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What is the relevant legislation regulating the award of public contracts?
The two foundational laws governing public procurement activities are the Government Procurement Law (GPL) and the Bidding Law (amended in2017).
The GPL governs the purchase of goods, projects or services stipulated in the centralised procurement catalogue, or above a threshold value, using fiscal funds by all levels of government authorities, public service institutions and group organisations.
The Bidding Law governs bidding activities with respect to procurement of projects and related goods and services that occur within China.
In order to facilitate compliance with the laws in practice, the Ministry of Finance (MoF) has issued various implementation regulations, the most important of which are the Measures for the Administration of Tenders and Invitations to Bid in Government Procurement of Goods and Services (the MoF Bidding Rules amended in 2017) and the Administrative Measures for Non-Bidding Methods of Government Procurement (the MoF Non-Bidding Rules).
In addition, local provincial governments have promulgated their own implementation rules applicable to government procurement at the provincial level and below.
Is there any sector-specific procurement legislation supplementing the general regime?
Regulations in relation to sector-specific procurement are issued by the ministry in charge of the sector, either on its own or in conjunction with the MoF. Some regulations issued by a ministry in charge of a sector set out detailed procedures, while others, such as the Implementation Advice on Government Procurement of Wireless Local Area Network Products, are designed to prioritise the procurement of products that meet national certification standards for the promotion of domestic industries.
For military procurement, the applicable procurement laws are issued separately by the Central Military Commission.
In which respect does the relevant legislation supplement the EU procurement directives or the GPA?
China has not acceded to the World Trade Organization’s Agreement on Government Procurement (GPA) as of the end of March 2018, but has initiated negotiations for accession to the GPA. It has made its sixth market access offer in 2014. Universities, hospitals and state-owned enterprises (SOEs) are included. Other GPA participants are still not satisfied with the coverage of government procurement bodies, particularly SOEs.
The MoF repeated its intention to continue negotiations for accession to the GPA in its 2016Government Procurement Report, but many domestic industries and key Chinese ministries view government procurement as a tool to promote domestic companies, and, therefore, oppose China’s signing of the GPA.
This opposition can be seen in some legislation and administrative rules that give preference to domestic goods and services, contrary to the spirit of the GPA, such as article 10of the GPL, which states that government procurement projects shall purchase domestic goods, projects and services, unless:
- such goods, projects and services are not available within China;
- such goods, projects and services are not obtainable on reasonable commercial terms;
- such goods, projects and services are being procured for use abroad; or
- the relevant laws and administrative regulations specifically require the use of foreign goods, projects and services.
Furthermore it is the practice of Chinese governments to grant advantages to Chinese companies by stipulating requirements in the government procurement process to promote the ‘indigenous innovation’ policy. An example of this is the abolished Administrative Measures on Government Procurement Contracts for Indigenous Innovation Products and related Qualification Standards on Indigenous Innovation Products, which provided that signing and execution of government procurement contracts must promote indigenous innovation, and that the indigenous innovation products’s trademark must be first registered in China.
However, the State Council issued two notices in December 2011and November 2016requesting governments at all levels to stop implementing measures that link innovation policy with provision of government procurement advantages.
Are there proposals to change the legislation?
To ward off accusations of protectionism or discriminatory conduct, due to their inability to define ‘domestic goods’, in May 2010, the MoF and three other ministries released the draft Administration Measures on Government Procurement of Domestic Goods for comments.
This draft defines ‘domestic goods’ as ‘goods manufactured in China where the domestic manufacturing cost represents more than 50per cent of the overall manufacturing costs of the final product.’ As of the end of March 2018, these measures have not been promulgated and have not been rendered effective.
In March 2014, the Legal Affairs Office of the State Council released the Draft Amended Provisions on the Scope and Threshold of Construction Projects for Bid Invitation (the Draft Amended Provisions) for comment. The Draft Amended Provisions, among others, sought to further clarify the scope of construction projects, raise the thresholds for mandatory bidding requirements and prohibit local government and ministries of the State Council from stipulating a greater scope and threshold for their own procurements. These amendments to the provisions remain incomplete as at the end of March 2018.
