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Cabinet Order on Budgets, the Settlement of Accounts, and Accounting (Summary Chapter VII (contract relation))

Imperial Order No. 165 of April 30, 1947

Chapter VII Contracts

Section 1 General Provisions

(Delegation of Administrative Processes for Contracts)

Article 68(1)When delegating or allotting administrative processes relating to contracts to employees in the ministry or agency pursuant to the provisions of Article 29-2, paragraph (1) or paragraph (3) of the Public Accounting Act, if necessary, the head of a ministry or agency may delegate the authority prescribed in paragraph (1) or paragraph (3) of that Article to the chairperson or director-general prescribed in Article 50 of the Act for Establishment of the Cabinet Office (Act No. 89 of 1999), the head of the local branch office prescribed in Article 43 or Article 57 of the Act (including when applied mutatis mutandis pursuant to Article 18, paragraph (1) of the Imperial Household Agency Act (Act No. 70 of 1947)), the head of the Imperial Household Agency, the head of the local branch office prescribed in Article 17, paragraph (1) of the Imperial Household Act, the chairperson or director-general prescribed in Article 6 of the National Government Organization Act (Act No. 120 of 1948), the head of the local branch office prescribed in Article 9 of the Act, or other employees equivalent to the foregoing (referred to as the "head of an external bureau, etc." in Article 139-3, paragraph (3)).

(2)The provisions of Article 26, paragraph (3) apply mutatis mutandis when the head of a ministry or agencies delegate or allot a portion of the administrative processes relating to contracts to employee of other ministries or agencies pursuant to the provisions of Article 29-2, paragraph (2) or paragraph (3) of the Public Accounting Act, and the provisions of Article 26, paragraph (4) apply mutatis mutandis when administrative processes relating to relevant contracts are delegated or a portion of relevant processes is allotted to employees of another ministry or agency by designating a government position pursuant to the provisions of Article 4-2, paragraph (4) of the Act as applied mutatis mutandis pursuant to Article 29-2 paragraph (4) of the Act.

(Designation of Contract Assessment Commissioners)

Article 69(1)The head of a ministry or agency must designate an employee from among those from their ministry or agency or those from other ministries or agencies, and, when necessary, the employee from the ministry or agency delegated by the head of a ministry or agency must designate an employee from the relevant ministry or agency to express their opinion when requested by a contract officer, etc. (referred to bellow as "contract assessment commissioner"), pursuant to the provisions of Article 86, paragraph (2) (including when these are applied mutatis mutandis to Article 98).

(2)If the head of a ministry or agency seeks to designate an employee from another ministry or agency as a contract assessment commissioner pursuant to the provisions of the preceding paragraph, they must obtain consent for the employee and the their government position in advance from the relevant head of the other ministry or agency.

(3)In a case under paragraph (1), the head of a ministry or agency or an employee delegated by them may appoint a person in a government position as a contract assessment commissioner by designating a government position in the relevant ministry or agency or other ministry or agency. In this case, it is sufficient for consent pursuant to the provisions of the preceding paragraph to be obtained for the government position.

(4)There are three contract assessment commissioners for one contract officer, etc.; provided, however that this does not preclude a contract assessment commissioner from simultaneously acting as a contract officer, etc.

(5)When the head of a ministry or agency or an employee delegated by them designates a contract assessment commissioner, they must notify the relevant contract officer, etc. to that effect.

Section 2 Contracts Under Open Tendering

Subsection 1 Eligibility as Open Tender Participants

(Persons Who May Not Be Permitted to Participate in Open Tenders)

Article 70If a sale, lease, contracting, or other contract is put out to tender pursuant to Article 29-3, paragraph (1) of the Public Accounting Act (referred to bellow as an "open tender"), the contract officer, etc. may not permit a person who falls under any of the following items to participate, unless there are special grounds for doing so:

(i)a person who is incapable of concluding the relevant contract;

(ii)a person who received an order of commencement of bankruptcy proceedings and has not had the person's rights restored; or

(iii)a person who falls under any of the items of Article 32, paragraph (1) of the Act on Prevention of Unjust Acts by Organized Crime Group Members (Act No. 77 of 1991).

(Persons Who May Be Prevented from Participating in Open Tenders)

Article 71(1)If a contract officer, etc. determine that a person who wishes to participate in an open tender falls under any of the following items, the officer, etc. may prevent the person from participating in open tenders for a period of not more than three years. The same applies to the employer of the same person as a proxy, manager, or other employees:

(i)if the person has intentionally carried out construction, or manufacturing, or any other service in a careless manner or acted fraudulently concerning the quality or volume of an object in the course of performing a contract;

(ii)if the person has obstructed the fair implementation of a tender or has hindered a fair price from being reached or colluded with others to obtain an unlawful profit;

(iii)if the person has obstructed the successful bidder from entering into a contract or obstructed a party to a contract from performing the contract;

(iv)if the person has obstructed an employee from performing the their duties in a supervision or inspection;

(v)if the person has not performed a contract without a justifiable reason;

(vi)if the price is fixed after the signing of the contract under a contract, and the person has intentionally claimed an excessive amount of that price based on false facts; or

(vii)if the person has employed a proxy, manager, or other employee who is not eligible to participate in an open tender pursuant to this paragraph (excluding this item) in the conclusion or performance of a contract.

