Public procurement regulation in China

July 2021

• Public procurement in the People’s Republic of China (“PRC”) is governed by the PRC Government Procurement Law (“GPL”). The current GPL was promulgated on 29 June 2002, took effect on 1 January 2003 and was last amended on 31 August 2014. The GPL requires that public procurement notifications be publicly announced in a timely manner in the media, as designated by the competent government procurement regulatory authorities, unless commercial secrets are involved (Art 11 GPL). The PRC Ministry of Finance (“MOF”) has designated www.ccgp.gov.cn as the official channel to announce the public procurement notifications in the PRC. The website is available only in the Chinese language.
• The GPL provides that contracting authorities have to acquire domestic goods, services and construction projects, except in any of the following circumstances:
  • The goods, services or construction projects are not available in the PRC; or
  • The goods, services or construction projects cannot be acquired under reasonable commercial conditions in the PRC; or
  • The goods, services or construction projects are procured for use outside the PRC; or
  • It is specifically stated otherwise in other laws or administrative regulations
• The term “domestic goods, services and construction projects” is not defined in the GPL. It needs to be specified further by the GPL’s implementation regulations. In practice, the public procurement notifications specify whether foreign supplies are excluded on a case-by-case basis.
• The PRC is currently carrying out the legislative procedure to further amend the GPL to improve the provisions on the scope of application, methods and procedures related to governmental procurement, procurement contracts and contract pricing, legal liability, etc. A new version of the GPL is, therefore, expected.

• If a procurement meets the following conditions, it is subject to the GPL:
  • The procuring entity is a government authority, a public institution or a social organization (jointly “Procuring Entity”);
  • The intended procurement is financed by fiscal funds; and
  • Either the goods, services and/or construction projects to be procured are listed in the Catalogue for Centralized Procurement (“Catalogue”), or the budgeted amount of the procurement reaches the statutory thresholds.
• The central government, i.e. the State Council, is empowered to determine and publish the state level Catalogue for government procurements, which are covered by the central government budget (“Central Projects”). Every provincial level government is empowered to determine and publish its respective local Catalogue for government procurements, which are covered by the provincial government budget (“Local Projects”). As long as the goods, services and/or construction projects are listed in the Catalogue, the procurement is subject to the GPL regardless of whether the budgeted amount of the procurement reaches the statutory thresholds.
• The State Council determines the statutory thresholds for public procurement of Central Projects if they are not mentioned in the state catalogue. According to the state level Catalogue published by the State Council for the year 2020, a procurement is subject to the GPL if the relevant goods, services and/or construction projects are not mentioned in the state level Catalogue but the budgeted amount of the procurement reaches the following thresholds:

• Every provincial government determines the statutory thresholds for the public procurement of Local Projects, if they are listed in the relevant local Catalogue. For example, according to the local level Catalogue published by the Shanghai People’s Government for the year 2019-2020, the procurement is subject to the GPL if the goods, services and/or construction projects are not mentioned in the local level Catalogue but the budgeted amount of the procurement reaches the following thresholds:

Statutory procedures for public procurement under the GPL include (i) open procedures, (ii) restricted procedures, (iii) competitive dialogues, (iv) single source procurements, (v) requests for quotation, and other procedures acknowledged by the MOF (Art 26 GPL).

Open procedures

• The government procurement of a State Project is subject to an open procedure if the budgeted amount of the State Project reaches the statutory thresholds stipulated by the State Council. According to the state level Catalogue published by the State Council for the year 2020, the statutory thresholds triggering the open procedures are as follows:

• The government procurement of a Local Project is subject to the open procedures if the budgeted amount of the Local Project reaches the statutory thresholds stipulated by the relevant provincial government. For example, according to the local-level Catalogue published by the Shanghai People’s Government for the year 2019-2020, the statutory thresholds triggering the open procedures are as below: 

Restricted procedures

• Restricted procedures may be adopted in any of the following circumstances:
  • The number of suppliers is limited due to a technological complexity, special requirements or restrictions of the natural environment; or
  • The costs to be paid for the open procedures are unreasonably disproportionate to the total value of the items to be procured.

Competitive dialogues

• Competitive dialogues may be adopted in any of the following circumstances:
  • After issuing an invitation to tender (i) no suppliers submitted a tender, (ii) there were no qualified tenders, or (iii) a new invitation to tender was not possible; or
  • The nature of the procured item and complexity of the technology makes the determination of detailed specifications or specific requirement impossible; or
  • The time required to prepare an invitation to tender cannot satisfy the urgent requirement of the end user of the procured items, for reasons neither foreseeable by the Procuring Entity, nor resulting from a delay due to the Procuring Entity; or
  • It is not possible to calculate the total price in advance due to reasons such as the impossibility of determining in advance the time or quantity of an art procurement, patents, know how or services; or
  • The public procurement of goods and services does not reach the statutory thresholds for open procedures; or
  • The tender has been exempted from the open procedures by the competent public procurement regulatory authority, even though the public procurement of goods and services reaches the statutory thresholds for open procedures; or
  • The public procurement of construction projects does not reach the statutory thresholds for open procedures or restricted procedures as set out in Article 3 of the PRC Law on Invitation and Submission of Tenders in conjunction with the Provisions on Engineering Projects That Must Be Subject to Bidding.

In addition, subject to the approval of the competent public procurement regulatory authority, the open procedure for public procurement of goods and services can be converted into a competitive dialogue if only two suppliers have submitted tenders or only two suppliers are found to respond substantively to the invitation to tender.

