FEDERAL CONTRACT LAW

Procurement rules go global'but very slowly

Joseph J. Petrillo

As you scour the world looking for the best technology, your vendors are increasingly looking to foreign governments for business opportunities.

Perhaps overseas work will increase their repertoire, creating new solutions that will apply in this country.

When doing business in foreign countries, vendors expect to encounter procurement processes that are less fair and open than those in the United States and more biased toward native companies.

Recent diplomatic agreements, however, have enhanced the ability of nonnative companies to compete for government contracts in countries in Europe and other technologically advanced regions.

The agreements' origins can be traced to the Agreement on Government Procurement, completed at the Uruguay trade talks in 1994. The agreement is multinational. The World Trade Organization, so bitterly opposed recently, administers and enforces it.

The agreement's guiding principle is called national treatment, which means the opposite of what the phrase implies. Signatories to the agreement may not exclude or penalize the bids of foreign companies in a public procurement simply because the companies are foreign.

This guiding principle is girded with procedures for soliciting and evaluating offers and resolving protests. Because they are modeled on the Federal Acquisition Regulations and administrative bid protest procedures in the United States, the procedures are already familiar to U.S. companies.

For instance, the purchasing government must list evaluation factors in the solicitation. It must maintain an administrative dispute forum that accepts protests within 10 days of learning the basis of a protest.

Still, the agreement is by no means as comprehensive as FAR. It doesn't eliminate barriers to trade in government procurement. Its reach extends only to 11 mostly developed countries plus the 15 members of the European Union that have signed and ratified the agreement and passed the necessary national legislation to bring the agreement into force domestically. The 26 countries add up to only one-fifth of the governments that belong to WTO.

Another limitation comes from Article 23 of the agreement. Even if a country has signed and implemented the agreement, it can limit or preclude foreign participation in government acquisitions for reasons of national security, health and safety, and social policy. The restrictions lead to some important exceptions. For instance, in the United States, procurements by the Army Corps of Engineers are exempt from the agreement and the Trade Agreements Act.

A third limitation is that, so far, the agreement extends only to purchases of goods, not services.

Although the agreement requires participating countries to achieve transparency, nondiscrimination and fair dispute resolution in their procurements, it doesn't say how. Most member countries have kept their existing administrative and legal structures for conducting procurements and enforcing bidders' rights, reasoning that those structures meet agreement standards. Thus the agreement hasn't created uniformity or harmony.

The agreement backs up national dispute resolution processes with an international supervisory body. The first stop in any dispute is the local dispute resolution mechanism of the procuring country. The agreement mandates that each signatory state maintain a judicial or administrative process that can provide 'nondiscriminatory, timely, transparent and effective procedures' to bidders complaining of unfair treatment. The individual bidder can invoke this right on its own, without the sponsorship of its home government. That's unusual in treaties.

If the local dispute resolution is unsatisfactory, the agreement grants the right of appeal to a dispute resolution board composed of procurement law experts. Such appeals require a sponsoring government. For a U.S. company, that means the Office of the U.S. Trade Representative.

The agreement is a good start, but the United States should encourage partners that have signed the agreement to include services and to avoid using the exceptions for national interest. The trade representative should also monitor the agreement's implementation and be ready to sponsor appeals to the dispute resolution board.

And now Congress is getting into the act. Rep. Jim Kolbe (R-Ariz.) has introduced a bill that would require countries getting aid through international organizations funded by the United States to adopt fair and transparent procurement procedures.

Joseph J. Petrillo is an attorney with the Washington law firm of Petrillo & Powell, PLLC. E-mail him at jp@petrillopowell.com. His partner, Karen D. Powell, contributed to this column.

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