Applicability of procurement law
Which, or what kinds of, entities have been ruled not to constitute contracting authorities?
‘Government procurement’ under the GPL refers to the purchase of goods, projects or services stipulated in the ‘centralised procurement catalogue’. It can also apply to items above a certain threshold value, using fiscal funds by all levels of government authorities, public service institutions and group organisations.
Government authorities include central, judicial and prosecution authorities. Public service institutions are non-profit entities established by government authorities, using state-owned assets to engage in education, science, culture or similar activities. A group organisation usually refers to a political party or a non-profit group approved by the government.
While it has been deemed that SOEs are not considered ‘purchasers’ (ie, contracting authorities) under the GPL, the Bidding Law and its implementing rules still apply to SOEs engaging in bidding activities to procure a construction project.
Are contracts under a certain value excluded from the scope of procurement law? What are these threshold values?
The GPL is not applicable to procurement of goods, projects and services that do not fall within the ‘centralised procurement catalogue’ nor meet the procurement threshold value. Local governments, or their authorised institutions, may issue their own centralised procurement catalogue and procurement threshold value. Under the threshold rules for 2017-2018, published by the Central Budget Unit, the GPL and the Bidding Law apply to a department’s single or bulk procurement of at least 1million yuan for goods or services, or 1.2million yuan for projects.
Amendment of concluded contracts
Does the legislation permit the amendment of a concluded contract without a new procurement procedure?
Parties to a government procurement contract cannot arbitrarily amend a concluded contract. However, if during the performance of the contract the contracting authority needs to add goods, construction works or services of the same type as those set forth in the original contract, amendments may be conducted without a new procurement procedure. This applies if no change is made to other clauses of the contract, and the total value of the additional procurement does not exceed 10per cent of the original contract price.
Has there been any case law clarifying the application of the legislation in relation to amendments to concluded contracts?
China is governed by civil law. Relevant judicial cases determine that parties of a concluded contract cannot arbitrarily amend, suspend or terminate such a contract. However, the GPL requires parties to a concluded contract to amend, suspend or terminate the contract, if the performance of the contract is against the national and public interest. In practice, disputes on whether the performance of the contract is against national and public interests are ultimately decided by the courts.
In which circumstances do privatisations require a procurement procedure?
Privatisation of a state-owned asset does not follow the GPL and is pursuant to the Law of the People’s Republic of China on the State-Owned Assets of Enterprises. Aside from an agreement for direct transfer according to state rules, privatisation of a state-owned asset shall take place publicly, at a lawfully established trading location in an open, fair and impartial manner. If there are more than two potential recipients of the transfer, the transaction shall take place by open auction.
In which circumstances does the setting up of a public-private partnership (PPP) require a procurement procedure?
If a government entity uses state funding, and the operation of a PPP is for procurement of goods, projects or services from within the centralised procurement catalogue, or above the procurement threshold value, the GPL is applicable. The MoF issued the Administrative Measures of Government Procurement in Public-Private Partnership Projects to ensure that in setting up a PPP, the partner may be selected by public bidding, invited bidding, competitive negotiation, competitive dialogue or single-source procurement. PPPs that procure projects or goods or services related to a construction project via bidding are subject to the Bidding Law.
Advertisement and selection
In which publications must regulated procurement contracts be advertised?
According to Article 50of the GPL Implementing Rules, contracting authorities shall announce details of a government procurement contract in media designated by the MOF within two working days of signing the contract, unless the contract involves national or business secrets.
Media platforms designated by the MOF include the China Government Procurement website, and the China Financial and Economic News, China Government Procurement and China State Finance magazines.
Are there limitations on the ability of contracting authorities to set criteria or other conditions to assess whether an interested party is qualified to participate in a tender procedure?
