Public Procurement in Chinese Law and Practice 9819910463, 9789819910465

Table of contents :
About This Book
Contents
About the Author
1 Introduction
1.1 Factors Affecting the Ways of Public Service Supply
1.1.1 Government Roles
1.1.2 The Autonomy of the Government
1.1.3 The Roles of the Market
1.2 Choice of Public Service Supply Mode
1.2.1 Administrative Supply
1.2.2 Supply with Market Contracts
1.3 Development of Market Contractual Supply
2 Basic Theories of Government Procurement of Public Services
2.1 Overview
2.1.1 Concept Definition
2.1.2 Basic Properties
2.1.3 Main Features
2.1.4 Development Status
2.2 Theoretical Framework
2.2.1 New Public Management Theory
2.2.2 Service-Oriented Government Theory
2.3 Practical Foundations
2.3.1 Historical Necessity
2.3.2 Practical Necessity
2.3.3 Realistic Feasibility
2.4 Basic Principles
2.4.1 The Principle of Cooperation and Coordination
2.4.2 The Principle of Competitive Benefit
2.4.3 The Principle of Responsibility and Credit
2.4.4 The Principle of Legal Reservation
3 Statutory Boundaries for Government Procurement in Public Services
3.1 Theoretical Analysis
3.1.1 The Meanings of “Public Service”
3.1.2 The Enlightenment of Extraterritorial Definition
3.1.3 Elements of Boundary Recognition
3.2 The Actual Situation in China
3.2.1 Research on Boundary Establishment
3.2.2 The Practice of Establishing Boundaries
3.2.3 The Problems of Boundary Establishment
3.3 Legislative Principles
3.3.1 The Principle of Legal Reservations
3.3.2 Benchmark Guarantee Principle
3.3.3 The Principle of Equal Supply of Public Services
3.3.4 Step by Step Principle
3.4 Specific Types
3.4.1 Compulsory Procurement
3.4.2 Prohibited Procurement
3.4.3 Discretionary Procurement
4 The Subject of Legal Relationship in Government Procurement of Public Services
4.1 Institutional Choice of Subjects
4.1.1 Subjects of Procurement
4.1.2 Undertaken Organizer
4.1.3 Service Objects
4.2 The Dilemma of the Disciplinary System
4.2.1 Legislative Flaws and Difficulties
4.2.2 Disadvantages of the Government as the Main Body of Public Service Supply
4.2.3 Defects of Citizens as the Subject of Public Service Supply
4.3 Legal Countermeasures to Perfect the System of Public Service Supply Subject
4.3.1 The Guiding Ideology of Reforming and Improving Public Services
4.3.2 Legal Countermeasures for Perfecting Reform
5 The Government's Commitment Mechanism for Purchasing Public Services
5.1 Connotation and Functions
5.1.1 Connotation and Elements
5.1.2 Basic Functions
5.2 Empirical Analysis
5.2.1 A Local Exploration
5.2.2 Existing Problems
5.3 Legal Countermeasures for Establishing and Improving the Undertaking Mechanism
5.3.1 Scientifically Set the Access Conditions for Undertaking the Main Bodies
5.3.2 Standardize the Operating Procedures of the Undertaking Mechanism
5.3.3 Reasonably Determine the Legal Methods of the Undertaking Mechanism
5.3.4 Public Disclosure of Statutory Information on the Undertaking Mechanism
6 Statutory Ways for the Government Procurement of Public Services
6.1 Forms, Legal Nature and Privileges of Procurement Contract
6.1.1 The Basic Forms of the Procurement Contract
6.1.2 The Legal Nature of the Procurement Contract
6.1.3 The Procurement Contract Contains Privileges
6.2 Signing of Procurement Contracts
6.2.1 Allocation of Rights of the Subject of the Procurement Contract
6.2.2 Requirements for Drafting Contract Terms
6.2.3 Main Contents of the Procurement Contract
6.3 Principles of Performance of Procurement Contracts
6.3.1 The Principle of Full Implementation
6.3.2 The Principle of Good Faith
6.3.3 The Principle of Change of Circumstances
6.4 Torts and Liability in Performance of Procurement Contracts
6.4.1 Occurrence of Infringement of Performance of Procurement Contracts
6.4.2 Torts and Liabilities of Non-interested Third Parties
6.4.3 The Torts and Liabilities of the Undertaking Subject
6.4.4 Torts and Liability of Service Objects
6.5 Special Issues in the Performance of Procurement Contracts
6.5.1 Subcontract Performance of the Procurement Contracts
6.5.2 The Supplementary Contract of the Procurement Contracts
6.5.3 The Performance Guarantee of the Procurement Contracts
7 Regulatory Mechanisms for Government Procurement of Public Services
7.1 Overview of Regulatory Mechanisms
7.1.1 The Meanings of the Regulatory Mechanism
7.1.2 Goals of the Regulatory Mechanism
7.1.3 The Functions of the Regulatory Mechanism
7.2 Statutory Regulatory Agencies
7.2.1 Overview of Related Situations Outside the Territory
7.2.2 The Setting Modes of China's Regulatory Agencies
7.2.3 The Conception of China’s Regulatory Agencies
7.2.4 The Statutory Powers of China’s Regulatory Agencies
7.3 Supervision of Government Procurement Contracts
7.3.1 Regulatory Bodies and Responsibilities
7.3.2 Regulatory Contents
7.3.3 Regulatory Approaches
7.3.4 Regulatory Principles
7.3.5 Regulatory Penalty System
7.4 Improvement and Perfection of Supervision Mechanism
7.4.1 Dilemmas of Regulatory Mechanism
7.4.2 Legal Assumption of Perfecting Supervision Mechanism
8 The Legal Remedy System for Government’s Procurement Public Services
8.1 The Value of Legal Remedy System for Government’s Procurement Public Services
8.1.1 Important Guarantee to Realize the Procurement Rights
8.1.2 The Necessary Elements to Improve the Procurement System
8.1.3 The Inevitable Initiative to Exert Administration According to Law
8.2 Remedy Objects and Remedy Rights and Interests
8.2.1 The Procurement Subjects and Its Remedy Rights and Interests
8.2.2 The Undertaking Subjects and Its Remedy Rights and Interests
8.2.3 The Service Recipients and Their Remedy Rights
8.2.4 The General Public and Their Remedy Rights and Interests
8.3 Existing Remedy Methods
8.3.1 Public Remedy
8.3.2 Social Remedy
8.3.3 Self-Remedy
8.4 Deficiencies of the Remedy System
8.4.1 Lack of an Independent Remedy System
8.4.2 The Administrative Power Tends to Dominate the Remedy
8.4.3 The Remedy Scope is Narrow
8.4.4 The Singularity of Legal Remedies
8.4.5 Incomplete Supporting Mechanism
8.5 Legal Measures to Improve the Remedy System
8.5.1 To Figure Out the Value of the Remedy System
8.5.2 To Select a Remedy Mode with a Science-Based Approach
8.5.3 To Establish a Remedy Mechanism of Administrative Modesty and Restraint
8.5.4 To Establish a Specialized Third-Party Mechanism
8.5.5 To Establish and Improve the Public Interest Litigation System
9 How to Improve the Legal System of Government Procurement of Public Services
9.1 The Situation of Law System for Chinese Government Procurement of Public Services
9.1.1 The General Situations
9.1.2 Basic Features
9.2 The Main Problems
9.2.1 The Unclear Objects of Legal Regulations
9.2.2 The Lack of a Comprehensive Legal System
9.2.3 Insufficient Authority of Legal Regulations
9.2.4 Messy and Fuzzy Legal Norms
9.2.5 The Lack of Supporting Laws
9.3 The Characteristics of the Legal System for Procurement of Public Services Outside the Territory
9.3.1 The Influence of Legal Tradition on Legal Forms
9.3.2 The Reflection of Market Contracts
9.3.3 The Guiding and Safeguarding Role of Laws
9.4 Strategies and Ways to Solve the Defects
9.4.1 Path Selection
9.4.2 The Main Contents of Improvement
9.4.3 The Legislative Principles

Citation preview

State Governance

Xiang Xiansheng

Public Procurement in Chinese Law and Practice

State Governance Series Editors Puqu Wang, Peking University, Beijing, China Jirong Yan, School of Government, Peking University, Beijing, China Pengcheng Gao, School of Government, Peking University, Beijing, China

State governance has always been the core topic of social science research. Moreover, scholars and policy makers pay full attention to evolution, distribution, types and components of governance. In practice, the governance with different contexts profoundly affects the behaviours, attitudes and preferences of individuals and political organizations. The series focuses on state governance, explores its influence mechanism in political system and culture, and attempts to contribute to the understanding of the governance in different research fields in political science. It involves monographs, edited volumes, and handbooks. The series aims to bring inspiration to researchers as well as policy makers.

Xiang Xiansheng

Public Procurement in Chinese Law and Practice

Xiang Xiansheng National Governance Institute Peking University Beijing, China

ISSN 2731-0833 ISSN 2731-0841 (electronic) State Governance ISBN 978-981-99-1046-5 ISBN 978-981-99-1047-2 (eBook) https://doi.org/10.1007/978-981-99-1047-2 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

About This Book

Whether it can provide good public services not only reflects the effectiveness of the government, but also affects the stability of the regime. Therefore, all countries attach great importance to the supply of public services, but because of the different types of governments in different countries, the roles and autonomy of the government in the process of public service supply are different. This book focuses on the three types of public service supply in China and analyzes the legal boundaries, legal subjects, purchasing methods, supervision mechanisms, and legal remedies of public service supply.

v

Contents

1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 Factors Affecting the Ways of Public Service Supply . . . . . . . . . . . . 1.2 Choice of Public Service Supply Mode . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Development of Market Contractual Supply . . . . . . . . . . . . . . . . . . . .

1 1 5 13

2 Basic Theories of Government Procurement of Public Services . . . . . 2.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Theoretical Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Practical Foundations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Basic Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17 17 41 54 60

3 Statutory Boundaries for Government Procurement in Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Theoretical Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 The Actual Situation in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Legislative Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Specific Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73 74 82 88 91

4 The Subject of Legal Relationship in Government Procurement of Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 4.1 Institutional Choice of Subjects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 4.2 The Dilemma of the Disciplinary System . . . . . . . . . . . . . . . . . . . . . . 103 4.3 Legal Countermeasures to Perfect the System of Public Service Supply Subject . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 5 The Government’s Commitment Mechanism for Purchasing Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Connotation and Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Empirical Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Legal Countermeasures for Establishing and Improving the Undertaking Mechanism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

119 119 124 130

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Contents

6 Statutory Ways for the Government Procurement of Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Forms, Legal Nature and Privileges of Procurement Contract . . . . . 6.2 Signing of Procurement Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Principles of Performance of Procurement Contracts . . . . . . . . . . . . . 6.4 Torts and Liability in Performance of Procurement Contracts . . . . . 6.5 Special Issues in the Performance of Procurement Contracts . . . . . .

137 138 149 166 168 179

7 Regulatory Mechanisms for Government Procurement of Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 Overview of Regulatory Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 Statutory Regulatory Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 Supervision of Government Procurement Contracts . . . . . . . . . . . . . . 7.4 Improvement and Perfection of Supervision Mechanism . . . . . . . . .

187 187 190 206 219

8 The Legal Remedy System for Government’s Procurement Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1 The Value of Legal Remedy System for Government’s Procurement Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 Remedy Objects and Remedy Rights and Interests . . . . . . . . . . . . . . 8.3 Existing Remedy Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4 Deficiencies of the Remedy System . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5 Legal Measures to Improve the Remedy System . . . . . . . . . . . . . . . . 9 How to Improve the Legal System of Government Procurement of Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1 The Situation of Law System for Chinese Government Procurement of Public Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2 The Main Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3 The Characteristics of the Legal System for Procurement of Public Services Outside the Territory . . . . . . . . . . . . . . . . . . . . . . . . 9.4 Strategies and Ways to Solve the Defects . . . . . . . . . . . . . . . . . . . . . . .

233 235 239 249 265 274 293 293 310 317 320

About the Author

Dr. Xiang Xiansheng is a research fellow in the National Governance Institute at Peking University. He is also an adjunct professor at Huaqiao University. He was a postdoctoral fellow at the School of Government, Peking University. His research interests include interdisciplinary jurisprudence and modernization of governance capacity. His academic papers have been published in top journals such as Chinese Public Administration and China Legal Science. He is also the host of many national, provincial, and ministerial research projects.

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Chapter 1

Introduction

1.1 Factors Affecting the Ways of Public Service Supply There have been many types of governments in history and society. From the perspective of market economy alone, there are also many types. So far, there have been four types of market economy in human society, namely free market economy, market economy with government intervention, market economy in welfare states, and socialist market economy, and their corresponding types of government are inaction-oriented government, management-oriented government, welfare-oriented government, ruling-oriented government, and service-oriented government. The inaction-oriented government emphasizes that the government is only a “night watchman”; the management-oriented government intervenes in economic development; the welfare-oriented government is to provide social welfare for the citizens; the ruling-oriented government directly manages and takes over the economy; and the service-oriented government is characterized by the service providers undertaken by the government in the economy and society.1 Either type of government is closely related to social, political and economic conditions, and there is an interactive relationship of “adaptation-inadaptationadaptation” between them, that is, each type of government is always adapted to the prevailing socio-political and economic conditions at the initial stage of its emergence. But this kind of adaptive relationship is a dynamic process, and at a certain stage, there will be contradictions and conflicts. As such contradictions and conflicts are irreconcilable, a new type of government will emerge, which is the alternating development process of government types.

1

Hu Xueqin: “The Orientation of China’s Economic Reform from the Perspective of the Relationship Between the Market and the Government”, Economic Review, No. 12, 2014, pp. 29–31.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 X. Xiansheng, Public Procurement in Chinese Law and Practice, State Governance, https://doi.org/10.1007/978-981-99-1047-2_1

1

2

1 Introduction

1.1.1 Government Roles In this process, there are many factors that determine whether the government is compatible with the socio-political and economic conditions. One of the key factors is the function of the government, in other words, it depends on whether the functions performed by the government meet the needs of the socio-political and economic conditions at that time. If the functions performed by the government can meet the needs of the socio-political and economic conditions at that time, then the government is an adaptive government, which is of vitality and is conducive to social development; otherwise, the government belongs to elimination type and it will hinder the development of society. Government is also a historical category and a dynamic process with different connotations, extensions and expressions influenced by different historical conditions and state theories. In the era of Laissez-faire, it was generally believed that the fewer functions of the government, the better, and the functions of the government were limited. In the era of comprehensive intervention, the functions of the government were expanded, and the government began to comprehensively intervene in economic and social life. In the era of New Public Management, the government functions were neither restricted nor expanded, but required to return to rationality and the provision of public services, that is to say, “The government takes the helm and does not paddle”. It is necessary to establish a limited, cheap and efficient management under the guidance of managerialism theory, with entrepreneurial government as the model and the improvement of public services as the goal, thus creating a model for the return of government functions to marketization and decentralization to society.2 However, in general, in terms of quantity, the functions performed by the government have experienced a process from less to more and then to less. From the perspective of the intervention of administrative power, the intervention on the performance of government functions has experienced a process from weak to strong and then to weak, that is, “less intervention -comprehensive intervention-moderate intervention” or “laissez-faire-comprehensive intervention-serving the society”. In the process of adjustment and transformation of government functions, except for the function of maintaining national security and social order, the regulatory function and public service function of the government’s main functions have undergone great changes. The changes reflect an inversely proportional growth relationship, that is, the former keeps weakening while the latter keeps strengthening. This kind of change is the embodiment of the modernization and scientization of government functions and is also an important feature of modern government and an inevitable requirement of modern administration. The weakening of the government regulation function is to improve the governance efficiency and respond to the needs of the market. The strengthening of the government’s public service function is for

2

Wang Xuejie: “International Comparison and Its Enlightenment of the Evolution of Government Functions”, Learning Forum, No. 12, 2013, pp. 50–51.

1.1 Factors Affecting the Ways of Public Service Supply

3

the government to adapt the requirement of social, political and economic development and respond to the people, ensuring the validity and legitimacy of government governance. Therefore, in a sense, modern government is an effective organization to provide public services. A responsible government must be one that can effectively respond to public demands and provide adequate and high-quality public services. The practice has also proved that the more the market developed, the more advanced the economy, the more democratic the politics, and the more eager the government is to provide high-quality public services. Whether the government can provide effective public services has become the basic basis for the government to effectively perform its duties. Only by providing adequate and high-quality public services can the government prove its value and legitimacy.3

1.1.2 The Autonomy of the Government Whether the public services can be effectively provided not only determines the efficiency of the government’s performing of public service functions but also affects the stability of the political power. Therefore, all countries attach great importance to the supply of public services, but because of the different types of governments in each country, the role status and the degree of autonomy of government in the process of public service supply are different. Different types of government have different behavioral initiative and different degrees of intervention in social, political and economic life, and reflected in the autonomy and decision-making power of the administrative decision-making and specific administrative acts. A government with a strong initiative has great autonomy in government actions; a government with a weak initiative has less autonomy in specific administrative actions. In the supply of public services, the government’s autonomy is mainly reflected in how much autonomy and decision-making power the government has in terms of the ways, content, and procedures of public service supply. In order to improve the effectiveness of public service supply, governments are generally given considerable autonomy. This is not only the practical need of public service supply, but also the result of the influence of government governance theories. For example, “social contract theory” is one of the more influential theories. Based on the “political contract”, the government has the non-transferability of its responsibilities in providing public services, but the government has its own autonomy in the specific public service supply procedures and production modes. Under the premise of ensuring the satisfaction of taxpayers and power trustors, the government has the right to decide who and how to provide them. It should be emphasized that the “political contract” is the legal basis for the existence of the government and the basic political premise of the source of the government’s legitimacy. Therefore, 3

Chen Guoquan, Wu Shuai: “Public Service Orientation of Responsible Government”, Social Science Front, No. 4, 2009, pp. 196–201.

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1 Introduction

what is transferred out of the second entrustment is only the way of performing the government functions, rather than the government’s public responsibility. At no time should the government use the “economic contract” concluded in the second entrustment to shift or shrink the responsibility of public service supply.4 The government’s autonomy in the way of public service supply determines its diversity in ways of public service supply because governments in various countries can decide the way of supply according to the degree of autonomy. From the perspective of the development process of public service supply, there have been different types of public service supply. Traditional fiscal federalism emphasizes the reasonable division of the supply of public products and services and their corresponding fiscal sources among governments at all levels; market-maintaining federalism provides a good political support system for market efficiency while realizing public products and services by constructing good governance structures. On the basis of criticizing traditional public administration, the New Public Management Theory emphasizes the distinction between the supply and production of public services, advocates the introduction of the market mechanisms in public services, and proposes the polycentric system for public service supply.5 According to the interaction between public service providers and users, people divide the supply modes of public services into: mode centered on the provider (the government), mode centered on the actual feeling of the consumers, and mode centered on the reasonable interaction between the providers and users.6 Based on the difference of supply subjects and their operating mechanisms, public service supply can be divided into three modes: government supply, market supply, and voluntary supply.7 Public service supply can be divided into three types based on the provider and operating mechanism: government supply, market supply, and social supply.8 Depending on different influences of theories and cultures, public service supply can be divided into the “fair welfare-based” public service model represented by the United Kingdom, the market-oriented and competition-centered public service model in the United States, and the “government-society cooperation” public service model led by government in Singapore.9

4

Chen Guoquan, Wu Shuai: “Public Service Orientation of Responsible Government”, Social Science Front, No. 4, 2009, p. 197. 5 Liu Deji: “Equalization of Basic Public Services: Foundation, Institutional Arrangement, and Policy Choice”, Shanghai Jiao Tong University Press, 2013, pp. 166–167. 6 Chen Zhenming: “Introduction to Public Service”, Peking University Press, 2011, pp. 144–152. 7 Ye Xiangqun: “Multi-Subject Supply in Public Services: Theory and Practice”, Social Sciences Academic Press, 2014, pp. 31–47. 8 Shi Guoliang, Zhang Chao, and Xu Ziliang: “The Theory and Practice of Foreign Public Service”, China Yanshi Press, 2011, pp. 28–35. 9 Gu Limei: “A Comparative Study of Public Service Models in Britain, America and Singapore— Theory, Models and Changes”, Zhejiang Academic Journal, No. 5, 2008, pp. 108–111.

1.2 Choice of Public Service Supply Mode

5

1.1.3 The Roles of the Market Although the above-mentioned division of public service supply describes the conceptual characteristics of different supply modes to a certain extent, it does not reveal the reasons for the emergence of different types of supply modes. In addition to the difference in the scope of government functions and the difference in the degree of government autonomy in the supply of public services, there is another important reason for the diversity of public service way of supply—that is, the market plays a different role in the supply of public services. Generally speaking, a government with less administrative intervention, such as service-oriented government, will place more emphasis on the role of the market in the allocation of public service supply, highlighting the universality and efficiency of supply. On the contrary, government with more administrative intervention, such as regulatory and almighty government, will emphasize the leading role of administrative power in the supply of public services, and the government basically takes over public service supply. Judging from the practice of government procurement of public services in various countries, it has become a trend that the role of market allocation has gradually replaced the leading role of administrative power in the supply of public services. The reason why the market can replace the leading role of administrative power in the supply of public services is that the market can more scientifically allocate the rights and obligations of various public service subjects. In order to scientifically allocate the rights and obligations of public services’ subjects, various contracts are inseparable. Therefore, contracts, as a very effective way, openly enter the system of government governance and public service supply.

1.2 Choice of Public Service Supply Mode Actually, this market-oriented institutional change is a kind of re-selection between the institutional arrangement of government authority and the institutional arrangement of market exchange.10 Governance is increasingly taking place through agreement (often informally) rather than through direct legal and political action. This governance activity even includes traditional authority-based activities like compulsion regulation.11 This means that government governance has shifted from the governance of exercising government power through government agencies to contractual contract governance, that is, “the traditional power-obedience mode of administration has gradually evolved into a negotiation-cooperation mode of public governance.“ In the new government governance model, the supply of public services has also 10

Zheng Hui: “Research on Canadian Public Service Reform—Reconstruction of Public Service Supply Mechanism”, Social Science Literature Publishing House, 2011, p. 158. 11 [America] Philip Cooper: “Contractual Governance: Challenges and Opportunities for Public Managers”, translated by Zhu Ganwei, Lu Yi, Chen Zhuoxia, Fudan University Press, 2007, pp. 49– 50.

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1 Introduction

changed from an administrative supply to a market contract supply. Therefore, the replacement of administrative supply by market contractual supply is the embodiment of the transformation of government governance, and it is also an inevitable choice for the transformation of the way of supply of public service.12

1.2.1 Administrative Supply (1) The Connotation and Characteristics of Administrative Supply Administrative supplying refers to a public service supply mechanism in which the government is the main supply body of public services, emphasizing the government’s leading role and monopoly position in supply and ignoring the role of market allocation. Administrative supply has the following characteristics: firstly, the production and provision of public services are mainly undertaken by the government, and the government is the main supplier; secondly, the contents and quantity of public services are mainly determined by the government from top to bottom; thirdly, the cost of public service provision is mainly paid by financial funds; fourthly, theoretically, all people enjoy public services equally; finally, the government plays both the role of public service provider and the main body of supervision. (2) Disadvantages of Administrative Supply Administrative supply has played an active role in a special historical period, but with the development of society, the disadvantages of this supply mechanism that upholds monopoly supply while ignoring multi-subject supply, strengthens monopoly supply and excluding the role of market allocation have gradually emerged. First, the supply is not what is needed. With the development of society and the improvement of people’s living standard, the public has multi-level and diverse needs for public services. However, the administrative supply, in which the government is the main body of supply, cannot meet the urgent needs of the public. Under the administrative supply system, the public services provided by the government are often single in variety, low in quality, and insufficient in quantity; the public services provided by the government are not the public’s actual needs. (民众需要的公共服务供给没有提供, 政府却提供了民众不需要或 者当前不需要的公共服务)This kind of public service supply not only fails to achieve the government’s goal of providing public services but also greatly wastes financial funds and public resources. The supply mechanism with the government as the main provider is the main reason for this situation. It is because that without the participation of other supply subjects, a government with no competitive pressure cannot provide multi-level and diverse public services. Second, inefficiency of supply. In administrative supply, as the main legal supply body, the government almost monopolizes the supply of public services. Monopoly 12

[America] Judy Freeman: “Cooperative Governance and New Administrative Law”, translated by Bi Honghai and Chen Biaochong, Commercial Press, 2010, p. vi.

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in the supply of public services is both a seller’s monopoly (a monopoly in which the subject of the monopoly is a seller), a government monopoly (a monopoly in which the subject of the monopoly is a government), a production monopoly (exclusive production by the government), a sales monopoly (in which case taxes are seen as the cost to the taxpayer of the product supplied by the government), and to some extent, a price monopoly (in which the government is required to produce a certain amount of public services as determined by the taxpayer personally or by the legislature, so that prices seem to be controlled. However, since taxpayers or legislatures have no way to accurately know the true cost of production of public services provided, the effectiveness of control is greatly reduced, and the government can achieve a certain degree of price monopoly).13 Monopoly supply makes the government lose the external pressure based on market competition requirements and the internal driving force to improve the internal management of the government. Therefore, the government has low-cost consciousness and poor timeliness awareness in the supply of public services. The cost of providing public services is higher than the cost of providing public services. Many public services are not in place when the people are in urgent need, but only when time passes and the situation changes, which greatly affects supply efficiency and benefits. Again, it cannot reflect the fair and just supply value. Theoretically, based on the characteristic of the publicity of government functions, the government should ensure that all citizens enjoy public services equally. However, under the administrative supply system, this is not the case in reality. There are differences and inequality in the public services enjoyed between regions, between urban and rural areas, and between different groups. On the one hand, the government is a subject with its own interests, and its staff are less constrained than non-government staff who are constrained by market mechanisms. Therefore, the government is more likely to be manipulated when it provides public services. On the other hand, due to the influence of the national fiscal policy, the supply of public services in different regions is also very different. Taking the difference between urban and rural areas as an example, there has always been a big difference in the supply of public services between urban and rural areas in our country. The public services enjoyed by urban residents are much higher than rural residents, especially in the fields of medical care, health care and education. Finally, the remedy mechanism is not perfect. In administrative supply, the government is both a public service provider and a supervisor, a public service “steerer” and a “paddler”, and both an “athlete” and a “referee”. Under this supply mechanism, the government’s inappropriate behaviors are often not properly supervised; the people’s reasonable demands are also not effectively responded to.

13

Xu Jifang and Zhou Yicheng: “Three Failures of Public Service Supply and Innovation of my country’s Public Service Supply Model”, “Journal of Nanjing Agricultural University (Social Science)”, No. 3, 2009, p. 84.

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1 Introduction

This kind of mechanism tends to deviate the government from the purpose of its work, transforming the provision of public services from the government’s responsibility to the government’s concern or charity to the public. Public services are not provided by the government but begged by the public.14 Therefore, in the process of public service supply, the government’s slack in providing public services or the public services provided are of inferior quality and high price.

1.2.2 Supply with Market Contracts (1) The Connotation of Market Contract Supply Market contract supply refers to breaking the monopoly of government supply in the supply of public services, giving play to the role of market allocation, introducing a competition mechanism, and making some of the government’s public service supply functions available to other organizations or individuals other than the government by contracting on an equal footing, with the government only responsible for supervising the performance of the contract and paying the cost with financial funds. (2) The Reasons Why Market Contractual Supply Become the Main Supply Way of Public Services The main reasons why market contractual supply can be selected as the main supply method of public services by various countries today are as follows: First, it should be attributed to the contract’s own value and attributes. The supply of public services is an important function of the government, and it is necessary for the government to choose an appropriate supply method. As a very effective governance tool, the contracts are widely used by governments around the world today, and they are naturally suitable for the provision of public services. Social contract theory uses social contracts to explain the occurrence of the state and believes that the state is the result of contracts between people. Since the state originates from the contracts, it can also be managed by contracts, and then contracts can be introduced into the government management activities.15 Contracts are familiar to the general public, and they are easy to understand and accept as a tool for institutional construction. The phenomenon of contract has become one of the most common and basic phenomena in people’s daily life. It not only becomes a theoretical resource for building new social relations and social organizations, but also makes people’s thinking undergo a new “formatting”, creating

14

Su Ming, Jia Xijin, Sun Jie, Han Junkui: “Research on Chinese Government’s Procurement of Public Services”, “Financial Research”, No. 1, 2010, p. 10. 15 Xiao Beigeng: “On the Legal Nature of Government Procurement Contracts”, Contemporary Law, No. 7, 2005, p. 25.

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a condition for the general acceptance of contractual representations of relationships—including the state.16 Contracts have secular characteristics, and they imply the principles of equality, liberty, utility and rationality. The use of contracts as a way of constructing organizational order is fundamentally different from the theocracy of medieval order organization and the composition of society and power characterized by commands. Therefore, the pattern of contract may be used as a new basic model to construct the state and society.17 These values and functions of the contracts are exactly the values and functions that the public service supply should follow, and the two are highly compatible. This also makes it possible for the supply of public services to shift from the center of executive orders to the center of the market, and it is also corroborated by the specific practices of public service supply in various countries. Murray Hunt pointed out in “Constitutionalism and the Contracting of Government in England” that contracts replaced commands and control as the paradigm of regulation.18 Secondly, in addition to its own value and attribute advantages, market contractual supply also has institutional advantages that meet the requirements of public service supply, that is, it can not only give full play to the advantages of government’s dominance and market exchange advantages but also overcome “government failure” and “market failure”. In essence, market contractual supply is the transformation of the government’s roles, not the weakening of the government’s supply functions; it is the marketization of the ways the government provides public services, not the marketization of government’s responsibilities. The status of the government as the main body of supply remains unchanged, but only the way of supply and supervision and management has changed, that is, the role of the producer and provider of public service supply has changed to a public service provider, while the production functions are performed by non-governmental entities. In the new public management movement characterized by marketization and privatization reform, the government has dual roles: on the one hand, in the provision of public services, it is the trustee of the “one-time contract”, that is, the political contract, and plays the role of the sole responsible person; on the other hand, it is the entrusting party of the “second contract”, and the corresponding identity at this time is the role of the intermediate principal. From the perspective of the connotation of marketization of public services, its essence is to organically combine the functional advantages of government authority and market exchange through the rearrangement of the roles of the government, the private sector, and the third sector and the complementarity of their functions. The introduction of the competition mechanism in the supply of public services breaks the government’s monopoly position, overcoming

16

Su Li: “From Contract Theory to Social Contract Theory—A State Doctrine of Knowledge Archaeology”, “Chinese Social Sciences”, No. 3, 1996, p. 82. 17 Su Li: “From Contract Theory to Social Contract Theory—A State Doctrine of Knowledge Archaeology”, “Chinese Social Sciences”, No. 3, 1996, p. 90. 18 [New Zealand] Michael Taggart: The Scope of Administrative Law, translated by Jin Zining, Zhong Ruihua, Renmin University Press, 2006, p. 21.

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1 Introduction

the dual failure of the market and the government, and transforming the government from a “direct provider” of public services to a “promoter” and “employer”.19 This mode of supply can overcome the drawbacks caused by “government failure” and “market failure”, that is, to overcome the monopoly and rigidity of government public service supply and the randomness and blindness of market public service supply. At the same time, it has the advantages of both government-led supply and market supply, that is, public service supply has both the advantages of governmentled macro planning and the advantages of individualized and maximizing benefits of market supply. (3) Advantages of Market Contract Supply Although supplying with market contract reduces the specific public services produced by the government, the government’s supply capacity has not weakened. This is because market contract supply has the advantage of providing more public services that meet the people’s needs, specifically: (a) Improve supply capacity. As mentioned above, the government is the main provider of public services in administrative supply, and the public services provided by the government often cannot meet the diverse needs of the people. The market contract supply with diversified supply subjects can just make up for the shortage of administrative supply and make it possible to provide diversified public services. First, the market contractual supply improves the macro-planning ability of the government’s public service supply. The public services provided by the government are not without merit. Their authority, planning and common feelings toward the public are their advantages. However, in administrative supply, the government is not only responsible for the production of specific public services, but also performs the macro-planning function of public services, which makes its advantages not fully exerted. Market contract supply separates the functions of government public service production and provision, freeing the government from specific public service production, thereby improving the government’s ability to provide public services in macro-planning. Without the distractions of producing public services, government officials have more time to investigate and understand the types and quantity of public services needed by the public and to solve problems in the supply of public services. The planning of supply formulated after thorough research will be more scientific and better meet the needs of people, and at the same time, unnecessary supply problems will be avoided. Second, market contract supply can give full play to the advantages of multiple supply subjects. In administrative supply, although the advantages of government supply as the main body have been brought into play, the advantages of other main bodies outside the government have not been brought into play. The multi-subjects 19

Chen Guoquan, Wu Shuai: “Public Service Orientation of Responsible Government”, Social Science Front, No. 4, 2009, p. 199.

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participation mechanism in market contract supply can just make up for the shortage of administrative supply and production subjects. In the market contractual supply, various for-profit organizations, non-profit organizations and natural persons may become the main producers of public services. Each production entity has its own advantages, such as technical advantages, management advantages, talent advantages, and natural advantages such as geographical location. Either advantage is very meaningful for the provision of public services. By giving play to the advantages of different subjects, not only can the supply capacity of public services be improved, but also the supply capacity of the whole country can be improved by learning from each other. Third, the market contract supply condenses the wisdom of the people. In administrative supply, the supply of public services is mainly planned and implemented by the government. Therefore, the government provides public services more out of its own needs, rather than the actual needs of the public. Therefore, this top-down supply mechanism tends to ignore the feelings of people, because the quality of people’s feelings will not have a fundamental impact on the government’s formulation and implementation of supply plans. It is precise because of the dispensable status of the public in the supply that it also affects the enthusiasm of the public to participate in the supply of public services to a certain extent. The market contractual supply attaches great importance to the enthusiasm of the people for participation and the voices and demands of the people. Therefore, various effective measures will be taken to increase the enthusiasm of the people to participate in the supply of public services. Through the participation, the people’s actual needs, opinions and suggestions on how to provide public services and the improvement measures can be known. In the process of public service supply, it can pool the public’s wisdom, unite the people’s hearts and build consensus. The purpose of popular ownership and active participation in the process of managing state affairs can also be achieved. (b) Improve the supply efficiency. Breaking the monopoly supply and establishing the market’s role in allocating public resources are the essential characteristics of market contractual supply. The greatest significance of the market for the supply of public services is that it can greatly mobilize the enthusiasm of all parties and improve supply efficiency. First, the allocation role of the market has prompted all supply subjects to establish cost awareness. It is both the requirements of economics and public services supply that to obtain the maximum return with the least input. Public service supply uses financial funds, and the pursuit of maximizing input and output is also one of the requirements for the use of financial funds. Especially in the Western “welfare countries” where financial funds are relatively tight, how to improve the use efficiency of financial funds is an even more urgent government mission. Therefore, improving the use efficiency of financial funds is also the institutional pursuit of public service supply. To improve the efficiency of the use of financial funds, it is necessary to be cost-conscious, that is, to exhaust all means to reduce the cost of supply, that is, to obtain a certain unit of public services with the least financial funds.

