Public Procurement & Government Contracts 2020

Last Updated April 06, 2020

China

Law and Practice

Authors



Zhong Lun Law Firm was founded in 1993 and has become one of the largest full-service law firms in China. With over 310 partners and over 2100 professionals working in 18 offices in China and abroad, Zhong Lun is capable of providing clients with high-quality legal services in more than 60 countries and across a wide range of industries and sectors. The firm's legal service team tailored for this practice area consist of nine members and has been working as a group for over a decade of years. The team's partners and associates are familiar with the legal service expected to be rendered in the area. Some of our team’s representative work/clients include: the People’s Bank of China, the Ministry of Environmental Protection, the Ministry of Justice, the Ministry of Commerce and the State Council.

In China, the laws that regulate government procurement include:

  • The Government Procurement Law of the People's Republic of China (the “Government Procurement Law”);
  • The Regulations on the Implementation of the Government Procurement Law of the People’s Republic of China (the “Government Procurement Law Implementation Regulations”);
  • The Measures for the Administration of Tenders and Invitations to Tender in Government Procurement of Goods and Services;
  • The Administrative Measures for Non-Tendering Government Procurement;
  • The Interim Measures for the Administration of Government Procurement through the Competitive Consultation Procurement Method; and
  • The Administrative Measures for Government Procurement of Services (Interim).

There are many special laws concerning government procurement involving construction projects, Public Private Partnerships (PPP), or military supplies.

Tendering laws regulate government’s procurement of construction projects or construction-related goods and services. These laws include:

  • The Tendering Law of the People’s Republic of China (the “Tendering Law”);
  • The Regulations on the Implementation of the Tendering Law of the People’s Republic of China (the "Tendering Law Implementation Regulations");
  • The Rules on Projects Subject to Tendering; and
  • The Regulations on the Scope of Infrastructure and Public Utility Projects Subject to Tendering.

Governing laws for PPPs include:

  • The Guidelines of National Development and Reform Commission on Carrying out Public-Private Partnerships;
  • The Circular of the Ministry of Finance on Issues Concerning the Promotion and Application of the Public-Private Partnership Model;
  • The Circular of the National Development and Reform Commission and the Ministry of Finance on Further Jointly Implementing Work relating to Public-private Partnership (PPP) Projects;
  • The Administrative Measures for Government Procurement under Public-private Partnership Projects; and
  • The Administrative Measures for the Franchising of Infrastructure and Public Utilities.

Pursuant to the Government Procurement Law, the Central Military Commission of China should subsequently set down military procurement laws on specific matters. The current laws on this front include the Administrative Measures for Military Supplies Procurement.

According to Article 2 of the Government Procurement Law, there are three types of procuring entities:

  • State authorities, including legislators, administrative authorities, procuratorates, courts and military institutions.
  • Public institutions, which mean those established by government funds and perform public services in fields such as education, science, culture, and health, including public schools, public hospitals and scientific research institutions. 
  • Social organisations, which mean those financed by government funds, including Communist Youth League, All-China Women’s Federation and the Federation of Trade Unions.

Article 44 of the Government Procurement Law provides that “[g]overnment procurement contracts shall be in writing”, meaning the copies of contracts which are duly signed or stamped by the procuring entity and the suppliers. However, when tender procedures are involved, contracts might be deemed to have come into force when tenderers have received a notification of award.

Article 22 of the Government Procurement Law provides that suppliers engaging in government procurement activities shall fulfil the following criteria:

  • have the capacity to bear civil liability independently;
  • have a good commercial reputation and sound financial accounting systems;
  • have the equipment and professional and technical competence required for performance of the contract;
  • have a good record of paying taxes and social insurance premiums in accordance with the law;
  • have no record of major violations in its business activities for the three years prior to participation in government procurement activities; and
  • other criteria stipulated in laws and administrative regulations.

Procuring entities may, in accordance with special requirements of procurement projects, specify particular requirements for the supplier, but they may not impose unequal or discriminatory treatment on the supplier with unreasonable conditions.

As can be seen from the above, the criteria are rather generic, which may apply to a wide range of participants intending to enter a government procurement contract. That being said, since suppliers are required to “have a good record of paying taxes and social insurance premiums in accordance with the law”, and in practice only Chinese entities can qualify for that, it will pose practical difficulties to foreign suppliers to strike a deal if they do not have an affiliate registered in China.

