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Beijing Court Orders Ministry of Finance to Rule on Supplier's Complaints, but Skirts Broader Issue of Schism in China's Procurement Supervision

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InternatIonal
Government ContraCtor
Information and Analysis on Legal Aspects of International Public Procurement
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Analysis
¶ 98
Beijing Court Orders Ministry Of Finance
To Rule On Supplier’s Complaints, But
Skirts Broader Issue Of Schism In China’s
Procurement Supervision
In what is likely the first judicial interpretation of
Chinas 2002 Government Procurement Law (GP
Law), a court in Beijing has ordered China’s Ministry
of Finance to carry out its administrative obligations
and affirmatively handle and respond to complaints by
an unsuccessful bidder. The order—made twice, under
separate judicial opinions covering solicitations related
to the same overall project—was issued on December
8. Beijing Modern Wo’Er Trading Co. Ltd. v. Ministry of
Finance of the People’s Republic of China, No. 1 Inter-
mediate People’s Court of Beijing Municipality, First
Level Administrative Division Decision No. 432 (2005)
(Modern Wo’Er 432) and Beijing Modern Wo’Er Trading
Co. Ltd. v. Ministry of Finance of the Peoples Republic of
China, No. 1 Intermediate People’s Court of Beijing
Municipality, First Level Administrative Division Deci-
sion No. 433 (2005) (Modern Wo’Er 433). Attention to
Modern Wo’Er’s grievances was overdue, as the contract
awards at issue date back to autumn 2004.
Modern Wo’Er 432 pertains to a contract award for
the purchase of 286 blood gas analyzers through a bid-
ding process entrusted to a tender intermediary known
as GuoXin Tenders Ltd. (Guo Xin translates as National
Trust). Modern Wo’Er 433 pertains to a contract for 300
portable blood gas analyzers, for which the procurement
process was entrusted to a different intermediary, China
Far East International Trading Co. Beyond these dif-
ferences, the facts of each case are largely the same and
mostly undisputed, with the Court addressing identical
questions of law in each opinion. The plaintiffs limited
victory is cause for some optimism, but the cases highlight
many unsettling aspects of China’s purchasing regime.
Vol. 3, No. 12 December 2006
This material reprinted from InternatIonal Government ContraCtor appears here with the permission of the
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Factual Background—The Chinese government’s
purchase of blood testing equipment was part of a
larger national endeavor to establish a medical rescue
and treatment system throughout China. This larger
program is managed by Chinas National Development
and Reform Commission (NDRC), also known as the
State Development and Reform Commission, and the
Ministry of Health, pursuant to express appointment by
Chinas executive-branch State Council. See Notice of
the Office of the State Council Turning Over Planning
and Construction of a Public Health Rescue and Medi-
cal Treatment System to the National Development and
Planning Commission and Ministry of Health (2003)
(State Council Office Document No. 82). State Council
Office Document No. 82 is a relatively detailed direc-
tive outlining a three-year plan to establish new medi-
cal facilities throughout China and improve response
to medical emergencies. The blood testing equipment
procurements of which Modern Wo’Er complains are
meager components of this major project.
In Modern Wo’Er 432, upon learning that the con-
tract was awarded inexplicably to the highest-priced
bidder, the plaintiff submitted a timely inquiry to
the NDRC and Ministry of Health (GP Law Articles
51–52). The plaintiff also submitted its inquiry to the
intermediary (GP Law Article 53). Such “initial queries”
from an aggrieved supplier are mandatory under China’s
government procurement protest procedures. See GP
Law Articles 51–53, requiring supplier inquiries to be
submitted to the purchaser or intermediary within seven
business days after the supplier knows or should know
that its rights and interests were violated during the
procurement process. See also 1 IGC ¶ 38.
In the first query, Modern Wo’Er alleged that
(1) the solicitation did not spell out the concrete evalua-
tion method, the standards for awarding points and how
overall scores were determined; (2) it was the lowest bid-
der, but somehow did not win the bid; (3) the contract
award did not adhere to the legislative aim of the GP
Law; (4) the bid evaluation experts did not follow legal
stipulations; and (5) the procurement process was not
transparent because the purchaser simply announced a
winner without disclosing the names of the experts on
the evaluation committee or other details, which made
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it difficult for the plaintiff to submit an effective inquiry.
