Tendering procedures

Open tendering procedures

Ippan kyousou nyuusatsu

Open tendering is the procedure most commonly used by Japanese government entities. The procuring entity publishes a notice in the official gazette, the Kanpo, or its local-level equivalent, inviting qualified suppliers to take part in the tender. The contract is awarded to the tenderer offering the best price, although where necessary, the procuring entity may also apply a technical evaluation alongside price.

Selective tendering procedures

Shimei kyousou nyuusatsu

Selective tendering is used where open tendering is unnecessary – for instance, where only a small number of suppliers are able to participate due to the nature or purpose of the contract, or where open tendering is otherwise considered inappropriate. The procuring entity designates those qualified suppliers it considers capable of fulfilling the contract and invites them to take part. The contract is awarded to the tenderer offering the best price. This procedure is now relatively rare, in particular in case of internationally regulated procurement. When applied, it is used mainly for complex public works contracts; the Ministry of Land, Infrastructure and Tourism (MLIT) applies several variations of it, outlined below.

As with open tendering, a notice is published in the Kanpo or its local equivalent, and suppliers who have not been designated may still take part, provided they complete the qualification procedure.

Limited (single) tendering

Zuiikeiyaku (gentei nyuusatsu)

Under limited tendering, the contract is awarded without competitive tendering (i.e. without using the open or selective procedures). It is often used for service contracts, frequently in IT-related fields. It may only be applied under the conditions set out in the WTO Agreement on Government Procurement (GPA) – for example, where no suppliers respond to a public notice, or where exclusive rights such as patents need protection and therefore preclude competition.

In Japan, the most common reasons for limited tendering are:

• Changing supplier would harm interchangeability with existing equipment
• Protection of exclusive rights or technical compatibility
• Absence of tenders in response to open or selective tendering

Open counter (quotation)

Oopen kauntaa (mitsumori)

The open counter method is used by government entities for relatively small-scale procurement. This type of procurement is not internationally regulated.  Suppliers submit quotations (mitsumori) for a specific good or service, and the lowest quote is selected. It differs from open tendering in several respects:

• Winning bids tend to be lower
• The period between notification and bidding is shorter
• It is used mainly for purchasing consumables or printed materials

Suppliers will usually still need the relevant supplier qualifications, although at the regional level, qualification is not always required if the company already has a presence in the region. There is no universal threshold for this procedure; maximum contract values can range from €600 to €20,000, depending on the government entity.

Source: NJSS

Reverse (Dutch) auction

Serisage houshiki

This procedure has been used experimentally by public procurement entities since 2010 and is often used for open competitive tender procedures. Prospective suppliers place successively lower bids over a series of rounds until a single supplier remains.

Tender procedures related to public works contracts

Given the scale and complexity of public works, numerous variations on standard bidding procedures are applied. In terms of evaluation, Overall Greatest Value (OGC) assessment it standard, lowest price-assessment is still used by smaller municipalities, but becoming rarer.

Below are some of the procedures listed by the Ministry of Land, Infrastructure, Transport and Tourism's Electronic Tendering System: 

Open tendering: Implementation Plan Evaluation Type

Sekou kikaku shinsa gata

Used for highly complex projects, this method requires potential bidders to submit their implementation plans in advance, allowing the technical merits of each proposal to be assessed. Its use has declined in recent years.

Public Invitation Designated Competitive Bidding

Kouboukei shimei kyousou nyuusatsu

Under this method, the commissioning entity first determines, for each project, the scope of firms from which it will request technical documents, then publishes an outline of the project along with the qualifications required of firms invited to submit such documents. Interested firms submit their technical documents, which the entity then reviews before designating which firms may proceed to bid. Reasons for non-selection are generally provided on request. MLIT typically applies this method for projects valued between ¥200 million and ¥730 million.

Project Interest Registration Competitive Bidding

Kouji kiboukei kyousou nyuusatsu

Under this method, construction companies indicate at the time of qualification registration which types of project they prefer to bid on. When a relevant project arises, the entity takes these preferences into account and requests technical documents from 10 to 20 registered companies (a "provisional selection"). After reviewing the submissions, the entity selects the final nominees to submit bids. Reasons for non-selection are generally provided on request.

MLIT typically applies this method for projects valued between ¥100 million and ¥200 million. Many other entities use it for projects smaller than those handled under Public Invitation Designated Competitive Bidding.

Other Designated Competitive Bidding

For Designated Competitive Bidding outside the two variations above, the commissioning entity selects construction companies to invite based on each company's track record and its score under the entity's construction company ranking system. Selection is usually carried out by a dedicated committee within the commissioning entity.

This method is widely used for small-scale projects: MLIT typically applies it for projects valued at under ¥100 million, and local governments use it for small to medium-sized projects. It is also well suited to construction works requiring unusual or specialist construction techniques.

Technical Proposal Integrated Evaluation System

Gijutsu teian sougou hyouka houshiki

Under this system, the commissioning entity asks bidders to submit technical proposals alongside their price bids for a given public works project. The entity then evaluates each bid on both price and technical merit, considering factors such as quality, speed, design and safety of execution. This combined approach is used fairly frequently, particularly for construction design and consultancy tenders.

Design-build bidding system

Sekkei chikou ikkatsu hachuu houshiki

This approach is more common outside Japan, where tenders for design and construction are usually published separately and awarded to different companies. To date, only a limited number of projects in Japan have been tendered using this system.

Value Engineering (VE) system

VE houshiki

The VE system was introduced to improve quality and reduce project costs, and may be applied either at the tendering stage or after contract award. Where VE is applied post-contract, half of the resulting cost savings is often returned to the contractor. MLIT and Local Housing Supply Corporations have used this system on some projects, and several local governments are trialling it, though it remains an uncommon method of tendering.