MLIT Failed Public Works Tenders Continue to Drop
The Ministry of Land, Infrastructure, Transport and Tourism (MLIT) published new statistics on the public works contracts the Ministry concluded in 2015. Each year, MLIT compiles data regarding tenders for construction of public works and construction related consulting and design work conducted by organizations it directly supervises.
Important for the industry is always the percentage of so-called ‘failed tenders’. These are tenders where there is no winning bidder exists at the end of a tender procedure. This can either be due to the fact that no interested parties have place a bid, or due to the fact that all the bids have been higher that the prospected price the ordering government entity had set. Although rarer, failed tenders also occur if the all the bidders are below the minimum price set. The ratio of ‘fail tenders’ is for the industry one of the indicators as to how the prices paid for public works contracts are developing.
After the March 2011 Great Tohoku Earthquake and Tsunami Disaster, the number of failed tenders had been on the increase, due to shortages in labor and building materials, caused by increased demand needed for reconstruction in disaster stricken areas. The percentage of failed tenders peaked in 2013, when close to 7% of contracts ended with no winning bidder. However, with most of the social infrastructure restored, the number has decreased again and was 4.6%, down from 6.6% a year earlier. For consulting-related tenders the ratio dropped from 3.1% to 1.7%.
According to the Daily Engineering & Construction News the decrease can also be attributed to more flexibility with regard to unit labor costs and changes in the estimation standards that take into account the latest conditions in construction.
In 2015, organizations under direct supervision of MLIT concluded a total of 13,170 contracts valued at ¥1.65 trillion (€13.1 billion), of which close to 85% was spent by the Regional Development Bureaus (chihou seibikyoku). Of the total number of tenders issued, only 293 (2.2%) were conducted under international WTO rules. The total value of these WTO tendered contracts was an estimated €4,115 m. In terms of procedures used, close to 70% of the contracts where decided by open competitive tenders and most of the remaining contracts were single tenders. Selective tendering procedures were rarely used by MLIT supervised organizations, which 92 contracts awarded.
As can be expected with the high thresholds Japan applies with regard to construction, there were no construction related consulting contracts conducted under international WTO rules. Here the number of open tenders is substantially lower, with close to half of the contracts concluded through selective tenders, followed by single tender procedures at 28.5% and open procedures at less than 22.9% of a total number of 14,918 contracts.
2015 Contracting by MLIT organizations: Total and WTO contract values
WTO contracts value
WTO contracts value
Regional Development Bureaus
Government Buildings Department
National Institute for Land and Infrastructure Management
Hokkaido Regional Development Bureau
Civil Aviation Bureau
Regional Aviation Bureaus
Regional Transport Bureaus
Meteorological Research Institute
Meteorological Satellite Center
Japan Coast Guard
Japan Coast Guard Academy
Japan Coast Guard School
Regional Coast Guard Bureaus
Private Finance Initiatives (PFI) not included