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1 Introduction

Cost awareness is difficult to achieve in an administrative supply mechanism but can only be achieved in a market contractual supply where each supply subject has its own interests. This is because administrative supply focuses on policy benefits rather than economic benefits; on the contrary, market contract supply focuses on both policy benefits and the economic benefits of various suppliers. If each supply subject is not driven by economic interests, it will lose its intrinsic motivation to participate in supply, and there will be no cost awareness. Market contract supply focuses on economic benefits, so as to improve the cost awareness of supply subjects and the use efficiency of financial funds. Second, the allocative role of the market clarifies the supply targets. The market contractual supply is deeply influenced by the new public management theory, advocating the introduction of market competition and the market-oriented operation of the supply mechanism with reference to the methods of managing enterprises. In the supply of public services, the essence of being market-oriented is to be oriented by the needs of the people; the public services that are required to be supplied in the direction of the people’s needs must take the needs and satisfaction of the people as the goal of supply, and the efficiency of supply must be improved to meet the needs of the people, that is, to provide adequate and high-quality public services in a timely manner. The third is the allocation of the market has achieved the performance goals. The advantage of the market mechanism is that it can implement process control and achieve performance goals. The performance target of public service supply is the realization of procurement policy target and realization of procuring public service. Whether the procurement policy goal can be fulfilled depends on whether the procurement of public services can be achieved. In order to achieve the performance target of public services, all supply entities must actively improve their work measures and improve their management level according to market needs. The market contract supply emphasizes the configuration function of the market mechanism, which provides the possibility for each supply subject to improve the supply efficiency and achieve the performance goal. If each supply subject cannot achieve the performance target, then it cannot obtain the corresponding reward, and the supply subject may face the risk of losing competitiveness or even going bankrupt if it loses economic benefits. Therefore, the achievement of performance goals should be pursued by all supply subjects. Of course, the realization of supply performance goals can further improve supply efficiency. (c) Improve the supply satisfaction. Providing public services is not only the basic function of the government but also a touchstone to test whether the foundation of the government is solid. Only when the public services provided by the government satisfy the public can the goal of government governance be achieved; otherwise, the government is at risk of being overthrown. Therefore, from the 1960s to the 1970s, governments in various countries implemented public service supply reforms with contractual supply as the main content and took improving the supply level of public services as an important governance model to consolidate their regimes.

1.3 Development of Market Contractual Supply

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The public service supply under the administrative supply is often of high price and inferior quality, which is deeply criticized by the public. Market contractual supply can improve capacity and efficiency of the supply, provide public services needed by the people, and then achieve the goal of improving people’s satisfaction with public services and achieving the political stability. Of course, market contractual supply encourages multiple subjects to actively participate in supply and competition, which is conducive to improving the transparency, restraining corrupt behavior in supply, and further improving people’s satisfaction with the supply of public services. Although market contractual supply has many advantages, it is not a perfect and impeccable supply model. It also has its shortcomings, such as variations in contract execution and transaction costs arising from the implementation process. A contract is similar to a governance structure. To a large extent, a contract just establishes a governance structure, and its effectiveness depends on the specific conditions for fulfilling the contract. The transaction costs existing in the process of contract implementation will make the performance of the contract affected by many uncertain factors and reduce the governance effect of the contract; in the process of the performance of the public service contract, there are also uncertain factors caused by transaction costs. The contract supply model does not necessarily solve the problems existing in the traditional supply model but may destroy the potential institutional rationality in the traditional supply model and increase the cost of public services.20 In the same way, although the market can allocate resources effectively, it also has blindness, which leads to the failure of public service supply. Therefore, in addition to giving full play to its institutional advantages, attention should also be paid to overcoming its shortcomings.

1.3 Development of Market Contractual Supply At present, although market contractual supply is in full swing in many countries, due to the different national conditions of each country, it presents different formulations and expressions. Market contractual supply mainly includes “government procurement public services”, “public service contract outsourcing”, “privatization of public services”, and “marketization of public services”. Although the formulations of market contractual supply are different, only the formulation of “government procurement public services” fits the connotation of market contractual supply. The specific forms of government’s procurement of public services include intergovernmental agreements, contract procurement, franchise, direct subsidies and voucher systems. Although the specific forms of government procurement public services are different, they all contain the mechanism and value of market contracts and appear in the form of “contracts” or “agreements”.

20

Li Xue: “Incomplete Contracts, Transaction Costs and Governance Performance—On the Supply Model of Public Service Marketization”, in “China Administration”, No. 1, 2009, pp. 116–117.

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1 Introduction

In our country, there are also different formulations for market contractual supply. Government documents and laws and regulations use “the government procurement services from social forces”, but most of the academic circles use “the government procurement public services”. Although the two have different formulations, their operating mechanism is the same. Both use contracts as tools and the market as a link to give full play to the advantages of the government and the market. The introduction of the mechanism for the government to procure public services from social forces replaces the original political power relations with market contracts and legal relations in the field of social public services, making market contracts and relevant legal rules a link between the state and society, government builds a rational contract and responsibility relationship based on market rules with citizens in terms of public service supply and consumption.21 Both are the result of the transition from government-authoritative governance to government-led governance model with the participation of multiple subjects. The procurement public services require the government to break through this topdown power relationship and establish an equal and cooperative relationship with the market and society. Correspondingly, the governance model of the government has also changed from single authoritative governance within the government to a governance model in which vertical authoritative governance and horizontal agreement governance intersect. At the level of horizontal agreement governance, government departments and service contractors jointly formulate rules through negotiation, respectively fulfilling the obligations stipulated in the contract; at the level of vertical authority governance, government departments formulate rules and carry out corresponding administrative control to achieve social responsibility of government departments in the public sphere.22 Since the founding of the People’s Republic of China, the public service supply has experienced two periods, the supply model during the planned economy period before the reform and opening up and the supply model during the socialist market economy period. The supply mode in the planned economy period was adapted to the highly centralized planned economic system in the country at that time. The government monopolized all social resources and the government uniformly provided public services. Under the specific historical conditions of weak national financial resources and lack of materials at that time, this supply mode concentrated all the national resources to ensure the provision of key public services. However, it also caused the problems of low efficiency in the supply of public services, overstaffing and heavy financial burden in our country. Since the reform and opening up, our country has implemented socialist market economy and accordingly, the functions of our government have also been adjusted

21

Wang Puqu: “Analysis of the Reform Implications of the Government’s Purchase of Public Services from Social Forces”, Journal of Social Sciences of Jilin University, No. 7, 2015, p. 83. 22 Xu Yong: “The Dilemma and Way Out of the Transformation of Government Functions in Public Service Purchases”, in “Journal of the Party School of the Tianjin Municipal Committee of the Communist Party of China”, No. 4, 2015, p. 70.

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from an omnipotent and ruling government to a limited and service-oriented government. The government’s regulatory functions greatly weakened and service functions have been continuously strengthened. In 2002, the report of the 16th National Congress of the Communist Party of China defined government functions as economic regulation, market regulation, public service, and social management. In 2007, the report of the Seventeenth National Congress of the Communist Party of China put forward the reform goal of “speeding up the reform of the administrative system and building a service-oriented government”. In 2012, the 18th National Congress of the Communist Party of China clearly proposed to improve the ways the government provides public services, make more use of social forces, and increase the government’s efforts to procure public services. On July 31, 2013, Premier Li Keqiang presided over an executive meeting of the State Council, with a special study on government procurement. In September 2013, the General Office of the State Council clarified the guiding ideology, basic principles, objectives and tasks, and overall requirements of government procurement public services, and formally established the government procurement public services system with the General Office of the State Council of the People’s Republic of China [2013] No. 96 “Guiding Opinions on Government Procurement Services from Social Forces” (hereinafter referred to as “Guiding Opinions”). The Third Plenary Session of the 18th National Congress of the Communist Party of China further clearly stated that to promote government procurement services, for all transactional management services, in principle, a competition mechanism should be introduced to procure from the society through contracts and commissions. On December 15, 2014, the Ministry of Finance, the Ministry of Civil Affairs, and the State Administration for Industry and Commerce jointly formulated the “Administrative Measures for Government Procurement Services (Interim)” (hereinafter referred to as the “Measures”) for the first time in the form of regulations to confirm government procurement public services, and various systems of government procurement are specified. The introduction of these series of policies and regulations fully demonstrates that our country’s public service supply has changed from government monopoly supply to government procurement public services, that is, from administrative supply to market contract supply. The logical premise and practical starting point for advancing the modernization of government governance lies in the transformation of government functions and the full and correct performance of government functions. The key to the practical transformation of government functions and the full and correct performance of them in accordance with the law lies in the correct handling of the relationship between the government and society. This requires clarifying the legal boundaries of the socialization of government functions, clarifying the direction and content of the socialization of government functions, and on this basis, transforming the way of government governance and administration according to law, promoting and realizing feasible mechanism innovation, cultivating and shaping the mechanism of social self-regulation, self-service, and carrying the social functions divested by government reform and function transformation. The procurement public services

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1 Introduction

by the government from social forces effectively shapes and constructs the undertaking and carrying mechanism of the social functions that have been divested in the process of government streamlining and decentralization, making it feasible to reduce government functions and improve quality and making the government truly transformed into a limited, effective, capable, responsible and promising government.23 From administrative supply to market contractual supply, from government arrangement to government procurement, it is the result of the transformation of government functions and the result of the modernization of government governance. In this process, the government has always pursued supply efficiency and reduced fiscal expenditures, attached importance to market factors, and advocated pluralistic participation of the society through the release of government power and the adoption of governance tools such as contracts to stimulate the vitality and creativity of the whole society. The government procurement public services is the result of the transformation of government functions and the reform of the public service supply model. In essence, it is a market-oriented contractual supply model. It is of great significance to participate in national governance, comprehensively deepen reform and build a socialist system with Chinese characteristics. Therefore, the supply of public services is a core content in the field of government governance, and effective public service supply is often regarded as a manifestation of “good governance”.24

23

Wang Puqu: “Analysis of the Reform Implications of the Government’s Procurement of Public Services from Social Forces”, Journal of Social Sciences of Jilin University, No. 7, 2015, p. 81. 24 Zheng Xiaoyan: “Research on the Diversified Development of China’s Public Service Providers”, Shanghai People’s Publishing House, 2012, p. 1.

Chapter 2

Basic Theories of Government Procurement of Public Services

2.1 Overview Since the 1970s, there has been a strong trend of thought and movement in western countries to think about and reform the issue of social governance, the main content of which is dissatisfaction with the existing “Top-down” governance model of controlling government, advocacy and promotion of “Bottom-up” governance model of participation by all people, and, with particular emphasis on the role of various non-governmental subjects in governance. Therefore, Western countries have taken various measures to promote the “Bottom-up” participatory governance model through different forms and ways, and the main practices include privatization. However, these models are not suitable for all countries due to their political systems, history and culture; at the same time, the privatization of public management are not omnipotent in themselves and cannot effectively overcome the problems caused by “government failure” and “market failure”. In other words, the privatization model of public management has not achieved very satisfactory results. Nowadays, many countries are still cautious about the privatization of public management. At the same time, the “Top-down” governance model of controlling government also has its traditional advantages and considerable rationality and has not been completely abandoned. Therefore, it has become a necessity to find a new model of government governance that can fully absorb the advantages of both models and overcome the shortcomings of the existing management model. In this context, government procurement public services came into being and became an important choice for innovation of government’s governance model.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 X. Xiansheng, Public Procurement in Chinese Law and Practice, State Governance, https://doi.org/10.1007/978-981-99-1047-2_2

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2.1.1 Concept Definition What is government procurement public services? Scholars have put forward a variety of opinions from different perspectives. This article has been sorted out and summarized into three views: firstly, the “phenomenon theory”, experts who hold this view describe it from the empirical appearance of government purchase of public services and define it as the operational process of public services funded by the government and implemented by non-governmental subjects. Secondly, the “cause and objective theory”, which takes the causes and objectives of government procurement public services as the starting point and defines government procurement public services as the innovation of government’s governance model for transforming government functions. Thirdly, the “core relationship theory” takes the core legal relationship involved in government procurement of public services as a viewport and expresses government procurement of public services as a contractual way for non-government subjects to participate in government governance. These three representative views have different perspectives and have their own merits. 1. “Phenomenon Theory” The representative expression of this theory should be based on the book “Study of Government Procurement Public Services from Social Organizations: Analysis of China and Global Experiences” written by Wang Puqu, Lester M. Salamon etc. The authors of the book believe that “the so-called ‘purchase of service contracting (POSC) refers to the government’s practice of handing over the public services originally provided directly to qualified social service organizations through direct funding or public bidding, and finally paying the services according to the quantity and quality of public services provided by the selected or successful bidder.”1 In addition, the authors further describe the central word in the government procurement public services—“procurement”—in terms of the phenomenon. According to the authors, “‘purchase’ means that the government entrusts some public service matters to qualified organizations and pays for them. It’s actually a market mechanism.”2 The authors also describe four types of “purchase”: “that is, according to whether the social organization undertaking public services has independence in relation to the government department as the purchaser, it can be divided into independent service purchase and dependent service purchase; according to whether the purchase procedure is competitive, it is divided into competitive purchase and non-competitive purchase. On this basis, four working modes are distinguished:

1

Wang Puqu: [America] Lester M. Salamon et al.: “Research on the Government’s Procurement of Public Services from Social Organizations: An Analysis of China and the Global Experience”, Peking University Press, 2010, pp. 1–2. 2 Wang Puqu: [America] Lester M. Salamon et al.: “Research on the Government’s Procurement of Public Services from Social Organizations: An Analysis of China and the Global Experience”, Peking University Press, 2010, pp. 6–7.

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19

competitive purchase with independence, non-competitive purchase with independence, competitive purchase with dependence and non-competitive purchase with dependence”.3 Finally, taking China as an example, the authors also point out three specific ways of government purchasing of public services, namely contract, direct funding, and project application.4 The advantages of “phenomenal theory” are obvious. Through the collection of factual data or phenomena and empirical analysis and research, it clearly shows what kind of things or phenomena the government purchases of public services are and tells people how it works and what its key factors are, and makes it easy for people to observe, imitate and operate. 2. “Cause and Objective Theory” A typical expression is: “The government hands over the matters that were originally organized by the government to provide services for social development and people’s lives to qualified social organizations, and after evaluating them according to certain standards, the government shall pay for the services according to the quantity and quality provided by social organizations. This is a new way of government providing public service, which is “government undertaking, project entrustment, contract management and evaluation cashing”. The government purchase of public services will, to a certain extent, change the monopoly structure of public service supply, so as to achieve the “win–win” goal of promoting the growth of social organizations and improving the efficiency of the use of public budget resources.”5 This expression has been quoted many times since China began to discuss the issue of government purchase of public services and has become a common saying. Others directly stated: “Purchase of Service Contracting is one of the ways of providing public services and is also an important change in the social welfare system of the developed countries in the West. Public Social Service is particularly characterized by the government’s guarantee of citizens’ basic right to live and the satisfaction of social equity. The practice and reform process of Purchase of Service Contracting has been in place for 30 years of the developed countries in the West. This process is usually associated with the privatization reform in welfare countries and has been along with the deepening of the concept of public service and social management in the West, where the provision of social services has undergone both market-oriented and social reforms. Although the two expressions are different, they both elaborate their core content from the perspective of the causes and objectives of Purchase of Service Contracting. 3

Wang Puqu: [America] Lester M. Salamon et al.: “Research on the Government’s Procurement of Public Services from Social Organizations: An Analysis of China and the Global Experience”, Peking University Press, 2010, p. 19. 4 Wang Puqu: [America] Lester M. Salamon et al.: “Research on the Government’s Procurement of Public Services from Social Organizations: An Analysis of China and the Global Experience”, Peking University Press, 2010, p. 17. 5 Jiao Shuying: “A Discussion on the Government’s Procurement of Public Services”, in “Administration and Law”, No. 5, 2010, p. 68.

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The advantages of the “cause and objective theory” are that it is conductive to clarifying the ins and outs of Purchase of Service Contracting, to grasp the essence of the Purchase of Service Contracting from a macro perspective, and to judge and control the direction of development of government purchase of public services, and to correctly analyze its model status. In addition, the advantage also lies in that it puts the government purchase of public services into the entire social structure for observation and analyzes whether the government purchase of public services is objective through its functions and effects, so as to judge the value of its existence in terms of results. 3. “Core Relationship Theory”. The “Core Relationship Theory” states that the government procurement public services as follows: “There are various institutional arrangements for the government to provide public services, among which ‘contractual cooperation’ is a mutual relationship between the public sectors and social organizations to provide public services, which is established through a formal contract. In the contract, both parties perform their respective duties and operational mechanisms according to prior agreement in order to achieve the goal of providing effective public services. The contractual cooperation between the governments and social organizations gives social organizations the opportunity to participate in the provision of public services, which not only improves the efficiency of supply and meets the diversified needs of the public, but also provides a broader space for the development and growth of social organizations. Other scholars have elaborated the “core relationship” as follows: “The procurement of public services refers to an institutional arrangement and implementation mechanism whereby the government provides funds and procures goods, services or public facilities from service providers to meet users’ service needs according to a pre-established contract (agreement) or concession granted by the government. The former defines government procurement public services as a contractual relationship, while the latter points out that it should also include concession and funding relationships. Foreign scholars generally view government procurement public services as a form of privatization of social public management (because developed capitalist countries have few state-owned enterprises, the concept of privatization is different from developing countries with a large number of state-owned enterprises, such as China), and contracting is the main form of such privatization. For example, “governments can be privatized by contracting with private for-profit or non-profit organizations to perform some of the work of government departments. In the United States, it is the most common form of privatization used by the federal, state, and local governments, and it is also the most direct form of authorization.”6 The “Core Relationship Theory” has three advantages: firstly, it is conducive to go deep into the interior of the government procurement public services, grasp the 6

E. S. Savas, Privatization in the City: Successes, Failures, Lessons (Washington, DC: CQ Press, 2005), Chap. 1 or see Lester M. Salamon, ed., The Tools of Government: A Guide to the New Governance (New York: Oxford University Press, 2002: 2.

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main veins of government procurement public services, and analyze the essential attributes of the government procurement public services; secondly, it is conducive to grasp the connection and sequential arrangement between governmental and nongovernmental subjects and between things and things in the government procurement public services, and separating rights, obligations and responsibilities; thirdly, it is conducive to finding the key points of the government procurement public services, which is conducive to regulating the government procurement public services, preventing economic externalities, and even facilitating its efficiency within the framework of the government procurement public services. All three doctrines have their obvious advantages, but since government procurement public services is a highly practical, functional, purposeful and complex mode of government governance, its definition should not only stand the test of practice but also be conducive to theoretical exploration, and any single perspective definition will be biased. Therefore, this paper intends to provide a comprehensive definition of government procurement of public services from multiple perspectives, namely: government procurement of public services refers to the traditional “top-down” government-led public service supply model that cannot adapt to social progress and meet the public’s public service needs. Under the influence of theories such as “New Public Management”, in order to realize the participation of multiple subjects in the supply of public services, the public services that were originally produced and provided by the government have been handed over to qualified profit-making organizations, non-profit organizations and natural persons through public bidding and contracting, and the government is responsible for supervising the performance of the contract and paying for it with financial resources. In this new mode of public service supply, for-profit organizations, non-profit organizations and natural persons are directly responsible for the production of public services, and the government supervises and evaluates the quantity and quality of public services produced by these contractors.

2.1.2 Basic Properties Analyzing the natures of the government procurement of public services is conducive to a deeper understanding and grasp of this new thing, and to prepare for its operation in a purposeful manner. As mentioned above, government procurement of public services, as a new model of government governance, can be found from different perspectives: from a legal perspective, government procurement of public services is a special administrative act; from a social perspective, government procurement of public services is actually a way for people to participate in social public management; from an economic perspective, government procurement of public services is a form of privatization or marketization of public service management. This paper focuses on the legal nature of the procurement of public services.

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From the legal perspective, government procurement of public services is a contractual relationship. As mentioned above, there are various forms of government procurement of public services, such as intergovernmental agreements, contract purchases, concessions, direct subsidies, and vouchers. These forms are collectively referred to as “purchases”. According to renowned Mr. Lester M. Salamon, the most widespread strategy of government procurement of public services as a means of privatizing public services is “delegation,” and the most appropriate forms of delegation include outsourcing, concessions, public–private partnerships, subsidies, and trusteeship. Under the “delegation”, the government remains an active actor, delegating the production of public services to qualified non-governmental subjects while retaining the basic responsibility of a public service provider, practicing the role of a continuous, active actor rather than withdrawing from public service activities. The contractual relationship of government procurement of public services reflects the essence of government governance reform, that is, the shift from the traditional “top-down” model of command and authority to the “bottom-up” model of social participation, which indicates that government governance is no longer the exclusive power or obligation of the government, but rather the shared responsibility of society. Instead, it is something common to the public. Based on the spirit of contract, the relationship between the government and public service producers is no longer a command and obedience relationship between superiors and subordinates, but rather a equal partnership that forms a common will through joint negotiation. Both the government and public service producers are active participants in public service management; however, there is a difference in the number of participants. Generally, there is only one government as the buyer, while there is more than one public service producers, including any qualified individuals or organizations. The number of potential producers of public services determines whether the institutional value of government procurement of public services can be achieved. The contractual nature of government procurement of public services also determines that the traditional “top-down” bipolar model of “government decision and passive acceptance by service recipients” has been shifted into a “two-body-three-pole” model in the public service management relationship: government purchasers and public service producers are the “two bodies” (subjects of purchase contracts), while government purchasers (subjects of purchase), public service producers (subjects of acceptance) and public service recipients are the “three poles”. In this “two bodies and three poles” model, not only the government and the public service producers are in an equal relationship, but also the public service producers and recipients are in an equal relationship. In the production of public services, the government, as a public service provider, is no longer directly connected to the public service recipients, but only in the relationship of monitoring and evaluation. Thus, the contractual relationship of government procurement of public services transforms the whole government governance into an equal, bottom-up government governance model.

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Regarding the legal nature of government procurement of public services, the question that needs to be further discussed is: what is the nature of the contractual relationship of government procurement of public services? The contractual relationship of government procurement of public services is different from the general contractual relationship in appearance. The government not only enjoys rights and undertakes obligations as the subject of the contract, but also acts as a manager to exercise supervision and management rights over the counterparty of the contractual relationship. Based on the observation of this special phenomenon, the contractual relationship of government procurement of public services is civil contractual relationship, or a special contract, namely an administrative contract. In this regard, scholars have further formed a debate on whether the contract for the government to procure public services is a civil contract or an administrative contract. At present, from the legislative level, our country stipulates that government procurement contracts are subject to contract law and are civil contracts; government procurement are civil acts. The “Measures” are currently the only specialized regulations and the highest legal norm for the government to procure public services. Although it does not have clear provisions on the nature of the purchase contract, it is based on the “Government Procurement Law” which is one of the bases for the formulation of the “Measures” and the “Regulation on the Implementation of the Government Procurement Law of the People’s Republic of China” (hereinafter referred to as the “Regulations”) can deduce the legal nature of the purchase contract. According to the fourth paragraph of Article 2 of the Regulations, the services mentioned in Article 2 of the Government Procurement Law include public services provided by the government to the public, which clearly stipulates that the government procurement of public services to be governed by the Government Procurement Law. According to Article 43 of the Government Procurement Law, the Contract Law shall apply to government procurement contracts. From this, it can be seen that the Contract Law is also applicable to government procurement contracts. The first paragraph of Article 2 of our country’s “Contract Law” stipulates that a contract is an agreement between equal subjects of natural persons, legal persons, and other organizations to establish, change, and terminate the relationship of civil rights and obligations, and it is a civil act. Therefore, although our country does not have legal provisions that directly stipulate the legal nature of procurement contracts, from the perspective of the internal connection between the provisions of the Contract Law, the Government Procurement Law, the Regulations and the Measures and their legal provisions, it has been the government procurement contract is defined as a civil contract, and the government procurement behavior is defined as a civil behavior. However, this view that the government procurement of public service contracts as civil contracts and the purchase behavior as a civil behavior cannot correctly reflect the nature of the purchase behavior and is unscientific. It is because that this view only pays attention to the external formal elements of the purchase contract but does not consider the substantive elements; it only pays attention to the local characteristics of the procurement contract without grasping its overall nature; it only reflects the existing phenomena of contract typification

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but fails to reflect the evolutionary logic of contract typification. Due to the obvious “administrative nature”, the purchase contract should be an administrative contract, not an ordinary civil contract. To define a purchase contract as an administrative contract, it is necessary to clarify the internal connection between the procurement contract and the administrative contract. There are different criteria for judging administrative contracts, and the practices vary from country to country. The most typical example is France, which has a relatively complete administrative contract system. There are two basic criteria for judging administrative contracts: the contract is related to public services, and the contract reserves special powers for the administrative organ. Any one of these criteria is sufficient to constitute the “administrative” character of the contract.”7 Contracts are related to public services” reveals the target standard of administrative contracts, that is, the purpose of signing administrative contracts is for the government to perform the function of providing public services.” “The contract reserves special powers for the administrative agency” stipulates the standard of “administrative prior rights”, that is, in the administrative contract, the administrative agency has certain privileges, such as supervising the performance of the management contract, unilaterally rescinding the contract and punishment and other powers of the other party. In our country, there are different identification standards for administrative contracts. Scholar Liu Xin believes that administrative contracts are distinguished from civil contracts by the following characteristics: (1) One of the parties to an administrative contract must be an administrative organ or other administrative subjects (hereinafter referred to as an administrative organ, but both include other administrative subjects). However, another conclusion cannot be deduced from this feature, that is, all contracts with administrative organs as one party are administrative contracts. (2) Administrative contracts are aimed at performing administrative duties and are a means and way for administrative organs to perform their duties. The administrative contract has both administrative factors and mutual agreement, so it naturally becomes a new alternative means to implement the government’s intention and complete the government’s tasks. (3) The administrative contract carries out the principle of administrative prior rights. The administrative prior rights that the administrative subject enjoys to the administrative contract is where the administrative contract settles.8 Scholar Yang Huaifu believes that to judge an administrative contract should: first, one of the subjects of an administrative contract must be an administrative organ. Second, the purpose of an administrative contract is to implement administrative

7

[English] L. Levelle Brown, John S. Bell, [French] Jean-Michel Galambert: French Administrative Law (Fifth Edition), translated by Gao Qinwei and Wang Kai, published by China Renmin University Press, the 2006 edition, p. 193. 8 Liu Shen: “A Humble Opinion on Administrative Contracts”, in China Law, No. 5, 1995, pp. 70–71.

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management. Finally, the content of the administrative contract should be the “outsourcing” of administrative authority, such as outsourcing the sanitation work of a certain area to a cleaning company.9 Professor Jiang Mingan summed up various theories and believed that the criteria for judging administrative contracts mainly include “subject theory”, “purpose theory” and “legal relationship theory”. The “subject theory” uses the administrative subject status of the parties to the contract as the judgment standard. If one or both parties are the administrative subject, the contract is an administrative contract; As the standard, if the purpose of signing a contract is to achieve a certain administrative management goal or for the public interest, the contract is an administrative contract; A contract for an administrative legal relationship is an administrative contract.10 To sum up, the main criteria for judging an administrative contract are: first, one party to the contract must be an administrative agency (including the administrative subject); second, the purpose of signing the contract is to perform administrative duties; third, the administrative agency has contractual privileges. In addition, whether the contract costs are financial expenses is also one of the judgment criteria. Chief among the above criteria is the “teleology” criterion. Regarding the judgment standard of administrative contract, most scholars hold the “ teleology”, that is, judge whether it is for the purpose of public interests or administrative management.11 The reason why a government procurement contract is an administrative contract is that it conforms to the above-mentioned defining characteristics of an administrative contract: from the perspective of the contract subject, one party to the purchase contract is constant, that is, an administrative organ or other administrative subject. According to the provisions of Articles 4 and 5 of the Measures, the purchasers are administrative organs at all levels and public institutions with administrative functions. The public services and performance services provided to the society by Party organs and mass organizations that are included in the administrative establishment management and whose funds are borne by the finances may be purchased according to actual needs. In addition to the above subjects, our country does not allow other subjects to conduct government procurement. From the perspective of purchase goals, although the government procurement contract also reflects the principles of equality, voluntariness, fairness, good faith, legality, public order and good custom, and the performance of obligations in accordance with the contract, the role of these principles in the purchase contract is not only to ensure the performance of the contract, but also more important to ensure that the objectives of the purchase contract are fulfilled, that is, to achieve the objectives of state administration and to reflect the state’s high-quality governance. 9

Yang Huaifu: “On the Nature of Administrative Contracts”, in “Journal of Dalian Maritime University (Social Science Edition)”, No. 5, 2012, pp. 67–68. 10 Jiang Mingan: “Administrative Law and Administrative Litigation Law”, Peking University Press, 1999 edition, p. 251. 11 Yang Jiejun, Chen Yongmei: “Dispute Resolution of Administrative Contracts in Mainland China: Current Situation, Problems and Path Choices”, in “Administrative Law Research”, No. 1, 2014, p. 62.

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That is to say, although there are also civil acts in the purchase act, these civil acts are always under the influence of administrative power and are carried out within the scope of its privileges, which is to enable the administrative organs to better perform their administrative duties. From the perspective of the distribution of rights and obligations in the contract, the procurement subjects plays a special role in government procurement. It is both the initiator and manager of the purchase contract and the party to the purchase contract. Contractual privilege (or administrative privilege), therefore, the purchaser is not a party to an ordinary civil contract under purely market rules. Purchasing behaviors can be divided into administrative behaviors and quasicivil acts according to the nature of the behaviors of the purchasers in the purchase activities. In the purchase activities such as the determination of the contents and quantity of government procurement, the release of purchase announcements, the selection of undertaking subjects, the completion of tendering and bidding matters, and the signing of purchase contracts, the purchaser is mainly based on administrative duties. In the activity, the purchasing subjects are always in a dominant and strong position. Therefore, the purchasing behavior has obvious administrative behavior characteristics and can be identified as administrative behavior. Superficially, the process of performing the contract after the signing of the purchase contract is the process of performing the contract on an equal basis by the purchasers and the undertakers. However, in essence, the status of the two in performance is unequal, and the behavior of the purchasers is a quasi-civil act, not a pure civil act. This is because the dominant and coercive advantages of the purchasers over the purchase contract in order to perform the state governance function remain unchanged during this process. In addition to the rights of the general contract parties, the purchaser also enjoys the privilege of supervising and managing the performance of the purchase contract (administrative privileges). In addition to performing obligations in accordance with the contract requirements, the undertaker must also take the initiative to accept supervision. Article 20 of the “Measures” stipulates that the purchaser shall strengthen the management of the purchase contract and urge the undertaker to strictly perform the contract. Article 21 provides that the main body shall perform the obligation to provide services according to the contract, conscientiously organize the implementation of service projects, complete the tasks of service projects on time, ensure the quantity, quality and effectiveness of services, and take the initiative to accept the relevant departments, service recipients and social supervision. From the perspective of the source of funds, the “public nature” of the purchase contract is obvious. The funds it uses are financial appropriations or the realization of the government’s control over social resources. Therefore, the purchase contract conforms to the characteristics of the administrative contract in any aspect, and the administrative characteristics are obviously stronger than the contractual characteristics, and it is a typical administrative contract. Therefore, since the purchase contract is a typical administrative contract, and the behaviors of the purchaser in the purchase activities includes administrative behavior and quasi-civil behavior, then

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the purchase behavior cannot simply be summed up as a general civil behavior, but a special kind of administrative behavior or a new type of administrative behavior. In fact, the differences in people’s understanding of the nature of government procurement also related to people’s unclear understanding of the dual functions or functions of the government procurement public service contracts. The functions of government can be divided into two categories, namely basic functions and extended functions. In less developed countries, the functions of the government are mainly basic functions, which mainly include three contents: defending against foreign enemies, maintaining order, and collecting taxes to complete these two functions. This is also known as the “minimum government function”. In most developed countries, the functions of the government are no longer limited to the minimum scope of functions. As people’s public needs increase, they often have to undertake the function of providing social public services, that is, the extended function of the government. Obviously, the extended functions of the government do not have the same important status as its basic functions. The basic functions are necessary, while the extended functions vary with the degree of social development and are not essential. In the contract relationship of government procurement of public services, the government undertakes basic functions and extended functions, and plays two different roles. On the one hand, government procurement public services is a management model designed by the government to maintain a certain social order. This kind of function of the government cannot be transferred and must be done by oneself; on the other hand, the procurement of public services by the government is a kind of extended function of the government, not an indispensable function of the government. Moreover, in the face of a wide variety of social public service demands, the government may not be able to provide them; from the practice of various countries, it has been proved that the government produces and provides public services by itself, which is not desirable and inefficient. Therefore, for the provision of public services, the government does not have to operate it personally, but can purchase it from qualified individuals or organizations in the form of contracts. In this purchase relationship, the legal status of the government as the buyer and the public service producer seems to be equal, but in fact they are not completely equal, because the government always takes the performance of its functions as the goal, guiding, promoting and supervising the government procurement behavior, and acts as the guide, promoter and manager.

2.1.3 Main Features By examining the systems and practices of government procurement public services in major countries, several main characteristics of government procurement public services can be summarized:

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Government Procurement of Public Services is a Combination of “Top-Down” and “Bottom-Up” Public Service Supply Models For a long time, the supply of public services has been monopolized by the government, thus forming a “top-down” public service supply model. During the formation period of this monopoly and the initial period after it was formed, the public services provided by the government to the society were efficient and dynamic. However, with the increasingly complex demand for public services, government monopoly supply has increasingly become an obstacle preventing better public service producers from entering the field of public services, and this “top-down” public service supply model has become increasingly more unsatisfactory. Since the 1960s, the trend of thought and movement of popularization of social management first appeared in developed countries. This movement has continued to this day. Today, the management of public services in various countries can be roughly divided into three basic types: the “topdown” type arranged by the government; the “bottom-up” type of market-oriented or private public service management; a combination of “top-down” and “bottom-up” in which the government leads the participation of non-governmental subjects. These three types do not matter whether they are good or bad, the key is to see whether it matches the national conditions. The government’s procurement of public services is a typical example of the third model, which prevails in countries where the marketization of public services is not yet adequate. In these countries, the pursuit of equality and efficiency is at odds, and the desire for rules is as inextricable as the reliance on directives. The procurement of public services by the government is the result of these contradictory effects.

The Government’s Procurement of Public Services Has a Strong Public Character Although the government procurement of public services has the characteristics of an equal contractual relationship in form, its public nature is very obvious on the whole. The publicity of the government’s procurement of public services is manifested in the aspects of service objects, funding sources and final responsibility. From the point of view of service objects, the government procurement of public services to serve a group with a certain service demand rather than a special individual. This group also needs to have a large enough scale for this kind of procurement to have universal significance and a realistic possibility. From the perspective of funding sources, the funds for the government to procure public services are the national fiscal revenue. Before the government monopolized the supply, the source of funds for the supply of public services was often the donations of the rich, rather than the government’s forcible expropriation from people’s property through powers. In Western countries, Hayek’s theory has an important influence on the source and use of finance. Hayek believes that fiscal size should determine fiscal uses and objectives, rather than designing budgets based on objectives and then levying taxes

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as needed. In any case, because the government procurement of public services is public funds, the services it purchases have to consider the legitimate use of financial funds, thus limiting the procurement of public services. From the perspective of the ultimate responsibility, the public nature of the government procurement of public services is also obvious. In the government-purchased public service relationship, the government is still the provider and leader of public services, it just transfers the productive tasks of public services to individuals or non-governmental subjects, and the government has the obligation to provide satisfactory public services to the relevant people It has not been transferred. If the producers of public services are not in place, the government will ultimately bear the responsibility.

