Comprehensive National Plan Nr. 24

General Policy Ordinance Nr. 157

October 31, 2003

 

To Prefectural Governors

 

Minister of Land, Infrastructure, Transport and Tourism

Head of the Local Administration Bureau of the Ministry of Internal Affairs and Communications

 

Concerning proper tendering and contracting for public works, we asked for accurate application of the "Law for the Promotion of Proper Tendering and Contracting for Public Works" (hereafter referred to as the "Act for Promoting Proper Tendering and Contracting for Public Works") in our May 14, 2001 notice titled "Concerning Proper Tendering and Contracting for Public Works" and in our October 31, 2001 notice titled "Concerning Promotion of Proper Tendering and Contracting for Public Works."

However, according to the results of a survey of the status of implementation of the "Act for Promoting Proper Tendering and Contracting for Public Works" and the "Guidelines for Measures to Plan Proper Tendering and Contracting for Public Works" (hereafter referred to as "guidelines") by contracting organizations for public works, even though certain improvements are evident, some municipalities without a contracting organization administration system are still late in handling such matters as outline and public announcement of nomination standards, the contents of contracts changed due to changes in sum and reasons for changes, and the reasons for selection of parties for negotiated contracts and requests for submission of copies of work execution registries.

These obligatory points are general matters that all contracting organizations must adhere to in the same manner, and we therefore ask that they be implemented quickly in regional governments with reference to the status of the specific implementations of other contracting organizations and the various manuals that have recently been drawn up.

On the other hand, concerning the status of implementation of matters for which contracting organizations were asked to make efforts towards the guidelines, the survey results indicate that improvements have been made in terms of steady implementation of the guidelines; however, there are also issues for which the implementation by the contracting organizations is insufficient, such as when it comes to establishing third party institutions and submission of breakdowns of construction work costs at the time of tendering.

Therefore, based on Article 18 of the Act for Promoting Proper Tendering and Contracting for Public Works, we, by order of the minister, are requesting regional governments to take the following measures, which are recognized as being especially necessary from the standpoint of the guidelines for contracting organizations.

We are also asking regional governments to make the items of this notice widely known in their respective municipalities in order to further improve proper tendering and contracting.

 

Contents

 

1. Securing the tendering and contracting process and transparency of contract contents

 

(1) Promotion of public announcement of information related to tendering and contracting

Public announcement of the total points for ratings of management situation and completion ability of competition participants or the applicable number of points from ratings by other contracting organizations, construction work results, and standards in the case of categorization by grades are basic items for securing transparency and impartiality in the tendering process, and therefore regional governments that have not yet implemented these public announcements are to implement them as quickly as possible.

Furthermore, regarding draft and public announcement of nomination standards for open competitive tendering, as they contribute to elimination of arbitrariness of the contracting organizations involved with nominations and prevent impropriety, regional governments are to quickly make draft standards and public announcements.

In addition, in regard to preliminary announcement of the estimated price, in view of the possibility that competition will be limited by holding to that price, that the efforts of construction businesses in making estimates will be hindered, and that it makes occurrence of big-rigging more likely, appropriate judgments need to be made with respect to the actual results of the regions.

 

(2) Promotion of securing transparency in contracting systems and transparency and fairness in the contents of contracts when using third party institutions

Third party institutions, such as tendering surveillance committees, are to be establish quickly in regional governments that have not yet done so.

Furthermore, efforts are to be made to establish them with reference to the recently drawn up Basic Guidelines for the Operation of Third Party Institutions, and based on the actual situation concerning the size of the regional governments and the operating costs of third party institutions, such as tendering surveillance committees, efforts should be made by municipalities to secure transparency in tendering and contracting and to actively eliminate impropriety by jointly establishing third party institutions with several regional governments and making use of preexisting structures, such as making use of observers according to Article 195 of the Local Government Act.

 

(3) Promotion of adequate response to complaints

In order to secure transparency in tendering and contracting and to promote fair competition, public announcement of the reasons for not nominating and of the policies for handling complaints about the process of tendering and contracting are to be promoted quickly.

Furthermore, in order to increase the level of transparency of the procedures, structures are to be set up to handle complaints about tendering and contracting in a neutral and fair way, including the use of third party institutions, such as tendering surveillance committees.

 

2. Improvement of the methods of tendering and contracting to promote fair competition

 

(1) Promotion of implementation of adequate tendering methods and selection of contractors based on company ratings

In regard to tendering methods, we would like to see plans for increasing the level of transparency in tendering and contracting through adequate execution of open competitive tendering and competitive tendering by nominated contractors based on the scale of the construction work and the administration systems of the contracting organizations.

