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Japan Public Works Agreement (1994)

EMBASSY OF JAPAN

WASHINGTON, D.C.

January 19, 1994

Dear Secretary Brown:

I am pleased to convey the following to you, with regard to the "Action plan on Reform of the Bidding and Contracting Procedures for Public Works" (hereinafter referred to as the "Action Plan"), adopted on January 18, 1994, and of which the Government of Japan has informed the Government of the United States in my letter addressed to you on the same date.

The Government of Japan intends to implement the Action Plan according to the time schedule set out in the Action Plan.

The Government of Japan intends to keep the Action Plan under review, and in this regard, to hold annual meetings with the Government of the United States to assess implementation and utilization of the Action Plan. The Government of Japan is prepared to hold the first annual meeting with the Government of the United States in the first quarter of FY1995. The annual meetings will deal with, among other things, an evaluation of the relevant information and data, described in the Appendix attached to this letter.

The Government of Japan is also prepared to consult at any time, an the request of the Government of the United States, with the Government of the United States to resolve issues with regard to the implementation and utilization of the Action Plan. Annual meetings and consultative meetings held upon request by either Government will be held until the end of FY1999, at which point, the two governments will decide whether it is necessary to continue these meetings. To make a useful reference for effective implementation of the Action Plan, the Government of Japan may wish to discuss matters concerning the procurement procedures of the United States, public works -market on the occasion of these meetings.

The relationship between the Major Projects Arrangements (hereinafter referred to as the "MPA") and the Action Plan is described in the Action Plan. The MPA will be terminated when the projects covered by the MPA are completed. Review of the MPA will take place at the same time as the annual meeting on the Action Plan.

The Government of Japan hopes that the third sector entities apply transparent, objective, competitive and non-discriminatory procurement procedures in their construction projects.

The Government of Japan reaffirms its SII commitment on Advisory Committees (Shingi-kai) and Study Groups (Kenkyu-kai) with regard to the construction-related sector.

The Government of Japan reaffirms its Basic Policies for import Expansion announced in the Trade Conference on October 7, 1993, and confirms its applicability to the construction-related sector.

I consider that the contents of the Action Plan are satisfactory from an international perspective, and also in light of the bidding and contracting procedures for public works procurement by the Government of the United States.

Sincerely yours,

Takakazu Kuriyama

Ambassador of Japan

Appendix: Relevant Information & Data

The Honorable

Ronald E. Brown

United States Department of Commerce

Herbert C. Hoover Building, 14th & Constitution Avenue, N.W.

Washington, D.C. 20230

APPENDIX : RELEVANT INFORMATION & DATA

1. Construction Contracts

(a) The total annual yen value and number of construction contracts awarded for procurements covered by the Action Plan.

(b) The total annual yen value and number of single bidder construction contracts awarded for procurements covered by the Action Plan; and those in which foreign companies are the single bidders, or participants In a cooperative relationship with the single bidder, including as subcontractors.

(c) The total annual yen value and number of construction contracts awarded to joint ventures for procurements covered by the Action Plan, and those in which foreign companies are members.

2. Design and Consulting Contracts

(a) The total annual yen value and number of design and consulting contracts awarded for procurements covered by the Action Plan.

(b) The total annual yen value and number of single bidder design and consulting contracts awarded for procurements covered by the Action Plan; and those in which foreign companies are the single bidders, or participants in a cooperative relationship with the single bidder, including as subcontractors.

(c) The total annual yen value and number of design and consulting contracts awarded to joint ventures for procurements covered by the Action Plan, and those in which foreign companies are members.

3. Commissioning entities' evaluation with regard to the efforts made by foreign companies in making use of opportunities provided through the implementation of the Action Plan, including use of contact points and other efforts.

4. The number of registrations made by foreign companies.

5. The number of bids or proposals submitted by foreign companies in the procurements covered by the Action Plan.

6. The total annual value of construction-related foreign goods procured by general contractors which have voluntarily established contact points.

EMBASSY OF JAPAN

WASHINGTON, D.C.

January 18, 1994

Dear Secretary Brown:

I have the honor to inform you that the Government of Japan has adopted an "Action Plan on Reform of the Bidding and Contracting Procedures for Public Works," as attached hereto, on January 18, 1994.

The Government of Japan will voluntarily implement the Action Plan, with the aim of reforming bidding and contracting procedures for public works in Japan, to enhance transparency, objectivity and competition, as well as to strengthen the application of the principle of non-discrimination.

Sincerely yours,

Takakazu Kuriyama

Ambassador of Japan

Appendix: "Action Plan on Reform of the Bidding and Contracting Procedures for Public Works"

The Honorable

Ronald H. Brown

United States Department of Commerce

Herbert C. Hoover Building, 14th & Constitution Avenue, N.W.

Washington, D.C. 20230

Action Plan on Reform of the Bidding and Contracting

Procedures for Public Works

(Background and Objectives of the Action Plan)

Given the recent situation of bidding and execution of public works in Japan, it is a matter of extreme urgency to recover people's confidence in execution of public construction and in public works itself. Recognizing the Increasing interest of foreign companies including those of the United States in entering the Japanese construction market against the background of international trend for more open construction markets, the Government of Japan views It important to make its bidding and contracting procedures more transparent and objective with an international perspective taken into account. Based on this recognition, on the 26th of October of 1993, the Government of Japan announced the "Outline of Action Plan on Reform of the Bidding and Contracting Procedures of Public Works" as well as its decision to formulate the "Action Plan on Reform of the Bidding and Contracting Procedures of Public Works" (hereinafter referred to, inclusive of Attachment, as the "Action Plan") at the beginning of 1994.

During the past months, the Central Council on Construction Contracting Businesses (CCCCB) tackled the issue of drastic reform in the bidding and contracting system of Japan, and produced its recommendation, "Recommendation on the Reforms of the Bidding and Contracting System for Public Works", on the 21st of December of 1993.

