Procedures for Government Procurement on Products
(Operational Guidelines)

Decision of the 21st Meeting of the Committee for
Drawing Up and Promoting the Action Program

Procedures for Government Procurement on Products
(Operational Guidelines)

Based on the Agreement on Government Procurement, efforts have been made to ensure that transparent, fair and competitive procedures are taken in Japanese government procurement; however, in order to contribute to suppliers' convenience, to expand market entry opportunities for competitive domestic and foreign suppliers, and to enhance transparency, fairness and competition in procurement procedures, the Government of Japan has decided to take necessary steps in keeping with the following operational guidelines for procurement of products covered under the Agreement on Government Procurement and for procurement carried out in accordance with that agreement.

I. Scope of Application

1. These operational guidelines will be applied to procurement contracts covered by the Agreement on Government Procurement entered into by those entities listed in Attachment 1 (hereafter referred to as "entities"). In addition, procurement contracts valued between 100,000 SDR (inclusive) and 130,000 SDR, which are decided to be implemented in accordance with the Agreement on Government Procurement, as stipulated in the Understanding of the Government of Japan on Government Procurement (hereafter referred to as "the 1991 Understanding") on 19 November 1991 by the Committee for Drawing Up and Promoting the Action Program will be subject to these operational guidelines as well.
   
   
2. In the event that special procedures and/or measures have been introduced for specific sectors, these special procedures and measures will be applied, without regard to the measures outlined within these operational guidelines. As long as they do not contravene such special procedures or measures, the measures outlined within these operational guidelines will be taken, with their detailed range of application to be determined separately.

II. Basic Outlook on Market Research

1. When conducting market research to gather information regarding the development of specifications as well as the market value of the scheduled procurement, for smooth implementation of that procurement, entities will request information from domestic and foreign suppliers ensuring fairness and non-discrimination.
   
   
2. Furthermore, entities will not allow suppliers who were directly involved in the development of specifications to participate in tendering procedures unless fairness and non-discrimination are ensured.

III. Request for Submission of Materials for Entities' Market Research

In procurement which is no less than 800,000 SDR, and for which the development of appropriate specifications is difficult for entities without requesting the submission of materials from suppliers, the following measures will be taken at the beginning of the fiscal year, or at the earliest possible time before the beginning of the fiscal year, except in cases of urgency or in cases of single tendering in conformity with the Agreement on Government Procurement.

1. Entities will publish a notification in Kanpo (the official Government gazette) of their request for the materials and other necessary information on basic requirements for scheduled procurement, and will provide copies of the notification to suppliers upon request.
   
   
2. Notifications in Kanpo will clarify the following:

   (1) Entity's name and its address

   (2) Subject matter of procurement (name, volume and basic requirement for procurement)

   (3) Deadline for the submission of material

   (4) Notice of any conferences scheduled to be held

3. Except in cases of urgency, the deadline for submission of material outlined in 3., above, should be set at least 30 days after the day following publication of the request for submission of materials.

IV. Request for Comments to Ensure Smooth Procurement

For smooth implementation of procurement valued no less than 800,000 SDR, entities should take the following measures to ensure that interested suppliers will be able to submit their comments on draft specifications prepared by the entities, except in exceptional cases of urgency, cases of procurement related to raw materials, fuels, or other similar materials, or cases of high-volume purchases of off-the-shelf products with unit costs not more than 500 SDR, or cases of single tendering in conformity with the Agreement on Government Procurement. When repeated use of the existing specifications is necessary for the continuity of administrative service, each ministry or agency should explain its specific reasons in its explanation of the subject matter of the procurement, at a seminar in the beginning of the fiscal year.

1. Entities should publish notification in Kanpo that the development of draft specifications has been completed, at least 30 days before the scheduled public Notice of Procurement. When necessary to supplement this, letters which solicit comments will be sent to suppliers who have submitted materials and other matters in response to III., above; however, in exceptional cases of urgency, the above-mentioned period may be shortened to the extent that suppliers will be able to respond, by announcing such intent in the Notice of Procurement.
   
   
2. In publication of notification that the development of draft specifications has been completed, the following points must be clearly stated:

   (1) Entity's name and its address

   (2) Subject matter of procurement (name and volume)

   (3) Contact point to receive draft specifications

   (4) Deadline for the submission of comments

   (5) Notice of any conferences scheduled to be held

3. The deadline for submission, as outlined in point (4) of 2., above, should be set at least 20 days after the day after the publication of the Request for Comments.
   
   
4. When entities, as a result of the comments submitted from interested suppliers, recognize that there is a need to make improvements and modify the draft specifications, these entities must notify all suppliers who have responded to the Request for Comments extended through the Notification or supplementary letters.
   
   
5. The procedures outlined in 1. through 4., above, by no means inhibit any supplier who desires to participate in competitive tendering from making inquiries concerning the specifications after the Notice of Procurement.
   
   
6. Entities, when requesting comments in accordance with the procedures in 1. through 4., above, should hold pre-tender conferences, in principle.

