Brexit Institute News

Public Procurement and Brexit: The Risk to Ireland

by Paul Davis, DCU Business School

Public procurement refers to the purchase of goods, works and services by the public sector (and organizations funded in the main through public monies).

In Ireland, as undoubtedly in many other countries, interest in public procurement appears to be inversely related to the fortunes of the economy. In times of economic prosperity the procurement of goods and services by public sector organizations has tended not to be a primary consideration for politicians, policy makers or industry representative groups. However, in recent years public procurement has moved center stage for both the public and private sectors of the economy. For central government, the strategic management of procurement across the public sector has assumed priority status. Expenditure by public sector organizations on a range of goods and services is coming under increasing scrutiny with a view to realizing cost savings.

According to the European Commission, in 2014, total public procurement expenditure in Ireland was €15.5 billion, or 9% of GDP; reflecting the small size of the public sector in Ireland. Having regard to the Book of Estimates and the (revised) Public Capital Programme 2017-2021 that allocates higher expenditure to capital works (€7.6 billion in 2017), the value of supplies and services procured by commercial semi-State companies (some €3 billion), and voted works to be procured annually, the total value of expenditure to be procured will rise to at least €17 billion per annum. This will amount to €85 billion over five years[1].

As many Irish suppliers bid successfully into Northern Ireland one should look at the island procurement market as a single market. The projected value of the NI market over the next five years is £13.5 billion (€15 billion).

To date in the Brexit debate there has been little public debate over the effects Brexit will have on public procurement on the island of Ireland.  Import substitution may play a role in public sector tendering, with supplies and services currently sourced in the UK shifting either to home grown organizations or organizations that are based on the continent.  Irish public contracts awarded to UK companies may come back to Ireland (in this case, the 26 counties). On the other hand there may not be companies here to support this.

One case comes to mind. In 2012 the tender for library books in Irish public libraries, in particular the greater Dublin region, was awarded to an English Distribution Company. Previously local bookshops held this., but now many of these bookshops have ceased trading.  As a result, if the UK cannot compete for EU tenders then there is a risk of loss of supply.

There is no estimate for the value of goods coming from the UK. Currently around 3.5 % of companies competing for public sector contracts come from Northern Ireland. However over 16 % come from the UK. Taking even a round figure of 20%, this would equate to €3.5 bn euros per annum of goods / services being procured from companies based in the UK.  Given the size of this spending, it is a wonder that there has been no significant discussions held on this topic to date. Neither the Government or the Office of Government Procurement seems to have set out any actions to govern this imbalance in public procurement.

Professor Sue Arrowsmith[2] highlighted a number of issues related to public procurement that would need to be dealt with as part of a withdrawal agreement. Some of these included:

  • How will ongoing award procedures be treated?
  • How will the remedies for violations when proceedings are instituted be enforced after Brexit?
  • What will be the treatment of ongoing procurement arrangements in the form of framework agreements, qualification systems and dynamic purchasing systems?
  • Will there be a risk of contracts being terminated?
  • How will the application of the e-Invoicing directive be applied?
  • What will be the outcome of contracts that concluded under award procedures that are ongoing at the time of regime change?

While the incoming flow of public procured goods and services needs to be addressed, the risk to outgoing goods and services under public procurement regimes also needs addressing. Over 25% of companies surveyed as part of a four-year survey competed in International Markets, many of these being in the UK alone. There is a direct threat to these organizations should any change to the procurement regime happen.

In many cases supply chains that have been configured to support the public supply market for Ireland from the UK now need to be examined promptly. Contracts and tenders being awarded and going for tender should be examined in the light of Brexit and a risk assessment carried out.

Whatever interim solution to the UK working with the EU on trade, in the area of public procurement there is substantial work to be done on behalf of the Irish Public sector in assessing their current and near future contractual arrangements.

[1], last date accessed 05/12/17

[2] , last date accessed 05/12/17