In the international arena, negotiations concerning the new Agreement on Government Procurement have been concluded substantially with a view to establishing, in 1996, new international rules primarily among major industrial countries on government procurement covering such areas as construction, design and consulting services.

In the light of these new trends, each commissioning entity should improve its bidding and contracting procedures for public works. At the same time, external relations should be handled in a coherent manner among governmental agencies. For this purpose, the Government of Japan has formulated this Action Plan as a common guideline.

Paying due attention to the importance of ensuring high quality in public works, the "Action Plan" alms to drastically enhance transparency, objectivity and competitiveness in bidding and contracting procedures for public works in Japan, as well as to make these procedures more approachable from an international perspective, and to further strengthen the principle of non-discrimination. To this end, the Government of Japan will undertake the concrete measures, as described below, which Include the adoption of transparent, objective and open competitive procurement procedures, appropriate evaluation of foreign firms, establishment of a complaint mechanism, and preventive measures against such unfair practices as "Dango".

Consistency with the provisions of the agreements negotiated within the framework of GATT, which entered or will enter into force and to which Japan is a party, will be ensured In the implementation of this Action Plan.

(Timetable)

The central government entities and quasi-governmental agencies will make it a principle that they introduce, to the best of their abilities, the concrete measures set forth in this Action Plan in relation to public works starting under the initial budget of FY 1994, and make necessary arrangements for adopting transparent, objective and competitive procedures in procurement amounting to not less than the thresholds specified in 1.2. below, by the and of FY 1994. The central government entities and quasi-governmental agencies will immediately begin preparation to this end.

[Concrete Measures]

I. Adoption of Transparent, Objective and Competitive Procurement Procedures

1. Procurement Procedures

Transparent, objective and competitive procurement procedures with an international perspective taken into account, will be adopted for the procurement of construction services, and design and consulting services in, the following manner. Procurement relating to national security and such procurement as that for reasons of urgency or that requiring confidentiality will be exempted.

(1) Construction Services - Adoption of Open and Competitive Bidding Procedures

Construction services, which are to be commissioned by the central government entities (the entities of Japan listed in ANNEX I, including the Notes, to the new Agreement on Government Procurement) and the quasi-governmental agencies (the entities of Japan listed in ANNEX III, including the Notes, to the new Agreement on Government Procurement), and which are not less than the thresholds described in paragraph 2 below, will be procured through open and competitive procedures.

(2) Design and Consulting Services - Adoption of "Public-Invitation Procedures"

Procurement of design and consulting services for public works of the central government entities and the quasi--governmental agencies, which is not less than the thresholds described in paragraph 2 below, will be made according to the "Public-Invitation Proposal Procedures," or the "Public-Invitation Competitive Bidding Procedures."

Routine and simple services which are excluded from Japan's offer in the new Agreement on Government Procurement and which commissioned individually will be exempted.

2. Threshold

(1) The thresholds for each commissioning entity are as follows:

Type of service Threshold

(a) The central government entities Construction 4,500,000SDR

Design and Consulting 450,000SDR

(b) The quasi-governmental agencies Construction 15,000,000SDR

Design and Consulting 450,000SDR

(2) The above thresholds are applied on the basis of estimated price of each contract value at the time of public notice.

(3) No commissioning entity may prepare or design a contract, with the intention of avoiding the application of this Action Plan, or giving advantages to a particular supplier.

(4) No commissioning entity may divide procurement, or select a valuation method, with the intention of reducing the value of resulting contracts below the thresholds.

II. Transparent, Objective and Competitive Procurement Procedures

1. Construction Service

(1) Construction License

Those who wish to win a contract f or public works will participate in the following procurement procedures after obtaining such necessary construction licenses stipulated in the Construction Contractors Act as those for civil engineering, building construction and installation of machinery (see the Construction Contractors Act, Chapter 2).

(2) Procurement Procedures

(a) Outline of Procurement Procedures

An Open and Competitive Bidding Procedure consists of procurement notice, application for qualification confirmation by those who wish to participate in competitive bidding, notice of the result of qualification confirmation, bidding, and awarding/contracting. The period between public notice and bidding will be 40 days at the minimum. (A flow chart of this procedure is described in Annex 1-1.) In cases where the procurement falls under exceptional cases provided by Article 11-3 of the new Agreement on Government Procurement, this period of 40 days can be shortened.

In cases of executing particularly difficult projects, the "Implementation Plan Evaluation Type" of Open and Competitive Bidding Procedure may be used. This procedure would require applicants for competitive bidding to submit in advance an implementation plan for the project so that their technical qualification can be examined (See Annex 1-2).

Every fiscal year, after the initial budget is formulated, a commissioning entity will publish information relating to its procurement not less than the thresholds as its annual procurement plan.

(b) Procurement Notice

i) A commissioning entity will publish a notice In "Kanpo", indicating that a procurement procedure has been initiated and containing the following information. Until the new Agreement an Government Procurement enters into force and Japan becomes a party to it, the notice may be published in the daily industrial papers listed in Annex 2 instead, when publishing a notice in "Kanpo" would create difficulties to the execution of the project:

- general information on the construction (subject matter of the contract, location, outline and period of the construction);

- qualification requirements to be fulfilled to participate in competitive bidding (objective points based on the business evaluation; past records of the firm in similar projects; availability of engineers with required qualifications and experiences; disqualification criteria; matters concerning other qualification requirements if any; and, in the case of "Implementation Plan Evaluation Procedure," submission of an implementation plan);

- method and place to receive tender documentation;

- method and deadlines for the submission of application for tenders and relevant documentations;

- information on major construction materials and equipments to be procured by the general contractor or the subcontractor;

- method and place of bidding, and deadline for the submission of tenders;

- the contact point where relevant information is available.

Qualification requirements for participants in competitive bidding will be published in an objective and specific manner so that those who intend to participate in the competitive bidding can judge by themselves whether they are eligible.

ii) The following information will be published in English as well as in Japanese.

- subject matter of the construction;

- an application form and relevant documentations for the tender procedure and deadline set for the submission of a tender;

- the contact point where the tender documentation is available.

