Public Procurement (International Trade Agreements) (Amendment) Regulations 2022

Lord Lansley Excerpts

Wednesday 15th June 2022 Grand Committee

[The Minister of State, Cabinet Office (Lord True) (Con)]

My Lords, the instrument brought forward today will give legal effect in domestic regulations to the United Kingdom’s procurement obligations under the free trade agreement between the UK and EEA EFTA states of Iceland, Liechtenstein and Norway. The EFTA agreement sought to reflect many of the provisions of the EU-EFTA agreement by which the UK was bound when an EU member state. This is part of the Government’s wider approach to provide continuity, as far as possible, in existing trade and investment relationships with third countries that had an agreement with the EU before we left.

The UK-EFTA agreement was signed on 8 July 2021 and completed its scrutiny period prescribed under the Constitutional Reform and Governance Act in October 2021. This instrument is concerned with implementing the procurement obligations contained in that agreement. The procurement provisions will ensure that UK businesses will continue to be able to access procurement opportunities in these three countries. This coverage is reciprocated by the UK giving businesses from those EFTA states no less favourable treatment when conducting its procurements covered by the agreement.

The UK has an open procurement market underpinned by principles of non-discrimination and equal treatment. However, without this instrument, there is a risk that, in respect of procurements covered by the agreement, relevant EFTA businesses will not be entitled to the legal remedies that the UK has committed to in the agreement. This instrument therefore ensures that we fulfil our obligations.

In terms of the coverage in the agreement, the UK is an independent party to the World Trade Organization’s Agreement on Government Procurement—or GPA, as it is known—along with Iceland, Liechtenstein, Norway and other major world economies. The GPA aims to mutually open global public procurement markets and is worth some £1.3 trillion in guaranteed access to global procurement opportunities for UK firms.

The UK-EFTA agreement incorporates the relevant GPA provisions, and goes further. The procurement coverage is similar to the UK’s coverage under the EU’s agreement with the EEA EFTA states, with some exceptions including in respect of health services.

This instrument is being made using powers set out in Section 2 of the Trade Act 2021. It will add the UK-EFTA agreement to the existing schedules of international trade agreements contained in the various UK and Scottish procurement regulations to ensure that no less favourable treatment is accorded to businesses of Iceland, Liechtenstein and Norway, where the procurement is covered by the terms of the agreement. It will also make explicit in those procurement regulations that contracting authorities can make inquiries as to whether subsidies form part of an abnormally low tender, as provided for in the agreement.

Importantly, these amendments do not add any burdens to the UK’s procurement process, nor do they reduce any of the UK’s procurement standards.

The provisions will be implemented across the United Kingdom. We have consulted officials from the devolved Administrations throughout the process. We have also formally notified each Administration, via ministerial letters, of our intention to lay this instrument. The Scottish and Welsh Governments have formally agreed to our approach and the Northern Ireland Executive Minister responsible for procurement has confirmed that he did not have any objections. I therefore thank each Administration for their engagement and collaboration.

Any amendments to the procurement coverage in the UK-EFTA agreement, or other international trade agreements, will require further legislation to give them legal effect. Any future trade agreements which the UK signs or has signed—for example, with Australia and New Zealand—will be implemented by separate legislation.

I hope that noble Lords will join me in supporting these draft regulations. I commend them to the Committee and beg to move.

[Lord Lansley (Con)]

My Lords, I am very glad to have the opportunity to say a few words about these regulations and I thank my noble friend for introducing them so clearly. As somebody who laboured long and hard on the Trade Act 2021, it is always a pleasure to see the powers being used. There may not be many such further events but it is interesting to see it being used in this case.

I must confess that the reason I looked at these regulations was that, as my noble friend will recall, at Second Reading of the Procurement Bill I raised the interaction between that legislation and the Trade (Australia and New Zealand) Bill, which had, of course, been introduced at the same time in the other place. I looked at this instrument and thought, “How does this relate to the Procurement Bill?” Like the Australia and New Zealand Bill, as far as I can see, the Procurement Bill will supersede these regulations when it becomes law. Schedule 9 to the Procurement Bill incorporates the UK-EFTA agreement into the list of treaty state suppliers. So far, so fairly straightforward: we need these regulations to give effect to the agreement in the intervening period.

However, there is an issue about what these regulations do, because they also amend public contract, concession contract and utilities contract regulations to include the further provision relating to abnormally low tenders. It is a question of whether the price or costs take into account the grant of subsidies. First, I ask: does the preceding EU-EFTA economic area agreement have the same language? It seemed surprising if it did, on the face of it, because existing regulations, which are part of the structure of EU regulation, already take account of whether—to cite Regulation 69 of the Public Contracts Regulations, for example—the abnormally low tender price is because of the possibility of the tenderer obtaining state aid.

I should have thought that, in the EU context, the question of state aid and grant of subsidy were regarded as effectively the same thing. I suspect, therefore, that EFTA countries are saying that the words “state aid” do not necessarily have the same meaning in United Kingdom in future as “state aid” did in the EU in the past. I may be wrong about that, but I should be interested to know whether that is the case.

Anyway, this additional provision in the regulations changes, for example, Regulation 69 of the Public Contracts Regulations, which relates to abnormally low tenders. I thought, “Let’s see how this is incorporated into the Procurement Bill”, but I cannot find it. So, my other question is: how will that Bill incorporate the provisions of, for example, Regulation 69 relating to abnormally low tenders into the structure of our regulation in future? I am happy to be guided by my noble friend on that, not least because it will no doubt give us an opportunity to learn a bit more about how the Procurement Bill itself will work in future. Subject to those questions, I am glad to take the opportunity to welcome the regulations and support my noble friend.

[Baroness McIntosh of Pickering (Con)]

I, too, am pleased to speak to some of the issues before us this afternoon and thank and congratulate my noble friend on bringing forward the regulations. My noble friend Lord Lansley has eloquently addressed a number of issues on the relationship between this instrument and the public procurement Bill. But there is also the broader context of our new relationships with the EU and, now, with the three countries before us this afternoon. What is generally understood by “state aid” and has our policy towards them changed in that regard?

Perhaps the thing that concerns me most is this. My noble friend spoke about the GPA, the global procurement agreement to which we have signed up, and mentioned that it is worth £1.3 trillion to the UK economy. When the Trade Bill was passing through—I also took an interest in that at the time, and my noble friend Lord Grimstone spent hours trying to allay our concerns in this regard—it was curious that any public service was obliged to declare a contract worth, I think, €130,000 and to put it out for tender.