Concerning the promotion of proper tendering and contracting for public works
Comprehensive National Plan Nr. 25
General Policy Ordinance Nr. 157
December 28, 2004
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 the proper tendering and contracting for public works, we have previously asked for the necessary improvement measures to be undertaken and have especially asked for accurate application of the "Law for the Promotion of Proper Tendering and Contracting for Public Works" (Law Nr. 127 of 2000, hereafter referred to as "Act for Promotion of Proper Tendering and Contracting for Public Works") since its coming in effect on April 1, 2002.
Overall improvements can be seen due to the efforts of regional governments for proper tendering and contracting; however, according to the results of the survey (see attachment) on the status of implementation of the "Act for Promotion of Proper Tendering and Contracting for Public Works" and "Guidelines for Measures to Plan Proper Tendering and Contracting for Public Works" (cabinet decision from March 9, 2001; hereafter referred to as "guidelines") by contracting organizations for public works conducted based on the Act for Promotion of Proper Tendering and Contracting for Public Works, even though the matters were imposed onto the contracting organizations by law, some points have not been implemented by some of regional governments, and the execution of matters regarding the demands for contracting organizations to make an effort to take measures is insufficient.
Based on these kinds of survey results, we are now proposing actions concerning proper tendering and contracting and are requesting that regional governments take measures as quickly as possible regarding the matters not yet implemented as imposed by the Act for Promotion of Proper Tendering and Contracting for Public Works and that they take the following measures in accordance with Article 18 of the Act for Promotion of Proper Tendering and Contracting for Public Works.
We are also asking regional governments to make the items of this notice widely known in the municipalities of their prefectures in order to further improve proper tendering and contracting.
Contents
I Items regarded as particularly necessary in view of recent changes concerning tendering and contracting for public works
1. Rigorous prevention of impropriety, such as bid-rigging, and the involvement of contracting organizations therein
(1) Employees concerned with the business of tendering and contracting for public works must not be involved in impropriety, such as bid-rigging. Nevertheless, there have been cases where employees of contracting organizations have been arrested and impropriety continues to occur even now. Because of this, regional governments are to concentrate all their efforts to stop this from occurring, to rigorously prevent impropriety by establishment of comprehensive measures, and to handle improprieties in an appropriate manner.
(2) From this standpoint, adequate education and training must be conducted so that these employees gain knowledge about the laws concerning tendering and contracting for public works, and the necessary measures must be executed, such as setting up third party institutions like tendering surveillance committees to conduct investigations on tendering and contracting.
(3) Furthermore, 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 rigorously prevent impropriety by promoting draft and public announcement of the essential points for handling of cases where information about bid-rigging is obtained and by establishing internal information/report systems to handle bid-rigging information.
2. Rigorous and accurate implementation of nomination suspension measures
In regard to nomination suspension measures, which should be adequately executed from the standpoint of elimination of impropriety in tendering and contracting and to eliminate arbitrariness and secure objective execution therein, standards for nomination suspensions are to be drafted and announced, and with reference to the "Model of a Central Public Works Contract Management Application Coordination Conference for the Outline of Nomination Suspension for Construction Contracts," "Application Arrangements of Model of a Central Public Work Contract Management Application Coordination Conference for the Outline of Nomination Suspension Measures for Construction Contracts," and "Concerning Adequate Application of Nomination Suspension Measures for Construction Contracts" (General Policy Nr. 199 dated December 13, 2001, National Contract Nr. 45, Notice of the Chief of the Policies Section of the Self-Governing Policies of the Head of the Self-Governing Administration Bureau of the Ministry of Internal Affairs and Communications, see attachment), revision of the standards is to be conducted as necessary and efforts are to be made for adequate application. When doing this, enough attention must be paid to the fact that application of nomination suspension measures when an on-the-spot investigation is conducted or rejection advice is given without waiting for the period for compliance with the rejection notice and unfair treatment of business persons by evading factual nominations based only on judgment that there is a possibility that they meet the requirements for nomination suspension measures even if the requirements for nomination suspension measures have not yet been met are indicated as undesirable examples in this notification and must be handled with discretion.
