RESTRICTED
WORLD TRADE WT/WGTGP/W/1
10July1997
ORGANIZATION(97-2887)
Original: English Working Group onTransparency
inGovernment Procurement
THE UNCITRAL MODEL LAW ONPROCUREMENT OFGOODS,
CONSTRUCTION AND SERVICES
Statement bytheRepresentative oftheUNCITRAL at
theWorking Group 'sMeeting of23May1997
Introduction
1. TheUNCITRAL Model LawonProcurement ofGoods, Construction andServices iscurrently
being utilized byStates onanincreasingly wider scale. Among thevarious policy objectives ofthe
Model Lawisthatoftransparency inthepublic procurement process. After introducing theprocess
offormulation oftheModel Law, thepresent paper outlines themanner inwhich theModel Law
promotes transparency. Because ofthesummary nature ofthepresentation, thepaper doesnotattempt
exhaustively tolistanddescribe alloftheprovisions contained intheModel Lawthatfacilitate greater
transparency. Itisintended rather tohighlight theprincipal ways inwhich national legislation based
ontheModel Lawwould promote transparency inpublic procurement.
I. LEGISLATIVE NATURE AND HISTORY OFMODEL LAW
A. Purpose ofModel Law
2. TheUnited Nations Commission onInternational Trade Law(UNCITRAL) concluded the
preparation oftheUNCITRAL Model LawonProcurement ofGoods, Construction andServices in
1994. Thepurpose oftheModel Lawistoprovide amodel forStates modernizing theirnational
procurement legislation orestablishing suchlegislation forthefirsttime. Itsscope islimited tothe
procedures utilized inselecting suppliers andcontractors withwhom public purchasers conclude
procurement contracts.
B. TheUNCITRAL Process
3. UNCITRAL isanintergovernmental technical organ oftheUnited Nations General Assembly.
Itsprimary function istoactasasortofglobal "commercial lawlegislature" forinternational commerce.
Theinternational conventions ortreaties, model laws andother legal instruments formulated by
UNCITRAL assist States inmodernizing thelegalregime forinternational commerce. Thisenables
commercial parties fromdifferent countries, regions, andlegalandeconomic systems tosuccessfully
implement various types ofcommercial transactions andtoovercome differences among legalsystems
thatmight otherwise hinder international commerce.
4. TheUNCITRAL process takesplace attheintergovernmental level. Therotating membership
ofUNCITRAL ismade upof36States, elected bytheGeneral Assembly onthebasis ofaregional
representation formula. Inaddition, allotherStates areinvited toparticipate intheworkofUNCITRAL
asobservers. Bothmember andnon-member States thusparticipate actively inthedevelopment of
legalinstruments formulated byUNCITRAL. Inaddition totheinput ofthedelegates, whorepresentWT/WGTGP/W/1
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their governments, thework ofUNCITRAL benefits from theinput ofinterested international
organizationsbothofintergovernmentalandnon-governmentalcharacter(e.g.,WorldBank,International
Chamber ofCommerce, Asian-African Legal Consultative Committee, International BarAssociation)
aswellastheinput ofexperts. Itmayalsobenoted bywayofintroduction thatUNCITRAL deals
primarily withmatters ofcontractual relations between trading parties, rather thanfocusing on
intergovernmental trade regulation andtariff arrangements.
5. ItisalsonoteworthythatthelegaltextsofUNCITRALaredevelopedonthebasisofaconsensus.
Thisisafitting approach inview oftheobjective ofspanning various types oflegal andeconomic
systems, andmeeting theneeds ofinternational commerce, which involves theinteraction ofparties
fromStatesatvariouslevelsofeconomicdevelopment.Thatapproachhassuccessfullyledtoformulation
ofinstruments widely adopted byandutilized inStates atalllevels ofeconomic development, such
astheUnited Nations Convention onContracts fortheInternational SaleofGoods, theUNCITRAL
Model LawonInternational Commercial Arbitration, andtheUNCITRAL Arbitration Rules.
C. Juridical Nature ofanUNCITRAL Model Law
6. TheUNCITRAL Model Lawonprocurement isexactly whatitstitleindicates -amodel for
emulation bynational legislatures. Itisnotatreaty orconvention liketheWTO Agreement on
Government Procurement although thereisharmony inthesubstantive content ofthetwoinstruments.
Adoption oflegislation based ontheModel Lawdoesnotdepend onreciprocal action byanyother
State. Apart fromthataspect, theModel Lawmaybeviewed astheconsensus statement ofgovernments
fromaround theworld ontheminimum elements ofasound national legislative framework forpublic
procurement. Assuchitisintended tobeusedbyStates fromallregions andatalllevels ofeconomic
development.