In Modern Wo’Er 433, the plaintiff added allegations that
(6) some content of the solicitation’s technical standards
limited competition among suppliers, in violation of the
GP Law; and (7) there was a conflict of interest between
an evaluation expert and a supplier, but no withdrawals
from decision-making.
As the purchasers, the NDRC and Ministry of
Health did not respond to Modern Wo’Er’s timely in-
quiries. (Under Article 53 of the GP Law, a procuring
department must reply to an inquiry within seven work-
ing days after its receipt.) The intermediaries in each case
replied by fax (GP Law Article 54), but the responses
lacked substance. Unsatisfied, Modern Wo’Er filed com-
plaints with the Ministry of Finance (GP Law Article
55). Under Article 56 of the GP Law, the Ministry of
Finance is required to provide responses to a plaintiff
within 30 working days. The ministry never formally
responded to Modern Wo’Er’s complaints, but called
a meeting with the NDRC and the Ministry of Health
and referred the complaints to an NDRC investigation
office that handles major national construction project
issues. Modern Wo’Er alleged that it never received a
response to its complaint from any office.
The Ministry of Finance proffered a number of
legal arguments to justify its failure to formally respond
to Modern Wo’Er’s complaints: (a) because the relevant
equipment purchases were part of a larger procure-
ment of a national medical rescue and system program
throughout China, the plaintiff’s complaints were not
within its sphere of regulation—i.e., not covered by the
GP Law; (b) because the Modern Wo’Er cases involved
bidding procedures, the cases were subject to Article
2 of the 1999 Tender and Bidding (T/B) Law, which
applied to all bidding activities within China; (c) the
medical rescue and treatment program constituted a
“major national construction project” (guojia zhongda
jianshe xiangmu), over which the State Council expressly
delegated supervisory powers to the NDRC; and (d) by
referring the matter to the NDRC for resolution, the
Ministry of Finance adequately performed any applica-
ble statutory duty and avoided the risk of administrative
duplication in the handling of complaints.
As legal support for its arguments, the Ministry of
Finance cited Article 65 of the 1999 T/B Law, which al-
lows the State Council to delegate supervision of bidding
activities, and the subsequent delegation to the NRDC
of oversight responsibilities for “major national construc-
tion projects.” State Council Opinion on the Division of
Responsibilities for Administrative Supervision Among
the Relevant Administrative Departments Carrying
Out Tender and Bidding Activities, Office of the State
Council, Document No. 34-2000 (2000 State Council
Opinion), and Temporary Measures for Supervision of
Tender and Bidding on Major National Construction
Projects, NDRC Document No. 18, Jan. 10, 2002. (A
detailed analysis of the 2000 State Council Opinion and
the resulting chaotic regulation of bidding activities in
China can be found at 3 IGC ¶ 17.) For some observers
of the Chinese public procurement system, the Ministry
of Finance defense represents a remarkable abdication of
the regulatory supremacy granted to it under the express
terms of the GP Law. To others, the Ministry of Finance
arguments simply follow an unwritten understanding—
about which the Beijing judges should have been well
aware—between two regulatory giants, the NDRC and
Ministry of Finance, delineating their respective super-
visory spheres of supervision. The truth, albeit hard to
determine, is probably somewhere in the middle.
The Court rejected the position that, by referring
the complaint to the NDRC, the Ministry of Finance
had satisfactorily performed its administrative duties.
