Public procurement in the life sciences sector post Brexit – what you need to know

Public procurement in the life sciences sector post Brexit – what you need to know

We last wrote on this topic in early December 2020, when it still wasn’t clear whether the UK and EU would reach a “deal” or not and so it was difficult to give a firm view of how public procurement would be regulated post Brexit.  Now that the transition period has finally ended, the picture is starting to get clearer.

Life sciences companies wishing to supply their products and services into the UK National Health Service (NHS) have long had to navigate their way around the complexities of public procurement rules that were underpinned by European Union (EU) law.  Whether it was competing to get a place on a highly regulated framework agreement or seeking to negotiate a direct award for products such as COVID-19 test kits that the NHS urgently needs, it has been a minefield for the uninitiated.  So how has this changed now the UK is no longer part of the EU? 

Unfortunately, the answer is not terribly straightforward from a legal perspective.  But the good news is that the practical changes are not too significant at this stage.  That’s not the end of the story though as the UK government has already signalled that some fairly major changes are on the horizon.

All change?

Like many areas of UK regulation post Brexit, the current position on public procurement is basically staying the same until the UK decides to change it.  As the UK historically implemented its EU law public procurement obligations through UK regulations (the principal ones being the Public Contracts Regulations 2015 (PCR 2015)), these continue to apply even though the UK has left the EU and the transition period has ended.

Some minor changes to the PCR 2015 have been brought in by the Public Procurement (Amendment etc) (EU Exit) Regulations 2020 (PPR 2020).  The PPR 2020 remove all references to the EU and so, for example, the financial thresholds are no longer calculated in Euros.  They have also removed the requirement to publish OJEU notices.  Instead, the NHS and other public sector bodies should publish procurement notices on the Government’s new platform “Find a Tender”.  This is worth suppliers in the life sciences sector noting as they will need to register with Find a Tender if they wish to be notified of relevant opportunities.

What happens if I’m a supplier from outside of the EU?

As an EU member state, the UK was previously party to the World Trade Organisation’s Government Procurement Agreement (GPA). This applies to procurements involving suppliers from countries around the world that are parties to it.  The UK is now an independent party to the GPA on the same terms as the EU and so procurements involving suppliers from other GPA countries will be largely the same as they were when the UK was party to the GPA through its EU membership.  This means that UK companies can continue to bid for contracts in GPA jurisdictions and vice versa, in the same way as before 1 January 2021.  

What about the Trade Agreement?

The EU-UK Trade and Cooperation Agreement (TCA) defines the procurement relationship between the EU and the UK, and represents the only real change following 1 January 2021. Broadly, it covers the provisions of the GPA with some additions.  Helpfully, the TCA rules do not really go any further than the PCR 2015 save for a few exceptions.

One important provision is the non-discrimination principle expressed as a “national treatment obligation”.  This states that a measure of either the EU or UK (as parties to the TCA) shall not result for suppliers of the other party in treatment less favourable than that party accords to its own suppliers.  Of course, non-discrimination has always been a key plank of UK public procurement regulation, but it is worth noting this very specific requirement to ensure that UK suppliers cannot receive more favourable treatment that their competitors in the EU.  This should ensure there is a level playing field where life sciences suppliers from outside the UK bid for NHS contracts.

Another provision to note is a requirement that where a procurement specifies that suppliers have particular experience of providing a service or supplying a product, the procurement cannot dictate that the experience is gained locally in that jurisdiction.

So for now at least, it’s largely business as usual.  But the UK Government has signalled that it does plan to make some quite significant changes to the public procurement regulatory framework – as set out in its green paper “Transforming Public Procurement” published on 15 December 2020.  We finish by looking at two key areas of potential reform that are particularly relevant to the life sciences sector.

What’s new for framework agreements?

Currently, framework agreements are extensively used by the NHS as a way of procuring products and services.  These are often set up on a national or regional basis and can be used by a wide range of NHS bodies for a period of up to four years. In this way, they speed up and simplify the process for awarding contracts for particular needs while also aggregating demand to drive competition.  The scale and duration of these frameworks means that it can be crucial for companies in the life sciences sector to secure a place on the right framework if it wishes to gain its market share of the contracts on offer.

The green paper signals the UK Government’s intention to legislate for new “open framework” with multiple joining points and a maximum term of eight, rather than four, years.  The proposals suggest that there would still be the option to have a “closed framework” where only those who had won a place on the framework through an open competition could be awarded contracts, but these would be limited to four years’ duration. The new longer term open frameworks could be opened up for new entrants at multiple points during the life of the framework, as long as this was provided for in the initial call for competition. At each such point, the suppliers already on the framework would have the opportunity to update their pricing and other terms.  These new arrangements, if they make it into new law, could be particularly useful in the life sciences sector, as they would give suppliers a route to market even though they may not have had a product ready in time for the initial competition.

Will the regulation of urgent direct awards change?

There has been a fair amount of publicity recently about the contracts that have been directly awarded in the UK for PPE, COVID-19 testing kits and so on without putting the contracts out to tender in an advertised competition.  In response to the pandemic, public bodies needed to procure enormous volumes of goods and services with extreme urgency and in March 2020, the Cabinet Office issued guidance that noted that direct awards could be made using the “extreme urgency” exception from the competition obligation in Regulation 32(2)(c) under the PCR 2015.  As time went on, however, questions were raised as to whether the prolonged use of this exception could be justified, particularly given it can only be used where the extreme urgency is brought about by unforeseeable events.  In response, the green paper proposes a new additional ground of “crisis” for the most serious of situations with strengthened safeguards for transparency.  “Crisis” would include an “event which exceeds the dimensions of harmful events in everyday life and which substantially endangers or restricts the life or health of people”, the aim being to give greater clarity to public bodies should there be a national or local emergency. It is proposed that the Minister for the Cabinet Office would have new powers to declare a crisis for these purposes.  Where a public body can justify use of the crisis or extreme urgency exception, this wouldn’t necessarily mean that they should just directly award a contract to a chosen supplier and they should always consider whether it is feasible to run an albeit very short competition.  In any event, they will be required to publish a notice whenever the decision is made to award under these provisions, which should improve transparency.

What next?

These are just two areas of the green paper that are of particular significance to the life sciences sector. 

For a fuller commentary on the green paper more generally, please see other articles on this topic here:

The deadline for comments on the green paper is 10 March 2021 and it will be interesting to see how the Government’s plans for reform develop after that.