THE Public Procurement in JAPAN

1. THE Public Procurement in JAPAN JULY 23,2019 Tomohiro Ogawa Japan Construction Information Center

2. The objectives 1. The budget planning for construction projects in public （and private） sectors （公共部門における建設プロジェクトの予算計画） 2. The base price system in Japan （日本の予定価格について） 3. The procurement system in Japan in public （and private） sectors （日本の官公庁における調達システム） 4. The control and tracking of construction progress in Japan （日本における建設進捗の管理と追跡） 5. The advance technology for construction in Japan （日本の建設のための先端技術）

3. 1. The budget planning for construction projects in public sectors（公共部門における建設プロジェクトの予算計画） Question • Role and mechanism of budget planning in Japan. • Who is the responsible for the base cost? • Who will check the correctness of base cost? • How the base cost related to the procurement process? • What is the mechanism to get the most precise base cost? • How to manage the project budget. • How to calculate the base price and apply it to be the procurement budget ?(予定価格と調達予算の関係は?)

4. 1. The budget planning for construction projects in public sectors（公共部門における建設プロジェクトの予算計画） • 国土交通省（建設プロジェクト計画者・発注者（予定価格算出）） 　：MLIT(construction project planner / responsible for the base cost) 　　　　↓ • 財務省（予算管理者）：MOF (budget manager) 　　　↓ • 国会（予算承認者）：Diet (budget approver) 　　　↑ • 会計検査院（予定価格の正当性を外部チェック） 　：The Board of Audit of Japan/ check the correctness of base cost 　　（http://www.jbaudit.go.jp/english/index.html ）

5. 1. The budget planning for construction projects in public sectors（公共部門における建設プロジェクトの予算計画） • 公共事業評価制度（Public project evaluationsystem

6. 1. The budget planning for construction projects in public sectors（公共部門における建設プロジェクトの予算計画）

7. 2. The base price system in Japan（日本の予定価格について） Question • It is difficult to write the standard for every kind of construction works. • The suppliers did not give the actual price of material to the officer to calculate the base price. • The officer cannot get the price of material especially the material from monopoly manufacturer or supplier. • The labor cost varies from place to place in Thailand. • The government cannot know the actual cost of construction project. • Our assumption is if we know the actual cost of the construction, the base price calculation will be more precise. • Then, we are trying to find mechanism that help us to get more precise base price and to predict the material cost especially from the monopoly manufacturer.

8. 2. The base price system in Japan（日本の予定価格について） 積算:measurement,accumulation 建設工事の積算は工事の目的物を造るために、最も妥当性があると考えられる標準的な施工方法を想定し、設計図書、仕様書に基づいて、標準的な業者が標準的な施工をして完成させる場合に必要な適正な費用を算出すること Estimated construction work assumes standard construction method considered to be most appropriate for construction purpose, and standard contractor performs standard construction based on design documents and specifications. Calculating the appropriate costs required to complete

9. 2. The base price system in Japan（日本の予定価格について）

10. 2. The base price system in Japan（日本の予定価格について）

11. 2. The base price system in Japan（日本の予定価格について）

12. 2. The base price system in Japan（日本の予定価格について） 土木工事標準積算基準書： measurementstandard document

13. 2. The base price system in Japan（日本の予定価格について） 予定価格： planned price ≒ base price 予定価格の決定方法（会計法,予算決算及び会計令） 予定価格は、競争入札に付する事項の価格の総額について定めなければならない。 予定価格は、契約の目的となる物件又は役務について、取引の実例価格、需 給の状況、履行の難易、数量の多寡、履行期間の長短等を考慮して適正に定めなければならない。 How to determine the planned price（ Accounting law ） The planned price shall be determined on the total price of the items to be submitted to competitive bidding. The planned price shall be properly determined in consideration of the actual price of the transaction, the situation of supply and demand, the difficulty of fulfillment, the largeness of the quantity, the length of the fulfillment period, etc. for the construction intended for the contract.