The GPL and the Bidding Law permit contracting authorities to set criteria or conditions based on specific requirements of the tender to determine whether suppliers or interested parties are suitably qualified. Such criteria or conditions may not be unreasonable or discriminatory.
Is it possible to limit the number of bidders that can participate in a tender procedure?
The GPL states that if special goods or services can only be procured from limited suppliers, or if the cost of public bidding is extremely disproportionate to the total value of the procurement project, the contracting authority may conduct ‘invited bidding’. The contracting authority must choose at least three suppliers from the list of suppliers that meet qualification requirements, and send them an invitation to bid accordingly.
For construction projects, the Bidding Law states that the contracting authority has the choice between public bidding or invited bidding, unless the State Council or local government confirm the project is unsuitable for public bidding. In that case the approval of the competent authority is required prior to invited bidding. Invitations to bid under this scenario must also be sent out to at least three qualifiedentities.
Regaining status following exclusion
How can a bidder that would have to be excluded from a tender procedure because of past irregularities regain the status of a suitable and reliable bidder? Is the concept of ‘self-cleaning’ an established and recognised way of regaining suitability and reliability?
The GPL states that a supplier may be blacklisted from participating in government procurement activities for one to three years if it is found to have engaged in unlawful behaviour, such as bribery. On expiry of the prohibition the supplier may again participate in government procurement activities, in principle. Whether it can actually participate will still depend on the qualification requirements of the procurement project.
There is no concept of ‘self-cleaning’ in the laws and regulations of China.
The procurement procedures
Does the relevant legislation specifically state or restate the fundamental principles for tender procedures: equal treatment, transparency and competition?
Article 3of the GPL and article 5of the Bidding Law iterate the principles of transparency, fair competition, justice (including equal treatment), honesty and trustworthiness.
Independence and impartiality
Does the relevant legislation or the case law require the contracting authority to be independent and impartial?
The GPL requires a contracting authority to adhere to the principles outlined in question 15. Article 12of the GPL also addresses conflict of interest scenarios (see question 17).
Conflicts of interest
How are conflicts of interest dealt with?
A conflict of interest is defined as:
- having an existing employment relationship with a bidder within the three years prior to the bidding activities;
- serving or having served as a bidder’s director, supervisor, controlling shareholder or actual controller;
- having a spousal, blood relative or in-law relationship with the responsible person of the bidder; or
- having a relationship that may affect the fairness of the procurement.
Article 12of the GPL requires procurement personnel and related personnel that have a conflict of interest with a bidder to recuse themselves from the bidding process. If a bidder believes that procurement personnel or related personnel have a conflict of interest with another bidder, they may apply for the personnel to be recused from the bidding process. Related personnel include members of bid evaluation committees, negotiation groups for procurement and members of quotation request groups.
The Bidding Law and the Bidding Implementing Rules have similar requirements on the recusal of natural or legal persons that have a conflict of interest with a bidder, which may affect the fairness of theproceedings.
Bidder involvement in preparation
How is the involvement of a bidder in the preparation of a tender procedure dealt with?
The GPL Implementing Rules allow the contracting authority to seek the advice of relevant bidders and experts if the project is technically complex or requires expert confirmation on certain details. It is not expressly stipulated that such activity is sufficient to prohibit the bidder’s subsequent participation, and the GPL Implementing Rules only disqualify a bidder if it provided the overall design, preparation of standards, project management, supervision or testing. This does not apply to single-source procurement.
Given the fundamental principle of transparency and conflict of interest rules, a bidder involved in the preparation of the tender should recuse itself from the bid.
What is the prevailing type of procurement procedure used by contracting authorities?
Article 26of the GPL provides that procurement procedures used by contracting authorities include:
- public bidding;
- invited bidding;
- competitive negotiations;
- single-source procurement;
- requests for quotations; and
- other methods recognised by the State Council Government Procurement Supervisory and Management Department.
The MoF promulgated the Interim Administrative Measures on the Procurement Method of Competitive Dialogue for Government Procurement (the Competitive Dialogue Measures) in 2014, which allow the use of competitive dialogue as a procurement method under certain circumstances.
In general, public bidding is the primary method of government procurement, and prior approval is needed from competent authorities if different procurement methods are required.
Separate bids in one procedure
Can related bidders submit separate bids in one procurement procedure?
According to the GPL Implementing Rules, related bidders that have the same persons in charge, or have direct shareholdings or management relationships, may not participate in the government procurement activities under the same contract. Members of a consortium that participate in government procurement activities cannot independently form another consortium with other bidders to participate in the same government procurement activities. The Bidding Implementing Rules contain similar provisions, a violation of which renders such bidsvoid.
Negotiations with bidders
Is the use of procedures involving negotiations with bidders subject to any special conditions?
Pursuant to the GPL and the MoF Non-Bidding Rules, goods or services that meet one of the following may be purchased using competitive negotiation:
- there was no bidder nor a qualified bidder, and a new tender could not be established;
- detailed specifications or actual requirements cannot be confirmed, owing to technical complexity or special nature of the project;
- reasons not foreseen by the contracting authority, or a delay not owing to the contracting authority, causing the time required for the bidding procedure not to satisfy the urgent need of the user; or
- the total price cannot be calculated beforehand because procurement of artwork, patents, proprietary technology, time and service levels cannot be confirmed in advance.
The Competitive Dialogue Measures state that projects that meet one of the following may be purchased using competitive dialogue:
- government purchase of services;
- the project is technically complex, or has a special nature, and detailed specifications or actual requirements cannot be confirmed;
- the total price cannot be calculated beforehand because procurement of artwork, patents, proprietary technology or time and level of service cannot be confirmed in advance;
- the project involves scientific research for which there is insufficient market competition, and technological achievements that require support; or
- the project involves construction and falls outside of the category of construction projects requiring a bidding procedure, according to the Bidding Law and its Implementing Rules.
The applicable scope for competitive negotiations and competitive dialogue are similar, but there are differences. Competitive negotiation is decided by the lowest quote, and competitive dialogue uses a comprehensive scoring method.
If the legislation provides for more than one procedure that permits negotiations with bidders, which one is used more regularly in practice and why?
As outlined in question 21, there are two circumstances under which competitive negotiation and competitive dialogue may apply: the project is technically complex or has a special nature which renders certain details or requirements unable to be confirmed, or the total price cannot be calculated in advance. The use of a comprehensive scoring method under competitive dialogue, which entails consideration of non-price factors, may in theory lead to a more reasonable decision, but legislation does not clearly stipulate a preference for either method.
In practice, the applicable procurement method is decided mostly by considering the circumstances and the characteristics of the procurement project.
What are the requirements for the conclusion of a framework agreement?
Relevant laws and implementing rules do not expressly recognise the concept of a framework agreement. According to contract law the content of a procurement contract that expressly stipulates the relevant procurement information, and does not violate the country’s mandatory laws, can constitute an effective procurement agreement.
May a framework agreement with several suppliers be concluded?
Neither the GPL nor the Bidding Law address the issue of a framework agreement.
Changing members of a bidding consortium
Under which conditions may the members of a bidding consortium be changed in the course of a procurement procedure?
The GPL does not expressly permit a change to membership of a bidding consortium. Under the Bidding Implementing Rules it is the contracting authority’s responsibility to stipulate the relevant consortium bidding rules in the qualification pre-review announcement. A bidding consortium that changes the composition of its members after qualification pre-review will render its bidinvalid.
Participation of small and medium-sized enterprises
Are there specific mechanisms to further the participation of small and medium-sized enterprises in the procurement procedure? Are there any rules on the division of a contract into lots? Are there rules or is there case law limiting the number of lots single bidders can be awarded?
Under the Law of the People’s Republic of China on the Promotion of Small and Medium-Sized Enterprises, which was implemented on 1January 2018, the relevant government departments of the State Council shall draft the relevant preferential policies for government procurement from micro, small and medium-sized enterprise (SMEs). The idea is to increase the proportion of SMEs involved in government procurement through various measures, such as:
- drafting the standards for procurement;
- reserving quotas for procurement through SMEs;
- providing preferential treatment in price reviews; and
- giving priority to procurement through SMEs.
The reserve quota in particular should take up at least 30per cent of the department’s annual government procurement budget, and the quota for small and micro enterprises shall be no less than 60per cent. In addition, government procurement shall not discriminate based on the enterprise’s shareholding structure, term of operation, size of business and financial indicators.
Before the effectiveness of the aforesaid law, the MoF and the Ministry of Industry and Information Technology have jointly issued the Interim Measures for the Promotion of Small and Medium-sized Enterprises through Government Procurement (the SME Measures), and have granted many benefits to SMEs in the course of government procurement activities. SMEs are defined according to the number of employees, operating income and total assets. Using the construction industry as an example, SMEs comprise enterprises that have operating incomes of less than 800million yuan or total assets of less than 800million yuan. Within this category, medium enterprises have operating incomes of at least 60million yuan and total assets of at least 50million yuan; small enterprises have an operating income of at least 3million yuan and total assets of at least 3million yuan; and micro enterprises refer to those enterprises with operating incomes and total assets below that of small enterprises.
Benefits in the course of government procurement activities include:
- Government procurement activities cannot discriminate against SMEs by registered capital, total assets, operating income, employees, profit, payable tax and other details regarding the scale of the bidder.
- Conditional upon the self-operation and provision of basic needs of public services, at least 30per cent of the ‘annual budget of public procurement’ shall be purchased from SMEs. At least 60per cent thereof should be allocated to small and micro enterprises.
- For projects that are not specifically targeted at SMEs, the contracting authority shall reduce the bidding price offered by small and micro enterprises by 6to 10per cent, and the reduced bidding price is considered in the bid evaluation. For a consortium in which contract value from small and micro enterprises accounts for more than 30per cent of the total contract value, the bidding price offered by the consortium could be reduced by between 2and 3per cent for bid evaluation purposes.
- Encouraging large enterprises to subcontract SMEs, but prohibiting small and micro enterprises from subcontracting large or medium enterprises, or prohibiting medium-sized enterprises from subcontracting large enterprises.
The contracting authority cannot break a contract that is subject to public bidding requirements into lots for the purpose of evading a bidding requirement. However, the relevant laws do not provide for a limitation on the number of lots a single bidder may be awarded.
What are the requirements for the admissibility of variant bids?
Unless set out in the bid invitation, a bidder may not put forth alternative bids; otherwise these will be rejected by the bid evaluation committee.
Must a contracting authority take variant bids into account?
The contracting authority can accept alternative bids but is not requiredto.
Changes to tender specifications
What are the consequences if bidders change the tender specifications or submit their own standard terms of business?
If a bidder changes the tender specifications or submits their own standard terms of business and either fails to meet the substantive requirements and conditions set out in the bid invitation documents, their bid will be deemed invalid.
What are the award criteria provided for in the relevant legislation?
As discussed in question 19, government procurement can be conducted by the following methods:
- public bidding;
- invited bidding;
- competitive negotiations;
- single-source procurement;
- requests for quotations; and
- competitive dialogue.
The award criteria for the respective methods are as follows.
Evaluation methods for bids
Evaluation methods of bids under the GPL Implementing Rules are the lowest price method and comprehensive scoring method. Projects for the supply of goods and services that are subject to uniform technical, services or other standards shall apply the lowest price method:
- Lowest price method: assuming that substantive conditions set forth in the bid invitation documents are satisfied, the winning bidder will be the bidder that offers the lowest price.
- Comprehensive scoring method: assuming that all substantive conditions set forth in the bid invitation documents are satisfied, the winning bidder will be the bidder that obtains the highest score from a comprehensive scoring of key factors. The price of goods shall be weighted at no less than 30per cent and no higher than 60per cent of the total score, and the price of services shall be weighted at no less than 10per cent and no higher than 30per cent of the total score.
Evaluation methods for construction projects include the lowest price method, comprehensive scoring method or other evaluation methods permitted by the legislation or administrative measures.
Evaluation method for competitive negotiations and requests forquotations
According to the MoF Non-Bidding Rules, the winning supplier will be the entity who can satisfy the substantive requirements of the bid invitation documents at the lowest price.
Evaluation method for competitive dialogue
The comprehensive scoring method, pursuant to the Competitive Dialogue Measures, shall be used.
Evaluation method for single-source procurement
The contracting authority and supplier shall follow the principles outlined in the GPL, guarantee the quality of the procurement project and agree on a reasonable price.
Apart from specific evaluation methods expressly provided in legislation, a contracting authority will usually apply an evaluation method based on the requirements of the project. The contracting authority shall stipulate and explain the chosen evaluation method on the relevant documents distributed to the public.
Abnormally low bids
What constitutes an ‘abnormally low’ bid?
The Bidding Law and the MoF Bidding Rules do not contain the term ‘abnormally low bid’, only the similar term ‘bid prices below costs’ and ‘bids that are substantially lower than those from other bidders who have passed their qualification reviews’.
What is the required process for dealing with abnormally low bids?
Under the MoF Bidding Rules, if the price offered by one bidder is substantially lower than the price offered by other qualified bidders then it is likely to jeopardise the product quality or the good-faith performance of the procurement contract, the evaluation committee must request the bidder to provide an written explanation on site within a reasonable period as well as the relevant supporting documents (if necessary) to justify its low price, failing which the evaluation committee shall disqualify the relevant bidder from the bidding process.
In construction projects, a bidder cannot submit a bid price below cost. The bid evaluation committee shall disqualify such bids.
Which authorities may rule on review applications? Is it possible to appeal against review decisions and, if so, how?
The applicable appeal and review process depends on the type of procurement and appeal content.
For goods or services procurement projects governed by the GPL
A supplier with a query regarding government procurement activities may raise it with the contracting authority, which shall respond within a reasonable time. Legislation does not expressly provide whether relief may be sought by a bidder dissatisfied with the response.
A supplier that believes the determination of the bid, the contracting result, the procurement procedure or the procurement documents have harmed its rights may submit a challenge to the contracting authority in writing within seven working days from the date the supplier knows or should have known that its rights were harmed. The contracting authority is required to respond within seven working days after receiving the challenge. If the supplier is dissatisfied with the reply (or if there is no response), the supplier may, within 15working days of the deadline for the reply, file a complaint with the competent finance authorities.
The finance authority shall render a decision concerning the handling of the complaint within 30working days of the receipt of the complaint, which does not include the time required by the finance authority to undertake inspection, testing, evaluation, expert review or to ask the complainant to supplement materials. If the supplier is still dissatisfied, or the finance authority fails to respond to the complaint within the stipulated time, the supplier may apply for administrative reconsideration, or initiate an administrative action in court.
According to the MoF Non-Bidding Rules, any supplier, entity or individual may submit an objection in writing to the contracting authority challenging its decision to use single-source procurement, and copy the relevant finance authorities. The contracting authority should consider whether the objection is valid within five business days of the expiry of the said publication period and adopt other procurement methods if the objection is valid. If the contracting authority is of the view that the challenge is not valid, it should notify the relevant finance authorities of its review opinion and its reasoning. The MoF Non-Bidding Rules, however, do not further provide the objecting party with an appeal remedy.
For the construction bidding procedure under the Bidding Law
A bidder or other interested party who believes that bidding activities violate the legislation or administrative measures may raise a complaint with the relevant administrative supervisory department within 10days of the date that the bidder or other interested party becomes aware, or should have become aware, of the violation. If there is a disagreement with the qualification pre-review, bid invitation documents, opening the bid or bid result, prior to the submission of the aforesaid complaint, the concerned bidder or other party shall raise an objection with the contracting authority. The administrative supervisory department shall render a decision in writing within 30days of the date of complaint. A complainant who is dissatisfied with the decision may apply for administrative reconsideration or initiate an administrative court action.
