Mr. Jiang Xipei Making His Voice in NPC & CPPCC: regulating the bidding laws and improving the business environments

Source:ChinaEconomic Net    Date:2016-03-09

Link of the text: http://www.ce.cn/cysc/newmain/yc/jsxw/201603/08/t20160308_9361776.shtml

Zhisland NPC & CPPCC salon was held on March6 inChangan Club. The theme of this year is “2016, what do we believe in?” More than 30 entrepreneurs and the representatives of NPC & CPPCC and committee members wrote down their beliefs; between the lines were full of the entrepreneurs’ persistence and hopes. The reporters learned that the representatives and committee members attending the meetings shared their opinions about NPC & CPPCC and their beliefs about the future with the entrepreneurs; Jiang Xipei, BOD Chairman of Far East Holding Group, raised his suggestions in NPC & CPPCC about “regulating the bidding law”; he hoped that his suggestion would improve the existing business environment.

The reporters learned that before NPC & CPPCC were held, Mr. Jiang Xipei, with the profound research and investigation, brought forward his suggestion about “regulating the bidding law”; to perfect his suggestions, he also asked for opinions from his friends in the business circle to reflect the voices of more people.

Mr. Jiang Xipei’s suggestion includes the following four parts:

I. Present state of bidding business

Bidding is widely used in China as an important means of transaction; with effective and positive results exist also some issues demanding urgent solutions, especially the abuse or misuse of the method of the lowest successful bid price, which have disturbed the market seriously, hindered the fair competitions and lowered the product quality and the good will be forced to withdraw and the bad will be preserved in the market. This situation is not in line with the initial intention and wish of our country to strengthen the country with quality and rejuvenate with brands and the principles of “competitive quality and price” and “reform of supply side” suggested in “the 13^th 5-year plan”.

The misuse of method of lowest bid price has resulted in the vicious price competition and forced some bidders to make the offer lower than the cost to win the bid and then cover the loss by means of poor performance and unqualified materials and cheating and high price claiming; some bidders even threatened the Owner to increase the cost by means of construction suspension, completion extension, etc. to obtain extra interest; these conducts will generate the most dangerous hidden problems in project quality, project quality, service quality, work safety and even the progress; in addition, massive economic disputes will be caused, including default payment of salaries, default payment of contract prices, etc. The social stability will be impaired.

For industry of manufacturing and construction, the misuse of method of winning bid with the lowest price will also have a profound adverse effect. With the vicious price competition, the bidders can’t win any bid with normal price and some large-scale companies will loss the opportunities of business or can’t have any profit with the successful bid at low price; they can only cut down the investment dramatically in technology, equipment and production research and development so that the company will certainly lack the energy for future development and self-innovation ability can’t be improved. In aspect of employment, to cut down the cost, the companies will lower the employment standard, decrease the input in employees education and training and the employees’ quality will be hard to be improved; in the end, the company will see no hope of development and the corresponding industry will be trapped in the trouble of vicious competition and canceration of market order; the economic and social development will be unsustainable.

II. Analyzing the existing issues

Law of the People's Republic of China on Tenders and Bids regulates in Article 41 that “The bid of a winning bidder shall satisfy any of the following requirements: to be able to satisfy the maximum various comprehensive assessment standards set in the tender documents; or to be able to satisfy the substantial requirements set in the tender documents and to have the lowest bid price quotation upon assessment, with the exception of the bid price quotation which is below cost.” In addition, Temporary Provisions on Bid Evaluation Commission and Bid Evaluation Methods regulates in Article 29 that “bid evaluation methods include lowest bid price method, comprehensive evaluation method and other bid evaluation methods approved by laws or administrative regulations.” Therefore, at present, mainly two bid evaluation methods are used inChina: lowest bid price method and comprehensive evaluation method.

However, in the present laws and statutes, the explicit application scope and preconditions of “the approved lowest bid price method” are not regulated specifically and the detailed state and standard of “bid price lower than cost” are not specified; this have developed a condition where in most of the bidding projects applicable for comprehensive evaluation based on technology, commerce and price, the conditions of “ability to meet the substantial requirements of bid documents” will be neglected deliberately and the contract performance ability of the bidders is measured only with the standard of low price; no price identification program will be launched when a abnormally low price is found, the state of “bidding price lower than cost” is neglected so that massive bids are won with low price and the vicious competition ignoring the cost have been generated. In addition, Jiangsu Province Bidding Codes regulates in Article 38 item 2 that “for the general projects of construction and procurement with common technology and performance standards or without special requirements in technology or performance from the bid inviters, the approved lowest bid price method shall be adopted. The bidder who can meet the substantial requirements of bidding documents and offer the lowest bid price shall be the candidate of the successful bidder. However, the bid where bid price is lower than cost shall be excluded.” It is also regulated that some bidding projects with certain technology features and performance regulations shall also obtain the approved lowest bit price method, which has worsen the misuse of lowest bid price method in bidding project. In addition, the inspection agencies will obtain more interest from the growth of unqualified products and the sham and fake products, like the situation where bad money drives away the good money.

The normal price is the respect to the innovation and labor of others and to the bidders themselves. The abnormal price will only reflect an abnormal relationship between supply and demand and incomplete legal environment and credit. The principle of lowest price winning will gradually rot the atmosphere for the manufacturing industry inChinato chase quality and try innovation and form the concentration of industry although the initial intention of it is for good. It will also provide the government and companies with the chance to put on a nominally qualified shield without considering the possibility and relevant consequence of contract performance so that the price will keep falling from lowest to lower when Chinese economy is declining gradually and every industry is fading.

III. Suggestions and proposals

Firstly, the relevant laws and statutes should be established and completed. “approved lowest bid price method” should be cancelled and “approved average bid price method” should be used in product bidding; the bid evaluation percentage for technology content and brand content shall not be less than 30%; the price higher than the average bid price can also win the bid; the items of relevant regulatory documents should be completed and specified.

Secondly, an industry cost price system should be established to prevent vicious price bidding. For the industries with obvious vicious low price bidding, based on the overall situation of the market and relevant government documents and experts’ experience, the government or industry organization should establish the cost guidance price for bid and should regulate strictly that the bidding offer will be considered as lower than the cost when the price is lower than the average bid price by a certain percentage after the highest and lowest prices are removed and this should serve as the price evaluation basis for the whole bidding project.

Thirdly, the integrity system should be established and the integrity infringement punishment system shall be completed. At present, as the supply and demand relationship has lost the balance and the bidders suffer from serious excess production capacity, in process of bidding, market access standard should be controlled strictly and market withdrawing system should be established so that the bidders committing attachment bidding, illegal subcontracting, illegal transference and collusive bidding and fake bidding and the bidders with history of material quality default, safety accident and material default in bidding and contract performance and bribery and the measurement agencies and personnel breaking laws and statutes should be penalized strictly according to lows and limited from entering bidding market and field of supervision; in addition, the companies with well established reputation and integrity and excellent qualification should be provided with support with priority to promote the sound development of the industries and healthy growth of society and realize the great Chinese Dream.