Moreover, according to Article 10 of the Government Procurement Law and Articles 4 and 7 of the Administrative Measures for Government Procurement of Import Products, Chinese domestic goods and products have priority over imported ones. Foreign suppliers can be admitted only with the approval of relevant finance authorities and in circumstances where goods and products are not available or the commercial conditions required to acquire them are unreasonable, or laws and regulations specify that imported goods or products are needed.

The following outlines the key obligations under the legislation.

Government procurement shall conform with the principles of transparency, fair competition, impartiality, and good faith.

No work unit or individual may in any way obstruct or restrict the free entry of suppliers in the government procurement market in their region or industry.

Government procurement shall be conducted in the following forms:

  • public invitation of tenders;
  • (private invitation of tenders;
  • competitive negotiations;
  • single-source procurement;
  • requests for quotations; or
  • other procurement methods recognised by the State Council regulatory department for government procurement.

Public invitation of tenders shall be the principal method of government procurement.

Except for single-source procurement, all other forms of government procurement should have more than three suppliers to participate in the tender, and the successful suppliers should be selected through the examination procedures required by the law; the application of single-source procurement is strictly limited. 

Government procurement items shall be listed in budgets and funds for the year and report these to the finance authority at the same level. Examination and approval of the budgets shall be carried out within the limits of budgetary authority and according to the procedures.

The Government Procurement Law and the Tendering Law also lay down the scope and limit for activities to be categorised as government procurement. The Government Procurement Law, for example, provides that central and local governments shall formulate specific catalogues containing items that will be procured with their own budgets, which items will be considered government procurement. For provisions delineating those subject to tenders, please see the Rules on Projects Subject to Tendering and the Regulations on the Scope of Infrastructure and Public Utility Projects Subject to Tendering.

Government procurement contracts shall be subject to the Contract Law of the People’s Republic of China. Rights and obligations of a contract shall be agreed upon based on the principles of equality and voluntariness. 

Both parties to a government procurement contract shall not alter, suspend, or terminate the contract on their own. If the continued performance of a government procurement contract will harm national or social interests, both parties involved shall alter, suspend, or terminate the contract. The party at fault shall be liable for compensation. If both parties are at fault, each shall bear the corresponding liability.

According to Article 2 of the Circular of the Ministry of Finance on Issues Concerning the Disclosure of Government Procurement Information (Cai Ku [2015] No 135), the announcements of government procurement projects shall be published on the China Government Procurement website.

Such announcements include public invitations of tenders, pre-qualification review announcements, competitive negotiation announcements, competitive consultation announcements, and requests for quotations.

Information  contained in public invitations of tenders and pre-qualification review announcements includes: the names, addresses, and contact information of the procuring entities and their agencies; the names, quantities, and simple specifications, or basic introductions of the projects; budgets, government procurement policies and regulations to be implemented, and Tenderers’ qualifications; the time, place, and method of obtaining tendering or pre-qualification documents, and the prices of the Tendering or pre-qualification documents; the deadlines of the submission of the tendering or pre-qualification documents, the times and places of pre-qualification or of the opening of tenders, and the names and phone numbers of contact persons.

Information in competitive negotiation announcements, competitive consultation announcements, and requests for quotations includes: the names, addresses, and contact information of the procuring entities and their agencies; the names, quantities, and simple specifications or basic introductions of the projects; budgets, government procurement policies and regulations to be implemented, and suppliers’ qualifications; the time, place, and method of obtaining negotiation, consultation, and quotation documents, and the prices of these documents; the deadlines, opening times, and places of the submission of the response documents, and the names and phone numbers of contact persons.

Awarding authorities may be permitted to do so depending on different situations. For government procurement of goods and services involving tendering, Article 10 of the Administrative Measures for Tenders and Invitations to Tender in Government Procurement of Goods and Services (Decree of the Ministry of Finance No 87) provides that the procuring entity shall conduct a market survey on the market technology or services, supply, price, and among others of the procurement items, scientifically and reasonably determine the procurement demand based on the survey and asset allocation standards, and calculate prices.

For other government procurements, Chinese laws do not preclude the awarding authority from conducting a market survey prior to procurement. However, in case the procurement is make via a tendering process, it is advisable to pay close attention to Article 43 of the Tendering Law, which prescribes that, before giving an award, awarding authorities should not negotiate with tenderers in relation to tender prices, proposals, or any other substantive matters.