The Government’s Roles Have Changed from the Direct Production Providers of Services to the Selectors and Supervisors of Public Service Producers, and the Production Capacity of Public Services Has Given Ways to Negotiation, Selection and Supervision Capacity In the “top-down” public service supply system, the government is the direct producer of public services, and government agencies or their related agencies directly provide certain public services to the people. With the complexity, specialization and individualization of public service demands, the government is no longer able to provide satisfactory public services; while the government’s financial resources are also insufficient to cope with the impact of complex social uncertainties. At this time, the direct production and provision of public services by the government is not only inefficient, but also causes social injustice, because public services have become a scarce resource that only a small number of people can enjoy. For example, this is the case in our country’s railway transportation services. Due to insufficient transportation capacity, no matter how to change the existing railway management methods, the difficulty of buying tickets for the Spring Festival still cannot be solved, which is unfair to passengers who want to buy tickets but cannot. And this injustice is caused by the government’s monopoly on railway transportation. In the procurement public services by the government, the role of the government has undergone major changes. The government’s main job in public service management is no longer to produce public services, but to select appropriate public service producers and supervise these selected public service producers. production and delivery activities. The function of the government in public service is rationally returning to the real function of the government. When the government directly produces services, the government’s work capacity is the service capacity. In the case of limited financial resources, the government’s service capacity is very limited. During the government procurement of public services, the government’s work capacity requirements have also undergone great changes. The production capacity of public services is weakened while the negotiating capacity, selection capacity and supervision capacity are strengthened.

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Profits Are No Longer the Main Goal of Public Service Producers, and the Social Management Functions of Non-governmental Subjects as Public Service Producers Have Been Strengthened Generally speaking, in government procurement public services, public services can be produced by government subjects or non-government subjects. Due to the organization and scale of government subjects, it is easy to make people think that government subjects must be more credible and reliable than non-government subjects. Coupled with the government’s long-term monopoly on public services, people often distrust the production of public services by non-government subjects, and often associate them with profit. In fact, both government subjects and non-government subjects must have funding sources if they want to maintain their own existence. The source of funds for government subjects is fiscal revenue, and fiscal revenue comes from taxation, which is no different from non-governmental subjects transferring part of the people’s property to their own through profit. People’s perceived intimacy between the two is due to the following misunderstanding, that is, they think that the profits of non-government subjects directly transfer their own property, while the government taxes are taxed by others and do not need to be borne by them. Judging from historical facts, public services were initially provided by nongovernment subjects, and later government subjects took advantage of opportunities, power, and people’s trust to monopolize this field when they saw it was profitable. Both governmental and non-governmental subjects have their profit-making side, but at the same time their existence is also the need of social structures and social order, and they have social management functions. In the procurement public services by the government, non-government subjects, as producers of public services, are less profitable, and their social management functions are reflected. As a producer of public services, natural persons can improve their sense of social responsibility and ownership by participating in the acquisition of public services.

The Initiative of the Third Party in the Government Procurement of Public Service Contracts Has Been Enhanced, and Its Influence on Contractual Relations Has Been Increased According to the principle of privity of contract, the contract produces the relationship of debt, and a contract is only binding on the parties, not the third party. Although in the post-civil law era, the relativity of contracts is subject to some restrictions, generally the status of the third party will not change, and the third party is still in a passive and passive position. In the case of government procurement of public services, the initiative of the public service recipient as a third party to the contract cannot be underestimated for the following reasons: first, the public services procured by the government are tailored for a certain service group, and the government as a buyer is actual. These services are not required. Secondly, the third party is the beneficiary of public services and if it is not satisfied with the public service producers chosen by the government,

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the public service recipients have the procedures and rights to directly participate in the selection as stipulated by law. Finally, the public service recipients as the third party are also an important part of the public service supervision and evaluation system. The standards, requirements and evaluation behaviors for evaluating public services directly have important impacts on the producers of public services and can even decide whether they participate in or withdraw from public service procurement contracts.

2.1.4 Development Status Development of Government Procurement Public Services in Foreign Countries From a historical perspective, the supply of public services has gone through a process from private individuals to the government, and the government-led public service is only a matter after the emergence of the nation-state. It is not a matter of principle that public services are led by the government or the private sector. Public services can be provided by the government, by individuals or organizations outside the government, or by a combination of the government and individuals. The procurement of public services by the government is a way for the government and non-governmental subjects to jointly provide public services. There is no clear answer as to when and where the government procurement public services. Some scholars believe that it originated in the United States in the 1960s,12 some claim that it originated in the United Kingdom in 1979,13 and some push it forward to the Federal Acquisition Regulation 1761.14 No matter when and where the government procurement public services come into being, there is a basic consensus on its background. It is generally believed that in the 1960s, under the influence of the “New Public Management (NPM)” theory (including power sharing theory, cooperative governance theory, public–private partnership theory) and in response to the international and domestic situations at the time, people in major developed countries in the West became dissatisfied with government administration and demanded reform of the government administration model. As a response to the public’s demand, a long-lasting innovation movement such as the reform of public service supply was formed. This movement had an initial impact on the marketization policy of public services proposed by the British government in 1979. Later, British practices and views were accepted by major developed 12

Zhang Jianwei: “The Enlightenment of Western Governments’ Procurement Public Services ”, in “Oriental Corporate Culture”, No. 15, 2010, p. 260. 13 Zhou Zheng: “Government Procurement Public Services in Developed Countries and Its Reference and Enlightenment”, in “Western Finance and Accounting”, No. 5, 2008, p. 16. 14 Jia Xijin and Su Ming, Final Report on Government Procurement of Public Services People’s Republic of China. (ADB) TA 4790-PRC: Facility for Reform Support and Capacity Building (June 2009): 8.

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countries in the world. In the following two or three decades, the marketization of public services in developed countries reach a climax. At the end of the twentieth century and the beginning of this century, as the marketization of social public services progressed, people gradually discovered its shortcomings while enjoying its benefits. For these shortcomings, countries are looking for countermeasures, and government procurement public services is one of the most important countermeasures. Coincidentally, government procurement public services are a model of public service governance that meets the needs of some developing countries and traditional Eastern countries, and has had a great impact. However, the model has its existence value for a certain period, and its fate remains to be tested by history. Therefore, it is necessary to study the typical cases of government procurement public services to investigate the root causes, understand the backgrounds, and look for patterns. Taking the practice of the most typical western countries such as the United States and commonwealth countries as examples, this paper tries to describe the origin of government procurement public services. In the late 1960s and early 1970s, the United States began to implement the policy of government procurement public services. The implementation of this policy has its special historical background. In the 1960s, the United States experienced rapid urbanization and the migration from the countryside to the city brought many problems. Coupled with the serious aging trend of the society, the welfare rights movement appeared. The combination of many factors led to a dramatic increase in the programs, scopes and demands of public services have increased dramatically. In response to this new situation, President Johnson called for a “War on Poverty”, and the U.S. government subsidized the public service sectors to an enormous extent, resulting in a very heavy financial burden. In order to overcome this dilemma, the United States has carried out an effective exploration of government procurement public services. The U.S. government has introduced a competitive mechanism of survival of the fittest in the field of public services, hoping to ultimately achieve the goals of improving the quality of public services, reducing the cost of public services, and easing financial burdens. The application of this mechanism began in the U.S. federal government’s Office of Economic Opportunity, which used the Department of Defense’s procurement process to purchase educational services from the private sector in order to ensure educational services for low-income families. Since then, local governments with major public service mandates have followed the lead of the Office of Economic Opportunity. After several years of experimentation, the US government passed relevant legislation in the mid-to-late 1970s to protect and promote the private sector to enter the public service field and to encourage the forces of the whole society to participate in the provision of public services. Since then, under the protection of the law, the government procurement public services has developed significantly in the United States. According to data, the U.S. federal government has successively signed about 20 million contracts with private companies, research institutions and individual consultants, and the amount involved accounts for 14% of the total federal expenditure. Of these, two-thirds of the total DOD spending is through various forms of

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public service purchase contracts, with the Department of Energy and NASA being the largest federal contractors.15 U.S. state governments are particularly keen on procuring public services and the scope of public services procurement is much wider than that of the federal government. It seems that every public service is available for bid, from road construction, library operations to prison management, public security and firefighting. For example, the city of La Miranda has only 60 government employees, but 60 public service contractors, providing almost all public services from firefighting to police to public works.16 It should be noted that, due to the developed social stratification and the abundance of social autonomous organizations and social groups in the United States, various non-profit organizations play an important role in the government procurement public services. At present, there are more than 1 million non-profit organizations in the United States, which spend $340 billion annually and contribute at least 6% of the gross national product. A considerable part of public services is provided by them, while 60% of its funding is obtained through government procurement of public service contracts.17 In the UK, government procurement public services developed under the explicit policy of marketization of public services. In 1979, British Prime Minister Margaret Thatcher clearly put forward the policy of promoting the market-oriented reform of public services, which preceded in the western world. The main content of this policy is to introduce competition mechanism in the public service sector with market orientation, economy and efficiency as the objective. In order to introduce the competition mechanism in the public service sector, the British government enforced nonmonopoly and promoted the competition between the government public and private sectors and between the government public sectors. In this process, the government procurement public services has become an important way for private sectors to participate in competition. In the 1990s, with the further deepening of government reform, the United Kingdom launched the “Chartism” and the “Competing for Quality” Movement to improve the quality of public services and customer satisfaction, which further promoted the development of government procurement public services. In the “Chartism” and “Competition for Quality” Movement, “market testing” has become a new way to promote competition. For government procurement public services, market testing refers to comparing the prices and results of public services produced by government and non-government subjects and selecting producers who can provide public services with the best use of funds to ensure the optimal supply of public services. Then, the high efficiency and the low cost of the public services can be achieved. 15

Zhang Jianwei: “The Enlightenment of Western Governments’ Procurement Public Services”, in “Oriental Corporate Culture”, No. 15, 2010, p. 260. 16 Peng Hao: “Government Procurement of Public Services Promotion from Experience of Developed Countries”, in “Financial Research”, No. 7, 2010, p. 49. 17 Zhang Jianwei: “The Enlightenment of Western Governments’ Procurement Public Services”, in “Oriental Corporate Culture”, No. 15, 2010, p. 260.

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The specific steps of market testing include confirming the scopes and natures of public service supply, establishing the level and quality standards of public service supply, organizing competitive bidding, selecting and identifying public service producers, and monitoring and evaluating the results. Through the “market testing”, from 1991 to the end of 1993, the private sector was awarded contracts worth £885 million and the government was awarded contracts worth £768 million for 389 public service projects, a symbolic victory for government procurement public services in the public service sector.18 Australia and New Zealand, both members of the Commonwealth, have also implemented their own policies on government procurement public services since the 1980s. In Australia, the most unique procurement aspect is its fruitful innovation in the procurement public employment services. Australia’s original employment services were run by more than 400 public employment service agencies across the country under the former Ministry of Employment, Education, Training and Youth Affairs, which had long been plagued by high costs, inefficiency and bureaucratic shortcomings. In order to solve this problem, the Australian government decided to establish a set of professional networks of socialized employment services with fair competition, the measure of which is to implement government procurement of employment services. The specific approach is to marketize all the public employment service agencies originally affiliated to the government into the National Employment Service Co., Ltd., and transfer even more than 9000 staff who were formerly civil servants into the labor market and implement two-way selection according to the company’s needs and personal wishes. The company is under the responsibility of the board of directors and enjoys the same conditions and status as other private employment service agencies in contracting business. Then, the government procures relevant employment services from the market, regardless of who the producer of the service is, and implements fair competition. In this way, the Australian government has achieved full government procurement of employment services and expected results. In the field of government procurement public services, the New Zealand government’s approach is different. It retains the original government public sector but pushes it into the competitive market to compete fairly with other public service providers. The specific approach is to set up an independent public service committee as a buyer of public services, sign a performance framework agreement with the supplier, agree to produce a specific quantity and quality of products at a specific price, and at the same time implementing full performance management across the public service on behalf of the government. The Public Service Regulatory Commission can enter into supply agreements with both the private sector and similar agreements with the public sector, thus creating competition between the government’s public services and private enterprises. There has always been an administrative governance theory of “minimum government” in the EU continental countries, and there has been a long-standing controversy 18

Zhou Zheng: “Government Procurement Public Services in Developed Countries and Its Reference and Enlightenment”, in “Western Finance and Accounting”, No. 5, 2008, p. 16.

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over the government’s monopoly on public services. In practice, Germany, French and other countries have tried small-scale government procurement of public services before or at the same time as the UK, the United States and other countries. However, on the whole, its implementation of government procurement public services is later than that of the British and American countries, and its scale is not as grand and thorough as the British and American countries. This is evidenced by the development of the EU’s system of government procurement public services. In the European Union, government procurement public services is included in the scope of government procurement. “In the European Union, government procurement refers to contracts awarded by the governments of the European Union and its member states for public works and the procurement of goods and services.”19 However, judging from the process of EU government procurement legislation, initially, government procurement did not include government procurement public services until the introduction of the Services Directive 92/50. The development of EU public procurement legislation has been well described as going through the initial legislation, the first generation of secondary legislation, the second generation of secondary legislation, the third generation of secondary legislation, and the fourth generation of secondary legislation. The so-called initial legislation refers to the “European Union Treaty”, which, as the parent law including government procurement and other legal systems, establishes the “Four Freedoms” principles for unifying the EU’s large market and prohibiting trade protection, which are also applicable to government procurement. However, the law is only prohibitive and not operational for government procurement public services. The first generation of secondary legislation includes the General programmers adopted by the Council of Ministers of the European Commission in 1962, Directives 66/863, 70/32, 71/305, 77/62, 80/767 Directive and the 1979 GATT Agreement on Government Procurement. However, although these legislations have developed the EU government procurement law system, they still do not involve government procurement public services. The second generation of secondary legislation was introduced by the European Commission’s 1985 “White Paper for the Completion of the Internal Market”, 1986 “Single European Act”, Directive 88/295, 89 /Directive 440, Directive 89/995, Directive 90/351, and Directive 92/13, which amended and supplemented all previous legal documents related to government procurement. Especially, Directive 90/351 is the first directive on public utility. At this point, EU countries have finally included government procurement legislation on government procurement public services (if the supply of public utilities is considered to be a public service). The third generation of secondary legislation refers to the Services Directive 92/50 and Directives 93/36, 93/37 and 93/38. Among them, Directive 92/50 is a directive specifically aimed at public services. It stipulates that the same rules apply to government procurement public services as government procurement goods and infrastructure and divides public services into 19

Government procurement in the European Union. http://en.wikipedia.org/wiki/Government procurement in the European Union. accessed January19.2012.

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“priority services” and “non-priority services”. The former applies all government procurement rules, while the latter only abides by basic requirements such as nondiscrimination and openness. The three Directives 93/36, 93/37, and 93/38 are just confirmations and reaffirmations of the previous directives to systematize the EU’s government procurement legislation. The fourth generation of secondary legislation represents a further consolidation of EU government procurement law, which consists of several post-2004 EU directives. The most important of these are the two directives in 2004, namely Directive 2004/17 and Directive 2004/18. Through these two directives, the EU divided government procurement into two categories: public infrastructure procurement and other procurement. Directive 2004/17 governs government procurement public infrastructure, while 2004/18 integrates government procurement public services and public works by the government under the same rules. Other legal documents include Directive 2007/66, which amends two procedural directives 89/665 and 92/13 to simplify government procurement procedures.

The Development of Government Procurement Public Services in Hong Kong and Taiwan The direct comparison with the government procurement public services in our country is the relevant practice of government procurement public services in Hong Kong and Taiwan. The mainland and Hong Kong and Taiwan share the same root and have strong cultural homogeneity. The relevant practices of Hong Kong and Taiwan can not only enlighten us on what to do, but also some practices can be directly learned from. Traditionally, the social welfare in Hong Kong and Taiwan, like the mainland, is undertaken by the primary social network constructed by blood family relationships. Even if there are public things, most of them occur within the family or clan, basically not talking about public service issues. This traditional social welfare model has its unique advantages and constitutes an important component of our traditional culture, and its welfare supply is full of affection and warmth, and gives people a sense of trust. However, this traditional mode of providing welfare has an extremely fragile side and its limitations become obvious when modern society enters a stranger society and the demand for public services grows, or even fails to provide public services at all. Therefore, in the process of transition from traditional society to modern society, it is urgent to establish a public service system. In this context, Hong Kong and Taiwan have been exploring the reform of the public service supply system. Initially, both Hong Kong and Taiwan have gone through the process of imitating foreign public service systems. However, due to the different paths taken by Hong Kong and Taiwan in the transformation of social modernization, the impact on traditional culture is also different. For this reason, it has even led scholars to question whether the system of the common law system or the civil law system is more likely to be compared with the Chinese traditional system. Discussion of cultural integration issues. It is because of the

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different path of social transformation and the impact on traditional culture that the public service in Hong Kong has taken a path dominated by the people, while Taiwan has chosen a path dominated by the government. In this process, just like the practice of developed countries such as the United Kingdom and the United States, Hong Kong and Taiwan have also implemented the government’s policy of procuring public services to varying degrees, and have gone through different journeys. (1) The Emergence and Development of the System of Government Procurement Public Services in Hong Kong In 1979, influenced by British government procurement of public services, the Hong Kong region put the procurement of public services on the agenda. Prior to this, as a free port, Hong Kong’s public services were mainly for poverty remedy before World War II and for the care of women, children, the elderly, the weak and the disabled after World War II. Especially after World War II, the political situation and social order in mainland China continued to be chaotic, resulting in the influx of a large numbers of people into Hong Kong, where the social order was better. At that time, the Hong Kong government had relatively few obligations in terms of public services. “The government’s responsibilities in social welfare, apart from the most basic in-kind remedy, from the postwar period to the early 1960s, the focus was only on fulfilling legal responsibilities, such as probation services, adoption services, and job security for women and children.”20 Most of these basic public services are undertaken by non-governmental voluntary organizations, and their financial support mainly comes from abroad. Because of abundant funds, most of these non-governmental voluntary organizations provide public services according to their own purposes and with a high degree of independence. Government procurement of public services never happened. However, this background has laid a social and institutional foundation for the government procurement public services in the future, that is, there is such a consensus both institutionally and conceptually: private institutions are capable to producing good public services. The rapid increase in population has caused many social problems, the biggest of which is the rapid increase in the demand for public services. Yet, the government was unable to provide adequate public services. In the following period, two riots occurred in Hong Kong in 1966 and 1967, the root cause of which was the inadequacy of the social security system, reflecting that with the social changes, the demands for public services had increased dramatically, and when not met, the society would suffer catastrophic problems. Driven by these two riots, the Hong Kong government had deepened its understanding and emphasis on public services. Hong Kong’s public services had gradually moved away from meeting the most urgent needs of life and had begun to pay attention to some new problems brought about by social changes, such as youth crime issues, pension issues, caring for the disabled and other issues. 20

Luo Guancui and Wang Junfang: “Hong Kong’s Experience in Government Procurement of Services and Discussion on Mainland Development”, in “Learning and Practice”, No. 9, 2008, p. 125.

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In 1973 and 1977, the Hong Kong government released White Paper “Social Welfare in Hong Kong: The Way Ahead” and three public service green papers, namely, “Social Security—Helping the Least Incapable of Self-help” and “Counseling Social Work for Youth”. The white paper divides the responsibilities of government and non-government entities in public services, and proposes that the Social Welfare Department and voluntary agencies should jointly provide public services, using the popular term “partnership” in the West at that time, to clarify the government’s funding responsibility for supporting non-government entities. According to the three Green Papers, the government has also begun to subsidize private voluntary organizations by implementing a “discretionary grant system”. It can be seen that during this period, government procurement public services mainly through subsidies. Some data shows that government subsidies accounted for 43% of the funding for non-governmental organizations at that time.21 However, at this time, Hong Kong’s public services cannot be said to be implemented through standard government procurement public services, as there is no contractual relationship of consideration between the two. In 1979, the British government decided to introduce a competition mechanism into the field of social public services; in the same year, the Hong Kong government issued a white paper on “Social Welfare in the 1980s” as a response. From then on, the government has gradually begun to procure public services from private institutions, but still in the form of subsidies; the difference is that the subsidies at this time are full subsidies, and the purchase contract has consideration. In particular, the Hong Kong government introduced a “standard allowance” system since 1982, whereby the government provided “100%” subsidy for public services provided by non-governmental voluntary organizations. In 1991, the Hong Kong government issued the “White Paper on Social Welfare in Hong Kong Beyond the 1990s”, which proposed a new goal of Hong Kong’s social and public services and should provide more and better innovative services. In order to solve the contradiction between popularizing services and improving service quality, the white paper proposes countermeasures such as the ability to pay and the development of self-financing non-profit services. These are all synonymous with the introduction of market mechanisms in public services. The government’s efforts in the field of public services mainly focuses on the monitoring of public service performance, and since 2000, it has followed the British “market inspection” system and gradually implemented the “Service Quality Standard” (SQS) test, which has assessment of the quality of public services. In line with this, in terms of public service funding, the standard subsidy system should be replaced by a “block grant system”, and the input control system should be replaced by a service quality control system, so as not to impose strict restrictions on the use of funds by private organizations and to give subverted private organizations more flexibility in handling public service resources. In this way, the shortcomings of 21

Luo Guancui and Wang Junfang: “Hong Kong’s Experience in Government Procurement of Services and Discussion on Mainland Development”, in “Learning and Practice”, No. 9, 2008, p. 126.

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the standard subsidy system that suffocate public service operations, cause resource misallocation, and waste the human and material resources of the government and institutions will be overcome. (2) The Emergence and Development of Government Procurement Public Services System in Taiwan Taiwan is a region with a good heritage of Chinese traditional culture. However, “Taiwan’s social welfare has also begun to adopt purchase-type service contracts since the 1980s.”22 It is generally believed that government procurement public services system in Taiwan was also formed in the 1980s. Prior to that, Taiwan’s traditional welfare services were different from modern public services. The forms of supply mainly came from informal sectors such as clans and families and were realized through the primary social network constructed by blood and kinship ties. The motivation to supply stems from emotional factors that are spontaneous and do not seek equivalent material rewards (perhaps from positive emotions—love, or from negative emotions—guilt). The power of tradition is not easily shaken because of the strong traditional family network of relationships in which there is trust between the service provider and the service beneficiary, and the interaction scene makes people feel familiar and warm. Even in the later public services, formal departments such as the government and volunteer organizations gradually took a place, and public services provided by informal departments such as families and household remained the primary choice for most people. However, this primary social network in traditional culture had its natural flaws and cannot withstand the impacts of natural disasters or various social structural changes. Major natural disasters or social structural changes often impact the density, strength and breadth of primary networks. Such shocks often lead to a reduction in the capacity of public service delivery. When the supply capacity is insufficient to meet the needs of individuals, it needs to be supplemented or remedied through the squires, the geographical secondary network between neighbors, or through the external tertiary network such as the community introduced by the government. Therefore, in the face of social progress, it is inevitable that the traditional strong-tie networks of individuals will be replaced by weak-ties. The 1960s was a time when Taiwan’s economy took off, and it was also a time of urbanization, large population movements between urban and rural areas, and the loosening of traditional social support systems. In this era, the traditional social service system could no longer meet the needs of public services, and the formally organized public service system developed. By the early 1980s, a government-led public service system was basically established in Taiwan. Since the 1980s, the spirit and theory of Anglo-Saxon capitalism has permeated the world, bringing about the commercialization and marketization of public services. 22

Zhang Yingzhen: Reflections on Community Care: Phased Tasks of Purchased Services, Theory and Practice of Community Work, http://www.ccswf.org.tw/files/7100/14/3.%E5%BC%B5%E8% 8B%B1%E9%99%A3.pdf , accessed January 5, 2012.

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Influenced by “new managerialism”, Taiwan government followed the example of the United States and other western developed countries to promote the marketization of public services. “In 1983, it promulgated the ‘Strengthening Civil Forces to Promote Social Welfare Implementation Plan’, which opened the model of purchase-type service contracts.”23 The 1990s was often referred to by scholars as the “golden decade” of Taiwan’s public services, and it was also a time when the Taiwan government procurement public services developed greatly. On the one hand, with the development of the political, economic and social situation, people’s demand for public services have expanded to new scales and new areas, forcing the government to significantly increase the public service budget to meet social needs; on the other hand, due to the trend of new managerialism influenced by the government’s financial scale, its administrative manpower and material resources are insufficient to meet this demand. In addition, the government-led public service supply system is full of drawbacks, and the new government governance theory has doubts about the government. Therefore, the use of private resources to jointly develop public services has become a better strategy to solve the problem. In 1997, Taiwan’s “Ministry of the Interior” adopted the “Key Points for Promoting the Privatization of Social Welfare”, which was the highest legal basis for the marketization of public services in Taiwan at that time. In 1999, Taiwan implemented the “Government Procurement Law” in order to formulate standard procurement procedures for government projects, goods and services (including welfare services). These regulations all require the public and private sectors to combine reality to create a new mode of public service cooperation. In these new cooperation models, the government is mainly responsible for the management and supervision to ensure the quality of public services, and the non-governmental organizations are responsible for the efficient and high-quality production of public services. Later facts proved that this new model of public service cooperation is the embodiment of various forms of government procurement public services. However, when a large number of public services are entrusted to nongovernmental organizations to operate or provide, due to incomplete competition in some markets, the beneficiaries of public services cannot fully exercise their right to choose, and the quality and level of public services are not improved, so people have to seek the original government-led model again. In short, in the face of the new task environment, neither the government nor the civil organization can solve all public service problems with a single model. The integrated application of various service approaches and the joint cooperation between the public and private sectors have become the key to solving the problem. Therefore, in the current public service system in Taiwan, although the government procurement public services is an important part, it is definitely not the only way, but forms a hybrid model of public services together with other ways. 23

Luo Guancui and Wang Junfang: “Hong Kong’s Experience in Government Procurement of Services and Discussion on Mainland Development”, in “Learning and Practice”, No. 9, 2008, p. 127.

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2.2 Theoretical Framework 2.2.1 New Public Management Theory An Overview of the New Public Management Theory The New Public Management (NPM) is a new theory of public administration model that flourished in Western countries such as Britain and the United States in the 1980s, and has been the most important guiding principle of public administration innovation in the last two to three decades. Modern scholars generally define New Public Management Theory as: “The combination of a rapidly expanding bureaucracy into many smaller and more fragmented departments, with competition among the various smaller departments and between government agencies and private institutions, and stimulation along multiple economic lines.”24 Compared with other public management theories, the New Public Management theory tends to be more result-oriented and efficiency-oriented, and it emphasizes public budget management25 ; it focuses on the implementation of competitive relationships between public sector institutions like the well-known private institutions; it emphasizes Economics and Leadership Laws. New Public Management theory tends to treat the beneficiaries of public services as consumers and the rest of the public as shareholders. The New Public Management theory is an innovation of the traditional public management theory. It is a new public management theory that is anti-empirical, anti-technical and anti-bureaucratic. The emergence of new public management theory has its unique historical background. In the middle of the twentieth century, Western countries, under the guidance of Keynesian theory, implemented the “welfare state” policy, emphasizing the leading role of the state in economic and social life. However, the “welfare state” policy did not bring about the expected effect, namely, the improvement of economic growth and social satisfaction; instead, economic stagflation and inefficiency of government public services appeared, which led to widespread social dissatisfaction. As a result, Keynesianism and its derived “welfare state” policy marked by state intervention have been criticized by people, while the theory of government governance that advocates market, freedom and responsibility has begun to receive attention. It is against this background that the theory of public management comes into being. Western countries have actively practiced it: Margaret Thatcher’s reform in the United Kingdom; the “Citizens Charter Movement” of the Major government; the “Third Way” movement of the Blair government; New Zealand’s government governance reform based on the “Government Department Act”; Canada’s government governance reform with the theme of “Canadian Public Service 2000”; the 24

Patrick Dunleavy, Helen Margetts. (2006).‘’New Public Management is Dead: Long Live Digital Era Governance’, Journal of Public Administration Research and Theory, July 2006: 469. 25 Aleksander Aristovnik and Janko Seljak.“Performance budgeting: selected international experiences and some lessons for Slovenia,” MPRA Paper 15,499, University of Ljubljana, Faculty of Administration, Slovenia, 2009: 10.

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United States’ national partnership reform with performance evaluation as the core. Throughout the government reforms in Western countries, the marketization of government governance and the role of market mechanisms in the field of public services are the core. Actively learn from the management techniques and methods of the private sector and improve the government’s management capabilities and public service capabilities for these reforms important features. At the same time, the success of these reforms marks the birth of a new paradigm of public management. By the 1980s, the New Public Management theory had become the management philosophy used by the government to modernize the public sector. New public management is a broad and rich term that describes the wave of reforms in the field of public management that swept the world in the 1980s. The main assumption of this new wave of public management reform is that market orientation in the field of public management will bring huge cost-effectiveness to the government in the field of public management, without any negative effect of reducing other goals and issues. The main issues involved in the new public management include: traditional public management theories and models are not beneficial to the problems existing in contemporary society, and social reality must be considered; it is impossible to maintain value neutrality in public management, but the pursuit of value served by public management must be transparent; the primary goal of public administration is social justice; skeptical of the entrenched mandate and reality of standing public administrations; public administration should be entrusted to proactive, responsive administrators rather than high-ranking, authoritarian “ivory tower” bureaucracy.

The Main Contents of the New Public Management Theory The main contents of the new public management theory can be summarized as the following aspects. First, it pursues the concept of customer-first government management. The government is no longer just a commander, but a public service provider with a public focus. The relationship between government and citizens is that of entrepreneurs and customers. The goal of the government that assumes the role of “entrepreneur” is not to make profits, but to realize the efficient allocation of economic resources, that is, to move from places with lower production efficiency to places with higher efficiency. Therefore, “customer-driven government is one that can provide diversified and high-quality public services”.26 In the evaluation of public services, it emphasizes the importance of customer participation, and requires the intervention of customers to ensure the formation of a public service supply mechanism that conforms to customer preferences to achieve efficient public services.

26

[America] David Osborne, Ted Gabler: Reforming Government: How Entrepreneurship Is Reforming the Public Sector, Shanghai Translation Publishing House, 1996, p. 379.

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Second, change government functions. That is to say, in public administration, the government should change from “paddle” to “steering”, and it is the policy maker rather than the executor, and the specific operation of administrative management and business should be separated. The traditional government has forgotten to take the helm because it is too busy rowing the oar. As for how to steer, the new public management theory provides the way: to reshape the market, the government keeps exerting various favorable and feasible influences on the private sector, allowing the private sector to “row” instead of rowing itself. Third, the introduction of competition mechanism. That is, a market competition mechanism should be introduced into government management, so that more market-trained departments can actively participate in the provision of public services through government procurement and other forms, in order to achieve the goals of saving costs, improving quality and efficiency. Fourth, reform the civil service system. Abandon the concept of “value neutrality” and the “secure job” system of civil servants, reshape the political sensitivity of civil servants, and implement new systems such as the contract system and the temporary employment system. Similar to the new public management theory, the public choice theory is also an academic idea that has explanatory power for the government procurement public services. Public Choice Theory is a new public economic theory founded by James M. Buchanan, a famous American economist and Nobel laureate in economics. The human behavior in the market system and the government behavior in the political system are brought into the same analysis track, thus revising the theoretical defect that traditional economics places the political system outside the economic analysis. The theory of public choice firmly believes that the market has more advantages and competitiveness than the government in many fields, and advocates breaking the monopoly of the government and establishing public–private competition to improve the efficiency of public service supply. New public management theory and public choice theory redefine the relationship between the government, the market and social organizations, update the concept of government governance, and accordingly re-identify the role of the government in the process of public service supply, which is in line with the marketization of public services. It has laid a solid foundation for breaking government monopoly and realizing the diversification of public service providers.

The Compatibility Between New Public Management Theory and Government Procurement Public Services There is a special and close relationship between the new public management theory and the government procurement public service system. The origin of the new public management theory comes from people’s thinking about the problems of the government in the field of public services. In practice, government procurement public services is a kind of new public management model; in theory, government procurement public services is a direct application of the new public management theory; in

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terms of the interaction between the two, government procurement of public services and new public management Theories interact in a consistent manner in terms of content, characteristics, etc. The new public management theory, with its clear and rational expression, outlines the theoretical lines of the government procurement of public services. First of all, the background of the new public management theory and the government procurement of public services is similar, both originating from the failure of traditional public management in the field of public services. As mentioned above, the emergence of new public management theory is because traditional administrative management cannot meet the needs of the welfare state. As we all know, after the two world wars, the major western developed countries generally implemented the welfare state policy. The so-called welfare state means that the state provides the people with a wide range of public services of great quantity and high quality, which is vividly called “from cradle to grave”. Such a policy requires substantial financial resources and proper public management. However, traditional public administration is based on the theory of “political and administrative dichotomy” put forward by Woodrow Wilson and systematized by Goodnow, and the theory of “bureaucracy” put forward by Max Weber. It should be said that the two theories, as the theoretical basis of traditional public administration, have trans-era significance. The traditional public administration model based on this theory is a significant improvement over the previous management, and once became the basic model of public administration in most countries in the world. However, due to its inherent theoretical flaws, it was severely criticized by the political science behaviorism and the interpersonal relationship school shortly after its formation. Therefore, since the 1960s and 1970s, the almost rigid bureaucratic system of traditional public administration has become powerless in the face of the rapidly changing information and knowledge-intensive social life under the challenge of the new external environment, the government’s financial crisis, unsustainable social welfare policies, increasingly large and bloated government agencies and low efficiency, and the public’s loss of confidence in the government’s capabilities have become insurmountable problems and difficulties for the government, and the theory of “government failure” has become dominant. It is against this historical background that the New Public Management theory emerged in Britain and the United States in the 1980s and spread rapidly in Western countries. The new public management theory is different from the previous public management reforms—that is, the reforms carried out within the traditional public administration framework. It no longer makes some partial adjustments to the existing administrative management systems and management methods. To reduce administrative costs and expenses, it is necessary to conduct a comprehensive review and reflection on the traditional public administration model. Secondly, government procurement of public services, as a model of the new public management model, is a direct application of the new public management theory. The application of the new public management theory in the supply of public services mainly includes three modes, namely, the marketization mode of public

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services, the mode of government purchasing public services, and the mode of partnership between government and non-government entities. The management reform in the field of public service is the birthplace and the most important battlefield of the new public management. The marketization of supply is an ideal model to be constructed based on the theory of new public management. However, due to the inertial effect and inhibition of the traditional public management mode, namely the command-based and bureaucratic management system, this ideal public service supply mode encountered many resistances in the implementation process. Coupled with the shortcomings of the market-oriented management model, many countries no longer implemented the pure market-oriented model. On the contrary, this gave birth to a government-procured public service supply model. Under the premise of not giving up the government’s main responsibilities, the government procurement of public services, by fragmenting the public management departments, and introducing a market competition mechanism between government public management departments, and between government departments and nongovernment entities, to achieve bottom-up management innovation. In the management of public services, the government is no longer the direct producer of public services and has realized the transformation from “paddle” to “steering”. Therefore, from a practical point of view, the government procurement of public services is a kind of new public management model; from a theoretical point of view, the government procurement of public services is an application of the new public management theory. Finally, the government procurement of public services is in harmony with the new public management theory. From the specific content to the basic spirit, the new public management theory outlines the surface lines of the government procurement of public services. In terms of specific content, as mentioned above, the new public management theory emphasizes the transformation of public management to marketoriented management, the need for clear performance standards and measurement indicators, the need to pay more attention to output control, the implementation of departmental decentralization, and the need for decomposing the public sector into smaller units, introducing market mechanisms, strengthening internal competition in the public sector, introducing management styles and methods from the private sector, emphasizing restraint and conservation in the use of resources, emphasizing the value of money, and focusing on consumers’ needs, and emphasizing relevance rather than sensitivity of public services. The procurement of public services by the government is exactly the way the government introduces a market competition mechanism in order to save financial funds and improve the quality and efficiency of public services. Among them, the rights of public services have been partially transferred with the participation of non-government subjects; government public service departments have been reorganized due to competition needs and become smaller and fully competitive small departments; the principle of result supervision has been adopted to make providers of public services pay more attention to the needs of public service objects; because the government can procure public services from

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non-governmental subjects of different sizes, its flexibility is realized; because nongovernmental subjects have various professionals, the management of public services is professionalization is improved. In short, in terms of specific content, the government procurement public services fully meets the requirements of the new public management theory and is almost a practical replica of the new public service theory. From the spiritual point of view, the new public management theory is not a theory based on politics, but a theory based on economic considerations and starting from the market, which pursues the efficiency of the use of public service resources. Similarly, the government procurement of public services is also a policy and method implemented for the sake of public service efficiency. By introducing a market competition mechanism, the limited government fiscal revenue can be used more efficiently in the field of public services.

