Order 87: Public Contracts

by L. Paul Bremer, Coalition Provisional Authority

COALITION PROVISIONAL AUTHORITY ORDER NUMBER 87

PUBLIC CONTRACTS

Pursuant to my authority as Administrator of the Coalition Provisional Authority (CPA),
and under the laws and usages of war, and consistent with relevant U.N. Security Council
resolutions, including Resolutions 1483 and 1511 (2003),

Recognizing that public contracts laws should conform to international standards of
transparency, predictability, fairness of treatment; provide for dispute resolution
mechanisms; be free from corruption and undue influence; and create a system to procure
goods and services at the best possible value for the government,

Noting that the concept of full, fair and open competition is of critical importance to the
economy of Iraq and the goal of free trade among nations,

Building on the existing Iraqi laws in the field, including administrative instructions, and
modernizing them in accordance with best international practice,

I hereby promulgate the following:

Section 1
Principles of Government Public Procurement


1) This Order applies to all procurements of goods, services, and construction services
by the State of Iraq acting through Ministries or other federal agencies (collectively
“agencies”); or governmental units including Regions; Governorates; and all other
subdivisions of the State of Iraq (collectively “governmental units”) that may commit
public funds. Procurement is the acquiring by contract with public funds of goods,
services or construction services by and for the use of the government through
purchase or lease. The State of Iraq through Ministries or other federal agencies;
Regions; Governorates; and all other subdivisions of the State of Iraq shall commit
public funds in accordance with the following basic principles:

a) To the maximum extent practicable, full, fair and open competitive public bidding
procedures, including, but not limited to: effective tender publication; objective
bid evaluation criteria; public bid opening; and, the use of electronic commerce
methods.

b) International standards of transparency, predictability, fairness and equality of
treatment;

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c) Procurement process integrity, minimum ethical standards and non-conflict of
interest;

d) Offeror’s right to file tender protests and related appeals;

e) Tender dispute resolution mechanisms and the timely resolution of such disputes.

Section 2
Office of Government Public Contract Policy


1) Establishment and Responsibilities

a) There shall be established, within the Ministry of Planning and Development
Cooperation, an Office of Government Public Contract Policy. The head of this
Office shall report directly to the Minister of Planning.

b) The Office of Government Public Contract Policy shall have responsibility for:

i) Coordination of government public contract policy for all ministries and public
entities of the government, including, but not limited to, the issuance, after
appropriate provision for notice to and comment by interested parties, of
implementing regulations and administrative instructions in the Arabic and
Kurdish languages, and such other languages as appropriate, in furtherance of
this Order;

ii) Establishment and adoption of rules for an independent Administrative
Tribunal to have jurisdiction over complaints and disputes arising under or
relating to the award of public contracts by the government;

iii) Recommendations for amendments to this Order and related Iraqi laws,
regulations and administrative instructions;

iv) Development and adoption of standard government public contract provisions;
and

v) Training of government public contracting personnel for the proper application
of this Order and its implementing regulations and administrative instructions.

2) Application

a) Every governmental unit or agency described in Section 1.1 “government” shall
designate a contracting office that shall be responsible for the contracting activities
of the governmental unit or agency. For reasons of administrative convenience, a

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governmental unit or agency may agree with another governmental unit or agency

that the latter will be responsible for the contracting activities of the former.

b) In addition to the standard contract provisions adopted for all governmental units
or agencies, each individual governmental unit or agency, after concurrence by the
Office of Government Public Contract Policy, may include standard contract
provisions that are necessary for the particular objectives of said governmental
unit or agency.

c) This Order applies to Iraqi state-owned enterprises when awarding public
contracts for the procurement of goods, services or construction services that are
directly financed by government funds.

