Describes how major projects are secured and financed. Explains activities of the multilateral development banks in and other aid-funded projects.
Selling to the Government
For major infrastructure projects, the government has increasingly held tenders on a BOT or PPP basis. For these types of projects, the government guarantees a certain number of passengers or clients and meets the price difference until a target number is met. Some projects have special conditions related to the use of locally produced materials.
While Turkey has been a WTO member since 1995, the country has yet to sign the WTO Government Procurement Agreement (GPA), electing instead to maintain observer status. Public Procurement Law No 4734 and Public Procurement Contract Law No 4735 define the tendering procedure for public sector procurement and implementation of new projects. Prequalification and registration of bidders is mostly done electronically. In some cases, original documents are required to mitigate fraud.
Companies established in Turkey, including foreign companies’ subsidiaries, can register their company on the “Electronic Public Procurement Platform,” or EKAP, website. Documents entered in EKAP under a company name must be scanned, official documents. For bids submitted by consortia, work completion certificates from each company are accepted by tender committees. Work completion certificates obtained from previously completed work are valid for five years. Foreign documents with apostille or documents approved by Turkish consulates are accepted.
Since e-tendering started in early 2019, thousands of tenders have been conducted through the e-tendering system since 2019. The system will likely be extended to cover medical equipment. There is often a 15% price advantage for local contractors/producers, placing foreign bidders at a disadvantage.
U.S. firms should work closely with a local partner/representative or legal consultant to analyze public procurement tender specifications not only in terms of technical compliance, but also for required documentation compliance, and any additional costs involved. The main laws and regulations that regulate government procurement can be found on the Public Procurement Authority (KIK) website.
For defense tenders and contracts, the Presidency for Defense Industries (SSB) and the Ministry of National Defense have their own procurement regulations. SSB procurement is financed off-budget, through special taxes, and is not subject to public procurement laws.
KIK approves public tender conditions and evaluates complaints of wrongdoing in public procurement tenders for a certain fee as specified by the relevant regulations. Bidders can file objections to tender specifications or tender conditions after procuring the tender documents but before the tender closing date. KIK evaluates the objections and makes decisions in accordance with the regulations. Its decision is final unless a bidder appeals in court. Bidders can also file cases at KIK if they believe there is wrongdoing after the evaluation is finalized but before a bid bond is collected.
For GoT tenders, the proposal must generally be valid three to six months from the bidding date. Along with the proposal, a bid bond (bank guarantee letter) in the amount of 3% of the bid amount must be submitted. The bid bond must be issued by a Turkish bank, counter-guaranteed by the bidder’s bank, and valid at least for the period of bid validity (usually three months). A bid bond is not required for consultancy tenders. A bid bond is issued by the bidder’s bank to the project owner to guarantee that the winning bidder will undertake the contract under the specified terms. This action is only triggered should the principal who is awarded the contract fail to enter the previously agreed-to contract.
Once a company is awarded a contract, the bidder then becomes the contractor and must provide a performance bond, which is usually 6% of the contract amount and is valid throughout the delivery or per final acceptance beginning from the contract date. All bonds must be issued by a Turkish bank and counter-guaranteed (confirmed) by the bidder’s bank.
U.S. companies bidding on government tenders may also qualify for U.S. Government advocacy. The Advocacy Center, a part of the ITA in the U.S. Department of Commerce, coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our U.S. Commercial Service network and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.
Financing of Projects
Project financing is available through a multitude of sources including Turkish and foreign commercial and investment banks.
U.S. EXIM Bank financing, along with DFC and USTDA programs, are available to U.S. suppliers in priority areas such as telecommunications and renewable energy. The EBRD and the World Bank/International Bank for Reconstruction and Development continue to fund major projects in Turkey. In April 2016, Turkey and EXIM Bank signed a co-financing agreement for projects in third countries. EXIM Bank recently declared that it can be the prime ECA if the main contractor is a U.S. firm, including those Turkish contractor firms which have subsidiaries in the United States. The EXIM Bank can co-finance projects with up to three other ECAs.
DFC provides equity financing, debt financing, political risk insurance, and grants for feasibility studies and technical assistance.
Multilateral Development Banks and Financing Government Sales
Price, payment terms, and financing are significant factors when it comes to winning government contracts. Many governments finance public works projects by borrowing from Multilateral Development Banks (MDB). The U.S. Department of Commerce’s ITA has a Foreign Commercial Service Officer stationed at the EBRD and the World Bank who can assist U.S. companies seeking project financing through MDBs. EBRD, the World Bank, and the IFC (International Finance Corporation) are active in Turkey.
Learn more by contacting the Commercial Liaison Offices to the:
See ‘Trade Financing’ section above.