Just Released! Bid Farewell to “Winning the Bid at the Lowest Price”!

Disruptive change! Medical equipment “Lowest price” win the bid, really goodbye!

 On July 15, the Treasury Department of the Ministry of Finance issued the Notice on Soliciting Public Comments on the Government Procurement Law of the People’s Republic of China (Draft for Comments) (hereinafter referred to as the Draft for Comments).

In view of some problems exposed by China’s government procurement in the past 20 years, the Draft for Comments has created a series of new practices from the institutional level to further improve the reform of the government procurement system.

Specifically, in the old version of supporting domestic and decentralized procurement, the restriction of “above the quota standard” is canceled, and the references to “local centralized procurement directory” and “departmental centralized procurement directory” are canceled. At the same time, the evaluation method in “best quality method”, the procurement method in “innovative procurement” are added，and clarifies the scope of application of the “minimum evaluation price method”, etc.

Compared with the 88 rules in 9 chapters of the current Government Procurement law of the people’s Republic of China, the Draft for Comments has a total of 125 rules in 10 chapters, and the length of the changes is unimaginable.

But there is no doubt that once the revision of the new government procurement law is completed, it will completely subvert the domestic procurement market, especially for medical equipment companies that often deal with public hospitals.

Further support for “domestic”

In Chapter III government procurement policy of the Draft for Comments, the first thing mentioned is to support domestic industries.

The Draft for Comments clarifies that government procurement shall purchase domestic goods, projects and services, except for those that cannot be obtained in China or on reasonable commercial terms.

At the same time, products produced in China that meet the specified value-added ratio and other conditions shall enjoy evaluation preferences in government procurement activities.

Obviously, supporting domestic is the primary premise, but foreign-funded enterprises that achieve production and R & D in China will also receive policy support and encouragement.

It can be seen that in recent years, with the successive implementation of domestic support policies, Ge, Medtronic, Philips and other enterprises have also continued to accelerate the layout of “localization”, moving factories into China and coating products with “national brands”, which can be said to be a very wise choice.

 Information projects must be subcontracted

Article 38 of the Draft for Comments stipulates that if purchasers implement informatization projects and carry out professional classification or subcontracting procurement of information infrastructure, application systems, security protection and other construction contents.

In other words, in the future, all public hospitals’ SPD platform construction projects cannot be undertaken by one company, but must be subcontracted.

Unified nationwide and abolition of “local centralised procurement catalogues”

For now, government procurement implements a combination of centralized procurement and decentralized procurement.

In the current government procurement law, the scope of centralized procurement is determined by the centralized procurement catalogue published by the people’s government at or above the provincial level. Government procurement projects under the local budget are determined and announced by the people’s governments of provinces, autonomous regions and municipalities directly under the central government or their authorized institutions.

In the future, there will only be one centralized procurement catalog and quota standards, which will be unified across the country.

Once the centralized catalog is under the unified management of the State Council, large-scale medical equipment projects of Class B will be included in the scope of government procurement projects for public services. This shall has significant implications for all large medical device companies.

Support for science and technology innovation

Support for technology and innovation has long been a major focus in the past few years and will continue in depth in the future.

In Article 25 of Chapter III of the Drafts for Comments, “supporting scientific and technological innovation”, it is clearly required that government procurement shall support the application of scientific and technological innovation, give play to the guiding role of the government procurement market, promote the deep integration of industry, University, research and application, and promote the research, development and application of innovative products.

If there are less than three suppliers, the bid will not be rejected

In many projects in the past, especially some special medical equipment procurement projects, because the number of responding suppliers was less than three, they could only scrap the bid and re invite bids. The new version of the Draft for Comments has changed this phenomenon.

In Article 44, the number of bidding suppliers is specified: if the procurement is conducted in a competitive manner, there is no less than three bidding suppliers and qualified bids.

However, the Draft for Comments proposes that after the implementation of open competition, if there will be only two or one bidding suppliers or qualified bids, and there will be no unreasonable terms in the procurement documents, and the procurement procedures comply with the regulations, the procurement activities shall be continued.

 The “lowest bid” is really changing!

Finally, the “lowest price” that we are most concerned about winning the bid may really be goodbye. Draft for comments says that there will be three evaluation methods for government procurement, including the lowest evaluation price method, the comprehensive scoring method and the optimal quality method.

Among them, the “optimal quality method” is a new evaluation method. It refers to the evaluation method that if the bidding documents can meet all the substantive requirements of the procurement documents and the price has been set, the winning, closing and shortlisting suppliers will be determined in descending order according to the evaluation score of the quantitative index of quality factors.

For example, for the purchase of some precision instruments, in order to “select the best from the best”, the optimal quality method will be adopted.

It is worth mentioning that Draft for Comments also proposes that the competitive negotiation method will generally adopt the comprehensive scoring method, which will be the biggest change to the lowest price transaction evaluation method used in the competitive negotiation method in the current Government Procurement Law.

Article 35 stipulates that general goods and services with clear and unified standards such as technology and services, and engineering construction that has been designed, will be procured by bidding or inquiry. For large-scale equipment with complex technology, special instruments and equipment such as experiments and testing, suppliers are required to provide services such as design consultation of solutions and construction of information application systems. Innovative procurement and cooperation between government and social capital will be carried out. Competitive negotiation will be adopted.

To put it simply, only procurement projects whose procurement needs are particularly clear and can be completed at one time only with suppliers’ quotations will be able to use bidding or inquiry. In addition, other projects need to negotiate with suppliers in order to clarify their demands will have to adopt competitive negotiations.

Perhaps, in the future, “competitive negotiation” is expected to replace “open bidding” as the mainstream procurement method. At the same time, the limitation of the scope of the “minimum evaluation price method” will also benefit all medical equipment enterprises and get out of the “strange circle” of “low-price competition.” After all, medical devices are by no means general-purpose goods.

BradyKnows localization team has extensive experiences in facility establishment, audit, supplier evaluation, manufacturing, registration, and marketing in China. Pls feel free to let us know any questions on China entry via info@bradyknowsmedical.com

 Source：HiMed医创合作社群

Edited & translated by：BradyKnows