Introduction

1. Under APEC’s collective action plan on government procurement (GP), a set of non-binding principles on GP will be developed in 1997-2000 for adoption by members on a voluntary basis. In pursuing this work, the Government Procurement Experts Group (GPEG) has decided to start with the principle of transparency.

2. The GPEG has identified a set of elements pertaining to the principle of transparency in GP, which are set out in the ensuing paragraphs. Examples on practices are also provided for the purpose of illustrating the possible ways to give effect to these elements, and are not intended as prescriptions of how these elements should be given effect in practice. It should also be noted that the elements of transparency in GP identified by the GPEG are non-binding and individual economies are in the best position to decide on the applicability of individual elements of transparency to them, and how best to translate these elements into practical measures, taking into account the specific characteristics of their economy and possibly the costs and benefits of adopting specific transparency measures.

Elements of Transparency

3. The general principle is that sufficient and relevant information should be made available to all interested parties consistently and in a timely manner through a readily accessible, widely available medium at no or reasonable cost. This general principle is applicable to all aspects of GP, including the general operational environment, procurement opportunities, purchase requirements, bid evaluation criteria and award of contracts, as further elaborated in paragraphs 5 to 14.

• sufficiency and relevance of information: to enable potential suppliers to make informed decisions. For example, potential suppliers must have access to information on the conditions for participation and the requirements of the intended procurement in order to decide whether to participate and to prepare a responsive offer.

• timeliness: to ensure that the information is valid and useful when available to the receiver.

• availability to all interested parties: to ensure that the procurement process is fair to all participants and seen to be fair.

• through a readily accessible medium at no or reasonable cost: to ensure that information is accessible in practice.

• consistency: the objectives of maintaining a transparent procurement system can only be achieved if the system remains consistently transparent. This also includes making information up to date and informing relevant parties of changes and additional information promptly.

4. Notwithstanding the above, the following information may be withheld: commercially sensitive information, and information the release of which would prejudice fair competition among suppliers, impede law enforcement, contrary to public interest or compromise security of the economy concerned. Where such information is withheld, the reason should be given on request.

The general operational environment

5. The laws, regulations, judicial decisions, administrative rulings, policies (including any discriminatory or preferential treatment such as prohibitions against or set aside for certain categories of suppliers), procedures and practices (including the choice of procurement method) related to GP should be transparent.

6. This is to let suppliers know the rules of the game so that they can decide whether to participate. In practice, this can include -

• publishing these "rules" in a medium which is readily accessible to all.

• publishing either a positive or negative list of the entities subject to these "rules".

• publishing any changes immediately.

• establishing contact points for enquiries.

• wherever possible, providing a description of the above information on the APEC GP Home Page and linking APEC members’ individual GP Home Pages, where available, with the APEC GP Home Page.

Procurement opportunities

7. Procurement opportunities should be transparent.

8. This would encourage wider participation leading to increased choices for the buyer and enhanced competition, contributing to achieving better value for money in procurement activities. In practice, this can include -

• making open and competitive tendering the preferred method of tendering. Where other procurement methods are to be used, any procurement invitations issued should indicate the intended method.

• where open tendering is adopted, publishing procurement opportunities in a medium readily accessible to suppliers (e.g. official journals/gazettes, newspapers, specialised trade journals, Internet, and through embassies and consulates.)

• allowing adequate and reasonable time for interested suppliers to prepare and submit responsive bids.

• publishing contact details of purchasers, and their product/service purchase interests, for suppliers wishing to register their interest in being notified of bidding opportunities which may not be publicly advertised.

• making early advice of complex high-value procurement needs available to interested suppliers through staged procedures such as public requests for information, requests for proposals and invitations for pre-qualification, and allowing adequate time for interested suppliers to prepare and submit a response.

• making available requirements and procedures for pre-qualification of suppliers.

