JAPAN Law and Practice Contributed by: Makoto Terazaki, Taku Matsumoto, Suguru Yokoi, Naoko Takasaki and Jun Suzuki, Anderson Mori & Tomotsune
curement framework is not determined by a separate defence-specific monetary threshold. In practice, defence procurement contracts are often based on draft contract terms prepared in advance by the procuring authority. Those draft terms are usu - ally prepared on the basis of standard forms, and the scope for negotiation is generally limited. As a result, the contract that is ultimately signed tends to follow the authority’s pre-prepared draft, substantially as it stands. 2.4 Restricted and Classified Procurement As a general rule, procurement is conducted through competitive bidding. However, where the subject mat - ter is sensitive or confidential, or where the number of suppliers capable of performing the contract is limited, procurement may exceptionally be carried out by way of a contract with a particular business operator. In practice, this allows the procuring authority to secure the procurement outcome through a more limited and controlled process. In such cases, the procuring authority may establish qualification criteria in advance and require bidders to submit documents demonstrating that they satisfy those criteria before bidding. A bid submitted by a bid - der that does not satisfy the prescribed criteria may be treated as invalid. In the defence sector, this com - bination of qualification screening and internal review operates in practice as a de facto form of restricted procurement. Even where a contract is not concluded on a discre - tionary basis, confidentiality is often reinforced by oth - er means. For example, the content of bidding docu - ments may be disclosed only to those bidders that pass an initial screening, and confidentiality clauses may be included in the contract to impose stricter obligations to protect sensitive information. 2.5 Tender Procedures for Defence Contracts As a matter of principle, Japanese public procure - ment is conducted through competitive bidding. The ordinary procedure is general competitive bidding, while designated competitive bidding is available only exceptionally where the relevant ordinances permit it in specified circumstances.
In the defence sector, procurement may exception - ally be carried out by way of a contract concluded at the discretion of the procuring authority rather than through a fully competitive process. This reflects the limited number of suppliers, the need for advanced technology, and the security-sensitive nature of the subject matter. Accordingly, while competitive bidding remains the formal starting point, defence procurement may be structured so that the contracting authority can use a more controlled process, including discretionary con - tracting where confidentiality or supplier limitations make open competition impractical. In that context, the authority may also pre-screen bidders by requiring them to satisfy specified qualification criteria before submission, and bids that do not meet those criteria may be treated as invalid. 2.6 Direct Contract Awards and Single- Source Procurement Under the Accounts Act, general competitive bid - ding is the default rule to ensure equal opportunity, procedural fairness and economic efficiency, while delivering cost-effectiveness. Specifically, Article 29-3, paragraph 1 of the Accounts Act provides that contracts are, as a rule, to be concluded by general competitive bidding. However, designated competi - tive bidding or a contract by discretionary award may be used under certain conditions. The procurement rules for the national government are generally based on the Accounts Act; the Cabinet Order concerning the Budget, Auditing and Accounting; the National Property Act; and the Contract Management Regula - tions. Where a contract by discretionary award is contem - plated, the budgetary regulations require that the esti - mated price be determined in advance. The regula - tions also provide that, as far as possible, quotations should be obtained, and from two or more sources whenever possible. In competitive bidding, the bid - der offering the lowest price within the estimated price is to be awarded the contract. Although there is no express statutory rule to the same effect for dis - cretionary awards, it is generally understood, in light of the Ministry of Finance circular, that the contract
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