Consumers, businesses and governments throughout the Western Hemisphere should agree on the need to maintain open and transparent government procurement practices. Such measures have already been called for in the Inter-American Convention Against Corruption, and should be adopted as rapidly as possible. The Free Trade Area of the Americas (FTAA) process provides an ideal mechanism for completing work on such an agreement as a business facilitation measure by 2000.

Rationale

• Transparency is fundamental to public confidence. Transparency in public sector procurement results in public sector accountability by demonstrating that government officials are spending public funds responsibly.

• Transparency promotes sustainable economic growth. An open and transparent procurement process gives new entrants confidence to compete for public contracts. This creates fair and healthy competition, leading to higher quality levels and reduced costs This efficiency, in turn, supports rational economic growth.

• By contrast, non-transparent procurement costs countries and companies needlessly, and is incompatible with the realities of today's global source

• Transparency in procurement is the current standard. The IDB and World Bank have adopted stringent anticorruption procurement guidelines. An FTAA agreement would provide consistent rules for non-bank financed procurement.

Proposal: A hemispheric agreement on transparency in public procurement should be concluded by 2000, providing for:

• Adequate Notice. Timely notice of opportunities to allow bidders to properly evaluate projects and prepare bids. Invitations should be published internationally and should establish a minimum term of 60 days from publication for proposal submission.

• Neutral Standards. The broadest possible scope should be applied to technical specifications to insure that all qualified bidders have an opportunity. Bid specifications should be stated in terms of internationally recognized standards, and performance standards should be used to ensure equivalent products are treated equally.

• Specifications Development. All qualified suppliers should be invited to participate in the development of specifications prior to the issuance of requests for proposals. Specifications developed should be widely disseminated with a request for public comment to ensure requirements adopted for a procurement can be met by the widest possible range of competitive suppliers.

• 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.

• 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. 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.

Background:

At the 1997 Americas Business Forum in Belo Horizonte and in 1998 in San Jose, private sector representatives from around the hemisphere reached consensus on the need for an agreement on transparency in procurement and on the elements of such an agreement. The only disagreement concerns the timeframe for implementation. The timing issue appears to be related not to the merits of a procurement transparency agreement, but to more generalized concerns about the timing of FTAA agreements. This issue, however, is in the interest of all countries of the Americas and should not be delayed because of perceived tradeoffs with other FTAA issues.

Action Items:

• The Trade Negotiation Committee (TNC) will accept proposals for early concrete progress until mid-September, 1998 and will decide which will be considered for early progress in December. Supporters should submit the above proposal to their national TNC representative.

• Contact with other relevant government representatives should be made.

• Efforts should be made to place the issue on the agenda of private sector and professional association meetings to build private sector support.

• Results of government contacts should be reported back to US.