International Public Procurement Law

Transcription

1 International Public Procurement Law The Evolution of International Regimes on Public Purchasing by Arie Reich ÍKLUWER LAW INTERNATIONAL THE HAGUE LONDON- BOSTON

2 CONTENTS Foreword Abbreviations Preface v xvii xix CHAPTER I: THE PROBLEM OF PROTECTIONIST PROCUREMENT POLICIES 1 A. Introduction to the Chapter 1 B. Governments as Purchasers of Goods and Services 1 C. Government Procurement as an Instrument of General Policy Promotion 2 D. Domestic Preference Policies 3 E. Other Reasons for Domestic Preferences 5 F. Forms of Discrimination against Foreign Suppliers 6 1. Overt Discrimination 6 2. Less Visible Forms of Discrimination 7 G. An Effect-Based Taxonomy: Restrictive Tendering Procedures and Margins of Preference 8 H. Margins of Preference The Canadian Content Premium The "Buy American" Differential Margins of Preference in Relation to Tariffs and Subsidies 13 I. Restrictive Tendering Procedures 14 J. Procurement Preference Policies as a Disguised Subsidy Scheme 16 K. Retaliatory Protectionism in Government Procurement 17 L. Conclusión 18

3 viii CHAPTERII: NORMATIVE ANALYSIS OF PROTECTIONIST PROCUREMENT POLICIES: ARE THEY ECONOMICALLY OR MORALLY SOUND? 19 A. Introduction 19 B. Economic Analysis: Domestic Prefence Policies and Efficiency The Economic Effects of Restrictive Tendering Procedures The Economic Effects of a Margin of Preference The Problem of Collusion 25 C. Positive Externalities: Are there External Benefits from Domestic Preference Policies? Protectionism and Employment Procurement Policies and Depressed Regions Procurement Policies and Infant Industries Procurement Policies and Strategic Trade Policy Procurement Policies and National Security Retaliatory Procurement Policies: Are They Wise? 34 D. Empirical Evidence on the Costs of Protectionist Procurement Policies Studies on General Trade Restrictions The Costs of Protection in the Government Procurement Sector: Some US Studies A European Study 38 E. Ethical Perspectives on Protectionist Preference Policies Judaism 40 (a) Biblical Ethics 40 (b) Talmudic Law Kantian Social Contractarianism Utilitarianism Communitarianism 46 F. A Political Perspective 48 G. Conclusión: The Benefits from a New International Order 50 CHAPTER III: EARLY ATTEMPTS TO ELIMÍNATE DOMESTIC PREFERENCE POLICIES: THE EUROPEAN FREE TRADE ASSOCIATION 55 A. Introduction: International Agreements on Government Procurement 55 B. The European Free Trade Association Background: The Formation of EFTA The Stockholm Convention: Institutional Structure Consultations and Complaints Procedure Tariffs and Quantitative Restrictions 58 C. Article 14: Public Undertakings The Rules of Competition Protectionist Procurement Policies State Trading Activities 59 D. Further Clarification: The Lisbon Ministerial Agreement Preparatory Work An "Authoritative Interpretation" of Article 14 61

4 Conients ix 3. Future Co-operation and Surveillance Dispute Resolution 64 E. Implementation 65 F. Assessment of EFTA's Procurement Regime 65 CHAPTER IV: THE EUROPEAN COMMUNITY: THE FIRST TRY 69 A. The EC: History and Institutional Structure 69 B. Government Procurement Policies under the EC Treaties Prohibition on Discrimination Quantitative Restrictions and Measures of Equivalent Effect Commission Directive 70/ Right of Establishment and Freedom to Provide Services 74 C. The Co-ordination Directives The Need to Prescribe and Co-ordinate Procurement Procedures The Legal Status of the Directives The Public Works Directive 78 (a) Basic principies 78 (b) Scope and coverage The Public Supplies Directive Tendering Procedures under the Directives 82 (a) Open tendering procedures 83 (b) Restricted tendering procedures 84 (c) Exceptions: non-competitive procurement Rules on Technical Specifications Criteria for Qualitative Selection Award of Contracts 91 (a) Award criteria 91 (b) Abnormally low tenders 92 (c) Preferences for under-developed regions 93 (d) Procedural requirements and post-award information Surveillance and Enforcement 94 (a) An Advisory Committee for Public Contracts 94 (b) Enforcement: complaints to the Commission 95 (c) National courts Amendments following the GATT Code 98 D. Conclusión: Assessment of the EC Procurement Regime 98 CHAPTER V: ON THE MULTILATERAL LEVEL: THE GATT CODE ON GOVERNMENT PROCUREMENT 103 A. The Initial Position: Government Procurement as an Exception to the National Treatment Obligation 103 B. The Negotiations towards an International Agreement on Government Procurement Discussions in the OECD The Problems in Connection with an International Agreement The Tokyo Round and the Reduction of Non-Tariff Barriers to Trade The Sub-Group on Government Procurement and its Discussions 108