(2)A contract officer, etc. may prevent a person who employs a person falling under any of the provisions of the preceding paragraph as a bid proxy from participating in an open tender.

(Eligibility as Open Tender Participants as Determined by Heads of Ministries and Agencies)

Article 72(1)The head of a ministry or agency or an employee delegated by them may determine the eligibility required of persons participating in open tenders, when necessary, concerning matters related to results of construction, manufacturing or sales, etc., number of employees, amount of capital, and other matters related to the scale of management and management circumstances, for each type of contract in terms of construction, manufacturing, the purchase of objects, and other contracts, in accordance with the price, etc. of the contract.

(2)If eligibility has been determined pursuant to the preceding paragraph, the head of a ministry or agency or an employee delegated by them must gather applications from persons who seek to participate in open tenders, and examine whether those persons are eligible to do so periodically or when necessary and pursuant to what they have determined.

(3)The head of a ministry or agency or an employee delegated by them is to prepare a name list of the persons who are eligible as referred to in paragraph (1).

(4)If the eligibility required of persons participating in open tenders has been determined pursuant to the provisions of paragraph (1), the head of a ministry or agency or an employee delegated by them must issue a public notice regarding the fundamental matters and the timing and manner, etc. of application prescribed in paragraph (2).

(Eligibility as Open Tender Participants as Determined by Contract Officers)

Article 73If a contract officer, etc. seek to put a contract out to open tender and finds it necessary for the appropriate and reasonable implementation of the tender based on the nature and purpose of the contract, the officer, etc. may further determine the eligibility required of persons participating in the tender regarding those that are eligible pursuant to paragraph (1) of the preceding Article, and may have those with the relevant eligibility engage in the tender pursuant to what is specified by the head of a ministry or agency.

Subsection 2 Public Notices and Tenders

(Public Notices for Bids)

Article 74If a contract officer, etc. seek to put a contract out to open tender by bidding, the officer, etc. must issue a public notice by the Official Gazette, newspapers, posting, or in other ways at least ten days before the bid date starting from the day before the date; provided, however, that in urgent cases, this period may be shortened to five days.

(Matters Related in Publicly Notices Regarding Bidding)

Article 75A public notice pursuant to the preceding Article is to be related to the following:

(i)the matters subject to tender bidding;

(ii)the matters of the eligibility required of persons participating in the tender;

(iii)the location where the terms and conditions of the contract are displayed;

(iv)the location, time, and date of the tender; and

(v)the matters related to the security deposit prescribed in Article 29-4, paragraph (1) of the Public Accounting Act (referred to bellow as a "bid deposit").

(Invalid Bids)

Article 76A contract officer, etc. must clearly specify in the public notice prescribed in Article 74 that bids submitted by persons without the eligibility required of those participating in the tender which is set out in the public notice, and bids that breach the bid requirements set out in the public notice are invalid.

(Exemption from Payment of Bid Deposits)

Article 77A contract officer, etc. need not collect a bid deposit, either in whole or in part, in the following cases, pursuant to the proviso to Article 29-4, paragraph (1) of the Public Accounting Act:

(i)if a person who seeks to participate in an open tender has concluded a bid deposit insurance contract with an insurance company, naming the State as the insured party; and

(ii)if a contract has been put out to open tender for persons who are eligible as referred to in Article 72, paragraph (1), and it has been determined that there is no risk of the successful bidder failing to enter into the contract.

(Bonds in Lieu of a Bid Deposit)

Article 78(1)A contract officer, etc. may permit government bonds and the following items to be provided as bonds in lieu of a bid deposit, pursuant to the provisions of Article 29-4, paragraph (2) of the Public Accounting Act:

(i)debentures guaranteed by the government;

(ii)debentures issued by a bank, the Shoko Chukin Bank, the Norinchukin Bank, or a nationwide federation of Shinkin Banks;

(iii)checks issued or guaranteed by a bank; or

(iv)any other item that the Minister of Finance determines to be a bona fide bond.

(2)The valuation of a bond prescribed in the preceding paragraph and other procedures for submission are governed by the determination of the Minister of Finance, unless separately prescribed otherwise.

