Farewell to Bad Bids

The amendment marks the first comprehensive revision to the Law since the legislation took effect in 2003. Expanding the Law from nine chapters and 88 articles to 10 chapters and 104 articles, the amendment is described by legal experts as one of the country’s most significant institutional reforms aimed at reducing corruption, strengthening market competition and modernizing public spending.

Official data shows that China’s government procurement market expanded about 33-fold, from 101 billion yuan (US$14.9b) in 2002 to 3.3 trillion yuan (US$487.6b) in 2025, while its share of GDP rose from 0.8 percent to 2.4 percent.　

Citing persistent problems such as bid rigging, discriminatory procurement requirements, disorderly low-price competition, incomplete procurement rules and weak oversight throughout the procurement process, Hao said the amendment is intended to create a fairer and more transparent procurement system by ensuring equal market access, strengthening legal remedies, reducing opportunities for rent-seeking and tightening anti-corruption safeguards.　

In December 2025, the Ministry of Finance published 10 examples of “typical” procurement violation cases, illustrating how procurement requirements have sometimes been tailored to benefit preferred suppliers. In one case, a university laboratory required suppliers to respond to procurement notices within 24 hours, effectively excluding bidders from outside the local area. In another, a government agency used criteria such as business premises, workforce size and total sales to evaluate bids, creating barriers for small- and medium-sized enterprises (SMEs).　

A third case involved bid rigging, with three companies coordinating their bids through shared personnel and nearly identical tender documents to create the appearance of competition. The firms were fined and barred from government procurement for one year.　

In July, the Ministry of Finance released another eight penalty notices after a nationwide inspection of government procurement, involving discriminatory tender requirements, improper fees charged by procurement agencies, suppliers submitting false documents and bid rigging.

According to Zhan Ana, a lawyer at Jincheng Tongda & Neal’s Shenzhen office, a major problem in government procurement is that tenders often use seemingly innocuous conditions as vehicles for rent-seeking. “Many of these conditions only appear fair on the surface but they are exclusionary in reality,” Zhan told NewsChina.　

Such hidden barriers impose significant costs on smaller businesses before they even have a chance to compete. For example, although the Ministry of Finance has long prohibited procurement platforms from charging fees for downloading electronic tender documents, enforcement has been uneven, and some local authorities continue to impose charges.　

Zhan cited the example of an SME that must first pay a 500 yuan (US$74) fee to obtain tender documents, only to discover that it does not meet the eligibility requirements. While the amount may seem modest, if a company typically wins only one out of every 100 bids, it would have to spend around 50,000 yuan (US$7,400) on document fees to secure a single contract. “These hidden barriers accumulate over time and ultimately shut many SMEs out of the market,” she said.　

The new law seeks to address these issues by strengthening equal market access and improving transparency. It prohibits authorities from unlawfully restricting suppliers from competing across regions or industries, while requiring procurement opportunities to be publicly advertised to all eligible suppliers.

One of the most common is offering an abnormally low bid, in which suppliers submit unrealistically low prices to win contracts, only to cut corners during implementation or seek to recover losses through contract changes later. Xiao Beigeng, a professor at the Law School of Hunan Normal University who has long studied government procurement reform, said that both excessively high and abnormally low contract bids are often symptoms of corruption or procedural weaknesses.　

To address the problem, the draft grants evaluation committees greater authority to reject suspiciously low bids. It requires suppliers whose offers are significantly lower than the government budget ceiling to provide evidence that they can still meet contractual obligations, and the committee can reject the bid upon concluding that quality or performance would be undermined. The provision reinforces a Ministry of Finance notice issued earlier this year requiring stricter scrutiny of abnormally low bids, signaling a shift away from awarding contracts solely on the basis of the lowest price.　

Another problem is a practice known as “accompanying bids,” where firms enter tenders not to compete, but to meet the legal minimum number of bidders required for a procurement to proceed. Under the current rules, tenders are canceled if fewer than three suppliers participate, creating an incentive for entities to submit token bids.　

The draft relaxes that requirement, allowing evaluation to proceed after a re-tender even if only two qualified suppliers remain. If only one supplier qualifies after the second round, the procuring entity may, with approval, switch to single-source procurement. The changes aim to reduce incentives for sham competition by removing an arbitrary numerical threshold.　

For Professor Xiao, the roots of procurement corruption often lie much earlier than the bidding stage. “When procurement requirements are not clearly defined, they create room for all kinds of rent-seeking,” Xiao said.　

The changes seek to address a longstanding weakness in China’s procurement system: its focus on awarding contracts, with a complete lack of oversight of project delivery.　