Finding that the GP Law applied to the case, the Court
determined that the Ministry of Finance was statuto-
rily obligated to respond to the complaint. The Court
reaffirmed that the law applied to purchases of goods,
construction or services (huowu, gongcheng, he fuwu)
by state organs, social institutions or public organizations
(zhengfu jiguan, shiye danwei, shehui tuanti) using fiscal
funds (shiyong caizhengxing zijin). The Court then found
that the relevant procurements represent simple purchases
of goods under the GP Law (expressly citing Article 2
Clause 5, which defines “goods”) and that, pursuant to
GP Law Article 13, supervision over such purchases rests
with Finance (citing Measures on the Administration of
Tender and Bidding for Government Procurement of
Goods and Services Article 10, Ministry of Finance Docu-
ment No. 18, effective September 2004). Accordingly,
the Court held that Finance failed in its duty to respond
to Modern Wo’Er’s complaints, pursuant to Article 56 of
the GP Law, and ordered Finance to provide responses
by Dec. 21, 2006, although the ministry could choose to
appeal the rulings. In its rulings, the Court never directly
addressed the ministry’s characterization of the relevant
purchases as belonging to a “major national construction
project and, as such ... properly subject to the oversight
of the NDRC, not the Ministry of Finance.”
A Missed Opportunity to Rule on More Fun-
damental Issues—This author applauds the Beijing
Court’s decisions. Considering the general barriers
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Vol. 3, No. 12 / December 2006
3
to procedural justice in China, the Court’s opinions
certainly advance the cause of contractor rights in
China—although the prospects for adequate justice for
Modern Wo’Er itself remain in doubt; see discussion
below. While Court rulings do not create precedent,
judicial opinions can highlight core issues and problems
in the Chinese legal system. In this sense, the Modern
Wo’Er cases may influence the course of development of
China’s public purchasing regime. However, the cases, if
handled differently, could have had an even greater im-
pact, particularly on overlapping jurisdiction of Chinese
government agencies that supervise public construction.
In this sense then, Modern Wo’Er represents a lost op-
portunity for the Court to rule on fundamental issues
plaguing public procurement in China.
By characterizing the Modern Wo’Er procurements
as simple goods purchases under the sole oversight of
the Ministry of Finance and by implicitly rejecting
the Finance characterization that the procurements
belonged to a broader “major national construction
project” (guijia zhongda jianshe xiangmu), the Beijing
Court avoided addressing tensions between the 1999
T/B Law and 2002 GP Law. This may have facilitated
an easy disposition of the Modern Wo’Er cases, but it was
not necessarily in the best interest of healthy evolution
of the Chinese public procurement regime.
If the Beijing Court had agreed with the Ministry of
Finance characterization that the subject procurements
are part of a “major national construction project,” a
whole set of important issues could have been raised
for consideration. Interestingly, such a finding would
not automatically have sanctioned Finance’s attempt to
disown regulatory authority over the subject purchases.
To the contrary, under the express terms of Articles 2
and 13 of the GP Law, the ministry has jurisdiction
over “the purchase of construction using fiscal funds”
(shiyong caigouxing zijin caigou ... gongcheng). This
conflicts with the NDRC’s role as key regulator for
“major national construction projects” (guojia zhongda
jianshe xiangmu). See 2000 State Council Opinion. This
conflict desperately needs resolution to correct nagging
confusion in Chinas regulation of public construction.
In previous editions of InternatIonal Government
ContraCtor, this author explained how the seeds for
conflict between the 1999 T/B Law and 2002 GP Law
were planted during compromises made in the drafting
of the GP Law. 1 IGC ¶ 38; 3 IGC 17. During the
drafting process, NDRC representatives took the posi-
tion that the definition of government procurement in
China should not include the purchase of construction.
Such an argument conflicts with both the traditional
and emerging international definition of government
procurement, which uniformly includes the purchase
of goods, construction and services by public agencies.
Hence, this more inclusive definition is used in Article 2
of the GP Law. However, a compromise was reached for
Article 4 of the GP Law, which states without elabora-
tion: “Where government procurement construction is
carried out through tender and bidding, the Tender and
Bidding Law should be used.”
