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Brexit and Public Procurement


Wednesday, January 30, 2019

With less than 60 days to go until the UK leaves the European Union, Irish contracting authorities should review their existing tenders and contracts to mitigate the possible impact of Brexit. Brexit (in any form) not only impacts UK companies delivering public contracts in Ireland but also Irish companies with UK entities in their supply chain and Irish contracting authorities delivering public services.

Can UK companies still participate in Irish public tenders?

Yes – even in the event of a “no-deal” Brexit, UK businesses at present will still be entitled to participate in Irish public tenders. The Irish implementation of Directive 2014/24/EU obliges contracting authorities to treat “economic operators equally and without discrimination and [act] in a transparent and proportionate manner[1] – no reference is made to an economic operator residing in the European Union – and it is currently the Office of Government Procurement’s position[2] that UK companies should not be treated differently from EU businesses.

The UK has formally applied to join the World Trade Organisation’s Government Procurement Agreement (the “GPA”). Once it becomes a member of the GPA, UK businesses will have an explicit right to equal treatment with EU businesses to the extent that the GPA applies to the subject of the tender – certain services are excluded from the scope of the GPA.

What should Irish contracting authorities do if they are currently running a tender procedure?

It is strongly advisable that Irish public sector organisations review any ongoing tenders to determine the following at a minimum:

  • The nature of the commercial agreement – e.g. if the contracting authority pays a fixed fee or if it pays on a costs plus margin basis, the latter may expose the contracting authority to significant cost increases due to tariffs, shortages of resources and/or delays in the supply chain;
  • Liability for taxes/customs tariffs – tender documentation and contracts should make it clear that the liability for any new taxes or tariffs should fall upon the contractor and not the contracting authority;
  • Force majeure – contracting authorities should ensure that their force majeure clauses explicitly exclude the departure of the United Kingdom (or any part of it) from the European Union;
  • Data protection – in the event of no-deal Brexit, the UK is likely to be treated as a “third country” (at least initially) and therefore personal data transfers to the UK will be a breach of the General Data Protection Regulation unless certain steps are taken. For more information, please see our article on this issue;
  • Location, location, location – the contracting authority should know as far as possible its contractor’s supply chain to determine any potential issues (e.g. contractors using the UK as a landbridge to reach Ireland from continental Europe);
  • Is time of the essence? – contracting authorities should ensure that delivery dates and milestones are clearly included in their contracts and in certain cases that “time is of the essence” is a requirement in respect of delivery, providing the contracting authority with more effective remedies if the contractor fails to achieve these dates;
  • Certifications – contracting authorities should review their contracts to ensure that British standards are not referred to and that their contractor does not rely upon UK certifications – for more information, please see the NSAI website;
  • Delivery, risk and payment – contracting authorities may need to consider purchasing items in bulk or alternatively requiring the contractor to hold a certain level of stock within Ireland for the contracting authority. As a consequence, payment provisions should be reviewed to determine when the contracting authority must pay the contractor (and whether risk and title passes on delivery to the contracting authority); and
  • Jurisdiction and governing law – contracting authorities should ensure that, unless there is an objective reason for doing so, their contracts should be subject to Irish law and the Irish courts.

If your organisation identifies any deficiencies in tender documents or draft contracts that you wish to address, you may wish to consider issuing a clarification notice via eTenders and revised documentation to tenderers – provided that your revisions do not breach your obligation to treat economic operators in accordance with the principles of Directive 2014/24/EU identified above.

You may also wish to make it clear (either within your tender documentation or as a circular on eTenders) that your organisation will not accept conditional tenders that make any reference to increases in the price due to Brexit.

What should you do with existing contracts?

Your organisation should:

  • review its existing contracts to determine which contracts are due to expire in the next 12 months and consider exercising any permitted renewal periods to avoid price instability;
  • ensure that contracts that could impact your organisation’s ability to deliver services are appropriately managed, placing greater emphasis on identifying issues at an early stage between the contracting authority and the contractor;
  • consider whether it is entitled to vary existing contracts under Irish public procurement legislation to address any of the issues identified above.

For more information on any of the issues raised above, please contact our Procurement Team.

 

[1] Regulation 18(1) of the European Union (Award of Public Authority Contracts) Regulations 2016.

[2] Office of Government Procurement’s Information Note on Brexit and Public Procurement (published December 2018), available here.

 

 


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