WTO Government Procurement Agreement

Under the GPA, many large public sector procurement opportunities must be opened up to suppliers in the EU and certain other countries (the parties to the Agreement), and this procurement must be subject to open, fair and transparent conditions of competition.5

The UK Government says that the UK becoming an independent member of the GPA will:

  • maintain “current guaranteed access for UK businesses to global procurement opportunities” and
  • offer value for money for public sector buyers by promoting competition among suppliers.6

It would also mean that certain larger UK procurement opportunities continue to be open to suppliers in EU countries and other GPA member countries, including the United States, Japan, South Korea, and Canada.

Difference to EU Rules

The differences between the WTO and EU rules are y summarised by Prof Sue Arrowsmith:

The scope of procurement covered for the EU/UK under the GPA is narrower than the scope of covered procurement under the EU procurement directives in relation to a few utility sectors, coverage of private utilities, the defence sector, some services, (possibly) concessions, and certain private contracts subsidised by the Government. The GPA also does not include below-threshold procurement. However, some of these differences are of limited importance in the UK context. Further, the procurement that does fall into the gaps between the directives and GPA, at least above the directives’ thresholds, could easily be added to the GPA UK if desired. […]9

WTO Position and UK Intention

The WTO agreement on government procurement was updated in 1993. It provides a much weaker framework than that applicable under European Union law. In the absence of any specific agreement between the EU and UK relation to procurement, the WTO agreement on procurement is intended by the UK to apply. It is not clear if the EU will also apply it, and whether it might apply in a hard Brexit without an agreement.

The UK EU future trading declaration states as follows. It is a non-binding statement of intention says

VIII. PUBLIC PROCUREMENT 48. Noting the United Kingdom’s intention to accede to the WTO Government Procurement Agreement (GPA), the Parties should provide for mutual opportunities in the Parties’ respective public procurement markets beyond their commitments under the GPA in areas of mutual interest, without prejudice to their domestic rules to protect their essential security interests.

The Parties should also commit to standards based on those of the GPA, ensuring transparency of market opportunities, public procurement rules, procedures, and practices. Building on these standards, the Parties should address the risk of arbitrary behaviour when awarding contracts, and make available remedies and review procedures, including before judicial authorities.

UK Joining WTO Procurement Agreement

The Agreement on government procurement applies only to a relatively small number of states at present, 20 parties, including the EU comprising 28 WTO members. The Agreement only applies to the extent that states specifically agree. There are schedules as to the extent to which each state participates which are effectively reciprocal. There is a specific threshold that applies which are specified by the participating state. There are various exclusions that are broader than those under EU law.

The Agreement only applies in so far as specifically agreed by WTO member states concerned. The existing degree of application is set by the EU. It is not clear to what extent the UK will become subject to the EU’s existing position. One opinion is that the UK would have to opt to join the general procurement agreement. The US-Japan and Canada are parties to the Agreement so that not joining it may mean losing access to their procurement markets

It appears that the UK could and may have significant incentives to join the GPA on the same terms as the EU. The has been comment that there may be some technical complications in the UK joining the GPA agreement and it may even take a period in which event even if the UK wished, the very basic WTO agreement on procurement would not apply.

WTO GPA Commitments

The WTO procurement agreement provides that each State (UK and EU) is to provide immediate and unconditional access to the product services and suppliers of other states. They are to afford treatment no less favourable than that accorded to domestic products services and suppliers. Under the most-favoured-nation principle, each state must afford the same rules to all other states as is afforded to the most-favoured-nation.

The WTO GPA rules apply above €130,000 for central Government and €200,000 for other governmental bodies in the areas/ sectors to which the countries concerned have agreed that they will apply.

The Agreement provides that a State shall not treat a locally established supplier less favourably than another locally established supplier on the basis of the degree of foreign affiliation or ownership. States shall not discriminate against locally established suppliers on the basis of the country of production of the goods and services.

Apart from the rules themselves being less generous than the EU rules, it might be more difficult in practice to challenge and invalidate a decision under them than with the EU rules. Public bodies can put in requirements that are effectively discriminatory. They can be subtle or not so subtle. Although they might technically breach the WTO agreement, the problem is the costs and practicality of challenging a decision is likely to be much more difficult in a post-Brexit environment.

The challenge would need to be made in the domestic court concerned. The strong body of EU rules and remedies, including injunctions, would not necessarily be available. The strict overriding EU rules would not be applied. Rather the looser more general WTO rules as applied by the courts in the state concerned would apply.

Canada and Swiss EU model is WTO GPA Based

The Canadian model of a procurement relationship with the EU is very relevant as the EU Canada comprehensive trade agreement is held up by many in the Conservative party, as a desired final arrangement between the UK and EU. There is a school of thought that this is the most likely outcome of Brexit at least looking at it from the present position. The result of the forthcoming election might be very significant in determining whether this route is taken.

The Agreement applies to procurement in respect of the most types of goods and services. The precise areas are specified in a schedule to the Agreement. This would be the same in any UK agreement, so there would be no guarantee that any particular area would be covered or not. The chances are that only very sensitive areas will be excluded.

The EU and the EU and Canada agreement define the various governmental bodies and the relevant threshold applicable. For example, the United Kingdom included are the main governmental departments. The general threshold contract level is 130,000 SDR, with an exchange rate of one SDR equals €1.25. Contracting bodies covered by the EU utilities directive are largely covered. The threshold for utilities is €400,000.

