(3) Procedure Outline The procedure outline of the new tender and contract methods will be described as follows. (* Reference 3: "Procedure Outline of New Tender & Contract Methods") Among these methods, for the methods such as the comprehensive evaluation method and the bulk order method, it is necessary to appropriately limit the range of the constructors and then request to submit the technical proposal not only to lessen the excessive burden on the both of the constructor and the owner but to conduct the efficient and effective competition based on the technical strength.
1) At-tender VE
a. Technical proposal type public tender method
For the construction method and the other themes, the owner receives the technical proposals that make the cost reduction possible from the applicants and examines those to determine the competitors. The planned price is decided based on the standard construction method specified by the owner, however, each competitor will tender according to its own proposal. The successful bidder will be decided based on the price competition.
b. Technical proposal type comprehensive evaluation method
The competitors are decided beforehand based on the examination on the condition such as the track records of the construction similar to that of the targeted project. The selected competitors submit both of the technical proposal related to the construction method and the price proposal in a lump. The successful bidder will be decided comprehensively evaluating both of the price and the other conditions such as the term of construction and the safety. The planned price is decided based on the standard construction method specified by the owner.
2) After-contract VE
Some clauses stipulating that the contractor can submit the proposal are appended to the project contract and the contractor submits the technical proposals that make the cost reduction possible. If that proposal is adopted, the design documents and the contracted price is amended according to the proposal. In that case, the contract price is cut postulating that the part of the reduced contract price will be paid to the contractor.
3) Design and construction bulk order method
The owner selects the applicants of whom the submission of the technical proposal is requested beforehand based on the examination on the condition such as the track records of the construction similar to that of the targeted project, and receives the technical proposals related to the construction method and the other themes from the applicants. The owner examines those proposals to select the competitors and then decide the successful bidder based on the price competition. Or, the owner selects the competitors beforehand based on the examination on the condition such as the track records of the construction similar to that of the targeted project and receives the both of the technical proposal such as the design plan and the price proposal in a lump from those competitors, and then decides the successful bidder based on the comprehensive evaluation. The planned price is decided based on the general specification and the basic requirement and design.
In the case where the same contractor performs both of the design and the execution, the construction method would differ according to the working condition of the actual site and the equipment and machinery owned by the constructor. Therefore in addition to the method mentioned above, in the case where it is more efficient to prepare the detail design based on these condition, it might be better to adopt the other method in which the detail design and the construction are ordered in a lump according to the basic design (competitive tender with the detail design). Furthermore, in the case where the newly developed method such as a patented method will be used, it might be better to conclude the private contract for the execution with the contractor prepared the concerned design after the design works are completed.

4. Management of Issues Related to Technical Proposal

(1) Examination of Technical Proposal
In the new tender and contract method, it is necessary to perform the comprehensive evaluation of the technical proposal including the price fairly, accurately and quickly to select the qualified competitors beforehand and/or decide the successful bidder. And the securement of the reliability for the examination is the important issue in the management.
Therefore each of the owners who take care of the examination of the technical proposal is required to make efforts at improving and keeping its own technical strength. In the term of the examination scheme, it is reasonable to utilize the council system within the owner's organization and, in the case where the construction works and/or the contents of the technical proposal have technically unique/special characteristics, to hear the opinion of the specialist outside of the organization as necessary.
And to secure the fairness of the examination, it is necessary to ensure the transparency of the procedure. Therefore the owner should disclose the reason to the applicant for the competition whose proposal is judged to be inappropriate at the tender and/or to the contractor whose proposal after the conclusion of the contract is not adopted at their request. Especially in the case of the comprehensive evaluation method, of course it is important to establish the proper evaluation scheme in the first place, however also in the term of the procedure, it is reasonable not only to disclose the method in the general evaluation such as the assessed items and the evaluation standard, but also to announce the result of the general evaluation and explain the reason to the applicant who lost the competition at the request. Furthermore, it should be allowed to make a plea to the fair and independent third-party organization such as the tender administration committee when the applicant has objection against the owner's explanation.

(2) Defect Liability
The defect liability related to construction works should be held by the contactor in principle except when the defect is caused by such as the owner's instruction.
The liability for the defect caused by the technical proposal from the contractor submitted at the tender or after the contract conclusion is considered to be held by the contractor as the proponent in principle. However, it is considered that the liability might be discharged in some special cases, therefore it is necessary to discuss about the specific transaction within the trial projects.

(3) Protection of Proposed Technology
It is considered that the technology proposed by the contractor at the tender or after the contract may be used by the owner without any restriction within the project ordered after the concerned one except for the ones covered by the intellectual property right such as patent. However, also it is considered that it is better to protect the concerned technology to raise an incentive to technical proposal until it will become common and be used in general. Further specific discussion is necessary for this issue within the trial projects.

(4) Required Cost for Technical Proposal
The certain cost is required to offer a technical proposal according to the reserve of technological experience of the constructor and/or the detail of the proposal. In the case of the method where the technical proposal is received at the tender, the constructor makes the technical and/or price proposal considering the probability for order placement for the cost and detail of the proposal comprehensively because the fact that if the proposal is outstanding the probability for order placement would rise provides an incentive. As a result, if it gets the order the cost can be retrieved, however, if it cannot get the order the constructor cannot bring back the cost. This can be considered as a risk the constructors should bear, as they bear the cost for the aggregation.
However to provide more incentives for proposal, it is necessary to take the appropriate proposal into the company evaluation process as a merit when the constructor get the order placement.
Furthermore, in the case of the design plan proposal, sometimes it is expected that the incentive for proposal might be hampered because significant cost might arise and the risk would increase, therefore, even for the proponents of the excellent proposal including other parties than the contractor, it is necessary to discuss the possibility that the proposal cost will be borne by the owner, in addition to the reflection of the appropriate proposal into the company evaluation process, according to the detail of the proposal.
In the case of at-tender VE, in addition to the proposal itself, the treatment of the amount of the project after the price reduction according to the proposal have to be considered to make it fairly taken into account while the company evaluation process.

