Public Procurement, Trade and Industrial Policies

Annex A. 

This Annex summarises the OECD taxonomy of measures affecting trade in government procurement processes. The taxonomy provides a standard nomenclature (M1–M10 and subgroups) to identify both explicit and procedural measures that can affect foreign suppliers’ access to public procurement.

Presentation

The OECD taxonomy was developed to provide a structured, standardised classification of government procurement measures that can affect cross-border procurement. Its principal aims are: i) to collect in a systematic way a broad (though not exhaustive) set of government procurement measures across countries, and ii) to deliver a practical classification that facilitates cross-country data collection, comparison and further empirical analysis of trade-affecting procurement measures. The taxonomy is explicitly framed to identify measures that have an impact on foreign suppliers’ access to government contracts, rather than to pass judgement on the policy objectives behind those measures.

Methodology

The methodology provides guidance on what to collect, where to look, and how to record government procurement measures:

• What to collect: The taxonomy covers both: a) explicit measures (de jure restrictions that directly differentiate between domestic and foreign suppliers) and b) implicit measures (rules, administrative practices or procedural features that can have a discriminatory or restrictive effect in practice). Collectors are instructed to ask two screening questions for any candidate measure:

  • Can this measure have a restrictive effect on cross-border government procurement? and;

  • Can this measure have a discriminatory effect on foreign firms or discourage foreign participation?

• Where to collect data from: The taxonomy uses a mix of primary and secondary sources – official laws, statutes and regulations (primary), standard bidding documents (SBDs), procurement websites/e-procurement platforms, and existing databases (for example Global Trade Alert/GTA, WTO GPA compilations, OECD-Services Trade Restrictiveness Index/STRI and other OECD/UNCTAD resources).

• How to collect data: The taxonomy provides practical rules for assigning measures to subcategories, flags for scope (national/local/sectoral), and guidance for handling measures that straddle several categories (a first broad collection is recommended followed by a refined sifting process to identify trade-restrictive elements). Pilot data collection across selected countries is described to illustrate the approach and to test the taxonomy’s usability.

Classification

As mentioned, the Taxonomy classified two main clusters divided into ten main categories. Each category is then subdivided into multiple categories:

• Explicit measures: Measures or practices that directly reduce or prevent foreign companies' access to a government procurement system (M1 – M4).

M1: Market access restrictions: Measures and practices that expressly restrict access to government procurement to national suppliers, sub-national (local) suppliers or which require joint ventures with a national/local entity (M13).

M11 To national supplier

M12 To local supplier

M13 To joint ventures with national supplier

M14 Access based on reciprocity

M15 Commercial presence required

M16 Exclusion for national security or safety reasons

M17 Thresholds

M2: Domestic price preferences: Provisions that explicitly favour domestic firms by allocating a price preference to national suppliers, local suppliers and joint ventures with national companies.

M21 For national supplier

M22 For local supplier

M23 For joint ventures with national entity

M3: Local content requirement: Measures that require bidders to purchase domestically manufactured goods or domestically supplied services, such as a percentage of value added or intermediate inputs to be purchased locally.

M31 Inputs and data storage

M32 Services

M33 Staff requirement

M34 Subcontract requirement

M35 Offsets

M4: Collateral restriction / restrictive effects: Measures that are relevant because of their potential collateral restrictive effect but are less centred on government procurement access per se. It includes measures imposing a tax on procurement projects carried out by foreign entities that is not incurred by national bidders; measures that act as barriers to foreign direct investment (FDI) in the country where the procurement takes place which effectively can prevent access to procurement in sectors where local presence or joint ventures are required; measures that restrict eligibility of foreign bidders to subsidies and tax preferences, and any measures that relate to the lack of transparency in investment and trade (e.g. information access) likely to discourage or disadvantage foreign investors.

	M421 Constraints on forming joint ventures
	M422 Constraints on mergers
	M423 Absence of national treatment
	M224: If the sector is closed to FDI
M43 Restricted eligibility to subsidies and tax preferences
M34 Subcontract requirement
M44 Transparency measures in investment and trade

• Implicit measures: Measures or practices that do not expressly target foreign bidders but that may, indirectly or potentially, affect cross-border procurement. These measures or practices may not be restrictive de jure but in their application, they may prevent access to procurement by foreign firms (M5 – M10).

M562 performance securities: Measures related to the ways procurements are carried out under specific conditions and rules. They can be considered restrictive when their purpose or effect limits or avoids competition by protecting domestic suppliers. Many of these practices are commonly used and referred to in international agreements or government procurement model laws (e.g. United Nations Commission on International Trade Law – UNCITRAL or WTO Government Procurement Agreement). These two legal instruments recognise that countries may use these measures, but they also assist in building appropriate safeguards in law to prevent against discriminatory practices.

M51 Design of procurement methods
M52 Registration mechanisms
M53 Shortlist / pre-selected list of bidders
M54 Direct / limited tendering
	M561 tender securities
	M562 performance securities
M57 Time period (deadlines, submission windows)

M6: Qualification criteria: Measures prescribing administrative formalities, such as certification or license requirements beyond the regular professional qualifications required to undertake a given activity, measures allowing set asides for specific groups such as SMEs or local minorities, and requirements related to specific past performance or prior experience.

M61 Certification or licence criteria

M62 Set asides for specific groups (SMEs, minorities, etc.)

M63 Past performance requirements

M64 Prior experience requirements

M7: Evaluation criteria: criteria include contractual terms and conditions which may be geographically specific, out of step with international standards and which would impose a disproportionate compliance burden or cost on non-national firms, or financial requirements related to the tender process, which may, for example, impose national currency requirements.

M71 Technical / contractual conditions favouring domestic firms

M72 Financial requirements

M73 Offer-backs or requirements targeted to specific groups (SMEs, minorities)

M8: Review / Complaint system: Countries should ensure that foreign firms (either aggrieved suppliers or contractors) have access to an independent judicial body or court that allows for a timely, effective, transparent and non-discriminatory complaint mechanism and/or review procedure to challenge a decision regarding the procurement process. These mechanisms and considerations with regard to public procurement ensure competitive neutrality.

M81 Challenge of bidding process or award

M82 Choice of complaint forum (domestic/other)

M83 Time limits for review

M84 Cost (access to remedies)

M85 Suspension of bidding process

M86 Sanctions and remedies

M9: Transparency and information: Transparency and access to information is key to ensuring that all suppliers participate in the procurement process on a level playing field and that fair conditions of competition are maintained. This subgroup includes measures that make it difficult or impossible for foreign firms to access the information required for any of the stages of procurement process.

	M921 online publication of tender
	M922 online tender process
	M923 online award process
	M924 e-communication
	M925 e-signature
	M926 other online requirements
M93 Notification procedures / delays
M94 Complexity of procurement rules (fragmentation, unpredictability)

M10: Effectiveness of ethics and anti-corruption system: While inadequate anti-corruption laws or ineffective enforcement thereof affect all firms, they may disproportionately affect foreign firms, including discouraging them from participating in the government procurement market and posing particular challenges for them in navigating non-transparent and compromised processes. The taxonomy thus includes some important anti-corruption measures that affect cross-border procurement.

M101 Conflict-of-interest policies / measures in public procurement

M102 Anti-bribery measures in public procurement

M103 Whistle-blowing protection measures in procurement

M104 Guidelines on preventing and detecting bid rigging in public procurement

M105 Debarment regulations in public procurement