This seemingly benign clause in the short-term may
have facilitated the drafting of the 2002 GP Law, but it
later created uncertainty as to what agency holds regu-
latory supremacy over public construction using fiscal
funds. Was GP Law Article 4 merely referring to T/B
Law procedure for bidding on construction using fiscal
funds, or was it wholly transferring the regulatory regime
for public construction to the T/B Law system managed
by the NDRC and other agencies? If the former, how
should the respective powers of the NDRC, Ministry of
Finance and other agencies be delineated? If the latter,
why include construction in the definition of govern-
ment procurement in the GP Law at all, and muddle the
relationship between the two purchasing regimes?
A broad reading of the 2002 GP Law reveals further
mixed messages. For example, the definition of “sup-
plier” in Article 21 refers to “legal persons, other organi-
zations or natural persons providing goods, construction
or services” (emphasis added), but many provisions
that spell out various procurement methods include the
purchase of goods and services, or “procurement,” but
conspicuously make no reference to construction. See
GP Law Articles 33–40.
While this problem originates in the law’s drafting,
it has been exacerbated by the behavior of government
agents. The NDRC consistently engages in propaganda
to entrench the notion that the T/B system is distinct
from government procurement—a position detrimental
to uniformity in China’s public purchasing system that
not only affects efforts to improve the system, but also
complicates China’s promise to join the Government
Procurement Agreement of the World Trade Organiza-
tion. See 3 IGC ¶ 45. In turn, the Ministry of Finance
has never formally dispelled the notion that its regula-
tory authority in some cases may extend to, or evolve
to cover, government-financed construction. To the
contrary, a provincial-level finance department officer
repeatedly has asked this author to write a book in Chi-
nese describing how public construction is regulated in
the U.S. and how public construction regulation might
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practically be incorporated into the Chinese “govern-
ment procurement” system.
At the same time, however, the Ministry of Finance
muddles its message by issuing separate regulations on
tender and bidding for the government procurement of
goods and services (suggesting retrench from the pos-
sibility of its regulating public construction), and shy-
ing away from any regulatory role in the Modern Wo’Er
cases. No wonder Chinese suppliers, intermediaries,
academics and the public at large are at a loss for identi-
fiable boundaries on this issue. Moreover, if there is, as
some believe, a gentleman’s understanding between the
NDRC and Ministry of Finance about the supervision
of construction funded by government budgets, then
there is no reason to keep the public guessing. Clarity
could be achieved by a simple, low-level regulation on
the subject issued jointly by the two departments.
Much of the problem here stems from the nature
of public funds in China. The appearance of central-
ized control over public monies suggested by the
language of the GP Law does not accurately explain
the Chinese condition. The GP Law, in this sense,
is a document prepared for a future China in which
the distribution of public monies emanates from a
single institution. For now, Chinese public agencies
have access to independent sources of funding and
other ways to surreptitiously bind the public fisc.
In addition, there are multiple categories of public
monies in China. These gradations are represented
in both the GP and T/B laws, with the GP Law ap-
plying to purchases with fiscal funds (caizhengxing
zijin) and the T/B Law covering projects financed by
the state (shiyong guoyou zijin huozhe guojia rongzi
de xiangmu). This expanse of public monies explains
the long reach of the T/B Law, which applies to
nearly every construction project in the country and
a host of other projects for which other laws or local
regulations make public bidding mandatory. Conse-
quently, the T/B Law touches projects that in most
non-socialist countries would be considered private
commercial transactions, but because the use of state
money is involved or the public interest is otherwise
implicated, become heavily regulated transactions
under the T/B Law.
At the other end of the spectrum, the T/B Law
bumps into the GP Law in its governance of construc-
tion funded by fiscal funds. The Modern Wo’Er cases
present this exact scenario. The court had before it proof
that the relevant major national construction project”
was being financed with fiscal funds. (See Notice of the
Office of the State Council Turning Over Planning and
Construction of a Public Health Rescue and Medical
Treatment System to the National Development and
Planning Commission and Ministry of Health, Chap-
ter 5 (State Council Office Document No. 82 (2003).)
Since the procurement was conducted by a govern-
ment agency, and fiscal funds were being used, Modern
Wo’Er logically filed its complaints with the Ministry
of Finance.