Section 3
Contracting Authority


1) The authority to obligate government funds, award and sign government public
contracts, enter into and authorize material modifications to such contracts, and
authorize the payment of invoices and claims, shall rest solely with a qualified
government agency or a committee within each governmental unit or agency, duly
appointed under the authority of this Order.

a) Agency and committee members shall not be political appointees or members of
the office within the governmental unit or agency that requires or benefits from the
contractor’s performance under the contract to be awarded. Political appointees
are Governing Council members and their deputies; ministers and deputy
ministers; governors; judges; members of national commissions, deputy
commissioners of such commissions, directors and equivalent officials within Iraqi
commissions, boards or similar organizations; all elected members of the Iraqi
Interim Government or Iraqi Transitional Government, including the national
executive; and those individuals appointed by the public officials listed in this
Section to advise them.

b) The individuals vested with the authority described in this Section shall not
directly report to the official or office requiring or benefiting from the contractor’s
performance under the contract.

2) In all public contracts, there shall be a standard provision advising contractors of the
public agency or committee that shall have this authority and the full scope of that
authority. Included in that provision, there shall be reference to the fact that direction
from the government to the contractor that affects the rights and liabilities of the
parties to the contract from anyone other than the designated responsible public
official shall not be authorized and shall not have any effect.

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Section 4
Full and Open Competition


To the maximum extent practicable, government public contracts shall be awarded on a
competitive basis. Prior to the competitive award of public contracts, the Contracting
Authority, vested with the authority pursuant to Section 3 of this Order, shall state in
writing the awarded contract price to be fair and reasonable under the prevailing facts and
circumstances.

1) Exceptions – Public contracts may be awarded using other than full and open
competitive public contracting procedures under the following conditions:

a) When, for technical or artistic reasons, or for reasons connected with the
protection of exclusive rights, the goods or services to be purchased under the
contract may only be manufactured or supplied by a particular entity or otherwise
is available from a very limited number of entities.

b) When for reasons of extreme urgency brought about by events not attributable to
the Contracting Authority, the public interest does not permit award on a fully
competitive basis.

c) When the goods to be purchased are:

i) Required as a partial replacement for or addition to goods purchased under an
existing or previous contract; or

ii) Required to be compatible or interchangeable with existing goods purchased
from the original source who supplied the existing goods.

d) When the use of other than full and open competitive public contracting
procedures is necessary to promote economic or institutional development among
certain population sectors or geographic regions of the State of Iraq or of Iraqi
state-owned enterprises. These regulations shall also indicate the circumstances
where the use of other than full and open competitive public contracting
procedures may be used to promote economic or institutional development among
certain population sectors or geographic regions of the State of Iraq or of Iraqi
state-owned enterprises.

e) When international agreements (bilateral, plurilateral, or multilateral) or treaties to
which the State of Iraq is a party require the use of other than full and open
competitive public contracting procedures, either by their explicit terms or by
implication.

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f) If the anticipated value of the public contract is below certain monetary thresholds,
as determined by regulations issued in accordance with Section 2, a streamlined
procedure for the procurement of lower priced goods and services shall be used.

g) The Office of Government Public Contract Policy shall issue implementing
regulations indicating, among other matters, those circumstances permitting other
than full and open competition and specifying the streamlined procedures for
awarding public contracts using other than full and open competitive public
contracting procedures. These regulations shall require documentation previous to
every occasion where other than full and open competitive public contracting
procedures are used.

2) Prequalification - Prequalification of offerors, including required deposits or bonds,
shall be implemented in such a manner that does not unreasonably limit competition.
If a deposit is required as a condition for participating in a competitive tender, such
deposit shall be reasonable in amount, based upon the value of the contract, and
returned to an unsuccessful offeror. The use of bonds, as opposed to deposits, is
encouraged.

