An Introduction to U.S. Procurement�Day 3

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Professor Christopher Yukins

George Washington University Law School

Washington DC

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Monday-Wednesday

December 8-10, 2025

University of Paris Nanterre

Wrapping Up Day 2

Trump Tariffs

Trump Administration Tariffs�Source: Atlantic Council

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WTO GPA

Trade Agreements on Tariffs

• Reciprocal Defense Procurement Agreements: examples
• UK: Sec. 4: “When allowed under national laws, regulations, and international obligations applicable to the Participants, the Participants commit that, on a reciprocal basis, they will not include customs, taxes, and duties in the evaluation of offers, and will use their best endeavours to waive their charges for customs and duties for procurements to which this MOU applies.”
• WTO Government Procurement Agreement
• Article IV.7 of the GPA generally exempts customs duties from the nondiscrimination obligations (“Paragraphs 1 and 2 [regarding non-discrimination] shall not apply to: . . . customs duties and charges of any kind imposed on, or in connection with, importation.”
• Free Trade Agreements: example
• Australia: Ch. 15: National treatment and nondiscrimination obligations “shall not apply to customs duties and charges . . . other than measures governing covered procurements.”

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Tariffs and U.S. Procurement�Starting Point: U.S. Procurements Bear Tariffs

• FAR 25.902 cross-references the U.S. Customs Service regulations and notes that “[e]xcept as provided elsewhere in the Customs Regulations … all shipments of imported supplies purchased under Government contracts are subject to the customs entry and examination requirements.”
• As a result, “[u]nless the agency obtains an exemption [citing FAR 25.903], those shipments are also subject to duty.”
• Standard clauses in the Government procurement regulations, such as FAR 52.212-4(k), similarly state that the price paid by the Government (the “contract price”) includes customs duties.
• The Customs Regulations echo the FAR and state that, except as exempted, “importations made by or for the account of any agency or office of the United States Government are subject to the usual Customs entry and examination requirements.” 19 CFR § 10.100.

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FAR 25.903: Exceptions

• FAR 25.903 notes that the Harmonized Tariff Schedule lists supplies for which exemptions from duty may be obtained when imported under a Government contract. Harmonized Tariff Schedule of the United States, Chapter 98, Subchapter VIII: Importations of the United States Government, including:
• Engravings and photos (all agencies)
• Sound recordings (Department of State)
• Emergency war supplies purchased abroad (all military departments)
• Strategic and critical materials for stockpiles (GSA)
• Materials for common defense and security (NRC / DOE)
• International launch materials (NASA)
• Supplies for government-operated vessels and aircraft may be withdrawn from customs warehouses duty-free
• FAR 52.225-8, Duty-Free Entry is to be inserted in any solicitations and contracts for supplies that may be imported into the U.S. and for which duty-free entry may be obtained in accordance with FAR 25.903.
• Contractors generally are not to include customs duties on supplies in the prices paid by the Government. Either the solicitation is to identify goods that are to be duty-free, or (if it does not) the contractor is to notify the contracting officer of purchased items (generally those worth over $15,000) to be imported under the contract, at least 20 days before the importation.
• The CO then is to determine if the identified supplies are to be accorded duty-free status and notify the contractor, and the contract price is to be reduced.
• No notice from the contractor is needed if the supplies are the same as those the contractor purchases commercially and segregating the “Government” items is not economical or feasible.
• The Government is to provide any required duty-free certificates and is to help the contractor in obtaining duty-free entry for supplies, using shipping documents which note that the supplies are for the contracting agency; the contractor must identify the supplies that will come from abroad

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DFARS 225.901 - Policy

• Unless the supplies are entitled to duty-free treatment under a special category in the Harmonized Tariff Schedule of the United States (e.g., the Caribbean Basin Economic Recovery Act or a Free Trade Agreement), or unless the supplies already have entered into the customs territory of the United States and the contractor already has paid the duty, DoD will issue duty-free entry certificates for—
• (1) Qualifying country supplies (end products and components);
• (2) Eligible products (end products but not components) under contracts covered by the World Trade Organization Government Procurement Agreement or a Free Trade Agreement; and
• (3) Other foreign supplies for which the contractor estimates that duty will exceed $300 per shipment into the customs territory of the United States.

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PGI 225.902 Procedures.

(1) Formal entry and release.

(i) The administrative contracting officer shall—

(A) Ensure that contractors are aware of and understand any Duty-Free Entry clause requirements. Contractors should understand that failure by them or their subcontractors to provide the data required by the clause will result in treatment of the shipment as without benefit of free entry under Section XXII, Chapter 98, Subchapter VIII, Item 9808.00.30 of the Harmonized Tariff Schedule of the United States.

(B) Upon receipt of the required notice of purchase of foreign supplies from the contractor or any tier subcontractor—

(1) Verify the duty-free entitlement of supplies entering under the contract; and

(2) Review the prime contract to ensure that performance of the contract requires the foreign supplies (quantity and price) identified in the notice.

(C) Within 20 days after receiving the notification of purchase of foreign supplies, forward . . . information in the format indicated to the Commander, DCMA New York, ATTN: Customs Team, DCMAE-GNTF, 201 Varick Street, Room 905C, New York, NY 10014 . . . .

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Status of National Defense Authorization Act (NDAA) for Fiscal Year 2026

• House passed HR 3838 on September 10, 2025
• Senate Armed Services Committee passed S. 2296 on July 11
• Senate approved motion to consider, but did not pass S. 2296 before recess
• Now reportedly in informal House-Senate reconciliation

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From SASC Report 119-39 (July 15, 2025)

Sec. 874--Duty-free entry of supplies procured by Department of Defense

The committee recommends a provision that would require the Secretary of Defense to issue duty-free entry certificates in certain circumstances, and requires supply chain tracking.

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Reciprocal Defense Procurement Agreements

The committee emphasizes that defense-related acquisitions from qualified sources under Reciprocal Defense Procurement Agreements should remain exempt from any tariffs or trade restrictions. The committee urges the Department of Defense and relevant interagency stakeholders to preserve existing exemptions and ensure that future trade actions do not hinder defense procurement or compromise national security priorities.

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Proposed Senate National Defense Authorization Act (NDAA) Section 874

Included in Senate bill as reported by SASC and in Amendment 3748 (as Substitute) by SASC Chairman Roger Wicker and Ranking Member Jack Reed on Sept. 4, 2025

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SEC. 874. DUTY-FREE ENTRY OF SUPPLIES PROCURED BY DEPARTMENT OF DEFENSE.

(a) Issuance of Duty-free Entry Certificates.--

(1) In general.--Except as provided by paragraph (2), the Secretary of Defense shall issue a duty-free entry certificate for any of the following supplies imported pursuant to a procurement contract entered into by the Department of Defense:

(A) An end product or component imported from a country with which the United States has a memorandum of understanding for reciprocal procurement of defense items in effect under section 4851 of title 10, United States Code.

(B) A defense item that is an eligible product as defined in section 308 of the Trade Agreements Act of 1979 (19 U.S.C. 2518).

(2) Exceptions.--Paragraph (1) does not apply with respect to a product or component described in that paragraph if--

(A) the product or component is eligible for duty-free treatment under the column 1 special rate of duty column of the Harmonized Tariff Schedule of the United States; or

(B) the product or component has already entered the customs territory of the United States and the contractor already has paid the duty with respect to the product or component.

Explanations:

*19 U.S. Code § 2518 defines “eligible product” to include those covered by the WTO Agreement on Government Procurement (GPA), US-Mexico-Canada Agreement (USMCA), and various Free Trade Agreements (FTAs). FAR 25.003 defines “eligible product” as “a foreign end product, construction material, or service that, due to applicability of a trade agreement to a particular acquisition, is not subject to discriminatory treatment.” DFARS 225.003 is similar, designating certain supply categories as “eligible.”

[Section 874 language continues . . .]

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Section 874 (cont’d)

(b) Tracking of Supply Chain.--The Secretary shall--

(1) track the impact of economic fluctuations, include tariffs, supply chain disruptions and inflation, on all major prime contracts entered into by the Department of Defense;

and

(2) not later than January 30, 2026, submit to the congressional defense committees a report that includes--

(A) an assessment of cost increases to both the Department and contractors as a result of tariffs imposed under the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) and section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862);

(B) an assessment of the effects of such tariffs on supply chains and lead times for major defense platforms; and

(C) a summary of agreements entered into under section 4851 of title 10, United States Code [Defense memoranda of understanding and related agreements], and an assessment of the application of those agreements to the defense supply chain.

(c) Report on Duty-free Entry Certificates.--Not later than January 30, 2026, and annually thereafter until January 30, 2030, the Secretary, acting through the Director of the Defense Contract Management Agency, shall submit to the congressional defense committees a report on articles classified under subheading 9808.00.30 of the Harmonized Tariff Schedule of the United States [“Materials certified to the Commissioner of Customs by the authorized procuring agencies to be emergency war material purchased abroad”] that includes--

(1) a summary of such articles for which the Secretary issued a duty-free entry certificate; and

(2) a summary of such articles for which a duty-free entry certificate was requested and denied.

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Open Questions

• What is the purpose of the NDAA provision?
• What is Congress’ view on imposing tariffs on Defense Department procurements?
• Should the same type of exemption be extended to civilian agency procurements?
• Could a tariff exemption be extended to state and local procurements, for example under:
• Federal grants?
• Cooperative purchasing (GSA or NASPO)?

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Electronic Marketplaces

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MAJ Abraham Young, USA

The Players

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MAJ Abraham Young, USA

The Problems

Vendor data – bid challenges – transparency –

competition -- socioeconomic goals (including Buy American) – no- standards security review -- fee to GSA – Most Favored Customer pricing

Current Status

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“According to GSA’s data, between August 2020 and July 2021, the participating agencies made nearly 24,000 purchases valued at $5.9 million through the commercial platforms.”

GSA 2019: “With a potential $6 billion addressable market for the e-commerce channel . . . “

Where GSA Commercial Platforms Initiative Stands

Convergence and Compliance

Convergence: Procurement Regulation

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CONVERGENCE

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EU 2014/24/EU: Self-Cleaning

Art. 57

6.   Any economic operator that is in one of the situations referred to in paragraphs 1 and 4 may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion. If such evidence is considered as sufficient, the economic operator concerned shall not be excluded from the procurement procedure.

For this purpose, the economic operator shall prove that it has paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct, clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities and taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct.

The measures taken by the economic operators shall be evaluated taking into account the gravity and particular circumstances of the criminal offence or misconduct. Where the measures are considered to be insufficient, the economic operator shall receive a statement of the reasons for that decision.

An economic operator which has been excluded by final judgment from participating in procurement or concession award procedures shall not be entitled to make use of the possibility provided for under this paragraph during the period of exclusion resulting from that judgment in the Member States where the judgment is effective.

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Victim Compensation?

Sustainable Public Procurement��

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Sustainability in Public Procurement: Trajectory

TRUMP

TRUMP

Strategies for Environmental Sustainability

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Steven L. Schooner

Brazil’s New Law – Sustainability – Assessing Social and Environmental Impacts As Part of Infrastructure Planning

• Article 18: Procurement planning to include “description of possible environmental impacts and respective mitigating measures, including requirements for low consumption of energy and other resources, as well as reverse logistics for undoing and recycling goods and waste, when applicable”
• Subject to review by Court of Account

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Environmental provisions in the Brazilian law

Brazil’s New Law – Sustainability – Assessing Environmental Impact in Bid Price

Art. 34. Asssessing by the lowest price or highest discount and, when applicable, by technique and price will consider the lowest expenditure for the Administration, in compliance with the minimum quality parameters defined in the bidding notice.

§ 1 The indirect costs, related to the expenses of maintenance, use, replacement, depreciation and environmental impact of the bid object, among other factors related to its life cycle, may be considered for the definition of the lowest expenditure, whenever objectively measurable, as provided for in regulation.

§ 2 The assessment for the highest discount will be based on the global price established in the bidding notice, and the discount will be extended to any additional terms.

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SUSTAINABILITY IN THE EUROPEAN UNION

Key Goals in European Procurement Directives – Are These Inherent to Procurement?

• “The principles of transparency and equal treatment of bidders, best value for money and the free movement of goods and services form the basis of the Public procurement Directives.”

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Three “Pillars” to European Sustainable Procurement

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Three “Pillars” to European Sustainable Procurement

Public Procurement spending amounts to as much as 16% of the EU’s gross domestic product, which is a sum equivalent to the GDP of Germany. This purchasing power can have a significant impact on the market by influencing the suppliers and setting an example for private procurements. Through adopting the principles of sustainable development to the public procurement procedures, public authorities can provide the industry with incentives to develop new and better technologies and encourage sustainable patterns of behaviour

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Compare: Portland, Oregon

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Sustainable Procurement in U.S. Federal Procurement

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Energy Savings Performance Contracts (ESPCs)

• “Energy-savings performance contracts (ESPCs) are unlike other federal contracts in that they have substantially longer terms (up to 25 years) and the agency pays the contractor a percentage of the savings realized from energy savings measures it proposes and implements for the agency.” - CRS

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PRESIDENTIAL POLICIES

• Executive Order (EO) 13423, “Strengthening Federal Environmental, Energy, and Transportation Management,” was signed by President Bush on January 24, 2007. EO 13423 instructs Federal agencies to conduct their environmental, transportation, and energy-related activities under the law in support of their respective missions in an environmentally, economically and fiscally sound, integrated, continuously improving, efficient, and sustainable manner

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President Obama – E.O. 13514�Federal Leadership in Environmental, Energy, and Economic Performance� (Oct. 5, 2009)

SUPERSEDED

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President Obama – E.O. 13514 (Oct. 5, 2009)

• Sec. 13. Recommendations for Vendor and Contractor Emissions. Within 180 days of the date of this order, the General Services Administration, in coordination with the Department of Defense, the Environmental Protection Agency, and other agencies as appropriate, shall review and provide recommendations to the CEQ Chair and the Administrator of OMB's Office of Federal Procurement Policy regarding the feasibility of working with the Federal vendor and contractor community to provide information that will assist Federal agencies in tracking and reducing scope 3 greenhouse gas emissions related to the supply of products and services to the Government. These recommendations should consider the potential impacts on the procurement process, and the Federal vendor and contractor community including small businesses and other socioeconomic procurement programs. Recommendations should also explore the feasibility of:�(a) requiring vendors and contractors to register with a voluntary registry or organization for reporting greenhouse gas emissions;�(b) requiring contractors, as part of a new or revised registration under the Central Contractor Registration or other tracking system, to develop and make available its greenhouse gas inventory and description of efforts to mitigate greenhouse gas emissions;�(c) using Federal Government purchasing preferences or other incentives for products manufactured using processes that minimize greenhouse gas emissions; and�(d) other options for encouraging sustainable practices and reducing greenhouse gas emissions.�

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Executive Order 13514 Section 13: Recommendations for Vendor and Contractor Emissions

General Services Administration

April 2010

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Goal: Reduce Government Scope 3 Emissions

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GSA concluded that it is feasible, if employing the recommended phased approach, for the Federal Government to track and reduce its scope 3 supply chain emissions through coordination with suppliers and other stakeholders. The reporting of scope 3 supply chain emissions is an emerging field, and all stakeholders will need time and resources to adjust to a steep learning curve. Adopting a phased approach should allow the Government to incorporate leading practices as they develop. The recommended mechanism for achieving scope 3 supply chain emissions tracking is based on existing requirements for agencies to measure and set reduction goals for scope 3 GHG emissions. Specifically including supply chain emissions in agency scope 3 inventories should provide the incentive for agencies to track supplier emissions and possibly use emissions information in procurement decisions.

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Government supply chain GHG emissions tracking should be done in partnership with the supplier community to reduce any duplication of effort across agencies and industry and to leverage existing GHG emissions programs. Any Government GHG emissions tracking approach should strive to minimize the burden placed on industry—especially small and disadvantaged businesses and other socioeconomic groups—while facilitating measurable scope 3 supply chain emissions reductions. Most importantly, reporting of scope 3 emissions should be done with the recognition that it is an emerging management concept, and any initiative should be flexible enough to work with changing practices.

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It is feasible to have suppliers report to a voluntary registry, but it is not necessary. As long as suppliers make their emissions information available to the Government, the storage location of that information is not important. Ultimately, emissions information disclosed to the Government should be calculated using an acceptable standard and then verified. Voluntary registries offer significant value in terms of inventory calculation assistance and data management to the supplier community; however, that value does not clearly translate to equal value for the Government.

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• GSA found no product standard or label for GHG emissions
• Government could use preferences as in other socioeconomic programs
• But until product standards available, preferences not effective at product level
• Government should define criteria for identifying reliable product standards
• When sufficient suppliers voluntarily disclose GHG emissions, corporate-level GHG emissions can be used as an evaluation factor, until product-level standards are available as evaluation factors

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• GSA found no product standard or label for GHG emissions
• Government could use preferences as in other socioeconomic programs
• But until product standards available, preferences not effective at product level
• Government should define criteria for identifying reliable product standards
• When sufficient suppliers voluntarily disclose GHG emissions, corporate-level GHG emissions can be used as an evaluation factor, until product-level standards are available as evaluation factors

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Why use corporate GHG emissions as an evaluation factor:

The reasoning behind recommending an evaluation factor instead of a purchasing preference or mandatory contracting goal is an evaluation factor allows agencies the discretion to trade the price of a given procurement against the GHG emissions associated with that procurement and thereby enable reductions in agency scope 3 GHG emissions through the acquisition system.

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The GHG emissions reporting status evaluation factor should be made mandatory for all acquisitions using the recommended phased approach. Agencies should retain discretion over the weight given to the evaluation factor in each solicitation, and an offeror should be evaluated as neither favorable nor unfavorable if they have not reported completion of a GHG emissions inventory.

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Executive Order 13693 of March 19, 2015 - Planning for Federal Sustainability in the Next Decade

• Initiatives to encourage use of eco-labels
• Council on Economic Quality (CEQ) to publish whether major suppliers have published a GHG emissions target
• Largest agencies to undertake pilot – 5 procurements annually – with contract requirements or evaluation criteria which address GHG

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U.S. “Eco-Label” Requirements

23.103 -- Sustainable Acquisitions.

(a) Federal agencies shall advance sustainable acquisition by ensuring that 95 percent of new contract actions for the supply of products and for the acquisition of services (including construction) require that the products are—

(1) Energy-efficient (ENERGY STAR® or Federal Energy Management Program (FEMP)-designated);

(2) Water-efficient;

(3) Biobased;

(4) Environmentally preferable (e.g., EPEAT-registered, or non-toxic or less toxic alternatives);

(5) Non-ozone depleting; or

(6) Made with recovered materials.

(b) The required products in the contract actions for services include products that are—

(1) Delivered to the Government during performance;

(2) Acquired by the contractor for use in performing services at a Federally-controlled facility; or

(3) Furnished by the contractor for use by the Government.

(c) The required products in the contract actions must meet agency performance requirements.

(d) For purposes of meeting the 95 percent sustainable acquisition requirement, the term “contract actions” includes new contracts (and task and delivery orders placed against them) and new task and delivery orders on existing contracts.

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EU Directive – On Eco-Labels

Article 43 - Labels

1.   Where contracting authorities intend to purchase works, supplies or services with specific environmental, social or other characteristics they may, in the technical specifications, the award criteria or the contract performance conditions, require a specific label as means of proof that the works, services or supplies correspond to the required characteristics, provided that all of the following conditions are fulfilled:

(a) the label requirements only concern criteria which are linked to the subject-matter of the contract and are appropriate to define characteristics of the works, supplies or services that are the subject-matter of the contract;

(b) the label requirements are based on objectively verifiable and non-discriminatory criteria;

(c) the labels are established in an open and transparent procedure in which all relevant stakeholders, including government bodies, consumers, social partners, manufacturers, distributors and non-governmental organisations, may participate;

(d) the labels are accessible to all interested parties;

(e) the label requirements are set by a third party over which the economic operator applying for the label cannot exercise a decisive influence.

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ENVIRONMENTAL SUSTAINABILITY IN THE BIDEN ADMINISTRATION

IMPACT OF RISING WATERS

DoD Request for Information (July 7, 2021)

A. Disclosure of Greenhouse Gas (GHG) Emissions

• Does your organization measure and report Scope 1 and Scope 2 GHG emissions in line with the GHG Protocol Corporate Standard or equivalent? If not the GHG Protocol, which standard(s) are used?
• Does your organization currently report Scope 3 GHG emissions? If so, which Scope 3 categories are reported and which methodologies and/or standards are used?
• Does your organization publicly report your GHG results either through a third-party organization or as part of an external corporate sustainability report?
• Does your organization disclose its GHG emissions inventory on an annual basis? If so, where or by what platform?
• Does your organization set and disclose targets for GHG emissions reduction and/or science-based targets? If so, are these targets reviewed or verified by a third party?
• Does your organization report climate risk-related information as part of your standard financial reporting disclosures?
• Would your organization be willing to participate in a pilot program involving voluntary disclosure of actual GHG emissions and GHG emission targets?

B. Environmental, Social, and Governance (ESG)—General

• Does your organization participate in ESG reporting? If so, which sustainability standards or platforms does your organization use (e.g., Carbon Disclosure Project (CDP), Global Reporting Initiative (GRI), Science Based Targets initiative (SBTi), Supplier Ethical Data Exchange (SEDEX))?
• What is the role of third-party verification in your ESG activities?
• Does your organization's ESG-related reporting include accounting for and addressing disparate impacts on disadvantaged communities and communities of color?
• Does your organization's ESG-related reporting include creation of jobs associated with the shift away from carbon-intensive energy sources?

C. Supply Chain GHG and Risk Management

• Does your organization have the ability to provide customers with GHG emissions information specific to their purchases or contracts? If so, at what level can your organization provide this information (e.g., by customer on an annual basis, contract, item)?
• Does your organization collect GHG emissions information from your suppliers? If so, what systems, standards, or instruments are used to collect this information? If so, how is this information used?
• Do you require your suppliers to set GHG emissions reduction targets or related targets (e.g., energy efficiency, clean electricity)?

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Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk�Proposed Rule, 87 Fed. Reg. 68312 (14 Nov 2022)

• Contractors with over $7.5 million in annual contracts will need to compile and disclose greenhouse gas emissions
• If not, presumptively non-qualified (“non-responsive”)
• Contractors must set reduction goals
• “The foundation to properly analyze and mitigate climate risks is public and standardized disclosure, which will enable the Federal Government to conduct prudent fiscal management of all major Federal suppliers.”

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Webinars available at PublicProcurementInternational.com

EU-U.S. Trade and Technology Council

• The catalogue was released as part of the sixth ministerial meeting of the Trade and Technology Council (“TTC”), which took place in Leuven, Belgium, on 4 and 5 April 2024. The meeting was co-chaired by European Commission Executive Vice President Margrethe Vestager, European Commission Executive Vice President Valdis Dombrovskis, United States Secretary of State Antony Blinken, United States Secretary of Commerce Gina Raimondo, and United States Trade Representative Katherine Tai, joined by European Commissioner Thierry Breton, and hosted by the Belgian Presidency of the Council of the European Union.
• The “EU-US Trade and Technology Council provides a forum for the United States and European Union to coordinate approaches to key global trade, economic, and technology issues and to deepen transatlantic trade and economic relations based on these shared values.  It was established during the EU-US Summit on 15 June 2021 in Brussels.”

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The joint catalogue reflects a common understanding on how “green public procurement” — public procurement grounded in environmental sustainability — can positively contribute to achieving shared environmental goals posed by climate change. The catalogue identifies key policies, actions and best practices in green public procurement, as part of a broader effort to use public procurement to “catalyze” reductions in the greenhouse gasses which cause global warming.

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Catalogue Demonstrates Parallel Developments – EU / US

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New U.S. Rule on Green Procurement �89 Fed. Reg. 30212 (Apr. 22, 2024)

• New clause FAR 52.223-23, Sustainable Products and Services (May 2024)
• Requiring agencies must procure sustainable products and services “to the maximum extent practicable”
• Applies to all procurements, including micro-purchases
• Does not apply to weapon systems, or to contracts performed abroad
• Requiring agency is to list the required sustainable products and services in the solicitation
• Agency may decide not to require sustainable goods or services (FAR 23.103-.104) (and if so must prepare written justification) because of:
• Price not reasonable (life-cycle cost assessment recommended but not mandatory)
• Performance issues (e.g., mission demands, quality, “Buy American” and cybersecurity)
• Time (cannot purchase competitively within a reasonable performance schedule)
• Requiring agency lists sustainable products/services, evaluates and enforces
• Defines “sustainable products and services” to specify that products and services must meet, e.g., the Environmental Protection Agency (EPA) Recommendations of Specifications, Standards, and Ecolabels (“EPA Recommendations”) in effect as of October 2023
• EPA Recommendations include 40+ ecolabels – Ecolabel Index reports 456 ecolabels worldwide
• Compare EPA Framework for assessing ecolabel standards vs. EU Procurement Directive Art. 53 / Max Havelaar (CJEU C-368-10)

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TRADE AGREEMENTS AND GREEN PROCUREMENT

Government Procurement Agreement (2014) �on Social and Environmental Criteria

• “The evaluation criteria set out in the notice of intended procurement or tender documentation may include, among others, price and other cost factors, quality, technical merit, environmental characteristics and terms of delivery.”

Art. III “Measures [may] not [be] applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination between Parties where the same conditions prevail or a disguised restriction on international trade . . . .”

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Anti-Corruption

Risks of Corruption

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• Public corruption occurs when an office-holder or other governmental employee acts in an official capacity for personal gain.

Principal

Agent 1

CO

Purchase

MONITORING

BONDING (PUNISHING)

Agent 2

Contractor

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Tools for Fighting Corruption

Suspension / Debarment

Tendering Rules

Prosecution

Audits

Bid Challenges

Transparency

Oversight

Corporate Compliance

Ethics

Red Flags – Third Parties

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UK Bribery Act of 2010

• Strict liability – unless compliance plan
• UK Ministry of Justice guidance (2011)
• Extraterritorial application
• Covers commercial bribery

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CORPORATE COMPLIANCE

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Brazil’s Anti-Corruption Law

Art. 5th. For the purposes of this Law, acts harmful to the public administration, national or foreign, are those performed by the legal persons cited in the paragraph of Art. 1st, which violate the national or foreign public patrimony, principles of the public administration, or the international commitments assumed by Brazil, defined thus:

. . .

IV – insofar as requests for bids and contracts:

. . .

f) to obtain an improper advantage or benefit, fraudulently, for modifications or extensions in contracts entered into with the public administration, not authorized by law, the invitation to the public request for bid, or the respective contractual instruments; or

g) to manipulate or defraud the economic and financial balance of contracts entered into with the public administration;

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France’s Law “Sapin II” (2016)

• The new law “also lays down an obligation to implement a corruption prevention plan in large companies. The National [Anti-Corruption] Agency will ensure that companies with a workforce of over 500 and whose annual turnover exceeds €100 million put in place procedures to guard against the risk of corruption, for example by training their employees. This obligation already exists in a number of countries, including the United Kingdom and Switzerland. The Agency will be able to penalise any failings in the 1,600 companies in France in this bracket. In this way, it will be able to issue a formal warning or impose a fine of up to €1 million for legal entities and €200,000 for natural persons, and make the proposed penalty public.”

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France’s Law “Sapin II”

• Corporate compliance system must include (Art. 17)

1. Code of Conduct

2. Internal alert system

3. Risk-mapping

4. Customer and supplier assessment

5. Internal accounting controls

6. Training for those at risk

7. Discipline

8. Evaluation and oversight of system

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Mexico’s General Law of Administrative Accountability (2017)

• However, Mexico’s new law also provides that sanctions shall be mitigated by 50-70 percent where a company self-reports past or ongoing misconduct and has implemented and enforced an adequate “Integrity Policy.” An “Integrity Policy” is defined to include, at a minimum: (1) a document setting forth the functions and responsibilities of each of the company’s areas, the leadership throughout the company and a clear chain of command; (2) a code of conduct with enforcement protocol; (3) control and audit systems that regularly supervise standards of compliance within the organization; (4) internal whistleblower and reporting systems that allow for appropriate reporting to enforcement authorities and disciplinary procedures for employees acting contrary to company policy or Mexican law; and (5) human resources policies for preventing the hiring of persons that may pose compliance risks to the organization.

https://www.corporatecomplianceinsights.com/anti-corruption-enforcement-mexico/

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What Is a Compliance System?

See Reading

List

U.S. Anti-Fraud Law

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UNCAC Peer Review

SUSPENSION/DEBARMENT/�EXCLUSION

US – Mexico – Canada Agreement �(USMCA)

Article 13.17: Ensuring Integrity in Procurement Practices

1. Each Party shall ensure that criminal, civil, or administrative measures exist that can address corruption, fraud, and other wrongful acts in its government procurement.
2. These measures may include procedures to debar, suspend, or declare ineligible from participation in the Party’s procurements, for a stated period of time, a supplier that the Party has determined to have engaged in corruption, fraud, or other wrongful acts relevant to a supplier’s eligibility to participate in a Party’s government procurement . . .

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United States: �Procurement Suspension or Debarment =�“Meta”- Responsibility Determination

FAR 9.402  Policy.

(a) Agencies shall solicit offers from, award contracts to, and consent to subcontracts with responsible contractors only. Debarment and suspension are discretionary actions that, taken in accordance with this subpart, are appropriate means to effectuate this policy.

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U.S. Federal Discretionary Debarment

Criminal or Civil Fraud

Adverse Past Performance Reports

Suspension or Debarment

Other problems:

• No uniform procedures
• Huge disparity in actions

Administrative Agreement / Compliance

Comparing Causes for Debarment/Exclusion

United States

• Conviction of a crime or civil fraud
• Poor contract performance
• Other serious misconduct showing the contractor is not responsible

World Bank

• Misconduct, as narrowly defined by Anti-Corruption, Guidelines, and Consultant and Procurement Guidelines: fraud, corruption, collusion, coercion and obstruction

European Union

Mandatory:

Corruption, fraud, money laundering

Non-Mandatory:

• Bankruptcy
• Convicted re: professional conduct
• Grave professional misconduct
• Social security / taxes

World Bank Sanctions System

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• Investigates allegations of fraud, corruption, collusion, coercion and obstruction
• Prepares and submits a Statement of Accusations and Evidence (SAE) to the Office of Suspension and Debarment

• Evaluates evidence presented by INT
• Issues Notice of Sanctions Proceedings to respondent
• Temporarily suspends respondent
• Recommends a sanction (becomes effective if respondent does not contest)
• 61% of cases resolved at this level

• Comprised of 4 external members and 3 Bank staff
• Reviews case ‘de novo’
• May hold a hearing with parties and witnesses
• Imposes sanctions (not bound by SDO’s recommendation)
• Decisions are final and not appealable
• 39% of cases resolved at this level

Adjudicative

Investigative

Compliance

• Monitors integrity compliance by sanctioned companies (or codes of conduct for individuals)
• Decides whether the compliance condition established by the SDO or Sanctions Board as part of a debarment has been satisfied.

Four Paradigms

Performance Risk

Reputation Risk

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Using Exclusion/Debarment Information Across Borders:�Key Issues

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Cross-Debarment:

Options

Options:

• Automatic cross-debarment
• Debarment list + Reasons
• Debarment list
• Do nothing

VOLUNTARY VERSUS MANDATORY DISCLOSURE

U.S. Federal Mandatory Disclosure:�FAR 52.203-13

• Report to Contracting Officer and Inspector General
• Failure to report: grounds for suspension or debarment

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World Bank Voluntary Disclosure Program

World Bank Voluntary Disclosure Program

Combine?

Combine?

Goal:

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Reputation Risk?

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Performance Risk?

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Reverse Auctions

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Assessing Electronic Procurement

• More efficient?
• More transparent?
• Discriminatory?
• Ready source of comparative lessons?

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What Is a Reverse Auction?

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Background

• For centuries, governments have asked bidders to submit bids against government specifications, and made award to the lowest-price, qualified bidder
• Reverse auctions are the next step in that evolution: iterative bidding at ever-lower prices

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Photo: Financial Times

Sample Reverse Auction

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Case study: Georgia – �Using E-Procurement To Combat Corruption

• Link to presentation on Georgian e-procurement system:
• https://prezi.com/1yugudjld6rw/e-procurement-reform-in-georgia-everyone-sees-everything/
• Transparency International – Georgia report on e-procurement system:
• http://www.transparency.ge/en/node/3117

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Georgia E-Procurement

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Sample Georgian Auction

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Which types of auction can be used?

• Type 1 – allowed; is the most common in UK
• winning tender is chosen based solely on the auction phase (usually price only)
• winner (usually lowest price) is apparent to participants during the auction process

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European Perspective

- Sue Arrowsmith

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Which types of auction can be used?

• Type 2 – allowed

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• award is based on aspects of tenders assessed before the auction (e.g.quality) and on the auction (where usually only price only is subject to change)
• winner is apparent during the auction process

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European Perspective

- Sue Arrowsmith

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Which types of auction can be used?

• Type 3 – not allowed under directives at all; was rare before new directives except for utilities

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• As in type 2, award is based on aspects of tenders not changed in the auction (e.g. quality) and on the auction
• winner is not apparent during the auction process (e.g. quality is judged after the auction and then an overall judgment made on price/quality)

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European Perspective

- Sue Arrowsmith

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European Union Directive – Cont’d

The electronic auction shall be based:

- either solely on prices when the contract is awarded to the lowest price,

- or on prices and/or on the new values of the features of the tenders indicated in the specification when the contract is awarded to the most economically advantageous tender.

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Any Recourse in GPA?

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Revised GPA Defines Electronic Reverse Auction

Article I:

(e) electronic auction means an iterative process that involves the use of electronic means for the presentation by suppliers of either new prices, or new values for quantifiable non-price elements of the tender related to the evaluation criteria, or both, resulting in a ranking or re‑ranking of tenders;

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And GPA Regulates . . .

Article XIV Electronic Auctions

Where a procuring entity intends to conduct a covered procurement using an electronic auction, the entity shall provide each participant, before commencing the electronic auction, with:

(a) the automatic evaluation method, including the mathematical formula, that is based on the evaluation criteria set out in the tender documentation and that will be used in the automatic ranking or re-ranking during the auction;

(b) the results of any initial evaluation of the elements of its tender where the contract is to be awarded on the basis of the most advantageous tender; and

(c) any other relevant information relating to the conduct of the auction.

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NEW U.S. RULES

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Over the Last 20 Years, Procurement Regimes Around the World – But Not the FAR – Have Embraced Electronic Reverse Auctions

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Reverse Auctions Can Yield Substantial Savings

GAO 2013 report found that “the four agencies [GAO] studied (Army, Department of Homeland Security (DHS), Department of the Interior, and the Department of Veterans Affairs (VA)) reported approximately 12% in savings from purchases totaling more than $800 million during fiscal year (FY) 2012 for a range of commercial items . . . . The Department of Energy separately reported seeing an average savings of about 14% per contract awarded to provide core supplies and services for its National laboratories. These savings were generally calculated by comparing the agency’s independent government cost estimate to the closing price of the reverse auction.”

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Lack of Governmentwide Rule Has Impaired Reverse Auctions

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GAO’s 2018 report showed that 1/3 of reverse auctions had only one bid or bidder

Pathway to the Final Rule

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Q: Have reverse auctions been adopted broadly in other public procurement markets?

What the Final Federal Rule Says

• Coordinating with the OFPP Memorandum
• Enforcers’ Access to Auction Data Through Service Providers
• Disclosure of Lowest Bidder Prices
• Limited Guidance on When to Use Reverse Auctions
• Limited Guidance on Conducting a Reverse Auction
• Only a Contracting Officer May Exclude Bidders
• Reverse Auctions Integrated Into Other Contracting Methods
• Reverse Auction Service Providers and Bidders
• If Only One Bidder

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Issues with the Final Rule

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No Encouragement to Use Reverse Auctions

• Why has the federal government not moved more quickly to embrace reverse auctions?
• DLA’s rule calls for an explanation if a contracting official does not use reverse auctions – why not create that sort of presumptive encouragement?