Purchase requirements

9. All the information required for suppliers to prepare a responsive offer should be made available.

10. This is to facilitate effective and efficient participation by potential suppliers in the procurement exercise. Also, because potential suppliers know the specific requirements, the non-responsive offers that the buyer may have to process can be minimised, increasing the operational efficiency of the buyer. In practice, this can include -

• including in procurement notices the following information : the nature of the product or service to be procured, specifications, quantity, time frame for delivery, closing times and dates, where to obtain tender documentation, where to submit bids, and contact details from which further information can be obtained.

• publishing any changes to the above information immediately.

• providing tender documentation and other information to suppliers promptly on request.

• wherever possible, drawing up specifications in terms of performance/functional/operational requirements using international or other relevant standards.

Bid evaluation criteria

11. All criteria for evaluating bids should be transparent and bids should be evaluated and contracts awarded strictly according to these criteria.

12. This is to ensure fairness and integrity. In practice, this can include -

• setting out in procurement notices and/or tender documentation all evaluation criteria, including any preferential arrangements.
• maintaining proper record of decisions.

Award of contracts

13. The award of contracts should be transparent.

14. This would demonstrate government accountability to suppliers and the public. In practice, this can include -

• publishing the outcome of the tender including the name of the successful supplier and the value of the bid.

• as a minimum, promptly notifying unsuccessful suppliers of the outcome of their bids and where and when contract award information is published, and debriefing unsuccessful suppliers on request.

Due process

15. Due process and public accountability are essential elements of fair, open and impartial procurement procedures, and the availability of an avenue/channel for review of complaints is an element of transparency. In practice this can include:

• designating a body/person for the purpose of reviewing supplier complaints about procurement processes which are not able to be resolved through direct consultation with the procuring agency in the first instance. This may take the form of an independent authority.

• making information on review procedures readily available. 

• making the review process available equally to domestic and foreign suppliers.

APEC Government Procurement Experts Group

September 1997
 

 Introduction

1.      Under APEC’s collective action plan on government procurement (GP), a set of non-binding principles on GP will be developed in 1997-2000 for adoption by members on a voluntary basis. In pursuing this work, the Government Procurement Experts Group (GPEG) decided to start with the principle of transparency. At its sixth meeting on 22-23 August 1997, the GPEG identified a set of elements pertaining to the principle of transparency and a list of examples illustrating how these elements could be put into practice. 

2. At its seventh meeting on 23-24 February 1998, the GPEG further identified the elements pertaining to the principles of value for money and open and effective competition, and examples illustrating how these elements could be put into practice. These are set out in the ensuing paragraphs.

3. As with the principle of transparency, the principles of value for money and open and effective competition identified by the GPEG are non-binding. Individual member economies should be in the best position to decide on the applicability of individual elements to them, and how best to translate those elements into practical measures, taking into account the specific characteristics of their economy and possibly the costs and benefits of adopting specific measures. The examples on practices included in this paper represent some of the possible ways to give effect to the elements of value for money and open and effective competition identified in this paper, and are not intended to be prescriptive or exhaustive.

Value for Money

4. The general principle is that GP practices and procedures should be directed to achieving the best available value for money in the acquisition of goods and services to deliver, or support delivery of, government programmes. 

5. The test of the best available value for money is a comparison of relevant benefits and costs on a whole of life basis. Purchase price alone is not an adequate indicator of total relevant costs. The lowest-priced compliance offer does not necessarily represent best value for money. Benefits in terms of savings to taxpayers and suppliers may also be obtained through improvement in the procurement processes and management.

Assessment of need

6. The desired outcomes of a procurement activity should be accurately identified. 

7. This assists buyers in identifying those factors that will contribute to the value of the procurement’s outcome. Buyers should not over-specify or under-specify the attributes and performance required to accomplish their objectives as these actions may affect the quality of value for money achieved.

8. In practice, in identifying the desired outcomes of a procurement activity, buyers may consider:

• where, why and when the need arises and for how long and for which unit or location;

• the program objectives and functional requirements, with a focus on what is to be achieved rather than how it is to be done, to encourage innovative solutions that may improve the value for money outcome;

• whether the need is for the replacement or enhancement of existing resources, or to meet an entirely new requirement; and

• any alternatives, including the use of in-house resources.

