Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations 2019

Viscount Waverley Excerpts

Thursday 14th March 2019 Lords Chamber

[Lord Young of Cookham (Con)]

My Lords, the Government are committed to securing an agreement on the UK’s exit from the EU but we must be prepared for all outcomes, notwithstanding yesterday’s votes. It is for this reason that I am today bringing forward two sets of regulations for approval: the Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations and the Public Procurement (Electronic Invoices etc.) Regulations. To be clear, in the event that the UK enters into a withdrawal agreement with the EU, the first of these sets of regulations will not be required.

The amendments in the Public Procurement (Amendment etc.) (EU Exit) (No. 2) Regulations do not amount to a material change in public procurement policy but, to all intents and purposes, maintain the status quo for UK contracting authorities with regard to their obligations towards certain non-UK suppliers. They will ensure that the UK’s procurement system continues to function as intended post-EU exit in the event of no deal, and grant certainty to UK contracting entities that they can continue to procure goods and services in the same way as they do now after exit day. In this way, the Government are ensuring that these entities continue to be able to obtain value for money for UK taxpayers.

As noble Lords will be aware, the UK Government are working to secure continuity agreements with a number of our international trading partners, which will replicate as closely as possible trade agreements to which the UK is currently a party via its EU membership. We have already laid before Parliament agreements with Switzerland, Israel and Chile. All these agreements contain substantial provisions on procurement, which will provide UK businesses with guaranteed access to lucrative procurement markets in those countries. Where the UK has entered into an agreement which contains provisions relating to public procurement, we must ensure that our domestic procurement legislation takes account of the obligations in that agreement.

In their current form the Public Procurement (Amendment etc.) (EU Exit) Regulations 2019, which were approved by this House on 20 February, would amend the existing procurement regulations so as to disapply, from exit day, the duties which UK contracting authorities currently owe towards economic operators from countries with which the EU has a trade agreement containing procurement provisions. Regulation-making powers in Clause 2 of the Trade Bill currently before Parliament would then enable the UK to reinstate these duties in such a way as to reflect the UK’s transitioned continuity agreements, rather than the EU agreements which these replicate and to which of course the UK will no longer be party after exit day.

As noble Lords will be aware, the Trade Bill is yet to complete its parliamentary passage. In the consequent absence of bespoke implementing powers in that Bill, we have had to look at other measures which would enable the UK to demonstrate compliance with the agreements that we have worked hard, and continue to work hard, to conclude. It is the duty of a responsible Government to ensure that, once we have left the EU, we continue to reap the economic benefits that these agreements bring. It is also our duty to uphold our reputation as a valued and respected trading partner, by ensuring that the obligations we have committed to maintaining after our withdrawal from the EU are adhered to.

I am therefore bringing forward this second EU exit instrument, which will amend the first such instrument before it comes into force so that, instead of removing from the procurement regulations the obligations owed by UK contracting authorities and other entities towards non-UK suppliers immediately on exit day, that first SI would preserve these obligations for a period of 18 months after exit day. The need for there to be a second, amending instrument was referred to during debate on the first EU exit instrument in the other place: specifically, during its consideration in the Delegated Legislation Committee on 13 February.

In practical terms, this preservation of obligations will have the effect of ensuring that, for a time-limited period, suppliers from certain non-EU trading partners will be afforded the same guaranteed rights of access to UK procurement markets that they enjoy now. This mirrors a similar provision already contained in the first SI in respect of suppliers from states which are party to the WTO government procurement agreement. That provision has already been approved by this House, but it is being extended so that it aligns with the other provisions in this instrument. By keeping alive the duties owed by contracting authorities as they exist already, the Government are ensuring that the UK can continue to meet its international procurement obligations. In turn, that will help to ensure that UK businesses continue to enjoy access to overseas public procurement opportunities and that UK contracting authorities can continue to obtain the best possible value for money when procuring, through robust supplier competition.

