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On April 23, an article titled "How to Express Expected Functions in Procurement Requirements" co-authored by Ms. Du Juan, General Manager, and Mr. Liu Guoqi, Chief Engineer of the Bidding Department, was published in the China Government Procurement Herald (No. 1335, p.4).

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Case Playback

In a government procurement activity, a certain hospital commissioned a procurement agency to purchase a set of medical equipment through open bidding. The evaluation method was a comprehensive scoring method. After evaluation, Company A was recommended as the first candidate for bid winning, and Company B as the second. After the purchaser confirmed the bid winning results, the procurement agency issued a bid winning announcement, announcing Company A as the winning bidder and its score. At the same time, the agency informed Company B of its final score and ranking according to the relevant regulations. Within the statutory questioning time limit, Company B raised an objection, claiming that Company A's product could not meet the key clause "capable of being upgraded to the XX function, with upgradeable hardware and software platform", and listed Company A's winning product manufacturer's official promotional materials, as well as conclusions obtained from on-site inquiries and investigations from other users of this product: Company A's winning product does not have the "upgradeable to XX function, upgradeable hardware and software platform". Because the final scores of the two companies were relatively close, whether this parameter scored directly affected the ranking order. Therefore, Company B believed that Company A should be penalized for false bidding, and that after deducting the corresponding score, Company B's score should exceed Company A's, making it the first candidate for the project's bid winner.

Because the relevant objection contents are all technical indicators, the agency organized the original bidding committee to assist in answering the objections. After reviewing Company A's bid documents, the bidding committee concluded that Company A's bid documents had clearly responded to this content and provided relevant supporting materials as required by the bidding documents. Therefore they maintained the original evaluation conclusion and the original ranking of the bid winning candidates remained unchanged. Company B then filed a complaint with the finance department, arguing that the bidding documents required that "the products must have this function, although it is not needed at present. Company A's winning product clearly does not have this function.". After consulting Company A, the finance department learned that Company A stated that the bidding documents required "future upgradeability", not that the equipment being purchased must have this function now. Although their product itself does not have this function, it can fully meet the requirements of future upgrades with the help of third-party auxiliary equipment. They had clearly responded to this in their documents, fully met the relevant requirements of the bidding documents, and there was no false bidding or other illegal or irregular behavior.

After consulting the purchaser on the original intention of the procurement requirements and the experts' judgment on the technical indicators of Company A's product, the finance department finally ruled that the description of the purchaser's procurement requirements was inaccurate and ambiguous, leading to a significant deviation in the bidders' understanding of the procurement requirements. The procurement result was deemed invalid, and the purchaser was ordered to formulate clear procurement requirements and reorganize the procurement activity.

The ultimate issue lies in the ambiguity in the description of the procurement requirements. If the procurement requirements are accurately described, this will raise the following new questions: firstly, can future expected functions be included in the procurement requirements? That is, the budget for the relevant functions is not included in the current procurement budget, but if the budget is sufficient in the future, the functions can be added immediately; secondly, does the purchaser's need for expected functions have practical significance and does it restrict or exclude other products; and thirdly, if expected functions are to be procured, how can they be expressed more reasonably?