14. 2. The base price system in Japan（日本の予定価格について） 「情報の非対称性」: information asymmetry“Information asymmetry” is the uneven information structure when there is a difference in the information held by each trading entity in the market. A condition in which neither the seller nor the buyer has the expertise and information between the seller and the buyer, and the buyer can not share information and knowledge between the seller and the buyer. When there is information asymmetry, efficient results can not be realized. 情報の非対称性の悪影響 「逆選抜」 : adverse selection

15. 2. The base price system in Japan（日本の予定価格について） 日本の場合：「公共工事の資材価格等調査」： Survey of materials prices for public works 　積算の妥当性・客観性・透明性の向上を図ることを目的として、積算基準類に定めのない特別な資材の価格や工事歩掛等の調査を実施 ① 調査依頼内容の確認：調査対象の品名及び規格、依頼内容の確認 ② 調査対象企業の抽出・選定：対象企業リストアップ、調査企業選定 ③ 資材価格及び工事費等の調査：調査表、ヒアリングによる実勢価格の把握 ④ 調査結果の検証・査定：調査結果の妥当性検証、調査価格・歩掛の査定 ⑤ 調査結果の報告：調査結果（調査価格・歩掛）の報告

16. 3. The procurement system in Japan in public （and private） sectors（日本の官公庁における調達システム） Question • The bidding contract system is preferred. • We want to know the mechanism that you can get the good contractor. • Do you have any system for constructor qualification? • Do you award only the lowest bidder? • Do you have the price-performance procurement system? • The price-performance procurement system, it just starts in Thailand. • We have found a lot of problems when using the price performance evaluation. • It will be great if we can exchange our practice and case studies.

17. 3. The procurement system in Japan in public （and private） sectors（日本の官公庁における調達システム）

18. 3. The procurement system in Japan in public （and private） sectors（日本の官公庁における調達システム）

19. Preparation of a list of qualified competitive bidding participants • Classification of grade is set for each type of work, and rating of firms is carried out biyearly based on management power and technical capability, and orders are issued by grade. Standard ranking of the main types of work (MLIT)

20. Comprehensive Evaluation Bidding • The method to determine a successful bidder by comprehensively evaluating both the price and other factors including construction period, function and safety 150 points (110 to 200 points) Applied to almost every construction work by MLIT Technical evaluation score Successful bidder B A Additional points C D Technical evaluation score E Evaluation value = Standard score (100 points) Bid price Evaluation value Price [Examples of comprehensive evaluation items]

21. Comprehensive Evaluation Bidding • Most of procurement in public works in Japan, competitive bidding method such as comprehensive bidding is adopted. [Ratio among all competitive biddings] 99% 99% 99% 99% 98% 99% 99% 98% 99% 84% 94% 67% 34% Based on monetary value Based on the number of projects 10% 2005 2006 2007 2008 2009 2010 2011 *Excludes projects related to ports, harbors, and airports

22. Classification of Comprehensive Evaluation Bidding • Comprehensive evaluation bidding is classified in 5 types depending on the importance of construction works and technical proposals. Technical proposal type Construction works type Devices of construction methods, etc. Partial design changes and advanced construction technologies Construction methods and structures appropriate for the conditions Not requested Construction works plan Technical Proposal Construction works plan Evaluation method By scoring 2 class rating (pass or fail) 22 Not held Held as necessary Required Interview Planned price Based on standard plan Based on technical proposals

23. Allotment Policies of Technical Evaluation Score

24. Committee for Evaluation

25. Measures against dumping bids for publicworks • Eliminate declines in quality caused by dumping by strictly examining and evaluating the quality assurance system of bidders whose price is lower than the investigation threshold priceand appropriately reflecting the results in the technical score under the comprehensive evaluation system. Tendering Low bidding price inspection system Minimum Limitation Price System Inspection benchmark price (minimum limitation price) Exclusion Low bidding price inspection lower lower Is performance of the contract possible? Exclusion higher No Yes Contract

26. （参考）フレームワーク合意方式（FrameworkAgreement/ EU )

27. 4. The control and tracking of construction progress in Japan（日本における建設進捗の管理と追跡） Question • In Thailand, we use the S-Curve to track and control the project. • The contractor will be fined only if the project cannot be finished on time. • Do you have any tools or mechanisms to control and punish the contractor especially before it is too late? • We have supervisors or consultants. • Anyway, by the government practices, we have the punishment only at the handover. • Thus, it is too late to urge the contractor in order to prevent the project delay. • We want to know that Do you have the milestone punishment? • Do you have any mechanism to prevent project delay?