(Formation of Target Prices)

Article 79A contract officer, etc. must set a target for the price of the subject matter of tender bidding (in the case of any tender as prescribed in Article 91, paragraph (1), the difference in the price of the assets that will be exchanged, and in case of any tender as prescribed in paragraph (2) of that Article, as determined by the Minister of Finance; the same applies in paragraph (1) of the following Article) based on the specifications and design, etc. of the subject matters, and must place a document specifying or recording the target price at the place of that opening at the time the bids are opened, in a way that the contents of the document are not visible.

(Manners of Determining the Target Price)

Article 80(1)The target price must be determined with respect to the aggregate price of the subject matter of tender bidding; provided, however, that a target price may be set on a unit price basis for any contract for manufacturing, repairs, processing, sales, supply or use, etc. that continue for a specified period.

(2)The target price must be appropriately determined by taking into account the prices of actual transactions, supply and demand conditions, difficulty of performance, volume, length of performance period, etc. for the object or service that is the subject of the contract.

(Opening of Bids)

Article 81The contract officer, etc. must open the bids in the presence of the bidders at the place, time and date of the tender, as specified in the public notice. In this case, if no bidders are in attendance, an officer who has no connection with the administrative processes relating to the bidding must be in attendance.

(Re-Bidding Process)

Article 82If there are none which fulfill the restrictions of the prescribed target price upon opening the bids, the contract officer, etc. may immediately pursue a re-bidding process.

Subsection 3 Determination of Successful Bidders

(Determination of Successful Bidders)

Article 83(1)When two or more persons submit a bid at the same price and that bid should be the successful bid, the contract officer, etc. must immediately decide the successful bidder by having the relevant bidders draw lots.

(2)In a case referred to in the preceding paragraph, if a bidder does not draw a lot, an officer with no connection to the administrative processes involved in the bidding may be made to draw a lot on behalf of the bidder.

(Contracts for Which It Is Permitted Not to Select the Bidder with the Lowest Price as the Successful Bidder)

Article 84A contract specified by Cabinet Order that is the cause of payment by the State that is referred to in the proviso of Article 29-6, paragraph (1) of the Public Accounting Act is a construction, manufacturing, or other contract for work with a target price that exceeds 10 million yen (or if an amount exceeding 10 million yen is decided on after discussion between the heads of a ministry or agency and the Minister of Finance, the relevant amount).

(Procedures for Not Selecting the Bidder with the Lowest Price as the Successful Bidder Due to the Likelihood That the Terms of the Contract Will Not Be Satisfactorily Performed)

Article 85When necessary pursuant to the proviso to Article 29-6, paragraph (1) of the Public Accounting Act, the heads of a ministry or agency is to develop standards for determining whether it is likely that the person who should be the counterparty to a contract stated in the preceding Article will not satisfactorily perform the terms of the contract for the price that the person has offered.

Article 86(1)If a tender for a contract prescribed in Article 84 has been conducted, the contract officer, etc. must examine whether it is likely that the person who should be the counterparty to a contract will not satisfactorily perform the terms of the contract, if the price that the person has offered falls within the standards stated in the preceding Article.

(2)If the contract officer, etc. find it to be likely that the relevant person will not satisfactorily perform the terms of the contract as a result of the examination referred to in the preceding paragraph, the officer, etc. must submit documentation specifying or recording the results of the examination and their opinion to the contract assessment commissioners, and request their opinions.

Article 87When a contract officer, etc. request the contract assessment commissioners' opinions pursuant to the provisions of paragraph (2) of the preceding Article, the contract assessment commissioners must conduct an assessment and express their opinions in writing.

Article 88(1)If the majority of the opinions that the contract assessment commissioners have expressed pursuant to the provisions of the preceding Article are the same as those of the contract officer, etc., the officer, etc. are not to select the person who offered the lowest price within the range determined by the target price as the successful bidder, but is to select as the successful bidder the person who offered the lowest price from among the other persons who made offers within the range determined by the target price (referred to bellow as a "next bidder").

(2)Even when the majority of the opinions of the contract assessment commissioners differ from those of the contract officer, etc., if there are reasonable grounds to determine that the person who should be the counterparty to the contract is unlikely to satisfactorily perform the terms of the contract, the officer, etc. may select the next bidder as the successful bidder.

(Procedures for Not Selecting the Bidder with the Lowest Price as the Successful Bidder Due to the Likelihood of Disrupting the Fair and Orderly Conduct of the Transaction)

Article 89(1)If a tender has been carried out for a contract prescribed in Article 84 and the contract officer, etc. find it extremely inappropriate to conclude the contract with the person who should be the counterparty, due to the likelihood that doing so will disrupt the establishment of a fair transaction, they must submit documentation specifying or recording the reasons for this and their opinion of to the relevant head of their ministry or agency, and request their approval for not selecting that person as the successful bidder.

(2)If a contract officer, etc. are given the approval referred to in the preceding paragraph, they are to select the next bidder as the successful bidder.

(Documents Submitted When the Bidder with the Lowest Price Is Not Selected as the Successful Bidder)

Article 90In a case stated in any of the following items, the contract officer, etc. must prepare an examination report for the relevant tender and submit it without delay to the Minister of Finance and the Board of Audit via the relevant head of a ministry or agency, attaching a copy of the documentation stated in the relevant item:

(i)if the next bidder is selected as the successful bidder pursuant to the provisions of the Article 88: documentation specifying or recording the result of the examination and the opinion of the contract officer, etc. prescribed in the provisions of Article 86, paragraph (2) and documentation specifying or recording the opinion of the contract assessment commissioner as prescribed in Article 87; or

(ii)if the next bidder is selected as the successful bidder pursuant to the provisions of the preceding Article: documentation specifying or recording the reason and the opinion of the contract officer, etc. prescribed in the provisions of that Article and documentation evidencing that the relevant head of ministry or agency has approved.

(Deciding the Successful Bidder When a Contract for Exchange Is Put Out for Tender)

Article 91(1)Pursuant to the provisions of Article 29-6, paragraph (2) of the Public Accounting Act, a contract officer, etc. may select the person who makes the offer with the difference in the quotation amount for each asset that is the most favorable to the State to be the successful bidder for a contract on the exchange of assets owned by the State and assets owned by persons other than the State.

(2)Pursuant to the provisions of Article 29-6, paragraph (2) of the Public Accounting Act, a contract officer, etc. may select the person who offers the price and other conditions that are the most favorable to the State to be the successful bidder for a contract other than one stated in the preceding Article which is difficult to treat pursuant to Article 29-6, paragraph (1) of the Public Accounting Act due to the nature and purpose of the contract, based on a decision made following discussions between the head of a ministry or agency and the Minister of Finance.

(Public Notice Period for a Fallowing Public Notice of a Call for Bids)

Article 92If there are no bidders or no successful bidders or if the successful bidder does not enter into the contract, and the contract officer, etc. seek to put the contract out for bid again, the officer, etc. may shorten the public notice period prescribed in Article 74 to five days.

(Auctions)

Article 93A contract officer, etc. may auction a movable property if they find it particularly necessary to do so for selling off the movable property in accordance with the provisions of this Subsection.

Section 3 Contracts Under Selective Tender

(If Contracts May Be Put Out to Selective Tender)

Article 94(1)A contract may be put out to selective tender pursuant to the provisions of Article 29-3, paragraph (5) of the Public Accounting Act in the following cases:

(i)when having construction or manufacturing done at a target price that does not exceed 8 million yen;

(ii)when purchasing assets at a target price that does not exceed 5 million yen;

(iii)when borrowing an object at an annual or total target lease charge that does not exceed 3 million yen;

(iv)when selling off assets at a target price that does not exceed 2 million yen;

(v)when lending out an object at an annual or total target lease charge that does not exceed 1 million yen; or

(vi)when the target price of a contract other than a work contract for construction or manufacturing, a sale or purchase contract for assets, or a contract to lend or borrow an object does not exceed 3.5 million yen.

(2)When a contract may take the form of a discretionary contract, this does not preclude the contract from being put out to selective tender.

(Eligibility as Selective Tender Participants)

Article 95(1)The head of a ministry or agency or an employee delegated by them must determine the eligibility required of persons participating in selective tenders regarding the matters prescribed in Article 72, paragraph (1), in connection with each type of contract in terms of construction, manufacturing, purchase of objects, and other contracts, in accordance with the price, etc. of the contract.

(2)The provisions of Article 72, paragraph (2) and paragraph (3) apply mutatis mutandis when the head of a ministry or agency or an employee delegated by them determines eligibility pursuant to the preceding paragraph.

(3)In the case referred to in the preceding paragraph and if it has been determined that an eligibility assessment or the preparation of a name list pursuant to the provisions of Article 72, paragraph (2) and (3) as applied mutatis mutandis to the preceding paragraph is not required due to factors such as eligibility pursuant to paragraph (1) being the same as eligibility pursuant to Article 72, paragraph (1), the eligibility assessment and preparation of a name list pursuant to the mutatis mutandis application stated in the preceding paragraph is not conducted, and the eligibility assessment and the preparation of a name list pursuant to Article 72, paragraph (2), and paragraph (3) is to be substituted for them.