If more than one authority may rule on a review application, do these authorities have the power to grant different remedies?
As discussed in question 33, there are different review authorities depending on the case, and, in most cases, there is an order of application. It is unlikely for more than one authority to rule on a review application. In addition, pursuant to the Bidding Implementing Rules, if a complainant lodges a complaint with respect to the same matter in more than two administrative supervisory departments that are authorised to process the matter, whichever department first received the complaint is responsible.
Timeframe and admissibility requirements
How long do administrative or judicial proceedings for the review of procurement decisions generally take?
See question 33for the deadlines to review challenges and complaints by the contracting authority or the MoF.
If a complainant proceeds for an administrative reconsideration, an administrative reconsideration authority will render a decision within 60days from date of application. If the situation is complicated, the deadline may be extended for up to 30days.
If the complainant is still dissatisfied with the result of the administrative reconsideration decision and initiates an administrative lawsuit, the court shall make its first decision within six months from the date the case goes on record. Therefore, from the above, once the case enters administrative litigation, the proceeding is expected to take at least six months, and may take years.
What are the admissibility requirements?
See question 33for reasons and substantive issues for an application for review.
Under the Measures for Questions and Complaints Regarding Government Procurement (the Questions and Complaint Measures, effective from 1March 2018), the admissibility requirements for a complainant to raise a complaint are as follows:
- the complainant must have raised a query prior to filing the complaint in accordance with relevant rules;
- the complaint must meet the conditions in relevant regulations;
- the complaint must be filed within the relevant deadlines;
- the matter has not been complained about and processed by the MoF before; and
- other requirements stipulated by the competent finance authorities must be met.
What are the time limits in which applications for review of a procurement decision must be made?
See question 33.
Does an application for review have an automatic suspensive effect blocking the continuation of the procurement procedure or the conclusion of the contract?
The GPL states that if the matters raised in the query or challenge may affect the results of a bid award or deal closing, the contracting authority shall suspend the conclusion of any contract, and the performance of any contract that has been signed.
In the construction bidding procedure, if a bidder, potential bidder or other interested party raises objections to the qualification pre-review, bid invitation documents or bid evaluation result of a project that are subject to the bidding process, the contracting party shall suspend the bidding activities before it responds to such objection.
In addition, Article 28of the Questions and Complaint Measures provides that a financial government department may, depending on the actual circumstances while handling a complaint matter, notify the procurement party and the procurement agent in writing to temporarily suspend procurement activities for up to 30days.
The procurement party and the agent shall suspend all procurement activities upon receiving the aforementioned notice during this legally stipulated suspension period, or until the finance department issues a written order for the resumption of procurement activities.
There is no provision allowing the parties of a suspended contract to request the bidding activities to resume. However, according to the Administrative Litigation Law, if parties to a suspended contract believe that the contracting authority’s decision to suspend has infringed their rights and interests, they may initiate legal action in court.
Approximately what percentage of applications for the lifting of an automatic suspension are successful in a typical year?
No relevant statistics are available.
Notification of unsuccessful bidders
Must unsuccessful bidders be notified before the contract with the successful bidder is concluded and, if so, when?
Under the GPL, the contracting authority must make a public announcement about the winning bidder within two working days of the date of finalising the winning bidder, on media platforms nominated by the finance authorities for one working day.
For construction procurement that must go through the bidding process, the contracting authority must make a public announcement about the proposed winning bidder within three days of the date of receiving the bid evaluation report. This public announcement must be available for at least three days.
Access to procurement file
Is access to the procurement file granted to an applicant?
There are no laws or regulations granting an applicant access to the procurement file.
Is it customary for disadvantaged bidders to file review applications?
No relevant statistics are available, but according to 2016statistics published by the Central Government Procurement Centre, the number of challenges with respect to procurement documents and results is on the rise. About 70per cent of challenges regarding procurement documents were about the inclination or discrimination of technical index. For challenges to procurement results the most common allegations are that the products of the winning bidder do not satisfy statedrequirements.