The Government Procurement Law, the Administrative Measures for Non-Tendering Government Procurement (Decree of the Ministry of Finance No 74), the Administrative Measures for Tenders and Invitations to Tender in Government Procurement of Goods and Services (Decree of the Ministry of Finance No 87), and the Interim Administrative Measures for Government Procurement through the Competitive Consultation Procurement Method (Cai Ku [2014] No 214) provide for six government procurement measures.

Public Invitation to Tenders

A public invitation to tenders means that a procuring entity lawfully invites by way of announcement unspecific suppliers to tender.

According to Article 43 of the Tendering Law, “[b]efore determining a successful tenderer, the tender inviter shall not enter into negotiations with the tenderer regarding tender prices, tender proposals or any other substantive matters.”

Private Invitation to Tenders

A private invitation to tender for the procurement of goods or services means that a procuring entity lawfully and randomly selects three or more suppliers from the qualified ones, whom are invited by an invitation letter to tender. A private invitation to tender for procurement of constructions means that a procuring entity shall send invitation letters to tender to three or more qualified and specific legal persons or other organisations who have a good standing on credit.

According to Article 43 of the Tendering Law, “[b]efore determining a successful tenderer, the tender inviter shall not enter into negotiations with the tenderer regarding tender prices, tender proposals or any other substantive matters”.

(Competitive Negotiations

Competitive negotiation means that, a negotiating group negotiates with any qualified supplier regarding the matters of procurement of goods, constructions, and services, then the supplier submits the response documents and final quotations according to the requirements in the negotiating documents, and the procuring entity finally determines the successful supplier from the candidates recommended by the negotiating group. This measure allows negotiation or consultation.

Competitive Consultations

Competitive consultation means that, by setting up competitive consultation groups, a procuring entity or its agency negotiates with any qualified supplier regarding the matters of procurement of goods, constructions, and services, then the supplier submits the response documents and quotations according to the requirements in the consultation documents, and the procuring entity finally determines the successful supplier from the candidates recommended by the consultation group. This measure allows negotiation or consultation.

Requests for Quotations

Request for quotation means that, a price inquiring group issues a notice of request for quotation for procurement of goods to qualified suppliers, asking the supplies to offer their one-time, fixed prices, following which the procuring entity determines the successful supplier from the candidates recommended by the price inquiring group. This measure does not allow negotiation or consultation.

Single-Source Procurement

Single-source procurement means the method of procurement of the goods, constructions, and services from a particular supplier. This measure allows negotiation or consultation.

The procuring entities do not have absolute discretion over the choice of tender procedures or other measures, which may vary depending on the fulfilment of certain conditions.

Public Invitation to Tender and Private Invitation to Tender

For government procurement of constructions, including the purchase of goods and services, the same below, if the budget of a project reaches certain prescribed standards (eg, the price of a construction contract is more than RMB4 million), then tendering procedures shall apply. For government procurement of constructions which is subject to tendering, Article 8 of the Tendering Law Implementation Regulations provides that, unless the construction project fulfils one of the following criteria for private invitation of tenders, public invitation to tenders shall apply:

  • only a limited number of suppliers can be chosen from due to that the project is special or technically complex, or due to external limitations; or
  • the cost of public invitation of tenders takes a proportion that is too high in a contract’s price.

For government procurement of goods and services, if it does not meet the conditions for non-tendering procedures (ie, competitive negotiations, competitive consultations, requests for quotations, and single-source procurement), the tendering procedure should apply. For goods and services subject to tendering, Article 29 of the Government Procurement Law provides that, unless the goods and services to be procured fulfil one of the following criteria, public invitation to tenders shall apply:

  • special goods and services that can only be procured from a limited number of suppliers; or
  • the cost of public invitation of tenders would be too high compared to the total value of the government procurement contract.

Competitive Negotiations

For government procurement of goods and services, Article 30 of the Government Procurement Law further provides that goods and services that fulfil one of the following criteria may be procured through competitive negotiation in accordance with this Law:

  • after tenders have been invited, no supplier has submitted a tender, or none of the tenders qualify, or it is impossible to invite tenders again;
  • the item involves complex technology or is of a special nature, and its detailed specifications or substantial requirements cannot be determined;
  • the time taken to invite tenders would not satisfy the client’s urgent needs; or
  • the total price cannot be calculated in advance.

Government procurement of constructions that is not subject to tendering according to applicable laws may adopt the measure of competitive negotiations.