(c) Distribution of Tender Documentation

i) A tender documentation, which contains all information necessary for submitting a valid tender (namely, a copy of the public notice; a draft contract; ground rules of the bidding; plan; specifications and other explanations; and, in case of "Implementation Plan Evaluation Procedure," materials necessary to make implementation plans) will be made available at the contact point shown in the procurement notice, for those who wish to participate in competitive bidding.

ii) A tender documentation will include the following information:

- the address of the entity to which tenders should be sent;

- the address where requests for supplementary information, if needed, should be sent;

- the language or languages in which tenders and tendering documents must be submitted;

- the closing date and time for receipt of tenders and the period during which any tender should be accepted;

- the persons authorized to be present at the opening of tenders, and the date, time and place of this opening;

- description of the required construction services, and sufficient explanation of requirements, if any;

- the terms of payment;

- any economic and technical requirements, financial guarantees, and information or documents to be submitted;

- any other terms or conditions.

(d) Qualification to Be Invited to Participate in Competitive Bidding

In order To ensure quality and efficiency of public works and thereby to promote betterment of taxpayers, procurement from reliable suppliers through transparent and objective procedures is indispensable.

i) Registration as Qualified Participants for Open and Competitive Bidding

A commissioning entity will register those who wish to participate in public works as qualified participants for open and competitive bidding based on their application. The registration will be effective f or two years and can be made at anytime. Those who are not registered as qualified participants for open and competitive biding and those who disqualify in the light of the disqualification criteria in the public notice, are not qualified to participate In the open and competitive bidding.

ii) Business Evaluation

To evaluate the business situation of those who wish to participate in bidding for public works objectively, commissioning entities will utilize the results of the Business Evaluation under the Construction Contractors Act.

Business Evaluation will, for the time being, be conducted by examining the following factors: annual value of completed construction works by types of works; net worth; number of staff members; business condition; number of technical staff members; and number of years in business. Minimum scores based on Business Evaluation will be specified in the public notice as one of the qualifications for participating in the competitive bidding.

The calculation method for the Business Evaluation scoring will be published. Each firm will be notified of the result of its Business Evaluation. When a firm has a complaint about the result, it can apply for reevaluation.

iii) Definitive Criteria

In an open and competitive bidding, definitive criteria, which are indispensable for judging suppliers' ability to fulfill the contract for each construction project, will be set as a part of qualification requirements to participate in the competitive bidding. The definitive criteria will include such criteria as the past records of the firm in similar projects and the availability of engineers with required qualifications and experiences, and will be published in an objective and concrete manner in the procurement notice, so that those who plan to participate in bidding will be able to judge by themselves whether they are eligible. In cases of "Implementation Plan Evaluation Type" of an open and competitive bidding, submission of implementation plans will be required to demonstrate the capability of the firm to perform, with full confidence, particularly difficult projects.

(e) Qualification Confirmation

i) Qualification confirmation is made on the basis of the date available by the deadline date for the submission of application and related documents.

ii) In cases of "Implementation Plan Evaluation Type," a commissioning entity may hold explanation meetings and hearings on related documents, if it announces in advance such explanation meetings and hearings together with their dates, times, and places in the procurement notice.

iii) A commissioning entity will notify the qualified applicants in writing of the result of the qualification confirmation within a period of 7 days (in cases of "Implementation Plan Evaluation Type," 14 days) from the next day of the deadline date for submission of application and related documents.

iv) For applicants whom the commissioning entity concluded as disqualified, the commissioning entity will give the reasons for the disqualification, and will notify the applicants that they are entitled to request further explanation for the disqualification within the period of 7 days (excluding holidays for administrative agencies) from the next day of the notification date of the result of qualification confirmation. The entity will give explanation to the applicants upon request.

(f) Bidding and Awarding

A commissioning entity will publish the result of bidding including the process of the bidding and the name of the winner as soon as possible after it decides the winner.

(g) Contracting

A contract will be awarded to the bidder who has submitted the lowest bid below the ceiling price set by the commissioning entity. When the bidding price is exceedingly low, it may be subject to examination to ensure its propriety.

(h) Complaint Mechanism

The above procedures will be subject to the complaint mechanism set forth in chapter IV of this Action Plan.

2. Design and Consulting Service

(1) Procurement Procedures

(a) Outline of Procurement Procedures

The "Public-Invitation Proposal Procedure" consists of procurement notice, expression of interest by firms (submission of brief technical materials), selection of the firms who are to submit proposals, invitation for them to submit proposals by notification, submission of proposals, selection of the proposal and contracting. The period between invitation for submission and submission of proposals requires a minimum of 40 days (See Annex 3). In cases where the procurement comes under exceptional cases provided by Article 11-3 of the new Agreement on Government Procurement, this period of 40 days can be shortened.

(b) Registration as Qualified Suppliers

Those who wish to submit proposals f or design and consulting services must be registered by each commissioning entity of the works they are interested In. The registration will be valid for two years and can be made at any time.

(c) Procurement Notice

i) A commissioning entity will publish a notice in Kanpo, indicating that a procurement procedure has been initiated and containing the following information. Until the new Agreement on Government Procurement enters into force and Japan becomes a party to it, the notice may be published in the daily Industrial papers listed in Annex 2 instead, when a publishing a notice in Kanpo would create difficulties to the execution of project:

- general information (subject matter of the contract, outline, and deadline for the completion of the service);

- method and deadline for expressing interests;

- qualification to be invited to submit proposals and criteria for selection of those who submit proposals;

- method and place to receive tender documentation;

- method, place and deadline for submission of proposals;

- the contact point where relevant information is available.

ii) The following information will be published in English as well as in Japanese:

- subject matter of the contract;

- deadlines set for the expression of interests and submission of proposals;

- the contact point where a tender documentation is available.

