Procurement process

Relevant procedure

What procedures normally apply to a PPP procurement? What evaluation criteria are used to award a PPP transaction?

PPP project procurement methods include public bid invitation, invited bidding, competitive negotiation, competitive consultation and single-source procurement. An authorised project implementing organ shall choose the appropriate procurement method in accordance with the law in light of the characteristics of the procurement needs of the PPP project concerned.

Two evaluation criteria need to be satisfied in order to implement a PPP project. According to two circulars issued by the MoF, namely the Guidelines on the Value for Money Assessment and the Guidelines on the Feasibility Study of Fiscal Capabilities, the PPP mode should be more cost-effective than other modes and the proportion of the expenditure liability required to be included in the budget for all PPP projects each year shall not exceed 10 per cent of the general public expenditure budget.

As to the awarding of a PPP transaction to a candidate, generally the bid price, financing ability and professional competence are key factors for evaluation. No matter which procurement procedure is adopted, the evaluation criteria used must be disclosed in the tender documents.

Consideration of deviating proposals

May the government consider proposals to deviate from the scope or technical characteristics of the work included in the procurement documentation during the procurement process, without altering such terms with respect to other proponents? How are such deviations assessed?

In some cases, variant bids may be permitted. If variant bids are permitted this will be stated in the procurement documents and will apply to all parties. According to the MoF’s circular, Measures for Administration of Government Procurement in PPP Projects, where the competitive negotiation or competitive consultation procurement method is adopted, the project procurement documents shall also specify the contents that may be substantively changed by the evaluation team based on negotiations with private investors, including the technical and services requirements based on procurement needs and the terms of the draft project contract.

Meanwhile, according to the Implementing Regulations on the Tendering and Bidding Law, issued by the State Council, for projects with complex techniques or with technical specifications unable to be determined accurately, bid inviters may make bid invitation in two stages. In the first stage, bidders shall submit technical advice without price as required in the bid invitation notice or bid invitation, and bid inviters shall determine the technical standards and requirements and prepare the bid invitation documents based upon the technical advice submitted by the bidders. In the second stage, bid inviters shall provide bid invitation documents to the bidders providing technical advice from the first stage, and the bidders shall, based upon the requirements as set forth in the bid invitation documents, submit the bid documents including the final technical schemes and price offered.

Unsolicited proposals

May government parties consider unsolicited proposals for PPP transactions? How are these evaluated?

Unsolicited proposals for PPP transaction are permitted by law but very uncommon in practice. According to the circular, Interim Measures for the Fiscal Management of Public-Private Partnership Projects, issued by the MoF, the following procedures shall apply in the case of a PPP project initiated by private investors:

  • the relevant private investor shall submit a written project proposal to the relevant competent industry department;
  • after the written project proposal is examined and approved by the competent industry department, the private investor shall prepare a project implementation plan; and
  • the project implementation agency authorised by the relevant people’s government at or above the county level shall request the finance department at the same level to carry out a value for money assessment and feasibility study of fiscal capabilities.
Government stipend

Does the government party provide a stipend for unsuccessful short-listed proponents or otherwise bear a portion of their costs?

The current PPP policy does not specify whether the government shall provide a stipend for unsuccessful short-listed proponents. In practice the government tends not to bear the expenses and costs of the proponents.

Financing commitments

Does the government party require that proposals include financing commitments for the PPP transaction? If it does not, are there any mechanisms during the procurement process to ensure that the applicable PPP transaction, once awarded, is financeable?

The procurement documents usually contain financing requirements for the bidder and the financing ability and plan would be the government’s first concern. In most cases, the government would ask the private investor to bear joint liability with the project company for the project financing.

Legal opinion

May the government ask its counsel to provide a legal opinion on the enforceability of the PPP agreement? May it provide representations as to the enforceability of the PPP agreement?

The government generally does not ask its counsel to provide opinions on the enforceability of PPP contracts, nor does it generally provide representations as to the enforceability. However, the project implementation agency is generally authorised by the relevant people’s government at or above the county level to sign and execute the PPP agreement, which in practice has been reviewed by the government’s legal department before signature.

Restrictions on foreign entities

Are there restrictions on participation in PPP projects by foreign entities? May foreign entities exercise control over the project company?

There are no different restrictions applied for foreign entities to participate in PPP projects or to exercise control over the project company. For any foreign entity to invest in China they must comply with the Catalogue for the Guidance of Foreign Investment Industries (revised in 2017) and the Special Management Measures for the Market Entry of Foreign Investment (Negative List) (2018 version) issued by the NDRC and the Ministry of Commerce, which prohibit or restrict foreign investment in certain industries or the controlling shareholding of a foreign investor in certain industries.