5 x C. The Agreement on Government Procurement (the Code) - An Analysis of its Provisions Scope and Coverage of the Code 111 (a) Government procurement 111 (b) Service contracts excluded 112 (c) Limited government entities 114 (d) The valué threshold 115 (e) Exceptions to the agreement National Treatment and Non-Discrimination Transparency in Tendering Procedures 117 (a) Open tendering procedures 118 (b) Selective tendering procedures 119 (c) Single tendering procedures 120 (d) Technical specifications 122 (e) Opening of tenders and awarding of contracts Enforcement and Dispute Settlement 126 (a) Surveillance on the Code's implementation 126 (b) Prívate bid challenge 127 (c) Inter-governmental measures of enforcement 128 (d) Panel cases under the Code 130 D. Evaluation of the Code' s Efficacy Limited Coverage Extensive Use of Single Tendering Other Problems of Non-Compliance Actual Impact on World Trade 135 E. The 1987 Amendments to the Agreement Background Improvements: The Threshold Valué Foreign-Owned Local Firms Improved Tendering Procedures Better Post-Award Information 139 CHAPTER VI: A BILATERAL APPROACH: GOVERNMENT PROCUREMENT UNDER THE ISRAEL-UNITED STATES FREE TRADE AGREEMENT 141 A. Israeli Government Procurement Policies Tendering Procedures Domestic Preference Policies 142 (a) The government decisión 142 (b) Implementation 143 (c) Preferential procurement procedures 144 (d) Enforcement measures The Industrial Offset Policy 145 (a) The policy 145 (b) The procedures Israel 's Implementation of the GATT Agreement on Government Procurement 147

6 xi (a) Government agencies covered by the Procurement Code 147 (b) Implementing directives 148 B. Government Procurement Policies of the United States Domestic Preference Policies 149 (a) The Buy American Act: history 149 (b) Implementation 150 (c) Other Buy American restrictions 150 (d) Set-asides 151 (e) Department of Defense Memoranda of Understanding US Implementation of the Procurement Code 152 (a) The Trade Agreements Act (b) The Trade Agreements Act versus bilateral procurement agreements 153 (c) The impact and coverage of the Code 153 C. The Israel-United States Free Trade Agreement: Background Bilateral FTAs and GATT Why Israel and the US sought an FTA 155 D. The Government Procurement Chapter of the FTA Background: The Procurement Code and Defence Co-operation Agreements Description and Analysis of the FTA's Procurement Provisions 157 (a) Lowering the threshold 158 (b) What rules of origin apply to procurement? 159 (c) Relaxation of offset requirements 159 (d) Inclusión of some procurements by Israel 's Ministry of Defence 160 (e) Further trade liberalisation 161 E. Prívate Enforcement of the Code and the FTA's Procurement Chapter in Israel and the United States In Israel 162 (a) Judicial review of government procurement 162 (b) The Code and the FTA in Israeli domestic law 163 (c) Can discriminatory treatment of a foreign supplier be challenged in the High Court of Justice? In the United States 164 (a) The Code and the FTA in US domestic law 164 (b) Judicial review of government procurement in the US 165 F. Conclusión 166 CHAPTER VII: GOVERNMENT PROCUREMENT UNDER THE CAÑADA-UNITED STATES FREE TRADE AGREEMENT 167 A. Government Procurement in Canadá Legislative and Regulatory Framework Competition in Contracting The "Buy Canadian" Policy 169 (a) The Canadian Sourcing Policy 169 (b) The Canadian Content Premium Policy 171 (c) Provincial preferences 172 (d) The Procurement Review Committee and Major Crown Projects Canadá's Implementation of the Tokyo Round GATT Code 173