5. Process for Introduction of New Tender & Contract Method

(1) Necessity of Trial Run
For the new tender and contract method, it is expected that the technical strength and the detail of the works will differ for each owner and also various proposed technology would be proposed. Therefore it is not reasonable to standardize some of the processes such as the selection of the targeted works and the handling of the technical proposal.
On this account, based on these basic policy, it is considered that each owner should narrow the options down to the appropriate methods through the trial run of the new tender and contract method to accumulate the example of the execution and to modify as necessary.
Furthermore, when the new tender and contract method has been executed, it is necessary to perform the fair administration and inspection tasks to ensure the appropriate execution according to the technical proposal.

(2) Comprehensive Evaluation Method
For the comprehensive evaluation method, because the bidder who offered the lowest price would not necessarily become the contractor, it is necessary to appropriately perform the selection of the targeted works and the comprehensive evaluation to broadly acquire the understanding from not only the constructor but also the citizens.
Therefore, for the time being, it is more realistic to specifically select the works that considered being not suitable for the competition based only on the price one by one and then judge and accumulate the experiences through the individual discussion with the Minister of Finance according to the current system. When the grouping of the targeted works will become possible because of such as the accumulation of the actual execution examples, it will be reasonable to handle it comprehensively according to the grouping.
Furthermore, because there have been vigorous argument in the course of the discussion, it is necessary to discuss about the introduction into municipal corporations and the actual management method for smooth and effective operation of the comprehensive evaluation method including the abolition, simplification and speed-up of the consultation with the Minister of Finance.
As the fundamental idea for the comprehensive evaluation method, it is defined that the owner should select the competitors based on such as the track records of the similar type of works and then the competitors should submit the technical and price proposal together after as described in the section 3 (3). In addition to this, to encourage the competition based on the technical strength, it is necessary to thoroughly consider the procedure in which the owner selects the competitors after the examining the policy for the expected technical proposal of the applicants as well as the track records of the similar type of works during the trial run phase.

(3) Design and Construction Bulk Order Method
The design and construction bulk order method is one of the exceptions to the design-execution separation principle, therefore it should be introduced only when it is really necessary. Consequently it is necessary to discuss what type of the works will be suitable for this method specifically.
In this method, the owner will be required to make reasonable judgment about both of the design and the execution, therefore it is necessary to establish the examination system that make it practicable.
Furthermore especially for the design in the construction project where both of the designer and the constructor are engaged to themselves in the technology development, there is also the chance to adopt the method in which the contracts for the design and the execution will be concluded gradually in each phase because the project should not necessarily be ordered according to the design and construction bulk order method. Therefore, while considering the possibilities for the bulk ordering, it is necessary to admit the adoption of the appropriate method suitable for the actual situation.

(4) Preparation of Standard Contract Stipulation
It is necessary to prepare the standard contract stipulation for some of the new tender and contract methods such as the design and execution bulk order method.
For the time being, each owner will prepare the stipulation individually. It is necessary to prepare the standard contract stipulation as soon as possible based on the result of those trials.

(5) Future Subject
During the progress of the discussion about the new tender and contract methods, there are many vigorous arguments about such as:
1) the flexible application of the upper limit of the planned price in the comprehensive evaluation method, in which the successful bidder will be decided based on the comprehensive evaluation of the price and the other factor, and the design and execution bulk order method, in which the planned price is determined before design;
2) the introduction of the method in which the contractor will be decided after negotiating about the price and technology between the owner and the constructor.
These subjects should be discussed based on the condition of the actual application of the various new tender and contract methods in the future.
For what the tender and contract system for the public works should be, candid discussion has been demanded especially in recent years. In the future discussion, more detailed examination is required while considering the simplification of the civil service and the farther rationalization of the public procurement.

[2] Farther Improvement of Transparency of Tender & Contract Procedure

1. Viewpoint of Discussion

To fairly execute the tender and contract procedure of the public works, it is necessary to guarantee the transparency of the procedure. As the renovation procedure for the tender and contract method according to the proposal from our council at December 21, 1993, the reformation measures such as followings have been taken:
1) the introduction of the more transparent new tender method such as general competitive bidding and public offering type competitive private;
2) the admistration of the tender procedure by a third-party organization such as the tender administration committee;
3) the establishment and disclosure of the designation standard, and the exhaustive disclosure of the process and result of the tender.
Furthermore, the proposal also points out about the necessity for the disclosure of the result of the managerial condition examination, the capacity qualification and the rating, and the ex post disclosure of the planned price. On the other hand, the governments are making effort to legislate the information disclosure act because it is strongly demanded to disclose the administrative information to the citizens to ensure the fair management of the civil service. For the municipal corporations, some lawsuits have been filed for the ex post disclosure of the planned price.
On the basis of these conditions, it is necessary to discuss about the disclosure of these information to further improve the transparency of the tender and contract procedure and guarantee the fairness of it.

2. Disclosure of Result of Managerial Condition Examination, Capacity Qualification and Rating

(1) Outline of Capacity Qualification for Competition in Public Tender for Public Works
In Japan, to select the competitors with the ability to surely fulfill the contact out of many constructors according to the diverse scale and detail of the works, the capacity qualification for competition is executed with the fundamental scheme as follows: The owner evaluate the result of the examination for the objective facts (these are common among the owners) and the subjective facts (evaluated by each owner individually) related to such as the managerial condition and the execution capacity of the applicants and for with the point system. Then the applicants will be ranked according to the points and categorized into the grades (so-called "rating") corresponding to the size of the project as necessary. The standard for the planned contract price (so-called "order standard") is set for each category. (* Reference 4: "Outline of Capacity Qualification for Competition in Public Works")
As the objective factors, the result of the managerial condition examination, which is the system stipulated in the Contractors Law, is exploited by each owner, and the track records of works, the execution results of the special construction and so on are exploited as the subjective factors while the condition differs for each owner.
The managerial condition examination is based on the system where the comprehensive score is calculated by aggregating the weighted marks derived from each of the amount of the completed works, the managerial condition analysis, the number of the technical staffs, and so on.
When the order for the individual project is placed, in the case of the public competitive tender, the owner specifies the requirement as the qualified constructor such as the required score based on the managerial condition examination and the track records of the execution of the similar type works. In the case of the private competitive tender, the owner designate the competitors among the qualified constructors based on the grade corresponding to the size of the project, the technical capacity and so on.
As mentioned above, the managerial condition examination, the capacity qualification and the rating play an important role in the selection of the competitors done by the owner.

