(a) Overview
1. The United States is a party to the WTO Agreement on Government Procurement (GPA). The list of central government agencies covered by the GPA is included in Annex I of Appendix I of the Agreement; the list of the 37 states and of the sub federal bodies applying the GPA is included in Annex 2. In January 2004, the United States circulated proposed modifications to Appendix I of the Agreement as regards the United States, to reflect recent changes in the administrative structure of the Federal Government. [1] The main change was the proposed addition of the Department of Homeland Security (DHS) to the list, and the deletion of the Federal Emergency Management Agency, which was transferred into DHS. The communication also listed all organizational elements and functions transferred to DHS from other entities, and noted that the proposed modifications would not reduce the level of the mutually agreed coverage provided under the Agreement. Initially objections by Canada and Japan were later withdrawn. [2]2. In December 2004, the United States submitted a communication in the context of the GPA Negotiations on Extension of Coverage and Elimination of Discriminatory Measures and Practices. [3] The communication contains generic requests (to all parties) including: changes to the structuring of the appendices to include a goods annex that would be comparable to the services annex in the parties' appendices, and would state that all goods procured by the listed entities are covered by the GPA, except for any goods excluded for specific entities; converting a party's positive list of covered services in Annex 4 to a negative list; converting a party's positive list of covered construction services in Annex 5 to a negative list; and moving exclusions that relate to a specific annex from the General Notes to the relevant annex. The communication also contained specific requests of other parties for expansion in market access under the GPA. In December 2005, the United States submitted an initial offer in the context of the negotiations. 3. In January 2002, the United States submitted to the WTO the statistical information required under Article XIX:5 of the GPA for the years 1996-99. [4] The submission for 1999 reported 56,598 contracts with a value of more than US$205 billion. [5] No new submission has been made since then. 4. Up-to-date statistics on the procurement activities of the main agencies at the federal level are maintained by the United States' Federal Procurement Data System (PDS). The PDS publishes an annual report with the procurement activities of some 50 federal agencies, and produces statistics on federal awards by department. [6] In FY2004, the total procurement of these agencies was US$327.2billion, up from US$305.5 billion in FY 2003; 68% is Department of Defense procurement. [7] In value terms, 23.6% of the contracts reported were awarded to small businesses in FY2003; over a third of these were small disadvantaged businesses. [8] Procurement by U.S. agencies outside the United States totalled US$27.6 billion in FY 2004, of which 69.9% was in Asia and 17.6% in Europe. [9] The 100 top federal contractors accounted for 57.1% of federal procurement in FY 2003; the majority are U.S. or foreign-based multinational companies.
6. U.S. procurement legislation was notified to the WTO in 1996. [11] The GPA is implemented in U.S. law at the federal level primarily through the Trade Agreements Act (TAA) of 1979, as amended, which provides authority for the President to waive discriminatory purchasing requirements (such as the Buy American Act, see below), designate eligible countries, and bar procurement from non-designated countries. At the state level, the GPA is implemented through laws and regulations in each of the 37 states listed in Annex 2 of the United States' GPA Schedule. 7. Procurement at the federal level is decentralized, through the various executive agencies' procurement systems. The Office of Management and Budget (OMB) oversees and coordinates federal procurement, and reviews proposed regulations for compliance with policy guidance, through the Office of Federal Procurement Policy (OFPP). [12] The Federal Acquisition Regulation (FAR) regulates all federal executive agencies' acquisitions of supplies and services with appropriated funds. Agency-specific procurement regulations supplement the FAR. The FAR system allows individual executive agencies and their sub-agencies to develop specific internal guidelines. Part 25 of the FAR provides policies and procedures for acquiring foreign supplies, services, and construction materials. It also implements trade agreements and other laws and regulations. 8. With certain exceptions, federal government agencies are required to publish notices of proposed procurement opportunities in excess of US$25,000 in the online federal-government-wide point of entry (GPE), Federal Business Opportunities (FedBizOpps). There are certain exceptions to this requirement, such as the purchase of perishable subsistence supplies or if the publication of a notice could result in serious injury to the Government. [13] Notices of proposed procurement must be published in the GPE at least 15 days before a request for bids; prospective suppliers have at least 30days to submit bids from that date. State governments that are covered by the GPA are also required to publish invitations to tender in their own publications. 