China has proposed major revisions of its Tendering and Bidding Law (TBL), one of its main procurement laws and the de facto law that applies to procurement by state-owned enterprises (SOEs). The TBL imposes uniform tendering and bidding procedures on certain classes of procurement projects in China, notably construction and works projects, without regard to the type of entity that conducts the procurement. The TBL was implemented in 2000, three years before the Government Procurement Law (GPL), the predominant law that regulates China’s government procurement activities, excluding procurement by SOEs and projects covered by the TBL. This post highlights key elements of the proposed revisions in the TBL in the context of China’s negotiations to join the WTO Government Procurement Agreement (GPA).
On December 3, 2019, the National Development and Reform Commission (NDRC) proposed revisions of the Tendering and Bidding Law and invited public comments (by January 1, 2020). The revised TBL would contain 94 articles, in contrast to 68 in the current Law. It would revise 58 articles, add 28 new ones and delete two.
The proposed revisions are part of a broader effort in China to revise its 20-year old procurement framework. The Ministry of Finance is undertaking a revision of the GPL, which will reportedly consider conflicts in its application with the TBL, recent reforms in its procurement regime and its GPA accession. Also, at the beginning of 2020, China implemented a Foreign Investment Law that prohibits discrimination against foreign-invested enterprises in procurement in China.
In China’s negotiations to join the GPA, the primary focus has been on the procurement that it will cover under the Agreement, which advanced with its latest offer in October 2019. However, it will also need to ensure that the laws and regulations that govern its covered procurement conform to the Agreement. The GPL is much more closely aligned with GPA requirements than the TBL.
Overall, the NDRC’s proposed revisions of the TBL would improve the transparency, conduct and fairness of tendering activities and move the Law closer to GPA requirements in certain areas and less so in others. The revision would establish public bidding (bidding is open to all) as the main tendering method, rather than invitation to bid (the entity undertaking the tendering process invites certain persons to submit a tender) and imposes more requirements on use of the latter.
A revised TBL would increase the transparency of the tendering process by expanding information required in tendering notices to include the qualifications of bidders, means for obtaining bid documents, the bid evaluation process and requirements for bid and performance guarantees. It would also add requirements in the pre-qualification of suppliers, including pre-qualification announcements.
With the revision, bidding documents would have to include technical requirements. Also, entities undertaking tendering would be encouraged to release information on planned projects to enable potential bidders to prepare for bidding. A new article encourages and expands the use of electronic procurement. Another limits the ability of entities to terminate a tendering process.
The revision emphasizes consideration of quality over price in selecting winning tenders. It encourages tendering entities to take into consideration the full life-cycle costs in their procurement and select bids with the lowest energy consumption and the least environmental impact. It adds provisions aimed at preventing the selection of winners based solely on price and limits the use of the evaluated lowest bidding price method to projects with general technical or performance standards or without special requirements. A bid evaluation committee must reject bids with abnormally low prices where the supplier cannot explain its reasonableness.
The proposed revision permits use of a two-staged bidding process in projects where there is a need to solicit proposals from potential bidders to clarify specific technical and economic requirements. In the first stage, bidders would submit proposals without bid quotations. Based on the submitted proposals, the entity would determine the specific requirements of the project and prepare the bid documents. In the second stage, bidders would include prices in their tenders.
The proposal would reduce the minimum time between issuing tender documents and the submitting of tenders from 20 days to 15 days. It would also allow a further reduction to 10 days in certain cases, such as for the procurement of standard equipment and materials and for small projects with simple construction technology.
The revised TBL would significantly expand provisions for bidders and potential bidders to file a complaint with the relevant administrative supervision department if they believe the tendering activities do not comply with the Law. They must do so within 10 days, the minimum time also required by the GPA. The revision also provides for the use of arbitration or mediation to resolve specific disputes and for the possibility of taking a dispute to the courts.
The proposed revision would remove large-scale infrastructure, public utilities and other projects that have a bearing on social public interests and public safety from the requirement to conduct competitive bidding under the TBL. If such projects are removed from the TBL, they should be subject to the GPL when they are undertaken by government-related entities. Two types of projects would continue to be subject to the TBL’s competitive bidding requirement: projects wholly or partly invested with state funds or financed by the state and projects using loans or aid funds from international organizations or foreign governments.
Jean Heilman Grier
April 13, 2020