(2) Disclosure of Managerial Condition Examination Result
The result of the managerial condition examination is not disclosed, however, the most of the examined information such as the amount of the completed works and the number of the technical staffs is listed on the reference document related to the authorization, and the marks given to these factors are also disclosed. Therefore it is possible to calculate the approximate evaluation score.
It is reasonable to disclose the result of the managerial condition examination to ensure the fairness of the selection of the competitors through the improvement of the transparency and to prevent the false application through the disclosure of the company's information and the mutual monitoring.
When disclosing, the comprehensive score as well as the value and the mark for each examination item such as the amount of the completed works should be disclosed, as they are notified to the concerned constructor it self.
For the disclosing method, it is reasonable to utilize a database system and the publication in addition to the public browsing for convenience.
Also it is reasonable to review the result of the managerial condition examination by around the end of the first half of 1998 and disclose the reviewed result.

(3) Disclosure of Result of Capacity Qualification and Rating
For the result of the capacity qualification and rating, the objective score and the grade are notified to the concerned constructor itself in the project directly managed by the Ministry of Construction, however, it is disclosed publicly.
It is reasonable that each owner notifies the objective and subjective scores and the grade to the concerned constructor itself to provide an incentive for the improvement of the company's evaluation.
Furthermore, it is reasonable to disclose the grade for a time while considering the effect on the social credit of the concerned company for the sake of the securement of fairness through the improvement of the transparency in the competitor selection procedure. It is necessary to further discuss about the specific measures and so on.

3. Disclosure of Planned Price

The ex ante disclosure of the planned price has not been practiced yet because, if the planned price is disclosed beforehand, there is several concern that: the planned price would be considered as a guide and the competition would be hampered, and then the contract price could stack at a high level; the incentive for the valuation to the constructors could be spoiled; and bid-rigging could performed more easily.
Furthermore for the ex post disclosure of the planed price, it is pointed out that the planned price for the similar projects ordered afterward would be presumable because of the ex post disclosure and it would induce the same kind of bad effect as the ex ante disclosure.
However, for the ex post disclosure of the planned price, the possibility for presumption of the planned price of the projects ordered afterward is somewhat limited even the planned price was disclosed afterward, while the disclosure of the documents related to the aggregation standard has been progressed and it has already become possible to presume the planned price if the constructor has enough ability in the aggregation. On the other hand, the ex post disclosure of the planned price is expected to have certain effect on the prevention of the bid-rigging and on the improvement of the validity of the aggregation. Therefore, the owner should determine to disclose the planned price afterward and discuss about the specific measures.
Also for the ex ante disclosure of the planned price, it is indicated that it would prevent the unfair action of investigation on the planned price in addition to the same effect as the ex post disclosure while it has some problems mentioned above. Therefore it should be the long-term issue to be discussed in addition to the securement of transparency and competitiveness, and the effect of the planned price as the upper limitation.

[3] Thorough Improvement in Municipal Corporations

1. Viewpoint of Discussion

To promote the improvement of the tender and contract system, it is important to encourage the municipal corporations that account for approx. 90% of the orders and approx. 70% of the amount of the ordered projects.
To improve the tender and contract system within the municipal corporations, various effort has been taken place such as the investigation into the actual conditions by the Ministry of Construction and the Ministry of Home Affairs and the cooperated notification based on it.
However, the principle of the improvement has not been penetrated enough especially in cities, towns and villages. It is considered that such as the lack of the consciousness of the responsibility for the improvement and the shortage of the technical staffs would be the reason for these conditions.
From now on, in addition to the effort to promote the settlement and penetration of the reformed new tender and contract system according to the proposal by our council at December 21, 1993, it is necessary to support the municipal corporations to reinforce the order system while encouraging their positive attitudes towards the reformation effort to further promote the introduction of the diverse tender and contract and the improvement of the transparency in the tender and contract procedure.

2. Measures

(1) Awakening Enthusiasm
The following measures should be taken place to promote appropriate and positive efforts according to the condition of each municipal corporation:
1) To cultivate the consciousness of the responsibility for the effort through such as the induction courses held by the public works contract affair conference of each region and/or prefecture while providing particular support according to each municipal corporation:
2) To make an agreement for the improvement and follow it up for each public works contract affair conference of each region or prefecture. (

2) Reinforcement of Order System and Support
In addition to the efforts to understand the order system in the concerned municipal corporation, it is necessary not only to prepare the appropriate order system but also to make the following efforts to reinforce and support its order system especially in the case where the number of the technical staffs is not sufficient:
1) To promote the exploitation of the technical strength of the national and/or prefecture government by providing the detailed information related to the technical advice and support, the condition of the development of the innovative efforts;
2) To promote the establishment, build-up and utilization of the official organization that retains the engineers such as the construction technology center;
3) To enhance the support for the affairs such as the order process by exploiting the organization in the private sector such as the construction consultant and the designer;
4) To promote the diffusion of the owner supporting database system. (* Reference 5: "Outline of the Owner Supporting Database System")

II Promotion of Structural Reformation in Construction Industry

[1] Reformation of Grouping of Authorized Constructors

1. Viewpoint of Discussion

The basic framework of the current authorizing system for the constructors was stipulated when the business type-based authorizing system was introduced in 1971. Up to that time, the registration system had been adopted for the construction business. Under that system, it had become impossible to prevent the constructors that did not have enough technical strength, resources and credibility entering the market, because a constructor could register when it had a engineer with experience for a certain time in the mainly contracted construction works and the constructor could contract any kind of the construction works after registration. Therefore the system was reformed from the registration system to the authorization system based on the business type where the constructor must gain the authorization according to its business type to ensure the technical strength of the constructors and to stabilize the status of them. At that time also the grouping of the business types was reorganized to the 28 groups and it has been used so far. (* Reference 6: "Condition of Authorized Constructors and History of Business Type Grouping")
As mentioned above, already 25 years and more have past since the current business type grouping was introduced. Therefore it is necessary to review the current 28-business type grouping considering the change in the form of the execution and the technological development.