Consequently, the Modern Wo’Er cases presented
a fine opportunity for the Court to comment on the
boundary between application of the T/B and GP
laws, or, in light of GP Law Article 4, to determine
the interaction between the two laws. By choosing to
characterize the transactions as “goods” purchasing,
however, the Court found an easy escape valve—inad-
vertently or otherwise—to pass on ruling on these more
fundamental issues.
The Long Race to the Starting Line—Under most
legal standards, Modern Wo’Er’s wait of approximately
50 months after contract award in October 2004 for a
judicial ruling on its protests seems extreme, especially
considering that its cases lack any factual complexity.
More notable, however, is how this long wait has, Kaf-
kaesque, returned Modern Wo’Er to the beginning of
the process, with the Court simply ordering the Ministry
of Finance to do what it should have done in January
2005.
The Beijing court was justifiably hesitant in interven-
ing in what Chinese commentors, both before and after
the Modern Wo’Er rulings, view as a “kicking of the ball”
(passing the buck) between two administrative giants.
But, alas, the case now has been thrown back to the spar-
ring titans and, to make matters more tantalizing, is back
in the lap of the more reluctant contender, the Ministry
of Finance. The power granted by the GP Law to Finance
to overturn purchasing decisions made by other Chinese
agencies is quite radical, and, judging from the nature of
the Finance arguments in Modern Wo’Er, is one it would
prefer not to wield. (Chinese agencies generally view each
other as equal constituents before the State Council and
jealously guard their traditional power to self-regulate
their activities). It will be interesting to watch as this case
is replayed at the administrative level.
But why is it being replayed at all? Why didn’t the
Modern Wo’Er Court simply make a substantive deci-
sion on the supplier’s complaints? The answer lies in a
quirk of Chinese administrative law that is proving to
be a major impediment to delivering adequate justice to
aggrieved suppliers.
¶ 98
Vol. 3, No. 12 / December 2006
5
Chinese administrative law subscribes to the notion
that an agency commits a legal wrong when it does not
carry out an administrative act prescribed by law (xing-
zheng bu zouwei). See Administrative Litigation Law
of the People’s Republic of China Article 11(5) (1989).
Therefore, if an agency does not perform a duty such
as ruling on a complaint as required by statute, it can
be compelled to do so by court order. Chinese courts
are, however, not empowered to rule on the substantive
issues underlying the administrative complaint, i.e., to
substitute its judgment for the agency’s; they may only
determine whether the agency failed in its duty or, if a
decision on a complaint was issued, whether the deci-
sion comports with law. Hence, Modern Wo’Er’s long
wait simply brings it back to the Ministry of Finance’s
doorstep. This process conceivably can be repeated ad
infinitum if the ministry neglects to provide an ade-
quate ruling on the complaint. For example, if Modern
Wo’Er is dissatisfied with the pending ministry ruling
due on December 21, it may choose to again run the
administrative litigation course, only to find itself once
more before the door of Finance, which may again be
ordered to revise its decision, and on and on.
This disheartening process has been demonstrated
in other Chinese bid protest cases. For example, in
the case of XinMi Construction Bureau et al. v. Xinmi
Shuangfu Constr. Co., High People’s Court of Henan
Province, Final Administrative Division Decision No.
15 (2000), the protester Xinmi Shuangfu Construction
Co. (Shuangfu) challenged the award of a construction
contract to XinMi Yong’An Construction Co. (Yong
An). The basis of Shuangfu’s complaint was that Yong
An did not place its corporate seal on its bid and,
therefore, that the award was illegal. Shuangfu twice
submitted its complaint to the local construction de-
partment, but received no reply.
Shuangfu then filed a lawsuit asking the Court to
cancel the award to Yong ‘An and award the contract to
Shuangfu. The first level court bravely obliged, order-
ing the Yong ‘An contract canceled, the contract in turn
awarded to Shuangfu, and Shuangfu to pay Yong ‘An the
value of the work that Yong ‘An already had performed.
Thereafter, the original defendants, Xinmi Construction
Bureau, the XinMi Construction Tender and Bidding
Office and Yong ‘An, appealed the decision.
