January 12, 1996
Many cases involving divergencies of interest among participating countries concerning the application of rules for international competitive bidding are settled either by informal consultation or discussion around the conference table. In the pre-arbitration period, nations should be prepared to reconsider their position if they want to reduce delays in implementation. There remain, however, exceptional cases where agreement cannot be reached by these means sufficiently quickly to avoid delaying unduly the implementation of the work to which the dispute relates.
In order to solve such cases a procedure has been developed which, within prescribed limits, provides countries of origin with a means of ensuring that host nations do not discriminate against their firms. Only those disputes based on alleged deviations of the rules as defined in paragraph A.2 below and raised by a country whose firm has been nominated to participate in a bid will be considered by NATO. Therefore a dispute is limited to the country of origin of the nominated bidder on one side and the host nation on the other.
To avoid delays in the procurement as much as possible, time periods mentioned in the dispute procedure should be strictly adhered to.
1. The procedure set forth hereafter shall apply to disputes about the correct application of the principles and procedures for international competitive bidding approved by NATO, which arise prior to the signature of a contract for NATO Security Investment works or prior to the host nation having formally committed itself in writing to award a contract to a particular firm. It will apply to disputes between one or more participating countries and the host nation.
2. The disputes are limited to:(a) The non-observance of procurement procedures contained in this document , if it can be demonstrated that this has led to discrimination against one or more firms;
(b) The non admission of a firm to submit a bid;
(c) The sending out of invitations to bid in such a manner that some eligible firms are not able to submit a bid if they so desire;
(d) The wording of a “cahier des charges” in such a way as to restrict competition unduly;
(e) The determination of the price of a bid conforming with the “cahier des charges”;
(f) The non-conformity of bids received with the “cahier des charges”;(g) The non-observance by the host nation of the time limits prescribed in paragraphs 6, 7 and 10 of the international competitive bidding procedures, if this leads to discrimination against a (prospective) bidder;
3. Depending on the nature of the complaint, the time limits for the procedure in paragraph 4 below are as follows:(a) complaints under paragraph 2, sub-paragraphs (a), (b), (c), and (d) above should be lodged with the host nation and notified to the Committee before the closing date for submissions of bids as established by the host nation in accordance with para. 10 of the international competitive bidding procedure;
(b) complaints under paragraph 2, sub-paragraph (e) and (f) above, should be lodged before the expiry of the time limit of 21 days provided for under paragraphs 13 (ii) (a) and 13 (iii) (a) of the international competitive bidding procedure;
(c) complaints under paragraph 2, sub-paragraph (g) above should be lodged within 14 days after expiry of the time limit (s) which the host nation has not respected.
4. Should a delegation allege the incorrect application of the agreed principles and procedures for international competitive bidding within the limitations given in paragraph 2 above it will submit, within the time limit specified in paragraph 3 above, a formal request to the delegation of the host nation to suspend the placing of the contract and to refrain from any action which might prejudice the rights of the parties concerned. At the same time the delegation making the request shall notify the Committee that it has done so.5. The host nation will immediately comply with the request submitted by the delegation lodging the complaint. A period of 21 days from the date of notification to the Committee will be allowed for discussions between the host nation and the other party (or parties to the disagreement), with the object of arriving at an amicable settlement. At this stage the International Staff may be invited to present their views on the matter under dispute.6. At the meeting of the Committee upon expiration of the 21 day period referred to in paragraph 5 above, the parties concerned shall either orally or in writing report to the Committee on the progress of their discussions. If at this meeting the Committee feels that an extension of the “talking period” is justified due to progress in the discussions and if the disputants request an extension even though they have not reached agreement, an extension of not more than seven days may be granted. If an extension is not granted, a formal dispute will be deemed to exist and the Committee will open discussion on the points in dispute during the meeting. The issue may be discussed at not more than two consecutive meetings of the Committee.