Competitive consultations

According to Article 3 of the Interim Administrative Measures for Government Procurement through the Competitive Consultation Procurement Method (Cai Kun [2014] No 214), goods and services that fulfil one of the following criteria may be procured through competitive consultations:

  • Government procurement of services;
  • the item involves complex technology or is of a special nature, and its detailed specifications or substantial requirements cannot be determined;
  • the total price cannot be calculated in advance as the time or quantity of procurement of artworks, patents, or know-how cannot be determined in advance, or due to other similar causes;
  • scientific projects which do not have adequate competition, and commercialised scientific projects that need financial supports; or
  • construction projects other than those required to be tendered by the Tendering Law and the Tendering Law Implementation Regulations.

Requests for Quotations

Article 32 of the Government Procurement Law provides that government procurement items of unified specifications and standards may be procured through requests for quotations in accordance with this Law provided that the stock is sufficient, and that the price variation is small.

Government procurement of constructions should not adopt the measure of requests for quotations.

Single-Source Procurement

Article 31 of the Government Procurement Law provides that goods and services that fulfil one of the following criteria may be procured from a single source in accordance with this Law:

  • they can only be procured from a sole supplier;
  • due to unforeseeable urgency, it is not possible to procure them from another supplier; or
  • it is necessary to continue to procure from the original supplier in order to ensure consistency or compatibility of ancillary services with the original procurement item, and the total additional procuring funds do not exceed 10% of the procurement amount in the original contract. Government procurement of constructions not required by law to invite tenders may adopt the measure of single-source procurement.

Chinese laws provide for the time limits for the publication of procurement documents.

The Circular of the Ministry of Finance on Issues Concerning the Disclosure of Government Procurement Information (Cai Ku [2015] No 135) provides:

  • the time limit for the publication of public invitations to tenders and pre-qualification review announcement of tenders is five working days;
  • the time limit for the publication of competitive negotiation announcement, competitive consultation announcement, and requests for quotations is three working days;
  • The time limit for the publication of single-source procurement announcement shall be no less than five working days;
  • The publication of a successful tender and the deal with the successful tenderer shall be made within two working days after a notification of award was issued and a successful tenderer was determined, and the time limit for this publication is one working day; and
  • Government procurement contracts shall be made public within two working days after such contracts were signed.

China’s legislation does not set out the specific time limits for receiving the letter of intent of the tender, and the time limits are normally determined taking into consideration elements such as the complexity and time required for preparation of a project. Provided that, for the tender procedure, a minimum time period of 20 days from the issuance of tender invitation to the submission of tenders is required by the law. If any clarification or alteration arises during the tender procedure, which may affect tender preparation, there shall be at least 15 days from the occurrence of such event to the date the time period for tender submission expires. Otherwise, the procuring entity shall extend the time period.

The qualification and criteria for participation in a procurement process are decided based on the specifics of each project.

From the prospective of legislation, the Government Procurement Law provides that, if a supplier wishes to participate in government procurement, it shall at least:

  • have the capacity to bear civil liability independently;
  • have a good commercial reputation and sound financial accounting systems;
  • have the equipment and professional and technical competence required for performance of the contract;
  • have a good record of paying taxes and social insurance premiums in accordance with the law;
  • have no record of major violations in its business activities for the three years prior to participation in government procurement activities; and
  • other criteria stipulated in laws and administrative regulations.

As to the sixth bullet point, more specifically, the laws provide for requirements relating to the qualifications of suppliers based on the subject matters of procurement. For instance, the laws set forth the qualifications of constructing entities and engineering designers, and such requirements shall be communicated by the procuring entity to the tenderers. This is particularly the case for construction projects. If an entity awarded or instructed to carry out a construction project lacks the qualifications required by law, their executed construction contracts will be nulled.

In addition, a procuring entity may set out special conditions for certain suppliers based on the particularity of the procurement projects, as long as such conditions are reasonable and do not constitute favouritism for or discrimination against any supplier.

If a competitive process is introduced (including open tenders, tender invitations, competitive negotiations, and requests for quotation), the laws stipulate a minimum number of qualified candidates to ensure a valid competition. A procuring entity may decide the number of qualified candidates as the situation requires, but the prescribed minimum number should be met. An open tender is expected to attract too many participants to be reviewed for qualifications, which would erode the subsequent progress of evaluation and award of contract, to avoid which, some local authorities have in place measures such as drawing lots or casting votes to cap the number of eligible suppliers.

