Tendering procedures

Open tendering procedures

ippan kyousou nyuusatsu

Open tendering procedures are the most common procedure used by Japanese government entities. In this procedure, a procuring entity publishes in the official gazette ‘Kanpo’ or its equivalents at the local level, a notice to invite qualified suppliers to participate in the tendering procedures. The contract is awarded to the tenderer who has made the best offer in terms of tendered price. If the procuring entity finds it necessary, (technical) evaluation in combination with price is also used.

Selective tendering procedures

shimei kyousou nyuusatsu

The Selective Tendering Procedure is used when the Open Tendering Procedure is not needed because only a small number of suppliers can participate in the tendering procedures due to the nature or purpose of the contract or when the Open Tendering Procedure is regarded as inappropriate.  In the Selective Tendering Procedure, a procuring entity designates, from among qualified suppliers, those considered capable to implement the contract and invites them to participate in the tendering procedures. The contract is awarded to the tenderer who has made the best offer in terms of tendered prices. This procedure is however rare nowadays and primarily used in public works contracts for complex projects.  The Ministry of Land, Infrastructure and Tourism (MLIT) applies a number of variations on this procedure, see below.

A notice is published in the official gazette “Kanpo” or its equivalents at the local level, as in the Open Tendering Procedure, and the suppliers who have not been designated but wish to participate in tender can do so on the condition that they complete the qualification procedure.

Limited (Single) Tendering

zuiikeiyaku  (gentei nyuusatsu)

In the Limited Tendering Procedure, the contract is awarded without competitive tendering (the open and selective tendering procedures). The Limited Tendering is most often seen in the awarding of service contracts, which are often IT related.  It can only be used under the conditions provided in the Agreement on Government Procurement, such as the absence of tenderers in response to a public notice or the need for the protection of exclusive rights like patents, which do not permit competition. 

The most common reasons for limited tendering (in 2011) were:

• Change of supplier would harm interchangeability with existing equipment,
• Protection of exclusive rights, technical compatibility
• Absence of tenders in open or selective tender

Other reasons to use of limited tendering procedures are listed here. (See appendix 2)

[1]  MOFA, Suggestions for Accessing the Government Procurement Market of Japan 2014

Open Counter (Quotation)

Oopenkauntaa (mitsumori)

The open counter method is used by government entities for relatively small procurement. Suppliers are invited to hand in quotations (mitsumori) for a specific good or service, and the lowest is selected. It differs from open tendering in a number of aspects:

• Winning bids tend to be lower;
• Period between notification and bidding is shorter;
• It is primarily limited to purchase of consumables or printing materials.

In most cases, suppliers will still need the necessary supplier qualifications. However at the regional level, if the company has a presence in the region, supplier qualification is not always necessary.  There is no universal threshold set for the application of this procedure, the maximum amounts range between 10.000 to 20.000 euro’s per contract.

Reverse (Dutch) Auction

serisage houshiki

 This procedure has been used experimentally by public procurement entities since 2010 and is (still) very rare. It entails a procedure where prospective suppliers place ever lower bids in a succession of rounds until one-supplier remains. 

[3] Lyckle Griek, Government Procurement in Japan. Obstacles and opportunities for European SMEs

Tendering procedures related to public works contracts

 Because of the scale and complexity of public works, a number of variations in the bidding producers are used.

Open tendering: Implementation Plan Evaluation Type

Sekikou kikaku shinsa kei

Applied in case of very complex projects, potential bidders are required to submit their implementation plans in advance for the project, to be able to access the technical merits of the proposals.  The use of this procedure has been limited in recent years.

Selective tendering:  Public Invitation designated Competitive Bidding

Kouboukei shimei kyousou nyuusatsu

In Public Invitation Designated Competitive Bidding, the commissioning entity first decides, for each project, the scope of firms from which it will request the submission of technical documents, and then publishes an outline of the project and the qualifications of firms from which the entity request the submission of technical documents. Firms that are interested in bidding on the project submit their technical documents. The entity then examines the submitted documents and designates firms for participation in bidding. Reasons that a particular firm has not been selected for bidding are generally provided upon request. The Ministry of Land, Infrastructure and Transport (MLIT) ordinarily adopts this method for projects with a contract value of ¥200-730 million.

Selective tendering: Project Interest Registration Designated Competitive Bidding

Kouji kiboukei shimei kyousou nyuusatsu

In Project Interest Registration Designated Competitive Bidding, at the time of registration for the qualification to submit tenders, commissioning entities request each construction company to indicate what types of construction projects it prefers to bid on. When it comes time for the bidding by this method, the entity considers the preferences of each company, and requests 10 or 20 registered companies to submit technical documents (“provisional selection”). After examining submitted documents, final nominees are selected to submit bids. Reasons that a particular firm has not been selected for bidding are generally provided upon request.

For example, the MLIT ordinarily adopts this method for projects with a contract value of ¥100-200 million. Many other entities introduce this method for projects smaller than those that use Public Invitation Designated Competitive Bidding.

Selective tendering: Other Designated Competitive Bidding

In Designated Competitive Bidding other than two variations mentioned above, a commissioning entity selects construction companies that it wishes to invite to bid on the basis of the track record of each company's work and its score in the entity’s construction company ranking system. Ordinarily, a selection committee at the commissioning entity is in charge of the selection.

This bidding method is widely used for small-scale projects. For example, the MLIT ordinarily adopts this bidding system for projects valued at less than ¥100 million. Local governments also use this method for medium- or small-scale projects. Additionally, this method is suitable for construction works that require unusual types of construction technology.

Technical Proposal Integrated Evaluation system

Gijutsu teian sougou hyouka houshiki

In the Technical Proposal Integrated Evaluation System, for a particular public works project, the commissioning entity calls upon bidders to submit technical proposals in addition to price bids. The entity then evaluates the bid considering both the price and the technical proposal, reviewing factors such as quality, speed, design, and safety of execution.  This tender method, where technical sophistication in combination with price are asessed, is used quite frequently, in particular in the case of construction design and consultancy tenders.

Design-build bidding system

Sekkei chikou ikkatsu hachuu houshiki

This method is more common outside of Japan. In Japan tenders for design and construction are usually published separately and handled by different companies.  Thus far only a limited number of projects have been tendered using this system.

Value Engineering (VE) System

VE houshiki

The VE system was introduced as a means of improving quality and reducing cost of a project. It is either adopted at the tendering phase or at the post-contract phase. In VE in the post-contract phase, half of the cost savings achieved through the use of VE is often returned to the contractor. MLIT and Local Housing Supply Corporations have used this system in some projects and some local governments are testing and using it. It is still quite uncommon method of tendering.

[4]  MLIT, Japanese Procurement Procedures for Public Works