On appeal, the higher court ruled that the lower
court lacked the power to rule substantively on Sh-
uangfu’s complaint and that its fashioning of a specific
remedy represented an excess of judicial power. Instead,
the appellate court held that any decision on the validity
of the bidding process could only be made by the local
construction bureau. Accordingly, it ordered the local
construction bureau to act on Shuangfu’s complaint
within seven days of the ruling.
Shuangfu, after enjoying the thrill of victory in
the lower court and the agony of defeat in the appel-
late court, was brought back to the start, serving its
complaint at the door of the relevant, but originally
unresponsive, local administrative department. To make
matters worse, by the time the case had run its first ju-
dicial course, the local construction contract essentially
was complete.
Like Shuangfu in XinMi Construction, Modern
Wo’Er is at risk of a circular journey. Therefore, Mod-
ern Wo’Er’s victory may be short-lived and certainly is
bittersweet. Yes, it received some satisfaction from the
Court’s admonition that the Chinese government owes it
a response on its claims. But even if it ultimately secures
a government ruling in its favor, it may again journey
up the long ladder in appeals, and even find itself at the
Ministry of Finance starting line once again. Its desired
medical supply contracts have long been completed, and
the prospect of an adequate remedy for Modern Wo’Er
remains in doubt.
The Remedies Question—Is there any adequate
remedy for Modern Wo’Er if its complaints are proven
as fact? This is an important issue, implicating the true
value of Chinese bid protests as an effective mechanism
of public procurement supervision. Will the costs of
protesting bids in China outweigh any benefits and
dissuade future bidders from protesting to protect their
legitimate rights and interests in the process?
Chinese procurement law does not provide for
an automatic stay of procurement proceedings in the
event a protest is filed. Rather, under GP Law Article
57, if a complaint is filed with the relevant finance
department, that department has discretion to order
cessation of the bidding process, but such a stay can-
not exceed 30 working days. See also “Measures for
Handling Complaints by Government Suppliers,”
Ministry of Finance Document No. 20 Article 22, ef-
fective September 2004 (Ministry of Finance Protest
Rules). In contrast, the T/B Law is silent on specific
protest procedures, but is supplemented by “Measures
for Handling Complaints on Tender and Bidding
Activities in Engineering and Construction,” NDRC
Document No. 11, effective August 2004 (NDRC
Protest Rules). Unfortunately, the NDRC Protest Rules
also are silent on whether the procurement process can
be stayed pending a supplier complaint. The absence
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of this prescription, however, is not fatal to the pros-
pects of staying the bidding process or a newly signed
contract under the T/B Law. Chinese administrative
agencies wield considerable power and have tools at
their disposal to effectively command a stay if they are
so inclined. Ironically, the express power granted to the
Chinese finance departments to stay the contract pro-
cess pending a dispute might be less empowering than
it seems at first glance. That any finance department-
ordered stay cannot exceed 30 working days may prove
a limit on power not imposed on any other Chinese
agency regulating public purchasing activities.
It is conceivable then, that a non-monetary remedy
for a protester, such as reinstitution of the procurement
process, can be fashioned, and that, ultimately, the
most suitable bidder will receive the contract (espe-
cially if protest proceedings do not drag on too long).
However, to date, this looks like a rarity in China.
Instead, most successful protesters must be satisfied
with monetary damages. The sufficiency of such dam-
ages unfortunately remains a mystery for Chinese
contractors.
The T/B and other Chinese laws speak of award-
ing damages, but in vague terms. T/B Law Chapter V,
Legal Liabilities, states generally that “if losses are caused
to others [by violation of provisions of the T/B Law],
compensation liability shall be borne according to law.”
T/B Law Articles 50 and 53. The NDRC Protest Rules
are even less helpful, stating simply that if the complaint
is factually supported and shows an actual violation of
the law, then punishment should be carried out accord-
ing to the T/B Law and other relevant laws and regula-
tions. NDRC Protest Rules Article 20. The GP Law
and Ministry of Finance Protest Rules do not do much
better in identifying the nature and extent of damages
available in a successful protest, although their remedy
provisions are written more clearly. See GP Law Article
73 and Ministry of Finance Protest Rules Articles 18 and
19; see also 1 IGC 38. Hence, there remains much
uncertainty regarding the ultimate value of protesting
contract awards in China.