9. Buyers may also develop a business case, including:

• consideration of funds availability;

• analysing and refining the initial statement of need;
• taking specialised advice from technical and procurement experts and on product availability, industry capability and potential risks or constraints;
• identification and treatment of any risks related to the procurement;
• setting out anticipated costs and benefits on a whole of life basis and, where appropriate, financial and sensitivity analysis which might include calculations of discounted cash flows; and
• identifying the costs of project management, including support requirements for technical and commercial expertise at the project approval stage, when these resources will need to be identified and the project team appointed.

Selection of appropriate procurement method

10. Buyers should, according to the needs of each procurement situation, choose the method that is likely to achieve the best value for money outcome. This includes encouraging levels of competition among suppliers commensurate with the anticipated benefits from that competition.

11. No single type of procurement fulfils all requirements. Buyers should choose the method for each procurement that will best enable them to achieve value for money outcomes from a range of procurement methods according to the circumstances of each purchase. Procurement processes should be designed to facilitate appropriate levels of competition.

12. In practice, while open and competitive tendering should generally be the preferred method of tendering, in selecting the appropriate procurement method, buyers may take into account:

• the strategic importance of the procurement;
• the complexity and/or cost of the procurement;
• the complexity of the marketplace and environment in which that procurement shall be undertaken; and
• constraints such as urgency, compatibility with existing goods and services, or existence of a sole source of supply.

Evaluation of suppliers and their offers

13. Buyers should evaluate suppliers and their offers to identify the bid offering the best value for money.

14. Buyers should:

• evaluate offers in a comprehensive and fully professional manner by taking account of the benefits and costs involved on a whole of life basis;
• establish or verify the competence, viability and capability of prospective suppliers;
• confirm that products offered comply with requirements including fitness for purpose and time frames and reflects an understanding of the needs of the end-user;
• assess and allow for relevant risks;
• ensure that unnecessary costs are avoided and other costs are reduced wherever possible, for example, through clarification; and
• ensure that the contractual agreements entered into are a comprehensive and accurate reflection of the terms, conditions and obligations agreed between the suppliers and buyers.

15. In practice, supplier evaluation may be done through a pre-qualification process and/or be part of the evaluation of bids. When evaluating suppliers, buyers may consider their management competence, financial status, technical competence and other matters such as their legal identity, previous contract performance and similar information that will provide an indication of the suppliers capability to meet the procurement requirements. Where supplier evaluation is part of a pre-qualification process resulting in a register of suitable suppliers, buyers should regularly re-evaluate suppliers to confirm their continued ability to deliver value for money outcomes. 

16. Evaluation of offers should be done in a whole-of-life context, so as to ensure that the best value is obtained for the procurement. Besides price and fitness for purpose, other factors that may be taken into account include performance, quality, reliability, delivery, inventory costs, running costs, warranties and after-sale support, and disposal.

17. In addition, negotiation, if not prohibited, may be considered to improve the value of a procurement outcome under certain circumstances, for example, when:

• it appears from evaluation that no one tender is obviously the most advantageous in terms of the specific evaluation criteria set forth in the tender notices or documentation; 
• only one tender is received;
• potential suppliers raise reasonable objections or propose alternatives to the prescribed terms and conditions; 
• offer prices are unfair and unreasonable in the circumstances; or
• there are substantial risks for either party warranting negotiation.

18. As a good policy, and to provide the buyers with the legitimacy for conducting negotiations, it is advisable to state in the tender notices and/or tender documentation that the buyers reserve the right to negotiate for the best offer and, if the submission of alternative proposals is allowed, that alternative proposals that improve the value of the offer may be submitted. The buyers should conduct the negotiations in a structured and ethical manner and should not in the course of negotiations discriminate between different suppliers. Properly drafted tender documentation, including draft contract terms and conditions, should ensure that negotiation with bidders commences from a well-defined base. Proper record of the negotiation should be kept.

