Abstract
The stated objective of the 1994 Agreement on Government Procurement (“GPA” or “GPA 1994”) is to provide an effective and transparent multilateral framework of rights and obligations with respect to laws, regulations, procedures and practices regarding government procurement with a view to achieving greater liberalization and expansion of world trade and improving the international framework for the conduct of world trade.1 After years of debate and disagreement, the negotiations conducted within various fora, including the ITO negotiations, the OECD and the GATT, have resulted in the most comprehensive multilateral set of enforceable provisions applying to government purchases, opening up potentially hundreds of billions of dollars worth of public procurement to foreign competition.2 The GPA does so by extending the GATT principles of non-discrimination (MFN and national treatment) and transparency to the tendering procedures adopted by government bodies at both central and regional levels as well as to those of other specified entities.
He was a member of the WTO panel in the Korean Government Procurement case, infra, note 74.
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References
For an analysis of the economic motivation for liberalising government procurement at the international level, see Aaditya Mattoo, Economic Theory and the Procurement Agreement, in Law and Policy in Public Purchasing: The WTO Agreement on Government Procurement (Bernard Hoekman and Petros Mavroidis eds. 1997).
It has been estimated that the GPA 1994 covers trade worth $350 billion per year. Bhala and Kennedy, World Trade Law 1315 (1998), citing International Chamber of Commerce, The Gatt Negotiations: A Business Guide to the Results of the Uruguay Round 71 (1994). Statistics available after the signing of the original 1979 GPA estimated that it covered around $35 billion per year: Annet Blank and Gabrielle Marceau, The History of the Government Procurement Negotiations Since 1945, 5 Public Procurement Law Review 77, 102 (1996), although the actual figures appear to have been even less: Arie Reich, International Public Procurement Law: The Evolution of International Regimes on Public Purchasing 133 (1998). The huge expansion of coverage of the 1994 Agreement resulted from the inclusion of services as well as goods, and the extension of the Agreement to subcentral government entities.
For a comprehensive and detailed history of the negotiations leading to the GPA, see Annet Blank and Gabrielle Marceau, supra note 2. See also, Morton Pomeranz, Towards a New International Order in Government Procurement, 11 Law and Policy in International Business 1263 (1980).
See, contra, Arie Reich, The New GATT Agreement on Government Procurement: The Pitfalls of Plurilateralism and Strict Reciprocity, 31 J. World Trade 125 (1997).
Government Purchasing in Europe, North America and Japan-Regulations and Procedures (OECD 1966).
Although this was an issue in the context of the GPA, for example, in relation to the ability of the U.S. federal government to impose the procurement rules required by the GPA on the individual States. Indeed, a WTO dispute panel was established in 1997 to consider a law enacted by the State of Massachusetts which essentially sought to prohibit State public authorities, covered by the GPA, from procuring goods or services from any companies, whether from the United States or elsewhere, that engaged in business with Burma (Myanmar) and that were listed in the law (United States—Massachusetts State Law Prohibiting Contracts with Firms Doing Business with or in Myanmar, WT/DS88/1-5, WT/DS95/1-5 and WT/DSB/M/49). The Law also imposed a ten percent price penalty on bids submitted by listed companies. The work of the Panel was suspended following a U.S. court ruling preventing the implementation of the law.
This bargaining for equivalent trade advantages became particularly marked during the Uruguay Round negotiations, notably between the EC and the United States which together employed an independent accounting firm to assess the value of the parties’ offers. See Gerard de Graaf and Mathew King, Towards a More Global Government Procurement Market: the Expansion of the GATT Government Procurement Agreement in the Context of the Uruguay Round, 29 International Law 552 (1995).
See Pomeranz, supra Morton Pomeranz, Towards a New International Order in Government Procurement, 11 Law and Policy in International Business 1263 (1980) note 5, at 1273.
OECD Archives, Government Purchasing—Note from the United States Delegation, September 9, 1968, cited in Blank and Marceau, supra note 2, at 89.
See Reich, supraArie Reich, International Public Procurement Law: The Evolution of International Regimes on Public Purchasing (1998) note 2, at 77
Friedl Weiss, Public Procurement in European Community Law 30 (1993).
Id. at 30, n. 86.
For a detailed analysis of the issue and the unreported disputes, see Pablo Olivera, Defining the Scope of Covered Entities under the WTO Agreement, 6 Public Procurement Law Review 1, 8 (1997).
This phrase has been omitted from the GPA 1994, although that has not removed the residual doubts, particularly since many of the Annexes rely on broader categories of entities than would be expected in Annexes supposedly limited to naming specific entities. See Pablo Olivera, ibid., at p. 16.