2. Future Policy

In the first place, the business type grouping has the legal meaning as the definition of the construction works. The business type grouping was determined using the fundamental unit works as the standard to define the application area clearly since the Constructors Law was enacted.
Thereafter when the authorization system based on the business type was introduced in 1971, the units of the authorization were specified as same as the business type, which was the definition of the construction works. By this means, the business type gained the meaning of the unit defining the range of the construction works that can be contracted under the authorization, and the authorization condition for each business type such as the required type of the engineer was also determined.
It is necessary to reform the business type grouping considering the factors such as the number of the executed projects of the certain business type, the level of the establishment of the execution organization and the business form to judge whether it has appropriate for giving legal significance.

There are many options for the management policy of the business type grouping. Various opinions ranged from the demand for the group ramification to the request for the unification are appeared from the construction industry. However, to rationalize the regulation and make the engineers versatile, and to make the method systematic and easy to understand, it is not enough to merely arrange the business types in line. It should be discussed, considering such as the common qualification required to the engineers, so as to establish the grouping that categorizes the constructors into groups which have some commonalities such as the technological architecture, and then rank the various business type within those groups; use each group as the unit for the authorization, and to make it possible to allow the constructor contracting the project beyond the border of the business type within the range of the group.
Standing on this policy, it is necessary to precisely understand and forecast the actual condition of the execution organization, technological characteristics, operation system for each business type; discuss comprehensively while reviewing from the viewpoint of the experts and draw a conclusion as soon as possible.

[2] Company Evaluation in Public Works

1. Viewpoint of Discussion

In the company evaluation in public works, each owner categorizes the constructors into several grades as necessary based on the result of the examination about such as the running condition, the objective and subjective factors related to the execution capacity. The result managerial condition examination is exploited as the objective factors while the works performance and the execution results of the special construction and so on are exploited as the subjective factors.
In the managerial condition examination, each item such as the amount of the completed works is converted into a mark based on the figure, and then the marks will be weighted and then totaled. (* Reference 7: "Outline of Examined Items and Standard in Managerial Condition Examination")
Within the company evaluation so far, the amount of the completed works has played an important role, because a quantitative index is considered to be the most plain.
However, there are objections indicate that the respect for the amount of the completed works forces the constructors to compete for it and distorts the company's rational operation strategy, or it hinders the small & medium scale and middle class constructors developing by exploiting the specialty technical strength and the managerial capacity. Furthermore, it is necessary to make a point of not only quantitative aspect but also qualitative one in the company evaluation because we can not expect the quantitative expansion of the construction market and the environment of the construction industry is expected to change significantly in the future.
Based on the understandings mentioned above, it is necessary to review the company evaluation system exploiting the managerial condition examination as a core element about the viewpoints such as:
○ review of the weight of the amount of the completed works;
○ respecting the constructor's technical strength; and
○ respecting the constructor's managerial capacity.
Furthermore, the system should be reformed to promote the competition based not on the scale but on the technical strength and quality.
Besides that, the grade system should be reformed to promote the more appropriate competition whereas in the term of the order of individual project it is providing an important function to allow the owner fairly and efficiently selecting the competitors that can execute the concerned works among many constructors.

2. Reformation of Managerial Condition Examination

(1) Review for Weight of Amount of Completed Works
To emphasize not only the size but also the importance of the index related to the technical strength and the quality of the constructor, it is necessary to reduce the weight given to the amount of the completed works. Currently for the amount of the completed works, the score ranged from the minimum 491 points to the maximum 3270 points is given according to the average amount of the completed works in 2 years backward, and then the score is multiplied by a coefficient of 0.35. However, in some cases the proportion of the score for the amount of the completed works to the comprehensive score exceeds 0.5 and largely deviates from 0.35. It means that the scores for the amount of the completed works vary greatly compared to the other examined factors. Based on this circumstance, it is necessary to compress the variation of the score and practically reduce the weight of the amount of the completed works.
Though currently the score is calculated by using the stair-stepped chart, the introduction of the linear calculation method should be considered to reflect the variety of the amounts of the completed works of the constructors.
Furthermore for the amount of the completed works, there is an idea indicating the necessity to change the score according to the detail of the works, however, to vary the score according to the diverse and various detail condition of works, it is necessary to discuss many kind of issues such as the standard for changing the score and the method for the examination management.
Besides that, to prevent so-called "padded application" includes the amount without actual execution experience, it is necessary to enhance the examination method by forcing the constructors disclosing information such as the contract type (prime contract/subcontract), term of construction and designated engineer(s) related in conjunction with the amount of the completed works.