9. The FAR is occasionally amended through Federal Acquisition Circulars (FACs); several changes have been introduced during the period under review. [14] Several of the amendments are related to the implementation of preferential access conditions granted to small businesses, veterans, and prison inmates; some are intended to simplify and clarify procedures and definitions, while others propose changes in the bidding process and thresholds. Several of the amendments are linked to the implementation of new legislation. [15]10. U.S. regulations allow for the preparation of lists of suppliers by a federal government agency, provided the agency prepares a written justification explaining the circumstances for the need of such a list. These non-exhaustive lists may include both national suppliers and potential foreign suppliers from countries that are parties to the GPA or other international agreements. Lists of qualified or registered suppliers are made public. Interested suppliers can apply for inclusion on such lists at any time. States and other sub-federal bodies may also maintain lists of suppliers for their procurement; in this respect, a number of the 37 States covered by the GPA use lists of qual ified suppliers when tendering for certain types of procurement.11. Contractors are required to register online in the Central Contracting Registration (CCR), the primary vendor database for the U.S. Federal Government. [16] As of August 2005, there were some 373,000 government vendors registered with the CCR, of which 10,030 were foreign firms. 12. At the sub-federal level, procurement is governed by state or other sub-federal government laws and procurement regulations. In some cases, where procurement is funded with federal money, states must comply with certain federal statutory requirements. Local governments have their own procurement agencies, as well as their own procurement policies. In some states, preferences are granted to local suppliers, and local-content requirements are applied under certain conditions. [17] Reciprocal preferences are used among states.
13. U.S. policy with respect to market access for government procurement is to grant reciprocal national treatment. The United States maintains a number of domestic purchasing requirements for procurement not covered by the GPA, NAFTA, the WTO plurilateral Agreement on Trade in Civil Aircraft, and bilateral trade agreements. The Trade Agreements Act of 1979, as amended, authorizes the President to grant waivers from the Buy American Act and other procurement restrictions; the President delegated this authority to the USTR.
14. The Buy American Act of 1933 restricts the purchase of supplies and construction materials by government agencies to those defined as "domestic end-products", in accordance with a two-part test that must establish that the article is manufactured in the United States, and that the cost of domestic components exceeds 50% of the cost of all the components. The Act does not apply to services. Exceptions to the Buy American Act can be granted if it is determined that domestic preference is inconsistent with the public interest, in case of U.S. non-availability of a supply or material, or for reasonableness of cost. In the latter case, the cost of the domestic offer is considered unreasonable if the cost of the foreign (non-eligible) product, inclusive of import duty and a 6% added margin, is below the lowest domestic offer when this offer is from a large business concern. If the lowest domestic offer is from a small business concern, the added margin considered is 12%. For purchases by the Department of Defense the price difference must be of at least 50%.
15. Annual appropriation and authorization bills sometimes include domestic preference requirements. Some states also apply domestic or state-specific preferences. [18] The non-statutory Balance of Payments Program, applies provisions similar to those of the Buy American Act to Department of Defense contracts over US$100,000 for end-products for use outside the UnitedStates. [19]16. The Trade Agreements Act of 1979 waives the application of the Buy American Act to the end-products of designated countries, which now include the parties to the GPA, NAFTA, and other bilateral agreements that cover government procurement, CBERA beneficiaries and least-developed countries (see below). For designated countries and for CBERA countries, the thresholds are those of the GPA; for NAFTA countries, Australia, Chile, Israel, and Singapore, the thresholds are those stipulated in each agreement. Eligible products are granted non-discriminatory treatment. The provisions of the Buy American Act are also waived for civil aircraft and related articles that meet the substantial transformation test of the Act and originate in parties to the WTO Agreement on Trade in Civil Aircraft.
