New Regulations on Bid Invitation to be Implemented, under which the Threshold for Engineering Projects Subject to Bid Invitation will Increase Sharply from June 1

On March 30, the National Development and Reform Commission (NDRC) issued the Provisions on Engineering Projects Subject to Bid Invitation (Order No. 16 of NDRC, hereinafter referred to as “Order No. 16”), which will come into effect on June 1, 2018.

This is the first great change for the past 18 years since May 1, 2000 when NDRC issued the Provisions on the Scope and Threshold of Construction Projects for Bid Invitation (Order No. 3 of NDRC).

According to the Order No. 16, the threshold for engineering projects subject to bid invitation will increase sharply from June 1:

The threshold of the estimated price of a single construction contract increases from RMB 2,000,000 to RMB 4,000,000;

The threshold of the estimated price of a single contract for the purchase of key equipment and materials increases from RMB 1,000,000 to RMB 2,000,000;

The threshold of the estimated price of a single contract for the purchase of surveying, design and supervision services increases from RMB 500,000 to RMB 1,000,000.

In addition, the Order No. 16 specifies:

1. Applicable to all areas of China

Order No. 16 removes the provision of Order No.3, which stipulates that “the governments of provinces, autonomous regions and municipalities may define the specific scope and threshold of local projects subject to bid invitation according to actual conditions, but shall not narrow the scope of the projects subject to bid invitation defined herein”. Nationwide regulations on the projects subject to bid invitation are implemented, where adjustments by local governments are not allowed.

The prohibition on adjustment is not applicable to the internal management regulations of enterprises. During the period when Order No. 3 was implemented, state-owned enterprises often separately developed more demanding internal regulations on the threshold of projects for bid invitation. For example, if the prescribed threshold of a single construction contract for bid invitation was RMB 2,000,000, enterprises might require that any project for which a single construction contract values over RMB 1,000,000 should be subject to bid invitation.

2. Further clarification to the scope

According to Order No. 3, “projects that are wholly or partially invested in by state-owned funds or financed by the government” mean that all construction projects funded by state-owned funds, regardless of the share of such funds in the total investment of construction projects, must be subject to bid invitation.

Order No. 16 defines the “projects that are wholly or partially invested in by state-owned funds or financed by the government” stated in Article 3 of the Bid Invitation and Bidding Law of the People’s Republic of China as the “projects with the budget exceeding RMB 2,000,000 and accounting for over 10% of the amount invested” and the “projects financed by any state-owned enterprise and institution as a shareholder or a major investor” to further clarify the meaning of “partially” and enhance operability.

Order No. 16 requires that the specific scope subject to bid invitation of large infrastructure, public utilities and other public interest and security-related projects that are not wholly or partially invested in by state-owned funds or use loans or aid funds from international organizations or governments of other countries shall be defined by relevant departments on the principle of necessity and specific limitation and reported to the State Council for approval.

3. NDRC and the relevant departments of the State Council will implement Order No. 16, remove regulations that are inconsistent with Order No. 16 and maximize the effect of streamlining administration and delegating powers. Meanwhile, NDRC will further innovate and improve the bid invitation and bidding system and accelerate the revision of the Bid Invitation and Bidding Law of the People’s Republic of China.

Full text of the document issued by the National Development and Reform Commission (NDRC)

Provisions on Engineering Projects Subject to Bid Invitation

Article 1 These Provisions are formulated in accordance with Article 3 of the Bid Invitation and Bidding Law of the People’s Republic of China, for the purpose of determining the engineering projects subject to bid invitation, regulating bid invitation and bidding activities, enhancing work efficiency, reducing enterprise costs and preventing corruption.

Article 2 The projects that are wholly or partially invested in by state-owned funds or financed by the government shall be subject to bid invitation, including those:

(1) with the budget exceeding RMB 2,000,000 and accounting for over 10% of the amount invested;

(2) financed by any state-owned enterprise and institution as a shareholder or a major investor.

Article 3 The projects using loans or aid funds from international organizations or governments of other countries shall be subject to bid invitation, including those:

(1) using the loans or aid funds from the World Bank, the Asian Development Bank and other international organizations;

(2) using the loans or aid funds from governments and government authorities of other countries.

Article 4 The specific scope subject to bid invitation of large infrastructure, public utilities and other public interest and security-related projects that are not specified in Article 2 and Article 3 shall be defined by the development and reform department and other relevant departments of the State Council on the principle of necessity and specific limitation and reported to the State Council for approval.

