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
Procurement regulations and practices are explained below. For major infrastructure projects, such as bridges, airports, ports, hospitals, highways, transportation and other public service-type infrastructure, the government has increasingly held tenders on a build-operate-transfer (BOT) or public-private-partnership (PPP) basis. For these types of projects, the government guarantees a certain number of passengers or clients and meets the price difference until the target number is met. Some projects have special conditions for local production or using locally produced materials.
While Turkey has been a WTO member since 1995, the country has yet to sign the WTO Government Procurement Agreement (GPA), but rather has had observer status since 1996. 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 conducted electronically. In some cases, original documents are required to avoid abuse.
Companies established in Turkey, including foreign companies’ subsidiaries, are able to register their company and attach any required documents at the “Electronic Public Procurement Platform” (EKAP for short in Turkish) included in the EKAP website. Documents entered in EKAP under a company name need to be official and scanned. 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 5 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 that system. It is expected that the system will 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 additional costs involved. The main laws and regulations that regulate government procurement are found at 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 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 Turkish Government tenders, the proposal must generally be valid 3 to 6 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 3 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 terms at which they bid. This action is only triggered should the principal who is awarded the contract fail to enter into the contract, as agreed with the project owner.
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. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center 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 network of the U.S. Commercial Service worldwide 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 banks as well as investment banks. The Export-Import Bank of the United States (EXIM) and the U.S. International Development Finance Corporation (DFC) are two sources for project financing for U.S. investors. Interested U.S. companies should note that American banks active in Turkey are among the leaders in project financing.
While Turkey is also affected by the COVID-19 pandemic, the country continues to offer some major opportunities for U.S. exporters in infrastructure projects. U.S. EXIM Bank financing, along with DFC and United States Trade and Development Agency (USTDA) programs, are available to U.S. suppliers. The European Bank for Reconstruction and Development (EBRD) and the World Bank/International Bank for Reconstruction and Development continue to fund major projects in Turkey. Turkish and U.S. EXIMs have signed a co-financing agreement for projects in third countries in April 2016. U.S. EXIM 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. U.S. EXIM can co-finance projects with up to three other ECAs.
DFC can provide 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 can be a significant factor in winning a government contract. Many governments finance public works projects through borrowing from the Multilateral Development Banks (MDB). A helpful guide for working with the MDBs is the Guide to Doing Business with the Multilateral Development Banks. The U.S. Department of Commerce’s International Trade Administration (ITA) has a Foreign Commercial Service Officer stationed at the European Bank for Reconstruction and Development and the World Bank, which finance projects in Turkey.
Learn more by contacting the Commercial Liaison Offices to the: