Evaluation of the government procurement policy and its correlation of the implementing

regulations in China

Hefa, SONG ,Rongping, MUInstitute of Policy and Management, Chinese Academy of Sciences

Add.: NO.55, Zhongguancun east road, Haidian district, Beijing, P.R.ChinaP. code: 100190Email: hfsong@casipm.ac.cnTel.: 8610 62540746 Fax : 8610 62540746

Main contentsMain contents

1. Introduction

2. Literature review

3. Implementation of China's government policy

4. Correlation analysis between the government

procurement policy and the implementation regulations

5. Main recommendations

Outline of the National Medium and Long Term program

for Science and Technology Development(2006-2020):

Government Procurement Favoring Indigenous Innovation. Establishing system of financial procurement of the indigenous innovative products

Improving assessment method of the government procurement and give priority

treatment to the indigenous innovative products

Establishing the system of the government's first-buy of the indigenous innovative

products and ordering system

Establishing the system of the domestic goods and audit system of purchasing foreign

products

Play roles of the defense procurement favoring the indigenous innovation

1.Introduction1.Introduction

The Ministry of Finance, Ministry of Science and technology and other

departments set down related implementing regulations. Administrative regulation on certification of government procurement of the

indigenous innovative products.

Administrative regulation on budget management of government procurement of

the indigenous innovative products .

Administrative regulation on contract management of government procurement

of the indigenous innovative products .

Administrative regulation on assessment of government procurement of the

indigenous innovative products .

Several Opinions on implementing the government procurement policy favoring

the indigenous innovation(2010)

Catalogue for Government Procurement of Indigenous Innovative Products

Edquist, C., Hommen, L.(2000): The government procurement

refers to purchasing of a product or system which is not exist

and needs further technological development.

Jakob Edler, Luke Georghiou (2007):The government

procurement mainly includes R&D procurement and innovative

products procurement.

Zegveld , Rothwell (1984) Compared the similarities and

differences between R&D procurement and innovative products

procurement and pointed out that the government

procurement could drive innovation in a long-term.

2. Literature review2. Literature review

Geroski, P.A considered the government procurement policy is a

more effective tool favoring innovation than R&D input.

Birgit Aschhoff and Wolfgang Sofka found the public

procurements more effective, especially for small businesses,

and they also studied the problems of public procurements.

“Creating an Innovative Europe ”suggested to create an

innovation- friendly market.

Palmberg and Saarinen’s research showed that 48%successful

innovation projects made mainly profit from public procurement

according to a survey about the commercialization of innovation

in Finnish from 1988 to 1998.

From 2007 to 2008, under the leadership of MR.MU, the

Center for Innovation and Development Research of Chinese

Academy of Sciences (affiliated to CASIPM) organized two

large scale surveys to investigate implementation situation of

the supporting policies targeting at enterprises having

enterprise technology centers recognized by the central or

province government.

3. Implementation of China's government policy3. Implementation of China's government policy

Table1 Types of the enterprises whose products were included in the "Catalogue for Government Procurement of Indigenous

Innovative Products"

central-rate enterprise

state-owned enterprise (non-central rate)

enterprise transferred from institute or academy

collective enterprise

private enterprise

foreign-funded enterprise

othersUnknown type

total

number 15 37 4 3 73 8 17 9 166

percentage 9.0% 22.3% 2.4% 1.8% 44.0% 4.8%10.2%

5.5% 100%

Table 2 Reasons for the enterprises whose products weren’t included in the "Catalogue for Government Procurement of Indigenous Innovative

Products"

reason

category

enterprise didn’t know the policy

policy was less attractive

policy requirements were too high to enjoy

policy was lack of operability

Percentage of the number of the enterprises which were not included in the "Catalog of government procuring the indigenous innovative products

28.72% 4.03% 42.02% 19.00%

Percentage of the number of the enterprises which didn’t enjoy the government's first buy of the indigenous innovative products and ordering policy

31.69% 4.18% 46.66% 19.45%

The Ministry of finance and Ministry of S&T this year issued a new

implementing regulation on identification of government procurement which was “notice of the identification of the indigenous innovation products in 2010 (draft)”, and expanded the scope of the indigenous innovation products to foreign products truly.

The new implementing regulation replaced the former stipulations of "the indigenous intellectual property rights" and " indigenous brand“ with two requirements of “enjoys intellectual property right or intellectual property licenses right in China according to law “, and “has exclusive right or using right of the registered trademark of product in China according to law”.

4. Correlation analysis between the government procurement policy and the implementation regulations

4. Correlation analysis between the government procurement policy and the implementation regulations

4. 1 Analysis method: comparison study 4. 1 Analysis method: comparison study

Supporting policy

point1 point2 Point5

regulation1 regulation2 regulation7

Other laws or policies

Other regulations

consistency inconsistency

contradiction

deficiency

……

……

Consistency: the supporting policies and implementing

regulations

Inconsistency: the supporting policies and implementing

regulations.

Deficiency: the implementing regulation themselves.

Contradiction: the implementing regulations and other laws,

policies and regulations.