7. If at the conclusion of the Committee discussion period as per paragraph 6 above, no agreement is reached, between the disputants, the Committee shall, at the end of the second and last discussion, submit the dispute to arbitration and a Board of Arbitration (hereafter referred to as the Board) shall be formed in accordance with paragraph 8 below and based on the Terms of Reference (see Appendix to this Annex).8. The Committee, currently with the submission of a dispute to arbitration, shall ask the Secretary General to request three participating countries in no way concerned in the dispute each to designate a member to serve on the Board. Alternatively, the Committee may ask the Secretary General to designate an officer of the International Staff, or a NATO Agency, and to request two participating countries each to nominate a member. It is desirable that the persons designated should be familiar with the NATO Security Investment Program. These persons shall act impartially according to their individual good judgement. NATO Headquarters will provide assistance and expertise whenever necessary.
9. The Secretary General shall inform each individual designated to the Board of the subject of the dispute in broad terms; each individual shall then signify to the Secretary General in writing within the time specified:(a) his acceptance of the position of arbitrator in the dispute, and
(b) his acceptance of the obligation not to disclose except as provided in paragraph 12 below, the views held by any of the arbitrators or the nature of their deliberations and discussions.10. When the composition of the Board has been settled the Secretary General shall take the following action:(a) forthwith inform the Committee at which time the dispute is closed to discussion in the Committee;
(b) the Secretary General, or the official acting on his behalf, shall charge the Board; inter alia, he shall mention the subject of the dispute and the rules that apply.
11. The Board shall meet as soon as possible and in any case not later than 14 days after the date of notification to the arbiters of their appointment to the Board. It shall establish its own rules of procedure in accordance with the Terms of Reference at Appendix to this Annex which, inter alia, will provide for:(a) An exchange of memoranda in which the parties in dispute shall state their position;
(b) each nation involved should be entitled to comment upon the memoranda submitted by the other involved nation;
(c) at least one hearing of each party concerned in the dispute;(d) nations should be allowed the assistance of technical experts of industry and/or of the firm involved.
12. The decision of the Board shall be based on the principles and procedures of international competitive bidding as contained in this document and on the evidence produced. The decision shall be the majority view and shall not show the minority view, if any. It shall be presented in writing to the Committee not later than 28 days after the Board’s first meeting. The decision of the Board shall be final, binding and no appeal be allowed.
13. Participating nations concerned shall, with due speed, take the necessary steps to implement the Board’s decision.
The guiding principles in the ICB procedures are:
The Board of Arbitration shall comprise representatives from participating countries, NATO agencies or the NIS, in no way concerned with the disputes; individual backgrounds shall be such that the Board has collective experience of the relevant aspects of the subject under dispute. The International Staff of NATO headquarters will provide assistance and expertise whenever necessary.
1. The Board shall establish its own rules of procedure in respect of each dispute to be considered.
2. The Board shall have access to all documentation relevant to the disputes, including but not limited to, the cahier des charges, results of the bidders’ conference, the bids, the statements of non-compliancy and relevant records.
3. The Board shall call for memoranda from the country of origin and from the host nation, fully reflecting the views of each. All such memoranda shall be made available to each of the nations concerned in the particular dispute.
4. The Board shall conduct at least one hearing of the country of origin in the presence of the host nation and of the host nation in the presence of the country of origin.
5. The Board shall be able to have private hearings of each disputing country without the presence of the other.
6. The Board shall, if so requested by a country of origin, allow bidders to provide further technical clarification during the hearings. Such clarification shall not result in a change to the technical proposals or the bid price.
7. If the dispute is related to action described in paragraph 2. (f) of Annex I, the Board shall determine whether in the light of all evidence and the clarifications provided, the bid is in conformity with the cahier des charges, or whether sufficient reasons in these respects justify a decision of non-compliancy. The decision of the Board in this matter shall be based on the guiding principles contained in AC/4-D/2261 (1996 Edition).
8. The decision shall be the majority view and shall not show the minority view. It shall be presented to the Council with detailed reasons as soon as possible, and in any case not later than 28 days after the Board’s first meeting. The decision of the Board shall be final and no appeal shall be allowed.