(4)The head of a ministry or agency or an employee delegated by them may specify provisions contrary to those prescribed in paragraph (1) and paragraph (2) regarding the determination and assessment of the eligibility required of persons participating in tenders, and may decide not to prepare a name list of persons who are eligible to participate in the tenders implemented by a contract officer, etc., due to the small number of annual contracts and other special circumstances involving the selective tenders implemented by that officer, etc.

(Selection Standards)

Article 96(1)The head of a ministry or agency or an employee delegated by them must determine the standards by which a contract officer, etc. will select persons to participate in tenders from among those that are eligible under the preceding Article.

(2)If the standards prescribed in the preceding paragraph have been determined, the head of a ministry or agency or an employee delegated by them must notify the Minister of Finance.

(Selection of Tender Participants)

Article 97(1)When a contract officer, etc. put a contract out to selective tender, the officer, etc. must select preferably ten or more persons to participate in the tender based on the standards prescribed under paragraph (1) of the preceding Article, from among persons eligible under Article 95.

(2)In the case referred to the preceding paragraph, the contract officer, etc. must notify the selected persons of the matters stated in Article 75, item (i) and items (iii) through (v).

(Mutatis Mutandis Application of Provisions on Open Tenders)

Article 98The provisions of Article 70, Article 71, and Article 76 through Article 91 apply mutatis mutandis to selective tenders.

Section 4 Discretionary Contracts

(When Discretionary Contracts May Be Used)

Article 99A contract may take the form of a discretionary contract pursuant to Article 29-3, paragraph (5) of the Public Accounting Act in the following cases:

(i)when it is necessary to keep the acts of the State confidential;

(ii)when having construction or manufacturing done at a target price that does not exceed 4 million yen;

(iii)when purchasing assets at a target price that does not exceed 3 million yen;

(iv)when borrowing an object at an annual or total target lease charge that does not exceed 1.5 million yen;

(v)when selling off assets at a target price that does not exceed 1 million yen;

(vi)when lending out an object at an annual or total lease charge that does not exceed five hundred thousand yen;

(vii)when the target price of a contract other than a work contract for construction or manufacturing, a sale or purchase contract for assets, or a contract to lend or borrow an object does not exceed 2 million yen;

(viii)when having something transported or stored;

(ix)when contracting with the Okinawa Development Finance Corporation or another corporation designated by the Minister of Finance from among those established by special acts of establishment pursuant to the provisions of a special Act;

(x)when selling off articles connected with production on a farm or in a factory, school, laboratory, prison, or other equivalent places;

(xi)when selling off articles that need to be used in the manufacture, repair, processing, or delivery of articles in demand by the State;

(xii)when selling off assets or lending them out at a charge to a person that may transfer or loan those assets at no charge pursuant to law;

(xiii)when selling off construction materials produced by the State to victims affected by an extraordinary disaster;

(xiv)when selling off or lending out objects needed to assist disaster victims or persons providing rescue services;

(xv)when contracting in a foreign country;

(xvi)when purchasing or borrowing objects directly from a prefectural or municipal government or other public corporation or from a public interest corporation, agricultural cooperative, or a federation of agricultural cooperatives;

(xvi)-2when purchasing or borrowing objects directly from a relief facility established for a charitable purpose or receiving service from a relief facility established for a charitable purpose;

(xvii)when the contract takes the form of a joint contract for work with developers of civil works in a development area;

(xviii)when purchasing objects directly from a business cooperative, small business cooperative, federation of cooperatives, commercial and industrial partnership, or a federation of commercial and industrial partnerships for protection and training purposes;

(xix)when selling off or lending out objects needed for the protection and promotion of academic studies or craftsmanship;

(xx)when selling or lending out objects needed for the protection and promotion of industry or development projects or when purchasing articles directly from the producer;

(xxi)when selling off, lending, or entrusting the necessary object directly to a public organization or business entity to provide it for public use, government use, or use for public benefit service;

(xxii)when selling off or lending out land, a building, or a forest or product derived from it to a person with a special connection;

(xxiii)when purchasing an article or having it manufactured, having a forest planted, or borrowing land or buildings, based on a special necessity in business operations;

(xxiv)when entrusting sales to a wholesaler or having a wholesaler conduct sales pursuant to the provisions of laws or Cabinet Orders; or

(xxv)when selling off a portion of patent rights or model utility rights resulting from test research that the State has entrusted to a person other than the State, to the person to which that test research was entrusted.

Article 99-2If there are no bidders even though the contract officer, etc. have put a contract out to tender or if there is no successful bidder even though the officer, etc. have called for re-bidding, the contract may take the form of a discretionary contract. In this case, the target price and other conditions of the initial tender may not be changed, except for the contract guarantee and performance period.

Article 99-3If the successful bidder does not enter into the contract, the contract officer, etc. may have the contract take the form of a discretionary contract, within the scope determined by the successful bid amount. In this case, the conditions determined for the initial tender may not be changed, except for the performance period.