2.2.2 Service-Oriented Government Theory An Overview of Service-Oriented Government Theory The theory of service-oriented government was put forward by Chinese scholar Zhang Kangzhi around 1998. Its proposal originated from the research and discussion of “service administration” by Chinese administrative law scholars. The study of “service administration” must explore the source of “public service”. The first person to put forward the concept of “public service” was the famous French jurist Leon Duguit, who discussed the concept of “public service” as the basis of modern public law in his book “Public Law Changes, Law and the State” and its meanings.27 The term “service administration” was first put forward by German administrative jurist Ernst Forsthoff in “Administration as a Service Subject”, and later it was quoted and expounded in the academic circles of civil law systems. In our country, the use of the concept of “service administration” can be traced back to 1995. At that time, the domestic discussion on “service administration” mainly focused on the research field of administrative law. Cui Zhuolan proposed and used the concept of “service administration” earlier. She proposed that due to the establishment and development of the market economy, the traditional administrative law theory that regards people as the object of management should be changed, the government’s “management” and “service” should be integrated, and build “management is service” mode of thinking. She believes that to follow the leading idea of “service as the goal” to carry out administrative and legislative work is of decisive significance to ensure the smooth realization of our country’s transition to a market economy.28 27

[French] Leon Di Ji: The Changes of Public Law, translated by Zheng Ge, China Legal Publishing House, 2010, p. 50. 28 Cui Zhuolan: “On the Renewal of Administrative Law Concepts”, in “Journal of Social Sciences of Jilin University”, No. 5, 1995, pp. 75–76.

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At about the same time, after summarizing the theoretical basis of administrative laws in various countries and their pros and cons, Chen Quansheng believed that the main content of modern administrative law should be “service” and “benefit”; the focus is “serving administration”; the theoretical basis is “service theory”. In his view, “service theory” is in line with the needs of our country’s market economy and taking it as the theoretical basis of China’s administrative law will help promote the construction of our country’s administrative legal system.29 Since then, “service administration” has gradually become one of the hot topics discussed by administrative law scholars and has played a leading role in the research of “service administration” in the fields of administration, politics and practice. For administrative researchers, the concept of “service administration” means looking for a mode that is different from the control administration under the planned economy. That is to say, there is a judgment among the researchers of administrative science: the administration under the planned economy belongs to “administration of control” and “administration of authority”. With the reform of the economic system, the transformation from a planned economy to a market economy requires a corresponding to different administrative modes, the concept of “service administration” is borrowed.30 With the deepening of reform and opening up, people have studied and discussed what kind of government should be established. The concept of “service administration” was introduced into the construction of the administrative model along with this process, and the concept of “service-oriented government” was born logically and became the target model of administrative reform. During this period, the scholar Zhang Kangzhi published many articles discussing “service administration”, and it was Zhang Kangzhi who directly proposed the concept of “service government” for the first time. In these articles, he sometimes uses the concept of “serving administration” for the administrative target model of socialist reform, and sometimes he simply uses the concepts of “serving government”31 and “service-oriented government”.32 Although the two concepts of “service administration” and “service-oriented government” have the same basic connotation, it is obvious that the use of the concept of “service-oriented government” can highlight the academic intention of the construction of the service administration model, or it can better reflect the significance of taking the construction of a “service administrative model” as the goal of institutional reform, and it is more easily accepted by all sectors of society. Since then, domestic scholars have set off a climax of research and publicity of service-oriented government. Building a service-oriented government has become 29

Chen Quansheng: “On the Theoretical Basis of Modern Administrative Law”, in Legal System and Social Development, No. 5, 1995, pp. 13–20. 30 Cheng Qian, ““Service Administration”: From Concept to Model: An Investigation of the Origin of Contemporary China’s “Service Administration” Theory”, in Nanjing Social Sciences, No. 5, 2005, p. 51. 31 Zhang Kangzhi: “Institutional Innovation in Institutional Reform”, in “New Horizons”, No. 5, 1998, p. 29. 32 Zhang Kangzhi: “The Concept of Limiting the Scale of Government”, in “Administrative Forum”, No. 4, 2000, p. 13.

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a conscious action of some local governments. Chengdu, Shanghai, Chongqing, Nanjing, Suzhou and other cities have successively put forward the goal of “building a service-oriented government”. They have implemented this vision in different ways, providing us with fresh experience in building a service-oriented government. After 2004, the central government began to emphasize the construction of a serviceoriented government. On February 21, 2004, Premier Wen Jiabao’s speech at the closing ceremony of the special seminar on “Establishing and Implementing the Scientific Outlook on Development” held by the central party school for leading cadres at the provincial and ministerial levels clearly stated for the first time that “strive to build a service-oriented government”.33 On March 8 of the same year, during the Second Session of the Tenth National People’s Congress, Premier Wen Jiabao also emphasized: “Management is service, we must make the government a service-oriented government, serving market subjects, serving the society, and ultimately serving the people”. At the third session of the 10th National People’s Congress held on March 5, 2005, Premier Wen Jiabao wrote the construction of a service-oriented government into the government work report, which was approved by the National People’s Congress and became the goal of national government reform. After that, General Secretary Hu Jintao and Premier Wen Jiabao emphasized it many times on different occasions. All this shows that building a service-oriented government has become the reform goal of our government. But what is service-oriented government? Different scholars have different opinions, and there are mainly four representative opinions: The first is the “citizen-based theory”, which holds that a service-oriented government is formed under the guidance of citizen-based and society-based concepts, under the framework of the entire social democratic order, through legal procedures, and according to the will of citizens, with the purpose of serving citizens. And the government that assumes the responsibility for service.34 The second type of “serving the people” is that a service-oriented government is a government that serves citizens. It regards serving the society and the public as the basic purpose of the government’s existence, operation and development. This type of government will completely abandon the old concept of governing the people or the concept of “making decisions for the people” and establish the concept of serving the people and “making decisions by the people”.35 The third theory of “transformation of government functions” holds that the socalled public service government, from an economic perspective, exists to correct “market failures” and mainly provide the society with public goods and services that cannot be effectively provided by the market. Formulate fair rules, strengthen 33

Wen Jiabao: “Raising Awareness, Unifying Ideas, Firmly Establishing and Earnestly Implementing the Scientific Outlook on Development,” People’s Daily, March 1, 2004. 34 Liu Xirui: “Service-Oriented Government: The Choice of Chinese Government Reforms in the Background of Economic Globalization”, China Administration, No. 7, 2002, pp. 52–54. 35 Zhang Kangzhi: “The Concept of Limiting the Scale of Government”, in “Administrative Forum”, No. 4, 2000, p. 13.

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supervision, ensure the effectiveness of market competition, and ensure the fundamental role of the market in resource allocation. The government should not directly participate in market competition as a microeconomic entity or rely on monopoly privileges to compete with the people for profit. Politically speaking, the power of the government is endowed by the people, and the government must ensure that it provides a safe, equal and democratic institutional environment for all sectors of society, including vulnerable groups, serves the people wholeheartedly, and achieves effective governance rather than rule. From a social perspective, the government should proceed from the long-term development of society, provide stable employment, compulsory education and social security, adjust the gap between the rich and the poor, and crack down on illegal and criminal activities to ensure the healthy development of society.36 The fourth theory of “transformation of government work methods”, this theory will improve service methods, improve service attitudes, and increase service items in government work, establish “government supermarkets”, “sunshine halls”, “one-stop service”, “approval center”, “first-ask-responsibility system” and other working methods as service-oriented governments.37 The first and second theories are similar in essence, and there is no contradiction in principle, but more of a difference in expression angle and approach. They both believe that the service-oriented government is a revolution against the traditional government and the target model of the Chinese government’s reform. The service-oriented government is essentially a citizen-oriented government that serves the citizens. Although these two theories describe the connotation of service-oriented government, they are not comprehensive enough. The third theory pays too much attention to the transformation of government functions and does not touch on the substantial changes in the relationship between the government and citizens. In this kind of public service government, the will of the government still occupies a decisive position in public management, while citizens remain passive recipients of government administrative activities. It should be said that the perception that a government whose main function is to provide public services is a service-oriented government is an intuitive understanding of the concept of a service-oriented government. The transformation of the government from an economic construction-oriented government that mainly focuses on economic construction to a public service-oriented government that mainly focuses on public services is not a transformation of the government management model, but only an adjustment of the focus of government functions, which is not fundamental. Although the fourth theory has made a valuable summary of the experience of many local governments in reforming, it does not reveal the essential characteristics of service-oriented government. 36

Chi Fulin, Fang Shuanxi: “Several Suggestions on Accelerating the Construction of a Public Service-Oriented Government (24)”, in “China (Hainan) Reform and Development Research Institute Briefings,” Issue No. 478, p. 44. 37 Jiang Hongjie: “Public Service-Oriented Government Model Selection in Jilin Province”, in “Administration and Law”, No. 5, 2005, p. 33; “Enlightenment”, in “Shanghai Economic Research”, No. 7, 2004, p. 18.

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It should be pointed out that the essential requirement of service-oriented government is to realize the transformation from the original government standard and the government will occupy the decisive position to the citizen standard and the citizen will occupy the decisive position. This does not mean that the government and its civil servants have done more good deeds for citizens, provided more services, more smiling faces at work, and opened more service halls, which is a service-oriented government. In fact, any type of government will provide public services, such as building water conservancy projects, building bridges and paving roads, and even helping the poor. The author believes that a service-oriented government is for serving the people and continuously meeting the growing public service needs of the people by optimizing the government structure, innovating government mechanisms, regulating government behavior, and improving government efficiency under the guidance of the people-oriented concept.

The Theoretical Contents of Service-Oriented Government To explore the contents of service-oriented government, we must answer the question of what services should the government provide? The answer to this question is varied. Adam Smith believed that the government mainly performs its duties in three areas: “(1) to defend society from the encroachment of other independent societies; (2) to maintain the property and personal safety of its members from intrusion by others38 ; (3) to build and maintenance of some public utilities and facilities.” Anderson believes that the government should provide services in seven areas: “(1) provide the economic base; (2) provide various public goods and services; (3) coordinate and resolve group conflicts; (4) to maintain competition; (5) to protect natural resources; (6) to provide individuals with minimum conditions for obtaining goods and services; (7) to maintain economic stability.”39 Buchanan proposed three levels of “collective activity”: “First, the enforcement of existing laws. Such activities include what Hobbes calls the legitimate activities of rulers, that is, in what he calls the ‘protective state’, what Nozick calls the ‘minimum state’, and what 19th-century philosophers called the ‘night watchman state.‘ Second, collective actions within the purview of existing laws. Such activities fall under the category of ‘protective state’ activities, which include funding, supplying and providing ‘the public needs’ goods and services’. Thirdly, to change those activities under the law itself and the existing set of laws.”40 38

[English] Adam Smith: Research on the Nature and Causes of National Wealth, Vol. 2, translated by Guo Dali and Wang Yanan, Commercial Press, 1974 edition, pp. 252–253. 39 Quoted from Mao Shoulong and Li Wenzhao: “Research on Government Functions and Management Methods”, http://www.wiapp.org/wpapers/wpaper200309.html. 40 [America] James M. Buchanan: “Freedom, Market and State—The Political Economy of the 1980s”, translated by Ping Xinqiao and Mo Fumin, Shanghai Sanlian Publishing House, 1989, p. 244.

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The World Bank’s 1997 Development Report states that governments should have at least five tasks: “(1) establish a legal basis; (2) maintain a non-distorting policy environment, including macroeconomic stability; (3) investment in basic social services and infrastructure; (4) protection of the less resilient; (5) protection of the environment.”41 The main content of service-oriented government is public service, everyone has reached a consensus on this point. The main contents of service-oriented government can be summarized, including the following aspects: First, the system provides services. Government exists as an institution of orderly governance. As the representative of order, the government must provide people and society with the institutional supply of social order, that is, to formulate an authoritative institutional framework or institutional model for the society that everyone must abide by. People need the government first and foremost to hope that the government can give people an orderly social environment. The establishment of this environment depends entirely on the government to provide a good system. For it is only under good institutional conditions that people can create wealth and seek personal happiness according to the rules. The government must provide the society with the system, implement the system and correct the outdated system according to the most basic and universal values of human beings, such as freedom, equality, justice, security, fairness, and prosperity. The government should also continuously promote institutional innovation according to changes in the social environment and natural environment. The government must provide the basic necessary system, rule framework and order maintenance for the operation of the market economy. The modern economic society is also a political system, and the functioning of the economic system is impossible without the rules of the game and the framework of economic life. Practice has proved: “The premise of a market economy is the protected property rights, the maintained transaction order and the disputes are effectively resolved, while the government provides security, order and fairness with institutional arrangements with economies of scale.”42 Second, provide good public policy services. Public policies refers to the principles, guidelines, strategies, measures and methods developed by the government through the political process in order to solve and deal with public problems, achieve public interests or public goals. The service-oriented government formulates public policies from the perspective of publicity, and formulates policies to solve the problems of stable social development and sustainable economic development. Some of these policies, such as environmental protection and social security, can directly bring benefits to people, and some indirectly bring benefits to every citizen by maintaining social and economic stability and sustainable development. After the government has established the basic system, its main service is to provide good public policy services.

41

World Bank: “World Development Report: Governments in a Changing World”, China Finance and Economics Publishing House, 1997, p. 4. 42 Zhang Chengfu, Dang Xiuyun: “Public Management”, China Renmin University Press, 2001 edition, pp. 59–61.

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Third, the provision of public goods. Public goods are relative to private goods, which refer to products that can be shared by the public. Theoretically, the nonrival and non-exclusive characteristics of public goods determine that they cannot be distributed through the market but can only be provided by the government. Because if they are provided by the market, the private person will not provide them, because the private provision has high cost and low utility for the provider. If the public pursues the maximization of their own interests, it will lead to the decline of the quality of public resources, which is not conducive to the stable development of society. Therefore, the government that seeks to benefit the public must take up the important responsibility of organizing and realizing the supply of public goods as a social manager and supervise the fairness and rationality of their use. However, government intervention does not mean that all products are directly produced by the government. For some public products or quasi-public products, non-governmental subjects can provide them according to actual needs and with the support of the government as much as possible, but the government must do a good job in organizing work. Fourth, the provision of public services. Paul Samuelson and William Northouse define a “public goods” as “goods that benefits every member of society as a whole, whether or not an individual is willing to buy it.”43 According to this definition, public services are public goods. It is generally believed that public service is the general term for the labor behavior of government agencies and their staff to meet social public needs and provide public products. In fact, it is to solve the problem of how the government provides institutional supply, how to adopt and formulate public policies and how to provide public goods. It mainly involves the procedures, attitudes, methods and methods of the government and its staff in providing public services. A service-oriented government requires government agencies and their staff to provide warm, fast, simple and thoughtful services to the parties in terms of service procedures, service attitudes, and service efficiency under the guidance of the service administrative concept, rather than treating them indifferently. Fifth, protect shared resources and natural resources. Common resources refer to those competing but non-excludable items, such as clean air and water, nonrenewable natural resources, which are closely related to our lives and lives (生活 和生命). The competitive and non-exclusive nature of common resources makes them vulnerable to predatory acquisition, which leads to the so-called “commons disaster”. Everyone cares more about their own things than other people’s things. In addition, the negative external effects of production and consumption behaviors of enterprises and residents make natural resources and the ecological environment extremely vulnerable to people’s destruction and pollution. Faced with this area of market failure, the government must protect shared resources and the environment through regulatory measures.

43

[America] Paul Samuelson, William Nordhouse: “Economics” 16th edition, translated by Xiao Chen, Huaxia Publishing House, 1999 edition, p. 268.

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Sixth, protect and maintain market competition. To some extent, the effectiveness of the market mechanism comes from the existence of effective competition in the market. However, due to the existence of monopoly, the effectiveness of the market mechanism is often difficult to exert. Therefore, monopoly must be prevented and regulated. Although the market itself has the need to prevent and regulate monopoly, it will form new monopoly actually, so the function of preventing and regulating monopoly can only be undertaken by the government. Seventh, safeguard social justice. Efficiency and fairness are the value goals pursued by any government, but if market competition is blindly to pursue efficiency, fairness may be lost. If the market mechanism is completely allowed to regulate distribution, it will inevitably lead to a widening disparity in income between the rich and the poor, and between the developed and the backward regions, which will lead to social polarization and pose a great threat to political and economic development and social stability. Therefore, the government must adjust income distribution and prevent excessive differentiation between rich and poor by formulating distribution policies and establishing a social security system.44

The Relationship Between the Theory of Service-Oriented Government and the Government Procurement Public Services A service-oriented government is a people-oriented government, a responsible government, a limited government, a legal government, a sunshine government, an efficient government, and a clean government. It is closely related to the system of government procurement public services, service-oriented government is the goal of government procurement public services, and government procurement public services is the way to realize service-oriented government. The goal of government procurement public services is to provide high-quality public services to the public, and providing high-quality public services is also an important responsibility of a service-oriented government. Therefore, the two share common goals and objectives. To achieve the goal of providing high-quality public services, a service-oriented government must have scientific and reasonable policies. From the previous analysis, it can be seen that the government procurement public services is the optimal countermeasure for various types of governments after continuous. exploration. The various service measures implemented by the service-oriented government are exactly what the government needs to procure public services. The two have common characteristics. Therefore, the service-oriented government theory is one of the theoretical sources for the government procurement public services.

44

Li Wenliang et al.: “Report on the Transformation of Chinese Government Functions”, China Development Press, 2003 edition, pp. 371–373.

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2.3 Practical Foundations As a new mode of public service supply under the guidance of the theory of “new public management” and “service-oriented government”, government procurement has profound historical inevitability, practical necessity and practical feasibility.

2.3.1 Historical Necessity To correctly understand and grasp the historical inevitability of government procurement public services, we must first understand public services and their historical evolution. Generally speaking, public services refer to various services provided by the government directly or indirectly to the public. The so-called direct provision refers to the production and provision by the public service department specially set up by the government; the so-called indirect provision refers to the government granting funds to the main body of public service production (undertaking), and the latter provides it to the public. The concept of public service is related to some kind of consensus formed by the whole society in some way. This consensus holds that certain services should be enjoyed by all in society regardless of their ability to pay. Of course, in some societies there are no public services directly provided or funded by the government, but things within the scope of this “public service” are often subject to special rules that differ from most sectors of the economy. The public generally believes that public service is very important to modern social life and ensuring its universal supply should be a moral obligation of a modern country. However, not all services are public services, such as hairdressing and beauty services are generally not considered public services, while fire and ambulance services belong to the public service sequence. Service is the act of helping others with specific needs. Among them, only the services that a certain scale and number of the public need to meet can be public services. From a human rights perspective, public services are closely related to basic human rights and are crucial factors in public life, such as water rights. In modern countries, the fields of public services generally include: radio and television, education, water supply, power supply, gas consumption, environmental protection, fire protection, medical care, military, police, public transportation, affordable housing, communications, urban planning, garbage disposal, etc. Some public services are public welfare, that is, non-competitive and non-exclusive; however, according to mainstream international standards, more public services are paid, that is, provided through the market. Public service is just a service, it does not involve the production of specific goods. The supply of public services has gone through the historical evolution process of “private supply”, “state supply” to “state and private cooperation supply”. The course of public service supply is the inevitable choice of history in a certain period, and

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it is also the inevitable trend of public service development, which has its profound historical inevitability. In the early days, public services were mainly provided by civil groups such as families, but with the emergence of the state, the state also began to provide a small number of public services. At the end of the nineteenth century, Western developed countries began to provide public services to the public. In the initial stage of providing public services in the country, public services were limited to municipal water supply and gas supply services, and later, such as electricity and medical services, were also provided by the government. Today, in most developed countries, although these public services are still provided by local or central governments, in the public service systems of the United States and the United Kingdom, non-governmental subjects are responsible for the production of most public services. However, this kind of public service produced by non-governmental subjects will be subject to certain regulations. Taking the United States as an example, the government has specially established a “public utility commission” to review and supervise public services produced by non-governmental subjects. In the vast developing countries, the supply of public services is not as good as in developed countries. The limited financial funds in these countries are more used for the performance of basic government functions rather than the performance of extended functions such as public services. In some countries, public services even become privileges possessed by the wealthy. After the Second World War, in order to make up for the wounds of the war, meet the needs of great economic development, and maximize production efficiency, countries implemented a series of central plans, and the “national supply” movement of public services began to prevail. Many public services, especially electricity, gas and public transport services, fall within the scope of central planning. Under the guidance and funding of the state, many countries have also begun to implement universal health care services and expand educational services. However, since the 1960s and 1970s, this “state-supplied” public service supply method has gradually become inefficient and incompetent. Governments of various countries have launched a campaign of “cooperative supply between the state and the private sector” in the field of public services. There are many ways to provide public services “cooperative supply between the state and the private sector”. Initially, countries generally set up a market-oriented company to provide some public services. The government did not completely give up control over the company, that is, the government had the ownership and final decision-making power over the company. Later, when the government set up its own companies to provide public services, it also let some companies willing to accept government regulation to provide services. Although these two supply modes break the government’s monopoly on the supply of public services to a certain extent, they are still supplied under the leadership of the government, which cannot form effective competition and cannot meet the needs of the people. Finally, countries have liberalized the control of companies that produce public services, that is, except for public services that the government cannot procure, the government can procure other public services from non-governmental subjects,

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and the supply of public services has entered a real state-private partnership era. Countries such as the UK, Australia and Canada all have successful practices and experiences in the provision of public services through cooperation between the state and the private sector.

2.3.2 Practical Necessity Scholars have various discussions on the practical necessity of government procurement public services. According to one scholar: “Once upon a time, public administration scholars were celebrating the fact that governments employed world-class experts in nearly every field: cartographers, chemists, engineers, lawyers, housing economists, librarians, policy analysts and food safety experts. However, there is no longer a large number of professionals within government today. Partly because of the large amount of new knowledge generated by social innovation after World War II, the complexity of government programs has increased dramatically, both in the public and private sectors, cannot be a master of all knowledge. Part of the reason is that governments demand for expertise and skills far outstrips the supply of experts due to shrinking government expertise and skills, and private employers can almost always win a bid over the government leaves the government with no choice but to take on private partners to help itself with its day-to-day work.”45 Some scholars also stated: “A basic consensus of existing research is that the reason why the government procurement of public services from social organizations has become a new model for the government to undertake public services is that the government is facing four aspects: first, the government is in the public goods. The inefficiency or even inefficiency in service provision has led to public dissatisfaction; the second is the rise and development of the new public management movement; the third is the continuous development and improvement of social organizations; the fourth is the growing demand for public services.46 From the discussion of scholars, the necessity of government procurement public services can be discussed from three aspects: the existing limitations of government production of public services; the possibility and comparative advantage of non-governmental subjects in producing public services; and the intrinsic value of government procurement public services. First, the government has its inherent limitations in producing public services. The necessity for government purchasing of public services stems from the lack of the ability of the government to directly produce public services, which has at least three aspects: First, the high cost of the government’s direct production of public services. If the government wants to directly produce public services, it must have 45

[America] Donald Celt: “Power Sharing: Public Governance and Private Markets”, translated by Sun Yingchun, Peking University Press, 2009 edition, p164. 46 Wang Puqu, [America] Lester M. Salamon, etc.: “Research on the Government’s Purchase of Public Services from Social Organizations: An Analysis of China and the Global Experience”, Peking University Press, 2010, p. 2.

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production activities; to have production activities, it must establish corresponding production institutions and hire certain staff. The establishment of corresponding production institutions and the employment of certain staff all require expenditure, which invisibly increases the cost of government production of public services. Second, the government is inefficient in directly producing public services. Under the supply system of government production of public services, the government is in a monopoly position in the production of public services and lacks effective competition, which easily leads to the lack of competitive pressure when the government produces public services, and then there are problems such as overstaffing, ignoring costs, and not paying attention to efficiency. Practice has also proved that the efficiency of the government’s direct production of public services is generally low. Third, there are still professional difficulties in the direct production of public services by the government. The supply of public services is not only a matter of government governance, but also a professional issue. That is to say, the supply of public services must not only require good policy measures, but also professional personnel to engage in the supply of public services. In a certain period of time, the number of people in the government who are engaged in the supply of public services is limited. It is impossible for the government to continuously increase the number of staff members with the expansion of the scope of public service supply, and it is even more impossible to increase the number of staff members for a certain professional public service. In this case, it becomes impossible for the government to perform some professional supply functions. Therefore, due to the limitation of the government’s ability to directly produce public services, the government must innovate and reform the public service supply mechanism in order to provide more and better public services. Secondly, undertaking the main body to produce public services has its realistic possibility and comparative advantage. The possibility of undertaking the main body to produce public services mainly depends on the market economy and the degree of development of the undertaking main body. The service products required for public services are generally large in scale, and sometimes have strong professionalism, and not all undertaking subjects have the ability to produce them. Only when the main body of public service undertakings develops to a certain extent, and there is a sufficient quantity and scale of supply of service products required by various public service needs, the possibility of providing public services to the society has practical operational significance. From the perspective of the government procurement public services, the possibility of undertaking subjects to produce public services is mainly related to the degree of development of the public service market. On the other hand, the public service is produced by the undertaker, and the comparative advantage is obvious. Compared with the main body of the government, the main body of undertaking often has the advantages of strong professionalism, superior quality and thoughtful service. Compared with the government, non-governmental non-profit organizations or for-profit organizations are able to provide more specialized and high-quality

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public services in countries with a higher degree of NGO development, because these organizations have the expertise to improve management efficiency and productivity. Finally, government procurement public services has its inherent unique value. The intrinsic value of government procurement public services is reflected in two aspects. First, government procurement public services is conducive to promoting the effective use of public financial funds and is conducive to the transformation of government functions. Governments all over the world are striving to establish a financial system that adapts to the needs of the market, decides financial expenditures on the premise of the public’s public service needs, and uses market failures as the basis for the use of government public financial funds. The use of government procurement public services allows those public services that the market can provide are provided by the market, and when the market does not work, the government’s financial funds are provided. Therefore, such governmentprocured public services are also referred to as “quasi-public services”. With the development of science and technology, the progress of society and the continuous expansion of public service demands, there will be fewer and fewer “pure public services” directly produced by the government, and more and more such “quasipublic services” will be procured by the government. The number and scope of public services will increase day by day. Second, from the perspective of social effects, government procurement public services is conducive to realizing the fair enjoyment of public services, thereby promoting social progress. When the government has limited financial resources, the public services directly produced and provided by the government often benefit only a few people, which is unfair to the majority; while government procurement public services effectively utilizes market resources, allowing more People can enjoy public services equally, even if they sometimes need to pay a certain price, but there is undoubtedly a big step forward in fairness.

2.3.3 Realistic Feasibility At present, in western developed countries, government procurement of public services has become quite common and has great practical feasibility. “In the 1990s, the United Kingdom took the lead in proposing the concept of public–private cooperation in the supply of public services and public goods. Subsequently, this concept was extended to the United States, Canada and other countries and put into practice. At the same time, the European Union, the United Nations, economic cooperation and development Organizations and international organizations such as the World Bank are also actively promoting the concept and experience of public–private cooperation in providing public goods and services on a global scale, and this wave has subsequently expanded to developing countries such as China.” Government procurement of public services is a typical way of supplying in cooperation between the state and the private sector.

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In recent years, the scale of government procurement public services has continued to expand, and its impact on the public has become greater and greater. Among them, the procurement of the “Star Community” probation service is particularly representative. There is a well-known child remedy agency in the United States called “Star Community”, which serves children with problems under the age of 18. “Star Community” is a non-profit, non-governmental organization founded in Michigan, U.S.A in 1918. Its service place is a privately donated manor, surrounded by ancient trees and green grass. The beautiful environment is very conducive to probation of troubled teenagers. Hundreds of juveniles with different degrees of crime are concentrated here. In serious cases, iron fences need to be set up at both ends of the dormitory. However, children learn in spacious classrooms, playrooms, libraries or outdoors, just like a school where they manage playrooms, libraries, dining halls and dormitories themselves. Through these activities, children experience the power of education first hand, and the results are obvious. These activities of the “Star Community” require a lot of expenses, and the government pays more than 100 U.S. dollars per child per day. Government funding accounts for more than 90% of the agency’s total expenditure, and the rest comes from social donations.47 The effect achieved by the government by procuring the probation service of the “Star Community” is more significant than that of the government’s own correction of problem juveniles. First, by procuring probation services from the “Star Community,” the government’s costs are much lower than those of its own juvenile prisons. Second, the “Star Community” is more humane in the education, service and management of children than the juvenile prison police. It is much better than the effect of police custody in juvenile prisons. In the United States, there are many such projects, including education, culture, health care, and especially services for special groups such as the elderly, children, the disabled, and orphans. The government is willing to purchase services from non-governmental subjects. It is no wonder that even American government officials admit that the public services provided by non-government subjects are highly efficient and the government is inefficient. The development of government procurement public services in Hong Kong, our country, has also been very successful. Hong Kong has always had a tradition of non-governmental subjects leading the entire social public service. However, the provision of public services by non-government subjects to society requires a lot of money. Where do these funds come from? According to statistics, in Hong Kong, about 70% of the total revenue of social services and welfare NGOs comes from government procurement of services, and only 30% comes from social donations and service charges. In addition, the education expenditure of government subsidies for nongovernment subjects running schools is also a very considerable figure. Nowadays, it is not easy to find public primary and secondary schools in Hong Kong, because only 6% of primary and secondary schools in Hong Kong are completely public, 4% 47

Xu Yongguang: “The Government’s Good Deals: Why Buying NPO Public Services”, http:// www.infzm.com/, accessed on August 20, 2013.

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are completely private, and 90% are government-subsidized associations. In Hong Kong, the Episcopal Church has 33 middle schools, 56 primary schools and 36 kindergartens.48 What deserves special attention is that a series of practices of the government procurement public services in our country also prove the feasibility of government procurement public services. In 1994, in Shenzhen, Luohu District first introduced the procurement of public services in the field of environmental sanitation, government procurement public services has achieved remarkable results, and many successful cases have been formed. The procurement content ranges from the initial procurement of public services in traditional fields such as education, public health, home-based care, and disabled services to the procurement of social management services such as culture, community development, urban planning, poverty alleviation, community correction, civic education, environmental protection, policy consultation, etc. Some places have also innovated to procurement content, such as legal services procured by the Pu yang Municipal Government in Henan Province; civil dispute mediation services purchased in Jiande and Longyou areas of Zhejiang Province; public services procured by the Government of Beijing Daxing District for calligraphy and painting lovers. The procurement of public services by the Chinese government not only enriches the content of procurement, but also increases the number of procurements. For example, from 2005 to 2007, the Pudong New Area government spent 22.282 million yuan, 41.973 million yuan and 59.55 million yuan on procuring services from non-governmental organizations.49 In addition, the procuring method also tends to be scientific. On December 19, 2005, the State Council Poverty Alleviation Office, the Asian Development Bank, the Jiangxi Provincial Poverty Alleviation Office and the China Foundation for Poverty Alleviation launched a pilot program of “nongovernmental organizations and the government to implement village-level poverty alleviation plans in cooperation with the government” in Beijing. Project”, which is the first public service procurement through a standardized procedure tender, marking the beginning of a standardized pilot for procuring services.

2.4 Basic Principles The basic principle of government procurement public services refers to the sum of abstract and universally instructive rules that must be complied with when procuring public services. From the perspective of procuring practice, the five basic principles that the government must abide by in purchasing public services are: the principle 48

Xu Yongguang: “The Government’s Good Deals: Why Buying NPO Public Services”, http:// www.infzm.com/, accessed on August 20, 2013. 49 Yang Jinzhi, Jiang Xiao, Ye Feng: “Shanghai Promotes the Development of Social Organizations Through “Government Procurement of Services””, http://www.gov.cn/jrzg/2007-12/19/content_8 38127.htm, December 6th, 2011.

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of cooperation and synergy, the principle of competition and benefit, the principle of responsibility and credit, the principle of legal reservation and the principle of due process. Since the principle of due process is the basic principle of administrative law, there have been many discussions in the academic circle, and a consensus has been formed, so this book does not study it, but only studies the principle of cooperation and cooperation, the principle of competition and benefit, the principle of responsibility and credit, and the principle of legal reservation. The basic principle.