3) Notice of Tenders - The Office of Government Public Contract Policy shall issue
implementing regulations that address, but are not limited to, the following:

a) The notice of tenders shall provide the maximum possible exposure of the
proposed public procurement action. Notices shall be published at a minimum in
the Arabic and Kurdish languages, as well as such other language as may be
appropriate where it is anticipated that offers will be made from entities or
individuals outside the State of Iraq.

b) The notice shall provide potential offerors with sufficient information, including
but not limited to, standard terms and conditions, the statement of work and a
delivery schedule, to reasonably respond to the tender. In this regard, all tenders
shall also contain the factors upon which offerors shall be evaluated, and the
failure of the government to evaluate an offer against the stated evaluation factors
in the notice shall be a basis for filing a tender protest pursuant to this Order.

c) The notice shall provide potential offerors with sufficient time to reasonably
respond.

d) The notice shall provide potential offerors the opportunity to request clarifications
about the tender and for extensions of time to respond to the tender, if necessary.

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e) The notice shall provide a date by which responses to tenders shall be due, and
provide those specific instances where late offers can be accepted.

f) The implementing regulations to this Order shall provide for exceptional
circumstances when the notice is not required.


Section 5
Negotiated Contracts


1) Authorization - Although competitive bidding is preferred in general, competitive
negotiated contracts that comply with this Order are hereby specifically authorized
and should be employed whenever the interests of the governmental unit or agency
concerned will best be served by awarding the contract on a basis other than the
lowest price.

2) Process

a) Tender notices for negotiated contracts shall specifically indicate that the contract
shall be awarded on a basis other than the lowest price.

b) The notice shall state those factors, in addition to price, that will be evaluated and
the relative importance of each of these factors (this is not an exhaustive list, and
all of these factors, except price or cost, may not necessarily be required on all
procurements):

i)
The merit of the technical solution proposed to meet the government’s
requirements;

ii) The risk associated with the offeror's proposed approach as it relates to
accomplishing the requirements of the tender;

iii) Past performance on recent and relevant government and commercial efforts;

iv) Experience of key personnel; and/or

v) Management structure.

c) The notice shall state the relationship between the price and the non-price factors
in making an award (e.g., are the non-price factors more important, less important,
or of equal importance to price).

d) The government shall have the right to enter into direct negotiations with offerors
after their written response to the tender has been received by the government.

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The purpose of entering into direct negotiations is to clarify offers, respond to
questions, and negotiate price. At no time during the negotiation process (and
after award) shall information, including price, about proposals from other offerors
be discussed or made public. The price of the awarded contract shall be made
public.

e) If requested, offerors shall have the right to amend their offers after negotiations
and prior to final evaluations.

f)
All members of procurement evaluation teams shall be bound by the principles
stated in Section 8 of this Order on “Procurement Integrity and Conflicts of
Interest”.

Section 6
Standard Public Contract Provisions


1) The Office of Government Public Contract Policy shall issue and publish
implementing regulations that include standard public contract provisions. These
provisions may include additional conditions not specifically required by, but
otherwise consistent with this Order. These regulations may provide that certain
conditions apply or do not apply depending on the value or type of the public contract.

2) The Office shall, in preparing the implementing regulations required by this Order, be
guided by recognized and accepted international standards and best practices, such as
those contained in the United Nations Commission on International Trade Law
(UNCITRAL), “Model Law for Procurement of Goods, Construction, and Services”,
Directives of the European Union, and the World Trade Organization Agreement on
Government Procurement. Where appropriate, these regulations shall also apply
generally accepted international commercial practices.

Section 7
Statements of Work, Contract Specifications, and Contract Types


1) Statements of Work and contract specifications must accurately reflect the
government’s needs and must be written in such a way that they do not unduly restrict
competition.

2) Proprietary features or brand names shall be avoided. If a brand name or proprietary
feature is included in a specification, offerors must be notified of the features of the
brand name and be advised that they may offer an equivalent or equal product.

