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What the fair competition review system brings to government procurement

Author: reporter Rongsu Mei Source: China Financial and Economic News Published: 2019-10-09

◆ Focus on the relationship between the government and the market, and manage "invisible hands" to prevent excessive government and improper intervention in the market

◆ Comprehensively clean up the regulations and practices that impede fair competition, remove market barriers, and ensure that various market entities participate in competition fairly and are equally protected by law

◆ Rethink and reshape China's current government procurement methods and review methods with reference to international norms to meet diversified procurement needs and achieve a balance between maintaining procurement interests and ensuring fairness and justice

Government procurement, which resonates at the same frequency as the pulse of the times, has once again shaken off and welcomed new opportunities.

The Ministry of Finance recently issued the "Notice on Promoting Fair Competition in Government Procurement and Optimizing the Business Environment" (Cai Ku [2019] No. 38, hereinafter referred to as Document 38) to implement the optimization of government procurement camps in the "Deepening Government Procurement System Reform Plan" Business environment specific requirements. Circular No. 38 clearly puts forward regulations and practices for comprehensively cleaning up government procurement in the field of obstructing fair competition. At the same time, it requires all regions and departments to strictly implement the fair competition review system when formulating government procurement systems involving market players. What is a fair competition review system? Who reviews, how, and what? What impact will the implementation of this system have on government procurement? After a period of study, digestion, precipitation, and thinking, the industry has a more comprehensive and in-depth understanding of these issues.

Restricting government behavior, maintaining a unified market and fair competition

The interviewed experts agreed that conducting a fair competition review is an important measure deployed by the Party Central Committee and the State Council to optimize the business environment and promote high-quality economic development. It is also a major institutional arrangement to maintain fair competition in the market. Its legal basis is the Anti-Monopoly Law. This work was mainly led by development and reform departments. In recent years, with the deployment of the State Council, it has gradually expanded to various policy formulation departments such as government procurement.

In June 2016, the State Council issued the "Opinions on Establishing a Fair Competition Review System in the Construction of the Market System" (Guo Fa [2016] No. 34), which is based on existing local protections, regional blockades, industry barriers, and corporate monopolies. Preferential policies or derogation of the interests of market entities require the establishment of a fair competition review system to regulate relevant government actions, prevent the introduction of policies and measures that exclude or restrict competition, and gradually clean up and abolish regulations and practices that hinder the unified market and fair competition across the country. Opinions set out the content of the review object, review methods, review standards, exceptions, etc. This is the first time a fair competition review system has been formally proposed.

In October 2017, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Commerce, the State Administration for Industry and Commerce, and the Legislative Affairs Office of the State Council jointly issued and issued the “Implementation Rules for the Fair Competition Review System (Interim)” (Fajian Price Supervision [2017] No. 1849), starting from the review mechanism. The relevant regulations of the fair competition review system have been explained and detailed in terms of procedures, review standards, exception regulations, social supervision, and accountability.

This year's "Government Work Report" clearly proposed that reforms and improvements to the fair competition review and fair supervision system should be expedited to clear up various regulations and practices that hinder the unified market and fair competition; the Executive Meeting of the State Council held on March 26 reviewed and approved the further advancement of implementation A series of measures for a fair competition review system. The implementation of the fair competition review system in all regions and departments continued to accelerate.

Specifically, the review system of this system is the establishment of market access, industrial development, investment promotion, bidding, government procurement, and operations by the administrative agencies and organizations authorized by laws and regulations with functions to manage public affairs (collectively referred to as policy-making organs). Codes of conduct, qualification standards, and other regulations, normative documents and other policies and measures related to the economic activities of market entities. The review method is self-examination by various policy-making agencies. At the same time, the opinions of interested parties should be heard. Experts, scholars, legal consultants, and professional organizations can also be consulted or the public can solicit opinions. The review criteria include market entry and exit criteria, such as unreasonable and discriminatory entry and exit conditions, etc .; free flow of goods and factors, such as not exclusion or restriction of foreign operators to participate in local bidding and tendering activities; etc., affecting production Operating cost standards, such as not giving preferential policies to specific operators in violation of laws, etc .; affecting production and operating behavior standards, such as not intervening in the price level of goods and services that implement market-regulated prices, etc. After review, policy documents that do not have the effect of excluding or restricting competition may be implemented; those that have the effect of excluding or restricting competition shall not be promulgated or adjusted after meeting relevant requirements. If there is no fair competition review, it will not come out.

According to statistics, as of the end of February this year, all departments of the State Council, provincial governments, 98% of municipal governments, 92% of county governments, and four-level governments have conducted review work. A total of 430,000 newly issued documents were reviewed nationwide, and more than 2,300 of them were revised and improved; 820,000 already issued documents were cleaned up, and documents related to local protection, designated transactions, and market barriers were abolished or revised2 More than ten thousand copies.