The procurement function itself providing value for money

19. Procurement systems should themselves represent value for money.

20. Buyers should regularly monitor and evaluate their procurement systems to ensure that they are efficient, effective, appropriate and continue to represent value for money. Costs to buyers and suppliers of procurement activities should be minimised as far as possible.

21. This may be achieved by the following practices:

• procurements are effectively planned and approved prior to commencement;
• specifications are not unnecessarily complex or onerous;
• procurement activity is not unnecessarily complex, costly or time-consuming, but is still designed to adequately deliver value for money outcomes;
• pre-qualification, shortlisting and staged-procurement are undertaken where appropriate;
• regulation and red-tape is not unduly complex or costly for buyers and suppliers to address;
• contracts resulting from procurement activities should be managed so as to produce the best available value outcomes; and
• procurement officials should be trained and competent.

Open and Effective Competition

22. The general principles are that the GP regime should be open and procurement methods should suit market circumstances and facilitate levels of competition commensurate with the benefits received.

Open government procurement regime

23. The GP regime should be transparent and GP readily accessible to the public and in particular to all potential suppliers. In addition, there should be a predictable bidding environment in which suppliers can readily evaluate their competitiveness and their chances of winning contracts.

24. These can be achieved by acting consistently with the transparency principles and practices identified by the GPEG earlier.

Encouraging competition in an open GP environment

25. Procurement processes should be designed to facilitate levels of competition, commensurate with the anticipated value for money benefit of that competition. 

26. Considerations include:

• ensuring that the maximum number of potential suppliers are able to compete, including ensuring access for potential new suppliers to opportunities, consistent with value for money principles and with the efficient operation of the procurement system; 
• ensuring that procurement procedures are flexible enough to accommodate market conditions; and
• avoiding unnecessary costs for buyers and suppliers. 

27. In practice, buyers may choose from open, limited or restricted procurement processes depending on the circumstances of each procurement. The considerations are set out in paragraphs 10 - 12 above.

28. The following may be necessary to ensure that a procurement action facilitates effective competition:

• specifications are adequate and drawn up, where possible, in terms of performance/functional/operational requirements using international or other relevant standards;
• "or equivalent" should be added to a particular trademark, patent, design or type, specific source of origin, producer or supplier prescribed in tender documentation;
• sufficient time-limit for tendering is allowed to enable interested suppliers to prepare tenders;
• where practicable, sufficient time-limit is allowed to enable interested suppliers to initiate and complete any necessary qualification procedures;
• requests for offers are made in good time, effectively promoted in the market and are clear, succinct and informative;
• bids are evaluated expeditiously on a whole of life basis against notified criteria, giving all bidders full opportunity to demonstrate the benefits they can provide; and
• any negotiation undertaken with suppliers is conducted in a structured and ethical manner by trained and experienced negotiators.

29. Also, good market knowledge can help buyers to design and plan the procurement process, to identify possible new sources of supply as well as to conduct the procurement in the most effective manner. Buyers may use methods such as Invitation to Register Interest (ITR) or Request for Proposals (RFP) to identify the market and available or possible products or services, or to encourage suppliers to propose solutions where the fundamental nature of a solution to a requirement is not clear.

Responding to conditions that limit competition

30. Buyers should ensure that limitations to competition are effectively addressed to ensure value for money outcomes.

31. Competition may be limited by factors such as existence of monopolies or cartels, limited number of qualified suppliers, urgency of requirements, need for compatibility with existing products and difficulty in persuading suppliers to bid. Buyers should adjust their procurement method to achieve the best value for money in such limited competition situations. 

Office of the Chair
APEC Government Procurement Experts Group
3 April 1998
 

Introduction

1. Under the APEC’s collective action plan on government procurement (GP), a set of non-binding principles on GP will be developed in 1997-2000 for adoption by members on a voluntary basis. In pursuing this work, the Government Procurement Experts Group (GPEG) decided to start with the principle of transparency. At its sixth meeting on 22-23 August 1997, the GPEG identified a set of elements pertaining to the principle of transparency and a list of examples illustrating how these elements could be put into practice.

