Comprehensive National Plan Nr. 24

Finance Ordinance Nr. 3096

December 28, 2004

 

To the heads of ministries and agencies

 

Minister of Land, Infrastructure, Transport and Tourism

Minister of Finance

 

We have 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") after being put into effect on April 1, 2001.

However, according to the results of a survey (see attachment) 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 sufficient measures are being undertaken by all but a part of the institutions concerning the matters imposed on contracting organizations by law and the points in the guidelines that require effort by contracting organizations for their implementation are being addressed, some matters can be seen where the implementation is still insufficient.

Therefore, based on the obligations due to Article 18 of the Act for Promoting Proper Tendering and Contracting for Public Works, we are requesting measures be taken as quickly as possible in regard to points that have not yet been implemented, and based on Article 18 of the same law, we request that the following measures be taken, which are recognized as being especially necessary in view of the guidelines for contracting organizations.

Furthermore, we are asking the ministers who oversee semi-governmental corporations to rigorously implement the issues raised in this notice in order to promote proper tendering and contracting with regard to overseen semi-governmental corporations.

 

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 of ratings for management situation and completion ability of competition participants or the applicable number of points for ratings by other contracting organizations, construction work results, and standards in the case of categorization by grade are basic items for securing transparency and impartiality in the tendering process; contracting organizations that are late making public announcements should make them as quickly as possible.

 

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

Because a lack of established third party institutions, such as tendering surveillance committees, is evident in some ministries, agencies, and semi-governmental corporations, we would like to see a quick increase in the transparency of contracts through use of third party institutions. Furthermore, in regard to contracting organizations who have difficulty in setting up and managing third party institutions on their own, we would like to see efforts to plan for increasing the transparency of tendering and contracting and elimination of impropriety through the use of third party institutions established jointly by several contracting organizations.

 

(3) Promotion of adequate response to complaints

In order to secure transparency and impartiality in tendering and contracting, we would like to see promotion of policy decisions for handling complaints about the process of tendering and contracting and public announcements. Furthermore, we would to see structures established quickly to handle complaints about tendering and contracting in a neutral and fair way, such as using third party institutions like 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, as tenders from inferior and unqualified businesses with poor capabilities to conduct work have recently been observed, we would like to see efforts towards full implementation of business administration systems regarding layout of the essential points for rating of construction work results and qualification inspections

In addition, the "2004 Basic Guidelines for Economic and Financial Operations and Structural Reform" state that "they are to advance reform towards proper tendering and contracting in order to promote sound competition in value, including not only the price, but also technical skill and quality," and concerning the "Program to Reform the Cost Composition for Public Projects," we would like to see tendering and contracting systems that apply private technical proposals, such as the winning tender comprehensive evaluation systems, the VE-System at the time of tendering, and combined planning/work execution systems, implemented and used.

Furthermore, for contracting organizations that do not possess sufficient systems, we would also like to see 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 by contracting organizations to prevent impropriety by quickly implementing submission of breakdowns of construction work costs at the time of tendering, which is especially efficient for prevention of impropriety, such as bid-rigging and dumping.

Furthermore, in cases of insufficient application of breakdowns of construction work costs due to the business administration systems related to 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 a low tendering price investigation system

 

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, it is necessary to adequately apply low tendering price investigation systems and to plan for elimination of the above problems.

In regard to application of low tendering price investigation systems, we would like to see plans to promote draft and public announcement of the essential points of low tendering price investigation systems, conduct of adequate investigations, and effective use the investigation results through a review of the suitability of standard investigation values based on the results of investigations and public announcement of investigation results.

In addition to this, as measures for cases in which a contract is made with a person who won a tendering with a price lower than the standard price of a low tendering price investigation, submission of a breakdown of the construction costs must be rigorously enforced and a check of the important points must be conducted. Other than this, effective measures to ensure accurate work execution and to lower the damages resulting from contracting companies going bankrupt during execution of construction work, such as the obligation to increase deployment of staff for corporations where there have been problems with execution of construction work in the past, increase of the execution warrantee ratio, or decrease of the preliminary payment ratio, are now being implemented in various contracting organizations. By settling these issues before contract conclusion and making them clear when a tendering is announced, corporations whose management affairs are deteriorating can be avoided and appropriate execution of construction work can be ensured. Therefore, we would like to see their introduction considered.

 

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

 

To accurately carry out 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, we would like to see planning for rigorous elimination of impropriety by drafting the essential points for handling cases where information about bid-rigging is obtained, by making quick public announcements, and at the same time, by setting up 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 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. Currently, there seem to be some ministries, agencies, and semi-governmental corporations that, as contracting organizations, do not demand submission of a work execution system registry; however, we would like to see efforts made to ensure proper work execution systems through planning for quick improvement.

Furthermore, in regard to planning of execution systems, efforts are to be made to adequately display the work execution systems of the site so that third parties can easily check them and to adequately disclose the construction work execution registry if disclosure is requested.

 

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

We would like to see promotion of draft and public announcement of the essential points and standards of supervision and examination for understanding work execution systems and as a measure to enforce supervision and examination of construction works in order to ensure a proper execution of public works and rigorous exclusion of inferior and unqualified businesses with poor work execution capabilities.

Furthermore, in regard to contracting organizations that have not defined the respective necessary points, we would like to see efforts to quickly draft them by referring to essential points already drafted and announced by other contracting organizations, and in cases where there are no construction organization administration systems due to a lack of engineers, we would like to see outside institutions employed for supervision and examination and complete conduct of supervision and examination of construction work.

 

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

To exclude inferior and unqualified businesses and ensure systems of proper work execution, we would like contracting organization support databases actively used, and for selection of tendering participants and determination of winning tenderers, accurate work execution systems should be secured 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 and lowering of the costs for tendering and publicly announcing calls for tenders via the internet. It is also a means of increasing competitiveness. Therefore, we would like to see efforts made by ministries and agencies to promote introduction of electronic tendering based on the plan to emphasize e-Japan and the Program to Reform the Cost Composition for Public Projects and would also like to see them introduced in semi-governmental corporations as possible.