(Divisible Contracts)

Article 99-4In cases referred to in the preceding two Articles, only if it is possible to calculate the target price or the successful bid amount by dividing it, the contract may be divided among and entered into with a number of persons, within the scope of the target price or successful bid amount.

(Determination of the Target Price)

Article 99-5When the contract officer, etc. seek to have a contract take the form of a discretionary contract, the officer, etc. must determine the target price in advance in accordance with the provisions of Article 80.

(Collection of Quotations)

Article 99-6When the contract officer, etc. seek to have a contract take the form of a discretionary contract, the officer, etc. must collect quotations from preferably two or more persons.

Section 5 Conclusion of Contracts

(Matters Included in Written Contracts)

Article 100(1)A contract officer, etc. must include the following matters in a written contract that the officer, etc. must draw up, in addition to the contract purpose, contract price, performance period, and contract guarantee, pursuant to the provisions of the main clause of Article 29-8, paragraph (1) of the Public Accounting Act; provided, however, that this does not apply to matters that are not applicable in view of the nature and purpose of the contract:

(i)the place of contract performance;

(ii)the time, date, and form for the payment or receipt of the contract price;

(iii)supervision and inspections;

(iv)interest for delay, penalties, and other damages in cases of delay in performance or other defaults;

(v)risk of loss;

(vi)warranty against defects;

(vii)method of resolving disputes related to the contract; and

(viii)other necessary matters.

(2)Beyond what is prescribed in the preceding paragraph, matters included in a written contract and other details related to drawing up a written contract are governed by the determinations made by the Minister of Finance.

(Cases a Written Contract May Be Omitted)

Article 100-2(1)The omission of a written contract pursuant to the provisions of the proviso of Article 29-8, paragraph (1) of the Public Accounting Act is permitted in the following cases:

(i)when entering into a contract under open tender or a contract under selective tender or a discretionary contract with a person that is eligible pursuant to Article 72, paragraph (1), for an amount not exceeding 2.5 million yen (or 3.5 million yen if entered into in a foreign country);

(ii)when putting the contract up for auction;

(iii)when an article is sold off and the purchaser immediately pays the price and receives the article; and

(iv)when the head of a ministry or agency determines that it is not necessary to draw up a written contract for a discretionary contract other than one prescribed in item (i).

(2)If the head of a ministry or agency seeks to reach a determination pursuant to item (iv) of the preceding paragraph, the head of a ministry or agency must hold s discussion with the Minister of Finance.

(3)The Minister of Finance must notify the Board of Audit after the discussion has come to a satisfactory conclusion prescribed in the preceding paragraph.

(Exemption from Payment of a Contract Guarantee)

Article 100-3A contract officer, etc. need not collect a contract guarantee, either in whole or in part, pursuant to the provisions of the proviso of Article 29-9, paragraph (1) of the Public Accounting Act, in the following cases:

(i)if the other party to a contract has entered into a contract for performance guarantee insurance with an insurance company, naming the State as the insured;

(ii)if a work performance guarantee has been contracted with an insurance company, bank, or the Norinchukin Bank entrusted by the other party to the contract or with another financial institution designated by the Minister of Finance; or

(iii)when the contract officer, etc. put the contract out for open tender or selective tender or up for auction with eligible persons pursuant to Article 72, paragraph (1) or when the contract takes the form of a discretionary contract, and it is found to be unnecessary to collect a contract guarantee.

(Security in Lieu of Contract Guarantees)

Article 100-4The provisions of Article 78 apply mutatis mutandis when a contract officer, etc. permit security to be provided in lieu of the payment of a contract guarantee.

Section 6 Contract Performance

(Timing for Completing Payment of the Sales Price)

Article 101Except as otherwise provided for by law or Cabinet Order, the sales price of assets owned by the State must be completely paid by the time of the delivery or the transfer of a registration or the time of registration.

(Timing for Payment of Rental Fees)

Article 101-2Except as otherwise provided for by law or Cabinet Order, rental fees for assets must be paid in advance; provided, however, that if the loan period is six months or more, advance payments may be made in periodic installments.

(Means of Supervision)

Article 101-3A contract officer, etc. are to personally perform or order an assistant to perform the necessary supervision to ensure the appropriate performance of a contract for work involving construction, manufacturing, or other work referred to in Article 29-11, paragraph (1) of the Public Accounting Act (referred to bellow as "supervision" in this Subsection), by being present, issuing directions, or using other appropriate means .