Establishing system of financial

procurement of the indigenous

innovative products

Play roles of the defense

procurement favoring the indigenous innovation

Establishing the system of the

domestic goods and audit system

of purchasing foreign products

Establishing the system of the government's

first-buy of the indigenous innovative

products and ordering system

Improving assessment method of the government procurement and

give priority treatment to the

indigenous innovative products

Establishing certification system of the indigenous innovative products, establishing certification standard and assessment system

In major national construction projects and other major equipment and product projects using fiscal funds , The relevant departments should committed to the procurement of indigenous innovation products as conditions of application and approval, and definitude clearly the specific requirements

Enhancing the budget control, giving priority to the indigenous innovation projects ,

Several Opinions on implementing the government procurement policy favoring the indigenous innovation

Catalogue for Government Procurement of Indigenous Innovation Products

Administrative regulations on assessment of government procurement of the indigenous innovative products

Administrative regulations on certification of government procurement of the indigenous innovative products

Price-based projects bidding should give preferentially purchase the indigenous innovation products, give a certain price deduction. The enterprises of the indigenous innovative products have a priority to get the government procurement contracts.

For the major innovative products or technology, government needs to select research and development units though signing ordering contract, and establish exam and check mechanism and result propitiation mechanism

Products on test or first marketing of the domestic enterprises or research institutions can enjoy the first-buy policy by purchasers or government

Defence procurement should be based on domestic innovation products and technologies.

Policy goal Policy measuresCorresponding implementing

regulationsMain point of the implementing

regulations

The government procurement contracts should give the supplier of indigenous innovative products appropriate support in performance bonds, payment terms and so on. The supplier shouldn’t sign sub-contracts to others. The supplier should provide qualified indigenous innovative products according to the law. The financial sector and other relevant departments at all levels are responsible for supervision and management government procurement contracts of the indigenous innovation

Preparing government procurement budget of the indigenous innovation products in accordance with the scope of the directory. Preparing government procurement plan of the indigenous innovation products; purchasing the indigenous innovation products in accordance with government procurement budgets and procurement plans. Financial departments at all levels should study and establish reward and punishment system procurement of the indigenous innovation products

Purchasers should buy the indigenous products preferentially based on stipulations of "The People's Republic of China Government Procurement Law" .

Inviting tendering, competitive negotiation and inquiring price and other procurement methods can be used to. The specific provisions of preferably purchasing the indigenous innovative products in the tender documents should be given. For the Lowest assessing method of bid, the tender can be given a preferential price from 5% to10%. For the Composite score method, the tender can be given a 4% -8% increase of the total score of price or technology. For the competitive negotiation, inquiring approach, if the tender price of the indigenous innovative products is not higher than the lowest quote of 5% -10% of the offer, the tender should be determined as the supplier.

Administrative regulations on contract management of government procuring the indigenous innovative products

Administrative regulations on budget management of government procuring the indigenous innovative products

Adhering to principles favoring the indigenous innovation and absorption of the core technologies, preferably purchasing products of The technology Has been transferredProcurement of foreign products, help enterprises

Administrative regulations on government procurement of the imported products

The purchaser and his procurement agency should specify preferentially purchasing the imported products of the suppliers who had transferred technology to Chinese enterprises and signed the absorption and re-innovation solutions in the procurement documents of the imported products

Government procurement of the Imported products should make the public tender as the main way

The products which the purchasers need to purchase and can’t obtain in reasonable commercial terms in China, they can purchase foreign products under the approval of the financial sector and expert demonstration

Because of the consistency of the products or the service match requirements, the purchaser can continue purchasing from the original supplier without re-examination, but the total amount fund of additional procurement shouldn’t exceed10% of the original contract amount. In performance of the contract of the imported products, if he does need to purchase the same kind of products as the contract without changing other provisions, and all the additional purchasing amount does not exceed10% of the original contract amount, the purchaser can sign a supplementary contract with the original supplier without re-examination

The national indigenous innovation products certificated have priority to be purchased in government procurement, the state procurement of major projects using financial funds, and can get key supports in policies of the high-tech enterprises certification, scientific and technological results transfer and industrialization

The indigenous innovation product applying to national certifications should has indigenous intellectual property rights, indigenous brand with ownership of the registered trademark, high degree of product innovation, advanced technology, reliable quality, and has potential economic benefits and a larger market prospects or can replace imported products

"Establishing system of financial procurement of the indigenous

innovation products," and "Improving assessment method of

the government procurement and give priority treatment to the

indigenous innovation products" are well supported by the

corresponding implementing regulations.

The Inconsistency of the implementing regulations with the

supporting policies embodied as following:

1. “Establishing the system of the government's first-buy of the

indigenous innovative products and ordering system” is lack of

support of implementing regulations.

2. "Establishing the system of the domestic goods and audit system

of purchasing foreign products” is only supported by one

implementing regulation.

3. "Play roles of the defense procurement favoring the indigenous

innovation" is lack of support of implementing regulations.

1. Definitude the certification and evaluation criteria of the indigenous

innovative products. It is important to give clear definitions of the

indigenous innovative products and indigenous intellectual property

rights.

2. Formulating implementing regulations of the “PRC Government

Procurement Law”.

3. It is necessary to define the first-buy, ordering and using subjects of the

indigenous innovative products, and government procurement

budgeting, government procurement contract, government

procurement assessment, government procurement procedure and so

on, and make clear the defect tolerance rate of the indigenous

innovative products that can't passed the market test.

5. Main recommendations5. Main recommendations

4. Establishing a quick updating mechanism of Catalogue of

Indigenous Innovative Products. Governments should issue the

Catalogue of Indigenous Innovative Products and should update it

timely.

5. Increasing the proportion of subsidy-based procurement. The major

domestically made high-tech equipments and products that possess

proprietary intellectual property rights can be given a post subsidy in

accordance with its R&D costs and pre-state financial investment and

the required years to amortize.

6. Expanding the government procurement policy scope to the individual

indigenous innovative products and technologies. Non-service invention

products and technologies should be treated as the indigenous

innovative ones and should be purchased by the government too.

Thank you for your attention！