Article 60 of the draft introduces a formal acceptance mechanism requiring procuring entities to establish inspection teams and verify contract performance against agreed standards.　

To achieve this, the amendments establish a whole-process management system covering budget preparation, procurement demand assessment, procurement, contract execution, acceptance and final performance evaluation. Xiao said it brings the entire process, from budget preparation to final performance evaluation, under a unified legal framework.　

For public service procurements, inspection results must be disclosed, and actual service users, not just purchasing agencies, should participate in the acceptance process where appropriate.

According to Wang Conghu, a professor at the Renmin University of China’s School of Public Administration who participated in preliminary consultations on the legislation, decades of implementing existing procurement standards have created a deeply ingrained mindset of open tendering.　

“For a long time, the consensus has been that open tendering is the fairest and most objective procurement method,” Wang told NewsChina.　

But that assumption does not always hold. Jiao Hongbao, an associate professor of law at Tianjin Foreign Studies University, wrote in an article published in China Government Procurement News on June 30 that it is particularly problematic for technically complex projects, such as large-scale equipment procurement or information systems, where procuring entities often do not know the optimal technical solution when the process begins. Requiring suppliers to submit one-off quotations before technical discussions take place can result in inflated prices or substandard outcomes.　

The draft amendments therefore significantly expand the use of competitive negotiations for technically complex projects and those requiring suppliers to help develop technical solutions. For many experts, the adjustment reflects years of practical experience finally being recognized by lawmakers.　

“I think this is rational institutional design,” Wang said. “It leaves an appropriate degree of discretion for procuring entities and regulators.”　

The wider use of competitive negotiations, however, raises concerns about rent-seeking and hidden barriers to competition, as the procedure gives evaluation experts greater discretion. To address the new problem, the draft tightens oversight by making them directly accountable under the law. It stipulates establishing a national and provincial expert database with a dynamic removal mechanism and imposes tougher penalties for misconduct.　

Experts who violate evaluation rules, fail to recuse themselves over conflicts of interest, or collude with suppliers could face fines and temporary or even lifetime bans from government procurement evaluations.

An earlier draft published in 2022 included such provisions. The latest draft does not. According to Wang, the omission reflects differing views among government agencies.　

Some departments involved in negotiations over international agreements such as the WTO Government Procurement Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) argued that China should leave greater room for opening its procurement market to facilitate international negotiations.　

Others believe the timing is not yet appropriate. The resulting compromise appears in Article 99, which extends the law to “other entities” covered under international procurement treaties joined by China.　

Wang said the term “other entities” is widely understood to refer to SOEs and was deliberately left undefined to preserve flexibility for future international negotiations. If China makes reciprocal market-opening commitments under agreements such as the CPTPP, SOEs could be brought within the scope of the Government Procurement Law.　

In the meantime, Article 31 requires procurement projects financed with both budgetary and non-budgetary funds to be governed by the rules applicable to budget-funded procurement. According to Professor Xiao, it means that in practice, once public funds are involved, the entire project, including non-budgetary funds from SOEs, would be subject to the law.　

“In effect, this indirectly expands the law’s scope,” Xiao said.

The conflict is most evident in government-funded construction projects, where procurement financed with public funds falls under the Government Procurement Law, while many of the same projects must also comply with the Tendering and Bidding Law’s mandatory tendering requirements. Lawyers say the overlap has created years of uncertainty over both applicable procedures and regulatory oversight.　

Gu Liaohai, a lawyer known for representing what is described as China’s first government procurement lawsuit, said differences between the two laws, from mandatory tendering thresholds to regulatory responsibilities, have caused persistent confusion.　

While some scholars have called for a unified Public Procurement Law, the draft seeks to align the two systems. Wang Conghu describes this as a pragmatic approach. “Even if the two laws remain separate, keeping their core rules consistent can achieve much the same policy effect,” Wang said, “Compared with pursuing a wholesale legislative merger, gradual harmonization is likely to involve less disruption while delivering more stable and sustainable results.”　

Whether through strengthening oversight, broadening accountability or laying the groundwork for greater alignment to international practices, the amendments reflect China’s efforts to modernize a procurement system that now manages trillions of yuan in public spending.　

“The government procurement legislation is inherently complex because it governs purchasing across virtually all government departments,” Wang said. He stressed that the amendments are in line with the central government’s policy priorities, including building a unified national market and promoting fair competition. “Taken as a whole, it represents a major overhaul of China’s government procurement regime,” Wang added.　

Whether the reforms can deliver cleaner, fairer and more efficient public spending, however, will ultimately depend on how the new rules are implemented in practice.