Restrictions on suppliers should be imposed on a fair and reasonable basis, and no procuring entity should have double standards or offer partial treatment. According to the Government Procurement Law Implementation Regulations, no procuring entity shall:

  • provide different suppliers with different information about the same project;
  • set out any qualification, technology, or business condition that is incongruent with the features and actual needs of the project or irrelevant to the performance of the contract;
  • require for the procurement any technology or service that is only available from a certain supplier or product;
  • provide that any award limited to certain region or industry shall be a bonus or condition based on which the contract is awarded or the deal is entered;
  • apply different standards for the review of qualification or otherwise to different suppliers;
  • designate a certain patent, trademark, brand or supplier or a certain group of any of the foregoing;
  • illegally limit the form of ownership, organisation or location of any suppliers; or
  • use any other unreasonable conditions to limit or exclude potential suppliers.

For competitive procedures, the laws lay down a minimum of three eligible suppliers. Whereas, if procurement has only one source, there shall be one eligible supplier. Relevant Chinese legislation has specific provisions to determine which procurement measures should be adopted. The single-source procurement measure shall be limited to the purchase of goods or services that:

  • may only be purchased from a certain supplier, because such goods or services require a patent or know-how that is irreplaceable or is a public service entails special requirements that cannot be satisfied otherwise;
  • may not be procured from any other suppliers due to any unforeseeable emergency; or
  • may only be purchased from the previous supplier for consistency of the goods or services, provided that the new purchase shall be of less than 10% of the amount of the previous contract price.

The criteria used in evaluating tenders are determined by the procuring entity hinged on the specific requirements of a project, such as its nature, functions, scales, goals, technology, and price. Although such decision is considered a process of business decision-making, the procuring entities are forbidden from using this as an excuse to conceal biased or discriminative treatment.

Evaluation methods and procedures are directly linked to evaluation criteria, which may, subject to the principle of fairness and compliance, differ depending on the certain procurement measures differ. If the tendering procedure is adopted, the evaluation may depend on the lowest quote or  a combination of factors. Even if the lowest quote is the basis for awarding a contract, the quote itself shall not be the only decisive factor. Instead, all other substantial requirements in a tender invitation shall be met, where such requirements apply to procurement of goods or services with a unified standard in technology, services, etc. However, in practice, other factors will also be considered as criteria for evaluation. When tendering processes are involved, evaluation will be at its most stringent, requiring a tender evaluation committee to be set up to evaluate the tenders. The committee should also follow the statutory requirements stipulated particularly to regulate its selection of members and formation.

For the selection of the suppliers, according to the Government Procurement Law Implementation Regulations, the procuring entity shall determine, within five working days following the receipt of the evaluation report, the supplier(s) winning the tender or getting the contract according to the order of recommendation as shown in the evaluation report. In particular, if the candidates are invited to tender and the winner(s) of the tender is/are decided in the ways as mentioned in the preceding paragraphs, the winner(s) shall either: to the maximum extent satisfy the requirements contained in the tender invitation documents; or meet all substantial requirements contained in the tender invitation documents, and offer the lowest tender price as determined by the evaluation, provided that this lowest price shall not be lower than the relevant costs.

In practice, some local governments are promoting pilot programs to split tender evaluation from awarding. For instance, some have implemented a method of determining the winning tenderer(s) that separate such process from tender evaluation, so that the procuring entity may remain independent when making a decision about the candidates recommended by the tender evaluation committee. Such reform is not limited to local levels, and the central government has been also propelling the revision and reform of the provisions governing the tender evaluation and awarding mechanism under the Tendering Law.

According to the Government Procurement Law and applicable laws and regulations, the tender documentation (or the pre-qualification documents) shall set out the qualification criteria of the Tenderers, and the evaluation method and evaluation criteria for tender selection.

With respect to the qualification criteria of a Tenderer, the tender documentation will conspicuously specify the qualification or credit certification document to be provided by the Tenderer, qualification review criteria and method, and other verification documents that the Tenderer shall provide; in terms of the evaluation method and criteria, evaluation criteria that are not disclosed in the tender documentation shall not be adopted as grounds for tender evaluation. The procuring entity shall determine to either base the tender selection for government procurement projects on “lowest price wins” or on “multi-criteria selection” approach.

In the “lowest price wins” practice, the Tenderer offering the lowest price will be selected as the winning Tenderer, whereas, in the “multi-criteria selection” approach, the supplier who scores the highest against a set of quantified criteria will be the winner, provided that in both cases the tenders shall fit all material requirements in the tendering documentation. Nevertheless, it is required that the “lowest price wins” mechanism shall be applied to procurement of goods and services that have uniform standards, such as technologies and services.

