Concerning the results of factual investigation of the tendering and contracting procedures of regional governments
January 20, 2000
We are announcing the results of the factual investigation in fiscal 1999 of the tendering and contracting procedures of regional governments
1 Overview of the Survey
"Factual investigation of the tendering and contracting procedures of regional governments," which targeted all regional governments, has been jointly conducted by the Ministries of Construction and Home Affairs yearly since 1993 and has now been conducted 7 times.
(1) Survey targets...All regional governments (47 prefectures, 12 ordinance-designated cities, and 3,240 municipalities)
(2) Date of survey...June 1, 1999
In regard to the number of tenders, the survey took into account all works with tender calls of more than 500,000 JPY in 1998.
(3) Valid responses...3,299 organizations (100%)
2 Overview of the Survey Results
(1) Application of various tendering methods, such as open competitive tendering
Open competitive tendering has been introduced by all prefectures and ordinance-designed cities and by 875 municipalities (referring to all cities and districts other than ordinance-designed cities), an increase of 161 organizations (5%) compared with the previous year. Within the organizations that introduced open competitive tendering, 37 also target rather small scale work with a value of less than 50 million JPY.
Furthermore, competitive tendering by nominated contractors and competitive tendering with nominated contractors desiring construction work, both of which are tendering methods with high levels of transparency and competitiveness, are not yet practiced in many cases, especially in municipalities, and the establishment rates, 11.7% for competitive tendering by nominated contractors and 5.2% for nominated contractors desiring construction work, are low compared with open competitive tendering.
(2) Securing transparency and impartiality in tendering and contracting
Quite a few organizations have planned nomination standards, but as many as 599 municipalities are without plans, and in comparison to last year’s survey, the number of municipalities with plans has increased by only 68. In addition, concerning public announcement of nomination standards, this is only conducted in half of the municipalities, and even at the prefectural level, there are two organizations that do not make public announcements. This is a significant problem from the standpoint of securing transparency and impartiality in tendering and contracting. Regarding nomination committees, there is one ordinance-designated city and 208 municipalities that have not established committees, and therefore it is necessary that they establish committees quickly.
Furthermore, regarding the standards for nomination suspensions, there are 945 organizations that have not drafted any and 2,152 organizations, including 6 prefectures, that have not made public announcements (including organizations without draft standards). Compared with the previous year, the improvements are insignificant, and this poses a very significant problem.
Concerning public announcement of tendering results, the majority of organizations make public announcements; however, there are 402 organizations that do not, and improvement is very slow.
(3) Abolition of the Construction Completion Guarantor System and transition to the new Accomplishment Warrantee System
The majority of organizations have made the transition to the new Accomplishment Warrantee System, which focuses on monetary warrantees; however, there are still 3 organizations at the prefectural and ordinance-designated city levels with the Construction Completion Guarantor System for some construction, which makes quick improvement desirable.
(4) Introduction of various tendering and contracting systems
There are 10 organizations with a VE at the time of tendering (19 cases) and 10 organizations with a VE after contract conclusion (31 cases). In addition, there are seven organizations with Simultaneous Planning and Execution Order Systems (Design-Build Systems), two organizations with Competition Tendering Systems with Detailed Design (4 cases), and one organization with a Two-Step Negotiated Contract System (8 cases). This indicates that introduction of new tendering and contracting systems is continuously being attempted (total: 70 cases).
It should be noted that these trials are also being conducted in comparatively small municipalities.
(5) Public announcement of estimated price
Concerning post-facto announcement of price, since the February 1998 proposal of the Central Construction Industry Committee, this has been greatly advanced in prefectures and ordinance-designated cities, and public announcements are made in 45 prefectures, 12 ordinance-designated cities, and 678 municipalities. However, looking at all organizations, only 20% make public announcements, and request for further promotion is necessary.
(6) Introduction of Minimum Price and Low Tendering Price Investigation Systems
More than 70% of organizations have introduced a minimum price system, and low tendering price investigation systems have been introduced in 270 organizations.
However, concerning low tendering price investigation systems, minimum price systems cannot be established for construction work subject to the WTO, and while progress is being made regarding introduction in prefectures and ordinance-designated cities (44 prefectures, 12 cities), the rate of introduction in municipalities has not exceeded 6.6%.
Furthermore, 14,585 tenders were made under minimum price systems and 794 tenders were investigated based on low tendering price investigation systems; this represents a total increase of 60% compared with the previous year. Although this indicates that there was an increase in the number of cases in which minimum price systems have been established compared with the previous year, this might be a sign that competition is becoming fiercer. Considering that in 1998 there were a total of 1.03 million tenders and an extremely low percentage of low price tenders (only 1.5%), placing deliberate emphasis on low price tenders does not appear to be appropriate.
Additionally, as a result of investigations based on low tendering price investigation systems, 59 cases were uncovered that contained problems, such as in completion capability, and which therefore did not come to be contracts (about the same number as in previous years).
(7) Operation of a grading system
In regard to public announcement of ordering standards, progress is being made in prefectures and ordinance-designated cities (2 prefectures with no public announcements); however, the rate remains low in municipalities, with only 1,035 organizations (31.9%) making public announcements. However, if the 868 organizations or 27% of municipalities with no ordering standards are left out, the ratio of organizations with public announcements is around 44%.
Entry of low-ranked businesses into high-ranked construction work (so-called "kui-agari") was facilitated in 1,353 organizations (41%), which signifies a large increase in comparison with the previous year (528 organizations, 16.0 points).
On the other hand, notification to graded persons remains unchanged, with 43 prefectures, 11 ordinance-designated cities, and 74 municipalities providing notifications.
(8) Accurate exclusion of inferior and unqualified businesses
Concerning the obligation for registration with CORINS, all prefectures and ordinance-designated cities have registered; however, the number of municipalities remains low, 22.5%, and in order to raise the credibility of the Database System for Support of Contracting Organizations, further progress is required.
Furthermore, in regard to obligatory submission of work execution system registries, all prefectures have done so, but the numbers for the other types of organizations remain low, with only 10 ordinance-designated cities and 884 municipalities (27.3%).
In addition, on-the-spot inspections of construction site work execution systems are conducted in 80-90% of prefectures and ordinance-designated cities and close to 30% of municipal organizations, which is a significant increase compared with the previous year. This shows the interest of contracting organizations in the exclusion of inferior and unqualified businesses.
(9) Situation concerning the use of JVs
Special JVs have increased from 6,766 cases of orders (1997) to 8,391 cases (1998), and registered cases of Ordinary JVs rose from 3,309 to 3,579, indicating that the JV system is being actively utilized.
3 Future Action
Based on the results of these factual investigations, it is planned to quickly send out improvement notices.
4 Other
Simultaneous public announcements with the Home Affairs Ministry Internal Policies Club
