Construction Bids in Japan

* Regarding your articles on public works contracting in Japan (Oct. 27-30):

It is one thing to report on problems and the reform of procedures for public works bidding and contracting in Japan, but quite another if the reports create a picture which is distorted or misleading.

First, The Times’ articles made a point of contrasting public and private construction contracts of $13 billion won by Japanese firms in the United States against $299 million by U.S. firms in Japan--citing the U.S. trade representative as the source. However, the USTR office has admitted that it made an error. The $13 billion figure is the amount of contracts won by all foreign contractors in the United States--with Japanese firms capturing just over 10%.

Second, the key point of U.S.-Japan discussions is greater access to public works contracts. In 1991, U.S. firms completed $281 million of work for the Japanese public sector, and Japanese firms completed $277 million in public works contracts in the United States. Public works awards are at parity.

Third, either intentionally or carelessly, The Times includes the imbalance in private sector construction projects into the discussion of public works projects, which only distorts the issue. But apart from that, I consider it quite important to emphasize the unique nature of the construction business. Airports and subway tunnels are not exported like automobiles or computers. As a rule, unlike many other trade transactions, the “value-added” portion of a public works contract is generated “on-site.” Lead contractors depend upon local subcontractors for their labor resources, their supply channels, and their expertise--the lion’s share of any award ultimately benefits local businesses and workers.

Reforms in public works bidding and contracting would provide greater opportunity for both domestic and international construction firms, as long as they are competitive. As in any business, only those firms which understand and are dedicated to the market will succeed under these reforms--and market share “targets,” which have gained currency in certain circles, will certainly have no place in a system based upon open and free bidding.

KOICHI HARAGUCHI

Consul General of Japan

Los Angeles