17. FAC 2004-027, implementing the procurement provisions contained in the FTAs with Australia and Morocco (P.L. 108-286 and 108-302), entered into effect on 1January 2005 for Australia and is targeted to enter into effect on 1 January 2006 for Morocco. It exempts procurement from these countries from domestic purchase requirements (see below) for some foreign supplies and construction materials. [20] The rule also included a table of excluded services. FAC 2004-027 also revised the NAFTA threshold for Canadian services, correcting it from US$25,000 to US$58,550 (FAR 25.402(b)). FAC 2004-027 revised the list of designated countries, to include countries with which the United States has an FTA, and Caribbean Basin countries. The FAR was also amended to modify the definition of eligible product to include construction materials. The list of designated LDCs was revised partly following a U.N. revision of the list of Least-developed Countries. [21]18. Given that the TAA does not determine any procurement thresholds, different thresholds may apply to procurement exempted from domestic purchase requirements under FTAs; as noted, the thresholds are updated regularly through FACs. Thresholds for procurement contracts in SDRs have remained unchanged since the GPA entered into effect on 1 January 1996. Thresholds in U.S. dollars, however, are revised periodically (generally every two years) by the USTR. [22] In addition to the purchases under the GPA and the FTAs, the Department of Defense also waives the restrictions of the Buy American Act/Balance of Payments Program for the acquisition of defence equipment produced in any "qualifying country" (countries with which there is a reciprocal procurement agreement or Memorandum of Understanding). [23]19. Access conditions for procurement at the state level vary according to the State. As noted, 37 States participate in the GPA. Among, the states that do not participate, some, like Alabama, restrict foreign participation in biddings; others Alaska and New Mexico, offer preferences to in-state suppliers; or apply domestic purchase requirements (Indiana and South Carolina). The U.S. Administration has adopted a new reciprocity approach to sub-federal procurement in two FTAs under negotiation. [24] The Administration has written to Governors requesting that state governments consider voluntarily covering their procurement under the U.S.-Panama and U.S.-Andean FTAs under a new reciprocity policy, to benefit from new export opportunities. This approach does not apply to states' previous commitments under the GPA and other FTAs. 20. Procurement policy also seeks to increase the participation of small businesses, veteran-owned small businesses, small disadvantaged business (SDBs), and women-owned small businesses. The Department of Commerce (DOC) determines annually the authorized SDB procurement mechanisms and application factors (percentages). The Small Business Act (P.L. 85-536), as amended, requires, in principle, each contract with an anticipated value greater than US$2,500 but less than US$100,000 to be reserved exclusively for small business concerns. The Small Business Administration (SBA) manages five main programmes to promote the ability of small businesses to compete for federal procurement contracts. [25] The SBA also administers two business assistance programmes for SDBs. [26]21. The Veterans Benefits Act of 2003 (VBA, P. L. 108-183), established a procurement programme for Service-Disabled Veteran-Owned Small Business Concerns (SDVOSBC), which allows federal contracting officers to restrict competition to SDVOSBCs and award a sole source or set-aside contract where certain criteria are met. A number of other set-asides and pricing preferences are in place, such as the HUBZone Empowerment Contracting Program and the Small Business Competitiveness Demonstration Program. [27]22. In certain cases imported supplies for use in government contracts may be exempted from customs duties. These goods are listed in sub-chapters VIII and X of Chapter 98 of the U.S. tariff schedule. Other supplies may also be granted duty-free entry; in this case, the contract price must be reduced by the amount of duty that would be payable if the supplies did not enter duty free. Supplies (excluding equipment) for government-operated vessels or aircraft may be imported duty free. [28]23. Under Section 305(g) (1) of the Trade Agreements Act of 1979, the United States has applied sanctions, since May 1993, to certain Member States of the EU considered to discriminate against U.S. products and services in their government procurement practices. [29] The sanctions apply to end-products and construction materials not covered by the GPA, to all service contracts below GPA thresholds, and to a range of service contracts of any value, and exclude Department of Defense contracts or contracts awarded and performed outside the United States.
