Ministry of Finance issued a document to standardize the lowest bid
Strict supervision of the abuse of the “lowest bid” will benefit all medical equipment enterprises.
On August 18, the Chinese government procurement website published the Ministry of Finance will standardize the scope of application of the Minimum bid evaluation Law, which makes it clear that the Ministry of Finance will improve the government procurement transaction system, standardize the scope of application of the minimum bid evaluation (review) price law, and authorize the bid evaluation committee to reject unreasonable low prices and curb vicious low price competition.
On June 21, the Ministry of Finance released the Reply to the First Session of the 14th National People’s Congress No. 0649 Finance Letter (2023) No. 6), for the problem of the lowest bid leads to product quality and safety is difficult to guarantee, the Ministry of Finance made it clear that the fundamental reason is that the procurement demand is incomplete and unclear, and suppliers lack the basis for competitive offers. In this regard, the Ministry of Finance will further strengthen the management of government procurement demand, strengthen the main responsibility of the purchaser, require the procurement unit to reasonably determine the procurement demand and the maximum price, scientifically select the procurement method and evaluation method, and avoid the lowest price transaction in the case of unclear demand and lead to disorderly competition.
In response to the illegal practice of determining the winning bidder through “drawing lots” and the abuse of the lowest price for winning the bid, the Ministry of Finance introduced the situation where relevant departments have actively promoted the optimization of the evaluation mechanism in recent years.
In terms of government procurement evaluation system, the Ministry of Finance pointed out that the current government procurement legal system provides for two evaluation methods: the minimum bid evaluation (evaluation) price method and the comprehensive scoring method, which are reasonably selected by the purchaser according to the procurement needs and project characteristics.
The lowest bid evaluation (review) price method is mainly applicable to general projects with clear and unified technology and service standards. For such “enough is good” projects, purchasers can compete only around the price on the basis of clear demand standards, which can not only guarantee basic functions and quality, but also effectively control high prices.
For projects with complex technology and special nature of large equipment and specialized services, purchasers can use comprehensive scoring method to evaluate the cost performance of products and promote high-quality and affordable procurement.
The lowest bid is a form of bidding in which the winning bidder for a contract or project is the one who offers the lowest price. In short, the decision to select the winning bidder is based primarily on the low or high price of the offer. This method is widely used in many bidding and procurement processes, especially in projects requiring strict cost control, such as government procurement, construction projects, etc.
In all kinds of bidding, the “lowest bid” method is a common practice. This method emphasizes the selection of the lowest bidder as the winning bidder in order to save costs. However, this practice has caused a series of controversies in practical applications. First, quality. In order to stand out from the price competition, some suppliers may reduce the quality of products or services, affecting the long-term results of the project. Focusing too much on price may neglect quality, innovation and sustainability. Secondly, vicious competition. Some suppliers may reduce the price by any means, or even engage in vicious competition, damaging the stability of the market and the partnership. Thirdly, ignoring added value. The lowest-bid model ignores added value, such as after-sales service, technical support and innovation capabilities, which are also critical to the success of some projects.
Common ways to balance “the lowest bid” are：First, comprehensive evaluation criteria. Introducing comprehensive evaluation criteria, considering factors such as quality, reliability, and innovation in addition to price. This helps to balance the relationship between low prices and high quality. The second is to limit the bottom- line quotation to avoid suppliers falling to unreasonable levels. This can ensure the basic quality and sustainability of the project. For complex projects, a phased tender can be adopted, firstly， evaluating technical proposals and capabilities, and then opening price competition to balance quality and cost. Fourth, encourage innovation. Set up an innovation reward mechanism to reward suppliers that provide superior value in terms of technology, sustainability, etc.
In July 2022, the Department of Treasury of the Ministry of Finance issued the Government Procurement Law of the People’s Republic of China (Revised Draft for Comment), which clearly supports domestic and decentralized procurement to cancel the restriction of “above the quota standard” and cancel the reference to “local centralized procurement catalogue” and “department centralized procurement catalogue”. At the same time, the “optimal quality law” review law, “innovative procurement” procurement law, and the scope of application of the “minimum review price law” have been clarified.
It can be said that the new government procurement Law will directly change the current domestic procurement market and medical equipment procurement mode.
At this stage, from the national to the local level, strict supervision of the abuse of the “lowest bid” will benefit all medical equipment enterprises and avoid enterprises falling into the “vicious circle” and “low price competition” and even “low quality bidding”.
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Source：Devive Market
Translated & edited ： Bradyknows