D. Guide toEnactment
7. Together withtheModel Law, UNCITRAL hasissued aGuide toEnactment oftheModel
Law.TheGuide isintended toassist legislatures andexecutive branches ofgovernment utilizing the
Model Lawtomodernize orestablish procurement legislation.
II. TRANSPARENCY: THE FOUNDATION OFTHE UNCITRAL MODEL LAW
8. Thepreamble totheModel Lawlistsitsmainpolicy objectives. Those include theoverarching
objectiveofeconomyandefficiencyinprocurement,maximizingparticipationofbiddersandcompetition
among them, fairness intreatment ofbidders, objectivity indecision-making, andtransparency.
9. Those objectives areclosely intertwined, inthatitwould hardly bepossible toachieve economy
andefficiencyinprocurementwithoutmaximizingparticipationandcompetition,objectiveswhichdepend
inturnonobjectivity andprocedural fairness intheselection process. Atthefoundation ofthatpyramid
ofobjectives istransparency, onthebasis ofwhich procedural fairness isachieved, andthusthe
confidence ofthebidding community intheintegrity oftheprocurement process.
10. Aside from promoting participation inprocurement proceedings byassuring bidders offair
treatment, mechanisms thatachieve transparency foster theaccountability ofprocuring entities to
governmental andlegislative oversight bodies, andhelptobuild theconfidence ofthepublic, atlarge
inthemanagement andexpenditure ofpublic funds.
11. TheModel Lawreflects thevarious aspects oftransparency thatasound national legislative
framework forprocurement would establish. Firstly, thereisthequestion ofmaking readily available
toaswideanaudience aspossible information about procurement opportunities. Secondly, there isWT/WGTGP/W/1
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thebody ofprovisions inaprocurement statute designed toensure disclosure tobidders, and
implementation, ofthe"rules ofthegame" oftheselection ofthesuccessful bidder. Lastly, there
isthedesirability ofhaving whatonemight termtransparency astotheresults ofaprocurement action.
A. Information about Procurement Opportunities
12. This aspect isimplemented intheModel Lawbyprocurement methods involving wide
participation, andsolicitation requirements designed tofacilitate suchparticipation. Thus, asthedefault
rulefortheprocurement ofgoods orconstruction, theopentendering method isprescribed (Article 18).
Similarly, forprocurement ofconsultancy andother types ofintellectual services, aprincipal method
isincluded. Itmaybeimplemented soastostrike anappropriate balance between publicizing services
procurement opportunities andachieving economy andefficiency, fromthestandpoint bothofprocuring
entities andbidders, inthepreparation andconsideration ofproposals (Chapter IV).Arelated aspect
isthelimitation oftheuseofthelesscompetitive methods ofprocurement (e.g., restricted tendering,
request forquotations, andsingle-source procurement) tothose tightly defined cases inwhich they
aretrulyappropriate (Articles 19-22).
13. ThesolicitationrequirementsrelatedtoannouncementofprocurementopportunitiesintheModel
Lawmaybesupplemented byanenacting State byincluding inthelegal regime requirements also
ofpublication ofindicative notices ofprocurement planned foragiven yearorother budgetary period.
B. Disclosure ofProcedural Rules Governing Procurement
14. Thenextdimension oftransparency hastodowithdisclosing tointerested parties theprocedural
rules, or"rules ofthegame", oftheprocurement process. Thisinturnhasseveral aspects, including,
asoutlined below, accessibility oftherelevant legislative andother normative instruments, clarity as
tothescope ofapplicability ofprocurement rules, andpredisclosure andtransparency intherules
governing theselection ofthesuccessful bidder.
Accessibility oflegaltexts
15. WhilemostStateshaveamongtheirbasicconstitutionalandlegislativeprinciplestherequirement
thatlawshavetobepublished andotherwise made accessible tothegeneral public, theaccessibility
ofnormative textsisclosely linked totheachievement ofthefundamental goals ofprocurement policy,
inparticular theobjective oftransparency. Thus, theModel Lawincludes anArticle requiring
accessibility tothegeneral public oflegaltextsgoverning procurement (Article 5).
16. Awayoffacilitating accessibility ofnormative texts, andclarity intheunderstanding of
applicable rules, istheconsolidation totheextent feasible oflegislative rulesgoverning theselection
procedure. Totheextent thatthoserulesmaybescattered about thestatutes ofagiven State, accessibility
ismade more complicated, andtransparency maybediminished. Consolidation willassist notonly
bidders inunderstanding theprocurement process, butalsowillhavethebenefit forprocuring entities
ofdefining more clearly theirobligations.