[1] WTO document GPA/MOD/USA/1, 15 January 2004.
[2] WTO documents GPA/MOD/USA/2, 21 June 2004, and GPA/MOD/USA/3, 1 October 2004.
[3] WTO document GPA/O/USA/1, 23 December 2004.
[4] WTO documents GPA/21/Add.3, GPA/22/Add.4, GPA/29/Add.4, GPA/40/Add.4, 30 January 2002.
[5] WTO document GPA/40/Add.4, 30 January 2002.
[6] FPDS online information, Federal Procurement Report FY 2003. Available at: http://www.fpdc.gov/ fpdc/FPR2003a.pdf; and FY 2004 Federal Awards by Department. Available at: http://www.fpdsng.com/ downloads/top_requests/total_federal_spending_by_dept.pdf.
[7] Four agencies comprised over 84% of the total in FY 2003: the Departments of Defense and of Energy, the National Aeronautics and Space Administration, and the General Services Administration.
[8] FPDS online information, Federal Procurement Report.
[9] Federal Procurement Report FY 2004. Available at: http://www.fpdsug.com/downloads/FPR: Reports/Fpr_section_federal=views.pdf.
[11] WTO document GPA/W/23, 17 July 1996.
[12] Information on the OMB is available online at: http://www.whitehouse.gov/omb/; and on the OFPP at: http://www.whitehouse.gov/omb/procurement/ index.html.
[13] FedBizOpps online information. Available at: http://www.fedbizopps.gov/.
[14] Information on the FAR and its amendments is available online at: http://www.arnet.gov/far/ facsframe.html.
[15] For example, to implement provisions in the Veterans Benefit Act of 2003, the Consolidated Appropriations Act of 2005, and the Services Acquisition Reform Act of 2003.
[16] FAR 4.1102, 1 October 2003. CCR online information. Available at: http://www.ccr.gov.
[17] WTO (2004), Table AIII.2).
[18] For a list of these preferences, see WTO (2004), pp. 184-187.
[19] Federal Register Vol. 67, No. 83, 30 April 2002. FAC 01-07 online. Available at: http://www. acqnet.gov/far/FAC/fac2001-07.pdf.
[20] Federal Register Vol. 69, No. 248, 28 December 2004.
[21] As a result, Botswana was removed from the list and Afghanistan, Angola, Cambodia, the Democratic Republic of Congo, Eritrea, Ethiopia, Laos, Madagascar, Mauritania, Senegal, the Solomon Islands, East Timor, and Zambia were added.
[22] WTO document GPA/W/285/Add.3, 8 January 2004 contains the thresholds notified to the WTO for 2004-05. Threshold under the NAFTA may be found in FAR Subpart 25.4-Trade Agreements 25.406, available at http://www.arnet.gov/far/; and under the FTAs with Australia, Chile and Singapore in Federal Register Vol.69, No. 192, 5 October 2004, p. 59698.
[23] Australia, Belgium, Canada, Denmark, Egypt, France, Germany, Greece, Israel, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and the UnitedKingdom. Products from Austria and Finland may also be exempted, on a purchase-by-purchase basis.
[25] Prime Contracting Assistance; Subcontracting Assistance; Government Property Sales Assistance; Certificate of Competency; and Service-Disabled Veteran-Owned Small Business Concerns programme. Code of Federal Regulations Title 13, Volume 1, revised as of 1 January 2005.
[26] The two are the 8(a) Business Development Program and the Small Disadvantaged Business Certification Program. For further information see FAR Sub-Part 19.8, available online at: http://www.arnet.gov/far/; and SBA (2004).
[27] Information on the HUBZone Empowerment Contracting Program may be found in SBA (2004). Details on the Small Business Competitiveness Demonstration Program is available online at: http://www.arnet.gov/far/.
[28] FAR Subpart 25.9. Available online at: http://www.arnet.gov/far/current/pdf/FAR.book.pdf.
[29] Austria, Belgium, Denmark, Finland, France, Ireland, Italy, Luxembourg, the Netherlands, Sweden, and the United Kingdom.
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