(2) Respecting Technical Strength
1) Review of Evaluation of Technical Staff
The current evaluation of technical staff is applied to the staff belonging to the constructor with an engineer qualification (certain qualification and/or experience that enables the staff to become a chief engineer or a supervising engineer according to the Constructors Law), however, it is reasonable to also evaluate the national qualification that is not acknowledged as the engineer qualification and the other private qualification that is acknowledged corresponding to the national qualification and being comparable to the engineer qualification.
Besides that, it is indicated that the efficient management could be hindered if the technical staff evaluation is executed only based on the number of the technical staffs belonging to the concerned company. To cope with those kind of indication, it is necessary to discuss evaluating the number of the technical staffs while considering the correlation with the amount of the completed works and/or embracing the other technical staffs other than those belonging the company as the targets of the evaluation to certain extent in such a case when an agreement about the procurement of the technical staffs is concluded between the constructors forming a business partnership each other.
Furthermore, when evaluating the technical strength, it is necessary to examine from various viewpoints including the quality management and the other capacities.
2) Reformation of Grouping in Managerial Condition Examination to Contribute the Professional Technical Strength
The grouping in the managerial condition examination should be reformed to reflect the detailed information related to the professional technical strength of the constructor into the company evaluation.
Currently, the managerial condition evaluation is conducted within the 28 business type groups as same as the constructor authorization. It is indicated that this grouping is difficult to reflect the characteristics of each constructor and the grouping of each owner applied to its order does not correspond to that of the managerial condition examination.
Therefore, for the evaluation of the professional technical strength of each constructor and for the convenience of the owner, it is reasonable to indicate the evaluations for the technical works units in the breakdown in addition to the evaluation for each of the 28 business type groups while considering the number of cases, typicality and order trend of the concerned construction type.

(3) Respecting Running Condition
It is necessary to reflect the running condition of the constructor into the managerial condition examination because recently the environment of the construction industry has become harsh and some constructors have gone bankrupt one after another.
Currently in the running condition analysis the score is calculated using 12 indexes related to 4 factors of the profitability, liquidity, productivity, and soundness based on the financial statement. The score is ranged from the minimum 0 point to the maximum 1118 points, and is multiplied by the coefficient 0.2.
However, because the scores are distributed within rather limited range compared to those for the amount of the completed works and the technical strength, the proportion of the score for the running condition analysis can indicates less than 0.1 and be widely distanced from 0.2 especially in the cases of the small number of the large constructors. Based on these conditions, it is necessary to practically emphasize the importance of the running condition analysis by widening the distribution range of the scores for it to further reflect the running condition on the managerial condition examination.
Besides that, because the current 12 indexes related to the running condition were defined in 1988 and the environment surrounding the constructors has been changed significantly since that time, it is necessary to discuss and draw a conclusion about the issues such as the validity of those indexes from the various viewpoint including that related to the method for reflecting the defective asset.
Also it is necessary to provide the accurate information related to the running condition of the constructor by listing specifically the financial condition indexes such as the long-term debt, the suretyship obligation, the amount of the accounts receivable for the completed works.
Furthermore, the corporate accounting tends to make a thing of the consolidated account settlement. Considering this trend, it should be discussed to exploit the consolidated account settlement within the running condition analysis for the constructor.

(4) Dealing with Business Target and Diversified Organization Structure
Because the cost reduction in the public works has become an important issue, it is necessary to promote the development of the technology contributing toward the cost reduction, and to prevent the managerial condition examination hindering the diversification of the organization structure for such as the management rationalization.
For this purpose, in the works performed under the after-contract VE, it is reasonable to provide the exceptional provision to evaluate the amount of the completed works based on the contract price before the reduction in the case where the construction cost was reduced because of the proposal.
Besides that, as the measures against the diversification of the organization structure such as deconglomerate, it is necessary to clarify how to deal with the amount of the completed works in the case of the business transfer. And it is also necessary to discuss about the possibility of applying the group evaluation, which is now applied only to foreign corporations as an exception, while studying the problems such as the standard of the approval as a group and the execution scheme for the approval business.

(5) Dealing with Sectionalized Evaluation
In the current managerial condition examination, a large gap has arisen between the constructors that running the nationwide business and those that running business locally, there is opinion that the sectionalized evaluation system should be introduced. It is necessary to secure the small & medium scale and middle class constructors' opportunities to get orders in the future while ensure the efficient execution of the public works because they should fulfill the important roles for the development of the local economy. However, it is considered that the sectionalized evaluation, which provides several scores to one constructor, is not suitable for the managerial condition examination because it should provide a comprehensive rating to the corporation based on all of the objective factors.

3. Build-up of Technical Strength Evaluation by Owner

While the indexes indicating the technical strength have become more important in the company evaluation system, each owner is required to evaluate the construction results as a subjective factor and to practice the affirmative action such as the application of the weight to the construction results evaluation within the whole company evaluation.
And for the works conducted directly by the Ministry of Construction, the evaluation method for the construction results was unified in 1996. On the basis of the unification, it is necessary that more owners evaluate the construction results according to the unified evaluation method and to discuss the measure for mutual utilization among the owners through such as creation of a database of the construction results.
Furthermore, it is necessary to discuss how to reflect the technical proposal in the new tender and contract method such as the VE method on the company evaluation.

4. Rationalization of Grade System Management

For the management of the grade system, some measures for flexibility have been introduced such as the nomination of a constructor other than that rated to the grade corresponding to the concerned project based on the technical difficulties of the ordered works. For the future, it is necessary to promote that kind of management and examine for such as the unification of the grades and the appropriate reflection of the technical difficulties of the works.

[3] Elimination of Defective and Incompetent Constructors

1. Viewpoint of Discussion

It is necessary to combine the diverse professional technologies according to the targeted project in the construction business because it is a comprehensive assembly industry. Furthermore, the amount of the works varies widely because they are executed based on the orders. Therefore it is unavoidable that the structure of the industry becomes a multilayered subcontracting system where various engineering companies with diverse specialties join in, and it is considered that this kind of structure causes the responsibility within the execution organization to be uncertain and allows the defective and incompetent constructors such as a paper company entering into the market.
If these defective and incompetent constructors are allowed to exist, it can not only hinder the appropriate competition, but also discourage the good constructors that are making effort to improve their own technical strength.
Therefore needless to say it is necessary to eliminate the defective and incompetent constructors to secure the quality and reduce the cost of the public works, however, the situation has not been improved.
To eliminate the defective and incompetent constructors, the owner should fulfill the important roles in not only the business of the administration agency of the construction business but also the supervision and the inspection in the phase of the constructor selection and the execution. Therefore, the constructors and the owners should further enhance the coordination between them to labor for the improvement.