Clarity inscope ofapplication ofprocurement rules
17. Anotherfundamentalwayofinjectinggreatertransparencyintopublicprocurementistomaximize
clarity astothescope ofapplication ofthelegalregime governing suchprocurement. Thistranslates
intodefining clearly: (a)thetypes ofstateagencies andother entities covered (Article 2(b)); (b)the
typesofprocurement covered (Article 1);(c)defining anyexceptions tothecoverage intheprocurement
laworitsimplementing regulations andmaking anysuchexceptions assurgical andlimited aspossible
(Article 1(2)and(3)).WT/WGTGP/W/1
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18. Therecommendation embodied intheModel Lawistoextend thecoverage oftheprocurement
lawtoasmuch aspossible ofpublic procurement. Thus, procurement ofgoods, construction and
services iscovered. While aslotisincluded intheModel Lawfortheenacting Statetolistthetypes
ofprocurement thatmaybeexcluded from coverage, itisnotintended toencourage orrecommend
extensive exclusions.
19. Procuring entities maybeuncertain astowhich rulestoapply ifaprocurement action issubject
totreaty obligations oftheStateinquestion. Anexample isprocurement using funds disbursed under
aloanagreement between theState andaninternational financial institution suchastheWorld Bank
orwithfunds provided under abilateral aidagreement which istiedtotheapplication ofspecific
procurement rules. TheModel Lawrelieves theprocuring entity ofthatuncertainty bydeferring to
conflicting international treaty obligations oftheenacting State (Article 3).
20. Theextent ofpossible conflict between legislation based ontheModel Lawandtheprocurement
rulesofinternational financial institutions suchastheWorld Bank israther limited, since theModel
Lawisinbasic harmony withtheprocedures andprinciples ofsuchrules.
III. TRANSPARENCY INCONDUCT OFPROCUREMENT PROCEEDINGS
21. TheModel Lawincludes acomprehensive setofprocedures designed toensure thatprocurement
proceedings -inthevariety ofcircumstances encountered ineveryday practice -areconducted ina
transparent manner. Those provisions maybecategorized inthemanner setforth below.
A. UseofMost Competitive andTransparent Procurement Method
22. Abasicwayinwhich aprocurement lawcanfoster transparency isbyguiding procuring entities
tousethemostcompetitive andopenprocurement methods feasible inanygiven case. Thisinturn
helps tofoster transparency, asitmaygenerally beassumed thatthemore openandcompetitive the
procurement proceedings are,themore transparency there is.Ashasalready beennoted, theModel
Lawfollows such anapproach, byrequiring open tendering fortheprocurement ofgoods and
construction,exceptwhenthecircumstancesfitthegroundsspecifiedforuseoflessopenandcompetitive
methods. Asimilar approach isfollowed withrespect tothemain method fortheprocurement of
consultancy andother intellectual services.
B. Adequate Range ofAlternative Methods
23. Ashortcoming insome procurement lawsisthattheylackanadequate range ofalternative
procurement methods todealwithsituations inwhich opentendering maynotbethemostappropriate
method. Such lawsmaydropdown from themostopenandtransparent method toamethod thatis
essentially without competition, suchassingle-source procurement -ortoamethod withverylimited
transparency suchasunstructured, simultaneous negotiations withseveral bidders.
24. Legislation based ontheModel Lawmayavoid suchapitfall. Forexample, anenacting State
mayelecttoinclude intherange ofprocurement methods available toprocuring entities methods such
astwo-stage tendering andrequest forquotations ("shopping"). From atransparency point ofview,
aswellasfrom thestandpoint ofeaseofapplication ofthelawbyprocuring entities, thelawshould
beasclear aspossible astothecircumstances inwhich thealternatives maybeused. Additional
transparency maybeachieved bydefining procedures forthealternative methods (Chapter V)and
requiring entry intotherecord oftheprocurement proceedings -when analternative method isused
-ofastatement ofthegrounds justifying theuseofthealternative method (Article 11(1)(g)).WT/WGTGP/W/1
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C. Negotiation intheAward Process
25. Thedegree towhich aprocurement lawachieves transparency isrelated alsotothemanner
inwhich negotiated procurement ishandled. Among themethods offered bytheModel Lawfor
consideration bylegislators, thetwo-stage tendering isamethod thatpermits negotiations andtechnical
discussions tobeconducted withbidders when aprocuring entity wishes todiscuss withbidders various
technical orcontractual possibilities tosolve itsprocurement need, while applying thetransparent
selection procedures oftendering inthesecond stage (Article 46).