Fair competition review in government procurement has unique advantages

How to implement the fair competition review system in government procurement? Document No. 38 clearly states that all regions and departments should formulate government procurement system measures involving market entities, and must fully listen to the opinions of market entities and relevant industry associations and chambers of commerce, assess the impact on market competition, and prevent the problem of exclusion and restriction of market competition. Focus on reviewing whether the system measures set unreasonable and discriminatory access conditions to exclude potential suppliers from participating in government procurement activities, whether to set up administrative approvals without legal and regulatory basis or to have records of an approval nature, and to give preferential treatment to specific suppliers in violation of regulations. During the implementation of government procurement-related systems and measures, their impact on the unified national market and fair competition should be assessed regularly or in a timely manner, and those that hinder the unified market and fair competition should be modified or abolished in a timely manner.

Many experts interviewed said that compared with other fields, the basic work of conducting fair competition review in the government procurement field is relatively good. To Zhang Xudong, deputy director of the Government Procurement Supervision Department of the Zhejiang Provincial Department of Finance, the government procurement field has been working to eliminate the phenomenon that hinders fair competition. The efforts and effectiveness of national legislation in this regard are obvious to all. On the one hand, Article 3 of the Government Procurement Law clearly states that government procurement should follow the principles of openness and transparency, fair competition, fairness, and good faith, which is in line with the requirements of the fair competition system review. On the other hand, regarding the proper exercise of government procurement supervision and management functions, protection of fair competition, and protection of the legitimate rights and interests of market entities such as suppliers, the Government Procurement Law, the Implementation Regulations of the Government Procurement Law (hereinafter referred to as the "Regulations"), "Government Procurement" Laws, regulations and departmental regulations such as the Measures for the Administration of Tendering and Bidding of Goods and Services (Order No. 87 of the Ministry of Finance, hereinafter referred to as Order No. 87) have already made institutional arrangements, and there are many provisions in specific operational details, and relatively complete relief is provided. mechanism. For example, Article 20 of the Regulations sets out the specific circumstances in which the purchaser or the procurement agency applies differential or discriminatory treatment to suppliers on unreasonable conditions; Article 17 of Decree 87 makes it clear that the purchaser and the procurement agency No scale conditions such as the registered capital, total assets, operating income, employees, profits, tax amount of bidders shall be used as qualification requirements or assessment factors, nor shall authorization, commitment, certification, endorsement, etc. be made by manufacturers other than imported goods As a qualification requirement, bidders are subject to differential or discriminatory treatment. In recent years, the government procurement supervision and management department has earnestly implemented the requirements for the reform of “decentralized service”, cancelled the administrative license for agency qualification certification, changed the approval of the procurement plan to a record system, reduced the number of items for approval and review, and simplified and optimized procurement procedures to prevent excessive and Improper intervention in the market coincides with the inherent requirements of the fair competition review system. Proactive clearance of some government procurement regulatory documents involving local protection, industry protection, and other obstacles to a unified market and fair competition is a good example.

"It can be said that the practice of government procurement to maintain a unified market and fair competition has long been ahead." Zhang Zhijun, deputy chief engineer of Shanghai Belden Project Management Consulting Co., Ltd. believes that fair competition review will be conducted in the field of government procurement to promote the establishment of a unified national procurement The nature of the market and maintaining fair market order is not a new topic. From the content of the review, "whether there are unreasonable and discriminatory access conditions to exclude potential suppliers from participating in government procurement activities", "whether there is administrative approval without a legal or regulatory basis or a record of approval" "Is it given to specific suppliers in violation of regulations?" "Preferential treatment" is often involved in government procurement regulations and documents. Regarding the transformation of government functions, restricting the "invisible hand", and reducing the interference of government departments in microeconomic behaviors, it has also caused more and more attention and thinking of the government procurement industry. These have laid a good foundation for the implementation of the fair competition review system in the field of government procurement. At present, in accordance with the requirements of Circular 38, first of all, rules and practices that have previously conflicted with higher-level laws or hindered fair competition should be systematically cleaned up. Second, the government procurement regulations, regulatory documents, etc. that are about to be introduced will be rigorously reviewed. Policy-making agencies may review them on their own or rely on the expertise of third-party agencies. Finally, it should also be extended to the review of the previous institutional documents. The organizer can be the policy-making body itself, or it can ask a third party to assist in the evaluation review.

The blade faces inward, and rethinks and reshapes the current procurement method.