2. Effort toward Elimination of Defective and Incompetent Constructors

(1) Exploitation of Owner Supporting Database System
In the Constructors Law, it is stipulated that the dedicated specific engineer must be assigned for each construction site in the case of certain important works related to the public building. (* Reference 8: "Outline of Dedicated Site Engineer System")
This dedicated site engineer system ensures the appropriate execution of the construction works, eliminates the defective and incompetent constructors that get orders in excess of their own execution capacity, and fulfills the important role to foster the good constructors educating the engineers earnestly.
It has been said that huge tasks have to be performed to strictly implement the dedicated site engineer system and practically difficult to expect the precise verification. However, the business has been drastically improved because the owner supporting database system started operation in 1996. In this system, by exploiting the information about the supervising engineers assigned to each site of the public works registered in the construction result information service (CORINS), the owner can check the qualification of the supervising engineer planned to be assigned and whether he/she is assigned to the other construction site at the same time. (* Reference 9: "Verification of Dedication of Engineer using Owner Supporting Database System")
Therefore the owner of the public works can exhaustively implement the appropriate arrangement of the dedicated engineers by willingly using this owner supporting database system. It will also contribute to the exhaustive elimination of the bulk subcontracting.
It is considered that the using this owner supporting database system is the most efficient measure to eliminate the defective and incompetent constructors in the ordering phase at present. However, especially in municipal corporations, it has not been utilized sufficiently, because there are various demands for such as introduction of more simple system and the consciousness of responsibility for the elimination of the defective and incompetent constructors has not been necessarily fostered adequately. Therefore, it is necessary to make effort to disseminate this system while promoting the consciousness in the municipal corporations as well as making the system easy to use.
Besides that, through the exploitation of the owner supporting database system and the other measures, while it is necessary to promote the appropriate operation of the system to clarify the terms and the unit of the site the dedicated engineer is assigned to considering the actual situation of the works site for exhaustive implementation of the dedicated supervising engineer assignment system, it is necessary to review the scale of the targeted works of the on-site-dedicated engineer system,
Furthermore for the chief engineer, it is necessary to discuss how to implement the on-site-dedicated engineer system through such as the preparation of the database and the utilization of the construction result information service (CORINS).

(2) Utilization of Execution Organization Registry and On-site Inspection
In the amendment to the Constructors Law in 1994, it is stipulated that the specialty constructor have to prepare the execution organization registry for each works site. It is prescribed that this registry holds the information about the subcontractor and its engineer, the detail of the subcontracted works. The amendment in 1994 intended to guarantee that the execution organization is composed appropriately by forcing the specialty constructor that contracts the concerned construction works directly with the owner to preparing the registry.
However, also the owner of the public works can efficiently grasp the execution organization of the works site by using this execution organization registry. Therefore, also the owner itself have to request that the execution organization registry be submitted, utilize willingly and perform the on-site inspection to ensure the appropriate execution organization is maintained.

(3) Sanction against Offender
To eliminate the defective and incompetent constructors, it is necessary to strengthen the deterrent by dealing with the constructors that offend against the on-site-dedicated engineer system and/or the prohibition of the bulk subcontracting.
When an offense against the on-site-dedicated engineer or the prohibition of the bulk subcontracting is recognized, of course the owner must demand the immediate correction and then carry out the strict measure such as the cancel of the contract as necessary as well as the superintendence procedure based on the Constructors Law. Furthermore, the owner must strictly institute the procedure such as the suspension of the nomination for the tender.
Besides that, the prohibition of the bulk subcontracting is not applied when the owner approves it in writing, however, it is considered that the bulk subcontracting based on the approval by the owner should be abolished if it is not required practically, because there have been some cases where the owner abused it.

(4) Promotion of Company Information Disclosure
To eliminate the defective and incompetent constructors, it is important to encourage the disclosure of the information related to the constructors because it is considered that the disclosure will improve the deterrent power of the mutual observation against false application and malpractice and promote the appropriate selection of the constructors based on the market mechanism by the private owners.
Currently the authorization application form and its attached documents, and the alteration report are disclosed publicly among the information related the constructors, however it is not enough. Therefore it should be considered to disclose not only the information related to the construction business authorization but also that of the managerial condition examination, the construction works track record, the belonging engineers and so on.
During the discussion, it is necessary to discuss the information to be disclosed and the disclosure method such as the utilization of the database system to allow the citizens uses it easily

(5) Dealing with so-called "Reverse Subcontracting"
In the recent years, a lot of bad effect has been pointed out related to so-called "reverse subcontracting" (a small & medium scale constructor contracts the project then subcontracts out it to a large constructor) caused by the excessive securement of orders for the local small & medium scale constructors by the municipal corporations. The reverse subcontracting tends to induce the bulk subcontracting, therefore it must be properly eliminated. Furthermore, the effective elimination measure should be practiced such as the investigation about the actual situation, the verification of the assigned engineer in the early stage of the tender and contract procedure utilizing the owner supporting database system and the other measures, the exploitation of the execution organization registry and the disclosure of its information. In addition to that, in the case of split order, it is necessary to be ordered without hindering the efficient execution of the public works and pay enough attention to ensure that the constructor with sufficient technical strength will be selected through appropriate competition.

