Economy, Energy and Fair Work Committee

Meeting date: Tuesday, March 5, 2019

Official Report 663KB pdf

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Subordinate Legislation

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Public Procurement etc (Scotland) (Amendment) (EU Exit) Regulations 2019 [Draft]

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Public Procurement etc (Scotland) (Amendment) (EU Exit) Amendment Regulations 2019 [Draft]

We move to agenda item 3, on subordinate legislation. As the regulations are inextricably linked, we will consider them together before making a separate formal decision on each instrument.

I welcome Derek Mackay and his officials, who are Alasdair Hamilton and Mark Richards. I invite the cabinet secretary to make a brief opening statement before committee members ask questions.

We currently have three Scottish statutory instruments that transpose the three European Union procurement directives as well as the Procurement Reform (Scotland) Act 2014 and regulations made under that act. Today, the committee is considering two of the draft instruments that amend those pieces of legislation.

The first draft SSI was withdrawn and relaid to address some minor drafting issues identified by the Delegated Powers and Law Reform Committee. It became necessary to lay a further instrument when the United Kingdom Government changed its approach to dealing with international agreements.

The regulations that we are discussing today are designed to ensure that legislation governing public procurement will still function in the event of a no-deal Brexit. The objective is to retain, as far as possible, the status quo on day 1. First, that is necessary because the European Union (Withdrawal) Act 2018 allows for the correction of deficiencies arising from exit and not wholesale policy changes—that point is very important in understanding what we are being asked to approve. Secondly, the intention is to give as much certainty as possible to buyers and businesses in otherwise chaotic times. Thirdly, we anticipate that the UK will be party to the World Trade Organization Agreement on Government Procurement, from which the many requirements of the EU directives arise.

The basics of procurement will therefore be the same as they are today, although public bodies will advertise contracts on a new UK e-notification system instead of in the Official Journal of the European Union, known as the OJEU. Having one site per signatory is a requirement of the WTO GPA. However, in practice, Scottish public bodies will continue to use Public Contracts Scotland, as is required by the Procurement Reform (Scotland) Act 2014, which will forward adverts as it currently does to the OJEU.

Some powers to legislate would be transferred from the European Commission to Scottish ministers. Those would all be subject to negative procedure as they are either simple updating powers or powers that set out the precise conditions under which they can—and, indeed, must—be used, and they offer no scope for discretion or policy change.

In relation to the rights of bidders from other countries, we followed the UK Government’s requested approach in the first SSI. The UK then changed its ask and its own approach, which led to the second SSI. The delays to the Trade Bill mean that it is not safe to assume that the powers in that bill can be relied on to implement the UK’s accession to the GPA or the roll-over of the EU’s other agreements in time for exit. The effect of the two SSIs is to extend the EU’s obligations in relation to public procurement for 18 months after exit, by which time it is assumed that the Trade Bill or another piece of primary legislation dealing with the matter will be law.

We have to do this to ensure that our laws are compatible with the UK’s international obligations. I am sure that the committee will agree that it is a rather unsatisfactory, sticking-plaster approach. However, it is born of the UK Government’s approach to the EU, and our objective is to provide as much stability as possible.

Thank you, cabinet secretary. The first questions will come from John Mason.

I have a few questions. It has been suggested that, if that there was a no-deal exit from the EU, accession to the WTO GPA would come—according to a phrase that I have seen—shortly after exit day. Will you expand on what that means? How soon or late could it be?

The best estimate is about 30 days. The point of departure—the point of accession—would come after about a month. That is the timeframe that we are looking at.

On the wider timeframes, if there was a deal, the transition period would give us two years in which to plan. If there was no deal, the new arrangements would apply on the day after. However, the period of WTO GPA rules is about a month. Again, that is not ideal, but that is what we are living within.

That is helpful.

Various public bodies—for example, some health boards—have raised the concern that they would then be dealing with two systems.

No.

That has answered my question.

I can tell you why that would not be the case.

