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Government Procurement in the U.S.-Panama Trade Promotion Agreement

Government procurement typically represents 10 to 15 percent of a country’s Gross Domestic Product. Trade agreements that open foreign government procurement markets provide significant export opportunities for U.S. companies and American workers. When U.S. companies are able to sell into those foreign government procurement markets, they can boost exports and support better, higher-paying U.S. jobs.

The U.S.-Panama Trade Promotion Agreement (the “Agreement”) government procurement chapter provides significant opportunities for U.S. companies to supply their goods and services to the Panama government with strong procedures that apply to the conduct of the procurement. At the same time, the Agreement’s government procurement rules ensure that certain American business sectors – such as small businesses or textile companies bidding on Department of Defense procurement – continue to receive the same protections they have in other agreements, and also ensure that American environmental and labor safeguards will be maintained.

KEY ELEMENTS:

• The Agreement’s government procurement obligations will open Panama’s government procurement market to U.S. firms, creating significant new opportunities for exporters, and ensure that U.S. firms will get to bid on contracts on a level playing field with Panamanian firms.

• Under the Agreement, U.S. suppliers are granted rights to non-discriminatory treatment in bidding on the procurement of a broad range of Panamanian government entities in all three branches of Panama central government – executive, legislative, and judicial. U.S. suppliers will be able to participate in the procurement of Panama’s ministries, legislature and courts, as well as regional governments, and 31 public enterprises, including the Panama Canal Authority and Panama’s major electric utility.

• Access to the procurement of the Panama Canal Authority is important because of its $5.25 billion expansion of the Canal, which is the largest infrastructure project of its kind in Latin America. Panama is also expected to have additional infrastructure projects in coming years, including, for example, a highway between Colon and Panama City, the expansion and modernization of the Tocumen International Airport, and a mega-port project for container ships on the Pacific side of the Panama Canal.

• For all Panamanian central government agencies covered under the Agreement, American contractors will be able to bid on procurements of goods and services valued at $193,000 and above and procurement of construction services valued at $7,407,000. (The thresholds are subject to adjustment every two years on January 1, with the next adjustment set for January 1, 2012.)

• The Agreement also applies to the purchases of Panama’s regional governments – both provinces and districts.

• The Agreement preserves the U.S. right to set aside contracts for U.S. small and minority businesses. The agreement does not give Panamanian firms the right to bid on textile purchases by the U.S. Department of Defense.

• The Agreement clarifies that build-operate-transfer contracts (BOTs) are within the scope of its government procurement obligations. BOTs act as financing vehicles for large-scale construction projects and the building or rehabilitation of public work facilities.

• The Agreement encourages Panama to adopt the latest and best emerging practices in government procurement, such as the use of electronic procurement tools, which will help U.S. small businesses – and all U.S. firms – more easily participate in government procurement in Panama.

• The government procurement chapter of the Agreement requires the use of transparent, predictable, and fair procedures in conducting the procurement covered by the Agreement. Each Party must publish its laws, regulations, and other measures governing procurement, along with any changes to those measures. The Chapter sets out basic requirements for each step of the procurement process. These include that procuring entities must publish notices of procurement opportunities in advance and provide effective bid review procedures.

• The Agreement clarifies that U.S. government agencies can include provisions in their procurements to promote environmental protection.

• The Agreement also clarifies that requirements can be inserted into government contracts requiring suppliers to comply with generally applicable laws regarding principles and rights in the country where the good is produced or the service is performed. These include freedom of association, collective bargaining, elimination of all forms of compulsory or forced labor, effective abolition of child labor and a prohibition on the worst forms of child labor, and elimination of employment and occupation discrimination based on gender, race, or other factors.

• The Agreement includes strong anti-corruption provisions that ensure integrity in government procurement. Each Party must maintain procedures to declare suppliers that have engaged in fraudulent or other illegal actions in relation to procurement ineligible for participation in the Party’s procurement.