Document GPR.DS1/R, April 23, 1992, and reported in Re Procurement of a Sonar Mapping System: European Community v. United States of America [1992] 3 CMLR 573. For a commentary, see Mary Footer, GATT: Developments in Public Procurement Procedures and Practices, 2 Public Procurement Law Review 193 (1993). See also, a more recent case under the GPA 1994, Korea—Measures Affecting Government Procurement, discussed below at Part III:A(1).
This refers to the full cost of the product to the entity, including any VAT or customs duties payable: Report of the Panel on Value Added Tax and Threshold, BISD 32nd Supp., 247.
See further, on this issue and on the theory of procurement regulation, Peter Trepte, Regulating Procurement: Understanding The Ends and Means of Public Procurement Regulation (2003).
This procedure is similar to but not identical to the GATT procedure. See D.V. Anthony and C.K. Hegarty, Cautious Optimism as a Guide to Foreign Government Procurement 11 Law & Pol. In Int’l. Bus. 1301, 1330 (1979).
GATT Doc. GPR.DS2/R of April 28, 1992 (“Trondheim Panel Report”) and reported in Norwegian—Procurement of Toll Collection Equipment for the City of Trondheim, BISD 39th Supp. 400 (adopted). For a commentary, see Mary Footer, supra note 32, at CS200.
Trondheim Panel Report, ¶ 4.17
Reich, supra Arie Reich, International Public Procurement Law: The Evolution of International Regimes on Public Purchasing (1998) note 2 at 132.
During the negotiations, the parties adopted a Ministerial Decision on Accession to the GPA, partly in order to allay fears of developing countries as to the closed nature of the negotiations and the GPA. Under this Decision, coverage offers of countries seeking accession will be examined by a working party established by the Committee which will consider the coverage offer of the applicant, taking into account the export opportunities for existing parties in the procurement markets of the applicant country and the potential export capabilities of the applicant member to the procurement markets of the existing parties. See The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts, 407(WTO 1999).
For an account of the negotiations, see Gerard De Graaf and Mathew King, Towards a More Global Government Procurement Market: the Expansion of the GATT Government Procurement Agreement in the Context of the Uruguay Round, 29 Int’l Lawyer 435 (1995).
Contained in Article 29 of Directive 90/531 (OJ 1990 L297/1) which became Article 36 of Directive 93/38 (OJ 1993 L199/84).
See also Andrew Halford, An Overview of EC-US Relations in the Area of Public Procurement 4 Public Procurement Law Review 35 (1995), and Peter Trepte, The EC-US Trade Dispute: Negotiation of a Partial Solution 2 Public Procurement Law Review CS82 (1993).
OJ 1993 L125.
de Graaf and King, supra Gerard de Graaf and Mathew King, Towards a More Global Government Procurement Market: the Expansion of the GATT Government Procurement Agreement in the Context of the Uruguay Round, 29 International Law (1995) note 14, at 445.
The prevalence of these derogations led to Hong Kong, an active participant in the negotiations, declining to join the GPA. See Blank and Marceau, supra Annet Blank and Gabrielle Marceau, The History of the Government Procurement Negotiations Since 1945, 5 Public Procurement Law Review (1996) note 2, at 119.
The means of control or influence could include, inter alia, governmental ownership or part ownership, government financial assistance such as subsidies, statutory relationship between the entity and the government, special privileges such as legal monopolies, budget review by government, appointment of management personnel by government, political pressure etc. See Blank and Marceau, supra Annet Blank and Gabrielle Marceau, The History of the Government Procurement Negotiations Since 1945, 5 Public Procurement Law Review (1996) note 2, at 113.
Article 2 of Directive 93/38 (OJ 1993 L199/84). The EU’s Annex 3 to the GPA ensures that, of these, only the publicly owned utilities are subject to the GPA.
There are a number of commentaries on implementation in different states. See, for example: Joseph Francois, Douglas Nelson and David Palmeter, Public Procurement in the United States: a Post-Uruguay Round Perspective; Pierre Didier, The Uruguay Round Covernment procurement Agreement: Implementation in the European Union; Norio Komuro, Implementation of the GPA in Japan; Michael Hart and Pierre Sauvé, Does Size Matter? Canadian Perspectives on the Development of Government Procurement Disciplines in North America, all to be found in Hoekman and Mavroidis, supra note 1.
WT/DS163/R (“Korean Government Procurement”). See also, for a commentary, Arwel Davies, Korea—Measures Affecting Government Procurement: Some Critical Observations, 10 Public Procurement Law Review 229 (2001). See also Hans-Joachim PrieRecent Developments within the WTO: Korea—Measures Affecting Government Procurement 9 Public Procurement Law Review NA91 (2000).
