Regulatory and Institutional Framework for e-Procurement in the People’s Republic of China

 Dr. Zhu Jianyuan

Dr. Zhu Jianyuan
Co-author of the first Concession Management Approach in China

Lead co-author of The Law on Bidding

Co-author lead expert of Government Procurement Law

Board Member of the China Tendering and Bidding Association (CTBA)

Table of Contents
Ⅰ • Introduction

II

• Current Situation and Issues

III

• Our Solutions – Establishment of a Regulatory Framework for eProcurement

Ⅰ. Introduction
Feature - Huge investment in fixed assets

30
25 20 15 17 22

27

RMB Trillion

10
5 0 2008 2009 2010

China invested RMB 27 Trillion in fixed assets, 2010. Tendering and Bidding are the main channels of selecting suppliers

Ⅰ. Introduction
Sector distribution for fixed assets investment in 2010

20% 5%

Transportation Chemical products 9% Energy Metallurgy & Minerals IT

36%

17%

Urban infrastructure & services Water conservancy Etc.

6%

1%

6%

The online retail market size in China is expected to grow from $ 80 billion in 2010 to $ 300 billion in 2015

Size of online shopping by netizens, 2009-2020 (Unit: $ billion)
600

9.2% 8.5%

10.0% 9.0%

8.0%
500

7.1% 6.4% 5.9% 6.7%

7.5%

640

8.0% 7.0% 6.0%

400

5.3% 4.5%

300

300

5.0% 4.0% 3.0% 2.0%

3.6%

200

2.1%

100

80
1.0% 1.0%

0

2009E

2010E

2011E

2012E

2013E

2014E

2015E

2016E

2017E

2018E

2019E

2020E

Percentage of netizen’s online shopping vs. total online retail sales Source: National Bureau of Statistics, Ministry of Commerce, public media By the Development Strategy Department of 360buy.com

7

The best time for e-commerce
Size & rate of penetration rate of Internet in China
500
40% 35%

35.1%

400

28.1% 24.5% 24.8% 22.1% 30% 25% 20%

Number of Netizens

(in millions)

300

200 100

15% 10% 5%

0

0%

2006
Total number of netizens

2007

2008
Number of online buyers

2009

2010

Penetration rate of online shopping

Source: China National Network Information Center

By the Development Strategy Department of 360buy.com
9

Ⅰ. Introduction
Relevance of e-Procurement

Foster Efficiency

Relevance of e-Procurement

Promote institutional innovation Environmentally Friendly

Ⅱ. Current Situation
Different levels of e-Procurement

Online purchase Tendering Documents

Online bidding

All transactions online

Ⅱ. Current Situation
Multiple dimension of e-Procurement
Civil Works

ICB

GP

Procure ment Agent

Ⅱ. Current Situation
Different models of e-Procurement

Government Led

Procurem ent Agent

Different Models

SOE

IT Service Provider

Ⅱ. Issues
Issues encountered in development

Structure of KONEPS

Absence of legal framework

Lack of technical standards

Issues

No information mechanism

Security of transactions

Ⅲ. Our Solutions
Legal framework
Extensive Research

Structure of KONEPS

Survey was conducted following issuance by NDRC of the draft legislation on eProcurement in February, 2009.

Promotion Forum

The 1st China Tendering & Procurement Electronic Development Forum was held in Beijing in April, 2009.

Setup of Working Group The inception meeting for preparation of "Technical Specification for Electronic Tendering and Bidding System" was organized by NDRC in December, 2009. NDRC entrusted the China Tendering and Bidding Association (CTBA) with the selection of the experts for the Working Group. Drafting of Regulation

the “Electronic Tendering & Bidding Regulations (Preliminary Draft)” and its annex “Technical Specifications for an Electronic Tendering and Bidding Platform (Preliminary Draft)” were proposed by the NDRC together with relevant departments of the state council.

Ⅲ. Our Solutions
Legal basis for regulation

Draft regulation on e-Procurement

Provide legal basis for e-Procurement

Ⅲ. Our Solutions
Administrative framework

Draft regulation on e-Procurement

Multi-level administrative framework

Ⅲ. Our Solutions
Model

Draft regulation on e-Procurement

Integration of Government Public Service and Transaction Platforms

Ⅲ.

Our Solutions
The Public Service Platform

Characteristics of KONEPS

Principles: government leadership, unified standard, centralized and unified public information service platform. A three-layer national information network platform system will cover all industries and regions. the hub of e-information exchange, providing service for the project transaction system, featuring in public & common service

The Transaction Platform
Focused on transactional services (procurement of goods, works and services)

Ⅲ.

Our Solutions

Structure of the Model
Administrative supervision departments of the State Council Public service platform at national level

Administrative supervision departments at provincial level

public service platform at provincial level

Administrative supervision departments at municipal level

Public service platform at municipal level

public service platform at municipal level

项目

Transaction platform system

Transaction platform system

Ⅲ. Our Solutions
Oversight & Complaint Mechanisms

Draft regulation on e-Procurement

Setup of online oversight & complaint mechanisms

Ⅲ.

Our Solutions

Technical Specification of e-Procurement System

Technical Specifications of Electronic Tendering and Bidding Transaction System
▶ the technical specifications of information system, guaranteeing the validity, security, reliability, and coordination of electronic tendering and bidding unifying the standards for applicability, terms & definitions, system structure & function, data interface, technical support & guarantee, system coding, interface format, system evaluation, etc.

Ⅲ.

Our Solutions

Technical Specification of e-Procurement System

Technical Specifications of Electronic Tendering and Bidding Public Service Platform
▶ stating the frame structure, basic service function of e-Procurement, explaining its relation with the project transaction system

Internet and e-commerce will leads to social changes
Driven by technological revolution
Driven by Commercial innovation

Social change

The Evolution of IT
Rapid development of new business models Consolidation of new business models Emergence of new business models

Social Maturity of change new business models

The next stage of technological revolution

2000

2010

2015

Surge in the use of new technologies

Institutional adjustment

Financial bubbles

Development of new technologies
Emergence of new technologies

The adjustment of old & new institutions

Invention of tabulator & perforating machine Invention & Use of computer

Development stage
Change s in social & cultural behavior The maturity of regulations on the Internet

.com bubbles

Invention of the Internet Beginning of e-commerce

Rise of e-commerce

The public start autonomous learning of new business & technology

5