2. The objective of the optional preliminary bidding procedure is to allow the host nation to adopt a more flexible approach in its dealings with bidders. This flexibility should provide bidders with a better understanding of the NATO requirements and make the host nation aware of industrial capabilities. Such co-operation between the host nation and bidders should also decrease the risk of disputes during the second stage of the bidding procedure.
(a) the host nation will issue a notification of intention to call for bids and establish a list of eligible firms in accordance with paragraphs 5 and 6 of Document AC/4-D/2261 (1996 Edition).
(b) the issue of a Request for Bidder Views (RFBV) on their system approach to the problem but excluding an actual Technical Bid Proposal. During the entire procurement cycle up to the issue of an Invitation for Bid (IFB) in accordance with Document AC/4-D/2261 (1996 Edition) the term “system approach” will be used solely to distinguish the first step of the two-step procurement procedure;(i) The RFBV will provide the eligible firms with a comprehensive insight into the technical factors, criteria and/or problems which they should consider – as a minimum – in preparing their initial response. It will also indicate the basis on which preliminary discussions with potential bidders will be conducted and also that on which evaluation of their final technical proposals will be carried out; this will help to ensure that all eligible firms solicited have a common understanding of the requirement and of the way in which host nations intend to conduct the preliminary round of discussions and handle the final evaluation of bids;
(ii) RFBV will include:
- the best practicable description of the requirement;- the requirements of the proposed system approach and a statement that no pricing information nor the bidder’s detailed technical proposal should be submitted;- a statement that potential bidders will be free to respond with their system approach in whatever depth they would wish, but excluding their final technical proposal;- prospective contractual terms and conditions applicable to this project;- a closing date for submitting system approach proposals; this closing date must be at least 42 days after the issue of the RFBV;
- a notification that the optional preliminary bidding procedure is being used; eligible firms will be informed that the host nation will discuss their system approach proposal with them (and that all eligible firms established in accordance with paragraphs 3 (a) above will be permitted to submit a bid in the second step of the procurement cycle, even if they did not desire to participate in step 1);
(c) system approach proposals submitted in response to the RFBV will then be reviewed by the host nation. Discussions will be held with each participating firm to identify and clarify any difficulties foreseen in the implementation of the project;(i) during discussions with the firms, all personnel involved in the discussions will be cautioned against furnishing to one firm any additional information that may afford it a competitive advantage over the other eligible firms; if general information is provided to one firm on a particular subject which would aid him in preparing his bid, the same information will then be provided to all other eligible firms, by means of an amendment to RFBV document; disclosure of such information within the host nation will be on a “need to know” basis only;
(ii) host nation will take every step to safeguard information contained in the system approach received from eligible firms; in cases when system approach include descriptive literature or materials or special technical data in which the firms have proprietary or other interest, and which they do not want disclosed to the public or used by the host nation for any purpose other than evaluation of their system approach, special instructions in the RFBV will provide guidance to the eligible firms on how to identify and mark the data which falls in this category;
(d) upon completion of the discussions, the host nation may decide to amend/modify certain requirements contained in the RFBV in light of the exchanges made with industry: any amendments and modifications of this nature will be submitted to all eligible firms and by this manner the preparation of the final IFB package will be implemented according to a common and well understood baseline;
(e) from this point on, the procedure will be held in total accordance with that described in Document AC/4-D/2261 (1996 Edition); the list of eligible firms as mentioned in paragraph 3 (a) above will still be used for distribution of the final IFB; copies will be sent out to all eligible firms even if they do not respond to the RFBV.
4. This procedure is considered applicable to large projects involving high technology; a host nation should decide at the earliest possible stage whether it would wish to use the optional preliminary bidding procedure to supplement the procedure as set out in Document AC/4-D/2261 (1996 Edition) and preferably prior to the use of the “notification of intent to call for bid”; a host nation wishing to adopt the optional procedure in paragraph 3 above should so inform the Infrastructure Committee of its intention, and ask for its guidance and advice.