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Limited Guidance on When To Use Reverse Auctions

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Army Guidance on When to Use Reverse Auction

Reverse auctions are especially appropriate where there are:

• Healthy price competition
• A well-defined requirement
• Bulk commodity type procurements (such as IT equipment, spare parts
• Procurements in which there is a well-defined supplier base
• Procurements where the award evaluation criteria are not subject to interpretation (e.g., lowest price versus multiple criteria for tradeoffs and subjective judgments)

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Guidance on How To Design an Auction

• Almost no guidance in final rule on how auctions to be structured (FAR 17.804)
• National Defense Authorization Act in 2014 called for guidance from Defense Department which would state:
• If a reverse auction is to be conducted by a third party, “inherently governmental functions are not [to be] performed by private contractor,” and any “past performance or financial responsibility information created by the third party is [to be] made available to offerors.”

Questions:

• Is guidance on structuring a reverse auction important?

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Defense Logistics Agency Guidance on Structuring a Reverse Auction

• Notification to bidders
• Use of a reverse auction in conjunction with other competitive methods
• Price information to be disclosed to bidders during the auction
• In reverse auctions for delivery orders under a standing contract (L10): at the contracting officer’s discretion to declare whether all prices or only the lowest (“lead”) price will be disclosed during the auction
• How final auction prices will be treated, and how the auction may be reopened
• Conditions for vendors to participate in the reverse auction
• How to deal with two bids that are tie (equal) offers
• What the contracting officer will do if a vendor cannot access the auction
• Contracting officer’s authority to extend the auction
• Training for offerors

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The Winner’s Curse

Question: Nothing in the final rule addresses unrealistically low (abnormally low) bids. Is this a problem?

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Bidders’ Prices Disclosed During Auction

• Final rule says that reverse auction service provider must:

“Allow[] offerors to see the successive lowest price(s) offered in the auction without revealing an offeror's identity.”

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Question: Does this raise risks of collusion?

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When the Awardee Will Be Found Qualified (Responsible)

• Final rule is silent on when bidders to be assessed for qualification (responsibility)

Question: Is this an important issue?

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Utah: Qualification Before Auction

“Reverse auction is a two-phase process consisting of a technical first phase composed of one or more steps in which bidders submit a statement of qualifications to be evaluated against the established criteria by the executive director, and a second phase in which those bidders whose statement of qualifications are determined to be acceptable during the first phase submit their price bids through a reverse auction.”

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Service Providers and Source Selection Concerns

• The final guidance does not, however, detail the source selection issues that may arise with private service providers — due, for example, to the reverse auction providers’ unique access to non-public information on when an agency might launch a reverse auction.
• Compare the multilateral development banks’ guidance on reverse auctions, which bars premature disclosure of materials on an upcoming reverse auction.

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Alternative Approaches

• No guidance in the final rule on alternative auction formats

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Questions:

• Are there successful alternative models for reverse auctions, such as (1) Vickrey auctions, or (2) auctions in which quality is taken into account in an initial evaluation, and those scores are fed into the price portion of the auction by algorithm to give “better-quality” bidders an advantage (see Oregon)?
• What about using private auctions?

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Vickrey Auction

(see paper by Ryan Taft)

Sharing Pricing Outcomes Across Government

• Final rule is silent on disseminating pricing outcomes
• OFPP Guidance (2015) called for sharing pricing information across government

Question: Should pricing information from the outcome of a reverse auction be shared across government, and/or made publicly available?

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Assessment of Costs and Benefits

Because this was deemed not a “significant” rule with over $200 million impact, no cost/benefit assessment

Questions:

• Is this rule likely to have over $200 million impact on an $800 billion procurement market?
• Would a cost/benefit analysis help clarify the rule’s assumptions and guidelines, and set benchmarks for assessing future use of reverse auctions?

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The Loper Bright Effect

Loper Bright (June 2024) abandoned judicial deference to agency interpretations of ambiguous legislation.

Question: Who might bring a court challenge against the final rule or its implementation?

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MOCK AUCTION

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Mock Auction Rules

• Group descriptions drive bidding strategy
• Auction per mock solicitation
• U.S. bid protest rules apply
• Bids to be submitted; low bid posted
• Professor is both auctioneer and arbiter

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Mock Auction

• General Facts: Solicitation

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• Team-Specific Facts (to be distributed)

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Time

PRICE

$1

$2

2

4

8

10

12

14

18

AUCTION RESULTS

Essay Question

• You have been asked to prepare a contractor compliance plan for a large French manufacturer, FrancoDefence, planning to sell to NATO. Please:
• Discuss how ongoing inquiries, https://apnews.com/article/nato-procurement-investigation-corruption-fraud-military-equipment-ea94ead6da5c2575cc801af804e3edec, into procurement corruption in the NATO Support and Procurement Agency (NSPA) may affect the compliance plan.
• Please assume the compliance plan will be framed in accordance with the U.S. regulation at FAR 52.203-13, 48 CFR 52.203-13, and will follow compliance plans of other similarly situated contractors. Address each element of the plan; feel free to draw upon (and cite) other contractors’ compliance systems and analogous standards from the NSPA and around the globe. (See, e.g., the U.S. Department of Justice/SEC “FCPA Resource Guide” at page 56 and notes.)
• Please limit your essay to no more than 1200 words. Please include your name and the word count in the upper right-hand corner of the page.

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Conclusion

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