28. 4. The control and tracking of construction progress in Japan（日本における建設進捗の管理と追跡）

29. MLIT quality assurance measures against dumping bids (Example) • Measures taken by MLIT to ensure the proper performance of works covered by the low bidding price investigation system include the following. (1)Higher frequency of checks in execution phases (2)Installation of monitors at construction sites for monitoring ■Increasing the frequency of checks (example) Camera for monitoring (3)Video shooting by contractors

30. Supervision / Inspection • Structures’ as-built condition, qualities and construction status are verified through supervision/inspection. Completed works are verified through inspection for quality control purposes. • Supervisors (in-house engineers in MLIT) have to cope with the growing burden of coordination tasks including negotiation with the locals and design changes, as well as supervision tasks. (Example) Items verified through supervision/inspection (for consolidation method) Tasks of Supervisors/Inspectors (based on a hearing survey) Inspectors Inspection (on-site: 50%, papers: 50%) Added Burden! Increase in negotiation coordination Supervisors Negotiation coordination: 60% Supervision (on-site: 10%, papers: 30%)

31. Supervision Support System • Supervision support system for supervisors has been implemented. • Supervisor (in-house engineer in MLIT) makes administrative/technical decisions.Supervision assistant (contracted engineerdispatched from consulting firm) isnot a so-called “the engineer.” Supervisor’s Tasks Increase in negotiation coordination Previous tasks (supervisor only) Negotiation coordination Supervision Support System ・Assist supervision by checking status and papers ・Prepare documents for design change negotiation and negotiation with the locals Assistant Workload Increase in negotiation coordination After implementation (supervisor & assistant) Workload of Assistant -On-site confirmation -Paper confirmation -Negotiation coordination Supervisor Attend negotiation meetings, coordinate Assistant Prepare documents Supervisor Grasp construction plan Assistant Cross-check construction documents and specifications Supervisor Check construction stage Assistant Check as-built condition

32. Example of comprehensive evaluation method

33. The objectives 1. The budget planning for construction projects in public （and private） sectors （公共部門における建設プロジェクトの予算計画） 2. The base price system in Japan （日本の予定価格について） 3. The procurement system in Japan in public （and private） sectors （日本の官公庁における調達システム） 4. The control and tracking of construction progress in Japan （日本における建設進捗の管理と追跡） 5. The advance technology for construction in Japan （日本の建設のための先端技術）

34. Objectives of JACIC JACIC has been engaged in computerization of the construction field. • Promotion of arts, sciences and technology. • Standardization • Environmental preservation by utilization of resources. • Improvement in information security. • Stable provision of information. • Research and development of information systems • Education and dissemination of computerizations.

35. Profile • Name:Japan Construction Information Center (JACIC) • Public service corporation based on article 34 of the civil code (Supervised by the Ministry of Land, Infrastructure, Transport and Tourism) • Objectives : 1. Improving Construction Management 2. Collection, Processing, Storage and Dissemination of Information 3. Research Subsidy in the fields of Construction Information 4. Promotion of Information Technology • Headquarters: 7-10-20, Akasaka, Minato-ku, Tokyo 107-8416 Japan • President: Takeshi Kadomatsu • Established: November 15th, 1985 • Regional centers: 9 centers • Annual Budget: 4.5 billion yen (fiscal 2015) • Employees: 93 (as of April 2015) • Obtained ISO Certification: ISO 9001 [All business unit] ISMS [e-bid server control unit]

36. Thank you for your kind attention.