3) The contract type has a direct effect on risk allocation in public contracts. Fixed-
priced contracts are generally preferred over cost contracts, especially where a

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reasonable price estimate can be made by the government and the contract anticipates
a specific deliverable.

a) A fixed-price contract provides for a price that is not subject to adjustment on the
basis of the contractor’s costs incurred in performing the contract. A fixed-price
contract places upon the contractor maximum risk and full responsibility for all
costs and resulting profit or loss.

b) A Cost-reimbursement contract provides for payment of allowable incurred costs,
to the extent prescribed in the contract. These contracts establish an estimate of
total cost for the purpose of committing funds and establishing a ceiling that the
contractor may not exceed (except at its own risk) without the approval of the
contracting officer.

Section 8
Procurement Integrity and Conflicts of Interest


1) The Office of Government Public Contract Policy shall issue and publish
implementing regulations that implement, at a minimum, the following ethical
standards:

2) No minister, official or consultant under contract to support the governmental unit or
agency involved in any tender shall have a financial interest in the outcome of the
tender.

a) All proprietary or competition sensitive information received by ministers,
officials, or contractors during the tender process shall remain confidential.


b) The post-government employment of ministers and officials substantially involved
in the government procurement process shall be restricted for a reasonable period
of time in accordance with this Section. Those ministers and officials
substantially involved in the following activities shall not seek nor accept
employment with the offeror awarded the contract:

i) A particular tender;

ii) The administration of the contract awarded subsequent to a particular tender;
or

iii) The surveillance of the work performed under a particular contract.

c) No offeror shall have a business interest that is in conflict with its ability to use its
best efforts to satisfy the requirements of the contract.

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Section 9
Exclusions from Participation


1) To ensure the integrity of the procurement process, entities and individuals may be
excluded from competing for government public contracts in accordance with the
following provisions.

a) As defined in the implementing regulations issued under the authority of this
Order, misconduct, including but not limited to the following, shall be the basis for
exclusion:

i)
Willful violations of this Order or the implementing regulations issued under
the authority of this Order;

ii) Willful failure to perform in accordance with one or more material terms of a
public contract;

iii) Conviction of a criminal offense; or

iv) Other misconduct indicating a lack of business integrity or business honesty
that seriously and directly affects the ability of the contractor to perform.

b) Responsibilities for ensuring the integrity of the procurement process shall be
carried out by the Office of Government Public Contract Policy which shall issue
implementing regulations that shall, at a minimum:

i)
Provide standards for exclusion;

ii) Provide a fair, equitable and expeditious process with an opportunity to be
heard before a determination for exclusion is made;

iii) Provide a method by which an excluded entity may apply for re-instatement;
and

iv) Provide that a public record be maintained and published of all excluded
individuals and entities.

Section 10
Financial Requirements


1) No tender notice shall be published, nor any tender commenced, prior to a
certification by the senior financial officer, or his official designee, of the

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governmental unit or agency offering the tender that there are funds available

sufficient to satisfy the government’s estimated cost of any resulting contract.

2) No contract shall be awarded without a certification that sufficient funds are available
and dedicated (i.e., may not be used for any other purpose) to the contract in an
amount equal to the full contract price.

3) Regulations shall be issued and published providing for the right of any governmental
unit or agency awarding a public contract to have access to and have the authority to
audit a contractor’s financial records related to the public contract that was awarded.
This right to audit, together with any additional oversight responsibilities, shall be
exercised by an office that is not responsible for tender issuance. The Office of
Government Public Contract Policy may establish a central agency for public
procurement audit services.

Section 11
Termination for the Convenience of the Government


1) The right of the government, acting through the Contracting Authority vested with the
authority described in Section 3 of this Order, to terminate public contracts entered
into under the authority of this Order, in whole or in part, when it is in the
government’s best interest, may be included in contracts awarded by the government.

2) If a contract is terminated for the convenience of the government, the rights, duties,
and obligations of the parties, including compensation to the contractor, shall be in
accordance with the procedures set forth in Section 12 of this Order on “Dispute
Resolution”.