Problem Analysis

1. Can future expected functions be included in the procurement requirements?

Article 6 of the "Measures for the Management of Government Procurement Requirements" (CaiKu [2021] No. 22) states: "The procurement requirements referred to in these Measures refer to the subject matter to be procured by the purchaser to achieve the project goals, and the technical and business requirements it needs to meet. Technical requirements refer to the requirements for the functions and quality of the procurement subject matter, including performance, materials, structure, appearance, safety, or service content and standards." Article 11 of the "Measures for the Administration of Bidding and Tendering for Government Procurement of Goods and Services" (Ministry of Finance Order No. 87, hereinafter referred to as Order No. 87) states: "Procurement requirements shall be complete and clear and shall include the following: (1) the functions or objectives to be achieved by the procurement subject matter, and the requirements to be met for the implementation of government procurement policies; ... (3) the quality, safety, technical specifications, physical characteristics, etc., that the procurement subject matter must meet; ... (7) other technical and service requirements of the procurement subject matter." Both clearly state that procurement requirements refer to the technical, functional, and quality requirements for the subject matter to be procured, and their fundamental procurement purpose is to "achieve project goals". Order No. 87 also sets a minimum clause "other technical and service requirements of the procurement subject matter". Therefore, if the purchaser, due to the actual needs of the project, has a definite procurement objective for the entire life cycle of the subject matter to be procured, then in order to achieve this objective, the purchaser can include future expected functions as procurement requirements. However, it should be noted that this expected function should be a conventional function of the procurement subject matter itself, rather than an expansion function of other products specifically developed by a particular manufacturer.

2. Does the purchaser's need for expected functions have practical significance, and does it restrict or exclude other products?

According to the author's understanding, most large medical equipment, especially imaging diagnostic equipment, in the medical industry basically has this problem, and the bid winning prices of the same model product vary significantly. In simple terms, this is the difference between "full configuration", "high configuration", and "low configuration". In particular, with various auxiliary diagnostic and therapeutic medical analysis software, many medical equipment products are equipped with all auxiliary diagnostic and therapeutic analysis software upon leaving the factory, but require original factory authorization codes for activation. However, considering the development costs and market competition, this software often needs to be purchased by the purchaser. The actual operators of the purchaser must consider both the "high-end" "technical requirements" and "functional implementation" of the actual using department and the requirements of the financial department for "meticulous calculations" and "accurate budgeting". As a result, the problem of "a small plate holding a large dish" often arises. The situation of "cheap and inferior" resulting from the "low price winning bid" in government procurement makes them even more worried. Against this background, "first determine the grade and then increase purchases if funds are available" has become their compromised solution. Requiring future expected functions has become an important measure for them to solve this problem. However, the application of expected functions should avoid restricting or excluding other products. Several key aspects need to be considered: firstly, there must be a certain level of market competitiveness, and it must not point to or limit specific products or manufacturers; secondly, it must not be a substantive clause; and thirdly, scoring must have a certain degree of reasonableness, and the size of the convenience value brought by the setting of this indicator needs to be comprehensively considered. The overall principle is to allow products with expected functions to make up for their leading advantage in technology scores through price differences, thereby promoting full market competition.

3. How can expected functions be expressed more reasonably if they are required?

The key point of contention in this case is that Company A believes that the function is not needed at the time of the procurement project, but only later; Company B believes that the function needs to be fulfilled at the time of the procurement project. These two interpretations can also lead to another problem, namely inconsistent bidding bases. From a purely "cost" perspective, whether or not a certain function is included directly affects the cost of the product and thus its selling price. Therefore, if requirements are to be placed on expected functions, all bidders should have the same bidding basis. Article 9 of the "Government Procurement Demand Management Measures" (Cai Ku [2021] No. 22) states: "Procurement requirements should be clear, clearly stated, accurately expressed, and objectively defined. Technical and commercial requirements should be objective." Based on this provision, this author believes that ambiguous descriptions such as "upgradeable" and "optional" should be avoided in procurement requirements. If there are indeed requirements for later upgrades or additions to the equipment to be procured, it is best to clearly state that "the equipment to be tendered can be upgraded to *** without the need to add third-party facilities and equipment, and the upgrade content is not included in this procurement"; and "the equipment can be optionally equipped with ***, but the optional content is not included in this procurement."

The purchaser clearly informs the implementation method of the expected function and the scope of purchase for this procurement budget. This allows all suppliers to clearly understand the procurement requirements, allowing different products to fully compete in the market. It can also reduce subsequent doubts and complaints caused by unclear expressions.

Original URL: http://www.cgpnews.cn/epapers/67151?epaper_period_id=8009