As for criteria of bidder selection, the general practice is to use a price-based method which selects a bidder based only on the offered price. However, where entering a contract with the highest/lowest bidder is considered unsuitable, the Government (or the local government) can opt to enter into the contract with the second highest/lowest bidder. In the case of certain contracts such as asset exchange agreements, the Government (or the local government) can select a bidder based not only on price but also other conditions comprehensively.
The Government's public procurement procedures require participants to obtain, in advance, an All-Ministry Consolidated Qualification (the "Qualification"). The Qualification is a common requirement for all types of public procurement by the Government. The Qualification can be obtained by non-Japanese companies on their own behalf, or it can be used by proxy (that is, by either (i) engaging a third-party (who holds the Qualification), or (ii) using a substitute entity (who holds the Qualification) to participate in the bidding process). For non-Japanese companies, the process of applying for the Qualification generally requires around two months.
In the process of applying for the Qualification, the applying company will be scored by criteria related to annual average production and sales, total amount of equity capital, cash flows, years in operation and amount of machinery and equipment (in the case of manufacturing goods), and the category of the Qualification will be determined based on the total score out of 100 (e.g., a company which scored more than 90 can participate in procurement matters worth more than JPY 30 million around USD 272,000).
On the other hand, as for procurement by local governments, non-Japanese companies are allowed to participate in procurement as conducted by certain designated cities. For such procurement, participants are commonly required to obtain relevant bidding qualifications specially applicable to particular projects, and in some cases, a would-be participant's place of business can be an item for consideration in connection with the bidding qualification procedures, under the Order for Autonomy.
Under the Cabinet Order on Budgets and Accounts and the Order for Autonomy, the chiefs or officers of each Ministry and Agency or local government can, where necessary, and depending on the type of contract and the relevant price, establish criteria for the bidding qualification related to manufacturing performance or sales, number of employees, amount of capital and other types of information relevant to business, in terms of scale and situation.
In the case of Government procurement, a Mutual Reporting System has been adopted by which each Ministry and Agency can, by going through the Finance Minister, find records of improper actions of the types mentioned above. Once information about improper actions is shared between each Ministry and Agency under the Mutual Reporting System, this practically functions as a "blacklist".
However, even in the case of such improper actions, persons are not necessarily restricted from participation in open bidding. In cases where it is considered advisable for companies to keep many possibilities for participation, as an exception, companies may potentially not be restricted from participating in a bidding process, particularly in cases where the company has shown considerable indications that it will remedy the issue and not repeat such improper actions, or where it is considered unnecessary because the improper actions took place in an isolated branch of the company.
As mentioned above, a person can be prevented from participating in open bidding for a period of up to three years from the time of the applicable improper action. Following the lapse of such time period, the person is effectively "unlisted" from the Mutual Reporting System.
Although there may still be applicable bidding qualifications in an individual request for proposal which disqualify those who have worked for the government side in the set-up for the same procurement procedure, there are no particular provisions in the procurement legislations excluding companies from bidding procedures due to conflict of interest. However, the Cabinet Order on Budgets and Accounts and the Order for Autonomy provide that where it would be extremely inappropriate to conclude a contract with a company who would otherwise be the counterparty due to the likelihood that doing so would disrupt the establishment of a fair transaction, such a contract may be rejected. In such cases the company could be considered to be excluded from the bidding procedure based on these general provisions due to conflict of interest.
There are two types of bidder consortia, consortia for service contracts of construction works and for allocating opportunity of accepting offers.
In PFI projects, the Government or local government will generally enter into a contract with a Special Purpose Company incorporated by members of a consortium or it may enter into contracts with each member of the consortium.
According to the bidding guidelines issued by the Japan Fair Trade Commission, bidder consortia who exchanged information about members of the consortia with other would-be participants, can be contrary to the Anti-Monopoly Act.
Although there are no provisions regarding change of members of bidder consortia under the procurement legislations and the PFI Act, specific restrictions on the change of consortium members are normally established in the applicable bidding procedure documents.
Under procurement legislations and the PFI Act, there are no general limitations for participation of related bidders in the same procedure. However, limitations may be determined in relation to specific offering processes, as part of the selection process.
Under the procurement legislations and the PFI Act, there are no special regulations or requirements for non-Japanese companies. However, such regulations or requirements may be determined in relation to specific offering process, as part of the selection processes.