(Means of Inspection)

Article 101-4A contract officer, etc. are to perform the necessary inspections (referred to bellow as "inspections" in this Subsection) either personally or by assigning an assistant to verify that delivery under any contract for work involving construction or manufacturing or otherwise, or any purchase or other contracts involving an object, as prescribed in Article 29-11, paragraph (2) of the Public Accounting Act, is complete (including verifying completion of portions of construction or manufacturing or delivery of portions of the objects, if payment of a portion of the price before completion of delivery is required), based on the contract, specifications, designs, or other related documents.

(Partial Omission of Inspections)

Article 101-5Inspections of matters other than quantity may be omitted in connection with a contract for the purchase of objects that is prescribed by the Minister of Finance from among those for which the content of work to be delivered is found to have been secured by the special provisions prescribed in Article 29-11, paragraph (3) of the Public Accounting Act.

(Procedures for Having Employees Other Than Contract Officers or Their Assistants Perform Supervision and Inspections)

Article 101-6(1)The provisions of Article 68, paragraph (1) apply mutatis mutandis when the head of a ministry or agency has an employee from that ministry or agency other than the contract officer, etc., or assistant for a contract perform supervision or inspections pursuant to the provisions of Article 29-11, paragraph (4) of the Public Accounting Act, and the provisions of Article 26, paragraph (3) apply mutatis mutandis when the head of a ministry or agency has an employee from another ministry or agency perform supervision or inspections pursuant to the provisions of Article 29-11, paragraph (4) of the Act.

(2)In the cases referred to in the preceding paragraph, the heads of a ministry or agency or an employee delegated by them may have a person with certain official duties perform supervision or inspections by designating the government position in the relevant ministry or agency or other ministry or agency. In this case, it is sufficient for consent pursuant to the provisions of Article 26, paragraph (3) as applied mutatis mutandis pursuant to the preceding paragraph to be obtained for the scope of official duties they seek to designate or for the scope of administrative processes they seek to have performed.

(3)When the head of a ministry or agency or an employee delegated by them has an employee from that ministry or agency or from another ministry or agency other than the contract officer, etc., or their assistant for the contract perform supervision or inspections, they must notify the relevant contract officer, etc. of the fact and the government position and name of that another employee who is being made to perform the supervision or inspections, and of the relevant government position and the name of the employee, and must notify the employee who it has been decided will be made to perform the supervision or inspections of the government position and name of the contract officer, etc.

(Prohibition of Concurrent Involvement in Supervisory Duties and Inspection Duties)

Article 101-7The duties of an assistant who is ordered to perform inspections by the contract officer, etc., or an employee ordered to perform inspections by the head of a ministry or agency or an employee delegated by the head of a ministry or agency may not overlap with the duties of an assistant ordered to perform supervision by the contract officer, etc., and the employee ordered to perform supervision by the head of a ministry or agency or an employee delegated by the head of a ministry or agency, unless there is a special necessity.

(Delegation of Supervision and Inspections)

Article 101-8When it is determined to be difficult or inappropriate for supervision or inspections to be performed by a State employee due to particular professional knowledge or skills being required or for other reasons, a contract officer, etc. may delegate a person other than a State employee to perform the supervision or inspections, pursuant to the provisions of Article 29-11, paragraph (5) of the Public Accounting Act.

(Preparation of Inspection Reports)

Article 101-9(1)A contract officer, etc., an assistant ordered to perform inspections by the employee, etc., and an employee ordered to perform inspections by the head of a ministry or agency or an official delegated by them must prepare an inspection report upon the completion of an inspection, except as otherwise determined by the Minister of Finance.

(2)When an inspection report is to be prepared pursuant to the provisions of the preceding paragraph, payment may not be made unless based on that inspection report.

(Limitations on Partial Payment Amounts)

Article 101-10The payment amount when it is necessary to pay a portion of the price of partially performed construction, manufacturing, or other contracts for work or partially performed contract for the purchase of objects before completion pursuant to that contract, may not exceed nine-tenths of the price of the partially performed portion of the construction, manufacturing, or other contracts for work or nine-tenths of the price of the partially performed portion of the contract for the purchase of objects; provided, however, that payment may be made up to the total price for the completed portion of a severable construction, manufacturing, or other contracts for work.

Section 7 Miscellaneous Provisions

(Reporting on Persons Who May Be Prevented from Participating in Tenders)

Article 102(1)When a contract officer, etc. find that a person falls within the provisions of Article 71 in relation to a contract handled by the contract officer, etc., the officer, etc. must report this to the relevant head of a ministry or agency by submitting a document that specifies or records the details of that fact, in accordance with what is stated by the Minister of Finance.

(2)If the head of a ministry or agency receives a report prescribed in the preceding paragraph and finds that the person specified in that report falls under Article 71, they must submit a document specifying or recording that fact to the Minister of Finance.

(3)If the Minister of Finance receives a document prescribed in the preceding paragraph, the Minister is to summarize and submit it to the relevant head of a ministry or agency.