7 xii B. The Canada-United States Free Trade Agreement Background A Disappointing Achievement The Israel-US FTA as a Model "Expanded Procedural Obligations" The Obligation to Publish a Prior Notice on Single Tendering: The LANsPLUS Decisión 180 C. The Procurement Review Board of Canadá An Innovation in the Canadian Procurement System The Establishment of the Board The Jurisdiction of the Board Determining Jurisdiction: The Actual Valué or the Estimated Valué Rule? Postponement of Contract Awards Practice and Procedure before the Board Inquisitorial Procedures Standard of Review The Board' s Decisions are Recommendatory , The Remedy of Compensation in the Board' s Practice Conclusión: Evaluation of the Board 194 CHAPTER VIH: OPENING UP PROCUREMENT MARKETS IN THE EUROPEAN COMMUNITY: A SECOND TRY 197 A. Introduction 197 B. Amendments to the Co-ordination Directives Scope: Amendments and Clarifications 199 (a) The excluded sectors 199 (b) Defence procurement 200 (c) Valué thresholds and other amendments Improvements in Tendering Procedures 203 (a) Choice of procedures 203 (b) Regulating restricted procedures 204 (c) Negotiated procedures 205 (d) Extended time límits and improved contract information 207 (e) May negotiations be used in open or restricted procedures? Rules on Technical Specifications Award Criteria and Post-Award Information 210 (a) Abnormally low tenders 210 (b) Regional preferences Award Procedures and Post-Award Information Statistics on Contract Awards Implementation 216 C. The Review Directive Background Scope National Review Procedures 218 (a) General approach 218 (b) Cause of action and legal standing 219

8 xiii (c) Remedies 219 (d) Non-judicial review bodies Commission Intervention Implementation and Surveillance Assessment of the Review Directive 224 D. The Utilities Directive Introduction Field of Application 228 (a) General approach: to target the protectionist entities 228 (b) Defining the covered entities 230 (c) Oil, gas and coal exploration 232 (d) Covered contracts Tendering Procedures 234 (a) The approach 234 (b) Free choice of award procedures 235 (c) Qualification systems 236 (d) Negotiated procedures without cali for competition Criteria for Qualitative Selection Post-Award Information The Community Preference Rule Implementation and Surveillance Assessment of the Utilities Directive 242 E. The Utilities Review Directive National Review Procedures The Attestation System Commission Intervention Conciliation Implementation and Review Conclusión 250 F. Service Contracts Legislative Measures Categories of Services Covered Tendering Procedures Implementation, Enforcement and Review 255 G. Conclusión: Assessment of the Community's Second Try to Open Up Procurement Markets 255 CHAPTER IX: PUBLIC PROCUREMENT UNDER THE NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA) 261 A. Introduction 261 B. Scope and Coverage Federal Government Entities and Enterprises State and Provincial Government Entities Construction and Service Contracts Threshold Valúes Special Concessions to México 266 C. Small Businesses Set-Asides 267

9 xiv D. National Treatment and Non-Discrimination Prohibition on Offsets Rules of Origin and Denial of Benefits 269 E. Tendering Procedures 270 F. Bid Challenge Wider Jurisdiction Weakened Bid Challenge Procedures 273 G. Final Provisions 275 H. Assessment of NAFTA's Procurement Chapter 275 CHAPTER X: BACK TO THE MULTILATERAL LEVEL: THE URUGUAY ROUND AND THE GATT PROCUREMENT CODE 279 A. Introduction 279 B. The Uruguay Round and the Procurement Code The Negotiations Towards a New Code Outside the "Single Undertaking" "Semi-Membership" in the Code 283 C. Expanded Coverage Service Contracts 286 (a) Construction services 288 (b) Other services 288 (c) Rules of origin in relation to services Expanded Entity Coverage 292 (a) Central government entities 293 (b) Sub-central government entities 293 (c) "Other entities" 295 D. Tendering Procedures: Mostly Minor Changes Greater Flexibility for Annex 2 and 3 Entities Negotiation during Tendering Limited Tendering Technical Specifications The TRIPs Agreement and the Procurement Code 303 E. Prohibition of Offsets 305 F. Bid Challenge Tribunals Cause of Action and Legal Standing Independent Review Bodies Remedies 309 G. Inter-Governmental Dispute Resolution The New WTO Dispute Settlement Mechanism Applying the DSU to the Code Non-Violation Cases under the Code 315 H. Conclusión: An Assessment of the New Code 316 CHAPTER XI: SUMMARY AND CONCLUSIONS: WHAT'S NEXT? 319 A. Introduction 319 B. Substantive vs. Procedural Rules: The Importance of a Detailed Code of Tendering Procedures Substantive Rules 320

10 xv 2. Rules of Procedures 323 C. Enforcement and Dispute Resolution Introduction Dispute Resolution between Governments Governmental Surveillance and Enforcement Mechanisms Prívate Enforcement Mechanisms 333 (a) The role of a prívate enforcement mechanism 334 (b) The evolution of prívate enforcement in procurement agreements 334 (c) A critique of the existing regimes 335 D. Implementation 340 E. Scope and Coverage of the Agreements What is the Optimal Coverage of a Public Procurement Regime? Coverage of Existing Agreements 343 F. Expanding the Code's Coverage 346 G. Multilateralising the Code TheProblem Ongoing Negotiations: An Interim Agreement on Transparency A Possible Extensión of GATS to Government Procurement of Services 356 Appendix 359 Index 389