Circular on the Promotion of Fair Competition in Government Procurement and the Optimization of the Business Environment (Mainland China)

Joyce Wen

The Ministry of Finance issued the Circular on the Promotion of Fair Competition in Government Procurement and the Optimization of the Business Environment (the “Circular”) on July 26, 2019.  The Circular stipulates several measures to promote fair competition in government procurement and optimize the business environment so as to create a unified, open, orderly and competitive government procurement market system.

The Circular specifically calls on each region and department to focus on eliminating and correcting regulations and practices that undermine fair competition, including engaging in discriminatory treatment of suppliers based on their ownership forms, organizational forms or ownership structure and imposing unfair clauses for private enterprises; engaging in discriminatory treatment between products and services provided by domestic enterprises and those provided by foreign-funded enterprises in China; preventing suppliers from entering the government procurement market by shortlisting a pool of backup suppliers, a directory of suppliers, and a database of qualified suppliers for government procurement activities, except for contractual suppliers and designated suppliers of small-sum and sporadic goods or services as well as the circumstances otherwise prescribed by the Ministry of Finance.

With respect to the strict enforcement of fair competition, the Circular requires each region and department to formulate measures for the government procurement system involving market entities, strictly enforce the fair competition review system, listen to the opinions of market entities and relevant trade associations or business associations, assess the potential impact on market competition, and prevent the exclusion or restriction of market competition.  Relevant regulations may be promulgated and implemented if it is concluded after the review that there is no competition exclusion or restriction effect; if competition is excluded or restricted, such regulations shall not be released, or they shall be adjusted so that the relevant requirements are met before promulgation and implementation.  Regulations which do not go through the fair competition review shall not be released.

With respect to enhanced administration of government procurement engagements, the Circular requires procurement activities and procedures to be optimized, refines the implementation requirements for procurement activities, regulates the collection and return of the performance bond, specifies the timely payment of procurement and improves the compensation and remedy mechanisms for damage to suppliers’ interests.

With respect to the accelerated promotion of e-government procurement, the Circular requires accelerated improvement to the online transaction functions of the e-government procurement platform so that online procurement announcements, provision of procurement documents, and submission of bid (response) documents may be realized, as well as the implementation of electronic bidding and evaluations.  The “Internet Plus Government Procurement” initiative should be implemented more quickly to actively promote the development of the e-government procurement platform and online stores, establish sound and unified technical standards and data specifications, and gradually achieve nationwide connectivity.

In addition, the Circular also contains specific provisions on further improving the transparency of government procurement, improving government procurement complaints and administrative adjudication mechanisms and keeping supplier complaint channels running smoothly.  This Circular went into effect on September 1, 2019.