2. At its seventh meeting on 23-24 February 1998, the GPEG agreed on a set of elements pertaining to the principles of value for money and open and effective competition and a list of illustrative practices. The GPEG also agreed that it should aim to complete the development of non-binding principles by 1999, and next consider the principle of fair dealing at its meeting in September 1998.

3. At its meeting on 8 September 1998, the GPEG further identified the elements pertaining to the principle of fair dealing and practices illustrating how these elements could be implemented. These are set out in paragraphs 5 to 21 below. 

4. As with the principles previously discussed and agreed by the GPEG (transparency, value for money and open and effective competition), the principle of fair dealing developed by the GPEG is non-binding. Individual member economies are in the best position to decide on the applicability of individual elements to them, taking into account the specific characteristics of their economy and the costs and benefits of adopting specific measures. The examples on practices included in this paper represent some of the possible ways to give effect to the elements of fair dealing identified in this paper, and are not intended to be prescriptive or exhaustive. Also, the elements of fair dealing and illustrative practices developed by the GPEG should and will not prejudice the WTO discussions on GP nor the positions taken by member economies in the WTO. 

Elements of Fair Dealing

5. The general principle is that the procurement system should be designed and buyers should conduct themselves in ways such that procurement activities are conducted in a fair, reasonable and equitable manner and with integrity.

6. Fair dealing is especially important in GP because the expenditure of public funds is involved and procurement activities are thus subject to public scrutiny. Fair dealing promotes public confidence in the procurement process and mutual trust and respect between the buyers and suppliers which includes a clear understanding by all parties to a proposed transaction in regard of their obligations and expectations. This will in turn encourage participation and contribute to achieving the best value for money in the acquisition of goods and services. Unethical behaviour, on the contrary, will add costs to and/or reduce the quality of the goods and services procured and damage the image of the procuring entity.

Procurement process

7. The procurement process should be fair and seen to be fair, and should treat all parties even-handedly.

8. This may be achieved by the following practices: 

· contact between all procurement and evaluation personnel and tenderers and prospective tenderers should be on a formal basis once the formal procurement process starts.

· all tenderers should be accorded fair and equitable opportunity and treatment at all stages of procurement from access to pre-tender information to debriefing and consideration of complaints (without prejudice to tenders in future);

· qualifications of tenderers and technical specifications should not be prepared, adopted or applied with a view to, or with the effect of, creating unfair advantages to some suppliers;

· tenders should be kept sealed until they are opened and there should be clear policy or regulations setting out the circumstances under which they would be invalidated;

· tenders should be opened by a designated tender opening team, which should authenticate on the tenders and keep a duplicate copy of the tenders before passing them to the officers responsible for the evaluation of tenders. The names of the tenderers and tender prices should also be properly recorded by the tender opening team;

· clear and reasonable time limits should be set for various stages of the procurement process and should be followed strictly by all parties. In particular, there should be a clearly defined policy on whether and in what circumstances late tenders may be accepted;

· technical specifications and evaluations should be undertaken by more than one evaluating staff member or a committee to confirm their freedom from bias, and to verify that the offers contain all the elements necessary to enable them to be compared on a common basis;

· Any shortlisting process for negotiations should be conducted in a fair and equitable manner and any negotiations should be conducted in a structured and ethical manner; and

· bids should be evaluated and contracts awarded strictly according to the published criteria. Any action that the buyer is entitled to take, such as negotiations or cancellation of tenders, should be included in the published criteria.

9. The GP regime should be transparent. This helps to avoid problems such as fraud and corruption.

10. In practice, this can be achieved by acting consistently with the transparency principles and practices identified by the GPEG earlier.

