New Page 2

January 15, 1999

Dear Ambassador Barshefsky:

Re: Federal Register Notice: December 10, 1998; Vol. 63, No. 237 p. 68327

On behalf of Transparency International-USA (TI-USA), we appreciate the opportunity to respond to the referenced Federal Register notice inviting public comment for the negotiations on transparency in government procurement under the ongoing World Trade Organization (WTO) work program agreed at the 1996 Ministerial Conference in Singapore.

TI-USA welcomes the progress that has been made to date and applauds the leadership of the United States Government in promoting action at the WTO on setting global procurement rules that will support fair and open competition. A competitive and transparent bidding process with predictable rules will benefit bidders and citizens alike, ensuring that public funds are used in the most cost-effective manner.

TI-USA urges USTR to place the highest priority on the conclusion of a WTO Agreement on Transparency in Procurement by the time of the WTO Ministerial Conference in late 1999, as called for by the Quad trade ministers. We support the conclusion of such an agreement separate from the Government Procurement Agreement (GPA), which has more limited adherence because of its significant market access requirements. However, negotiations to improve the GPA should proceed and be coordinated with the work on the transparency agreement, with the goal of achieving harmonized transparency, openness and due process standards in the two documents.

The WTO Working Group on Transparency in Government Procurement has made significant progress in its study of transparency in government procurement practices. It now has a sound basis to begin negotiation of an agreement at its February 22, 1999 meeting.

Moreover, there is ample evidence of consensus on the need for reform and on the fundamental principles of transparency that should apply:

The APEC Government Procurement Experts Group has identified essential elements of transparency in government procurement and, with the approval of APEC ministers, transmitted its "Non-Binding Principles on Government Procurement: Transparency" to the WTO in early 1998.
At the 1998 Americas Business Forum in Costa Rica, the private sector submitted to ministers a set of transparency principles as the basis for the negotiation of an FTAA transparency agreement.
There are also strong elements in existing government procurement agreements that could be integrated into a multilateral pact. For example, the U.S.-Japan Framework Agreement on Procurement by Government Agencies includes extensive provisions for early participation in the specification-development process, requests for public comment on proposed product specifications and prior information on ranking of bid evaluation criteria – all designed to open procurement at the earliest possible stage.
The major multilateral development banks (MDBs) have all recently adopted more stringent rules for procurement on projects they finance. The MDBs supervise the process and have provisions for cancellation of contracts or debarrment if corruption is found to have played a role.
The OECD Development Assistance Committee has recommended that members incorporate anti-corruption measures in the procurement processes of their bilateral aid programs. Bilateral donors, such as USAID, have tightened their procurement rules to increase transparency and reduce opportunities for corruption in order to maximize development assistance initiatives.
The European Commission has reviewed its policies and expects to introduce anti-corruption clauses in foreign assistance agreements and procurement rules, including provisions to cancel contracts and sanction firms engaging in corrupt practices.

These initiatives are each an important, complementary building block of a universal system. They lay the foundation for an agreement at the WTO, which is the ultimate objective because of the breadth of its membership and its enforcement regime. The attached document incorporates widely accepted best practices that should form the basis for a WTO agreement.

With billions of public procurement dollars at stake annually, there is an urgent need for prompt and concerted action. The private sector has consistently urged greater transparency at all stages of procurement. They recognize that corruption can occur from the earliest stages, with biased pre-qualification of bidders or specifications to collusion in bid-rigging to over-invoicing or reduced quality in contract performance to the unfair or often unavailable process for the resolution of complaints.

What is needed is a uniform, transparent system that promotes competition among qualified bidders and suppliers of goods and services. This will also help governments maximize the opportunity to secure the best product at the most favorable price. Failure to do so diverts scarce government resources from important development objectives with a disproportionate impact on the poor.

A WTO Agreement on Transparency in Government Procurement should be concluded by the 1999 WTO Ministerial. We hope that you will personally encourage your colleagues to secure this important objective and assure you of Transparency International’s best efforts to support this outcome.

Sincerely,

Nancy Zucker Boswell

Managing Director

TI-USA

UNIVERSAL ELEMENTS OF SOUND PUBLIC PROCUREMENT SYSTEMS

There is broad agreement on the characteristics of a sound public procurement system. Rules should be clear and fair, the process transparent, and the results predictable. The following are the main elements in a competitive, transparent bidding process, as reflected in the best practices of the major multilateral development banks, the APEC Government Procurement Experts Group recommendations, and the private sector recommendations of the 1998 Americas Business Forum, among others.

· Regulatory Transparency. Laws, regulations, and policies related to the government procurement process should be readily available to the public.

· Adequate, Public Notice. Timely, public notice of opportunities to allow bidders to properly evaluate projects and prepare bids is essential to transparent procurement. Invitations should be published internationally and should establish a minimum term of 60 days from publication for proposal submission. In large or complex projects, pre-qualification of bidders is advisable.

· Neutral Standards. All interested parties should have the opportunity to contribute and comment on the preparation of national standards for materials, goods, works and services. Draft standards should be widely disseminated with a request for public comment. The standards should be clear and specific and reflect international experience and practice. There should be no unnecessary requirements, while comprehensively treating the requirements essential to the purchaser’s needs.

· Specifications. Bid specifications should be stated in terms of internationally recognized standards. The specifications should be broadly defined to ensure that the requirements adopted can be met by the widest possible range of competitive suppliers, and should set out the neutral selection parameters in a clear, specific and objective manner. Performance standards should be used whenever appropriate and feasible to ensure equivalent products are treated equally.

· Objective Criteria. Bidding documents should specify the relevant factors in addition to price which are to be considered in the bid evaluation and the formula by which they will be applied, as well as describing the bidding process. All bidders should be able to determine whether the objective criteria have been followed in the final award.

· Public Tenders and Bid Openings. Tender or bidding documents should be made publicly available in the country of procurement, and all bids should be opened in public, in the presence of all bidders.

· Award of Contracts. Competent evaluators should conduct an impartial comparison and evaluation of bids without influence or interference by bidders or other parties. Contracts should be awarded to the lowest compliant bidder or to the bid offering the best overall value (as specified in advance) on the basis of objective criteria. Awards, including the total amount of the award, should be internationally published.

· Dispute Settlement with Impartial and Fair Review. Contracting agencies should provide unsuccessful bidders access to an impartial, fair and independent review of compliance with the bid process. Standard written procedures for lodging a protest and adequate remedies for non-compliance should exist.

· Protection for Intellectual Property. Bidders’ rights to their technical data and patents must be protected in the procurement process. Technical submissions should be treated as proprietary and confidential. Inappropriate transfer of proprietary technical information should be sanctionable.