(d) Distribution of Tender Documentation

i) A tender documentation, which contains all information necessary for submitting a valid proposal, will be made available at the contact point shown in the procurement notice.

ii) A tender documentation will contain the following information:

- the address of the entity to which proposals should be sent;

- the address where requests for supplementary information should be sent;

- the language or languages in which proposals and related documentations must be submitted;

- the closing date and time for receipt of proposals and the period for receiving proposals;

- the evaluation criteria for selection of proposals;

- a sufficient description of the services required, and sufficient explanation of requirements, if any;

- the terms of payment;

- any economic and technical requirements, financial guarantees, and information or documents to be submitted;

- any other terms or conditions.

(e) Selection of/Notice to The Firms Which Are Invited to Submit Proposals

i) A commissioning entity will select the firms which are invited to submit proposals from among those who have expressed their interest with the submission of brief technical materials, in accordance with the specific criteria for selection published in the tender documentation. The commissioning entity will notify those who have expressed their interest in writing of the result whether each one of them has been selected or not.

ii ) For the applicants who were not selected, a commissioning entity will notify them that they are entitled to request further explanation why they were not selected within the period of 7 days (excluding holidays for administrative agencies) from the next day of the notification date. The commissioning entity will give the explanation to the applicants upon request.

(f) Submission of Proposals

The selected applicants will submit their proposals by the deadline date specified in the procurement notice.

(g) Selection of Proposals

i) A commissioning entity will select the best proposal from among the proposals submitted according to the published evaluation criteria for selection. The commissioning entity will notify those who have submitted proposals in writing of the result whether their proposals have been selected or not.

ii) For applicants whose proposals were not selected, a commissioning entity will add the reasons for non-selection, and will notify them that they are entitled to request further explanation why their proposals were not selected within the period of 7 days (excluding holidays for administrative agencies) from the next day of the notification date. The entity will give the explanation to the applicants upon request.

iii) The commissioning entity will negotiate a contract with the bidder whose proposal was selected, at a price which is below the ceiling price set by the commissioning entity.

(h) When price is the only criterion for evaluation in the selection of proposals, the "Public-Invitation Competitive Bidding Procedure", which is similar to the "Public-Invitation Proposal Procedure", will be adopted. This procedure consists of procurement notice, expression of interest by firms (submission of brief technical materials), selection of participants in competitive bidding, invitation for them to participate by notification, bidding, and awarding/contracting. The period between invitation for participation and bidding requires a minimum of 40 days (See Annex 3). This period of 40 days can be shortened when the procurement comes under the exceptional cases provided by Article 11-3 of the new Agreement on Government Procurement.

(i) Complaint Mechanism

The above procedures will be subject to the complaint mechanism set forth in chapter IV of this Action Plan.

(2) Rationalizing Procurement of Contracting-Out

(a) Where employees of a commissioning entity lack the technical capacity or the necessary resources to perform design and consulting work on its procurement, the commissioning entity will contract out such design and consulting work.

(b) When a commissioning entity receives design and consulting service from any outside individuals, firms or entities including study groups known as "Kenkyu-Kai" or "Kyogi-kai", the commissioning entity will take transparent procedures and will pay an appropriate amount of fee.

(c) The supplier of design and consulting services of a project procurement or any construction firms deemed to have personnel, capital or other ties with this supplier, should not be invited to bid in the construction procurement of the same project nor be allowed to contract as a supplier of construction services. This will not apply in cases where the entire procurement is made as one contract from the outset, where it is urgent or where the commissioning entity has no alternative.

III. Proper Evaluation of Foreign Firms

Foreign firms will not be discriminated against in any aspect of bidding procedures for public works.

In evaluating foreign firms, such evaluation factors as record of completed construction works, net worth, number of staff members engaged in the construction business and business conditions have been examined with the firms' I business activities outside of Japan taken into account. Adding greater weight to the international perspective and to thorough observance of the principle of non-discrimination, the Government of Japan will take the following measures:

(1) In evaluating the number of engineers and periods of construction business activities of a foreign firm under the Business Evaluation, the Minister of Construction and governors of each prefecture will take into account the number of engineers and periods of construction business activities outside Japan. The value of these factors overseas will be decided individually by the Minister of Construction, for the time being.

(2) A commissioning entity will take due account of a foreign firm's past records outside of Japan in similar projects and availability of engineers with required qualifications and experiences overseas through referring individually to overseas commissioning entities or receiving certificate concerning a firm's overseas achievements.

(3) In evaluating a foreign firm whose parent company is a construction firm in its home territory or whose parent company is a shareholding company of a group operation engaging in construction services in its home territory, the resources of the parent company (or in case of a group operation, the resources of the group as a whole) will be taken into account, if a certificate is provided by the parent or share-holding company to assure their manpower or financial support.

IV. Complaint Mechanism

A potential supplier In Annex 4-2 may file a complaint with a third party organization in relation to a procurement not less than the thresholds stipulated in I.2. As a third party organization, the Procurement Review Board, which is already established in the Cabinet Councilor's Office on External Affairs, will be utilized for the time being. This complaint mechanism is provisional, and when the new Agreement on Government Procurement enters into force and Japan becomes a party to it, the complaints will be handled in accordance with the procedures based on Article 20 of the Agreement. The details of the complaint mechanism are described in Annex 4.

V. Preventive Measures against Unfair Practices including "Dango"

1. Strengthening of Penalties by the Licensing Authorities against Unfair Practices Including "Dango" or Briberies

To strengthen penalties by the Minister of Construction and prefectural governors based on the Construction Contractors Act, penalty standards will be established toward the end of March 1994 to make clear the content of penalties to be imposed by the licensing authorities for each type of violation.

2. Suspension of Qualification as A Participant in Competitive Bidding

To assure appropriate implementation of a contract by excluding from open and competitive bidding suppliers who have conducted certain unfair and insincere practices, a commissioning entity will take measures, effective FY 1994 when the open and competitive bidding procedures are introduced, to limit the participation in bidding of firms which have committed such conducts as violation of the Anti-Monopoly Act.