V. Provision of Information at the Beginning of the Fiscal Year for Procurement for Suppliers' Convenience

1. In terms of procurement estimated at no less than 800,000 SDR, each ministry and agency (hereafter referred to as "entities," as listed in Attachment 1) will publish a notification of the following items in Kanpo (the official Government gazette) as early as possible in the fiscal year:

   (1) Entity's name and its address

   (2) Subject matter of procurement (name and volume)

   (3) Scheduled date for Notice of Procurement

2. The Ministry of Foreign Affairs, at the beginning of the fiscal year or as early as possible in the fiscal year, will hold a seminar on government procurement for interested domestic and foreign suppliers, and will explain the content stipulated in subpoint (1) through (3), below. The same policy will be implemented by each ministry and agency (including government-affiliated corporations, under the supervision of the relevant ministries and agencies) when there is a need to arrange an opportunity to provide more detailed information to suppliers. In these cases, the sponsors of the seminars will, in conformity with the principle of non-discrimination, publish the content of explanations provided in the seminars, by making it available for public perusal.

   (1) Scheduled procurement published in the notification (stipulated in 1., above).

   (2) Information related to procurement presumed to be of interest to many suppliers, including projections for government procurement in the following years, to the fullest extent possible, with budgetary reservation.

   (3) Outline of qualification procedures and other qualification requirements necessary to participate in competition.

VI. Provision of Procurement Information for Suppliers' Convenience

1. In order to contribute to the convenience of suppliers who are interested in government procurement, the Ministry of Foreign Affairs, with the cooperation of other ministries and agencies, will make efforts to collect information, including the names and addresses and the names of procurement officers of entities, which will enable suppliers to make easier reference to the entities. The Ministry of Foreign Affairs will strive to provide information, through notification in Kanpo and other measures, on a wide scale to domestic and foreign suppliers interested in government procurement. Furthermore, the Japan External Trade Organization (JETRO) will make efforts to provide the above information on a wide scale to domestic and foreign suppliers, with the development of the database for government procurement.
   
   
2. Each ministry and agency will publish its expected procurement which is estimated at no less than 100,000 SDR at the beginning of the fiscal year, by making such information available for public perusal at the entities' contact points, and by clarifying the section to make reference to. Each ministry and agency will make efforts to provide JETRO with the above information, as well as any information that is announced at the seminars as in point 2. of V., above, on the condition that there is sufficient possibility for change in the procurement plans, depending on further examination.
   
   
3. In case that information is requested by interested suppliers, JETRO will provide the relevant information in accordance with the principle of non-discrimination, and on the condition that there is sufficient possibility for change in the procurement plans and that the supplier will not file a complaint on such change.
   
   
4. Each ministry and agency will respond to any inquiries from interested suppliers.

VII. Gathering Information on Domestic and Foreign Suppliers for Smooth Procurement

VIII. Publication of Information Before the Contract Award of Single Tendering

1. The entity will publish a notification of its single tendering in Kanpo at least 20 days before the scheduled date for contract award.
   
   
2. In publication of a notification that procurement will be made through a single tendering, the following will be clarified:

   (1) Subject matter of procurement (name and volume)

   (2) Scheduled date for contract award

   (3) Justification for the single tendering, in accordance with the Agreement on Government Procurement

   (4) In cases in which discussions have begun with the intended supplier for the single tendering, the name of that intended supplier

IX. Strict Implementation of Procurement Procedures

1. The entities will strictly implement procurements in accordance with the regulations of the Agreement on Government Procurement, the accounting laws and regulations as well as the rules which conform to these laws and regulations. In particular, based on the principle of non-discrimination, and in accordance with the spirit of the current system, which makes it a rule to use open competitive bidding, entities will reduce their use of designated competitive tendering and single tendering.
   
   
2. Furthermore, entities will appropriately implement the following points specified in the notification from the Ministry of Finance in l980, when the Agreement on Government Procurement was accepted, and in 1987, when revision of the Agreement was made:

   Enforcement of Government Ordinance Establishing Special Cases Concerning Procedures for Government Procurement on Products (27 November 1980, Ministry of Finance No. 3096, issued by the Minister of Finance to the heads of all other ministries and agencies)

   (i) The supplier to whom the contract is awarded will be appropriately selected, in accordance with the principle of non-discrimination, even in single tendering as well as in open competitive tendering and designated competitive tendering.

   (ii) Consideration will be given to the convenience of suppliers who desire to participate in open competitive or designated competitive tendering, by taking measures to integrate operations involving qualification procedures to the fullest extent possible.

   (iii) As the Agreement prohibits the use of open competitive tendering or designated competitive tendering by specifying, among others, a trademark, and restricts instances in which single tendering may be used, efforts will be made to enforce appropriate procurement procedures, including the adoption of procurement procedures involving technical evaluations as necessary.

   (iv) In view of the strict stipulations regarding instances in which single tendering may be used in conformity with the Agreement, particular attention must be paid in determining whether or not single tendering may be used.