Korean Government Procurement, ¶ 7.57.
Id., ¶ 7.72. Given the negotiated inclusion of entities in the lists, to bring within the coverage of the GPA entities which have explicitly been negotiated out, would undermine the very basis of the negotiations. See, contra, Davies, supra note 81, at 231.
Korean Government Procurement, ¶ 7.116.
Article III:2(a). See Blank and Marceau, supra Annet Blank and Gabrielle Marceau, The History of the Government Procurement Negotiations Since 1945, 5 Public Procurement Law Review (1996) note 2, at 106.
Article 20 UNCITRAL Model Law. See also the World Bank Guidelines on Limited International Bidding (Official Records of the General Assembly, Forty-eighth Session, Supplement No. 17 (A/4817).
One of the incarnations of the EU’s Supplies Directive did, however, require a justification resulting from, inter alia, a need to maintain a balance between contract value and procedural costs and the specific nature of the products to be procured: see, Article 6 of Directive 77/62 (OJ 1977 L13/1) as amended by Directive 88/295 (OJ 1988 L127/1).
Article 19(2) of Directive 93/36 (OJ 1993 L199/1).
On similar difficulties with the EU system, see Sue Arrowsmith, The Law of Public and Utilities Procurement 217 (1996).
Collusion among bidders is one of the constant threats to an effective procurement system. However, collusion and other anti-trust matters are generally outside the scope of procurement rules since they address supply-side actors whilst procurement rules impose obligations on buyers. Collusion is also notoriously difficult to prove and it is unclear, in this provision, what authority is to make the finding of collusion. Certainly, procuring entities are ill-equipped to undertake such a task, whatever their suspicions. On competition matters and procurement generally, see supra Diane Wood, The WTO Agreement on Government Procurement: An Antitrust Perspective in Hoekman and Mavroidis, Petros Mavroidis eds. 1997 note 1, at 261; Peter Trepte, Public Procurement and the Community Competition Rules, 2 Public Procurement Law Review 93 (1993).
Although a number of countries would appear to permit such negotiations. See Procurement: Competitive Negotiations: Note by the Secretariat, in UNCITRAL Yearbook Volume XXIII, at 243 (1992).
It might be suggested that this is necessary in order to prevent arbitrary discrimination between tenderers. Otherwise higher weight might easily be assigned to suppliers favoured by procuring entities, whatever the reasons for that favouritism. The EU has now included such a requirement in its new directive coordinating the procedures for the award of public supplies, works and services contracts: Directive 2004/18/EC (OJ 2004 L134/114). Article 53(2) requires procuring entities, where additional criteria other than price are to be applied, to specify in advance the weighting given to each of those criteria.
Notably, the Utilities Directive 2004/17 (OJ 2004 L134/1): Articles 41 and 42.
See, for example, Article 38(4) and 38(8) of Directive 2004/18 in 2004 OJ 134/114.
This is a critical issue which has recently come to the fore in the EU. See case C-81/98 Alcatel Austria AG v Bundesministerium für Wissenschaft und Verkehr [1999] ECR I-7671.
Blank and Marceau, supra Annet Blank and Gabrielle Marceau, The History of the Government Procurement Negotiations Since 1945, 5 Public Procurement Law Review (1996) note 2, at 99.
BISD 26S/203–205 (1979).
See Sue Arrowsmith, “Developing Multilateral Rules on Government Procurement,” (1996) 6 PPLR, CS154; Martin Dischendorfer, “The Existence and Development of Multilateral Rules on Government Procurement under the Framework of the WTO,” (2000) 9 PPLR 1 at 29 et seq.
See Dischendorfer, supra Martin Dischendorfer, “The Existence and Development of Multilateral Rules on Government Procurement under the Framework of the WTO,” (2000) 9 PPLR 1 note 136 at 32.
WTO Document WT/MIN(96)/DEC/W of December 13, 1996.
WTO Documents WT/WGTGP/W/10 and 11. See also, Hans-Joachim Prieß and Christian Pitschas, The Proposed WTO Agreement on Transparency in Government Procurement-Doha and Beyond 11 Public Procurement Law Review 13, 14 (2002).
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Trepte, P. (2005). The Agreement on Government Procurement. In: Macrory, P.F.J., Appleton, A.E., Plummer, M.G. (eds) The World Trade Organization: Legal, Economic and Political Analysis. Springer, Boston, MA. https://doi.org/10.1007/0-387-22688-5_23
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