Discusses the legal requirements for selling to the host government, including whether the government has agreed to abide by the WTO Government Procurement Agreement or is a party to a government procurement chapter in a U.S. FTA. Specifies areas where there are opportunities.
Many governments finance public works projects through borrowing from the Multilateral Development Banks. Please refer to “Project Financing” Section in “Trade and Project Financing” for more information.
Japan implemented the WTO Agreement on Government Procurement (GPA) in 1996 to expand opportunities for foreign firms and increase international competition in government procurement in Japan. The Agreement extended coverage to services as well as procurements by "sub-central government entities." These entities include all prefectural (regional) governments in Japan, major cities and designated municipalities, and a host of other quasi-governmental agencies, corporations, companies, and authorities.
Government procurement contracts covered by the Agreement must have a value above the thresholds (denominated in special drawing rights of the International Monetary Fund or “SDRs”) specified by the Agreement, and include the procurement of products and services by purchase, lease, or rental by the agencies and organizations subject to the Agreement. The present threshold for supplies procurement by central government entities is set at 130,000 SDRs (21,000,000 Yen). For sub-central government entities, Japan's voluntary threshold for supplies is 200,000 SDRs (approximately U.S.$280,000). More information on SDR Valuation.
There are three types of government tendering procedures in Japan covered by the WTO agreement: open tendering; selective tendering; and limited or single tendering. Under an open tender, the procuring entity publishes an invitation for qualified suppliers to participate in the tendering process. Contracts are awarded to the highest bidder that meets tender requirements. Selective tendering is done in cases when the number of potential suppliers is limited (due to the nature of the contract), or when open tendering is regarded as inappropriate. In this case, the procuring entity designates those companies it considers capable from a list of qualified suppliers and invites them to bid. The contract is awarded to the bidder with the best offer in terms of tendered price and other required criteria. Limited or single tenders are used in cases where products or services cannot be obtained through open or selective procurement procedures, there has been an absence of bids in response to a public notice, when it has been determined there is a need for protection of exclusive rights such as patents, or when the procurement is of extreme urgency. Open tender and selective tender invitations are published in Japan’s official (central) government procurement gazette or Kanpō (in Japanese only). The procuring entity publishes the invitation to tender at least 50 days (40 days is required by the GPA) in advance of the closing date for receipt of bids. To increase access opportunities for foreign suppliers, as a voluntary measure, many procuring entities publish notices on the use of limited (closed) tenders at least 20 days in advance of the awarding of a contract. When the tender is announced on open bids, the type and quantity of products, time limits set for submission of bids, and names and contact data of the procuring entity are published within the announcement in English. Notices on selective tendering also outline the requirements necessary for firms to be designated for participation in the tender bidding process. Most companies find it useful to contact the procuring entity directly with any specific questions before a tender is submitted for consideration. The government practices the Comprehensive Evaluation Method in public tenders, and recently eighty percent of public works that are valued over JPY 200 million have been done using the Method, instead of the lowest price to satisfy the quality set by Japanese authority Act for Promoting Quality Assurance in Public Works. In 2014, revisions to procurement procedures allowed electronic bidding (GEPS), which is explained at GEPS.
Japan's Ministry of Foreign Affairs (MOFA) hosts a Government Procurement Seminar each spring where central government procuring entities explain their procurement plans for the fiscal year. Individual ministries sometimes follow this with their own seminars. Notice of these meetings can also be found in the Kanpō gazette. MOFA also provides suggestions for Accessing the Government Procurement Market in Japan: (http://www.mofa.go.jp/files/000037391.pdf)
U.S. suppliers can find information about Japanese government procurement on the Japan External Trade Organization (JETRO) website (which includes an online database of government procurement notices and invitations published in the National Printing Bureau’s “Official Gazette.” Users can search by publication date, product/service category as well as location.
For additional information including suggestions for accessing the government procurement market in Japan, visit the Ministry of Foreign Affairs (MOFA) website.
Potential suppliers must first be qualified by the procuring agency and registered on the tendering agency’s permanent list of qualified suppliers. Each procuring entity in Japan specifies the qualifications required of any potential supplier participating in open or selective tenders. Procuring entities may review a company's capacity to implement a contract, including the scale of its business and past business performance. In most cases, Japanese subsidiaries, agents, or distributors of a U.S. company can register on behalf of the firm. Documents required for qualification are set out in the public notice, but typically include an application form, registration certificate, company history, financial statements, and tax payment certificate. The qualification is usually valid for one to two years. Sealed bids must be submitted to the designated location by the closing date and time specified in the tender notice. Although a 5% guarantee fee is stipulated, payment is usually waived since those participating are normally pre-qualified. If there are tenders made by unqualified suppliers or in violation of the tender requirements, the procuring entity will rule them invalid and notify the unsuccessful bidder. The contract is normally awarded to the lowest qualified bid and bidders are informed of the result in writing by the procuring entity.
In accordance with the 1996 GPA, Japan has established a mechanism to process complaints about procurements by entities other than sub-central government entities. The Office of Government Procurement Review (OGPR), within the Prime Minister's Office, implements the provisions of the WTO Agreement regarding bid challenge procedures. For procurement by central government entities the Government Procurement Review Board processes and considers complaints in accordance with the specific procedures set out by the OGPR. Prefectural governments and designated cities have established their respective procedures to process complaints regarding procurement subject to the Agreement. Complaints by qualified bidders may be filed with the Secretariat of the Board in the Office for Government Procurement Challenge System (CHANS).
In addition, the U.S. Commercial Service in Japan may be able to assist or support U.S. exporters having difficulty bidding on Japanese government tenders. Contact us at Office.Tokyo@trade.gov
Further information on recent developments regarding Japanese government procurement can be found in Japan’s most recent submission to the WTO Trade Policy Review Mechanism.