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World Trade Organization - page 23 / 35





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Even though the GPA's procedural disciplines and the enforcement mechanisms are motivated primarily by the need to safeguard the rights of foreign suppliers, they play an important role in alleviating the domestic agency problem in procurement.  This is achieved by creating mechanisms for reciprocal international monitoring.  The legal scope for monitoring and enforcement is shifted from dispersed tax-payers, who have little interest in monitoring individual procurement decisions, to the bidders for contracts who have a significant stake.  As Laffont and Tirole (1993, p. 9) write, "the fact that consumers have no individual stake in procurement (the taxpayers do but are poorly organized) means that they are unlikely to be active in hearings and to act as watchdogs of the agency (unless the good procured is a local public good and local advocacy groups are well organized)." Two elements of the GPA are crucial in this context.  First, the agency problem is mitigated by creating obligations on the procurer to be transparent.  Secondly, foreign suppliers are given the opportunity to challenge the decisions of the procurer before national courts or independent and impartial review bodies.

It may be asked, what does the GPA add to national legislation which often contains similar provisions to mitigate agency problems?  First, the GPA extends the obligation to create detailed procedural and enforcement disciplines even to Members who previously did not have such disciplines, or not at the level contained in the GPA.  This obligation is enforced by the system of multilateral dispute settlement.  Second, where collusion amongst domestic bidders has been perceived to be a significant problem, the creation of the right to challenge for foreign bidders, who are less susceptible to these problems, may enhance the scope for private enforcement.23

In order to ensure the implementation of its basic principles of non-discrimination, the GPA places particular emphasis on transparency at each step of the procurement process.  Ex ante transparency requirements stipulate that adequate efforts be made to inform all interested bidders about relevant aspects of the procurement in question (Articles VII to XVII).  Ex post transparency requirements stipulate that adequate information be provided regarding the decisions that are taken (XVIII and XIX).  The GPA also contains an obligation

    (This may also be important where the procurer and domestic bidders are closely associated.  McLachlan (1985), for instance, suggests that in certain countries, representatives of domestic industry were closely involved in procurement review right up to (but not including) the final decision stage.  He finds that the relationship between domestic industry and procuring bureaucrats is often extremely close.


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