BACKGROUND: New Procurement Opportunities under Revised GPA

The recent revision of the WTO Government Procurement Agreement expands significantly the opportunities for participation in GPA procurement markets. 

In the recent revision of the WTO Government Procurement Agreement (GPA), the GPA Parties expanded the procurement covered under the GPA by approximately $80 billion to $100 billion annually and overhauled its procurement rules.  This posting outlines the new procurement offered by the GPA Parties as a result of the negotiations of the revised GPA.

Elements of CoverageEach GPA Party specifies in annexes the procurement that it covers under the Agreement based on the following elements:

  • Thresholds — the monetary value of the procurement above which the GPA applies;
  • Lists or descriptions of central government entities, sub-central government entities, utilities and other government enterprises;
  • Goods excluded from the GPA (based on the premise that all goods are covered unless excluded);
  • Services, including construction services, that are covered, using either a negative list (all services are covered except those excluded) or positive list (only listed services are covered); and
  • Any exclusions or derogations from coverage.

Reduction of Thresholds

  • Israel lowered its threshold for construction services procured by central government entities from 8.5 million Special Drawing Rights (SDRs) to 5 million SDRs, beginning five years after the revised GPA enters into force.
  • Both Japan and Aruba (formally known as Netherlands with respect to Aruba) reduced the threshold for goods and services purchased by their central government entities from 130,000 SDRs to 100,000 SDRs.  Aruba also reduced the threshold for its central government entities’ procurement of construction services from 5 million SDRs to 4 million SDRs.
  • The Republic of Korea reduced the threshold for goods and services purchased by other entities (Annex 3) from 450,000 SDRs to 400,000 SDRs.

Expansion of Coverage of Central Government Entities

Four GPA Parties (European Union (EU), Iceland, Norway, Switzerland) are covering all of their central government entities with a “catch all” clause, which means that they cover all existing entities, as well as those to be created in the future.  They provide indicative lists of the covered entities.

But, the EU provides its most comprehensive “catch all” coverage only to five Parties (Iceland, Aruba, Norway, Liechtenstein, Switzerland).  The EU gives Israel a second, more restricted level of coverage — access to all listed entities (not new entities).  The EU provides a third level of coverage to the remaining eight Parties, including the U.S.  That coverage consists of all the listed entities, except those marked by an asterisk.  The EU further refined its coverage with a fourth category, which applies to the U.S., Japan and Chinese Taipei, in which it provides access to the procurement of entities marked by a double asterisk.

A number of Parties added new central government entities:

  • The EU added one EU-wide entity — the European External Action Service and more than 150 central government entities for a number of its Member States, including Bulgaria, Finland, France, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Slovakia, Romania and Sweden.
  • Hong Kong China added the Chief Executive’s Office and the Secretariat, Commissioner on Interception of Communications and Surveillance.
  • Israel added five central government entities, including the Small and Medium Business Agency.  Israel also removed several product exclusions for the Ministry of Health.
  • Korea added eight entities, including the National Emergency Management Agency, Defense Acquisition Program Administration, Korea Communications Commission and Fair Trade Commission.
  • Liechtenstein added its courts and Parliament.
  • Aruba added nine entities, including its Parliament.
  • Switzerland added several federal judicial and criminal prosecution authorities, including its Federal Supreme Court, Federal Criminal Court, Federal Administrative Court, Federal Patent Court and the Office of the Attorney General.  It also added three federal assembly entities:  the National Council, Council of States and Parliamentary Services.
  • The United States added 11 federal entities, including the Social Security Administration, the Federal Energy Regulatory Commission and the Millennium  Challenge Corporation.  It also covered the Transportation Security Administration (TSA) under the Department of Homeland Security, except for TSA’s procurement of textiles and apparel.

Expansion of Coverage of Sub-central Entities

  • Canada extended to all the GPA Parties (except Iceland and Liechtenstein) the access to the procurement of its provinces and territories that it had provided to the United States under a 2010 bilateral agreement.
  • Japan added seven designated cities: Saitama-shi, Shizuoka-shi, Sakai-shi, Niigata-shi, Hamamatsu-shi, Okayama-shi and Sagamihara-shi.
  • Korea extended its sub-central coverage by adding the Ulsan Metropolitan City, and the local governments entities in three metropolitan cities: Seoul (25 local governments); Busan (16 local governments); and Incheon (10 local governments).
  • Chinese Taipei (Taiwan) added the bureau-Level administrative units of the Kaohsiung County Government, which was merged with the Kaohsiung City Government in December 2010.

Expansion of Coverage of Government Enterprises

  • Israel added nine government enterprises, including Environmental Services Co. and three development companies.
  • Japan added the Japan Alcohol Corporation.
  • Korea added the Korean Rail Network Authority.
  • Liechtenstein gave U.S. suppliers access to procurement by its electrical utility (Liechtensteinische Kraftwerke).
  • Chinese Taipei added the National Taiwan College of Physical Education
  • Aruba withdrew all Annex 3 entities due to privatization.
  • The United States covered the financing of telecommunications projects by the USDA’s Rural Utilities Service (RUS).  The U.S. commits that the RUS will not impose any domestic purchase requirement as a condition of its financing of such projects that are above 5 million SDRs.

Expansion of Coverage of Services

Seven parties expanded their partial coverage of telecommunications services to include telecommunications services.  They are the EU, Hong Kong China, Iceland, Aruba, Liechtenstein, Norway and Switzerland.  Parties also added other services.

  • Hong Kong China also added five services categories.
  • Israel added six categories of services, including commercial courier services, financial services (insurance, banking & investment) and armored car services.
  • Japan added 18 service categories, but only for its central government entities.  The new services include management consulting services, packaging services and motion picture and videotape production services (except motion picture videotape production services).
  • Korea added five service categories, including computer services and travel agency and tour operator services (except Government Transportation Request).
  • Aruba added 12 categories of services, including all services related to management consulting, accounting, auditing and bookkeeping services, market research and opinion polling services, and advertising services.
  • Singapore added executive search services.
  • Switzerland added more than 10 services, including certain legal advisory services and taxation services.

Expansion of Construction Services

  • The EU covered works concessions contracts under a national treatment regime when the contracts are awarded by central or sub-central government entities covered under the GPA.  But, it limits the beneficiaries of that coverage to construction service providers of Iceland, Liechtenstein, Norway, Aruba and Switzerland.
  • Japan extended coverage of procurement based on its Private Finance Initiative.
  • Korea covered build-operate-transfer contracts.
  • Liechtenstein added several construction services so that it now covers all construction services.

Offsets:   A major achievement in the revision of the GPA is Israel’s commitment to end its use of offsets – requirements for domestic content.  When the revised GPA enters into force for Israel, it will not apply offsets for procurement below 3 million SDRs.  In addition, it will phase-out the use of offsets over a 15-year period by progressively reducing the number of entities that apply offsets and the level of offsets from the current 20% level to zero.

Jean Heilman Grier

March 17, 2014

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