2.4.1 The Principle of Cooperation and Coordination The principle of cooperation and coordination refers to blurring the traditional boundaries between the government and public service contractors in the practice and legislation of government procurement of public services, and to achieve the corresponding national governance goals through negotiation and coordination of the relationship between the government and public service contractors. Therefore,cooperation and coordination are the basic principles of government procurement of public services. This is the basic principle for government procurement public services. The main content of this principle is that in the relationship of government procurement of public services, the government as the main purchaser and the undertaker of public services are interdependent, perform their own duties, and share responsibilities, and are motivated by the market competition mechanism to provide efficient and high-quality public services honestly and constructively. According to the principle of cooperation and coordination, the government is not only a policy maker, but also a supervisor and a motivator of the production process of public services and should bear the ultimate responsibility for the fault of the undertaker to the public service objects. According to this principle, the undertaker should not only produce some kind of public service, but also understand the government’s intentions and responsibilities; not only pursue its own interests but also pursue public interests, undertake more obligations for the society, and help or assist the government to provide high-quality services. Public service and bear the corresponding responsibilities that may arise. The principle of cooperation and coordination, as the basic principle for government procurement public services, is rooted in the need for collaborative governance. In other words, collaborative governance determines the fate of government purchasing of public services and is the soul of government procurement public services. To explore the connotation of the principle of collaboration, we must trace the legitimacy of collaborative governance and its model characteristics. The legitimacy of collaborative governance can be summed up in one sentence, that is, collaborative governance is a transition from the perfect administrative system in the past to changing the administrative model to cope with new realistic choices to make when it comes to problems. At present, it has become an indisputable fact that the “top-down” government governance method is ineffective, and the problems of rigid

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rule-making procedures and inconsistent implementation of this governance method have also been criticized. At the same time, within this traditional way of governance and the theory it supports, it seems that people cannot find a solution to the problem. In response to the widespread “malfunction” of governance, some scholars have proposed to strengthen the supervision of public opinion agencies and judicial agencies over the discretionary behavior of administrative agencies, or to improve the decisionmaking of administrative agencies through more and better cost–benefit analysis, risk assessment, and hazard assessment, analytical basis, etc. Although these claims may not achieve the desired goals, they herald the clarion call for reforms in the way governments are governed. People began to have a heated discussion on the reform direction of traditional government governance methods, and new ideas and new words for various government governance methods can be seen everywhere. What people want to know, however, is where exactly is the right goal of government governance innovation? Although countries around the world have carried out many reforms including the recommendations, the goals and visions of government governance reform are still unclear, and evaluation methods are still lagging behind. In this way, the so-called reform may not only lead government governance in a different direction, but may even be in a completely wrong direction, which not only fails to solve the problems faced by traditional government governance, but even hinders the progress of government governance. In this context, people are no longer entangled in the debate on the restriction or expansion of administrative power but jump out of traditional thinking and put forward a new concept of collaborative governance model. The collaborative governance theory describes the vision of government governance, establishes the means of evaluating reforms, constructs innovative government governance models such as consultative administrative legislation, consultative administrative licensing, supervisory control mechanism. The core of the collaborative governance model is to solve the problems of traditional administrative inefficiency, abuse of discretion, and poor responsiveness of administrative procedures by means of cooperation between the government and non-government subjects. The characteristics of its governance model are: (1) Problem-solving oriented. The focus of collaborative governance is to solve governance problems, which requires that government and non-government subjects should share information, conduct joint research, and jointly solve in terms of citing, designing, and implementing creative solutions and related knowledge. (2) Administrative stakeholders are involved in all stages of the decision-making process. Different participants have different life backgrounds and value pursuits. Their active participation in different administrative stages can effectively solve the problem of single value setting in the original administrative decision-making and realize the democratic and scientific decision-making. (3) Solve the uncertainty of the administrative process. This requires participants to face up to the problems that arise in the administrative process and to design solutions to governance problems according to the actual situation. The government must establish a coherent monitoring and evaluation mechanism. (4) Responsibilities that go beyond the roles of government and non-government actors

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in traditional governance. Government and non-government subjects must rely on each other in the governance process and be responsible for their own actions. Establish new supervision mechanisms including self-monitoring, information disclosure, social supervision, and third-party supervision. (5) Administrative agencies are flexible and proactive. Administrative organs are the convener and facilitator of multistakeholders to negotiate and solve problems. By providing technical resources, financial support, and organizational support, when necessary, they can play the dual role of participants and system builders. In collaborative governance, the administrative agency can set lower and upper bounds for the solution of the problem, and is the final decision maker of the solution, but the administrative agency must also realize that the success of collaborative governance depends on the contribution of other participants. Of course, the principle of synergy also faces some challenges in theory and practice. The principle of cooperation and coordination requires that in the process of government procurement public services, unreasonable governance methods must be corrected, and the traditional thinking of choosing between restricting the discretionary power of administrative organs and respecting the discretionary power of administrative organs must be corrected. The perspective of cooperation requires a rethinking of the relationship and responsibility between government and non-government subjects in the process of government procurement public services. Because the goal of government procurement public services is to focus on establishing a problem-oriented, creative, adaptive and participatory public service governance system. However, since the reasonable sharing of responsibilities between government and non-government subjects in government procurement public services has not been clarified, and a new accountability mechanism has not been established, many disputes have also arisen. At the same time, because of too much reliance on various standardized analysis indicators when choosing to undertake the subject, the nature of cooperation has been changed, so the meaning of cooperation between government and non-government subjects has been lost.

2.4.2 The Principle of Competitive Benefit The principle of competitive benefit of government procurement public services means that the market competition mechanism should be play a role in government procurement public services, and the optimal allocation of resources in the field of public services should be achieved through competition, so as to achieve the optimal state of benefit. Government procurement public services is a measure of the marketization of public services and the corporatization of government public service management. Taking market competition and efficiency as the basic principles for government procurement public services, the main goal is to overcome the problems of low efficiency and poor quality of public services brought about by the government’s

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monopoly on public services, and its core is to take advantage of the incentives of market competition mechanism. The principle of competitive benefit of government procurement public services can be summarized as follows: when the government procurement of public services is from the market, all public service undertaking subjects have equal status, and the government, as the purchasing subject, should only determine the counterparty according to market factors; All legislation and law application processes are open and transparent; All operations comply with the rules and are supervised. The competitive benefit principle of the government procurement public services has a profound theoretical foundation-market competition theory. While the idea of market competition cannot tell people exactly what to do, it can immediately explain what is wrong and what should be done to remedy it. If a set of perverse incentives causes the problem, the key to solving the problem is to change those incentives. The theory of market competition holds that if it is a problem in the public service field, the way out of the predicament is not to encourage the government to increase the budget to reward the government bureaucracy but to replace its monopoly practice with solid competition. Scholars have conducted fruitful research on the relationship between the government and the market. Researchers often advocate “reinventing government” by inspiring a new entrepreneurial spirit. They seek a vibrant government powered by a new engine which is the competition. “Corporate governments will find that when organizations have to compete for funding, they will reduce costs, respond quickly to changing needs, and do their best to keep citizens happy.”50 The researchers also believe that the problem is not that the government is too big or too small. The fundamental problem is that we have the wrong form of government. What we need is not a bigger or smaller government, but a better government. This goal needs to be achieved by promoting competition among service providers. Competition can be empowered to citizens by empowering them to choose and creating the necessary incentives for government employees. Some researchers argue that the government is too big and should be reduced. At the same time, they believe that projects that must remain in the hands of the government should also be contracted out, and the government must regulate them through market competition. No matter what the focus of scholars is, they are consistent in emphasizing the role of the market and competition; that is, they emphasize the use of the market instead of government control, the use of competition instead of commands and control powers, changing the ways the government operates, and making the work of the government become more commercial. From a practical point of view, the above theories of the market and the government have genuinely influenced the government’s policies and behaviors. For example, during the Reagan administration, a report from the U.S. Office of Management and Budget clearly stated this view: competition is the driving force behind the quality of private sector operations and the economy. Managers in the private sector are always challenged by competitors who risk knocking them out if they don’t operate in the

50

David Osborne, Ten Ways to Turn D.C. Around The Washington Post Magazine, 1990: 42–50.

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most efficient way possible. And when the government advocates a performancebased management model to serve its customers, this constant competitive pressure will force them to be innovative and flexible in their operations. In regular operation, government managers do not experience the efficiency pressures experienced by private sector managers. They have few comparable standards and face constant competitive threats. However, government managers repeatedly encounter legislative and financial constraints that prevent them from operating effectively. Competing with the private sector first highlights inefficiencies in government and then helps the government identify the need for change and decide whether to shrink it and make it more efficient or whether the private sector can deliver services more efficiently.51 The competitive benefit principle of government procurement of public services also benefits from comparing the market and the government. In the West, people have always advocated freedom, worshipped the market, and had a natural resistance to public powers. It is generally believed that the value of the market lies in the pursuit of efficiency, while the government often leads to laziness and the market can ensure that people have the right to choose in terms of product quality and price, but the government can only provide high-priced products; the market offers competitive energy which Stimulate people to innovate but the government only provides monopoly and old-fashioned. Therefore, the most effective way to criticize the government in the West is to make various comparisons between the government and the market. Critics argue that government agencies will foster slack without competition, and their employees have little incentive to innovate, manage costs, or deliver services efficiently. In contrast, the market is always alert, intelligent, agile, and efficient. According to inertia, the government is always committed to its expansion without considering the availability of resources because the wasted resources do not need to pay for them; and competition will make the owners of the private market clear their bottom lines. “Government bureaucrats are rewarded not for increased productivity, but increased budgets; not for increased responsiveness, but expanded power.”52 These claims have always been powerful and appealing because they explain not only why public power is so difficult to rein in and why government spending increases, but also why sometimes deviate from the needs of citizens and why officials exert so much control over government staff. Most importantly, it can explain why governments don’t work well. This theory incorporates many observations and fits well with the anti-government complex of the people.

51

Office of Management and Budget, Enhancing Governmental Productivity through Competition: A New Way of Doing Business within the Government to Provide Quality Government at Least Cost,1988:12. 52 Donald Celtic, Power Sharing: Public Governance and Private Markets, translated by Sun Yingchun, Peking University Press, 2009, p. 1.

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The principle of competitive benefit also has challenges from practical effects. While aggressively advancing the process of government procurement of public services, the astonishing waste, fraud, and misconduct of government programs often involve the greed, corruption, and often criminal activities of private government partners that weak governments fail to detect in time and correct these problems.53 If the resolution of the government’s issues relies on non-government entities, and the government has been increasing its partnership with non-government entities, why does this problem persist? And, why does this problem become more complicated? The U.S. Office of Management and Budget admits that: Civil society does not pay enough attention to contract management (for example, giving corresponding guidance, training, etc.). They focus on the issue of attribution of the purchase contract rather than the various rules and regulations that ensure compliance with the terms of the contract or guarantee performance when the contract is obtained.54 These challenges are real, but understanding these facts is related to the appropriateness of market competition and efficiency as the basic principles of government procurement of public services. The relationship between the government and the main body cannot be managed only by itself but must be actively managed through a competitive and robust government. At the same time, it should also be noted that although competition can improve efficiency, it does not always do so. Efficiency is one of the goals in government which is only one of many goals in the pursuit of public interests by government. Competition does not necessarily promote but sometimes even hinder the achievement of other goals, which are as important as public interests and sometimes even more important than the benefits. Many of the problems in government today are primarily not due to trying out competing concepts, but rather that the government is not intelligent enough to understand and follow these competitive concepts. In fact, it is not the fault of market and competition theory that many of the complaints people have made are precise because some governments have become increasingly reliant on non-governmental entities yet cannot manage such partnerships, leading to chaotic results.

2.4.3 The Principle of Responsibility and Credit Principle of Responsibility and Credit refers to the behaviors, products, decisions, and various policies and measures formulated and implemented by persons in a specific position or position within the scope of their position or position responsibilities. Responsibility for response and punishment. The principle of accountability and credit for government procurement of public services means that in the 53

Paul Staff, The Limits of Privatization. In Steve H. Hanke, ed., Prospects of Privatization (New York: Academy of Political Science, 1987) Paul Starr 1988:56. 54 Office of Management and Budget, Summary Report of the SWAT Team on Civilian Agency Contracting: Improving Contracting Practices and Management Controls on Cost-Type Federal Contracts, Shring Power Public Governance and private Markets. Donald F. Kettl, 1992:34.

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relationship between government procurement of public services, the government and public service undertaking entities should assume corresponding responsibilities within their respective duties. The principle of responsibility and credit is similar to the commonly used “accountability principle”, but its connotation is richer and more accurate. Scholars have classified the principles of responsibility and honor into eight categories: moral obligation, administrative responsibility, political responsibility, management responsibility, market responsibility, legal or judicial responsibility, election relationship responsibility, and professional responsibility.55 Each responsibility credit directly or indirectly relates to the government procurement of public services. The research on the Responsibility and Credit Principle was prevalent in the 1960s. At that time, the principle of responsibility and credit did research from the core issues of responsibility and credit principle, the behavior that needs excuses and reasons. Many famous researchers such as Marvin Scott, Stanford Lyman, Stephen Soroka, etc., published many influential articles. In recent years, when discussing the legitimacy of international institutions, the principle of responsibility and credit has become an important topic again.56 Because no international organization is accountable to the global democratically elected authority for which it is responsible, international organizations have been blamed for the existence of a credit gap in responsibility. The first to raise the banner of this research was a group called “One World Trust, “in its “The Charter 99 for Global Democracy”, the organization proposed for the first time that research and observe the principles of accountability for those intersecting sectors that have an impact on people. The issues they studied including: In a global context, to whom should international organizations such as the World Bank and the International Monetary Fund be held responsible? Is it accountable to the countries that invested informing them, or to the countries it invested in funding? For another example, in the debate on global justice, cosmopolitans advocate giving more responsibility and credit to those traditionally marginalized in society and developing countries; while nationalists reject universalism and believe that the beneficiaries of global development have no substantive power to hold international organizations accountable to them. In its first round of research from 2006 to 2008, the “World Common Trust Organization” published the Global Accountability Credit Accountability Report, which was an attempt to assess the ability of international organizations to assume accountability and credit obligations to their “shareholders.” Currently, the Principle of Accountability and Credit is becoming an increasingly important principle in the nonprofit world, with many NGOs signing the Global Charter for accountability, credit, and accountability in 2005. In the humanitarian field, movements such as HAPI have emerged. Individual NGOs have established their accountability systems, such as ALPS (Accountability, Learning, and Planning System of Action Aid). All in all, there is a growing awareness of the 55

Jabbra, J. G. and Dwivedi, O. P. (eds.), Public Service Accountability: A Comparative Perspective, Kumarian Press, Hartford, CT, 1989:59. 56 Grant, Ruth W.; Keohane, Robert O. “Accountability and Abuses of Power in World Politics”. American Political Science Review 99 (1), 2005: 28–43.

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importance of the principle of responsibility and credit. Viktor Frank, in his book Man’s Search for Meaning, even suggests that “a statue of a responsible man should be installed on the west coast of the United States to complement the Statue of Liberty on the east coast.”, believes that “freedom is not the final word, freedom is only a part of things and half of the truth, it is only the negative side of the whole phenomenon, and its positive side is responsibility. In fact, if you don’t live according to responsibility, freedom will be in danger of falling into sheer willfulness.”57 In the government procurement of public services, there is a problem of overlapping responsibility and credit between the government and the main body of public service undertakings. With the increasing number of public services produced by non-governmental entities, people have begun to call for more and more responsibility and credit mechanisms to be applied to public service providers. It is believed that in some public service areas, the boundaries between public and private are becoming more and more blurred. Suppose the principle of responsibility and credit is not uniformly applied. In that case, there will be gaps in accountability and recognition in these areas, which will jeopardize these areas’ political commitment and credit principle. Therefore, there must have some administrative law reforms to fill these gaps.58 In China, since the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Interim Provisions on Implementing the Accountability of Leading Party and Government Cadres” in 2009, the word “accountability” has been “legitimate” in our political and legal life. However, its meaning has not been clearly defined in the document. The document’s contents can be seen as a new term for “accountability.” It is believed that the accountability system “refers to the performance of the duties and obligations undertaken by the accountability subject to the organizations and members (institutions) at all levels within its jurisdiction, and implements and requires them to bear negative consequences.” A system of accountability—Accountability in legal terms is called the pursuit of legal responsibility. According to the constitution and the law, the government and its civil servants must bear the burdens that should be borne by it (they), including moral responsibility, political responsibility and legal responsibility. At the same time, the government must also accept Internal and external oversight to ensure accountability.59 In the procurement of public services by the government, we must specifically study the difference between our country’s regulations on accountability and responsibility credit. In the field of government procurement of public services, who should undertake the responsibility and credit obligations and who enjoys the responsibility and credit rights, that is, who should be held accountable and responsible, are the issues that scholars debate the most. According to the existing practice, if the responsibility and credit rights are left to government agencies, and non-governmental entities assume 57

Frank, Viktor Emil. Man’s Search for Meaning, 1956. “Oxford law—the faculty and its members: anne davies”. Competition-law.ox.ac.uk. http://www. competition-law.ox.ac.uk/members/profile.phtml?lecturer_code=daviesa. 2012-01-26. 59 http://baike.baidu.com/view/851649.htm. 58

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the responsibility and credit obligations. There is a suspicion that the government is evading responsibility and putting aside public service objects which couldn’t embody the purpose of service? Suppose the responsible credit rights are allocated to public service objects according to the market responsibility credit approach, and the public service providers including the government and non-government entities assume the responsibility and credit obligations. In that case, the government restricts the producers of public services. The non-governmental entities will not be qualified to be accountable, and the public will be confused with wielding power. Therefore, the responsibility credit system should also be innovated in accordance with the spirit of the principle of responsibility credit for the new public service governance model, such as government procurement of public services. The author believes that a hybrid responsibility credit principle should be established in the field of government procurement of public services. That is, a market responsibility credit system should be established between the government and the public service undertaking body, and an administrative responsibility credit system should be established between the public service objects and the undertaking bodies. For the former, we should follow the market competition mechanism and make the judgment according to the responsiveness of the public service demands and the quality of the service. For the latter, the public service undertaking body should be regarded as a qualified administrative accountability body, which can be undertaken independently or together with the government administrative responsibility and fiduciary duty.

2.4.4 The Principle of Legal Reservation German thinkers put forward the principle of legal reservation in the nineteenth century, and it is the product of German “rule of law” thought. The idea of the rule of law emphasizes that the law governs the country, and there is no administration without law in the relationship between legislation and administration.60 The concept was first proposed by Otto Meyer, the father of German administrative law. According to Meyer’s classic definition, a legal reservation refers to the exclusion of the executive’s self-action within a specific scope. Essentially, the principle of legal reservation determines the legitimacy of administrative actions and the degree of administrative autonomy. That is to say, all matters that the Constitution and the law stipulate can only be stipulated by law or can only be specified by administrative organs if the law has express authorization.61 Otherwise, the public will question the executive organ’s legitimacy of any administrative activities. As the basic principle of administrative law, the principle of legal reservation is of particular significance for administering according to law and building a country 60

Yang Jianshun, editor-in-chief, Comparative Administrative Law: A Study on the Principles and Empiricals of the Law of Payment Administration, Chinese University Press, 2008, p. 107. 61 Zhou Youyong, “Research on the Basic Principles of Administrative Law”, Wuhan University Press, 2005, pp. 187–188.

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under the rule of law. As a model of government governance, government procurement of public services must naturally follow the principle of legal reservation. The key to whether the government procurement public services can realize the system’s value is to define the boundary of the procured content. This is because the wide procurement range will inevitably increase or exceed the national financial burden, thereby affecting the development of the national economy and harming the interests of citizens. On the contrary, if the purchase scope is too narrow and cannot meet the legitimate needs of the public, it isn’t very meaningful to establish a system of government procurement of public services. Therefore, it is necessary to scientifically define the scope of the government procurement of public services. Therefore, we must solve the problem of “how to define”, which is the process of applying certain standards and principles. The principle of legal reservation is the basic principle that must be followed to define the scope of purchase. Essentially, the principle of legal reservations for government procurement of public services is a matter of defining the scope of procurement. There is a considerable disagreement in administrative law theory on whether the principle of legal reservations involves all or part of the administrative field. There have been various theories such as “infringement reservation theory,” “all reservation theory,” and “important matter reservation theory.” The “infringement reservation theory” is the core content of the classical theory of legal reservation principle, which was formed in Germany in the nineteenth century and became popular in civil law countries. This theory holds that the administrative power infringes upon the rights and freedoms of citizens, the deprivation of property rights and the burden of obligations should all be clearly stipulated by laws.62 As for the payment administration, the executive power still has its independence. However, with the expansion of the protection scope of citizens’ rights and the increase of administrative payment behaviors, this theory is not suitable for the requirements of the times. The “all reservation theory” emphasizes that sovereignty rests with the people, and believes that all the state’s power comes from the people. Therefore, all actions should be governed, guided, and regulated by the will of the democratic legislator, based on the laws formulated by the representative organs of the people. That is to say, no matter whether the administrative act is to infringe the administration or to pay the administration, there should be a legal basis. This doctrine fully respects the people’s representative organs. Still, it ignores the on-site, timely, changeable, and innovative characteristics of administrative actions, which is not conducive to the expected results of administrative actions. The German Federal Constitutional Court put forward the “reservation theory of important matters” in a series of judgments in the 1970s. This theory holds that the administrative field of interference with people’s freedom and property should be reserved by the application of the law and payment administration. All-important basic decisions concerning the realization and exercise of the people’s basic rights and public interests, especially those affecting common life, should be regulated by the Congress, which has a directly democratic basis by its own laws. At the same time, in special power relations, although the legislators 62

Weng Yuesheng: Administrative Law, China Legal Publishing House, 2009, p. 193.

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do not have to regulate all specific matters, the important decisions must still be stipulated by laws. That is to say, whether it is to intervene in the administration or to pay the administration, as long as it involves “important basic decisions”, it can only be stipulated by legislation, and the executive power cannot act freely. Scholars hold different views on whether the principle of legal reservation applies to the government of public procurement of services. Some people think that government procurement of public services is to pay the administration without intervention; some believe that government procurement of public services is to deliver the administration, but it is still necessary to intervene. The author thinks the latter point of view is more reasonable. Even in the payment administration, if no boundary is set, the government may set the procurement range according to its preference rather than setting the range according to the needs of the public. Among the various theories, the “important matter theory” is more in line with the requirements of the government’s procurement of public services. Some critics believe that the theory lacks clear standards for “what is important” and with low operability. In fact, the theory has applicable essential value in the government’s procurement of public services. First of all, the theory overcomes the shortcomings of the intervention reservation and the total reservation theory.63 That is, it is difficult to emphasize all or part of the intervention in the government’s procurement of public services. Secondly, for a thesis, there is no “best,” only “relatively better”, and “reservation of important matters” at least points out a direction for the theoretical and practical circles to think. Finally, the practice circle has generally accepted the theory because in individual cases, the reservation of essential matters can be embodied. In fact, the academic and practical circles have been carrying out the materialized process. According to Taiwan scholar Xu Zongli, the important criteria of public affairs include: (1) The size of the scope of the regulated person. Usually, the broader the range of regulated persons, the more significant the impacts of the regulation on the public, and the more critical it is to public affairs. (2) The effect is long-lasting. Usually, the more long-term influence, the more necessary it is for public affairs. (3) The impact of finance. Any experiences that require huge state funds are generally important for public affairs. (4) The strength of public controversy. Any matter that has or can be expected to cause public controversy in forming public opinions usually has the importance of public affairs, and the stronger the controversy, the more critical it is. (5) The magnitude of the change in the status quo. The greater the change, the greater the controversy it will cause, the more necessary for open and detailed discussions, and the more essential for legal reservations. (6) Compared with the current laws, in other words, for a particular issue or matter, if the legislator has decided to stipulate it by laws because of its importance, and faces a new issue or new matter of the same or similar contents today, he should equally affirm its importance.64 In addition, the implementation details and specific implementation methods, etc., or involving a high degree of professionalism or expertise are not essential matters, and the administration can

63 64

Weng Yuesheng: Administrative Law, China Legal Publishing House, 2009, p. 193. Hsu Chung-li, Law and State Power, Yuedan Publishing Company, Taiwan, 1993, pp. 189–191.

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act freely.65 Therefore, it is not impossible to determine what is an important matter, and there are still better judgment standards in practice. The definition of the scope of the government’s procurement of public services can also be defined by the criterion of “important matter theory”. However, due to the different political systems of various countries, the provisions on the legal reservation of government procurement of public services are different. For example, the US regulations, including prison management and other behaviors that the government must perform in other countries, can all be in the form of government procurement. Two problems should be solved regarding the principle of legal reservation for government procurement of public services. The government must procure what is required by laws; the other is that the government cannot buy what is not allowed by laws. These basic principles of government procurement of public services are the basic principles that must be followed in government procurement activities. They run through the whole process of government procurement activities and have universal guiding significance. The correct understanding and application of these basic principles can overcome the unclear national laws and regulations and better implement the various government procurement systems of public services. Of course, different directions have different guiding focuses, and the application must be based on the actual situations with comprehensive and coordinated utilization.

65

Weng Yuesheng: Administrative Law, China Legal Publishing House, 2009, p. 194.

Chapter 3

Statutory Boundaries for Government Procurement in Public Services

The boundary problem of government procurement of public services is the problem of the scope of government procurement of public services, that is, which public services can be procured by the government, which cannot be bought, and which can be purchased or not purchased. Only by clearly defining the boundary of the procurement of public services can the government make correct procurement. This is because if the scope of government procurement is too wide, it will inevitably increase or exceed the financial burden of the state, thereby affecting the overall development of the country, and ultimately harming the interests of the people; on the contrary, if the scope of procurement is too narrow, it cannot meet the legitimate needs of the people. Then it isn’t very meaningful to establish a system of government procurement public services. Therefore, the boundary problem is the source and core problem of the government’s procurement of public services. It is also the key to the realization of the institutional value of the government’s procurement of public services. For this reason, the academic and practical circles at home and abroad have attached great importance to the research on the boundary problem of government procurement of public services and have achieved specific results. Nonetheless, there is still a gap between the research results on the boundaries of government procurement of public services and the scientific requirement to define the boundaries clearly. Because of this, scientifically defining the boundaries of government procurement of public services is the only choice for academics and practitioners.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 X. Xiansheng, Public Procurement in Chinese Law and Practice, State Governance, https://doi.org/10.1007/978-981-99-1047-2_3

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3.1 Theoretical Analysis 3.1.1 The Meanings of “Public Service” In recent years, although “public service” is a popular word in China, scholars have not reached a consensus on its connotation. In the traditional theory of Western countries, the concept of “public goods” has been used to interpret “public services,” and the characteristics of public goods are used to deduce the characteristics of public services. Samuelson summed up the “non-exclusive, non-rival” characteristics of public goods in consumption in “A Pure Theory of Public Expenditure,” which has become the classic definition of the theory of public goods in the West. Buchanan further proposed the theory of quasi-public goods in his book “The Economic Theory of Clubs”, which classified those goods that could not satisfy both of the two conditions proposed by Samuelson but could satisfy one of them, and believes that “the goods and services financed by the public in the financial system rarely show the pure publicity here. Even the classic case that best reflects the pure publicity—national defense—is no exception.”1 Chinese scholars have also studied the connotation of public services and put forward the “public goods theory”, “public interest theory”, “human rights theory”, “government responsibility theory”, “public behavior theory”, and “welfare theory”, etc. Theory of public goods. When studying the connotation of public services, some scholars take the study of public goods as a logical starting point and believe that public services belong to the category of public goods. For example: “Public services belong to the category of public goods and are non-competitive and non-exclusive social services.”2 The theory of public interests. That is to take the public interest as the basis for defining public services. The public interest is the core value of the public service which can conform to its natural form only when it is connected with the public interest. For example, “Public services can be defined as activities that provide various goods (tangible and intangible) intending to maximize public interests. That is to say, the attributes of goods do not limit public services. Anything can be provided as a public service when the need arises.”3 The theory of human rights. From the perspective of political science, some scholars “divide state affairs into sovereign affairs and human rights affairs, and divide government behavior into sovereign behavior and human rights behavior. Sovereign behavior means ruling, and the most extreme form is the implementation 1

James P. Buchanan: Demand and Supply of Public Goods, translated by Ma Jun, Shanghai People’s Publishing House, 2009, pp. 47–48. 2 Gao Xincai and Zhang Ziyao, “Innovative Solutions for the Supply of Rural Public Services in Underdeveloped Areas”, in Social Science Journal, No. 7, 2006, p. 8. 3 Han Xiaowei and Yin Luanyu, “Analysis of the Concept of Basic Public Service”, in Jianghan Forum, No. 9, 2010, p. 44.

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of control. Human rights behavior is safeguarding. The most basic form is the provision of services.” Therefore, it believes that “the realization of universal human rights is the value basis of public services. Public services are activities to safeguard basic human rights, which are different from activities to exercise national sovereignty.”4 This doctrine directly excludes sovereign affairs from public services. The theory of government duty. Some scholars believe that public service is the responsibility of the government. For example: “Public services mainly refer to the responsibilities undertaken by legally authorized governmental and nongovernmental public organizations and relevant industrial and commercial enterprises in the production and supply of pure public goods, mixed public goods, and special private goods.”5 Theory of public conduct. This theory emphasizes that public service is the general term for developing and maintaining public interests to safeguard and promote fairness based on public goods with all tangible or intangible goods provided by the government through flexible mechanisms and methods.6 The theory of welfare. Treat public service as a benefit. For example: “Public service refers to the government’s use of its authoritative resources to respond to social needs through public policies based on specific public values (such as rights, charity, and justice) so that the greatest number of people receive the greatest benefit.”7 The above theories are based on different theories and perspectives to make different interpretations of the connotation of public services. It reflects the process of people’s cognition of the connotation of public service, and it cannot simply be regarded as right or wrong. However, what is certain is that each doctrine has both sound sides and flaws. Although “public goods theory” can reveal some characteristics and values of public services, “goods” and “services” are two different forms through its surface, and public goods themselves cannot replace public services, public services contain certain value judgment factors through more profound analysis, while public goods lack value judgment factors. “Public interest theory” describes one of the essential characteristics of public service. Still, it cannot reflect the connotation of public service, and what is “public interest” itself is difficult to define. It is also unrealistic to exclude sovereign affairs directly from public services in the “Human Rights Doctrine.” Sovereign affairs are the basis for a country to provide a safe social environment for the people. Therefore, sovereign affairs should also be the content of public services provided by the state. “According to the function of public service, public service can be divided into public maintenance service, public economic service and public social service. Maintenance public service is the most basic aspect of public service. Maintenance public service is also known as 4

Bai Liangze, “The Theory of “Public Service”,” in China Administration, No. 2, 2008, p. 18. Ma Qingyu, “Several Basic Theoretical Issues in Public Service”, Journal of the Party School of the Central Committee of the Communist Party of China, No. 2, 2005, p. 59. 6 Zheng Xiaoyan, “Research on the Diversified Development of China’s Public Service Supply Subjects”, Shanghai People’s Publishing House, 2012, p. 16. 7 Chen Zhenming: Introduction to Public Service, Peking University Press, 2011, p. 13. 5

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“sovereignty public service”. “Public services” that ensure the existence and normal operation of the state apparatus, such as the general administration of the government, the enforcement of laws, and the maintenance of national security and order.”8 The “Government Responsibility Theory” defines public service as the government’s duty. This doctrine only reveals the static side of public service, but fails to reflect its dynamic side, because “responsibility” is only the solidified content of the government’s legal existence. Although “public behavior theory” and “welfare theory” are discussed from the perspective of the dynamic characteristics and outcomes of public services, they lack system and integrity. Many theories also reflect that it is indeed difficult to understand the connotation of public service to a certain extent. Even scholars themselves have different definitions of the connotation of public service in different periods. The representative of “Human Rights Theory” also recognizes the method of defining “public interest” and believes that only from the perspective of “public interest” can the ideal theoretical side be achieved. “The nature of the goods does not limit public goods. When the social situation or living conditions are related to public interests, any goods can be provided by the government as the content of public services.”9 We can see that although Chinese scholars have achieved great success in the research on the connotation of “public services”, a consensus has not yet been formed. The author believes that public services should be defined from the perspective of public law. That is, public services refer to services provided by the government using public resources to meet the general needs of the unspecified majority population in a specific area in a particular period. Government procurement of public services is one of the ways the government provides public services, and it is a new model of government governance.

3.1.2 The Enlightenment of Extraterritorial Definition Historically, the role of government public service has always changed with the transformation of government functions.10 Changes in the role of government directly affect the procurement of service boundaries. Western countries pursued liberal economic policies in the early stage of capitalism, believing that the market could involve all public services. The key depends on the possibility of institutional arrangements and the government’s choices. It has led to the fact that the market mechanism has attached a great importance on providing public services in Western countries, while the government only plays the role of a “night watchman.” As the outbreak 8

Shi Guoliang, Zhang Chao, Xu Xiaoliang, et al., Theory and Practice of Foreign Public Service, China Yanshi Publishing House, 2011, pp. 15–16. 9 Bai Liangze, “The Logic and Perspective of Public Service Research”, in Chinese Cai, No. 3, 2007, p. 30. 10 Shen Ronghua, “On the Innovation of Government Public Service Mechanism”, Journal of Beijing Institute of Administration, No. 5, 2004, p. 12.

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of a great economic crisis in the twentieth century, the policy was unable to adapt to the needs of the times. Therefore, Keynesianism, which advocated state intervention, gradually emerged. Although the state intervention policy can avoid the blindness of the liberal economy, it also brings many problems. The role and production of the government in the field of public services are all taken over by the government. Still, the government’s supply capacity and level are under increasing embarrassment/financial pressure. Due to the constraints of the government management level, it is impossible to efficiently provide a wide variety of public services to the public. The people are deeply dissatisfied with this, and many social problems arise. Since the 1980s, western countries have carried out administrative reforms and transformed government functions in this context. Government procurement of public services is one of the reform measures. In theory, all public services that can be quantified and are in the public interests can be procured. Therefore, Western countries generally do not make definite provisions on the purchase boundary of public services; that is, do not make general specific provisions, but only general, abstract and universal provisions. When determining which public services need to be provided by the government, it is generally depended on the public service management department through democratic procedures and a case-by-case approach. Taking the United States as an example, most of the public services in the United States, except for defense department, which is under the federal government’s jurisdiction, are primarily local affairs of the states that are under the jurisdiction of the states. Each state has established a department specifically responsible for public service administration. These public service management departments all announce the public services provided by the state in a specific way. In practice, it seems that there is no public service that cannot be procured. The key is whether the conditions are suitable and conducive to saving financial expenses and improving the service satisfaction rate. However, this does not mean that Western governments’ procurement of public services is free of scope and border requirements. In fact, the governments of these countries still have to follow basic principles and implement specific standards when procuring public services. However, due to the different national conditions and practical problems each country faces, they have other choices for defining the boundaries of procuring public services. Some countries urgently need to solve financial problems. Therefore, their borders are mainly set around saving monetary funds. For example, in the United States, “In the 1970s, the ability of public service provided by government continued to decrease caused by U.S. government’s fiscal deficit. On the contrary, the public’s demand for public services increased. The government’s financial crisis was the root cause.” 11 Some countries face the problem of low quantity and poor quality of public services, therefore, its boundary-setting mainly revolves around enriching the variety of public services.

11

Wang Shuwen, “Marketization Reform of Public Services and Government Control Innovation in China”, People’s Publishing House, 2013, p. 140.

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The boundaries of government procurement of public services in Western countries mainly include “standards of the importance of government functions” and “standards of people’s livelihood”. “Criteria for the importance of government functions” means that defining the boundaries of government procurement of public services mainly depends on whether the service is an essential core function of the government. If it is, it cannot be purchased. Otherwise, it can be purchased. For example, in the United States, the criterion for judging whether public services can be procured from social organizations is whether the function is an “essential government function”. Except for essential government functions, the government can procure the services of social organizations. According to the Federal Procurement Administration’s Policy Order No. 92, the so-called essential government functions “refers to a function of the government that is closely related to public interests and should be performed by government civil servants.” The specific contents include criminal investigation, public prosecution and judicial function control (excluding arbitration and other alternative dispute resolution), foreign affairs, military command, command and management of federal civil servants, command and control of intelligence and counterintelligence activities, and decisions on the selection of civil servants, etc. 19 item content.12 The “people’s livelihood standard” is based on the degree of closeness between public services and people’s livelihood. For example, France classifies social and public service projects and determines the depth and breadth of procurement based on their importance and criticality about people’s livelihood.13 Although different countries set different procurement boundaries based on different problems to be solved, it is indisputably that the government is purchasing more and more public services. Under the call of the Western New Public Management Movement to return to the free market, the provision of most public goods in Western countries has been completed by the market, even if the government still provides pure public goods such as national defense and currency. In contrast, the government provides almost all quasi-public goods. Let the market produce and deliver, decoupling the financing of public services from delivery.14 Even the prisons that we have always regarded as the emblem of the state apparatus can be procured from the market in the United States. Supervision services have become an industry in the United States. 31 states and the federal government have signed escrow agreements with private prisons. There are 185 private prisons nationwide, accommodating 285,000 prisoners. Therefore, the connotation of the government’s procurement of public service boundaries in Western countries is dynamic rather than static. It changes with the problems that the country needs to solve.

