PPP procurement mistakes: Who’s responsible?

It’s frequent to see deficient, erroneous and contradictory content in procurement documents and contracts of public-private partnership (PPP) projects, leading to serious consequences such as the revocation of an award, as well as disputes over the return of bid security and the responsibility for resulting losses. This causes trouble for relevant parties and hinders the progress of projects.

In one case, a private party won the bid for a project through competitive procurement procedures, and received a bid-winning notice from the government agency responsible for the project. However, during negotiations prior to the contract signing, the two parties disputed a financial indicator that should have been clarified in the contract, which would have a material impact on investment return. As the procurement documents did not set pricing requirements on the indicator, nor did any other document offer a detailed calculation formula for it, the two parties had different views on the financial indicator, leading to a great difference due to their differing calculation bases. The government agency revoked the bidding result.

The financial indicator issue was a big flaw, in this case, within the procurement documents. But should this result in the private party bearing the negative consequences, like revocation of the award and legal risks? The answer is no.

Wang Jihong is a partner and Yu Li is an associate at Zhong Lun Law Firm in Beijing