(Permitted Subject Matters for Long-Term Contracts)

Article 102-2A contract officer, etc. may conclude a contract to be provided or supplied with the following electricity, gas, water, or electronic communications services over the following fiscal year and beyond, pursuant to the provisions prescribed in Article 29-12 of the Public Accounting Act:

(i)electricity supplied by an electricity utility prescribed in Article 2, paragraph (1), item (xvii) of the Electricity Business Act;

(ii)gas supplied by a gas supplier prescribed in Article 2, paragraph (12) of the Gas Business Act;

(iii)water supplied by a water supplier prescribed in Article 3, paragraph (5) of the Water Supply Act or by an industrial water supplier prescribed in Article 2, paragraph (5) of the Industrial Water Supply Business Act; and

(iv)telecommunications services (except services determined by the Minister of Finance) provided by a telecommunications carrier prescribed in Article 2, item (v) of the Telecommunications Business Act (Act No. 86 of 1984).

(Discussions with the Minister of Finance in Seeking to Determine the Eligibility of Tender Participants)

Article 102-3When the head of a ministry or agency seeks to determine the eligibility required of persons participating in open tenders as referred to in Article 72, paragraph (1), the standards referred to in Article 85, or the eligibility required of persons participating in selective tenders as stated in Article 95, paragraph (1), or to reach a determination pursuant to the provisions prescribed in paragraph (4) of that Article, the relevant head of a ministry or agency must hold a discussion with the Minister of Finance in advance. In this case, if the matter to be determined is the eligibility required of persons participating in tenders, it is sufficient that the discussion is held regarding the matters that are fundamental to that eligibility.

(Discussions with the Minister of Finance in Seeking to Put a Contract Out to Selective Tender or to Have It Take the Form of a Discretionary Contract)

Article 102-4If a contract officer, etc. seek to put a contract out to selective tender or to have it take the form of a discretionary contract, the head of a ministry or agency must hold discussions with the Minister of Finance in advance; provided, however, that this does not apply in the following cases:

(i)when an open tender is not necessary, due to the small number of people who would participate in the tender due to the nature or purpose of the contract, and the contract officer, etc. seek to put the contract out to selective tender;

(ii)if it has been determined to be disadvantageous to put a contract out to open tender and the contract officer, etc. seeks to put the contract out to selective tender, and the reason for determining open tender to be disadvantageous falls under one of the sub-items from (a) through (c), below:

(a)it is likely that parties involved will collude to prevent the fair performance of an open tender;

(b)the contract is for the construction or manufacture of a building, etc. with a particular structure or for the purchase of an object of a particular quality, and it is extremely difficult to inspect it; or

(c)it is likely that a project by the State will be greatly hindered in the case of a breach of contract;

(iii)when the nature or purpose of the contract does not permit a tender or a contract cannot be put out to tender due to an urgent situation, and the contract officer, etc. seeks to have the contract take the form of a discretionary contract;

(iv)if it has been determined that it is disadvantageous to put the contract out to tender and the contract officer, etc. seeks to have the contract take the form of a discretionary contract, and the reason for determining tender to be disadvantageous falls under one of the sub-items from (a) through (d), below:

(a)it is disadvantageous to have a person other than the party to a contract that is currently being performed, perform a contract directly related to the construction, manufacture, or purchase of objects under the contract currently being performed;

(b)it is anticipated that having the contract take the form of a discretionary contract will make it possible to contract at a greatly advantageous price in comparison to the market price;

(c)a large volume of objects is required and it is likely that the price will rise due to speculative stocking if the required objects are not purchased separately; or

(d)it is likely that the opportunity to form a contract will be lost or that it will become necessary to form a contract at a greatly disadvantageous price if it is not done quickly;

(v)when the contract officer, etc. seek to put the contract out to selective tender pursuant to any of the stated items of Article 94, paragraph (1);

(vi)when the contract may take the form of a discretionary contract pursuant to the provisions of Article 94, paragraph (2), and the contract officer, etc. seek to put the contract out to selective tender; or

(vii)when the contract officer, etc. seek to have the contract take the form of a discretionary contract pursuant to the provisions of Article 99, items (i) through (xviii), Article 99-2, or Article 99-3.

(Acts Equivalent to Contracts Between Ministry and Agency Organizations)

Article 102-5Acts equivalent to the formation of a contract between ministry and agency organizations are treated as are conducted for contracts; provided, however, that the following stated actions may not be taken:

(i)assessment of the eligibility required of persons participating in tenders pursuant to the provisions of Article 72, paragraph (2) (including when applied mutatis mutandis to Article 95, paragraph (2));

(ii)payment of a bid deposit or contract guarantee;

(iii)drawing up contracts; and

(iv)putting contracts out to tender.