Procurement personnel

11. Procurement personnel should at all times deal with suppliers fairly and even-handedly and with integrity. Officials involved in procurement should have access to, inter alia:

· advice about legal and legislative obligations and requirements;

· whole-of-Government advice such as Codes of Conduct; and

· Agency-specific or work area instructions or directions, including procedures to address instances of conflict of interest.

Disclosure of interests

12. Procurement personnel should not allow the pursuit of private interests to interfere with the proper discharge of their official duties. Also, they should not allow their conduct to warrant any suspicion of conflict between their official duties and their private interests. Early and open disclosure of personal interests will allow management to prevent a conflict of interest from arising.

13. In practice:

· procurement personnel should disclose any interest, directly or indirectly possessed, which conflicts or might reasonably be thought to conflict with their public duties, or improperly influence their conduct in the discharge of their public duties; and

· procuring agencies should have a systematic way to address conflict of interests, e.g. where a procurement officer possesses an interest which conflicts with his public duties, the basis of that interest should be discontinued, or the person should cease the duties involved or obtain management permission to continue.

 

Gifts, benefits and hospitality

14. Procurement personnel should not solicit or accept gifts, benefits or hospitality which might influence or be perceived to influence the conduct of their duties. Potential suppliers should not seek to influence procurement personnel in their duties by gifts, benefits or hospitality.

15. In practice:

· procurement personnel should not solicit or accept benefits or advantages whether for themselves, their immediate family or business concern or trust with which they are associated from persons who have or seek to have supplies contracts with their agencies;

· procurement personnel should not accept any gift or hospitality from suppliers except as may be permitted under the rules of their agencies;

· when it is difficult to decide whether an offer of gift or hospitality is acceptable or not, procurement personnel should decline the offer or seek the advice of a superior;

· procurement personnel should report to management immediately any attempts by suppliers to undermine impartiality and independence of action by the offer of benefits or other form of inducement;

· procurement personnel should avoid occasions where their presence may appear to imply a close relationship with the suppliers or lead to perception of a conflict of interests;

· procuring agencies should have a clear policy on whether their procurement personnel may accept any purchasing privileges offered to them by suppliers. If such privileges are allowed, value and quantity limits should be set. It is vital that the requirement for fairness and equity is not compromised by this practice, which can place procurement personnel under pressure to regard certain suppliers favourably.

 

Confidentiality and accuracy of information

16. Commercially sensitive information should be kept secure and should not be used for personal gain or to prejudice fair, open and effective competition. Information given by procurement personnel in the course of their work must be accurate, impartial and not designed to mislead.

17. In practice, procurement personnel should:

· not give one supplier’s or tenderer’s prices to another to meet or beat;

· not reveal details of commercial arrangements, including the details of contract pricing, in a way that compromises the commercial interests of the supplier or contractor concerned;

· safeguard commercially sensitive information physically so that other parties do not release it deliberately or inadvertently; and

· not use information obtained in the course of official duties to gain directly or indirectly a pecuniary advantage for themselves or for any other person.

18. If a procuring agency engages consultants to assist in the tender evaluation process, they should also be subject to the principles in paragraphs 12 and 14 above. The contractual agreements with such consultants should contain a statement to this effect. The contractual agreements with such consultants should also stipulate that information gained during the tender evaluation may not be disclosed for a specified period after the evaluation.

Separation of responsibilities and authorisation power

19. To minimise the risk of unethical behaviour including fraud and corruption, a procuring agency should separate where practicable the various responsibilities and authorisations in procurement. One method could be to rotate duties so that key decision areas are not continuously in the control of one individual. Rotation can reduce the risk of relationships that are ‘too cosy’ developing between a particular staff member and a supplier, or the appearance of this.

Procurement records

20. A record should be kept in relation to every contract awarded. The information recorded should be sufficient to justify decisions taken in the procurement process. 

21. Good record keeping will be further discussed under the principle of accountability and due process, which the GPEG has agreed to address in 1999.

APEC Government Procurement Experts Group
12 October 1998