12

Li Haiping, “Government Purchase of Public Service and Countermeasures: A Case Study of Shenzhen Municipal Government’s Purchase of Social Work Services”, Journal of the National Academy of Administration, No. 5, 2011, p. 96. 13 Zhang Ruli and Chen Shujie, “Experiences and Lessons of Governments Purchasing Social Public Services in Western Developed Countries”, in China Administration, No. 11, 2010, p. 99. 14 Zheng Sujin, “Government Purchase of Public Services: With Public Welfare Non-Profit Organizations as Important Partners”, in China Administration, No. 6, 2009, p. 65.

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3.1.3 Elements of Boundary Recognition Whether it is foreign or domestic procuring practice, academia or practice, there are different views and methods for defining the boundaries of government procurement public services. However, no matter which viewpoint or method is used, it is impossible to determine the procured limit of the government’s procurement of public services in a comprehensive, scientific and effective manner. Nonetheless, these perspectives and methods still provide many lessons and inspirations to study the boundaries of public service procurement. The author believes that, in general, although many factors affect the definition of boundaries, people’s livelihood, publicity, power constraint, and operability are the most critical factors affecting the government’s procurement of public services.15 Therefore, the boundary of government procurement of public services should also be identified by people’s livelihood, publicity, power restriction, and operability factors.

People’s Livelihood Factors The government’s ultimate goal of procuring public services is to meet the public’s growing demand for public services. This demand is the issue of people’s livelihood: people’s primary living conditions and the pursuit of high-quality life. If the procured public services fail to meet this standard, it is inconsistent with the government’s institutional objective of procuring public services and an abuse of power. Therefore, when setting the purchase boundary of public services, it is necessary to consider whether the procured contents are the basic survival needs of the public and whether it is for the better development of the people. In this regard, the goals of the Chinese government to procure public services are quite different from those of Western countries. The original intention of Western governments to procure public social services is to deal with the crisis of the welfare state, reduce financial expenditures, and improve service efficiency. At present, China is facing an increasing demand for public social services. Government procurement is not aimed at cutting expenses. On the contrary, under the premise that the government will continue to increase investment in public social services, its goal is to transform government functions. Integrate superior resources to meet social needs.16 Therefore, the key to the government’s procurement of public services is to promote the government to procure public services that the people need, rather than just considering the procurement of public services from the perspective of financial burden. Therefore, as a path for the transformation of government functions and a new mechanism for the supply of public services, the government must prioritize people’s 15

WenZheng, “Institutional Innovation of Government Procurement of Public Services: Reflections on the Exploration and Practice of Government Procurement of Public Services in Luohu District”, published in Shenzhen Special Economic Zone Daily, April 30, 2007. 16 Zhang Ruli and Chen Shujie, “Experiences and Lessons of Government Purchase of Social Public Services in Western Developed Countrie”, in China Administration, No. 11, 2010, p. 101.

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livelihood issues when procuring public services. Firstly, public services must be provided to children and adolescents, the elderly, the disabled, women, disaster victims, migrants, the floating population and related groups in difficulties with relatively weak economic and social functions, forming a significant bottom line for people’s livelihood protection. Secondly, it is necessary to allow the public to enjoy the fruits of social development on an equal footing and to realize the pursuit of social justice. Thirdly, keep up with the trend of the times to freely enjoy the public services needed for their development.

Public Factors Publicity is an essential attribute of the government, and it is also an important feature that distinguishes the government as an organizational form from private organizations. Although with the development of society and the improvement of citizen participation, the public characteristics of the government and non-government subjects in the public domain are gradually blurred, but the existence of the government means the existence of its public characteristics. Because the government exercises power based on the authorization or entrustment of the people, the government’s political philosophy, governance ethics, policy formulation, and decision-making implementation must be established and implemented based on publicity. As one of the measures for transforming government functions, the government’s procurement of public services must take publicity as an essential criterion for its boundary setting. The public nature of government procurement of public services is mainly reflected in three aspects: 1. From the perspective of government procurement motives, the public services procured by the government must fulfill the functional requirements of serving the people because of the existence of the government, not because of departments interests, local interests, or personal interests of government officials. 2. From the point of view of the consumption objects of public services, the general needs of the people must be satisfied. The public services procured by the government are not aimed at the needs of individual people or regions but are proposed according to the people’s survival or better enjoyment of development opportunities in a certain period. Therefore, the setting of the boundary of the government’s procurement of public services must be realized by the universality and representativeness of its consumption objects rather than the interests of individual cases. 3. From the perspective of payment of funds, it must meet the requirements of public finance. The public services procured are for the government to meet the general needs of unspecified subjects. Therefore, the related expenses should also be charged from the public finances. If the public services procured by the government cannot be included in the public finances, but are borne by the people voluntarily or in the form of self-payment, then either the design of the government-procured public service system is inappropriate, or the service itself is not a service that the government should procure, but a service that can be run through the private market.

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Power Constraint Factors As one of the government functions, the government’s procurement of public services must be restricted by state power. The procurement of public services cannot exceed state power. There are three reasons. (1) State power is mandatory and can guarantee the realization of the procurement of public services; (2) State power is accountable and can always be responsible for the public interest, and bear the ultimate responsibility for the procured public services; (3) State power has a legislative function, and it can ensure that the procurement of public services has a legal basis through legislation. Therefore, the boundaries of the government’s procurement of public services are deeply constrained by power. Firstly, it is affected by jurisdiction. State power always has its specific scope, and it can only take effect within its distinct administrative division. At present, under the circumstance that the cross-regional economic and administrative coordination mechanism is not yet perfect, the procurement of public services is mainly carried out within the administrative boundaries of the region and serves the area itself. Secondly, it is influenced by the thinking of those in power. At present, China is in a period of social transition. It still takes a process to liberate the supply of public services from the monopoly of local governments or government departments. In this process, whether those in power can change their thinking in time and establish public service awareness restricts the government’s procurement of public services to a considerable extent. Thirdly, it is affected by financial strength. The government’s procurement of public services can ease the government’s financial pressure. Therefore, when the financial pressure is tight, the power-holders have a relatively strong motivation to promote public service procurement. When the economic situation is relatively abundant, the power-holders motivation to facilitate government procurement is not apparent. Therefore, ignoring the influence of the restrictive factors of power on the government’s purchase boundary, the government’s acquisition of public services will lose the realization basis and guarantee conditions.

Operability Factors Operability means that a decision or deployment can be put into practice and reflect its expected value and functions. From its part of speech, it is a conceptual category corresponding to “abstractness”. But in the connotation of government’s procurement of public services, operability means that the content of the procured public services must be purchasable in the real world and can meet the needs of the public for public services. Specifically, the first is that the procured public services exist. That is to say, the demand for public services proposed by people lives in actual society and can be procured. Suppose the public service that needs to be procured does not exist or exist but is recently procured by the government unconditionally. In that case, the demand for such public service has no practical significance because it is not operational. Second, the procured public benefits must be quantifiable. The government’s procurement of public services introduces market competition factors

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such as contracts and bidding. It requires that the public services procured by the government can be specific and be measured quantitatively. If it cannot be embodied in quantity and transactions cannot be carried out in real life, then the government cannot provide the public with the public services that the government should produce through procurement. Producers of public services cannot participate in the government procurement public services through purchase. Therefore, quantification is an inevitable requirement for the government to procure public services in terms of quantity. The third is that the procured public services are assessable. The procurement of public services by the government ultimately pays the producers of the public services. Although the government can pay the fee according to the contract, the government must evaluate the procured public service before paying the fee and determine whether to pay the fee and how much to pay according to the evaluation. Therefore, the procured public services must be evaluable. That is to say, the government can make a more scientific and reasonable evaluation of the procured public services by establishing the corresponding work system and determining the affiliated staff.

3.2 The Actual Situation in China Since the 1990s, the procurement of public services by the Chinese government has shown a gradual trend. Various localities have formulated many norms for the government to procure public services and put forward different standards and requirements for the definition of the purchase boundary. Although this is a helpful exploration of the boundaries of government procurement, there are still many deficiencies.

3.2.1 Research on Boundary Establishment In recent years, Chinese academic circles have also conducted corresponding research on the boundary problem of government procurement of public services. It is only because the boundary issue is a further specific issue under the general policy of government procurement of public services, so there are few relevant research results. Existing results are generally “by-products” incidental to studying other problems. In the context of discussing China’s service-oriented government, some scholars talked about the concept of public services, which involved the scope of government procurement of public services, such as “public services are public goods that maximize social welfare with implicit value judgments. It’s something that should be provided or partially provided by the government.”17 Some scholars have mentioned the scope of the government’s procurement of public services when they specialize

17

Zhu Qianwei: Public Administration, Fudan University Press, 2003, pp. 4–5.

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in the concept of public services, such as “Therefore do not think that the government’s responsibility is only to provide pure public goods such as national defense. The inclined policies to the rural groups, nursing and life maintenance of widows are also under cover of government.”18 Chinese scholars have also conducted relevant research on the identification factors and standards of the procurement boundary. Some scholars believe that the government should decide whether to procure or not according to the nature of public services. For “heterogeneous” public services, such as national defense, foreign affairs, policies, environment, etc., should be directly provided and produced by the public sector, while for “homogeneous” public goods, such as municipal infrastructure, logistics services, supply systems, etc.19 The private sector and nongovernment sector can bear it. Some scholars divide the procured services into “hard services” and “soft services,” and believe that “in theory, any public product or public service that can identify the beneficiary and measure the degree of benefit and thus meet charging conditions can be produced by market and procured by government.”20 Other scholars have classified the scope of government procurement of public services, namely the scope of prohibited procurement, deterministic procurement, and discretionary procurement. As the name implies, the scope of prohibitive procurement refers to the situations that the government cannot procure. The scope of deterministic procurement stipulates that the government must procure public services determined by the state without discretion. The scope of discretionary procurement refers to the public services that the government can decide to purchase according to specific circumstances.21 In practice, there is no unified standard for purchasing public service boundaries by the Chinese mainland government. In Hong Kong, China, the “importance standard of public services” is proposed. That is, it is divided according to the importance of the service itself. The government cannot procure services which are not very important. Currently, the Hong Kong government divides public services into three types: core services, auxiliary services, and commercial services. It is clear that in addition to the government’s core services, ancillary services and commercial services can be provided by social organizations through government procurement.22 18

Jin Yongyi, “Analysis of Public Service and Related Concepts”, Journal of the Party School of the CPC Guizhou Provincial Committee, No. 1, 2007, p. 63. 19 Zhou Zheng, “Government Purchase of Public Services in Developed Countries and Their References and Enlightenments”, in Western Finance and Accounting, No. 5, 2008, p. 17. 20 Feng Libin and Guo Peixia, “A Preliminary Study on the Theoretical Basis and Operational Essentials of China’s Government Procurement of Services", in Chinese Government Procurement, No. 7, 2010, p. 71. 21 Li Haiping, “Problems and Countermeasures of Legal Regulation of Government Procurement of Public Services: A Case Study of Shenzhen Municipal Government’s Purchase of Social Work Services”, Journal of the National Academy of Administration, No. 5, 2011, p. 96. 22 Li Haiping, “Problems and Countermeasures of Legal Regulation of Government Procurement of Public Services––Taking the Purchase of Social Work Services by the Shenzhen Municipal Government as an Example,” Journal of the National Academy of Administration, No. 5, 2011, p. 94.

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3.2.2 The Practice of Establishing Boundaries The central and local governments have issued many work regulations to implement government procurement of public services in China. Most of these normative documents stipulate the boundaries of government procurement of public services. Analysis of these normative documents shows three main ways to define the boundaries of government procurement of public services in China: generalization, enumeration and generalized confirmatory. Generalization refers to abstract conditions and requirements to define the boundaries of government procurement of public services. The generalization type can be divided into “function configuration type” and “possible realization type”. “Functional configuration” means that the purchase boundary is mainly set according to the configuration of government functions. For example, the “Implementation Plan for Promoting the Transfer of Government Functions and Work Items and Entrusted Work” of SZ City, GD Province stipulates that the scope of the government’s transfer of functions or entrusted matters includes our city in the institutional reform, the ‘three fixed plans’ of relevant government departments specify the work items that will no longer be undertaken and will not be directly handled. “Realization possibility” refers to the definition of the purchase boundary according to the possibility of public service realization, such as WX City, JS Province, to determine the public service matters to be procured by the government in terms of procurement conditions. The enumeration method refers to a detailed listing of the public services that can be procured. For example, the “Interim Measures for Government Service Outsourcing” of NB City, ZJ Province stipulates in its eighth article: training and education, government legal counsel affairs, home-based care and other social public services, and logistics services are purchase matters. CD City, SC Province also listed the scope of government procurement, mainly including public health, social security services, public employment services, public cultural services, legal services and elderly care services. The general identification method determines a government department or agency to identify the target mode of government procurement of public services based on specifying the general conditions of the purchase boundary. For example, the “Implementation Options on Government Procurement of Public Services” (Trial) in PD District of SH City establishes the requirements and procedures for certification. Whether it is a generalization, enumeration, or generalized confirmatory, in essence, the technology used to formulate the specification is different, and each has its advantages and disadvantages. The generalized type can cover the public services that the government needs to procure through “abstract conditions,” but it is not very operable, arbitrary, and prone to deviations in practice. Although the enumeration can more clearly define the scope of the government’s procurement of public services, it cannot cover the content that the government needs to procure. The generalized identification type has both substantive conditions and procedural control on the surface. It is a more scientific definition mode, but the “uniform identification” can quickly become the decision of the chief’s will. As

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a result, the reform of the public service supply field will become an “unfinished project” that does not change the medicine.

3.2.3 The Problems of Boundary Establishment Although China has accumulated certain experience and practices in defining the boundary of government procurement of public services, we still have the problems like guiding ideologies, unclear definition scope, weak operability, lower legislative level, and inappropriate consideration of regional differences.

The Guiding Ideology is Ectopic The government’s procurement of public services is an administrative reform measure for the government to serve the people better. Its starting point and endpoint are whether the needs of the people are met. Therefore, the government’s services should proceed from the people’s vital interests and take the needs of the masses as the premise, rather than impose the needs of the government on the people being served.23 The value of the system can only be realized if the needs of the people are actually met. It requires that the definition of public service boundaries should adopt a “bottom-up” approach. However, judging from the regulations mentioned above in China, the Chinese government generally adopts a “top-down” approach when determining the scope of procurement. That is, the government’s own needs determine the content of the procurement. In this operating mode, it is easy to cause the channels of public opinion to be blocked, and it is impossible to understand the public services that the people need truly. Although Premier Li Keqiang proposed at the State Council executive meeting held on July 31, 2013, the reform of government procurement of public services should be promoted based on fully understanding the public service needs of the people. However, some of the existing working mechanisms have not been able to solicit public opinions fully. For example, the “Implementation Opinions on Government Procurement of Public Services (Trial)” in PD District of SH City stipulates that government departments propose the public services procured by the government and finally determined by the “PD District Government Procurement Public Service Examination Committee.” WX City, JS Province also stipulates that the right to determine the procurement of public services rests with the government’s “City Public Finance System Reform Office”. Undoubtedly, the decision to purchase public services is understandable in government. Still, without the full participation of the people in the procurement process, It is often easy to lead to dislocation of the guiding ideology and policy of the government to purchase public services, and the purchased public services are not what the people need but the government. 23

Gu Limei, “A Comparative Study of Public Service Models in Britain, the United States and Singapore––Theory, Model and Its Changes”, in Zhejiang Academic Journal, No. 5, 2008, p. 112.

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The Scope of Procurement is Not Clear The government’s procurement of public services separates public services’ provision and production functions. However, this separation does not mean that the government’s position of providing public services has diminished, nor does it mean that the government’s role in delivering public services has disappeared because the government is still responsible for the formulation of procuring policies and standards, project planning, process supervision, transaction evaluation, and policy correction. However, when procuring public services, whether it is norm formulation or practical exploration, there are very different understandings and practices among various local governments, resulting in a lot of randomness in the boundaries of public services due to the lack of a clear procurement. In some places, in order to win the lottery for innovation and performance, they hurriedly carry out government procurement activities without understanding the connotation of government procurement of public services; In some places it is considered routine, and the government does not actually care about the actual socio-economic effects of the purchase of the project. As a result, the government often procure the public services that can’t meet the people’s need, while the government does not procure the public services that the people urgently need. For example, the public needs public health services, but the government procures public cultural services; the public urgently needs public cultural services, but the local government procures public health services. In some poverty-stricken areas, there are often funny scenes that “Secretary Li will send books for a while, and Secretary Zhang will send plays for a while”. For people who remain in starvation, the priority is to solve basic life services, rather than higher-level spiritual needs. What’s more, the government’s procurement of public services is regarded as a way for the government to shirk its responsibilities, acting as a “hands-off shopkeeper”, evading its responsibility, and handing over the commitment to the undertaker to perform the obligation through procurement. For example, a district in GZ City was inspired by the government’s procurement of home-based care services and decided to procure demolition and resettlement services for residents from a professional public relations company, communicated with government departments and construction units, and publicized the government’s guidelines, policies and other services. Although the relevant person in charge said that the best professional public relations company in the industry will be introduced, and relevant clauses will be signed between the government and the professional public relations company, there will be a corresponding supervision mechanism. It is impossible to spend the money and leave it alone.24 Demolition and resettlement and explaining government policies to the public are their responsibilities instead of the procured contents. If the government performs its duties through so-called “procurement”, it is shirking its responsibilities.

24

Wu Guangyu: “Government Demolition intends to recruit public relations to purchase demolition services”, interviewed on July 3, http://news.gd.sina.com.cn/news/2011/04/18/1127347.html.2014.

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Low Operability of the Existing Regulations The government’s procurement of public services has strong practicality and operability, but the operability of the existing norms in China is not enough. First, the definition provisions are too abstract. China adopts a combination of “positive,” “negative,” and “enumeration” for defining the procured content, that is, the public services to be procured adopt “positive” regulations, and the public services that cannot be procured are “negative.” It also lists the public services that the government must procure through an “enumeration” in practice. Article 12 of the “Measures” stipulates that the content of the government’s procurement of services shall be services that are suitable to be provided in a market-oriented manner and that social forces can undertake. Article 12 of the “Measures” stipulates that services that do not fall within the scope of government functions should be directly provided by the government and those are not suitable for social forces shall not from social forces. For basic public services, social management services, industry management and coordination services, etc., should adopt enumeration method, and require the government to implement procurement. This method of definition seems to be clearly defined. Still, in fact, it is too abstract and is not very operational because both “positive” and “negative” are conceptual provisions without specific contents. Second, the connotation and denotation of the set project are not clear. For example, the “Opinions on Establishing a Service System of Social Organizations for Government procurement” in CD City, SX Province put forward “social security services” and defined the service, that is, based on pilot projects, the government-funded procurement of social security services will be gradually promoted, and part of the social security services will be promoted. Social insurance institutions shall handle the social security business. The relevant government functional departments shall supervise and explore the social security supply model of “separation of management and administration”. In fact, the main contents of this regulation involves the policy requirements of social security services. Its connotation is not clearly defined, so it lacks operability.

The Legislative Level is Too Low, and the Purchase Boundary is Not Unified Currently, the boundaries of government procurement of public services set by China are mainly reflected in the normative documents formulated by local governments. The highest level of formulation of these documents is the “Measures”, and most of the others are formulated by provincial, municipal, and county (district) governments. Although the “Measures” are the highest-level regulations, they are nothing more than departmental regulations. The level of the main body of norm-setting is low, regardless of whether the norm-setting technology is scientific or not. Still, its authority is insufficient, which will quickly lead to the norm’s lack of “rigidity” and the “lazy” government, which is unwilling to implement purchasing activities actively. At the same time, due to the low level of norm-setting subjects, different regions have different definitions of the boundaries of purchasing public services.

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For example, basic public services such as public health services have various regulations in different places, some have regulations, and some do not. In addition, the maintenance of services is also included in the scope of the government’s procurement of public services in some areas. For example, “organizational services for official activities and logistics services” are not contents of public services and are also included in the scope of government procurement. These regulations go against the fundamental spirit of the government procurement of public services from social organizations.

Insufficient Attention to Regional Differences China has a vast territory and a large population, and the development between regions is highly uneven. Although the Chinese government has elevated the procurement of public services to the national level, it is still in the exploratory stage as far as its boundaries are concerned. In practice, there are still problems such as insufficient minimum guarantee for procuring public services, adequate equalization and regional differences.

3.3 Legislative Principles Although the above identification factors provide the boundary standard for the government to procure public services, these identification factors are relatively abstract and have poor practical operability. At present, there is still a lack of general evaluation in the official performance by the Chinese government. The problems caused by that often include officials’ lack of work initiative, weak sense of responsibility, serious work “waiting and relying” thinking, insufficient drive in internal work innovation, etc. Government procurement of public services as a new initiative may be at risk of being shelved or poorly advanced. Suppose the procurement boundary is unclear, and the division of responsibilities is undefined. In that case, it is more likely to become an excuse for officials’ poor promotion of procurement work or random procurement. In order to avoid the ambiguity and deviation in the cognition of the procurement boundary, prevent the abuse of government public power or even rent-seeking, improperly encroach on public resources, and then affect the development of the government’s procurement of public services, the state must define the procurement boundary through legislation. The author believes that, based on drawing lessons from the existing boundary-setting mode of government procurement of public services and the research results of Chinese academic circles, and considering the national conditions of our country, the legislation of the boundary of government procurement of public services should strictly follow the principle of legal reservation, the principle of minimum guarantee, the principle of equalization of service supply and the principle of gradualness.

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3.3.1 The Principle of Legal Reservations The principle of legal reservation involves the issue of defining the scope of procurement from a legislative perspective, and two issues need to be resolved. First, the government must procure the services required by laws; second, the government cannot procure the services against laws.25 Therefore, the state must stipulate that the government itself must perform certain public services involving the essential functions of the government and cannot be procured from the undertakers. According to the administration principles, government procurement of public services is a noncompulsory administration, and the government can adopt a more flexible and active behavior model according to actual needs. However, due to the public’s dependence on public services, it is necessary to adopt legal reservations in legislation. The goal of the legal reservation is not to constrain the government’s executive power but to enable the government to actively administer under the constraints of the law and provide more and better public services for the people. In the form of legislation, it is clear which duties the government should perform directly, and which functions can be performed by procurement. It needs to be emphasized that the essential process of government is a concept of value judgment. From the perspective of national sovereignty, as long as it involves national sovereignty, it is the vital function of the government; from the perspective of the market, as long as the public services that the market or society cannot provide are the essential function of the government. According to the reality of our country, national defense, foreign affairs, legislation, justice, criminal investigation, nuclear energy, intelligence and internal government management are all essential functions of the government.

3.3.2 Benchmark Guarantee Principle The principle of baseline safeguards is the public services procured by the government which must safeguard the minimum requirements of the public. With the continuous progress of human society, the public will put forward higher and higher requirements for the quality and quantity of public services. However, the government’s ability to procure public services is limited by the degree and level of social development, especially the fiscal capacity. Therefore, there will inevitably be a contradiction between the people’s needs and the government’s supply capacity. Public services often have a solid regional and staged nature, and the public services urgently needed by people in different countries and regions in different periods are often various. According to Maslow’s theory, human needs include physiological, safety, social, esteem, and self-actualization needs. No matter how big the difference is between regions and stages, physiology, survival requirements and safety needs are the basic needs of individual natural persons. Therefore, the government must 25

Xiang Xiansheng, “On the Basic Principles of Government Procurement of Public Services”, Journal of the Party School of the Fujian Provincial Party Committee, No. 2, 2014, p. 43.

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insist on procuring public services that the people need at the minimum or benchmark level, that is, buying the public services to ensure the survival and safety of the people. Public services for subsistence needs are mainly services for citizens’ basic life, including employment, social security, social welfare and social assistance. The goal of safety needs is to ensure the safety of citizens’ basic life and property, that is, a safe living environment, including home, public, consumer security and social stability and other public services.

3.3.3 The Principle of Equal Supply of Public Services The principle of equal supply refers to legislation that ensure all people with the same rights can enjoy the public services procured by the government on an equal basis. All people have equal opportunities to enjoy public services, the benefits are roughly the same, and at the same time, they have greater freedom of choice. Suppose the basic guaranteed principle guarantees the people’s basic rights to subsistence. In that case, the equality of supply ensures that all citizens can enjoy equal development and improved services based on survival. Implementing equalizing public services can effectively narrow the gap between urban and rural enjoyment of public services and ease social conflicts.26 However, due to national financial constraints and the influence of government performance assessment indicators, the public services procured by the Chinese government still need further attention and fair treatment by the government between urban and rural areas and between different groups. At the same time, the law must guarantee equal access to public services. Equality of supply includes the public services guaranteed by the government at a minimum and the public services required by citizens for basic survival and development, such as compulsory education, public health, public culture, public transportation, public communication, primary medical care, residential services, public facilities and environmental protection. Of course, the equalization of public service supply isn’t the implementation of extreme egalitarianism. It does not exclude a particular group (such as the old and young, residents of border and poor areas, laid-off workers, and people with specific diseases) from enjoying more public services.

3.3.4 Step by Step Principle The principle of gradual development means that the legislature should set the public services procured by the government in a specific period based on seeking truth from facts and putting the easy before the difficult. Due to the different situations in

26

Xie Hailong and Li Bohou, “Countermeasures and Suggestions for Improving the Equalization of Public Services in China”, in Chinese and Foreign Entrepreneurs, No. 3, 2009, p. 24.

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various parts of China, it is difficult to promote government procurement simultaneously. We can only take the approach of first easy and then difficult to steadily promote government procurement of public services. From the current point of view, in areas with a high degree of marketization and less controversy, such as sanitation and cleaning, landscaping, road maintenance, medical care, pension, cultural entertainment, civil rights protection, employment training, employment guidance and services, community services, etc. It will be fully opened, and other areas will be advanced as appropriate.

3.4 Specific Types The final point of the boundary problem of government procurement of public services is clarifying procured contents. However, it is challenging to define it because government procurement of public services is only a measure of government governance. Different types of governments have different requirements with various contents; The content of the government procurement has also been different in various historical periods. This is also proved by the procurement of public services by foreign governments and the Chinese government. Although it is difficult to clearly define the procured contents, to ensure the smooth progress of procuring activities, the boundaries of contents must be scientifically defined in light of national conditions. Combining the practices mentioned above as well as the requirement of factors of recognition in procuring boundary and the legislating principle, the government procurement public services in China can be defined as three types: compulsory procurement, prohibitive procurement, and discretionary procurement.

3.4.1 Compulsory Procurement Compulsory procurement means that the government must provide some public services in accordance with the regulations. If the government does not supply the above-mentioned public services in the form of procurement while in other ways, in addition to no guarantee of funds, the procurement will also be investigated. The type of procurement for which the owner is responsible. Generally speaking, public services such as sanitation and cleaning, landscaping, road maintenance, medical and health care, pensions, cultural entertainment, civil rights protection, employment training, employment guidance and services, and community services can all be compulsorily procured by the government. At present, the content of the government’s procurement of public services is mainly stipulated by the “Measures,” that is, the “affirmative” and “enumerated” provisions of the “Measures”. According to Article 14 of the Measures, the government shall procure the following services: (1) Basic public services. Public education, labor and employment, talent services, social insurance, social assistance, elderly care services, child welfare services,

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disabled services, special care and placement, medical and health care, population and family planning, housing security, public culture, public sports, public safety, public services that are suitable for social forces in the fields of transportation, agriculture, rural areas and farmers, environmental governance, and urban maintenance. (2) Social management services. Community construction, social organization construction and management, social work services, legal aid, poverty alleviation, disaster prevention and relief, people’s mediation, community corrections, floating population management, resettlement assistance and education, volunteer service operation management, public welfare publicity and other fields are suitable for social Power to undertake service matters. (3) Industry management and coordination services. Industry professional qualification and level test management, industry norms, industry complaints and other fields suitable for service matters undertaken by social forces. (4) Technical services. Service matters suitable for social forces in the areas of scientific research and technology promotion, industry planning, industry surveys, industry statistical analysis, inspection and quarantine testing, monitoring services, and accounting and auditing services. (5) Auxiliary matters required by the government to perform its duties. Legal services, project research, policy (legislative) research, drafting and demonstration, strategy and policy analysis, comprehensive planning formulation, standard evaluation index formulation, social survey, conference economic and trade activities and exhibition services, supervision and inspection, evaluation, performance evaluation, engineering services, Service items suitable for social forces in the fields of project review, financial audit, consulting, technical business training, information construction and management, and logistics management. (6) Other service matters suitable to be undertaken by social forces.

3.4.2 Prohibited Procurement Prohibited purchase means that some public services cannot be provided through procurement. If the government procure such public services, it will be invalid and may even constitute an administrative violation. Prohibited procurement of public services generally involves the core functions of the country, such as defense, foreign affairs, legislation, justice, criminal investigation, nuclear energy, intelligence, and internal government management. At present, it is not clear which public services involve the core functions of the state in our country. The “measures” only make a “negative” type of content that cannot be procured. That is, the provisions of article 12 of the “measures” do not fall within the scope of government functions, and services that should be directly provided by the government and are not suitable for social forces should not be bought from social forces. Although this provision is relatively abstract, it continually defines the scope and direction for prohibited procurement.

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3.4.3 Discretionary Procurement Discretionary procurement means that the government has the discretion to provide public services through procurement. That is, the government can decide the scope of the procured contents according to the government’s financial resources and the demand of the people. Governments are free to decide whether to procure the category of public service. Discretionary procurement is the specific application of the principle of gradualness. Instead of “one size fits all”, specific problems are analyzed in detail, especially with China’s national conditions. In practice, it isn’t easy to decide whether some public services should be procured by the government in consideration of financial and social conditions and public opinions. For example, whether the government provides funeral services is not only related to government’s financial resources. It also involves local and national customs. The boundary problem of government procurement of public services is both a theoretical and a practical problem. Chinese and foreign academic circles have been actively discussing it, and various views have been formed. This situation reveals the complexity of the boundaries of government procurement of public services. This complexity is rooted in people’s different theoretical understandings of the connotation of public services and government functions, different government governance theories, and the actual situations in a specific country within a particular period related to the financial situations and public opinions. Nevertheless, this does not mean that there are no rules to follow in defining the boundaries of government procurement of public services. The key here is that the government needs to effectively and closely integrate national conditions, political conditions, social conditions, and public opinions to define the boundaries of public service procurement correctly and adequately. Government procurement of public services as an important path for deepening the reform of government and government governance and building a service-oriented government in China should be guided by the needs of the people and supported by the level of social and economic development.

Chapter 4

The Subject of Legal Relationship in Government Procurement of Public Services

The subject system of government procurement of public services has gone through different evolution paths, and there are also different theories and viewpoints in the academic circles. One of the salient features of these views is that they are essentially in line with the New Public Management School. The new school of public management emphasizes the market regulation function of public services and advocates the optimal allocation of public service resources through sufficient market competition to achieve the goal of a fair, efficient and abundant supply of public services. Therefore, a sufficient market mechanism is a premise for the new public management theory to function. Within the framework of the market mechanism, the subjects in the government’s procurement of public services are pluralistic, equal and independent. However, the main body in the procurement of public services by the Chinese government does not meet this requirement. In a country like China, where the market mechanism is not fully developed, what should be the primary system for the government to procure public services? Mature research results. Therefore, to construct the system of government procurement of public services in China, we must clarify the legal relationship among the participating subjects.

4.1 Institutional Choice of Subjects The primary system of government procurement public service is one of the crucial systems in the whole system. It is also the first problem encountered in the practice and research of the government procurement public service system. This system mainly includes two aspects, namely the scope of the subject and the rights and obligations of each subject. In a widespread sense, the issue of the range of the subject of government procurement of public services is which people or organizations can become the subject of government procurement of public services; The problem of behavioral boundaries between subjects. In the scope of the topics and

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 X. Xiansheng, Public Procurement in Chinese Law and Practice, State Governance, https://doi.org/10.1007/978-981-99-1047-2_4

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their mutual relations, the government as the subject of public service administration and supply and the public as the beneficiary subject have been less controversial because of their relatively straightforward scope and rights and obligations. The main disputes are the connotation and status of the main body. After the government’s “incompetence” in the public service field appeared in the mid-twentieth century, for-profit organizations, non-profit organizations and natural persons increasingly joined the ranks of public service providers. The change of subjects in the field of public services follows, especially how for-profit organizations, non-profit organizations, and natural persons act as the actual undertakers of public services, interpret or treat these emerging subjects, and their relationships with emerging issues. The relationship between traditional supply subjects has become an urgent problem to be solved in studying the subject system. After examining various research results, academia has described the general evolution path of the subject system: from the early government department as the only provider of public services without recognizing the subject status of for-profit organizations, non-profit organizations and natural persons, to the government’s use of for-profit organizations, non-profit organizations and natural persons as instruments of public service delivery and later as partners. This evolution process can be summed up as the process of developing from “binary subject” to “ternary subject”; the undertaking subject has also experienced the process of “non-recognition-tool-partner”. The government produces traditional public services and provides to the public, which is a typical “dual subject”. In the 1980s, many works on government tools appeared in the field of public administration, and some scholars regarded the marketization of public service producers as a government tool. Lester M. Salamon is a representative figure among them. In his book Beyond privatization: the tools of government action, he classifies the commonly used governance tools of government and proposes that public services can take market-oriented means to produce by commercial and nonprofitable organizations.1 It marks that people have taken the role of for-profit organizations, non-profit organizations and natural persons in public services as a new method of government governance and an important government tool. Since the twenty-first century, the roles of for-profit organizations, non-profit organizations and natural persons in the field of public service provision have been increasingly recognized. Scholars put forward the theory of partnership and collaboration between the relationship between for-profit organizations, non-profit organizations and natural persons in the field of public service supply with the government. E. S. Savas put forward the public–private partnership in Privatization and Public– Private Sector Partnership, pointing out that all public service production can be realized through a public–private partnership, and some public service projects can

1

Lester M. Salamon.: Beyond privatization: the tools of government action, Washington, DC: urban institute press.1989: p. 105.

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even achieve better results.2 Scholars such as Robert Agranoff proposed in “Collaborative Public Management: New Strategies for Local Government” that in the twenty-first century, successful collaboration between public and non-public organizations is usually successful because of some basic premise and procedural steps, and believes that Collaborative management tends to complement and, in some cases, replace bureaucratic processes.3 Further study the relationship between Savas and the government in public service supply into the category of collaborative governance. Research on the subject system of government procurement public services is relatively late. Chinese scholars have a high starting point and have accumulated certain academic achievements. For example, some scholars take the subject of NGOs as their research object and put forward corresponding theories: “For current NGOs, does the theory of corporatism, especially state corporatism, have any explanatory power, or, to what extent does it have explanatory power? What areas need to be revised in the process of interpretation?”4 Some clearly put forward the theory of pluralism: “To effectively provide high-quality, fair and sufficient public services, the government should no longer be the only subject of public service supply. The subject of public service should be a cooperative network in which multiple subjects participate. The government must work together with non-profit organizations, communities, the public and the private sectors to jointly govern, promote the marketization and socialization of public services, and build a competitive and dynamic public service system”.5 These studies have provided valuable theoretical guidance for improving the main system of the government procurement public services in our country. From a practical point of view, by examining countries such as the United States that have implemented the system of government procurement of public services earlier, it is not difficult to find that most of their subject systems adopt the “ternary subject” model, that is, the procured subject—the government, the undertaking subject of public services, and the public service object. The specific diagram is as follows:

2

E. S. Savas, Privatization and Public–Private Partnerships, translated by Zhou Zhiren et al., Chinese Min University Press, 2002, p. 4. 3 Robert Agranoff and Michael McGuire, Collaborative Public Administration: A New Strategy for Local Government, translated by Yin Yifen and Li Lingling, Peking University Press, 2007, p. 2. 4 Zhang Zhongru and Fan Minglin, “Construction of Cooperation Mechanism between Government and Non-governmental Organizations”, Shanghai University Press, 2010, p. 22. 5 Wang Zhuojun, “Research on Government Public Service Functions and Service-oriented Government”, Guangdong People’s Publishing House, 2009, p. 61.