The procuring entity or procuring agent is obligated to publicise in an announcement the tender award or the deal, tendering documentation, etc, on the media platform designated by the department of finance of a provincial or higher-level government within two working days after the supplier has been selected. Tenderers who did not pass the pre-qualification review will be informed of the reasons for the failure to pass.

The procuring entity or procuring agent is obligated to publicise in an announcement the tender award on the media platform designated by the department of finance of a provincial or higher-level government within two working days after the supplier has been selected.

The announcement shall specify the name, address, and contact information of the procuring entity or procuring agent; project name and reference number; name and address of the supplier and the contract price or transaction price of the awarded contract; name, specifications and models, quantity, unit price, and service requirements of the major project or service (as the case may be) that has won the tender, as well as a name list of experts participating in the tender evaluation.

When announcing the tender award, if the evaluation is conducted on the “multi-criteria selection” basis, the procuring entity or procuring agent will also notify non-successful Tenderers of their respective score of evaluation and the ranking.

There is no fixed standstill period between the notification of the contract award decision and the execution of the contract. However, according to the Government Procurement Law and applicable laws and regulations, if any question, query, or complaint lodged before the department of finance is likely to affect the contract award decision or the deal, the procuring entity shall suspend the execution of the contract. The procurement activities may also be suspended in the course when the department of finance is handling the complaint, but the suspension shall by no means exceed 30 days.

Review procedures are handled by different bodies based on the nature of each procurement measure.

If the Government Procures Goods or Services Other Than Construction Projects

It should be governed by the Government Procurement Law. This Law prescribes that “the finance departments of people’s governments at all levels shall be responsible for supervision and administration of government procurement”, which includes the supervision and inspection carried out by the government procurement regulatory departments in response to complaints filed by suppliers, and the supervision and inspection conducted by ex officio. Any interested party dissatisfied with a decision made by the finance department can apply for an administrative reconsideration of the decision or proceed with a judicial review by the court.

If the Government Procures Construction Projects

It should be governed by the Tendering Law. This Law prescribes that “[t]he departments of industry and information technology, housing and urban construction, transportation, railway, water resources, commerce and other departments of the local people’s governments above the county level shall supervise the relevant tender activities according to their respective duties and responsibilities”. Any interested party dissatisfied with a decision made by these departments can apply for an administrative reconsideration of the decision or proceed with a judicial review by the court.

If the Government Procures Goods or Services Other Than Construction Projects

According to the Government Procurement Law, if the procuring entity breaches procurement laws, suppliers can only seek legal redress through the procedures of queries, complaints, and administrative reconsiderations or lawsuits, sequentially rather than selectively.

First, the query procedure. “If a supplier believes that the procurement documents, procurement procedure, or the result of determination of the winning tenderer or winning supplier cause harm to their own rights and interests, they may query the procuring entity in writing…”.

Second, the complaint procedure. “If the supplier making the query is dissatisfied with the reply of the procuring entity or the procurement agency, or the procuring entity or procurement agency has not replied within the stipulated time period, the supplier may… complain to the government procurement regulatory department at the same level”.

Last, the administrative reconsideration or litigation procedure. “If a supplier is dissatisfied with the decision of the government procurement regulatory department, or the government procurement regulatory department fails to handle the complaint within the stipulated time period, the supplier may apply for an administrative reconsideration or institute an administrative action in the people’s court in accordance with the law”.

If the Government Procures Construction Projects

According to the Tendering Law Implementation Regulations, if the government breaches procurement laws, suppliers are subject to different remedies. If a supplier has any objection to the pre-qualification documents, tender opening, and the tendering review results of a project that must be tendered in accordance with the law, the supplier shall first lodge the objection with the Inviter, and then seek redress through the procedures of queries, complaints, and administrative reconsideration or lawsuits, sequentially. If the supplier has objections other than those mentioned above, the supplier may directly complain to the administrative supervision department and seek redress through the procedures of complaints and administrative reconsideration or lawsuits, sequentially.

If the Government Procures Goods or Services Other Than Construction Projects

According to the Government Procurement Law and the Government Procurement Law Implementation Regulations, interim measures, as remedial measures, may be taken by different parties in different manners at different stages of a procurement claim. In the case where a query is raised, which may affect the result of a tender or the transaction, the procuring entity shall suspend the execution of the relevant contract, or the performance of the contract if the contract has already been executed. In the case where a complaint is lodged, the government procurement regulatory department may, during the process of dealing with the complaint and based on the specifics of the complaint, require the procuring entity to suspend the procurement by sending a written notice to the procuring entity, provided that the suspension shall be no more than 30 days.

