Bid inviters face more restrictions

By Wang Jihong and Zhang Xiaofeng, V&T Law Firm

19 February 2012

894

On 20 December 2011, the State Council issued the PRC Invitation and Submission of Bids Law Implementing Regulations, which came into effect on 1 February. The Implementing Regulations come 12 years after the introduction of the PRC Invitation and Submission of Bids Law, and impose a series of restrictions on the procedures for bid invitations.

Wang Jihong, Managing partner, V&T Law Firm — **Wang Jihong**
Managing Partner
V&T Law Firm

No bids by related parties

Until recently, it was not uncommon for subsidiaries and affiliates of a bid inviter to participate in the bidding, as this was not expressly prohibited.

However, Article 34 of the Implementing Regulations now provides that “A legal person, other organization or individual that has a material interest in the bid inviter that could affect the impartiality of the bid invitation may not participate in the bidding.” The Implementing Regulations do not define what constitutes “material interest”, leaving the relevant authorities to determine whether it exists and whether the impartiality of the bid invitation is affected by it.

Material interests need not have an actual substantive adverse impact on the bid invitation and submission activities, just the “potential” to compromise their impartiality. The impact of Article 34 is therefore to prevent subsidiaries, affiliates and other materially interested parties of bid inviters from participating in the bidding process. The provision is likely to have an especially profound impact on bid invitations with respect to build-transfer and build-operate-transfer concession projects.

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Wang Jihong is the managing partner of V&T Law Firm. She practises in the field of infrastructure development.Zhang Xiaofeng is a partner at V&T Law Firm.