from specialist construction companies throughout the EU. It also means that UK companies, for example a UK architectural business, can tender for a commission to design a high profile development project in Spain on the same basis as companies based in other EU member states.
But post-Brexit, without a deal, this position would change.
The government’s guidance
There are two key messages in the government’s guidance “Accessing public sector contracts if there’s no Brexit deal”:
First, the UK is aiming to accede to the World Trade Organization (WTO) Agreement on Government Procurement (GPA). The GPA is an international trade deal that the UK currently participates in by virtue of its EU membership, but in a No-Deal Brexit world the UK will need to become a member itself. Whilst this is not a new position it does confirm that there has been no change to the government’s position on the need to seek GPA membership.
Second, the UK will develop a UK version of OJEU / TED, which it refers to as “a replacement UK-specific e-notification service”. The guidance states that:
- UK-based contract opportunities would no longer be advertised to the EU on OJEU / TED and would instead be advertised on the new replacement UK-specific free-to-use e-notification service
- This UK e-notification service will be available from “Exit day”
- The requirement to advertise and ability to access other UK domestic systems will remain eg on Contracts Finder, MOD Defence Contracts Online, Public Contracts Scotland, Sell2Wales and eTendersNI
- UK businesses who wish to tender or bid for EU contract opportunities may continue to do so via OJEU / TED and
- To enable the above, some changes to how the current procurement rules operate may be necessary, and these will be made by amending existing UK legislation.
The government has also said that further information will be provided nearer to the Brexit date.
So, has the government provided clarity?
In part, yes. The government has at least given some insight into its thinking about how works, goods and services can be advertised and procured across the EU in the event of a No-Deal Brexit.
However, there is very little detail around how this will work in practice.
In particular, while the guidance says that “Suppliers who wish to access contract opportunities from the EU may continue to do so via OJEU/TED”, it is not clear whether this position would be agreed to by the EU or whether they would have to access OJEU/TED as third country participants.
UK public authorities, construction companies, construction industry professionals and other construction industry businesses may also be concerned that, during a period in which they dealing with other challenges that may arise for their businesses due to Brexit (such as skill and labour shortages), they will potentially also have to familiarise themselves with a new UK e-notification service.
One thing is clear though, with no agreement yet reached with the EU, and with the Brexit date looming in a matter of months, the government should be working hard behind the scenes to flesh out its guidance, to provide certainty for UK public authorities and the construction industry before 29 March. We would hope to hear more on this by the end of this year.