3. Formulation of the "Guideline for Public Tendering"

The FTC (Fair Trade Commission) will formulate a "Guideline for Public Tendering" (provisional name) to enhance prevention of "Dango" practices in public tendering. The guideline will be applied to all public tendering including public procurement in construction services as well as in goods. The guideline will describe the basic ideas about how the Anti-Monopoly Act applies to public tendering and list up concrete examples and classify them into 3 groups: I) practices which, in principle, violate the Anti-Monopoly Act; ii) practices which have risks of violating the Anti-Monopoly Act; iii) practices which, in principle, are consistent with the Anti-Monopoly Act. A draft of this guideline will be prepared and published for comments, at the earliest time possible within FY 1994. The guideline will be finalized toward the summer of 1994 after examination which will take into account the opinions expressed by parties concerned. With the introduction of this new guideline, the current "Guidelines concerning the Activities of Trade Associations in the Construction Industry in Relation to Public Works" will be abolished.

4. Strict Enforcement of Anti-Monopoly Act

The FTC will continue to strictly enforce the Anti-Monopoly Act against "Dango" in all industries. Upon receiving relevant information regarding "Dango", the FTC will take appropriate steps, depending upon the content and reliability of the information. In the event that any legal actions such as recommendations and surcharge payment orders are taken by the FTC, the contents, including the names of the offenders, the nature of the offense and circumstances surrounding it, and all legal actions taken will be made public. Warnings will also be made public unless the case is an exceptional one.

5. Close Cooperation between a Commissioning Entity and FTC

(1) Formulation of Manual for Dealing with Information on "Dango"

Commissioning entities will formulate manuals which outline the flow of such procedures as those to be taken when they find possible existence of "Dango" practices, including reporting to the FTC. The "FTC/Public Procurement Liaison Officials Meeting" will be more actively utilized by both the FTC and commissioning entities.

(2) Training Program

Commissioning entities will establish training programs for fair procurement. The FTC will extend support to such training programs with a view to deterring "Dango" and to promoting fair and free competition.

6. Ensuring Fair Tendering

(1) Confirmation in Tendering Documents

Commissioning entities will require participants in bidding to confirm in tendering documents that they recognize they may not engage in practices inconsistent with the Anti-Monopoly Act, and that they are indeed not involved in such practices.

(2) Claims for Damages

When damages can be identified in such cases as where money has been transferred through "Dango", commissioning entities will seek to recover damages which they suffered as a result of unfair practices based on civil and other relevant laws.

VI. Other Measures Concerning the Improvement of Procurement Procedures

(1) Ensuring appropriateness of Technical Specifications

(1) No commissioning entity may prepare, adopt or apply any technical specifications which will be disadvantageous to specific supplier or suppliers, including foreign suppliers, who wish to participate in procurement procedures.

(2) In preparing, adopting or applying technical specifications, commissioning entities will, where appropriate:

(a) Use performance criteria, rather than design or descriptive characteristics; and

(b) Base the specification on international standards, national compulsory standards, recognized national voluntary standards or building codes.

(3) As for technical specifications for materials, commissioning entities will, where appropriate, use national standards or their equivalent.

(4) Commissioning entities will, when judging conformity with the specifications, treat generally accepted foreign test data and records of use in a foreign country as equivalent to Japanese test data and records of use in Japan, unless there is any compelling reason not to treat such data as equivalent. Where a commissioning entity does not intend to accept foreign test data as equivalent, a written explanation of the compelling reasons will be given immediately upon inquiry by those wishing to participate in procurement procedures and having specific interest, prior to the contract award.

(5) No commissioning entity, in preparing, adopting or applying technical specifications for a specific procurement, may seek assistance from any supplier who wishes to participate in bidding, or its affiliates or subsidiaries, in a manner which can be disadvantageous to other participants.

2. Improvement in the Joint Venture System concerning Construction Service

(1) The "Principle of Placing orders to Single Contractors" should be applied more thoroughly to exclude the kind of joint--ventures which only give rise to the suspicion that they have been created solely for the distribution of contracting opportunities.

A "joint-venture" is a business organization which is formed by several contractors for the purpose of contracting single construction work collectively, and in which each member contractor has a legal status as a direct party to the contract with the commissioning entity. Therefore, even if a contractor forms cooperative relationship with other contractors, including subcontracting, for a construction project, the contractor does not fall under the term joint-venture as used here, as long as it independently contracts with the commissioning entity. Such a contractor should not be excluded from the single-contractor-bidding procedures.

(2) In the procurement for a work, the commissioning entity may contract with a joint-venture when there is compelling necessity in terms of the size of the work and technical requirements. Even in such a case, however, if there is a contractor which is capable of independently executing the work, the bidding by such a contractor will also be allowed.

3. Improvement in Procedures for Procurement below the Thresholds

Concerning the procurement by the central government entities and the quasi-governmental agencies below the thresholds set forth in this Action Plan, it is basically left to the commissioning entity's choice, in accordance with laws an regulations, what type of procedures for procurement to adopt. Where the designated bidding procedure is used measures will also be taken to drastically improve transparency, objectivity and competitiveness of the bidding procedures.

4. Access to Information

(1) Concerning the access to information about its procurement, a commissioning entity will not treat foreign firms in a discriminatory manner because of the fact that those firms are foreign.

(2) The central government entities and the quasi-governmental agencies will establish contact points listed in Annex 5 to provide information regarding the implementation of measures set forth in this Action Plan.

5. Subcontracting

With respect to subcontracting, the Government of Japan hopes to see serious consideration be given to the business offers made by competitive firms including competitive foreign firms.

Concerning the procurement of construction services covered by the measures set forth in this Action Plan, a commissioning entity will publish, in its public notice information regarding the major construction materials and equipments to be procured by the potential general contractor or subcontractor.

VII. Encouragement to Prefectural Government and Designated Cities

The Government of Japan will encourage prefectural governments and Designated Cities to take, in principle, necessary measures similar to this Action Plan, for their procurement above the following thresholds, taking into account local circumstances and the provisions of relevant laws and regulations,

(threshold)

(1) Construction 15,000,000SDR

(b) Design and Consulting 1,500,000SDR

The Government of Japan will encourage prefectural governments and Designated Cities to consider establishing a complaint mechanism with respect to their procurement not less than the thresholds.