In particular, while the spread of open competitive tendering is progressing, as tenders by inferior and unqualified businesses with poor capabilities to conduct work have recently been observed, efforts are to be made to plan enforcement of supervision and inspection of construction work and rating of construction work results; to lay out the standards of supervision and inspection of construction work and essential points of rating of construction work results; and to fully implement business administration systems in order to prevent a decline in the quality of public works.

Furthermore, for regional governments that do not possess sufficient systems, we would also like to see the use of outside institutions considered for technical examinations in corporate evaluations.

 

(2) Prevention of improper tendering, such as bid-rigging, through promotion of submission of construction work cost breakdowns at the time of tendering

We would like to see efforts made to prevent improper tendering, such as bid-rigging and dumping, through promotion of submission or disclosure of construction work cost breakdowns at the time of tendering by contracting organizations.

Furthermore, in cases of insufficient application of breakdowns of construction work costs due to the business administration systems involved in tendering, we would like to see planning of valid application of breakdowns of construction work costs by referring to the methods applied by other contracting organizations.

 

3. Rigorous prevention of dumping tenders through adequate implementation of low tendering price investigation systems

 

So-called dumping tenders can easily be related to lowering of the quality of construction work by omission of important steps, shifting to subcontractors, deterioration of work conditions, and lax safety measures and can also distort fair business regulations and impede sound development of businesses. Therefore, adequate low tendering price and minimum tendering price investigation systems are to be applied and dumping tenders are to be thoroughly eliminated.

Low tendering price investigation systems are systems to determine whether, by examination of the value of the applications of persons that are to become contract parties, there is a possibility that the contract will not be fulfilled or conform to the contract contents in order to promote winning by tenders with a low price due to the efforts of tendering participants and from the standpoint of securing the quality of public works. With regard to execution, plans are to be established to promote planning and public announcement of the essential examination points of low tendering price investigation systems, adequate investigations are to be carried out, and the investigation results effectively used through review of the suitability of standard investigation values based on the results of investigations and public announcement of investigation results.

 

4. Thorough elimination of impropriety through adequate response to bid-rigging

 

To accurately conduct the duty to report to the Fair Trade Commission based on Article 10 of the Act for Promoting Proper Tendering and Contracting for Public Works, effort is to be made to thoroughly eliminate impropriety by promoting draft of the essential points for handling of cases where information about bid-rigging is obtained, public announcements, and setting up of internal information/report systems to handle bid-rigging information.

 

5. Securing proper execution of work

 

(1) Enforcing submission of a copy of the work execution system registry to the contracting organization

In order to secure proper work execution systems, submission of the work execution system registry, as set forth for contractors according to Article 13 of the Act for Promoting Proper Tendering and Contracting for Public Works, is important for understanding the execution system that is in place and conduct of adequate examinations. Therefore, efforts are to be made by regional governments to fully implement surveillance and examination of public works, to enforce submission of the work execution system registry by contractors, and at the same time, to ensure proper work execution systems with reference to the Manual on the Use of the Construction Work Execution Registry.

 

(2) Promotion of draft and public announcement of the essential points for understanding work execution systems and the standards of supervision and examination of public works

Draft and public announcement of the essential points for understanding work execution systems and the standards of supervision and examination are to be promoted to ensure proper execution of public works and to rigorously exclude inferior and unqualified businesses with poor work execution capabilities.

Furthermore, regional governments that have not drafted the respective necessary points are to make efforts to quickly draft them while referring to essential points already drafted and announced by other contracting organizations and are to completely carry out supervision and examination of construction work by employing outside institutions for supervision and examination in cases where there are no constructing body administration systems due to a lack of engineers.

 

(3) Promotion of the use of contracting organization support databases

To ensure proper work execution systems, regional governments shall make efforts to actively use contracting organization support databases, and for selection of tendering participants and determination of winning tenderers, regional governments should secure accurate work execution systems by accurately determining employment of supervising engineers at work sites according to the planned placement of the participating and winning tenderers.

 

6. Promotion of introduction of electronic tendering

 

Electronic tendering facilitates participation in tendering for public works by qualified competition participants through simplification of administration, lowering of the costs of tendering, and publicly announcing calls for tenders via the internet. Because it is also a means of increasing competitiveness, as much effort as possible is to be made for its introduction.

Therefore, in regard to introduction of electronic tendering and concerning the increase in burden on regional governments for introduction, the government is currently establishing the measures required to make the change to electronic tendering systematic and smooth for regional governments.