Single source procurements

• Single source procurements may be adopted in any of the following circumstances:
  • The goods, services or construction projects can only be procured from a sole supplier; or
  • It is impossible to procure the goods, services or construction projects from another supplier due to an unforeseeable urgency; or
  • It is necessary to continue to procure from the original supplier in order to ensure consistency of the procurement project or compatibility of the ancillary services with the original procured items, and the total funds do not exceed 10% of the procured amount in the original contract; or
  • The public procurement of goods and services does not reach the statutory thresholds for open procedures; or
  • The open procedures have been exempted by the competent public procurement regulatory authority, even though the public procurement of goods and services has reached the statutory thresholds for open procedures; or
  • The public procurement of construction projects does not reach the statutory thresholds for open procedures or restricted procedures as set out in Article 3 of the PRC Law on Invitation and Submission of Tenders in conjunction with the Provisions on Engineering Projects That Must Be Subject to Bidding.

Requests for a quotation

• Requests for a quotation may be adopted in any of the following circumstances:
  • The goods to be procured have unified specifications and standards, and the supplies are sufficient and the price variation is small; or
  • The public procurement of goods and services does not reach the statutory thresholds for open procedures; or
  • The open procedures have been exempted by the competent public procurement regulatory authority, even though the public procurement of goods and services has reached the statutory thresholds for open procedures; or
  • The public procurement of construction projects does not reach the statutory thresholds for open procedures or restricted procedures as set out in Article 3 of the PRC Law on Invitation and Submission of Tenders in conjunction with the Provisions on Engineering Projects That Must Be Subject to Bidding.

In general, a decision can be appealed if the supplier (“Claimant”) believes that the procurement documents, procurement procedures, acceptance of the tender, or closing of the public procurement violates its rights and interests (Art. 52 GPL).

Please click Public Procurement Remedies Toolbox to find all applicable and available remedies including their time limits in public procurement procedures in your jurisdiction.

• The Claimant may submit a written claim to the Procuring Entity or its agent within seven working days starting from the date on which the Claimant first became aware or should have become aware of the alleged violation of its rights and interests (Art. 52 GPL).
• The Procuring Entity or its agent, as the case may be, should reply to the Claimant or other related suppliers within seven working days following the receipt of the written claim from the Claimant (Art. 53 GPL).

If the Procuring Entity or its agent, as the case may be, fails to reply to the Claimant within the above time limit or the Claimant is not satisfied with the reply, the Claimant is entitled to file a complaint with the competent public procurement regulatory authority within 15 working days, starting when the aforementioned time limit expires (Art. 55 GPL).

No standstill period has been defined by the GPL..

The Claimant’s complaint should be submitted to the competent public procurement regulatory authority. The MOF is the competent authority to deal with complaints concerning state projects. The local financial administrations at the county level or above are competent to deal with the complaints regarding local projects.

No filing fees will be charged.

• Filing the complaint with the competent public procurement regulatory authority does not automatically suspend the procurement. However, after the authority has accepted the Claimant’s complaint, it may, at its sole discretion, issue an administrative order to suspend the procurement activities for a period of up to 30 days (Art. 57 GPL).
• No interim measures are available to suspend problematic procurement activities under the current PRC Law.

• The following illegal activities by the Procuring Entity and its agents may render the public procurement ineffective if they affect or may affect the tender’s acceptance or the closing of the transaction:
  • unauthorized use of other procurement procedures when open procedures should be used;
  • unauthorized raising of procurement standards;
  • appointment of an agent who does not possess the qualifications for carrying out the public procurement;
  • use of unreasonable conditions in order to subject a supplier to unequal or discriminatory treatment;
  • negotiating with tenders during the course of the invitation to tender;
  • failure to sign a procurement contract with the winning supplier after the letter of acceptance has been issued;
  • refusal to be supervised or inspected by competent authorities;
  • collusion with suppliers;
  • taking bribes or obtaining other improper benefits during the course of the procurement;
  • providing false information during the course of the supervision and inspection carried out by the competent authorities; and/or
  • disclosing the lowest reserve price before opening the tender.
• If any of the above illegal activities affect or may affect the acceptance of the tender or the closing of the transaction, the following legal consequences apply:
  • If the wining supplier has not yet been determined, the procurement activities will be halted, and a new one conducted;
  • If the wining supplier has been determined but the procurement contract has not yet been performed, the procurement contract will be cancelled and a new winning supplier will be selected from the qualified candidates; if there are no such qualified candidates, a new government procurement activity will be conducted;
  • If the procurement contract has been signed but not yet performed, the procurement contract will be cancelled and a new winning supplier will be selected from the qualified candidates; if there is no qualified candidate, a new government procurement activity will be conducted;
  • If the procurement contract has been performed, and has resulted in a loss for the Procuring Entity or other suppliers, the violating party will be liable for compensation (Art. 71 GPL Implementation Regulations).

The Chinese GPL generally prohibits modification of a procurement contract without approval.

However, when the contracting authority would like to procure additional goods, construction projects and services the same as those under the original public procurement contract during the performance of such a contract, the parties are permitted to sign a supplementary contract for such additional procurement, provided that the other terms and conditions are not changed and the price for such additional goods, projects and services does not exceed 10% of the original contract price (Art. 49 GPL).

The use of e-procurement by the Procuring Entity is voluntary under PRC law.