[ATTACHMENT]

1. Countries Covered by the Measures of This Action Plan

The countries covered by the measures described in this Action Plan are those countries to which the provisions of the Agreement on Government Procurement in force are applied.

When the Government of Japan finds that discriminatory practices are implemented against Japanese firms In public works procurement in a country covered by the measures of this Action Plan, the Government of Japan may suspend the implementation of measures described in this Action Plan for that country, in a manner consistent with the provisions of the new Agreement on Government Procurement, until that country eliminates such discriminatory practices.

2. Sunset of the MPA (Major Projects Arrangements)

(1) The MPA is a set of Special Measures which the Government of Japan voluntarily introduced in 1988 and 1991 for increasing access to large scale public works projects. Projects covered by the MPA are listed in Annex 6.

(2) The procurement procedures for the designated public projects covered by the MPA will be as follows:

(a) Concerning the procurement of construction, design and consulting services not less than the thresholds set forth in this Action Plan, measures as stipulated in the Action Plan will be adopted. Concerning the procurement less than the thresholds set forth in this Action Plan, and not less than the thresholds set forth in the MPA, commissioning entities will either adopt the measures of the Action Plan, or, following the policy stipulated in IV.3., choose to continue to implement the measures of the MPA, for the MPA provides transparent, objective and competitive procedures.

(b) As f or the procurement of goods, the measures set forth in the MPA will, continue to be implemented.

(3) As for the procurement of construction, design and consulting services and the procurement of goods in relation to designated private projects or third-sector projects as defined In the MPA, the measures set forth in the MPA will continue to be implemented.

(4) As for the procurement in relation to the "Future Projects", the measures stipulated in (2) above will be taken in the case that the commissioning entity of the project is the central government entity or quasi-governmental agency, and the measures stipulated in (3) above will be taken in the case the commissioning entity of the project is a designated private entity or a third-sector entity.

(5) The MPA will be terminated when these projects are completed.

[Annex 1-1 has not been included with the electronic version of this document.]

[Annex 1-2 has not been included with the electronic version of this document.]

[Annex 2]

DAILY INDUSTRIAL PAPERS

o Nikkan-Kensetsu-Kogyo-Shimbun

o Nikkan-Kensetsu-Tsushin

o Nikkan-Kensetsu-Sangyo-Shimbun

[Annex 3 has not been included with the electronic version of this document.]

[Annex 4]

Construction Procurement Review Board

As the third party organization which reviews complaints about procurement not less than the thresholds set forth in I.2., the Construction Procurement Review Board (Board) which was established as an independent reviewing organization under the Major Projects Arrangements (the Cabinet Approval on the 26th of July of l99l) will provisionally be utilized, until the new Agreement on Government Procurement enters into force and Japan becomes a party to it.

1. Board

(1) The Board will have no substantial interest in the outcome of a procurement subject to its review.

(2) The Board will receive complaints in writing, conduct investigations of the facts and make recommendations to a commissioning entity with respect to any aspect of a procurement by the entity.

(3) The Board will be comprised of persons who have knowledge and experience related to public sector procurement. No member of the Board will participate in the review of a complaint in which that member has a conflict of interest.

(4) Where necessary, the Board may hear opinions from technical experts who have in depth knowledge and experiences related to the procurement subject to its review. None of those technical experts should have substantial interest in the outcome of the procurement.

2. Eligibility for Complaint

All potential suppliers are eligible for filing complaints. Potential suppliers are defined as follows:

(1) In procurement of construction services, potential suppliers mean the following respectively;

(a) When a complaint is concerning registration as qualified participants for open and competitive bidding, those who have applied for registration;

(b) When a complaint is concerning qualification confirmation, those who have applied for qualification confirmation;

(c) When a complaint is concerning tendering procedures other than (1)(a) and (b) above, those who have been confirmed as qualified participants;

(d) When a complaint is concerning the result of the tendering, those who have made tendering.

(2) In procurement of design and consulting services, potential suppliers mean the following respectively;

(a) When a complaint is concerning registration as qualified participants, those who have applied for registration;

(b) When a complaint is concerning selection of the firms to be invited to submit proposals (in the case of "Public--Invitation Proposal Procedures") or selection of the firms as participants in bidding (in the case of "Public--Invitation Competitive Bidding Procedures), those who have expressed their interest to the procurement;

(c) When a complaint is concerning procurement procedures other than (2)(a) and (b) above, those who have been invited to submit proposals (in the case of "Public-Invitation Proposal Procedures") or those who have been qualified as participants in bidding (in the case of "Public-Invitation Competitive Bidding Procedures");

(d) When a complaint is concerning the selection of the best proposal (in the case of "Public-Invitation Proposal Procedures"), those who have submitted proposals; When a complaint is concerning the result of the tendering, those who have made tenders (In the case of "Public-Invitation Competitive Bidding Procedures".)

A potential supplier must notify the Board of its intent to participate in a complaint proceeding within 7 days after receipt of the notice in Paragraph 4.(4) below, and whereupon it would be subject to the procedures in Paragraph 4. (7) (b) below, unless barred by Paragraph 4.(3) below.

3. Participants

The commissioning entity, the complainant, and any other potential suppliers who would be affected may participate in a complaint proceeding.

4. Procurement Review Process

(1) A potential supplier, that believes a procurement covered by this Action Plan has been carried out in a manner inconsistent with any provision of this Action Plan, may file a complaint in writing with the Board, at any time during the procurement process, but no later than 13 days after the basis of the complaint is known or reasonably should have been known. The potential supplier will submit a copy of the complaint to the commissioning entity within 1 working day of filing it with the Board. (Days will be considered calendar days unless otherwise specified.)

(2) The Board may receive and consider a complaint which is not timely filed, if it finds that good cause is shown.