It would be helpful if you could, because those public bodies seem to think that, if they have entered a lengthier, three-year contract under the old system, they would still have to operate under that system but that, within the 30 days, they might also be operating under a new system.

There will be a switchover, if you like, from the current EU position to the WTO GPA. This evidence session is quite useful in enabling members to raise concerns that people may have and allowing us to correct any misunderstandings.

At the point of transfer, when the new arrangements come into force, those will be the procurement rules that apply. There will not be two systems. If a contract has already begun, as we switch over to the new system, the contract will comply with the new system. In exceptional circumstances, the details of which would be set out, there might be a crossover; however, at no point would we be operating two regimes. We would go from the existing regime to the replacement regime.

So, there would be a clear-cut switch as far as the tendering and award of the contract was concerned, even if a contract then ran for some time. I presume that that would be less important.

They would both be important. Procurement rules are procurement rules at the point of advertising and when a body sets about procurement, but I am advised by at least one lawyer and one policy official that what someone has signed up to in the contract is what they would be obliged to stay within. Nevertheless, the rules for how to go about procurement are the rules at that point in time.

Yes. The—

“Yes” will do. [Laughter.]

I will leave it there.

Cabinet secretary, perhaps you can clear up some confusion. You said that accession should take a maximum of a month.

We have been advised that that is the rough timescale.

I may be confusing two things, but the draft instrument sets the period at eight months, assuming that powers in the Trade Bill become available in that time. You are saying that, once the powers under the Trade Bill are available, it will take one month.

We are talking about accession and the terminology of lodging the instrument of accession, which is where the lawyers and the policy officials will be helpful.

You are now asking two separate questions. The first is on what the Trade Bill does and the second is on what we are trying to do in terms of the UK leaving the European Union—that is the important point—and compliance with what is necessary under the WTO GPA. There is a gap between our leaving what we are leaving and our joining the WTO GPA, and our estimate of that period is one month. Just to be clear, you have asked a slightly different question.

Last week, the WTO Committee on Government Procurement formally invited the UK to accede. The UK will now be going through its domestic ratification procedures. After that, it will have to lodge its instrument of accession with the WTO secretariat, and the UK will accede to the GPA 30 days after that, assuming that there is no deal.

Separately, we need to implement the requirements of that in domestic law. Given that we do not yet have the powers in the Trade Bill, we cannot do that in our own right, so the effect of what we are doing just now is to continue the obligations on the EU in domestic law. The obligations on the EU will be the same as the obligations on the UK, because we will be acceding on the same basis.

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The situation is far from ideal and has come about only because the UK Government has not got the Trade Bill passed in the fashion or time that it wanted and the negotiations have not provided the necessary clarity. That is why there is an unfortunate gap. We are trying to ensure that we are competent within an unsatisfactory set of circumstances.

The UK Government might still be suffering from an optimism bias towards getting everything in place in time. I am sure that we will debate that point elsewhere.

Does the amendment to the amendment regulations extend the period to 18 months purely to give greater flexibility and ensure that the powers are available under the Trade Bill?

It is not even as exciting as that. I was worried that I would raise members’ expectations of what we could do in relation to policy. The statutory instruments do not give us much power over policy and allow us to address only the deficiencies that arise from the bill itself—to fix administrative lists or to address any loopholes or deficiencies in the regulations. We are trying to do that from day 1 of the bill’s enactment.

As there are no further questions, we will move from the exciting part of proceedings to the more formal part, under agenda item 4.

Motions moved,

That the Economy, Energy and Fair Work Committee recommends that the Public Procurement etc. (Scotland) (Amendment) (EU Exit) Regulations 2019 [draft] be approved.

That the Economy, Energy and Fair Work Committee recommends that the Public Procurement etc. (Scotland) (Amendment) (EU Exit) Amendment Regulations 2019 [draft] be approved.—[Derek Mackay]

Motions agreed to.

Does the committee agree that, in the light of the timing, the clerk and I should produce and publish a short factual report that sets out the committee’s decisions on both instruments?

Members indicated agreement.