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Government -

Undertaking the main body

Service objects

Profit organization

4.1.1 Subjects of Procurement As a traditional public service producer, the government plays a critical role in the government’s procurement of public services. The laws of various countries have special provisions for this, and corresponding management departments have been established. For example, the Federal Accounting Office, the Office of Management and Budget, and the Federal Office in the United States, the Public Service Commission of New Zealand, etc., are all specialized government management departments established by the government to perform procuring duties. As a government administrative department that procurement public services by the government, regardless of its name and role, the laws of various countries have established similar rights, obligations or responsibilities for it. For example, in the 2005 Federal Acquisition Regulation (FAR),6 the United States has made representative provisions on the responsibilities of government entities. Article 1.102 (b) of the rule states that one of its basic objectives is “to provide consumers with efficient, high-quality, timely products and services”, “to promote competition” and “to achieve public policy objectives”. Clause 1.102-4 states: (a) The Government shall have the authority to

6

https://acquisition.gov/far/index.html.

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make procuring decisions within its sphere of responsibility, including the selection, negotiation and administration of contractual matters by these Guidelines. In particular, officials in charge of specific contracts have the power to determine the application of rules, norms and policies to the fullest extent possible in law and practice (b) Within the law, the power and responsibility carried by the government should be delivered to the lowest level of system. (c) All parties should be prepared for the execution of its duty and function. For sustaining and improving the knowledge, skills and abilities, the government has the responsibility to provide training, professional development and its necessary resources for the government to procure the public service no matter it is responsible for the specific areas in the system or as the individuals in procuring the public service. (d) The government should coordinate the relationship with contractors and carry out the highest duty to the tax payers. According to Article 5: Civilian government procurement committee is responsible for enacting, revamping and publishing the procuring rules. Members of committee are consisted of delegates who are representatives of their departments. According to Article 1.601, the leaders from all sectors could sign the contract of public service except the specific regulations in other clauses, and they could work on the establishment of contract and enjoy widely powers and be responsibility for the contract of management sectors. Only the signing officers could be representative of government to negotiate and sign the contract of procuring the public service. From the regulation of America and practice of other nations, we can see that the responsibilities of procuring public service including 3 categories: The responsibilities of management, service objects and undertaken entities. Management responsibilities include enacting related regulation, promoting competition and realizing the goal of public policies. The duty of service objects focuses on providing the low cost and high quality public services. In other words, government will decide the category of public services and the specific methods which is the symbol of power, but the ultimate duty will be carried by the government. The main duty of undertaken entity includes the rights and obligations related to the procuring contract such as contracting, contract management, and abide by the contract etc. In the undertaken entities of procuring the public service, most of laws stipulated profit organizations, non-profit organizations and natural persons. Some nations even take government department which produces public service as undertaken entity. For example, Australia applies the fragmentation measure to the government sectors, it shifts the role of government department which produced public services through system reform and launch in the market. In the procuring activity, the fragmented departments could carry out equal competition like other market entities. Therefore, whether or not the government department could become the undertaken entity depends on the transformation of quality of it. If the nature of government didn’t change, it won’t be concluded into undertaken entity; If it has changed, it would be the main part of market competition and will be brought into undertaken entity. This is sound strategy for improving the governing ability of government, but it is only adopted by a few nations which is not typical. Therefore, the undertaken entity

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discussed in this passage mainly conclude the profit organization, non-profit organizations and natural persons instead of the fragmented departments. In other words, the government department still remains the main part of procuring activity.

4.1.2 Undertaken Organizer The undertaken entity can be divided into 2 parts according to the organization, profit and non-profit organization. Non-profit organization is the private organization, which refers to the organization that provides public service with no interests such as education, health care, sanitation, rehabilitation and technology consulting, similar to the social organization or public institution in China. In China, social organization is consisted of social group, foundation and private non-enterprise units registered in civil affairs department. It mainly provides the services such as elderly care, helping the disabled, poverty alleviation, judicial rectifying, disaster assistance, charity, mental comfort. They work in the base course which are the indispensable social power in the public service. Public institution is the public service carrier with Chinese characteristics referring to the public service organization established by state asset, including education, science and technology, culture and sanitation for serving the social benefits. Most of nations brought economic organizations aiming at earning profits into undertaken entity of public service. For procuring the public service, it is special for profit organization to become the undertaken entity. As a profit-oriented company, competition awareness and ability is one of the necessary conditions for its existence and development. Competition means to establish its own organized construction and systematic design with the reduce of costs and increase of interests. The effect of that kind of characteristics and competitive system is consistent with the purpose of public service procured by government-reducing costs, saving expenditure, improving efficiency as well as quality. Therefore, there are enough reasons for profit-organizations to become the undertaken entity of public service procured by government. Scholars normally take the lighthouse system to explain the feasibility of profit organization engaging the public service. In 1974, Ronald Coase published the lighthouse in the economy, studying the early stage of lighthouse system in Britain, stressing the possibility of private fee in the lighthouse system, and he rejected the traditional economic perspectives that public products could only be monopolized by government. The lighthouse of Coase indicates that even the pure public products could be provided by private persons with higher efficiency. Therefore, it played a positive role of profit organizations, non-profit organizations and natural persons for entering the public products supplying sectors. There has two opposite perspectives related to the qualification of undertaken entity with public service in natural person. The objectors believe that if the government sign the service contract with natural person in procuring the public service, they are employment relationship so the natural person could not be concluded into the undertaken entity. The supporters believe that this kind of perspective doesn’t clear

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the relationship between the inner management or personnel relations of government and outside contracts. There will be no obstacles for natural person becoming the undertaken entity of procuring the public service as long as the natural person doesn’t affiliate with government or there has any interests conflicts. I support the latter opinion because the diversification of undertaken entity in public service is the need of development. The participation of natural person will not only enrich the category of public service, improve supplying efficiency but will also meet the demand of expansion of competitive entity in the public service procured by government, therefore, there should be no obstacles for natural person becoming the undertaken entity. In the legislation of the United States, the scope of the government to procure public services is not specified or limited according to the social nature of the subject. Still, a common qualification condition is determined, that is, no matter what kind of organization or individual has the specified qualification conditions, it can become the subject of succession. Rules 9.104-1 and 9.104-2 of the Government Procurement Rules set out general and particular eligibility criteria. The general eligibility criteria are “Have sufficient funds to perform the contract, or have the ability to obtain such funds; have the ability to comply with the required or proposed contract performance schedule, subject to existing commercial and governmental commitments; have good contract performance records, but not only whether they have relevant contract performance experience to determine whether they can be relied on; have a good record of integrity and business ethics; have the necessary organization, experience, financial and operational control and technical skills, or have the ability to obtain the above items the necessary materials, premises and facilities, equipment, or the ability to obtain them; and other conditions prescribed by laws and regulations.” The eligibility criteria specify that the contract authorizes the contracting officer to change the liability criteria, and the specific criteria varies from case to case. Since the undertaker undertakes the responsibility of the government to produce public services, its responsibilities are mainly divided into three types, namely, production responsibilities, responsibilities to service objects, and rights and obligations in contracts. The production responsibility refers to the public service that the undertaker must produce in time following the provisions of the contract, the quantity and quality of which are in line with the agreement. Responsibilities to service objects refer to taking into account the feelings and safety of service objects when producing public services. The rights and obligations in the undertaking subject contract are the opposite of the government subject’s rights and obligations. Still, there is no administrative privilege and contract supervision and management rights.

4.1.3 Service Objects The object body of public service is a difficult concept to grasp. On the one hand, because it is a factual state and does not need to be stipulated by law as the subject. On the other hand, due to different national conditions, the scope or qualification of

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public service objects stipulated by each country is not uniform. Generally speaking, the object of public service refers to the specific social public who enjoys the public service provided by the government within the scope of a specific administrative region. In the system of procuring public services by governments of various countries, the target of public services is generally not stipulated, and it is up to other laws to deal with this issue, but certain conditions will be required for the target of public services. For example, the United States stipulates that the service object must be a taxpayer, while some countries require a person with a certain status. The qualifications of the service recipients are also related to the benefited public service fields. For example, in some fields, the service recipients pay a certain price as the standard for enjoying public services and their degrees. Generally speaking, countries with a higher degree of social development have fewer restrictions on the scope of benefits of public services and special preferential treatment for disadvantaged groups while socially less developed countries have more restrictions. In any case, government procurement of services is altruistic and public welfare, to better perform social management and public service functions, and better meet the legitimate and basic social life needs of service objects, which determine the subject and audience of government procured services are separate. And it is the government’s leading service, but it is the object that the government serves enjoy services, not the government agency itself. Service objects have the right to enjoy high-quality public services, the right to supervise public services, the right to a final evaluation of public services, and the right to choose and suggest the scope of public service projects. However, clients also have certain obligations. For example, Article 1.102(c) of the U.S. Government procuring Rules stipulates: “The procuring team consists of all participants, including representatives of technical supply and procuring committees, the consumers they serve, and the contractors who supply products or services.“ This clearly includes the beneficiaries of public services into the scope of the government’s procurement of public services. At the same time, the article (d) also stipulates: “The task of each member of the procuring team is to exercise personal initiative and good judgment in providing the most valuable product or service to meet the needs of consumers,”, which means that the service target also has corresponding obligations. Therefore, in government procurement of public services, the service object is not only the subject of rights but also undertakes the social obligations shared by other subjects and the declarative obligation to achieve the ultimate goal of government procurement of public services. From the above analysis, it can be seen that the current academic circles and the practice of various countries have accepted the definition of the “three-dimensional subject” of government procurement of public services. That is, the participating subjects are the procured subject government, the public service undertaking subject and the public service object. The reason for this definition, mainly based on the premise similar to the definition of any legal subject as well as the historical development. That is, whether it has the corresponding right capacity. In the same way, the definition of the subject of government procuring public services must also be based on whether it can complete the task independently, that is, enjoy the corresponding rights and undertake the related obligations. However, compared with general legal

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subjects, the subject of government procuring public services has its characteristics. The first is the hybrid nature of the subject range. That is to say, the participants are not only the government but also the undertakers and service objects; there are both for-profit organizations and non-profit organizations, which are intertwined with each other. The second is the complexity of interest demands. Interest is an indispensable element for the existence of most subjects. Without interest demands, most subjects will lose their desire to actively participate. However, the composition of the interest demands of the main body of the government procuring public services is quite complex: those realize the interests of organizations or individuals, and those who participate in the goal of performing duties rather than pursuing interests. For example, companies and enterprises in the main body of the undertaking mainly aim at the pursuit of profits, while various civil organizations do not aim at the pursuit of profits; the government’s participation in government procurement is not for its interests, but for the performance of its duties to provide public services. In our country, the purpose of the existence of administrative organs is to serve a specific subject, that is, the state, not for their interests.7 That is to say, the government can only manage and provide public services on behalf of the people, rather than pursuing its interests. Though it is a pure benefit beneficiary, each service object has different individual needs as a public service object. The realization of such needs is completely dependent on external conditions, and there is no possibility of active realization. Third, the boundaries of rights and obligations of various subjects are different. Rights and obligations are the concretization and legalization of the interests of the subject. Different subjects have different roles in the government’s procurement of public services, and enjoy different rights and obligations, even unequal. The government focuses on supervision and fulfillment of the obligation to provide public services. The main body of undertakings focuses on the production of public services, during which both the performance of obligations and the corresponding contract rights are performed; the beneficiaries are the enjoyers of rights and undertake little or no obligations.

4.2 The Dilemma of the Disciplinary System Along with the practice of government procuring public services in our country, the institutional norms of government procuring public services have been continuously improved, and the main body norms have also been explored beneficially. At the central level, in 2006, the Ministry of Finance issued the “Opinions on Subsidy Policies for Urban Community Health Services”, which proposed that community public health services should be procured by the government, and clearly stipulated the main issues in the procurement of public services. The public health management

7

Zhang Shuyi, “On administrative subjects”, in Political Science and Law Forum, No. 4, 2000, pp. 92–97.

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department, the main body to undertake is the community health service organization. The document also stipulates the beneficiaries, “according to the number of the population served by the community health service institutions and the public health service projects, quantity, quality and subsidy quota of the unit (or comprehensive) project, the subsidy shall be approved on the basis of comprehensive assessment and evaluation,” this means that the resident population of the community is the target of this provision. In 2007, the General Office of the State Council issued “Several Opinions on Accelerating the Reform and Development of Industry Associations and Chambers of Commerce”. The people’s governments at all levels and their departments to should further transform their functions, establish a system for the government to procure services from industry associations, and make arrangements suitable for industry associations. The functions exercised are delegated or transferred to industry associations. This is the first time that industry associations have been included in the ranks of undertaking bodies at the national level, expanding the scope of undertaking bodies for government procurement of public services. The “Measures” stipulated the procurer and the undertaker for the first time. According to the “Measures”, there are two types of procuring entities in China: statutory procuring entities and reference procuring entities. Statutory procuring entities refer to administrative organs at all levels and institutions with administrative functions. And the funds are organized by groups that are financially borne. The undertaking entities include social organizations registered in the registration management department or exempted from registration with the approval of the State Council, public institutions that should be classified as public welfare or converted into enterprises according to the classification reform of public institutions, and registered in the industrial and commercial administration or industry in accordance with the law. At the local level, local governments’ legal norms for government procurement of public services also have corresponding provisions on the subject matters. Similar to the evolution path of other countries in the subject system of procuring public services, China has also experienced the evolution from “dual subject” to “three subject”. Before the 1990s, the state played a leading role in social life, especially in the provision of public services, and was a typical all-encompassing and omnipotent “big housekeeper”. It is undeniable that this model of taking the government as the only public service producer played an important role. Still, with the deepening of China’s reform and opening up and improving people’s living standards, people’s demands for their interests have become increasingly diversified. The original public service “ The dual subject” model obviously cannot meet people’s needs. Based on this, the country has carried out various practices on improving the efficiency of public services and tried to implement the “three-element subject” model, that is, to change the government’s single supply pattern and entrust some public services to non-governmental subjects. Therefore, theoretically speaking, the procure of public services by the Chinese government is also a three-dimensional subject model that divides the government, the undertaking subject and the service object. However, since most of the undertaking subjects are institutions affiliated with the government, the “three-element subject” model in our country has not achieved ideal practical results. From the above analysis of the current situation of the main

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system of the government procuring public services in our country, we can see that there are still many problems in the main system of the government procuring public services in China.

4.2.1 Legislative Flaws and Difficulties According to the theory of public choice and organization, the root of the inefficiency of public sector organizations lies in the monopoly of the public sector in providing public services; the mentality of members of the public sector to abide by the rules, to blame each other, to stick to the old rules and to be content with the status quo causes public sector organizations to lose internal motivation to pursue efficiency; the maximization of bureaucratic interests leads to the expansion of the scale of public sector organizations and the rising administrative costs. In this regard, the public choice theory believes that the fundamental solution lies in giving full play to the positive role of individual freedom and the market, introducing a public- private competition mechanism, breaking the monopoly pattern, and giving the public the right and opportunity to choose freely.8 The theory of public choice provides a theoretical basis for the government to procure public services and also provides an internal analysis for the undertaker to undertake government procurement activities. The basic consensus of the theoretical and practical circles is that the government procurement of public services is to achieve the goal of improving the quality of public services and reducing the cost of public services. One of the most important means is to introduce a market competition mechanism to achieve this goal. And one of the preconditions for the formation of effective competition is to have enough competitors. For the government to procure public services, one of the prerequisites for effective competition is that there are enough undertakers to participate in the bidding process of public services. However, the main body of market competition in China’s current public services is immature and has not formed an effective competition pattern. In 2010, at a public service procure fair held in Guangzhou, a city with 14 million, only 34 social worker service agencies attended. In Hong Kong, China, with a population of no more than 7 million, there are 10,000 NGOs.9 Take TH County in HN Province as an example. So far, there are 123 social organizations in the county, including 32 social groups and 91 private non-enterprises, absorbing 2261 group members, 36,076 individual members, and 37,953 employees. These organizations and personnel are far from meeting practical needs. For example, there are currently more than 190,000 older people in Sanwu over the age of 61 in the county, while there are only 10 social elderly care institutions, with 448 people actually staying. The existing county-wide elderly care institutions can only meet 8

Zheng Xiaoyan, “Analysis of the Driving Factors of the Development of China’s Public Service Supply Entities”, in Scientific Development, No. 9, 2011, pp. 78–88. 9 Xu Binbin, “Why Government Purchases of Public Services Stumble,” Southern Monthly, October 26, 2010.

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47% of the “five guarantees” elderly care.10 Such a low proportion of undertaking entities not only cannot meet the development needs of our government’s procurement of public services, but has become a bottleneck restricting the development of our government’s procurement of public services. There are many reasons for this situation: (1) The existing regulations limit the scope of the undertaking body. According to the meaning of government procuring public services, the subjects of procure includes for-profit organizations, non-profit organizations and natural persons, but some existing regulations artificially stipulate that the undertaking object is a non-profit organization while ignoring the profit organizations and natural persons. For example, JA District of SH City stipulates that the undertaker “must be a social group or a private non-enterprise unit legally registered by the District Civil Affairs Bureau”. (2) Some regulations restrict the development of non-profit organizations (civil organizations). Judging from government procurement of public services, nonprofit organizations should be a major force in public service procurement. Calculated by the number of non-governmental organizations per 10,000 people, France has 110, Japan has 97, and the United States has 52, Argentina has 25, Singapore has 15, Brazil has 13, and China has only 3.1 (according to the statistics of 431,000 social organizations by the Ministry of Civil Affairs in 2009), not only is there a gap compared with developed countries but also with some developing countries. From the perspective of economic scale, the total assets of US non-profit organizations in 2002 reached 2.4 trillion US dollars, while the total assets of Chinese social organizations in 2009 were only 103 billion yuan.11 From the perspective of personnel quality, the quality of employees who undertake the main body of public services procured by the Chinese government is relatively low, the proportion of professional and full-time personnel is small, and the educational structure, knowledge structure and age structure of employees are unreasonable. From the perspective of social recognition, because the government’s procurement of public services is still in the exploratory stage and the operating mechanism is not standardized, some non-governmental organizations only focus on fees, carry out evaluations, and blindly pursue economic benefits, while ignoring service levels, social integrity and professional ethics. As a result, it lacks due social credibility and is not recognized by the society. One of the important reasons for the slow development of non-governmental organizations in China and the insufficient ability to undertake public services is that the existing institutional mechanisms in our country are unreasonable, which restricts the active role of non-governmental organizations. Among them, the registration management system established by the “Regulations on the Registration and 10

According to the project team’s research and interview minutes in TH County, HN Province on June 5, 2015. 11 Wang Damei, “Analysis of the Problems and Countermeasures of the Government Purchasing Public Services from Social Organizations”, Journal of Guangdong University of Foreign Studies, No. 6, 2010, pp. 84–88.

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Management of Social Organizations” and the “Interim Regulations on the Registration and Management of Private Non-Enterprise Units” is the main system that needs to be perfected and improved. According to the “Regulations on the Registration and Management of Social Organizations” and the “Interim Regulations on the Registration and Management of Private Non-Enterprise Units”, the basic characteristics of the current registration management system in China include: high thresholds, many restrictions, weak supervision, and insufficient guidance. Among them, “dual management principle”, “non-competitive principle” and “restricted branch system principle” are the core factors leading to this situation. The “dual management principle” refers to the dual management system in the registration management system, that is, China implements dual audits, dual responsibilities, and dual supervision of non-governmental organizations by the “registration authority” and the “business management department”. The “registration authority” is responsible for registration, and the “business management department” is responsible for business guidance and management. Since NGOs cannot bring direct benefits, and they are also responsible for carrying out activities of NGOs, these government “business management departments” are often reluctant to take on the responsibility of NGOs. The business management department often adopts the practice of shirk when applying for the establishment of non-governmental organizations. This makes the development of non-governmental organizations in an awkward situation: on the one hand, non-governmental organizations must have competent professional departments to obtain legal status, and on the other hand, professional competent departments are unwilling to be the competent departments. However, according to the regulations, civil organizations cannot be registered as legal organizations without a competent business department. At the same time, Articles 13 and 19 of the “Regulations on the Registration and Administration of Social Organizations” and Articles 8 and 13 of the “Interim Regulations on the Registration and Administration of Private Non-Enterprise Units” also stipulate the principle of non-competitiveness and the principle of restricting the branch system. According to these two principles, two social groups or private non-enterprise units with the same or similar business shall not be established in the same administrative region of China. Because of these regulations, a large number of non-governmental organizations in China are in an “illegal state”.12 Since the beginning of 2016, China has successively revised the above two regulations, and the regulations on the establishment of branches and restrictions on the number of branches have been loosened, but the aforementioned problems have not been well resolved.

12

Xiang Xiansheng, “On the Main System of Public Service Purchasing by the Chinese Government”, in Legal Science (Journal of Northwest University of Political Science and Law), No. 5, 2014, p. 74.

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4.2.2 Disadvantages of the Government as the Main Body of Public Service Supply For a long time, as a monopoly production provider of public services, the Chinese government takes the form of government orders to entrust the task of producing and providing public services to the government’s affiliates—public institutions. Although public institutions have made important contributions to promoting the development of China’s economy and various social undertakings, especially the development of public services, this single public service supply mechanism mainly based on public institutions has many drawbacks. The first is the low efficiency of public service provision. In 2012, China issued the “Guiding Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting the Reform of Institutions by Classification”, and proposed to scientifically divide the categories of institutions, promote the reform of institutions that undertake administrative functions, promote the reform of institutions engaged in production and business activities, and promote the reform of institutions engaged in public services. And the improvement of government responsibilities, the encouragement of citizens and society to participate, the use of market mechanisms, and the construction of a new pattern of public service are required. But to this day, the state’s overall control over the supply of public services has not changed much. In order to maintain the status of a single supplier, China still implements government control and administrative approval systems in terms of policies, resulting in high operating costs and low efficiency of public service supply due to lack of competition and rigid mechanisms in public institutions. The second is that public services cannot meet the needs of service objects. With the development of China’s economy and the continuous improvement of residents’ living standards, the public’s demand for public services has continued to increase in quantity and quality. However, due to the drawbacks brought by the single supply main body mechanism, it is difficult for the government to provide the quantity and quality of public services to meet the needs of service objects, especially the individual differences of service objects. The third is to hinder the implementation of government procurement of public services. In China, public institutions undertake most of the production functions of public services. The procurement of public services by the government from companies, non-governmental organizations and natural persons will certainly reduce the government’s resource allocation to public institutions to a certain extent, thus directly impacting the vested interests of public institutions. And with the increasing number of undertaking entities, the competitive pressure faced by institutions has gradually increased. When such vested interests are impaired and pressure exceeds the capacity of public institutions, public institutions will become resistance to the government’s procurement of public services. The fourth is to squeeze the development space of other undertaking entities. At present, the funds for the Chinese government to procure public services mainly come from government financial funds, and a very small part comes from paid services and donation income. For public institutions, their operation and development mainly rely on government funding, and a considerable part of the government funding is provided

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by providing venues, supporting facilities, and office equipment. The undertaking bodies of non-public institutions mainly rely on paid services and donation income, but the funds of the paid income part are very limited, and the donation income is unstable. This has resulted in a situation of financial constraints, whether it is a public institution or other undertaking entities. Under such circumstances, public institutions often take advantage of the government to “compete for food” with non-public institutions and natural persons and squeeze the development funds of non-public institutions and natural persons. In comparison, foreign NGOs not only do not need to compete with the government for funds. On the contrary, government funds are an important guarantee for their development, such as 70% of the income of NGOs in Germany, 60% in France, 43% in Italy, 40% in the UK and 56% in Australia come from the government.13

4.2.3 Defects of Citizens as the Subject of Public Service Supply Public participation is a targeted and planned social action by the public within the scope of its rights and obligations; it enables the public to participate in the decisionmaking process and prevents and resolves the conflicts between the public and the government and the sectors involved in the action, the public and the public. “Administrative law requires public participation as a basic system; administrative law, which provides a ‘legalized’ interpretation framework for the administrative process, should take public participation as the core. A model of administrative law with participation as the core is more responsive to the demands of democratic theory but more constructive to reform the administrative process.”14 Effective public participation is a necessary condition for achieving good governance, and it is also an important part of the modern administrative rule of law. The status and role of public participation in government procurement of public services is more special and important than that in general administrative decision-making. The original intention of government procurement of public services is to provide high-quality public services to the public, and for this reason, public participation is even more necessary in order to understand the needs of the public. In government procurement of public services, public participation can achieve: (1) it is a continuous two-way exchange of opinions to enhance the public’s understanding of the practices and processes of the government and procuring agencies in the government’s procurement of public services; (2) The relevant situation and meaning of the procure project, procure plan, procure scale, procure funds and relevant policies can be fully conveyed to the public at any time; 13

Junkui Han, “Theory and International Experience of Purchasing Public Services from Nonprofit Organizations,” interviewed on September 10, http://www.360doc.com/content/10/0724/23/620 041_41238529.shtml,2013. 14 Wang Xizi, “Public Participation in administrative processes: A Framework for Conceptual and Institutional Analysis”, China Democracy and Legal Publishing House, 2007, no. 5.

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(3) Actively solicit the public’s opinions and feelings on the government’s procure of public services, such as whether the procure content is appropriateness, whether the scale of the procured project meets the needs, whether the services provided by the undertaker satisfy the public, etc., through information exchange, timely revise the work plan, and jointly promote the realization of the goal of the government procuring public services. Without public participation, sometimes the government does a lot of work and is not necessarily recognized by the public. At present, the Chinese government’s practice of procuring public services is to send dramas to the countryside this year, and books to be sent to households next year. Such procure services are relatively casual, and no opinions have been solicited in advance. The difficult things of the masses are not served.15 According to a telephone survey jointly conducted by the Shanghai Social Science Survey Center of Shanghai University, 19.02% of the respondents believed that the biggest community trouble was “inadequate public services”.16 On the one hand, it shows that the public services provided by the government are not in place, and on the other hand, it also shows the lack of effective communication between the government and the public. The public is the main body that puts forward the demand for public services. The government should respect the right of the public to choose services in the process of procuring public services democratically, and different groups have different hobbies and pursuits. Therefore, the more direct the supply and demand relationship of public services, the better the benefit of the use of funds. Only when the public’s right of democratic choice is fully realized can the institutional benefits of government procure be fully realized. Some places have been aware of this problem and have taken certain measures to avoid the lack of public participation.17 Article 15 of “Interim Measures for the Administration of Government Procurement of Government Procurement Services in ZH District of NB City” (T Procurement Office [2015] No. 6) stipulates that the public service projects provided by the government to the public shall be confirmed on the NB City Government Procurement Network. Wait for the government procurement designated media to solicit opinions from the public, and the publicity time shall not be less than 5 working days. In addition to the introduction of corresponding systems, there are also special work measures in some places. ZH District, NB City, ZJ Province takes the “Micro-People’s Livelihood” project and “Appointment on Friday” as the starting points, encourages grass-roots organizations to embed community services actively and effectively meets the people’s personalized, refined and diversified livelihood needs, so as to solve the problem. The problem of unclear objectives and weak pertinence of government procure projects. Through

15

Xiang Xiansheng, “On the Main System of Public Service Purchase by the Chinese Government”, in Legal Science (Journal of Northwest University of Political Science and Law), No. 5, 2014, p. 75. 16 Liu Liyuan, “Government Purchase of Services Should Respect Citizens’ Right to Choose,” visited on December 25, http://news.163.com/11/0314/09/6V3J9SVI00014AED.html,2015. 17 According to the project team’s research interview in the ZH District of NB City, ZJ Province on November 4, 2015.

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the above channels, ZH District has served more than 200,000 people, and the satisfaction rate of the masses is 97%.18 In most parts of our country, it is still difficult to ensure the participation of the people like ZH District, NB City, ZJ Province. Many local government laws and regulations on the procure of public services lack provisions or unclear provisions on public participation, and even if there are provisions, they lack the means and channels for public participation. The people are the actual consumers of public services, and the government should respect the people’s right to choose services in the process of procuring public services. Only when the people’s right to choose is fully realized can the benefits of procuring public services be maximized. However, there are few provisions for public participation in the legal regulation of government procurement of public services in China, resulting in the lack of basis, platform, channels and relief mechanisms for public participation in government procurement of public services. This is because, on the one hand, the government’s main body concept is lagging behind, and the procuring power is insufficient. Whenever a new public service task is added, due to the lack of effective public supervision, the government does not give priority to procuring from the market, but, under the impetus of inertial thinking, increases institutions, expands the establishment, hires personnel, and makes additional expenditures. The government cannot get out of the vicious circle of streamlining-expansion-re-streamlining-re-expansion, which not only fails to achieve the administrative performance goal, but also is not conducive to realizing the efficiency of public service supply. On the other hand, the subject consciousness of the service object is not strong, and the consciousness of rights and obligations is weak. Because the government does not provide the corresponding rights, obligations, and ways to participate in the government’s procure of public services, the service objects have a weak subject consciousness in the government’s procure of public services. At present, service objects have no basis or means to exercise the right to supervise and evaluate public services, let alone the right to decide on public service targets. The government has neither clear rights nor clear obligations, or even declarative social obligations in the system design. Therefore, there is no awareness of rights without awareness of obligations, and the awareness and actions of service recipients who do not fulfill their obligations are insufficient. Surprised.

4.3 Legal Countermeasures to Perfect the System of Public Service Supply Subject Above analysis shows that there are many deficiencies in the main system of government procuring public services in our country, and these deficiencies have become serious constraints to the development of government procuring public services.

18

According to the research and interview records of the project team in the ZH District of NB City, ZJ Province on November 4, 2015.

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However, the way to change the situation cannot just tinker with the existing system, but need to reconstruct the entire subject system.

4.3.1 The Guiding Ideology of Reforming and Improving Public Services China’s market mechanism is still being perfected, and the government’s procurement of public services lacks the market mechanism required by Western countries. Therefore, China’s public service subject system should start from the two dimensions of long-term and current, ideal and reality, and find the answer to the problem. From a long-term point of view, it is an ideal choice to construct our country’s main system of government procurement of public services based on the relatively mature system of government procurement of public services in western countries as a template, but the precondition is that China has a perfect market mechanism. In fact, even if an ideal market mechanism is established in China, it can only learn from the practices of Western countries. This is because the policies adopted by different countries are different. There are also differences even if they are both Western countries in the design of the main system. At present, China’s market mechanism is far from a fully developed level, and it is still difficult to introduce a market competition mechanism public service supply. Therefore, we should follow the principles while constructing the system including adopt the “three-component” framework of the system of government procurement of public service entities, remove obstacles to the development of participating entities through legislation and policies, and establish a good competition mechanism. Specifically, first, it is necessary to vigorously strengthen the macro-guidance function of government entities at the policy and legal level, but strictly limit the activity space of government entities to avoid their interference in competition; second, it is necessary to vigorously cultivate the undertaking of public services by means of legislation The main body, so that it can meet the needs of competition saturation in both quantity and quality; third, it is necessary to cultivate the subject consciousness of the public service objects, and clarify the rights and obligations of the service objects through legislation.

4.3.2 Legal Countermeasures for Perfecting Reform The Scope, Rights and Obligations of Legislation and Public Service Providers Through unified legislation across the country, the scope of the subject of the government’s procure of public services and their rights and obligations are clearly defined.

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It is stipulated that the government, the undertaker and the service object are the main body of the Chinese government to procure public services. For government entities, the promotion of full competition and the implementation of scientific procures should be taken as their due responsibilities. The central government is responsible for procuring public services of a national nature, while local governments are responsible for procuring public services of a local nature. The specific responsibilities of the central government are as follows: First, to formulate relevant laws and regulations for procuring public services. Laws and regulations are the institutional guarantees for government procurement of public services. The central government should formulate relevant laws and regulations on government procurement timely and issue relevant national policies based on objective conditions. Second, clarify the scope of public service procures. According to the theory of public goods, the scope and contents of public services procured by the central government and the local government should be reasonably determined. That is to say, the central and local powers and financial rights are divided reasonably to achieve the optimal allocation of public resources. Matters that the central government must handle cannot be delegated to local governments. The central government must procure public services such as nine-year compulsory education, rural basic medical and health services, and rural labor training, which are nationwide. Third, establish national standards for the procure of public services. The quality standards and technical standards of public services to be procured by the government need to be uniformly formulated by the central government. Because the procure standard is the basis for the government procure project, if the local governments formulate it, it will cause contradictions and duplication of the basis, which is a waste of resources and is not conducive to implementing government procurement. Local governments are mainly responsible for procuring local public services. Procuring responsibility is mainly divided into two aspects: on the one hand, organizing and implementing the procure of local public services. When procuring public services, the local government determines the procedures, methods, types, and quantities of public services procured by the local government in accordance with the method of procuring public services and relevant regulations and policies formulated by the central government, and in combination with the characteristics of their regions. The undertaking bodies of local public services shall implement supervision and management. Local governments should take various measures and rely on various forces, such as the public, media, intermediaries, experts, etc., to ensure that the quality and quantity of public services procured meet the requirements. For the undertaking subject, specific provisions shall be made on its qualifications, rights and obligations, and the ways of undertaking. For the main body of the service object, the qualifications of the service object shall be uniformly designed as much as possible, and the rules of integrity and good faith shall be made for the service object. Through unified legislation, it is necessary to follow the principle of strengthening the management functions of government entities to prevent interference in competition and to overcome the problems of unclear scope and responsibilities of government procurement of public services in our country.

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Legal Provisions on Improving the Registration and Management System of Civil Organizations China has implemented a highly centralized planned economy for a long time. The state’s management of the society is mainly achieved through the single control of power, and the social autonomy is relatively weak. Therefore, deepening the reform and improving the legislation is the general trend, and it is also the objective need for the healthy development of the government’s procurement of public services. For the main system of government procuring public services, it is particularly important to improve some laws, especially those related to the development of civil organizations. First, a unified civil organization law should be formulated. Through the formulation of the Law on Unifying Civil Organizations, clarify the establishment conditions, nature, functions, scope of activities, sources of funds and registration procedures of non-governmental organizations; clarify the recordkeeping system for non-governmental organizations, no registration is required. This can not only solve the identity problem of non-governmental organizations, but also provide a strong legal support environment for the development of non-governmental organizations. If the registration threshold is set too high and strict restrictions are attached (for example, there must be a competent authority, etc.), it will actually become the government’s choice for the society based on management needs, which will undoubtedly lead to a large number of civil society organizations.19 Failure to obtain a legitimate living space is not conducive to the healthy development of civil society organizations. Second, timely revise relevant regulations restricting NGOs. At present, the primary task is to speed up the revision of regulations related to non-governmental organizations such as the Interim Regulations on the Registration and Administration of Private Non-Enterprise Units and the Interim Measures for the Registration and Administration of Private Non-Enterprise Units after the revision of the Regulations on the Registration and Administration of Social Organizations. In particular, the “dual management system”, “non-competitive requirements” and “restricted branch system” and other regulations restricting the development of non-governmental organizations must continue to be thoroughly revised. If some regulations are difficult to amend in a relatively short period of time, the provinces should be empowered to explore and practice according to the actual situation. Third, simplify the registration and filing procedures of non-governmental organizations. With the goal of promoting the development of non-governmental organizations, registration and record-filing agencies should set up registration and record-filing procedures scientifically, reduce unnecessary registration and record-filing materials, and abolish cumbersome examination and approval procedures, so that nongovernmental organizations can conveniently complete registration and record-filing work. Fourth, introduce policies to support the development of non-governmental organizations actively. In addition to improving legislation, the state should also vigorously foster the development of non-governmental organizations from a policy 19

Hu Hai, “Non-governmental Organizations and Mass Incident Governance in China”, Journal of Hunan University (Social Science Edition), No. 4, 2011, pp. 44–51.