(3) The Board will review a complaint within 7 days of its filing, and may, in writing and with reasons given, dismiss any complaint found to be:

(a) not submitted in a timely manner;

(b) not subject to the Action Plan;

(c) frivolous or trivial on its face;

(d) not submitted by a potential supplier; or

(e) otherwise inappropriate for review by the Board.

(4) Where the Board determines that a-complaint has been filed properly, it will notify in writing, all potential suppliers whose interest would be affected by the complaint, within 1 day.

(5) Suspension of Award of Contract or Contract Performance

(a) Within 10 days of the filing of a pre-award complaint, the Board will promptly issue a written request for suspension of contract award pending resolution of the complaint.

(b) In the case of a post-award complaint, filed within 10 days after the award, the Board will promptly request in writing suspension of the Contract Performance pending resolution of the complaint.

(c) The commissioning entity will suspend the award or the performance of the contract immediately after it receives the Board's request, unless the head of the entity determines that urgent and compelling circumstances do not allow the commissioning entity to follow the request, or that the award or the performance of the contract will be in the best interests of Japan, in which case he will immediately provide written notification to the Board of his determination and the factual circumstances on which it is based.

(6) Investigation

(a) The Board will conduct an investigation of the complaint, which may include the filing of briefs, pleading and other documentation by the complainant and entity.

(b) The Board may, on the request of the complainant or the commissioning entity or on the Board's own initiative, hold a hearing on the merits of a complaints.

(7) Report by the Commissioning Entity

(a) Within 14 days after the day on which a copy of the complaint was sent to the commissioning entity, the commissioning entity will file with the Board a written report on the complaint, containing the following:

i) relevant documentations for tender, including the specifications or portions thereof relevant to the complaint;

ii) all other documents relevant to the complaint;

iii) a statement that sets out all relevant facts, findings, actions and recommendations of the commissioning entity and responds fully to all allegations of the complaint;

iv) any additional evidence or information that may be necessary in order to resolve the complaint.

(b) The Board will, forthwith after receiving the receiving the report referred to in Paragraph (a) above, send a copy of the relevant material to the complainant and give the complainant an opportunity, within 7 days after it receives the relevant material, to file with the Board comments or request that the case be decided on the existing record. The Board will, forthwith after receiving the comments, send a copy to the commissioning entity.

5. Findings and Recommendations

(1) The Board will make a report of its findings and recommendations to the commissioning entity within 50 days after the day on which the complaint is filed. Its findings, in which the Board will grant or deny the complaint in whole or in part, will specify whether the procurement process or award was inconsistent with specific provisions of the measures set forth in this Action Plan.

(2) Whenever the Board finds evidence of misconduct, actions or behavior contrary to law, it will refer the matter to the appropriate enforcement authorities for action.

(3) In making its findings and recommendations, the Board will consider all the circumstances surrounding the procurement process or award, including the seriousness of any deficiency in the procurement process, the degree of prejudice to any or all potential suppliers, the degree of impediment to the integrity and effectiveness of this Action Plan, the good faith of the participants, the extent of performance of the contract to which the procurement relates, the cost of the recommendation to the Government of Japan, the urgency of the procurement, and the impact of the recommendation an the business of the commissioning entity.

(4) Where the Board finds that any provision of the measures set forth in this Action Plan has not been followed, it will recommend an appropriate remedy, including one or more of the following:

(a) that a new tender documentation will be issued;

(b) that a new offers for the contract be sought;

(c) that the offers be re-evaluated;

(d) that the contract be awarded to another supplier;

(e) that the contract be terminated.

(5) The Board will send its findings in writing with its recommendations to the complainant, the commissioning entity and any other participants, within 1 working day after issuance.

(6) The commissioning entity will, in principle, and as its own decision, duly follow the findings of the Board on any complaint brought appropriately before the Board. The commissioning entity must report to the Board within 60 days of receipt of the Board's recommendation, if it has decided not to comply with the recommendation with the reasons for its decision.

(7) The Board will respond to external inquiries concerning its findings.

6. Express Option

(1) Where the complainant or the commissioning entity requests in writing an expeditious handling of a complaint, the Board will consider the feasibility of using the procedure set out in this section, referred to herein as the "express option."

(2) The Board will determine whether to apply the express option within 2 working days after receiving a request therefor and will notify the complainant, the commissioning entity, and other potential suppliers whose interest will be affected by the complaint, as to whether the express option is to be applied.

(3) Where the express option is applied, the time limits and procedures will be as set forth in this Paragraph.

(a) The commissioning entity will, within 6 days after the day on which it is notified by the Board that the express option is to be applied, file with the Board a written report on the complaint, as specified in paragraph 4.(7) above. The Board will, forthwith after receiving the report, send a copy of the relevant material to the complainant and any other participants. The Board will give the complainant and any other participants 5 days to file with the Board comments on such material or requests that the case be decided on the existing record. The Board will, forthwith after receiving the comments, send a copy to the commissioning entity.

(b) The Board will issue its findings and recommendations on the complaint in writing within 25 days after the day on which the complaint is filed.

7. Document Retention

To contribute to the above procedures, each commissioning entity will maintain complete documentation related to all procurement not less than the thresholds set forth in I.2. of the Action Plan, for five years from the date of the contract award, to allow verification that the procurement process was carried out in accordance with the measures set forth in the Action Plan.

[Annex 5]

[List of contact points not have not been included with the electronic version of this document.]

