16 September 2020 
Ashley Shelbrooke, HEPA and Project Specialist
A guest article by David Hansom, Partner, Clyde & Co.
As negotiations between the UK and EU continue, there is a long list of areas where changes after the end of the transition period (currently 31 December 2020) will potentially affect institutions. Two key areas are in public procurement regulation and the EU state aid regime. In this latest article, David Hansom, partner and co-head of the global education practice at international law firm Clyde & Co LLP , provides an update on what could be about to change and what universities should do now to prepare.
2020 has already seen all aspects of university life, in the UK and globally, heavily impacted by COVID-19 coronavirus. Institutions have had to move at pace to reassess their financial positions and projections at the same time as protecting the student experience in a world of distancing learning solutions and campus re-openings. Against this background, preparing for potential changes on how the university does its purchasing and how the state aid regime could change after any Brexit may seem low on the list of corporate priorities. But all the signs are that change is coming, and potentially in less than 4 months' time.
Like the state aid regime, the UK's current procurement regime is derived from EU law and principles. Whilst there has been an increasing amount of political 'noise' about the benefits of liberation from the existing regime, there is still little published clarity about what might replace it.
The starting point is that the European Union (Withdrawal) Act 2018 (Act) protects EU derived domestic legislation (and, in the context of the state aid rules, broadly incorporates existing direct EU legislation). This means that the existing Public Contracts Regulations 2015 (Regulations) would continue to apply, broadly, as they do today.
That does not mean that Government will not make any changes. Some minor amendments will be necessary in any event to reflect the end of the transition period, and the UK's new status outside of the EU structures. These 'new' regulations will need to be published quickly.
Government has already indicated that it wishes to go further in due course. Whether and when a wholly new regime will be introduced will depend on the outcome of the EU/UK negotiations, and Parliamentary time. It may be that, for example, the 'buy British', local labour and increased flexibility promised by the Cabinet Office comes in due course but this will need more consultation and we understand that that this may not happen immediately.
Many universities are using Brexit as an opportunity to revisit whether the public procurement regime applies at all to them. This is a legal test based on whether the institution is a 'body governed by public law'. Whilst there is a multi-part legal test, the main issue is generally whether more than 50% of the university's income projections for the next financial year come from public or private sources. We are currently working with many institutions on this change project. Practically, what is key is that the numbers are accurately projected and that there is a replacement procurement regime in place which is less onerous than what it replaces. Often, universities will need to comply with the Regulations in any event on specific projects, particularly on EU or publically funded research projects.
State aid has suddenly become a household term of art thanks to Brexit. The EU anti-subsidy regime, and how it should apply to the UK after the end of the EU transition, has become a politically charged issue in relation to the future relationship between the UK and EU.
The regime applies more often to universities than is first apparent. Key areas are all public grant funded research and development projects (where the university is often both a beneficiary of the aid and a conduit to others receiving aid), and in the spin out/commercialisation space where incubator hubs or funding to SMEs and micro businesses can all trigger the rules.
Subject to what is agreed, the combined effect of the Act and the State Aid Exit Regulations 2019 will ensure continuity of the existing regime in any event on 1 January 2021. What follows will, again, depend on the outcome of the negotiations between the UK and the EU but the practical advice is that universities should be ready for change in this area.
State aid and public procurement classification are not linked. Put another way, whether the university is subject to the public procurement regime or not does not affect the need for a case by case assessment of whether a project involves state aid.
For more information or advice, please contact David Hansom, Partner at Clyde & Co on david.hansom@clydeco.com / 0044 0207 876 4127 or 07500 708619.
You can book your place on the upcoming time to talk Making sense of Brexit: where are we now for the higher education sector? here.