As a matter of fact, once Circular No. 38 was issued, many places began to organize a comprehensive review of the regulations and practices that impeded fair competition in the field of government procurement. For example, Fujian Province emphasized when forwarding Circular 38 that financial departments at all levels must take the lead in implementing the requirements of Circular 38 and must not set additional conditions for procurement agencies that have registered in accordance with the regulations of the Ministry of Finance to enter the region to practice and not interfere with purchasers. Choose your own purchasing agency. Henan Province, in conjunction with the Provincial Finance Department's "Notice on Optimizing the Business Environment for Government Procurement" and local actual conditions, has systematically sorted out 13 key clean-up contents, requiring provincial departments, units, provincial financial bureaus, The County Finance Bureau and the Provincial Public Resources Trading Center will execute the comparison. At present, relevant departments and units have reported the written clearance report to the Provincial Department of Finance in a timely manner. The relevant person in charge of the Government Procurement Supervision and Administration Office of the Provincial Department of Finance told reporters that on the whole, the units in the cleanup work cooperated well and progressed smoothly. Some public resource trading centers have restricted the participation of suppliers and agencies in government procurement activities through supplier registration and agency filing, but the CA certificates introduced by the trading platform are not mutually recognized. The provincial, city, and county levels The transaction center CA certificate has a problem of repeated charges, which is strongly reflected in the society. Is this a market barrier and an obstacle to fair competition? Views vary. In addition, according to the person in charge, as early as two years ago, the Provincial Department of Finance took the initiative to clean up the government procurement system documents, abolishing and revising one batch. When other provincial departments study and formulate institutional documents that support industry or industrial development through priority procurement, the financial department will make suggestions from the perspective of removing market barriers and promoting and protecting fairness.

During the interview, some experts pointed out that some discriminatory clauses, violations of regulations give preferential treatment to specific suppliers, and even the content of designated brands and suppliers are mostly hidden in procurement documents or procurement announcements, and there is a system behind this to support fairness. The perspective of competition review is difficult to deal with. In this regard, Zhang Xudong said that if the purchaser or the procurement agency proposes unreasonable or discriminatory clauses in the procurement documents or procurement announcements, these contents are also supported by the policy system, and the supplier can raise questions, complaints, even reconsiderations, litigation And apply for a review of the legality of the policy system. In this complete chain of rights protection, there is not only administrative supervision but also judicial supervision. Zhang Zhijun also believes that the financial department can handle the procurement documents and procurement announcements that are relatively hidden under unreasonable or discriminatory provisions.

It is also argued that in the current government procurement activities that hinder fair competition, there are relatively few unreasonable regulations involving local protection and regional blockades, most of which are restrictions on market entities or deprivation of their rights. Peng Shiming, general manager of Hainan Fidick Tendering and Consulting Co., Ltd. believes that some procurement documents and procurement announcements set unreasonable or discriminatory clauses to exclude potential suppliers, often because they can't guarantee their procurement interests through legitimate channels. This is the last resort. Pain points caused by rigid government procurement rules and procedures and procedures. Buyers have the main responsibility for government procurement activities, and their willingness to avoid contract risks is relatively strong. They often take the interests of procurement projects as the core and intentionally or unintentionally bypass conflicting laws and regulations. From the perspective of project quality and benefits, purchasers are unwilling to choose some relatively weak companies that cannot guarantee the quality of their products or services, and agencies often cater to the wishes of purchasers. For example, for a procurement project, the implementation period of a project promised by a winning supplier is 3 months, but the actual implementation has been delayed for more than a year with various excuses. This project has not been completed, and the purchaser has a new similar procurement project. He wants to exclude the supplier, but there is no legal means. As a result, the supplier has won the bid again, and the purchaser is helpless.

"It is recommended to change the current government procurement methods and review in China with reference to international standards such as the" UNCITRAL Model Law on Public Procurement ", WTO" Government Procurement Agreement "(GPA)," European Public Procurement Directive ", and" World Bank Credit Procurement Rules " "Peng Shiming said that in the" UNCITRAL Model Law on Public Procurement "and other international norms, some personalized procurement methods are recommended for different transaction situations, different industry categories, and different contract types, which can well achieve maintenance procurement. The balance between interests and protection of fairness and justice provides legal guarantees for universal rules in exceptional cases and legally circumventing standard situations. For example, in order to ensure fair competition, Article 18 of the Regulations clearly states that, in addition to single-source procurement projects, suppliers that provide overall design, specification, or project management, supervision, and testing services for procurement projects may not participate in the procurement. Other procurement activities of the project, but the same supplier can simultaneously undertake overall project design, specification preparation and project management, supervision, testing and other services. From the point of view of being beneficial to the purchaser, the solicitation proposals recommended by the United Nations Model Law on Public Procurement (including proposals not negotiated, solicitations through dialogue, and solicitations through sequential negotiations) are classified as The contract link of the procurement project to provide pre-design, supervision, monitoring and other services is integrated with the post-construction to form a whole contract, breaking the restriction that those who provide pre-service may not participate in later bidding. At present, the government procurement method in China is too singular and rigid. It often puts exceptions in a desperate situation and damages its foundation. Therefore, it is necessary to summarize practical experience and refer to international standards to create more and more flexible procurement methods to meet diversified procurement needs. At the same time, it is also necessary to change the review method, change expert review to expert consultation, and return the decision-making rights of contract review and contract award to the purchaser; dilute or abandon the comprehensive scoring method, enable and improve the comprehensive evaluation method, and improve business, technology, and price. All evaluation contents listed as comprehensive evaluation factors, such as service and service, must give clear evaluation opinions, detailed and detailed comparison results of pros and cons, as well as the basis and concluding comments for contract award.

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