There are defined contract values above which the agreement procurement provisions apply. Many of the types of provisions mentioned above are applicable, including prior information notices transparent procedures and the prohibition on unnecessary restrictive preconditions. There are provisions for the use of online procedures. A reasonable time must be afforded to allow for incoming tenders.

The general principle is that each of the EU and Canada must ensure the public authorities allow no less favourable access to the procurement market to businesses established in the other jurisdiction. There must not be discrimination on the basis of the degree of affiliation of foreign ownership. There are provisions prohibiting certain types of conditions that would tend to favour domestic providers.Conditions for participation must be essential to ensure the supplier has the necessary legal financial commercial and technical capacity to undertake the relevant procurement

Each of Canada and the EU is to provide transparent non-discriminatory administrative and judicial review procedures by which breaches of the obligations may be challenged. The procedural rules for challenges are to be made available. Each of the EU and UK must designate at least one impartial administrative or judicial authority for this purpose.

Switzerland is not a member of the single market but has a close relationship. The WTO Agreement applies.  The Agreement between the EU and Switzerland specifies in relation to procurement the areas where the government procurement agreement does not apply .

Use of Standards under WTO Procurement Agreement

Technical specifications must not be prepared adopted and applied a view to creating unnecessary obstacles to international trade. They must be based on international standards where they exist. A procuring entity shall not prepare, adopt or apply any technical specification or prescribe any conformity assessment procedure with the purpose or the effect of creating unnecessary obstacles to international trade.

In prescribing the technical specifications for the goods or services being procured, a procuring entity shall, where appropriate:

  • set out the technical specification in terms of performance and functional requirements, rather than design or descriptive characteristics; and
  • base the technical specification on international standards, where such exist; otherwise, on national technical regulations, recognised national standards or building codes.

Where design or descriptive characteristics are used in the technical specifications, a procuring entity should indicate, where appropriate, that it will consider tenders of equivalent goods or services that demonstrably fulfil the requirements of the procurement by including words such as “or equivalent” in the tender documentation.

A procuring entity shall not prescribe technical specifications that require or refer to a particular trademark or trade name, patent, copyright, design, type, specific origin, producer or supplier, unless there is no other sufficiently precise or intelligible way of describing the procurement requirements and provided that, in such cases, the entity includes words such as “or equivalent” in the tender documentation.

Notice and Transparency

When conducting covered procurement by electronic means, a procuring entity shall ensure that the procurement is conducted using information technology systems and software, including those related to authentication and encryption of information, that are generally available and interoperable with other generally available information technology systems and software; and maintain mechanisms that ensure the integrity of requests for participation and tenders, including the establishment of the time of receipt and the prevention of inappropriate access.

A procuring entity shall conduct covered procurement in a transparent and impartial manner that:

  • is consistent with this Agreement, using methods such as open tendering, selective tendering and limited tendering;
  • avoids conflicts of interest; and
  • prevents corrupt practices.

States who participate undertake to publish notice e notice of intended procurement. Information on the actual procurement rules must be published. The notice provided for in paragraph 7 shall include:

  • a description of the goods or services, or categories thereof, for which the list may be used;
  • the conditions for participation to be satisfied by suppliers for inclusion on the list and the methods that the procuring entity will use to verify that a supplier satisfies the conditions;
  • the name and address of the procuring entity and other information necessary to contact the entity and obtain all relevant documents relating to the list;
  • the period of validity of the list and the means for its renewal or termination, or where the period of validity is not provided, an indication of the method by which notice will be given of the termination of use of the list; and
  • an indication that the list may be used for procurement covered by this Agreement.

Anti-Discriminatory Provisions

A procuring entity shall limit any conditions for participation in a procurement to those that are essential to ensure that a supplier has the legal and financial capacities and the commercial and technical abilities to undertake the relevant procurement.

In establishing the conditions for participation, a procuring entity:

  • shall not impose the condition that, in order for a supplier to participate in a procurement, the supplier has previously been awarded one or more contracts by a procuring entity of a given Party; and
  • may require relevant prior experience where essential to meet the requirements of the procurement.

Enforcement

The mechanisms for implementation of tendering rules are weaker than under EU law. However, the rules are better than the situation that would apply if the UK did not join the Agreement at all.

There is provision for State to State challenges. There is also provision for the establishment of rights for tenderers to challenge under the rules in the Agreement in the domestic courts. That is to say, there is a right for parties to challenge not compliance in the courts.

A State who accedes to the Agreement shall provide a timely, effective, transparent and non-discriminatory administrative or judicial review procedure through which a supplier may challenge:

  • a breach of the Agreement; or
  • where the supplier does not have a right to challenge directly a breach of the Agreement under the domestic law of a Party, a failure to comply with a Party’s measures implementing this Agreement,

arising in the context of covered procurement, in which the supplier has, or has had, an interest.  The procedural rules for all challenges shall be in writing and made generally available.

In the event of a complaint by a supplier, arising in the context of covered procurement in which the supplier has, or has had, an interest, that there has been a breach or a failure as referred to in paragraph 1, the Party of the procuring entity conducting the procurement shall encourage the entity and the supplier to seek resolution of the complaint through consultations.

The entity shall accord impartial and timely consideration to any such complaint in a manner that is not prejudicial to the supplier’s participation in ongoing or future procurement or its right to seek corrective measures under the administrative or judicial review procedure.

Each supplier shall be allowed a sufficient period to prepare and submit a challenge, which in no case shall be less than ten days from the time when the basis of the challenge became known or reasonably should have become known to the supplier.

Each Party shall establish or designate at least one impartial administrative or judicial authority that is independent of its procuring entities to receive and review a challenge by a supplier arising in the context of a covered procurement.

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