[Annex 6] THE MPA PROJECT LIST

I. The MPA Project List

1. DESIGNATED PUBLIC PROJECTS

Projects Listed in 1988

o Haneda Airport Expansion Phase III (FY 90-95)

o New Hiroshima Airport (FY 86-93)

o Tokyo Port Redevelopment (Metropolitan Expressway 12). (FY 84-)

o Akashi Kaikyo Bridge (to be completed by 97)

o Ise Bay Highway (to be completed by FY 96)

o Yokohama Minato Mirai 21 (Major Hall of International Conference Center, land consolidation, port construction) (FY 85-)

o Kansai Science City (land consolidation, second Keihan Expressway, Center for Graduate Studies in Advanced Science and Technology) (FY 88-)

Projects Added in 1991

o New Chitose Airport Phase III (to be completed by FY 2000)

o Kurushima Bridge (to be completed by FY 98)

o Makuhari High Rise Apartment (FY 92-) (tentative name)

o New National Theater (FY 91-96) (tentative name)

o Kansai National Government Building (tentative name)

o National Olympics Memorial Youth Center (FY 91-94)

o Postal Savings Nikko Kirifuri Resort Facilities (FY 91-96)

o Research Center for Aging and Health* (tentative name)

o Social Insurance Hospital (Kanto area) (FY 91-93)

o Tokyo University of Foreign Studies*

o National Institute of Polar Research, The Institute of Statistical Mathematics and National Institute of Japanese Literature*

o Synchrotron Radiation Facility (SPring-8) (Hyogo) (to be completed by 1998) (excluding Storage Ring Building [Phase I] and related facilities)

* when and if initiated

2. DESIGNATED PRIVATE PROJECTS

Projects Listed in 1987-88

o Kansai International Airport

o Trans-Tokyo Bay Highway

o Nippon Telegraph and Telephone Corporation (NTT) Shinjuku Building

3. THIRD-SECTOR PROJECTS

Projects Listed in 1987-88

o Technoport Osaka

o Rokko Island**

o Haneda Airport Terminal Construction (Phase II)

o Haneda Airport Terminal Construction (Phase III)

o New Hiroshima Airport Terminal Construction

o New Kitakyushu Airport Terminal Construction*

o Tokyo Teleport

o Yokohama Minato Mirai 21 (International Conference Center)

Projects Added in 1991

o Import Integrated Terminal in Yokohama Daikoku Pier (tentative name)**

o Rinku Gate Tower Building

o Sendai Airport Terminal Building for International Passengers

o New Chitose Airport Terminal Construction (Phase III)*

o JR Kyoto Station Redevelopment

o JR Ueno Station Redevelopment*

* when and If Initiated

** when and if third-sector major projects under these plans emerge

II. FUTURE PROJECTS (IF and when Projects)

(If and when these projects or the concept of these projects become concrete or decisions are made on their initiation, these projects wall be added to the MPA project list.)

o Fukuoka Airport Terminal Building (West)

o Chubu International Airport

o Fukushima Airport

o Saitama YOU And I

o Second National Diet Library

o Minami-Aoyama NTT Project

Note: Concerning "the Fukuoka Airport Terminal Building (West)" and "the Saitama National Government Building under the Saitama YOU And I, the procurement has practically been initiated under the MPA since 1992 and 1993, respectively, when these projects were put in concrete terms.

THE SECRETARY OF COMMERCE

Washington, D.C. 20230

January 19, 1994

His Excellency

Takakazu Kuriyama

Ambassador of Japan

2520 Massachusetts Avenue, N.W.

Washington, D.C. 20008

Dear Mr. Ambassador:

I am pleased to acknowledge the receipt of your letter dated January 18, 1994, conveying the "Action Plan on Reform of the Bidding and Contracting Procedures for Public Works" (hereinafter referred as to the "Action Plan"), and your separate letter, dated January 19, 1994, concerning the annual meetings related to the Action Plan, treatment of the Major Projects Arrangements (hereinafter referred to as the "MPA") and other construction--related matters.

I welcome your government's decision to implement the Action Plan, with the aim of reforming bidding and contracting procedures for public works in Japan, to enhance transparency, objectivity and competition, as well as to strengthen the application of the principle of non-discrimination. The Government of Japan's adoption of the Action Plan represents substantial and satisfactory process toward the successful resolution of a long-standing problem between our two countries related to access for foreign companies to Japan's public works market.

I welcome the Government of Japan's intention to keep the Action Plan under review, and in this regard, to hold annual meetings with the Government of the United States to assess implementation and utilization of the Action Plan. The Government of the United States is also prepared to hold the first annual meeting in the first quarter of FY 1995. I share your view that an annual meeting will deal with, among other things, an evaluation of the relevant information and data, described in the Appendix attached to your letter.

The Government of the United States is also prepared to consult at any time, on the request of the Government of Japan, with the Government of Japan to resolve issues with regard to the implementation and utilization of the Action Plan. I share your view that annual meetings and consultative meetings, held upon request by either Government, will be held until the end of FY 1999, at which point, the two Governments will decide whether it is necessary to continue these meetings. The Government of the United States recognizes that, to make a useful reference for effective implementation of the Action Plan, the Government of Japan may wish to discuss matters concerning the procurement procedures of the United States' public works market, on the occasion of these meetings, and the Government of the United States is prepared to consult with the Government of Japan concerning such matters. I note that the relationship between the MPA and the Action Plan is described in the Action Plan. I understand that the MPA will be-terminated when the projects covered by the MPA are completed. I share your view that review of the MPA will take place at the same time as the annual meeting on the Action Plan.

While I recognize that the Government of Japan has no authority to impose legal requirements on the third sector entities in carrying out their construction projects, I appreciate your reference to the third sector construction projects.

I also welcome the Government of Japan's reaffirmation of its SII commitment on Advisory committees (Shingi-Kai) and study groups (Kenkyu-Kai) with regard to the construction-related sector.

I support the recommendation of the Central Council on Construction Contracting Business in "Recommendation on the Reforms of Bidding and Contracting Systems for Public Works" of December 21, 1993 that consideration be given to the construction management system. In this context, I hope that a pilot construction management program will be undertaken in Japan.

I welcome the Government of Japan's reaffirmation of its Basic Policies for Import Expansion announced in the Trade Conference on October 7, 1993, and confirmation of its applicability to the construction-related sector.

I hope that the implementation of the Action Plan will provide foreign companies increased opportunities to participate in Japan's public works market.

Sincerely,

Ronald H. Brown


TANC offers these agreements electronically as a public service for general reference. Every effort has been made to ensure that the text presented is complete and accurate. However, copies needed for legal purposes should be obtained from official archives maintained by the appropriate agency.