[4] Promotion of Association between Companies for Enhancement of Managerial and Technical Strength

1. Viewpoint of Discussion

It is forecasted that the situation surrounding the construction industry will become harsh especially to the small & medium scale and middle class constructors that depend largely on the public works, and the possibility that the construction market is urged to be restructured is increasing. To cope with those situation effectually, it is expected that not only the effort of the individual company, also the association and cooperation among several companies are further required to ease the financial and risk burden, enhance the technical strength and mutual transfer of the technology, ensure the assured execution of works, and improve the managerial and technical strength. Considering the condition of actual association of the companies, the association between the companies within the same category, such as among the general constructors or among the specialty constructors, is expected as general example of the association and cooperation form.
For the public works, on the other hand, it is required to set the appropriate lot because the cost reduction while securing the function and quality has become an urgent issue. The association and cooperation among the constructors is required to be promoted to respond to those kinds of deals smoothly.
There are much kind of forms of association and cooperation among the constructors depending on such as the combination of the members and the strength of the union, and it should be chosen according to each constructor's decision. However, for the first step of the cooperation, it is considered that the establishment of an operating construction joint venture (hereunder referred to "operating JV") by the primary contractor is a practically effective method, therefore it is necessary to discuss promoting the exploitation of the operating JV. (* Reference 10: "Joint Venture")
Furthermore, considering the harsh environment surrounding the construction industry in the future, it is necessary to also consider about the merger between constructors although it is said that it does not have a lot of merit.

2. Promotion of Exploitation of Operating JV

(1) Expansion of Companies Eligible to Organize Operating JV
In the current operation rule for the operating JV, only superior small & medium scale constructors are allowed to organize an operating JV. However, recently even the middle class constructors has begun to consider establishing a business cooperation scheme such as the association to enhance the managerial capacity and competitiveness of each company because the business environment has become harsh to not only the small & medium scale constructors but also even the middle class ones.
Considering this situation, it is necessary to expand the range of the companies eligible to organize an operating JV to allow the superior middle class to organize the operating JV as well.

(2) Corporation Evaluation of Operating JV
When examining the capacity to organize an operating JV, it is prescribed to adjust the objective and subjective scores based on the strength of the union and the propriety of the JV to provide an incentive to organize the operating JV. However, it is not prescribed definitely when and how they should be adjusted, therefore almost every ordering agency does not practice these kind of adjustment.
Therefore, to clarify the criteria for deciding how and in what case they should be adjusted considering to promote the appropriate exploitation of an operating JV, it is necessary to establish and publish the evaluation standard related to the union strength among the members, the possibility of the maintenance of the continuous cooperation relationship, and the securement of the necessary technical strength.
Furthermore, it is necessary to relax the demand on the operating JV such as that requires the all members of the JV to submit the track record of execution of the similar works at the order placement.
Besides that, the ordering agency that has not defined the management standard for JV should stipulate and publish it as soon as possible.

(3) Discussion about Rationalization of Operating JV Management
The conventional management of operating JV seems to function rather as a joint business system for small & medium constructors. In the future, it is necessary to positively orient the operating JV as a type of cooperation for rationalization of the business and the execution organization. It is expected to realize the same effect as a consolidation of corporations because that the mutual utilization of the operating resource such as the engineers and the sales department of each company will be facilitated even within the market structure where the consolidation of corporations is hard to be progressed. Therefore, it should be discussed seriously in the construction industry.

3. Expansion of Support for Company Consolidation

The consolidation of construction companies enhances the managerial and technical strength by expanding the business area with sales cooperation and reinforcing the business foundation with the advantages of scale. However, also it is indicated that not so much benefit is expected from a consolidation between the primary contractors especially considering the opportunities for orders of the public works.
The businesses about the authorization and the managerial condition examination related to the consolidation of the constructors have been smoothed to support the consolidation of constructors for reinforcement of the corporation structure. And also for the consolidation between small & medium scale constructors, the adjustment is applied to the general scores for certain period in the qualification examination.
In the future, considering the trend of the corporation association in each district, it is necessary to discuss the extension of the range of the targeted companies that such as the adjustment measures of the general score are applied to, the expansion of the exceptional measure in the company evaluation such as the term extension, and the treatment of the consolidated corporation where the consolidation does not cause any advantageous effect on the opportunities for order acceptance.

[5] Correction of Primary Contract and Subcontract

1. Viewpoint of Discussion

In the construction industry, it cannot be prevented that a contract becomes a multilayered subcontracting structure, however, the subcontracting structure easily tends to become a dependent relation and likely cause the unilateral burdens such as an inappropriate price setting/payment and enforcement of the unreasonable term.
The correction of the subcontracting structure is an important issue concerning the sound development of the construction industry and its necessity has been further increasing under the recent harsh operating environment. The primary contractors should develop the awareness that a subcontractor is the equivalent partner, then equally make a contract, and establish the scheme where the reasonable value will be paid to the subcontractor from the prime contractor based on the effort and discussion among them.
Because a subcontracting dealing is a private contract relation it should be left to be managed within the free economy, however, also the governments should be engaged themselves in the case where any kind of unfair transaction is performed, for example, when the primary contractor abuses its position in the transaction. Furthermore, the governments are required to manage the establishment of the competitive environment where the specialty constructors with superior technical and managerial skill can be developed freely, and cope with the bankruptcy of constructors, which recently occurs frequently, to minimize the bad effects on the subcontractors.
Considering those issues, the "Policy for Production System Rationalization in Construction Industry" (hereafter referred to "Policy") that was stipulated as the principle for the direction from the governments and the effort performed by the construction industry to further enhance the enforcement of the provisions in the Constructors Law and the rationalization of the construction production system related to the correction of the subcontracting transaction in 1991 based on the report from our council. To penetrate the principle of the Policy, the direction for the correction of the subcontracting transaction has been given by the means of delivery of the notification about the appropriate subcontracting and the correction of the price payment to the chiefs of constructors' organizations during the financially busy time and to the chiefs of each ordering agencies when the budget is approved. However, because it cannot be necessarily said that the correct transactions are taken place, it is necessary to discuss the measures to further penetrate the principle. (* Reference 11: "Policy for Production System Rationalization in Construction Industry")
Besides that, recently there have been increasing cases of an affiliation such as the formation of cooperation party, however, on the other hand, both of the primary contractor and the subcontractor are trying to acquire new clients and the diversification of the clients has been progressed. The competition is expected to become harsh, therefore also the subcontractors have to develop their strength to the appropriate level for the equivalent partner of the primary contractor.

