Home  Contact Us
  Follow Us On:
 
Search:
Advertising Advertising Free Newsletter Free E-Newsletter
Magazine
  
      2021       2020       2019       2018       2017       2016       2015       2014       2013       2012       2011       2010       2009       2008

POLICY: Legal Framework on Tendering and Bidding Law of China
Share to
Public bidding in China is mainly regulated by The Tendering and Bidding Law of PRC (the ‘Bidding Law’) being effective in January 2000, which was adopted by the National People’s Congress in an effort to standardise tendering and bidding activities in China. More recently, the State Council issued the Implementation Regulation of Tendering and Bidding Law (the ‘Bidding Regulation’), which came into force on 1 February, 2012.
 

Scope of Bidding Activities

 
altIn accordance with Article 3 of the Bidding Law and Article 2 of the Bidding Regulationthe following construction projects, to be undertaken within the territory of China, shall be subject to bidding process:
 
• Large infrastructure and public utility projects that involve public interests and security;
 
• Projects invested completely or partially with State-owned funds or financed by the State; and
 
• Projects using loans or aid funds from international organisations or governments of other countries.
 
Construction projects encompass engineering and construction projects as well as pertinent goods and services. Such construction projects include: new construction, refurbishing and expansion of buildings and fixtures, and decorating, demolition and renovation of buildings and structures. The goods pertinent to project construction refer to equipment and materials, which constitute an integral part of projects and are required for achieving the purpose of the projects in question. Services pertinent to project construction means services such as survey, design and supervision required for the completion of projects.
 

Public Tender and Selective Tender 

 
Tender is classified into two categories: public tender and selective tender.
 
Public tender means that the procurement purchaser, in the form of public announcement for bidding, invites unspecified legal persons or other organisations to bid. Selective tender means that the bid inviter, in the form of written invitation, invites only specified legal persons or other organisations to bid. In an open tender, if there are less than 3 bidders, the tenderer shall make a new invitation to bid. In a selective tender, the tenderer shall invite at least 3 qualified candidates to submit bids.
 
For construction projects whereby State-owned funds take up the holding or controlling position of the investment, public tender is mandatory. However, there are exceptions where public tender is not employed:
 
• Only a small number of potential bidders are available for selection due to the complexity of technologies, special requirements or restrictions because of the natural environment; or
 
• The cost of conducting public bidding would account for an excessively large proportion of the value of the project contract.
 

Exemptions from Tender

 
According to the Bidding law and its implementation Bidding Regulation, there are circumstances under which tender could be exempted even for State-invested or State-funded projects, which include the following:
 
• Special projects that involve State security or secrecy;
 
• Emergency rescue and disaster relief;
 
• Projects that involve the use of relief funds for providing employment as a form of relief; 
 
• Projects that require employment of farmers;
 
• Where any particular patent or proprietary technology is required;
 
• The procurement purchaser itself has the requisite qualifications required to complete the project;
 
• The project can be constructed, produced or provided by the franchise project investor that has been selected through bidding;
 
• Where it is necessary to procure projects, goods or services from the original bid winner, otherwise the construction or supporting functions would be adversely affected;
 

altTender Process 

 
The tenderer shall sell pre-qualification documents or bid invitation documents at the time and place prescribed in the pre-qualification announcement, bidding notice or bid invitation. Pre-qualification documents or bid invitation documents shall be available for purchase for a period of no less than five days. The time for the submission of pre-qualification application documents shall be reasonably determined which shall not be less than five days from the date when the sale of pre-qualification documents ceases. Pre-qualification screening must be conducted according to the standards and methods provided in the pre-qualification documents.
For projects subject to public bidding where State-owned funds holds up the holding or controlling role, a bid assessment committee needs to be constituted to examine the pre-qualification application documents. The number of bid assessment committee members shall be an odd number, and at least 5. Industry experts shall constitute not less than two-thirds of the members who have to have experience of eight years or longer in relevant fields.
 
If a bidder believes that there is something wrong with the bid documents, it can raise the concern 10 days before the submission deadline.
 
The tenderer may request the bidders to furnish bid security deposits, and the amount of which shall not exceed 2% of the estimated tender price. The bid security deposits shall be returned to the bidder, with any accrued interest, within 5 days after the written contract between the bid winner and the tenderer is signed. The validity term of bid bonds shall be consistent with the term of bidding process.
 
Where it is found that the content of pre-qualification documents or bid invitation documents prepared by the tenderer violates any compulsory provision of laws and administrative regulations, or is against the principle of openness, fairness, impartiality or good faith, a new round of tender and biding shall be conducted.
 
If the bid winner assigns the project to a third party they shall be subject to a fine of between 5% and 10% of the tender price, and any illegal gain will be confiscated.
 

altCollusive Activities in Tendering and Bidding

 
Collusive activities are strictly forbidden in tendering and bidding. This has generated widespread concerns in China over the years due to lack of specific provisions and various forms of irregularities. The Bidding Regulation clarifies ambiguities and fills  any voids. Collusion can happen between bidders or between bidder and tenderer. Once found guilty, collusive activities might trigger administrative sanctions or even criminal liabilities.
 
It shall be deemed as collusion between bidders under any of the following circumstances:
 
• Bidders negotiate with each other on fixing bidding prices or any other substantive content of the bidding documents;
 
• Bidders agree on the bid winner;
 
• Bidders agree beforehand that some bidders quit bidding or win the bid;
 
• Bidders of the same group, association, chamber of commerce or any other organisation, collaborates with each other in bidding by demand of such organisations; or
 
• Bidders take other joint actions for the purpose of winning bids or excluding specific bidders.
 
Collusion between the tenderer and bidder could be any of the following circumstances:
 
• the tenderer opens bidding documents before opening bids and discloses relevant information to other bidders;
 
• the tenderer discloses to a particular bidder, directly or indirectly, the base bid price or information in relation to members of the bid assessment committee;
 
• the tenderer explicitly or implicitly suggests that a bidder lowers or raises the bidding price;
 
• the tenderer induces a bidder to replace or amend the bidding documents;
 
• The tenderer explicitly or implicitly suggests that other bidders cooperate, so that a particular bidder can win the bid; 
 

Conclusion

 
The tender and bid market is fraught with various fraudulence and irregularities and needs to be more strictly regulated. While the Bidding Regulation certainly provides better clarity and more specific guidance to address many issues, the administrative supervision, industry supervision and more effective enforcement have to be boosted. A centralised credit rating system might be a solution to resolve many thorny problems. In the meantime, joint efforts by different government departments are required to establish a healthy, transparent and orderly market. 
 
    Subscription    |     Advertising    |     Contact Us    |
Address: Magnetic Plaza, Building A4, 6th Floor, Binshui Xi Dao.
Nankai District. 300381 TIANJIN. PR CHINA
Tel: +86 22 23917700
E-mail: webmaster@businesstianjin.com
Copyright 2021 BusinessTianjin.com. All rights reserved.