3) The Office of Government Public Contract Policy shall issue implementing
regulations describing the circumstances under which the government can terminate
public contracts pursuant to the authority of this Order.

Section 12
Dispute Resolution


All interested parties, as defined below, to a government public contract tender process
and those entities and individuals that have been awarded government public contracts
have certain rights against the government that may include the ability to seek and obtain
monetary relief against the government.

1) Tender Protests

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a) Right to File - Any offeror deemed to be an interested party, that believes it has
not received fair treatment in the award of a government public contract, or
believes that the provisions of a tender unfairly restrict full and open competition
in a manner that inappropriately excludes it from competing, may file a tender
protest with the Administrative Tribunal established pursuant to the authority of
this Order.

i) An interested party is an actual or prospective bidder or offeror that has a
reasonable chance for award and whose direct economic interest would be
affected by the award of a public contract or by the failure to award such a
contract.

ii) The Tribunal shall rule on the protest within the shortest period of time
practicable and may, among other reasonable remedies, direct the contracting
authority to take corrective action, including but not limited to, terminating the
awarded contract, resoliciting tenders, reevaluating tenders received for
consideration, award reasonable tender preparation costs, or take other actions
necessary to comply with this Order and the implementing regulations
promulgated under the authority of this Order.

b) Results of Filing - Upon the filing of a tender protest after award, the
governmental unit or agency that awarded the public contract shall immediately
order the awarded contractor to cease working on the contract.

i)
If a minister or the senior official responsible for contracting within
governmental unit or agency awarding the contract determines the requirement
being satisfied by the contract is of such importance to the public interest that
ceasing work will unduly harm the public interest, such minister or official
may, by written determination of such undue harm, and after notice to the
Tribunal, order the governmental unit or agency to notify the contractor to
proceed with the contract.

ii) The minister or official, in making this determination, shall also consider the
likelihood of success of the protest.

c) Effect of Grant of Protest - If the Tribunal sustains the tender protest and either
directs the contracting authority to award the contract to the protestor or directs the
contracting agency to take corrective action consistent with this Order or the
regulations promulgated under the authority of this Order, the governmental unit
or agency shall immediately terminate the contract with the originally awarded
contractor, if that contractor is not selected for award following the corrective
action ordered by the Tribunal. Such contractor may have certain rights against
the government as discussed in Subsection 2 below.

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d) Additional Rights of Unsuccessful Offerors - There shall be notices published of
all public contract awards. All unsuccessful offerors in a government public
contract competition shall be notified by the authority offering the tender, and
such unsuccessful offerors shall be entitled to receive a written explanation of the
factors upon which it was not successful. Such explanations shall be provided
promptly and with full consideration to the proprietary nature of the information
provided to the government by the other offerors, including the awardee, of the
tender. Decisions of the Tribunal may be appealed by either party to the
appropriate Court with jurisdiction over the procurement.

e) Implementing Regulations - The Office of Government Public Contract Policy
shall issue implementing regulations published in conjunction with this provision
that address, but are not limited to, the following:

i) The establishment of the independent Administrative Tribunal referred to in
Section 2.1(b)(ii) of this Order;

ii) The rules of the Tribunal, including time and place requirements for filing
protests, both before and after public contract award (including the effect on
such time requirements if a request for explanation is made), and for issuing
decisions;

iii) The time requirements for an unsuccessful offeror to request an explanation of
the governmental unit or agency decision and for the governmental unit or
agency to respond to that request;

iv) The nature of the relief that may be granted by the Tribunal; and

v) The legal bases upon which a tender protest may be filed.