   Enforcement of government ordinance to revise part of the Government Ordinance Establishing Special Cases Concerning Procedures for Government Procurement of Products (25 November 1987, Ministry of Finance No. 3015 (MOF-BB), notification from the Director-General of the Budget Bureau of the Ministry of Finance to the Directors of Financial Affairs Divisions of all the ministries and agencies)

   (i) Appropriate selection of the contracting parties will be made in the cases not only of open competitive tendering but also of designated competitive tendering and single tendering, and market research will not be carried out, nor may information related to the procurement be provided in a manner that benefits certain suppliers.

   (ii) While unifying criteria/ratings related to qualifications of suppliers for participating in competition, during the qualification process, domestic and foreign suppliers will be treated equally, and the country of origin of the products handled by such suppliers will not be used as the basis for discriminatory treatment.

3. Furthermore, application of the overall-greatest-value evaluation method will be actively made to the extent possible, for those procurements for which the lowest-price-award method is not adequate. However, sufficient consideration should be paid in applying such evaluation methods to ensure transparency and fairness, and efficient management of budgetary resources stemming from the tax burden of the people.
   For procurement to which the overall-greatest-value evaluation method is applied, the entities are encouraged to apply the procedures as stipulated in "3. Request for Submission of Materials" and "4. Request for Comments," above, regardless of the value of such procurement exceeding the threshold for these procedures.

X. Operational Considerations for the Convenience of Suppliers

1. Entities will include in their Notice of Procurement, in addition to those matters required according to the Agreement on Government Procurement, a contact point related to the relevant tendering. Further, "qualifications for participation in tendering procedures," "delivery place" and "delivery date" were added to the English summary of tender notices, in accordance with the Government of Japan's 1991 Understanding.
   
   
2. The period for receiving tenders is extended to no less than 50 days from the date of issuance of the Notice of Procurement, unless special circumstances exist, in which case, in accordance with the Agreement on Government Procurement, entities will establish the period as no less than 40 days (in accordance with the Government of Japan's 1991 Understanding).

XI. Simpler, More Rational and More Efficient Procurement Procedures

1. Unification of forms of notices on government procurement, published in Kanpo (the official Government gazette).
   
   
2. Improvement of qualification procedures by, among others, simplifying and unifying application forms for qualification.

XII. Disclosing information to the public which enhances transparency in procurement

1. Entities, when using designated competitive tendering will include the names of designated suppliers for the tendering procedures in the information on contract awards published in Kanpo.
   
   
2. Entities will make available for their perusal of all interested suppliers a list of the names and addresses of suppliers qualified to participate in open competitive tendering, and publish a notification in Kanpo of the contact point for inquiries regarding such a list.
   
   
3. The Ministry of Foreign Affairs will publish in Kanpo statistics to be reported to the GATT Government Procurement Committee (in accordance with the Government of Japan's 1991 Understanding).

XIII. Establishment of Complaints Mechanism (for the interim until a new agreement on government procurement comes into effect)

XIV. Unfair Tenders

1. Based on the "Anti-Monopoly Act Guidelines on the Activities of Entrepreneurs and Trade Associations Involved in Public Tendering," which the Fair Trade Commission is now formulating, with a view to seeking thorough prevention of "dango" (bid-rigging) activities by entrepreneurs and trade associations, and in order to ensure that actions which violate the Anti-Monopoly Act will not take place in tendering, entities will maintain close communication with the Fair Trade Commission, and deal severely with anti-competitive practices in accordance with the relevant laws and ordinances.
   
   
2. When entities obtain information indicating the possible existence of practices that may violate the Anti-Monopoly Act in relation to their procurement, including the development of their procurement specifications, the entities, in order to execute the measures which the Fair Trade Commission decides to be appropriate, will provide such information on a timely basis to the Fair Trade Commission so as to enable the Commission to take such steps as it deems appropriate.
   
   
3. To this end, the entities will provide the name of their contact persons to the Fair Trade Commission to facilitate procedures for the detection and provision of information concerning practices that may violate the Anti-Monopoly Act.

XV. Timing of Introduction

XVI. Review and Follow-up of These Operational Guidelines

1. In order to ensure steady implementation of these operational guidelines, instructions for implementation and detailed schedules will be formulated at the inter-agency meeting to conduct follow-up measures in relation to the Action Program on Government Procurement.
   
   
2. The Cabinet Councilors' Office on External Affairs will annually conduct follow-ups on the status of the implementation of voluntary measures related to government procurement of products in general and on the status of utilization of the measures by suppliers. In this connection, the Office will review the results of such follow-ups at the above inter-agency meeting, as well as the status of the implementation of these operational guidelines. At the time of these reviews, those will be opportunities to hear opinions and requests from domestic and foreign suppliers, and their representative organizations.
   The above inter-agency meeting will report these results to the Committee for Drawing Up and Promoting the Action Program and will publish the relevant statistics which have been collected.

ATTACHMENT 1