Noble Lords may at this point be wondering why, when the UK is leaving the EU, it is appropriate to preserve obligations arising from EU agreements to which we are no longer party, and whether doing so may produce any adverse effect on British businesses and authorities. The procurement obligations which arise from the UK’s continuity agreements are, in essence, the same as those which have arisen until now from the EU’s trade agreements, meaning that the amendments in this instrument represent a temporary technical solution to complying with the UK’s international procurement obligations until such time as the Trade Bill is enacted.

I reassure noble Lords once again that, in practical terms, the provisions in this instrument amount to a time-limited continuation of the status quo, which will create no additional burdens or costs for UK businesses or contracting authorities. Public sector contracting authorities and other covered entities across the UK will continue to be able to procure competitive goods and services from overseas suppliers as they do currently; and UK businesses will see no change as a result of this instrument in the way they go about bidding for and winning lucrative public contract opportunities, both in the UK and in countries with which the UK has a trade agreement. It is for this reason that it has not been necessary to publish an official impact assessment.

In summary, this instrument will ensure that the UK’s procurement system will continue to function as intended post EU exit in the event of no deal; that the UK can successfully ratify and comply with its international continuity agreements; and that UK suppliers and contracting authorities can continue to operate as they do now for the foreseeable future.

I now turn to the second of the two instruments: the Public Procurement (Electronic Invoices etc.) Regulations 2019. Unlike the other SIs which we have been debating today, we will need this if we secure an agreement—as I hope we will. In the event that the Government enter into a withdrawal agreement with the EU, we will be required, under the terms of this agreement, to continue to comply with EU procurement law during the implementation period. That includes this directive, which concerns electronic invoicing in public procurement. It is a short and simple measure which aims to promote the uptake of electronic invoicing in public procurement by requiring public bodies to accept electronic invoices from their contracted suppliers. Principally, this instrument is to transpose the e-invoicing directive; it also makes a small number of other technical corrections to the public procurement rules. There are numerous different types of e-invoice used across the EU. These varied formats cause unnecessary complexity and high costs for businesses and public bodies.

There are significant benefits to be realised in promoting the uptake of standardised electronic invoicing in public procurement, both in terms of a reduction in costs and administrative burdens for procuring entities and their suppliers and in terms of the environmental impact of a move away from paper-based invoicing. That is why, in 2014, the EU adopted Directive 2014/55 on electronic invoicing. This instrument transposes the e-invoicing directive into domestic law. It does so by amending existing procurement legislation applicable to the award of public contracts and contracts in the utilities sector. The Scottish Government have brought forward their own legislation to give effect to the directive, in similar terms to this instrument.

The directive contains one simple obligation for member states: to take the necessary measures to require public sector buyers and utilities to receive and process electronic invoices that comply with a common standard. Private sector suppliers, other than those privatised utilities remaining subject to public procurement rules, will not be obliged to use the e-invoicing standard unless they wish to do so. We are not imposing additional costs on suppliers. The measures we have introduced would oblige contracting authorities and other procuring entities to include within their contracts an express term requiring them to accept and process electronic invoices that comply with the standard where, of course, there is no dispute as to payment. In the absence of an express provision of the contract dealing with electronic invoicing, a term to that effect is to be implied. In that way, suppliers will be able to enforce their ability to invoice purchasers of goods and services electronically via the terms of the contract itself.

The European Committee for Standardization—CEN—was commissioned to draft the standard and the British Standards Institute was involved in its development. The standard was published in October 2017, following which the UK had 18 months to implement the directive’s requirements. The deadline for implementation is 18 April 2019. This falls after the date on which it is anticipated that the UK may leave the European Union. However, it remains the Government’s aspiration and intention that the UK will secure a deal with the European Union. We would then enter a period of implementation, as provided for in the withdrawal agreement, during which the UK would continue to be bound by most aspects of EU law, including the e-invoicing directive. This instrument is, therefore, expressed to come into force on 18 April 2019.