2) Claims

a) Right to File - A contractor has a right to make a claim to the authority awarding
the public contract that a condition of the contract has not been followed or that it
has otherwise been treated in an unfair way. This right to make a claim shall also
apply to a contractor whose contract has been terminated as a result of a decision
by the Tribunal hearing a tender protest to terminate its contract where it believes
it is entitled to additional compensation for work under its terminated contract, but
not yet paid.

b) Process - A contractor seeking to exercise its rights under this Subsection must
first seek a final written decision on the merits of its claim from the governmental

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unit or agency that awarded the contract by submitting a written request to the
contracting authority for that governmental unit or agency. This request shall
specify that amount that the contractor believes it is owed and the basis for the
request. This final decision must be prepared by the contracting authority and it
must be issued within a reasonable period of time. If after a reasonable period of
time, the contractor does not receive a final written decision from the appropriate
authority, the contractor may deem this lack of a response as a denial of its claim.

c) Appeal - If the contractor is dissatisfied with the final written decision of the
governmental unit or agency, it shall have the right to file an appeal with the court
having jurisdiction over disputes between the government and private parties (or
such other Court granted jurisdiction to hear such cases), which shall render its
decision within a reasonable period of time.

d) Regulations - The Office of Government Public Contract Policy shall issue
regulations in coordination with the Ministry of Justice implementing the claims
process described in this subsection. The regulations shall include the following
subjects and may include other subjects:

i) The office within the governmental unit or agency where claims may be filed;

ii) The time for filing claims with the governmental unit or agency and for its
decision;

iii) The time for filing appeals and for decisions on such appeals;

iv) The scope of review, including but not limited to, whether to completely
review all of the facts and circumstances of the claim or to review a narrow
point of law, or whether a rational basis exists to support the contracting
authority’s decision;

v) The responsibility of the contractor to continue prosecuting the work under the
contract while a claim or appeal is pending;

vi) The legal bases upon which claims may be filed including, but not limited to,
claims concerning contract modifications and terminations; and

vii)
Such additional rules and procedures consistent with the responsibilities and
jurisdiction granted by this Order.

e) The State of Iraq, acting through the Contracting Authority vested with the
authority described in Section 3 of this Order, shall be able to make a claim in a
court of proper jurisdiction against the contractor to enforce the government’s

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rights under the contract. The State of Iraq shall be represented in the court of

proper jurisdiction by a representative designated by the Ministry of Justice.

f) Alternative Dispute Resolution - In resolving all such disputes (i.e., whether they
are tender protests or claims during administration of a public contract), principles
of alternative dispute resolution shall be used to the maximum extent possible, so
long as both parties agree.

Section 13
Effect on Present Iraqi Law


1) Tenders instructions (Outfitting and Buying) for State Agencies and the Social Sector,
issued by the Legal Department/Planning Organization/Council of Ministers/Republic
of Iraq, 2001 (Tender Instructions) are hereby suspended.

2) Instructions for Implementation and Follow up of Projects and Works of National
Development Plan. Issued by the Legal Department/Ministry of Planning/Republic of
Iraq, 1988 (Implementation Instructions) are hereby suspended.

3) Any provision of Iraqi law, including but not limited to, statutes, decrees, regulations,
and instructions, that is inconsistent with this Order is hereby suspended to the extent
of such inconsistency.

Section 14
Implementation


1) The Minister of Planning, through the Office of Government Public Contract Policy
shall issue Administrative Instructions and regulations to implement this Order.

2) Until such time as regulations are promulgated by the Ministry of Planning and
Development Cooperation under the authority of this Order, Coalition Provisional
Authority Memorandum Number Four and its appendices, dated 19 August 2003
(CPA/MEM/19 August 2003/04) (“Memorandum Four”), shall serve as the
implementing regulation for this Order.

3) In the event of an inconsistency between Memorandum Four and this Order,
Memorandum Four shall be interpreted in a manner that is consistent with this Order.

4) Except as otherwise specifically provided by Coalition Provisional Authority Order
Number 71, Local Governmental Powers, dated 6 April 2004
(CPA/ORD/6 April 2004/71), or other law or regulation, including other Coalition
Provisional Authority orders, this Order shall apply to the federal and regional
governments, Governorates, and municipal and local governments.

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