Assuming Modern Wo’Er wins its protest (a result
not pre-ordained), what should be the proper measure
of compensable damages? This author has, so far, found
only one case in China dealing with this important
subject. In the case of XiXian Bureau of Urban and
Rural Constr. v. Xixian Constr. Co. et al., High People’s
Court of ShanXi Province, Finance Administrative
Division Judgment No. 6 (1999), the appellate court
overturned a damage award of RMB 34,210 against
the local construction bureau (stemming from the
XiXian T/B Office’s proceeding with an illegal contract
award). Although the basis for the original damage
award is not fully articulated in the opinion, the award
clearly exceeds mere restitution and appears to be based
on expectation damages. In its review, the appellate
court highlighted that the protester spent RMB 3,861
participating in the bidding, paid an industrial and
commercial registration fee of RMB 255 and spent
an additional RMB 300 for notarization. On this evi-
dence, the Court reduced the award to RMB 4,416. As
for the remainder of the damages granted by the lower
court, the higher court, for lack of a more specific legal
basis, ruled that there was no direct causal link between
the relevant administrative act and the protester’s ad-
ditional losses.
Given the lack of legislative standards, the Court in
XiXian certainly will not be the only Chinese court or
agency to struggle with the proper measure of damages
for a successful protester who misses the opportunity
for a reinstitution of bidding procedures and another
chance to win a contract. See Gordon, Constructing A
Bid Protest Process: The Choices That Every Procure-
ment Challenge System Must Make, 35 Pub. Con. L.J.
427 (2006).
This author has stressed to Chinese audiences
that a real dilemma arises if a contract proceeds or is
completed pending an ultimately successful protest.
First, the system potentially has allowed performance
of an illegal contract. Second, if the protester receives
damages, then the Chinese government pays twice:
once to the completing contractor, and again to the
successful protester. Third, if the system only awards bid
preparation and protest costs as damages in a success-
ful protest, and protesters rarely get a second chance to
win the subject contract, the burdens of protesting will
exceed the benefits, and the protest system will wither
from lack of participation. China needs to address this
question forcefully if it wants to keep its protest system
relevant.
Conclusion—There is no need to be wedded to
preexisting notions of a best procurement system for
China. A bifurcated system with the Ministry of Finance
on one side and the NDRC and other agencies on the
other can work as well as a unified framework, as long
as the scope of the regulatory authority of each relevant
agent is well-defined. Such an approach, however,
would better serve the Chinese public if accompanied
by a reliable and enforceable mechanism for resolving
conflicts in regulatory authority, and a shift away from
¶ 98
Vol. 3, No. 12 / December 2006
7
Chinese agencies’ tendency to flout efforts toward ex-
ternal oversight.
Similarly, there is no steadfast rule for the best way
to deliver justice to wronged suppliers. Nevertheless,
the Chinese procurement system would benefit from
mechanisms to ensure swift, but fair, final determina-
tions in bid protests. Moreover, leaving adjudicators
without adequate standards for damage awards (espe-
cially considering that, in most circumstances, damages,
not resolicitation or redirected contract award are the
only remedy) unnecessarily creates uncertainty as to the
overall value of the bid protest system and likely will
lead to inconsistent results. Luckily, judges, in applying
law to specific factual circumstances, send messages like
the Modern Wo’Er opinions to remind society/people—
inadvertently or otherwise—that these important issues
need professional attention.
F
This analysis was written for InternatIonal Gov-
ernment ContraCtor by Daniel J. Mitterhoff.
Mr. Mitterhoff is Co-Director of the Research
Center for Government Procurement and Public
Construction at the Central University of Finance
and Economics in Beijing (CUFE). He teaches
comparative government procurement law at the
CUFE Law School.
¶ 98
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