D. Predisclosure ofInformation forEffective Participation inProcurement Proceedings
26. Attheheartoftheprovisions oftheModel Lawaimed atachieving transparency, anditsother
objectives, arerules requiring predisclosure toparticipating bidders ofvarious types ofinformation
essential foreffective participation ofbidders inprocurement proceedings.
27. Oneessential typeofinformation concerns thequalification criteria andprocedures tobeapplied
tobiddersseekingtoparticipateintheprocurementproceedings.TheModelLawidentifiesanexhaustive
listofthegeneral types ofqualification criteria thatmaylegitimately beapplied (Article 6(1)(b)). Their
legitimacy stems from thefactthattheyareobjectively linked tothecapacity ofabidder toperform
theprocurement contract.
28. Theexhaustive listing ofpermissible qualification criteria ispartofapackage ofqualification
provisions intheModel Lawcrucial totransparency (Articles 6and7).Other provisions include,
forexample, therequirement thatinprequalification proceedings anupordown decision bemade
onevery application (Article 7(5)), thatqualification assessments maybemade onlyonthebasis of
predisclosed criteria (Article 6(3)and(4)),andthatapplicants forprequalification determined tobe
unqualified beinformed ofthegrounds fortheirdisqualification (Article 7(7)).
29. Thenextaspectofessentialpredisclosureconcernsthetechnicalspecificationsfortheprocurement
inquestion. TheModel Lawrequires useofobjective, functionally defined technical specifications,
detailed tothefullest extent possible andreferring torelevant national andinternational standards
(Article 16). Thiscontributes notonlytotransparency, butalsotomore effective competition and
ultimately tobetter value forthepublic purchaser.
30. Aconcomitant, essential requirement, inparticular intendering proceedings, aswellasinthe
principal method forprocurement ofservices, isthepredisclosure ofthetechnical evaluation criteria
bywhich bidsaretobeevaluated, andtherelative weight ofthecriteria (Article 27(e); Article 38(m)).
Thecardinal rulehereisthatonlythose evaluation criteria thathavebeenpredisclosed maybeused
(Article 34(4)(a)).
31. Another areaofimportance fromthestandpoint oftransparency andpredisclosure tobidders
hastodowiththeterms oftheprocurement contract andthemanner inwhich theydescribe therights
andobligations oftheparties. Itmaybenoted inthisconnection thatintendering proceedings the
Model Lawrequires thepredisclosure tobidders oftheterms oftheeventual contract, aswellasthe
manner ofitsentry intoforce (Article 27(f); Article 27(y); Article 13).
32. Another important wayofinjecting greater transparency intothelegal rules applicable to
contractual andother aspects oftheprocurement process istoutilize harmonized legalinstruments.
Thisisparticularly relevant ininternational procurement. TothisendaState maywishtoconsider
becoming party totheUnited Nations Convention onContracts fortheInternational SaleofGoods,
toensure thatinternationally harmonized andwidely understood andavailable rules maybereadily
applicable totheprocurement contract.WT/WGTGP/W/1
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33. Furthermore, usemaybemade ofinstruments suchastheINCOTERMS oftheInternational
Chamber ofCommerce (ICC) todefine specific aspects ofthedelivery andinsurance terms ofthe
procurement contract, theICCUniform Customs andPractice forDocumentary Credits (UCP) todefine
rights andobligations oftheissuer andthebeneficiary under letters ofcredit, andtheICCUniform
Rules forDemand Guarantees (URDG) andtheICCUniform Rules onContract Bonds (URCB) for
defining rights andobligations withrespect tobidsandperformance guarantees. Mention should also
bemade oftheroleofstandard forms ofcontract andbidding documents inpromoting transparency
intheprocurement process. Forthepurposes ofdispute settlement under theprocurement contract,
theUNCITRAL Arbitration Rules andtheUNCITRAL Conciliation Rules arewidely known and
acceptable bothtopublic purchasers andsuppliers andcontractors.