Article 5 The projects listed in Article 2, 3 and 4 shall be subject to bid invitation, if the surveying, design, construction and supervision of such projects, as well as the purchase of key equipment and materials for such projects meet one of the following conditions:

(1) the estimated price of a single construction contract is over RMB 4,000,000;

(2) the estimated price of a single contract for the purchase of key equipment and materials is over RMB 2,000,000;

(3) the estimated price of a single contract for the purchase of surveying, design and supervision services is over RMB 1,000,000. A project with the total estimated price of a contract for the purchase of surveying, design and supervision services as well as key equipment and materials for the project meeting the above conditions shall be subject to bid invitation.

Article 6 These Provisions shall come into effect on June 1, 2018. 

NDRC Issued the Provisions on Engineering Projects Subject to Bid Invitation

With the approval of the State Council, NDRC recently issued the Provisions on Engineering Projects Subject to Bid Invitation (Order No. 16 of NDRC), which significantly narrowed the scope of engineering projects subject to bid invitation. As an important measure for the bid invitation and bidding field to implement the resolutions of the 19th National Congress of the Communist Party of China and the second and third plenary session of the 19th CPC Central Committee and deepen the reform of “delegating power, improving regulation and optimizing services”, this order can help to expand the autonomy of market entities, especially private investors, ease the burden on enterprises and stimulate market vitality and creativity.

According to the Bid Invitation and Bidding Law of the People’s Republic of China, the former State Development Planning Commission issued the Provisions on the Scope and Threshold of Construction Projects for Bid Invitation (Order No. 3 of NDRC, hereinafter referred to as Order No. 3) upon approval by the State Council in 2000, which specified the specific scope and threshold of construction projects subject to bid invitation. Since the implementation of Order No. 3, China has developed a relatively complete system of compulsory bidding which played a positive role in promoting the popularization and application of bid invitation and bidding system, regulating bid invitation and bidding behaviors, ensuring fair competition, improving the quality and efficiency of bid invitation and procurement and preventing and cracking down on corruption. However, with the continuous development of China’s economy and society and the constant deepening of the reform, Order No. 3 has gradually encountered the problems of over-wide scope and excessively low standards in its implementation. Meanwhile, according to Order No. 3, all provinces, autonomous regions and municipalities have developed the specific scope and threshold of construction projects subject to bid invitation based on local conditions, which enlarged the scope of compulsory bid invitation, resulted in differences in regulations and further increased the burden on market entities to varying degrees.

Aiming at the above problems, NDRC and the relevant departments of the State Council amended Order No. 3 and developed and issued the Provisions on Engineering Projects Subject to Bid Invitation upon approval by the State Council. The Provisions on Engineering Projects Subject to Bid Invitation would be officially implemented from June 1, 2018.The main modifications are as follows:

First of all, the scope of projects subject to bid invitation is narrowed. From the perspective of the nature of funds used, Order No. 16 defines the “projects that are wholly or partially invested in by state-owned funds or financed by the government” stipulated by Article 3 of the Bid Invitation and Bidding Law of the People’s Republic of China as the “projects with the budget exceeding RMB 2,000,000 and accounting for over 10% of the amount invested” and the “projects financed by any state-owned enterprise and institution as a shareholder or a major investor”. From the perspective of the specific scope of projects, Order No. 16 authorizes the development and reform department and other relevant departments of the State Council to define the specific scope subject to bid invitation of large infrastructure, public utilities and other public interest and security-related projects and report to the State Council for approval. At present, NDRC has already cooperated with relevant departments to prepare the draft regulations on relevant specific scope which has been narrowed sharply compared with that in Order No. 3. NDRC plans to issue the draft regulations before the official implementation of Order No. 16 upon approval by the State Council.

Secondly, the scale of projects subject to bid invitation is increased. According to the level of economic and social development, the threshold of the estimated price of a single construction contract increases to RMB 4,000,000; the threshold of the estimated price of a single contract for the purchase of key equipment and materials increases to RMB 2,000,000; and the threshold of the estimated price of a single contract for the purchase of surveying, design and supervision services increases to RMB 1,000,000, which have doubled compared with that in Order No. 3.

Thirdly, according to Order No. 16, the whole country shall implement unified regulations on the scope of projects subject to bid invitation. The provision of “the governments of provinces, autonomous regions and municipalities can define the specific scope and threshold of local projects subject to bid invitation according to actual conditions, but shall not narrow the scope of projects subject to bid invitation defined herein” in Order No.3 is removed. Nationwide regulations on the projects subject to bid invitation are implemented, where adjustments by local governments are not allowed.

NDRC and the relevant departments of the State Council will implement Order No. 16, remove regulations that are inconsistent with Order No. 16 and maximize the effect of streamlining administration and delegating powers. Meanwhile, NDRC will further innovate and improve the bid invitation and bidding system, accelerate the revision of the Bid Invitation and Bidding Law of the People’s Republic of China, give better play to the competition and selection effect of bid invitation and bidding activities and promote the sustained and healthy development of economy and society.

 (Sources: the official website of NDRC, www.gov.cn/)