Violations of procurement law
If a violation of procurement law is established in review proceedings, can disadvantaged bidders claim damages?
If a contracting authority, a procurement agency or its officers, or an individual supplier breaches the GPL and causes damages to a party’s interests, it shall be held civilly liable under the relevant law. However, this legislation does not specify the extent of civil liability and the elements to establish a claim, thus they will depend on the relevant law being asserted.
May a concluded contract be cancelled or terminated following a review application of an unsuccessful bidder if the procurement procedure that led to its conclusion violated procurement law?
The GPL states:
... if the failure of the contracting authority, procurement agency or winning bidder to comply with relevant laws on government procurement procedure has affected or may affect the bid result or closing deal, if the procurement contract has been signed but not performed, the contract shall be rescinded.
There are, however, no available statistics on the success rate of an unsuccessful bidder to rescind a government procurement contract based on violations of procurement laws.
Is legal protection available to parties interested in the contract in case of an award without any procurement procedure?
If the procurement should be conducted through public bidding procedures but the contracting authority fails to do so, the contracting authority may be fined and ordered to rectify within a certain period of time. If such failure to conduct public bidding causes damage to a party’s interests, the contracting authority shall bear civil liability under the relevant law.
What are the typical costs of making an application for the review of a procurement decision?
Generally speaking, the costs include costs of preparing an application. To process the review, the MoF cannot ask the complainant or party subject to the complaint for payment of costs. However, if examination costs are incurred in the course of processing the review, the party at fault shall bear all costs.
No application or review fee is required for administrative reconsideration. As for administrative litigation, payment shall be made depending on the individual case for application costs and other incidental costs including transportation, accommodation and compensation for loss of work occurred by the witness, examiner or translator for attending the hearing.
Update and trends
Update and trends
Are there any emerging trends or hot topics in public procurement regulation in your country? In particular, has the scope of applicability of public procurement law been broadened into areas not covered before (eg, sale of land) or on the contrary been restricted?
The amended MoF Bidding Rules that entered into effect on 1October 2017is the most important procurement-related legal document from the government in recent years and is deemed a landmark law that has effectively resolved many of the controversial issues encountered in practice, while also remaining compliant with recent trends in the amendment of laws on government procurement around the world. The key amendments include the following.
- Strengthening the autonomy and the responsibilities of the procuring party in the setting of the requirements for the procurement, the invitation of bidders, the organisational assessment, the assembly of the bid evaluation committee, the acceptance of the performance, and all other matters.
- Increasing the protections for the rights of suppliers, including lowering the suppliers’ costs in submitting a bid, as well as their right to participate in the tender and their right to know.
- Further promoting information transparency, especially with respect to the clarity of information in the tender invitation announcement, the preliminary qualification review assessment announcement, the tender documents, and the award announcement.
- Introducing new measures in response to oft-questioned issues in government procurement, such as lower quality despite high costs, hidden collection of rebates and worsening efficiencies, including but not limited to:
- Increasing the administration regarding procurement requirements and acceptance of performance so as to reduce the room for illicit activities and ensure the quality of the procured goods or services. This may include requiring the procuring party to conduct market surveys and use the results of such surveys to scientifically and reasonably set the procurement requirements, as well as conduct price evaluations. The procuring party may also invite the other bidders or third-party institutions to participate in the acceptance process.
- Increasing the fairness of the entire process, such as the evaluation committee being required to reject any abnormally low bids that the bidder cannot explain the reasonableness of, and the tightening of the procuring party’s internal controls while engaging in procurement activities, specifically prohibiting the reaching out to suppliers to seek or receive gifts, rebates and other products or services that are unrelated to theprocurement.
In addition, to strengthen the ability to respond to questions regarding government procurement and the handling of complaints, the Ministry of Finance implemented the Questions and Complaint Measures effective 1March 2018to specifically provide detailed explanations regarding the relevant procurement process.