If the Government Procures Construction Projects

The Inviter shall give a response to an objection brought up by a potential Tenderer or other interested parties within three days after the objection is put forward and suspend all tender invitation or submission activities.

If the Government Procures Goods or Services Other Than Construction Projects

As provided in Clause 4.1, both the suppliers engaged in the procurement project underlying the awarding authority’s decision that is to be challenged and the government procurement regulatory department may challenge the awarding authority’s decisions.

If the Government Procures Construction Projects

The Tenderers or other interested parties, and the government procurement regulatory department are all eligible to challenge the awarding authority’s decisions.

If the Government Procurement of Goods or Services Other Than Construction Projects

The time limit for suppliers to raise a query: if any supplier thinks that procurement documents, procurement procedures, the tender award, or the deal may harm its interests, the supplier shall bring forward a query within seven working days after it becomes or should have become aware of such injury to its interests.

The time limit for suppliers to lodge a complaint: if the supplier raising a query is unsatisfied with the procuring entity or procuring agent’s response, or the procuring entity or procuring agent fails to reply within the given time limit (seven working days), the supplier may lodge a complaint within 15 working days after the foregoing reply period expires.

The time limit for suppliers to apply for a reconsideration or initiate an action: in terms of application for a reconsideration, if any citizen, legal person, or other organisation thinks a specific administrative act has infringed on its lawful rights or interests, the citizen, legal person, or the organisation may apply for an administrative reconsideration within 60 days after it has become aware of the act, unless applicable laws provide for a longer term.

As for application for an administrative lawsuit, the statute of limitation for a citizen, legal person, or other organisation to directly file a lawsuit before a People’s Court is six months, beginning from the date on which the citizen, legal person, or the organisation becomes or should have become aware of the infringing administrative act, unless it is otherwise provided in applicable laws.

Government Procurement of Construction Projects

The time period for Tenderers and other interested parties to raise a point of disagreement: potential Tenderers or other interested parties may raise a point of disagreement over pre-qualification documents at least two days prior to the last date for submitting the application for pre-qualification review, and may raise a point of disagreement over the tender documentation at least ten days prior to the last day for submitting tenders.

If Tenderers have any objection to the opening of tenders, the Tenderers shall express the disagreement at the site of the tender opening. If Tenderers or other interested parties disagree with the contract award for projects that are required by law to invite tenders, the Tenderer or interested parties shall raise an opinion of disagreement during the announcement period of the winning Tenderer.

The time limit for Tenderers or other interested parties to file a complaint: if a Tenderer or other interested party thinks the tender invitation or submission procedures are inconsistent with applicable laws or administrative regulations promulgated by the State Council, the Tenderer or interested party may file a complaint within ten days after it becomes or should become aware of the non-compliance.

The time limit for Tenderers or other interested parties to apply for a reconsideration or lawsuit: for application for an reconsideration, if a citizen, legal person, or other organisation thinks a specific administrative act has infringed on its interests, the citizen, legal person, or the organisation may apply for an administrative reconsideration within 60 days after it has become aware of the act, unless applicable laws provide for a longer term.

As for application for administrative lawsuits, the statute of limitation for a citizen, legal person, or other organisation to directly file a lawsuit before a People’s Court is six months, beginning from the date on which the citizen, legal person, or the organisation becomes or should have become aware of the infringing administrative act.

Government Procurement of Goods or Services Other Than Construction Projects

The complete objection process regarding government procurements is consisted of four stages: objection, complaint, reconsideration, and lawsuit. The relevant time limitations regarding the four stages are as follows. Suppliers shall make a query within seven working days after the date on which they become or should have become aware of the infringement on their rights, and the procuring entity shall provide a response within seven working days after the query is raised.

Upon expiry of the foregoing seven-day reply period, the suppliers may lodge a complaint within 15 working thereafter, and the department of finance shall make a decision regarding the complaint within 30 working days after receiving the same. The time limitation for the department of finance to deal with a complaint is no more than 59 working days, which excludes time spent on inspection, testing, appraisal, expert review, or by the complaining party on supplementing or correcting the materials.