E. Clarity ofBidSolicitation Documents
34. Thediscussion inthepreceding paragraphs underscores theimportance from theviewpoint
oftransparency ofcomprehensive andclearly drawn bidsolicitation documents. Forthisreason, the
Model Lawpresents detailed provisions, inthisregard fortendering proceedings (Article 27),aswell
asforprocurement ofconsultancy andother intellectual services (Article 38).Alsoindispensable is
aneffective mechanism forresponding torequests forclarification ofthesolicitation documents
(Article 28;Article 40).Thisinvolves responding torequests forclarification intimefortheresponses
tobetaken intoaccount intimely bidpreparation andsubmission, andcirculation oftheclarification
toallparticipating bidders. Related mechanisms include meetings ofbidders andsitevisits, afterwhich
theprocuring entity prepares minutes thatarethenprovided tothebidders.
F. BidSubmission andOpening
35. Several Model Lawprovisions promote transparency atthiscrucial stage ofprocurement
proceedings when themethod usedistendering. Noteworthy aretherequirements thatthetender validity
periodbedeemedtobeonlyaspredisclosedinthesolicitationdocuments(Article31(1)),thatbidopening
should coincide withthedeadline forsubmission ofbids(Article 33(1)), andthatbidders ortheir
representativesshouldbeallowedtoattendbidopening(Article33(2)),atwhichcertainbasicinformation
about eachbidisreadout,including thebidprice (Article 33(3)).
G. BidEvaluation
36. TheModel Lawsetsforth anumber ofprocedures fortendering proceedings thatguard
transparency attheclimactic bidevaluation stage. Those include, forexample, thefollowing: (a)only
predisclosed technical andqualification criteria maybeapplied; (b)nochanges aretobesolicited
oroffered withaviewtomaking unresponsive bidsresponsive (Article 34(1)(a)); (c)prohibition of
negotiation (Article 35);(d)preservation ofconfidentiality astothecontents ofbids(Article 34(8));
and(e)correction ofarithmetical errors appearing onfaceoftender, withdisclosure ofthecorrection
tothebidder (Article 34(1)(b)).
IV. TRANSPARENCY INRESULTS OFPROCUREMENT PROCEEDINGS
A. Notifications toBidders andGeneral Public
37. Mechanisms forrecording anddisclosing theconduct ofprocurement proceedings, andthe
resultsofsuchproceedings,constituteanotheressentialsteptowardstransparencyinpublicprocurement.
Theyinclude, inparticular: (a)notification tobidders oftheresults ofapplications forprequalification,
including disclosure ofgrounds forrejection; (b)notification toparticipating bidders ofthewinner
oftheselection ofthesuccessful bidder (Article 36(6)); (c)publication ofnotice ofcontract award
competition (Article 14).WT/WGTGP/W/1
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B. Record ofProcurement Proceedings
38. Animportant toolforestablishing transparency inpublic procurement isthemaintenance of
arecord oftheprocurement proceeding. Inaddition tolaying down therequirement, theModel Law
details therequired contents oftherecord andtheextent andrecipients ofdisclosure oftherecord
(Article 11). Adequate record procedures, inaddition tosafeguarding transparency, helptomake a
procurement lawself-policing totheextent thatinterested parties andthegeneral public canmonitor
theperformance ofprocuring entities.
V. REVIEW PROCEDURES
39. Effective complaint andreview procedures areessential fortransparency inthepublic
procurement process generally, andtheaccountability ofprocuring entities tobidders, oversight and
supervisory bodies andthegeneral tax-paying public. TheModel Lawsetsastandard forsucha
mechanism thathasthefollowing keyfeatures: (a)affirmation oftheright ofaggrieved bidders to
obtain review ofalleged violations byprocuring entities ofrequired procedures (Article 52(1));
(b)exemption ofcertain discretionary matters notinvolving therights ofindividual bidders fromthe
review process soastoprevent excessive disruption oftheprocurement process (Article 52(2));
(c)several stages ofreview, commencing withinitial petition totheprocuring entity (iftheprocurement
contract hasnotyetentered intoforce), followed byadministrative review, andculminating withjudicial
review (Articles 53-55 and57);(d)thepossibility ofalimited period ofsuspension ofprocurement
proceedings, except inthepresence ofstrong countervailing public interest (Article 56),
VI. TECHNICAL ASSISTANCE FORPREPARATION OFPROCUREMENT LEGISLATION
BASED ONMODEL LAW
40. ThetextoftheUNCITRAL Model Lawandoftheaccompanying Guide toEnactment are
available from theUNCITRAL secretariat (Vienna International Centre, A-1400 Vienna, Austria,
P.O.Box500,tel:43121345 4060, fax:43121345 5813). Inaddition, theUNCITRAL secretariat
canassist States inobtaining legaltechnical consultancy services toassist inthepreparation oflegislation
based ontheModel Law.