For sub-central contracting authorities, such as local authorities and utilities, the directive confers on member states the discretion to postpone the application of implementing provisions until 18 April 2020 and we have taken advantage of that derogation. It is right that we allow procuring authorities, other than central government authorities, time to adapt to the change, although there is of course nothing to prevent those authorities from accepting electronic invoices prior to that date. In the event of no deal being reached by 29 March, we are free to implement the European e-invoicing standard and we will consider the options available to us for this instrument. The UK will be free to set its own policy on electronic invoicing.

As set out in further detail in the Explanatory Memorandum, we have also taken the opportunity in this instrument to make minor amendments to the way in which the Public Contract Regulations 2015 and the Concession Contracts Regulations 2016 refer to offences under the Modern Slavery Act 2015. The aim of the amendment to the Public Contract Regulations 2015 is to ensure legal certainty as to which offences under the Modern Slavery Act constitute grounds for mandatory exclusion from award of a contract. More specifically, the amendment omits a duplicate reference to offences under Sections 2 and 4 of the Act. That duplicate reference was included in error in 2016.

For the Concession Contracts Regulations 2016, the amendment is to ensure that offences under Section 1 of the Modern Slavery Act 2015 are included within the mandatory grounds for exclusion from participation in a concession award procedure, and ensure consistency in the grounds for exclusion across the procurement regulations. With this instrument, therefore, we have the opportunity to provide real benefits to both the supplier community and the public sector, and I look forward to seeing it progress through both Houses.

I hope noble Lords will agree that both sets of regulations brought forward today are necessary for the UK to adhere to the commitments it has made, both in its trade continuity agreements and under the terms of the withdrawal agreement. I hope they will also agree that these instruments will provide benefits to the public sector and to UK businesses. I commend them to the House.

[Viscount Waverley (CB)]

I wonder whether the Minister’s notes allow him to comment on the following and, if not, he will agree to write. Currently, all UK public sector opportunities are published on Tenders Electronic Daily—TED—which is the EU service on which all public sector tender opportunities within the European Union are listed and updated, constantly. What might be the plan for UK public sector tender opportunities either to continue to be published on Tenders Electronic Daily or to be published separately? If so, where might they be published?

[Baroness Neville-Rolfe (Con)]

My Lords, I welcome the opportunity to debate these SIs, but I have one or two questions of clarification. Luckily, the Minister has already answered my question about the Modern Slavery Act.

As I understand it, the first of the two SIs, in practice, relates to third-country public procurement by the UK. I admit to having a concern about the interests of our own UK businesses and small operators that are involved in procurement. I refer to my registered interests, just in case any might be affected, although the impact assessment suggests that the impact of this order is negligible.

My experience is that we in the UK are more punctilious about enforcement of procurement rules based on,

“transparency, non-discrimination, equal treatment and proportionality”,

and the remedies for breach of any of those; I picked up the wording from paragraph 6.2 of the Explanatory Memorandum. Perhaps the Minister would be kind enough to comment on the risk that the changes will put us at a future disadvantage and not be fully reciprocated by the third countries concerned in the procurement process. If there is a risk, how long will it last? The SI lasts for 18 months, but I am not clear whether that is 18 months altogether or 18 months during which contracts might be let. Of course, procurement contracts often go on for many years.

I was sorry to see that there was no public consultation on this SI, but perhaps my noble friend the Minister can let me know if any concerns have been raised since the SI was published. I fully support the second SI on electronic invoicing. The UK has led the charge in Brussels on permitting businesses and citizens, and people around the world, to take advantage of the magic of online. That includes invoicing, contracts and many basic things. Both in business and as a Minister, this is an area that I have strongly supported and I am glad to see that electronic invoicing continues to apply. Our support for online should continue in third-country and EU procurement, although I know that the latter may be more peripherally affected on this occasion.