2. Measures to Correct Subcontracting Transaction

(1) Enforcement of Quotation and Consultation
The conclusion of the appropriate subcontract has been promoted through the provision in the Constructors Law and the notification mentioned above, however, it cannot be said yet that the subcontract is made appropriately. Therefore, to ensure the necessary expense will be paid appropriately, the governments must execute the measures to enforce the submission of the quotation listing the breakdown of the expense much more clearly and the consultation based on that quotation at the conclusion of the subcontract.

(2) Correction of Advance Payment to Subcontractor
In the provision of the Constructors Law, the Policy and the notification mentioned above, it is stipulated that when the primary contractor has received an advance payment, it should properly consider paying the expense necessary for the commencement of the works to the subcontractor as advance payment. However, there are some cases where the advance payment is not paid to the subcontractor, therefore the government must execute the measures to further enforce the appropriate handling of the advance payment.

(3) Exploitation of Execution Organization Registry
It is stipulated that the particular constructor must prepare the execution organization registry not only of the direct subcontractor but also of the secondary subcontractor in each works to ensure the appropriate execution organization. The execution organization registry includes the information related to the subcontract, however, the subcontracting price is disclosed only for the direct subcontractor. To promote more rational subcontracting price setting, it is necessary to consider that the owner of the public works demands the submission of the execution organization registry and disclosing the subcontracting price for the secondary and the following constructors in the execution organization registry.

(4) Preparation of Proper Occasion for Even Discussion
To realize and enforce the idea of the Policy mentioned above, although the local system conferences are constituted in each prefecture, the government should promote the preparation of the occasion for the consultation between the primary contractor and the subcontractor.

(5) Expansion of Investigation on Actual Condition of Subcontracting Price Payment and the Other Factors
The Ministry of Construction and the Small and Medium Enterprise Agency conducts the investigation on the actual condition of the subcontracting price payment and the other factors, demands the correction report from the individual primary contractor that is necessary to take a correction measure, and also conducts the counter investigation in the subcontractor. Besides that, it is necessary to expand the targets of the actual condition and counter investigations and enhance the direction to individual company to further widely and accurately recognize the actual condition of the subcontracting price payment.

(6) Close Coordination among Related Agencies to Prevent the Successive Bankruptcy and the Other Phenomena
A bankruptcy of a construction company is not only a tragedy for the company itself, but also impact on wide range of the parties concerned such as the subcontractors and the construction workers, and it can cause great social disorder. Therefore, the related governmental agencies have to secure the close coordination to take the agile response related to such as the prevention of the successive bankruptcy and the workers' problem management.

3. Improvement of Specialty Constructors' Capacity

While it is expected that the competition in the construction market will become harsh and the clients of constructors will be diversified, to promote the correct subcontracting transaction, the specialty constructors themselves have to improve their corporate capacity and productivity to enhance the competitiveness, extricate themselves from the excessive dependence on the primary contractor, and convert their structure into the independent style.
For this purpose, the specialty constructors have to prepare the strength to cope with the increasing demand from the primary contractor and make effort to reduce the cost, enhance the technical strength, provide the special and professional technology, secure and foster the excellent engineers. Besides that, they have to also enhance the site management and furnish enough strength to bear the so-called execution responsibility and the certain part of the construction works where the material and execution is contracted as a unit. For this purpose, the constructors have to take such as the following measures:

(1) Exploitation of Corporate Strength Indexes
The specialty constructor's corporate strength indexes (the step-up indexes) was organized as a draft proposal to encourage the improvement of the constructor's own corporate strength by exploiting them as the polestar for the management improvement, business operation, operation planning and so on. In the future, the indexes themselves have to be enhanced, and on the side of the specialty constructors and their associations, it is necessary to encourage the willing exploitation of them to improve the corporate strength of the individual constructor.

(2) Securement and Training of Key Technicians
To improve the productivity of the specialty constructors, it is very important to secure and train the key technicians (for example the foreman), therefore the evaluation system of the key technicians should be prepared. And then while taking the contents of the system into account, it should be considered to include the key technicians into the specialty constructors' corporate strength indexes as the factor to be evaluated. Furthermore, when the evaluation system of the key technicians is sufficiently established, it is expected to include it into the evaluated factors of the managerial condition examination after discussing the position of the key technicians within the engineer categorizing system of the Constructors Law.

(3) Promotion of Companies' Coordination and Cooperation
It is forecasted that the necessity to improve the managerial and technical strength through not only the effort of the individual company but also the coordination and cooperation with the other companies to respond to the restructuring of the construction market. Also the specialty constructors have to consider the organization/cooperation such as the establishment of a business cooperative and/or the consolidation with the other company.

(4) Structural Reformation of Specialty Construction Industry
To improve the corporate strength of the specialty constructors, besides the individual company's effort, it is important to advance the structural reformation of the industry through the cooperation of the whole industry. Therefore the specialty constructors' associations have to make an effort to improve the competitive strength through such as the reformation the structure of the industry exploiting the Small and Medium Enterprise Modernization Promotion Law.

Conclusion

Our council has discussed and achieved conclusion about the further improvement of the tender and contract system and the promotion of the restructuring in the construction industry from the viewpoint to respond the recent structural changing in the construction market and advance the creation of the transparent and competitive market environment where the companies with excellent technical and managerial strength can develop.
The situation surrounding the constructors has been changing rapidly and the construction industry is facing very harsh operating environment, however, it is a good opportunity for the construction business to carry out the drastic reformation to become a highly productive business based on the technology. Furthermore, if not try now, it will be difficult to open up a new era after overcoming this hardship. Therefore, it is important to make an effort to prepare the environment where the companies with excellent technical and managerial strength can develop as soon as possible based on the unity of the related participants such as each owner of the public works, the authorizing governmental agencies, the constructors and so on. We sincerely appeal not only to the related ministries but also the municipal corporations all over Japan and the other related agencies to surely execute the contents of this proposal.
Furthermore, we request the constructors to work hard continuously to realize and develop the construction industry which is relied and trusted by the citizens and accomplishes its social responsibility while considering the contents of this proposal.