3. Rigorous prevention of dumping tenders
(1) 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 thoroughly eliminated.
Furthermore, with regard to execution, plans are to be established to promote draft 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 investigation and public announcement of investigation results.
(2) Regarding preliminary public announcement of the minimum price limit, the situation in the respective area should be given appropriate consideration because of the possibility that business operators who have submitted tenders without making a proper estimate may be selected as the winning tenderer due to the increase in number of tenderings decided by draw, which is the result of receiving increased numbers of tenders for the minimum price. The adequacy of execution of preliminary public announcements is also to be sufficiently discussed, and precautions are to be taken to prevent these problems from occurring.
(3) In addition to this, as measures for cases in which a contract is made with a person that 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 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, their active introduction is to be considered.
II Items judged as being necessary for promotion of execution of measures based on the results of the survey on the situation of measures
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 the 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 sticking to that price, that the efforts of construction businesses in making estimates will be hindered, and that it is makes occurrence of big-rigging more likely, adequate judgments need to be made with respect to the actual results of the regions and the suitability of preliminary public announcements is to be sufficiently studied and handled such that problems do not occur.
(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 established quickly in regional governments that have not yet done so.
Furthermore, based on the actual situation concerning the sizes 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 setting up third party institutions with several regional governments and 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 competitions, public announcement of the reasons for not nominating and draft and public announcement of policies for handling complaints about the process of tendering and contracting are to be established to handle complaints about tendering and contracting in a neutral and fair way, and the transparency of procedures is to be improved through 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 tenderings 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 tenderings by inferior and unqualified businesses with poor capabilities to conduct work have recently been observed, efforts are to be made to prevent interference with securing of proper work execution and evaluations of construction work results and qualification inspections are to be strengthened and to promote securing of proper work execution, such as by making the actual results from similar construction work a requirement for tendering participation and actually checking them through the use of contracting organization support databases. Furthermore, efforts are to be made to draft the essential points for construction work results evaluations and to fully employ the work execution system for construction work results evaluations and qualification inspections.
In addition, in regard to regional governments that do not possess sufficient technical capabilities, efforts are to be made to assign this to outside institutions in relation to technical supervision, surveillance, and inspections for company evaluations.
(2) Promoting submission of breakdowns of construction work costs at the time of tendering
As the submission of the breakdown of construction work costs at the time of tendering is a particularly effective means for prevention of improper tendering, such as bid-rigging and dumping, regional governments should move to employ this quickly.
Furthermore, regional governments that do not possess sufficient work execution systems due to the lack of technical experts should plan for effective use of breakdowns of construction work costs by referring to the usage methods of other contracting organizations.
3. Securing proper execution of work
(1) Rigorous enforcement of 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, and conduct of adequate examinations are important for understanding the execution system that is in place. 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 Construction Work Execution Registries.
Furthermore, a diagram of the execution system is to be displayed in an appropriate manner so that third parties can easily check the work execution system at the construction site, and efforts are to be made for accurate disclosure of the work execution system registry when requested.
(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
Construction work supervision and examinations are to be enforced and draft and public announcement of the essential points for understanding work execution systems and the standards of supervision and examination are to be promoted in order 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 construction organization administration systems due to a lack of engineers.
(3) Promotion of the use of the contracting organization support databases
Regional governments shall make efforts to actively use contracting organization support databases, and for selection of tendering participants and determination of winning tenderers, they should verify the regularly-employed engineer that the participating and winning tenderers plan to place at the work site, exclude inferior and unqualified businesses, and secure a system of proper work execution.
4. Promotion of introduction of electronic tendering
Electronic tendering facilitates participation in tenderings for public works by qualified competition participants through simplification of administration and 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, such as a local grant tax, systematic and smooth for regional governments.
(Reference)