The complete objection process for government procurements is consisted of four stages: objection, complaint, reconsideration, and lawsuit. The relevant time limitations regarding the four stages are as follows. The Inviter shall reply to an objection within three days after the date on which Tenderers or other interested parties make such objection.

The Tenderer or interested party may lodge a complaint with the regulatory department within ten working days after it becomes or should have become aware of the infringement upon its rights, and the regulatory department shall make a decision as to whether to accept the complaint within three working days after receiving the same and issue a final decision regarding the complaint within 30 working days after the acceptance of the complaint. The objection process may last no more than 60 days, including non-working days, and excluding time spent on inspection, testing, appraisal, and expert review.

There is no official statistics published in respect of the number of complaints considered by the review body per year, even though the results of consideration will be announced on China government procurement information platform run by the China Government Procurement website.

Tenderers or other interested parties may engage an agent to make a query or complaint against a tender award decision, which means, submitting a query or complaint may incur an agent fee. According to applicable regulations, no finance authority is allowed to charge either the complaining party or the party against which the complaint is made any fee for handling the complaint.

Additionally, there might be expenses incurred from inspection, testing, appraisal, and expert evaluation conducted for the purpose of preparing for requisite verification documentation, but these expenses are not necessarily charged to the complaining party.

According to the Administrative Measures for Making Queries and Complaints Regarding Government Procurement, the complaining party shall first bear the expenses of third-party inspection, testing and appraisal carried out regarding a complaint, and once the complaint handling decision determines the responsibility of each party, the party at fault shall be responsible for all expenses, or if both parties are at fault, each party shall bear the expenses in reasonable proportion to their own responsibility as determined by the complaint decision.

For construction projects procured by the government and all goods and services relating to such projects, if purchased through tendering procedures, the authority and successful tenderer shall enter into a written contract according to tender documentation and tenders with the subject matter, price, quality, term of performance, and other major terms in the contract being consistent with the provisions in the tender documentation and tenders submitted by the successful tenderer. The authority and the successful tenderer shall not execute a separate agreement containing anything substantially contradictory to the contract.

For other government procurements, the procuring entity and the supplier winning the tender shall enter into a government procurement contract stipulating matters confirmed in the procurement documents.

If the procuring entity aspires to add additional goods, construction works, or services same as the subject matter of the government procurement contract during the performance of the contract, the procuring entity may enter into a supplemental contract with the supplier on the condition that no other provisions in the government procurement contract will be modified, but the total amount of procurement of all such supplemental contracts added up shall be no more than 10% of the procurement amount of the original government procurement contract.

Neither party to the government procurement contract may alter, suspend, or terminate the contract without the other party’s consent.

Under the following circumstances, procurement contract may be directly awarded to one supplier:

  • there is only one supplier;
  • no other suppliers are available due to unforeseen emergencies;
  • it is necessitated by the requirement of consistency or compatibility with the original items procured to purchase from the original suppliers, and the overall sum paid for the additional procurement is no more than 10% of the procurement amount of the original procurement contract;
  • government procurement projects relating to national security and secrets, but this type of procurement does not necessarily have to be made with a sole source of supply; and
  • the items to be procured are not on the catalogue for centralised government procurement and the total price of such items does not meet the procurement limit. This type of procurement is not strictly a government procurement according to the law of China.

This is not applicable as there is no case law in China.

The Tendering Law is undergoing amendment. The National Development and Reform Commission of the People's Republic of China has published, in December 2019, the Tendering Law of the People’s Republic of China (exposure draft) to solicit public comments. This is a major amendment to the Tendering Law since its promulgation in 2000. After the amendment of the Tendering Law, the government will move on to amend the Tendering Law Implementation Regulations and supporting departmental rules.

In addition, the 2019 Legislative Plan of Ministry of Finance further confirms to conduct a legislative research on the Government Procurement Law (draft).

Zhong Lun Law Firm

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Law and Practice

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Zhong Lun Law Firm was founded in 1993 and has become one of the largest full-service law firms in China. With over 310 partners and over 2100 professionals working in 18 offices in China and abroad, Zhong Lun is capable of providing clients with high-quality legal services in more than 60 countries and across a wide range of industries and sectors. The firm's legal service team tailored for this practice area consist of nine members and has been working as a group for over a decade of years. The team's partners and associates are familiar with the legal service expected to be rendered in the area. Some of our team’s representative work/clients include: the People’s Bank of China, the Ministry of Environmental Protection, the Ministry of Justice, the Ministry of Commerce and the State Council.

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