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perspective. It is a common practice of the international community to adopt a twoway strengthening policy of vigorously supporting and strengthening management of civil organizations. Fiscal policy is especially necessary in the country’s active policies. Fiscal policy includes policies such as incorporating the procurement of public service funds from non-governmental organizations into the fiscal budget and tax reduction and exemption. The active fiscal policy can solve the funds needed for the development of non-governmental organizations and change the situation in which public institutions “compete” with them for funds.

Develop NGO Self-Regulatory Norms Civil organizations are neither state organs nor profit-oriented enterprises, and their existence and development must rely on their reputation and social recognition. In order to improve their reputation and gain social recognition, in addition to relying on national laws, regulations and policy support, non-governmental organizations also have to strengthen self-discipline and improve their service capabilities. The practice of many countries has proved that sometimes the internal self-discipline norms of civil organizations are often more effective than the national legal norms. Therefore, it is common in various countries to formulate self-discipline norms for non-governmental organizations. At the national level, each NGO can be required to formulate self-regulatory norms through legislation to clarify the management structure, member rights and obligations, and code of conduct of NGOs. For non-governmental organizations in the nature of industry associations, corresponding supervision and reward and punishment mechanisms should be formulated to strengthen the supervision and management and accountability of non-governmental organizations. The state should provide strong support for the information sharing of non-governmental organizations and the construction of relevant platforms. For non-governmental organizations themselves, there must be a clear internal governance structure, a transparent working mechanism, perfect operating procedures and a scientific performance appraisal mechanism. At the same time, it is necessary to strengthen the non-governmentalization of non-governmental organizations, realize the true autonomy and self-reliance of non-governmental organizations, and effectively perform the functions of public service production. The non-governmental development of non-governmental organizations is undoubtedly of great benefit to enhancing their independent status and blocking the unlimited extension of government power procuring public services.20

20

Wang Shiguo, “Reflections on the Development of Social Organizations in Guangdong”, in Journal of Community Management, No. 3, 2011, pp. 11–13.

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Accelerate the Reform of the Management System of Public Institutions According to the Law As mentioned above, the current state of public institutions has affected the living space of the main body of public service undertakings, and we must accelerate the reform efforts and process. The reform should start with the classification of public institutions and the abolition of administrative levels. The public institutions that undertake the production of public services should implement the legal person system, standardize their operating mechanisms, and strengthen the training of their staff, so that they can become social workers with professional qualities. This can overcome the various problems caused by the dominance of the original public institution and expand the team of public service providers. The government should provide funds according to the scale of public services undertaken by public institutions, rather than the number of employees, so as to realize the transition from “supporting people with money” to “supporting affairs with money”.

Establish a Legal Mechanism for Public Participation The establishment of a legal mechanism for public participation can enable the public to systematically participate the government procurement of public services, express their preferences, understand the problems that arise in the process of providing public services, and provide opinions and advice for the government to scientifically formulate procurement plans and provide service management and suggestion. The establishment of this mechanism can improve the awareness of service objects’ participation, rights, and obligations and strengthen the supervision of various behaviors of government entities and undertakers in government procurement. Legal mechanisms for public participation include: (1) Project Investigation. Project investigation is an important method used by the government to determine the content of public services and evaluate the effect. It is the first step for the public to understand the government’s procurement of public services. Through the project survey, the public’s demand for public services can be understood, and it can also be used to detect the public’s satisfaction with the government’s procurement of public services, so as to determine the areas that need to be improved, so that the government can arrange the work tasks in the next stage. (2) Establish Public Hearings or Public Hotlines. The public can express their preferences through public hearings or a hotline, and they have the opportunity to provide feedback on local implementation of government procurements. In particular, some plans and projects that directly involve the vital interests of the public should adopt this approach. (3) Establish Channels for Complaints to the Competent Authorities. When errors or complaints arise in the process of government procurement of public services, and the relevant government officials turn a deaf ear to the complaints,

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the public can seek help from the government’s public service procurement authorities. Competent authorities can directly accept and investigate misconduct in the procuring process. The mechanism of direct handling of public complaints by the competent authorities can improve the efficiency of handling problems and save administrative costs. (4) Provides That the Public Has the Right to Directly Participate in Procurement Activities. Citizens can also express their will by directly participating in the production of public services. In other words, they may contribute to institutional arrangements by designing, building, operating, and maintaining services. Especially in some rural areas, this method is more necessary. For example, in the rural pension problem, sometimes the government or the main body cannot provide effective services, but it is easy to solve the problem of providing services for the elderly by procuring services from local people. This way of citizens’ direct involvement in the production of public services solves the needs of the public and solves the problem of insufficient government service capacity. (5) Provide Legal Remedies. It is clear that citizens have the right to sue the purchaser or the undertaker through the right of action stipulated in the Constitution, the administrative law and the civil procedure law. When the legitimate rights and interests of the public are violated, they also have the right to obtain compensation.21 The construction of the main government procurement system of public services is a systematic project. In the past, people not only ignored its function, but also ignored its scientific construction. The main body system of the construction system must be laid out from a macro perspective, clarifying the “three-dimensional main body”, and a fine division of rights and obligations from a micro perspective to clarify rights and responsibilities, there must be the full promotion of the government and the full participation of non-governmental entities with policy support and follow the rules of law.

21

Xiang Xiansheng, “On the Main System of Public Service Purchase by the Chinese Government”, in Legal Science (Journal of Northwest University of Political Science and Law), No. 5, 2014, p. 77.

Chapter 5

The Government’s Commitment Mechanism for Purchasing Public Services

To achieve the institutional goal of the government procuring public services, one of the key elements is to select a qualified undertaker. The selection of the appropriate undertaking subject must have a scientific undertaking mechanism. However, there is no systematic research on the undertaking mechanism in China, and there are problems such as small subject scope and irregular procedures. Scientifically explaining the connotation, characteristics, and functions of the government’s procuring public service undertaking mechanism and putting forward a specific construction plan is unavoidable for the legalization of our government’s procuring of public services.

5.1 Connotation and Functions 5.1.1 Connotation and Elements The government procurement of public service undertaking mechanism refers to the operating mechanism in which the government selects the public service undertaking body through certain procedures, and the undertaking body provides public services to the public service objects, including the access conditions, undertaking procedures, undertaking methods and information disclosure procedures of the undertaking body. It is one of the core mechanisms for the government to procure public services. In this mechanism, the government is responsible for setting the undertaking procedure and selecting the undertaking method, and determines the undertaking subject accordingly, that is, the undertaking subject in the undertaking mechanism. All units, organizations or natural persons qualified to provide public services can take advantage of the undertaking procedures and methods set by the government to participate in undertaking activities actively. They are the undertaking bodies in the undertaking mechanism. The public service object is the ultimate service object in the undertaking mechanism, and it is also a stakeholder. They can express their demands and make © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 X. Xiansheng, Public Procurement in Chinese Law and Practice, State Governance, https://doi.org/10.1007/978-981-99-1047-2_5

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suggestions or opinions by means of complaints and feedback. The purchaser and the undertaker are a relationship of choice and selection, and there is an active and passive relationship between the two; but from the perspective of the contractual relationship, the two have equal status, and they mainly perform their respective rights and obligations according to the purchase contract, that is, as the purchaser. The government of the People’s Republic of China must be responsible for the process and consequences of choosing the undertaker. The undertaker must be responsible for the information, behavior, and situation it provides in obtaining the contract. In the undertaking mechanism, although the procuring subject, the undertaking subject, and the service object have different positions, roles, and pursuits, they are interconnected, cooperate with each other, and participate together in order to achieve the goal of selecting a suitable undertaking subject.

5.1.2 Basic Functions Establish the Acceptance Procedures The primary function of the government’s procurement of public service undertaking mechanism is to select qualified undertaking bodies through specific undertaking procedures and methods. Judging from the public service practice of governments around the world, it is a common practice to select the undertaker through specific procedures and methods, but those projects are different. Whether the undertaking subject is independent of the government and whether there is competition between the undertaking subjects when procuring public services, the government purchases of public services in various countries can be divided into four types: independent competition, independent non-competition, non-independent competition, and non-independent non-competition.1 That is to say, there are four kinds of undertaking procedures for the government to purchase public services: independent competition, independent non-competition, non-independent competition, and non-independent non-competition. Since there are few nonindependent competitive procuring patterns in practice, the author only studies the other three procuring patterns. Independent competition undertaking procedure refers to the undertaking procedure in which the undertaking subject is independent of the government, and the undertaking subjects are in a competitive relationship with each other in the process of procuring public services. In other words, there is an independent relationship between the undertaker and the government, and there is no dependence on resources and personnel. The government as the purchaser adopts a competitive procedure to select the undertaker (such as using public bidding to select the most suitable public 1

Wang Ming, Paradise: “Analysis of the Model of Chinese Social Organizations Participating in Public Service”, journal of the Party School of the Zhejiang Provincial Party Committee of the Communist Party of China, No. 9, 2008, p. 5.

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service producers) to reflect the principle of value for money. This is a relatively mature undertaking procedure for the government to purchase public services from the undertaking entity. Most of the countries in the world have adopted this model. The characteristics of this undertaking procedure are as follows: first, the two parties involved in the purchase activities are independent of each other and do not have any dependency relationship; second, the rights and obligations of the two parties are agreed in the purchase contract; third, the selection of the undertaking main body is generally made through bidding; because the bidding method can follow the principle of “fairness, impartiality and openness”, and comprehensively consider factors such as cost and benefit, it can provide the society with more high-quality and cheaper services; Fourth, the undertaking main body can combine its own advantages to use unique methods and management experience to maximize profits. The independent non-competitive undertaking procedure refers to the undertaking procedure in which the undertaking subject is independent of the government, but each undertaking subject does not achieve the purchase goal through competition in the process of procuring public services. That is to say, the undertaking body itself is an independent entity, and its operation does not depend on the government, but its opportunity to provide public services is not through competition, but through maintaining a good relationship with the government, or even through direct communication relationship, to whom the government exclusively entrusts projects of public service. The characteristics of this undertaking procedure are as follows: First, the undertaking subject is independent of the government. It only cooperates with government departments due to procuring activities, and its personnel and financial relations are independent and do not depend on government procuring funds to survive. The second is negotiated procurement, that is, the purchasers purchase public services through negotiation rather than open competition; although these undertaking entities can obtain opportunities for the production of public services, such opportunities are not monopolistic and can be replaced. The third is high professionalism. In order to achieve the original intention of procuring public services and reduce risks, the government often prefers to choose the undertaker with a good social reputation. The fourth is comprehensive responsibility. Unlike the general undertaking body, the undertaking body in the process of government procuring public services undertakes the responsibility of producing public services and bears a certain degree of administrative responsibility. The non-independent and non-competitive undertaking procedure refers to the undertaking procedure in which the undertaking body is not independent of the government but is a subordinate institution or branch of the government, and it obtains public service production through government-oriented and non-competitive means. This kind of undertaking procedure has the following characteristics, one is strong dependence. Because of the non-independence of the organization, there is usually a “superior-subordinate” relationship between the undertaker and the purchaser, and the dependence is strong. The undertaking entity is usually established by the procuring entity to procure public services. They do not have their own independent decision-making power, nor can they decide whether to participate in the purchase. The operating costs are also completely dependent on the purchase funds. Second, the

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procedures are not standardized. Since there is no competitive procedure and no standardized contract constraints, the entire government’s procurement of public services relies on government administrative management, and the procedures are extremely irregular. The third is the confusion of government functions. Since the main body of procuring public services is still an internal organization of the government, the government has not completely transferred the function of providing public services to the undertaking body, and the government still needs to take direct responsibility for the quality of the production of public services. The goal of separation of public service producers and providers has not been achieved. The above undertaking procedures can be divided into competitive and noncompetitive procedures according to their degree of competition. Competitive selection procedures are usually characterized by pre-set selection criteria, one bid, one decision and no private consultation and negotiation popular and adopted by most countries. However, in practice, there will be some special circumstances that make it impossible to use the competitive selection procedure, such as the failure of the tender but the inability to continue the tender for some reasons. In this case, the non-competitive selection procedure can make up for the deficiencies of the competitive selection procedure. Therefore, the non-competitive selection procedure is a necessary supplement to the competitive selection procedure. The competitive selection procedure and the non-competitive selection procedure constitute a complete undertaking procedure. In addition, taking the motivation of the government to purchase public services as the criterion, the government procurement procedures of public services in various countries can be divided into two types: active purchase and passive government procurement. Proactive purchase refers to the undertaking procedure in which the government takes the initiative to purchase public services according to the needs of the people to realize the transfer of functions, improve the efficiency of public services, and reduce financial expenditures. Proactive procurement refers to the undertaking procedure in which the government takes the initiative to procure public services according to the needs of the people to realize the transfer of functions, improve the efficiency of public services, and reduce financial expenditures. However, it also has obvious shortcomings, such as the government will have a blind spot in the procurement of public services, that is to say, due to insufficient research and information lag, the government will not timely understand the public’s demand for public services, resulting in non-necessary procurement. Passive procurement means that the government’s procurement of public services is not motivated by the government, and the government is passive in the process and the procurement based on the pressure of the public or social organizations. The advantage of this undertaking procedure is that it can timely reflect the public’s demand for public services and reflect the timeliness and effectiveness of public services. But its shortcoming is that the government is always passive, and there are often situations where the promotion is unfavorable, and the effect is not obvious.

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Choose the Methods of Acceptance Method of the undertaking is another important content in the undertaking mechanism, that is, the way in which the purchaser implements the public service it undertakes. The selection of the undertaking method is closely related to the type of public service project and choosing the appropriate undertaking method for the public service project can play a multiplier effect with half the effort. The government’s procurement of public services mainly includes franchising, funding, voucher system, volunteers and self-help.2 Franchising refers to an undertaking method in which the government grants the undertaking entity the right to operate a certain public service, and the undertaking entity directly charges a certain fee to the public service object according to the authorization. The advantage of this approach is that the government does not need to use financial funds to purchase projects, but directly relies on the sharing of public power to achieve purchase goals. The difficulty of its implementation is the pricing of public service charges. If the government sets the price of the franchised public services, it will be suspected of administrative interference; legitimate interests. In addition, the franchising method also has the problem of how to protect the vulnerable customers, who may think that the price of public services is too high and do not use or look for other alternative services. Therefore, countries are very cautious when using the franchise method. Appropriation, also known as financial appropriation in the usual sense, refers to an undertaking method in which the purchaser determines the undertaking body and uses financial funds to directly pay the price to the undertaking body according to the purchase contract. This is currently the most important way to undertake. The voucher system is another form of financial appropriation, except that the purchaser does not directly pay the financial funds to the undertaker, but the government first distributes public service vouchers to the service object, and the service object goes to the undertaker designated by the purchaser according to their own needs. Then the undertaking entity demands payment from the procuring entity based on the public service vouchers it holds. This method is based on the premise that there are many subjects and it is easy to measure the public services provided by standardization. The voucher system allows service objects to have more choices, and at the same time encourages the undertakers to strive to provide high-efficiency and high-quality services. Volunteers and public service users are still in the exploratory stage as a supplementary way to undertake self-help. Their advantage is that the purchaser does not need to invest financial funds for the purchase project, and the disadvantage is that the public services provided cannot be fixed and quantified, and it is not easy to supervise and manage. The above undertaking methods can also be divided into financial support and non-financial support according to whether financial funds need to be invested. Government grants and vouchers belong to the category of financial support; franchising, volunteers and public service self-help belong to the category of nonfinancial support. According to the existing practical cases, most of the projects are 2

Anwar Sha: Public Service Provision, translated by Meng Hua, Tsinghua University Press, 2009, p. 162.

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undertaken in the form of financial support. In recent years, there has been a gradual increase in non-financially-supported undertaking methods, and some countries even adopt a combination of the two, that is, the purchaser pays part of the purchase funds to the undertaking body, and the undertaking body is responsible for the rest.

Carrying the Function of Anti-corruption and Upholding Integrity Carrying the concept of “fairness”, anti-corrosion and establishing a clean government image are other essential functions of the government’s procurement mechanism for public services. “The notion that good public service should be widely available to all with equal opportunities, regardless of social or economic status, or other differences, does not affect their need for public services is crucial and relatively indisputable.”3 The concept of fairness means that all public service objects can obtain public services fairly. At the same time, all undertaking subjects can also obtain fair opportunities to undertake public services. To this end, it is required that the undertaking mechanism should be stable and open, that is, the undertaking procedures and methods must be relatively stable and cannot be changed overnight. Suppose the purchaser frequently changes the undertaking procedures and methods. In that case, the undertaking body will be at a loss, unable to propose an undertaking plan, and unable to obtain a fair chance to undertake the undertaking. In addition, the public needs to have equitable access and opportunity to obtain information about government procurement of public services. In an undisclosed, unstable and unfair undertaking environment, the purchaser may use the convenience of the position and the advantage of information to seek power rent and trade power for money. Therefore, a good undertaking mechanism must have the function of fighting corruption and promoting integrity.

5.2 Empirical Analysis At present, China has carried out preliminary exploration on the mechanism of government procurement of public services and accumulated a lot of useful experience, but as an important system, the current exploration obviously cannot meet the needs of the government’s strong promotion of government procurement of public services.

3

Julian Le Grande, The Other Invisible Hand: Providing Public Service Through Choice and Competition, translated by Han Bo, Xinhua Publishing House, 2010, p. 8.

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5.2.1 A Local Exploration Although China has no unified national regulations on the mechanism for undertaking government procurement of public services, nor does it have a unified code to support it, actions have been carried out in various regions in terms of undertaking bodies, procedures and methods.

Undertaking the Main Bodies At present, there are two main types of government procurement of public services in our country, one is for-profit organizations (mainly companies), the other is non-profit organizations (mainly including voluntary organizations, NGOs (non-governmental organizations) and NPOs (non-profit organizations)). The former mainly exists in the fields of environmental sanitation, public transportation, urban security, medical and health care, etc. For example, LH in SZ City purchases sanitation cleaning work from sanitation companies, WX City purchases sanitation work from private enterprises, and HZ City purchases public transportation services from private bus companies, etc. The latter widely exists in cultural services, elderly care services, poverty alleviation, social work, child development and other public service fields. For example, SH City purchases community corrections personnel, out-of-school, unemployed, and out-ofcontrol youths from three private non-enterprise units: SIA, Sunshine, and Ziqiang. For social service work related to drug abusers, HS District in NB City procured home care services from Starlight Respect for the Elderly Association, and SZ City procured services from industry associations.

Undertaking Procedures There are three main types of procedures for the government to purchase public services: First, the procedures for open competition. This undertaking procedure requires that the undertaking of public services can only be carried out in the form of open competition, and no other means of the undertaking are allowed. For example, in the “Opinions on Establishing a Service System for Government Procurement of Social Organizations” in CD City, SC Province, it is stipulated that the government procurement of social organization projects should be included in the government procurement center for procurement, and service providers should be determined through open competition. The second is the undertaking procedure combining open competition and directional selection. There are many regions adopting this kind of undertaking procedure, and its basic approach is to adopt a combination of public bidding and directional procurement. For example, the “Implementation Opinions on Government Procurement of Public Services (Trial)” in OD District of SH City, and the “Guidelines on Government Purchase of Public Services (Trial)” in WX City, JS

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Province and other local regulations have all made the above provisions. The third is the acceptance procedure of internal review. That is, the undertaking subject submits an application for undertaking, and then a special government committee reviews the undertaking application, and finally determines the undertaking procedure of the undertaking body. This kind of procedure has the characteristics of non-public internality. Although it can save the complicated links brought by public bidding, it cannot ensure that the undertaker has an equal opportunity to undertake it. The MH District of SH City stipulates in the “Implementation Opinions on the Government’s Procurement of Public Services from Social Organizations (Trial)” those social organizations should submit project applications in accordance with the regulations, and the evaluation committee of the government’s procurement of public service projects will organize experts, deputies to the National People’s Congress and members of the Chinese People’s Political Consultative Conference. After reviewing the application, the committee determines the social organization that undertakes public services. The “Measures” do not make specific provisions on what kind of undertaking procedures should be adopted for the procurement of public services, but put forward a principled requirement. Therefore, the purchaser should those social organizations, according to the supply and demand characteristics of the procured content, the degree of market development and other factors, follow the principle of simplicity, openness and transparency, orderly competition, and evaluation of results to organize and implement government purchases.

Acceptance Methods According to Article 19 of the “Measures”, the government’s procurement of public services mainly includes procurement, entrustment, leasing, franchising, and strategic cooperation. In practice, according to the different ways of funding, there are three main ways for the government to purchase public services in China: contract-based funding, direct government funding, and government subsidies. (1) Contract-Based Funding. The contract-based appropriation is an undertaking method in which the government pays the expenses by procuring the amount agreed in the contract, which is the most commonly used undertaking method at present. The basic approach is as follows: for a procured project that can be evaluated and quantified and has market-oriented operation conditions, the relevant government department first publishes the purchase project and specific requirements through the information platform and determines the undertaker through an independent competitive undertaking procedure. After the undertaking body is determined, the government will sign a purchase contract with the undertaking body. The government pays the corresponding fees to the undertaker according to the performance of the contract. (2) Direct Government Funding. The direct government funding means that the government directly grants certain funding to the public service undertaker. This kind of funding is in cash assistance, in- kind assistance, and preferential policy

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support. For example, in December 2009, a grant of 50 million yuan from the Ministry of Finance was transferred to the account of the Little Angel Fund of the Red Cross Foundation of China, so that each of the 1,548 children with leukemia who were waiting for assistance in the Little Angel Fund received 30,000 yuan medical aid.4 In 2008, the Municipal Committee of the FS Youth League allocated 10,000 yuan to Deng Zanpeng’s volunteer team every year to establish a comprehensive service platform for young people in the form of “government procurement of public services” to carry out activities related to the rights and interests of young people.5 (3) Government Subsidies. Government subsidy refers to a certain amount of financial subsidy given by the government to public service undertaking entities through financial transfer payments or by providing certain financial subsidies embodied in the form of “vouchers”, “student vouchers”, etc. For example, TJ City implements the government subsidy method in the procurement of elderly care services by the government. TJ City stipulates that the elderly over 60 years old with minimum living allowances will receive cash vouchers issued by the government, and the elderly can go to several designated home elderly care service units with the service vouchers. Select a service item. NJ City subsidizes students by issuing “student vouchers” for preschool education. The government subsidy method can fully respect the diversified needs of the service objects and is more humane.

5.2.2 Existing Problems Although China has accumulated some experience in the practice of the undertaking mechanism, there are still many problems.

Unscientific Regulations on Access Conditions for Undertaking Entities The setting of access conditions for the undertaking subject is one of the factors that determines whether the undertaking procedure can realize the selection of qualified undertaking subjects. Although some regions of our country have made regulations on the access conditions for the government to purchase public services, these regulations are unscientific and imperfect. Therefore, scientifically setting the access conditions for undertaking entities is a major issue to improve the government’s

4

Wang Kara. Beijing News: 50 million yuan of funding from the Ministry of Finance; “equal” rescue of all children to be rescued; “government purchase of NGO services” Road still needs to be explored. http://www.ccafc.org.cn/templates/T_Common/content.aspx?nodeid=117&page= ContentPage&contentid=592. 5 “Government purchase service” is expected to have more support, visited on September 9, http:// epaper.nfdaily.cn/html/2011-07/28/content_6992971.htm.2013.

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undertaking mechanism for procuring public services. The problems existing in the setting of the access conditions for undertaking the subject are: (1) The Scope of Undertaking Subjects is Narrowed, and Effective Competition Cannot Be Formed. Only the formation of effective competition can improve the efficiency of public service procurement. In order to create effective competition, there must be enough competitors, so expanding the main body of undertaking is an important measure to achieve procuring benefits. The undertaking bodies of public services should include for-profit organizations, non-profit organizations and natural persons. However, the existing legal regulation of government procuring public services in China artificially narrows undertaking bodies’ scope. First, there are local regulations that only non-profit organizations can serve as the undertaker. As mentioned above, JA District of SH City clearly stipulates that the main body of the undertaking is a social group or a private non-enterprise unit. The second is to exclude natural persons from the subject of undertaking. The procurement of public services by the Chinese government does not give natural persons the qualification to undertake the subject. Although natural persons are not organized, they have the advantages of large numbers and flexible working methods and can undertake many public services that non-natural persons are unwilling and unable to undertake. (2) The Specific Conditions for Undertaking the Subject Are Not Clearly Defined. The unclear provisions on the qualifications of the undertaking subject will lead to the randomness of the undertaking procedure on the one hand, that is, the government can choose the undertaking subject according to its own preferences; requirements, which is not conducive to cultivating the main body to undertake, and also indirectly hinders its development and growth. According to Article 7 of the “Measures”, the undertaking entity shall meet the following conditions: established in accordance with the law, with the ability to independently assume civil liabilities; sound governance structure, sound internal management and supervision systems; independent and sound financial management, accounting and assets management system; have the necessary facilities, personnel and professional technical capabilities to provide services; have a good record of paying taxes and social security funds in accordance with the law; have no major illegal records in the past three years, pass the annual inspection or perform the annual report publicity obligation as required, credit status good, not included in the list of abnormal business operations or serious illegal enterprises; meet the requirements of the state on separation of government affairs, government and society, and government and enterprise; laws, regulations and other conditions required for procuring service items. The “Measures” make general provisions on the qualifications of the undertaker and empower the purchasers to determine the qualifications, that is, specific conditions based on the specific needs of the procured content. However, some provisions of the “Measures” are still relatively abstract and difficult to understand and operate. For example, whether the provisions of “major violation records” are to be

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investigated for criminal responsibility or to be investigated for administrative responsibility as the criterion, whether both are required at the same time or only one of them is required, there will be different interpretations in the implementation. The Acceptance Procedures Are Not Standardized Irregularity of the undertaking procedure is mainly reflected in the application of the non-competitive undertaking procedure. When the purchaser applies the noncompetitive undertaking procedure, it is easy to generate “internal transactions” and “related transactions”, which increases the purchase cost and the risk of corruption. “Internal transaction” means that the government directly designates a specific undertaking body to undertake public services and excludes other undertaking bodies from participating in undertaking public services. Some of these specific undertakers are themselves government subordinate units or organizations temporarily established to undertake public services. In essence, this so-called purchase means that the government hands over public services to its subordinate units through purchase. “Related household transactions” refer to the fact that the government has not passed the statutory undertaking procedures to allow the undertaking body that has a close relationship with the government to undertake public services. This kind of succession procedure is determined based on the intimacy of the relationship between the government and the successor, which is not stable, and often changes the procuring relationship with the change of leadership. The government chooses to undertake the procedure mainly to avoid political risks or to continue to monopolize resources, and then to choose an organization that it can control or trust.6 If the acceptance procedures are not standardized, government procurement will easily be “recited distorted scriptures” and become a way and platform for some departmental groups or individuals to seek private interests.

Incomplete Information Disclosure Procedures in the Process of Undertaking Public disclosure of relevant information on government procurement of public services can promote fair competition, ensure fairness, standardization, and transparency in government procurement, and enhance public understanding and recognition of government procurement of public services. Usually, public services are provided and produced by the government. Once a non-government undertaking entity undertakes public services, the public will not understand or trust them, and additional purchase costs will be incurred. Therefore, ensuring the public’s understanding and recognition is the humanistic basis for the government to purchase public services, and it is also an important guarantee for the healthy development of 6

Kang Xiaoguang and Feng Li, eds., 2011 Observation Report of China’s Third Sector, Social Sciences Academic Press, 2011, p. 129.

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the government’s purchase of public services. To achieve the goal of public understanding and recognition, the government should improve the public procedures for government procurement of public services. Before the promulgation of the “Measures”, China’s normative documents for government procurement of public services did not provide much for information disclosure. The “Measures” stipulates the disclosure of purchase information, that is, the purchaser shall promptly announce to the public the relevant information such as the procured contents, scale, qualification requirements for the undertaker, and relevant materials to be submitted. The “Measures” are not comprehensive in terms of information disclosure, and various standards and conditions are vague. For example, it is not clear what the “relevant materials” in the “relevant materials to be submitted” are.

5.3 Legal Countermeasures for Establishing and Improving the Undertaking Mechanism The following guiding principles should be followed in constructing the undertaking mechanism for government procurement of public services in China: First, the principle of priority in undertaking capacity. That is to say, to build an undertaking mechanism, priority should be given to the undertaking capacity and level of the undertaking body. The selected undertaker should have the ability to undertake general purchase targets and have the ability and level to undertake purchase targets with special requirements. Second, the purchase price is fair. Low cost is one of the three goals pursued by the government in procuring public services. The set undertaking procedure should be able to select the public service undertaking body that provides the best quality and the lowest price. The price promised by the undertaker should be based on scientific evaluation rather than artificially reducing costs and prices in order to obtain public service projects. The third is the strong self-correction ability of the undertaking mechanism. Since public services directly involve the people’s vital interests, once they are activated, they cannot be abolished or changed at will. This requires the establishment of a succession mechanism to have a strong ability to correct. It must be able to solve problems in procuring activities in a timely manner, and at the same time. Eliminate or reduce damage to the legitimate rights and interests of service recipients. Based on the above principles and requirements, China’s government procurement of public service undertaking mechanism should focus on optimizing and constructing the establishment of access conditions for undertaking entities, the specification of selection procedures, the selection of undertaking methods, and the improvement of information disclosure procedures.

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5.3.1 Scientifically Set the Access Conditions for Undertaking the Main Bodies The setting of the access conditions for the undertaker must first solve the problem of the scope of the undertaker, and it must clarify the access conditions of each undertaker.

Scope of Undertaking Subject In China, the main entities that undertake government procurement of public services are mainly for-profit companies and non-profit social organizations, and natural persons and unincorporated units are excluded. In order to form effective competition among undertaking entities and promote the development of government procurement of public services, the government should stipulate not only for-profit corporations and non-profit social organizations as undertaking bodies, but also natural persons and unincorporated entities as undertaking bodies. The government must provide equal undertaking opportunities and access conditions for all undertaking entities, and cannot artificially set up obstacles to limit competition. In order to prevent the artificial exclusion of potential successors and prevent the government from arbitrarily appointing successors, which leads to corruption, the government should establish a special “undertaker information base”, as long as the qualified acceptors can become the information base through the registration process a member. In order to ensure the objectivity and fairness of the process of selecting the undertaking subject, the government also needs to establish an “accreditation expert database for undertaking subjects”. The experts in the database are composed of two parts. One is in the field of procuring projects. They are responsible for reviewing the professional content such as the ability and technical conditions of the undertaker, that is, the qualification of the undertaker. The other part is the undertaking procedure experts, who are responsible for reviewing the implementation and operation of the undertaking procedure. Therefore, it can determine whether the undertaking subject’s behavior conforms to the procedure specification. During the review process, experts should carry out work in strict accordance with the contents, standards and methods stipulated in the purchase documents, minimize misjudgment, and ensure the fairness and scientization of the selected conclusions.

The Access Conditions of the Undertaker The basic requirements for the access conditions of public service undertaking entities are strong service capacity, low price, excellent quality, and great development potential. The primary condition is whether they can provide public services. Therefore, the access conditions for public service undertaking entities should also be set around the core element of providing capability. Different undertaking entities have

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different access conditions. For non-natural persons to undertake the subject qualification conditions, it must be legally registered or filed. This is the premise of the legal existence of institutions. Generally speaking, the undertaker should consciously perform the registration obligations in accordance with state regulations, otherwise it will not have a legal identity. For non-profit organizations, there is no need for mandatory registration, and more flexible management measures can be adopted, such as only filing and so on without registration. The second is to have qualified staff. According to the type of public service procured, the undertaking entity should have a work force of the same age, appropriate number of people, strong working ability and corresponding professional knowledge. The third is a sound organization. The undertaking body shall establish and improve the corresponding working institutions to meet the needs of various affairs of the procuring activities. The fourth is to have a fixed workplace. The workplace is a geographic requirement for the provision of public services without which work cannot be performed. Fifth, improve the management system. This is an inevitable requirement for the main body to maintain the organized operation. The undertaker must set up a work ledger, and establish a work management system and financial system. Sixth, the working facilities meet the requirements. Because some governments have special requirements for facilities and equipment when procuring public services, such as pension services procured by the government, they require a certain number of facilities that meet the requirements, such as beds and bathing facilities. If the working facilities do not meet the requirements, it is easy to cause accidents. Therefore, in addition to complying with the conditions of safety, convenience and comfort, the facilities that undertake the main body of such public services also need to be verified by the relevant departments and obtained the certification qualification certificate. Next, we should have a good integrity record. The undertaker must have a good credit record; its managers must also require no criminal record, bad hobbies and other requirements. When the government makes a choice, as long as the undertaker does not meet one of the above conditions, it can be excluded. As for the successor of a natural person, it is required to have the capacity for civil conduct and a good record of good faith.

5.3.2 Standardize the Operating Procedures of the Undertaking Mechanism The standard operating procedure of the undertaking mechanism is the core content of the scientific undertaking mechanism. The operating procedures of the undertaking mechanism for government procurement of public services in our country should follow the principle of competition being the main factor and non-competitiveness being the supplementary principle, that is, the public service projects procured by the government should be carried out in the form of public bidding, and the noncompetitive undertaking mechanism operating procedures should be carried out. It is

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only used in very exceptional circumstances. In general, the non-competitive succession mechanism can be used to run the program only if the following conditions are met. First, there is only one or a very small number of undertaking entities, which cannot meet the quantity requirements of public bidding undertaking entities; second, the public services procured by the government are particularly urgently needed by the people, and if they are not provided in a timely manner, the legitimate rights and interests of the people will be damaged, and such loss is irreparable, and public bidding is too time-consuming; third, the public services procured by the government are not large in quantity, the amount is very small, and the number of beneficiaries is small, which is not suitable for public bidding. Only if the above conditions are met, the government can use the operating procedures of the non-competitive undertaking mechanism to select the undertaking body. Procuring projects that adopt the operating procedures of the competitive undertaking mechanism can be carried out in accordance with the relevant provisions of China’s “Tendering and Bidding Law”; purchase projects that adopt the operating procedures of the non-competitive undertaking mechanism can be procured according to the “Government Procurement Law”. Inquiry purchase or single source procuring regulations, other non-competitive selection procedures such as invitation to bid and inquiry bidding should be minimized or disabled. After the operating procedures of the undertaking mechanism are activated, the government procurement of public service management department can entrust the specific undertaking work to the intermediary organization, but the entrusted intermediary must be evaluated before the entrustment. It can be entrusted when the performance efficiency is higher and the cost is lower, otherwise, the government department cannot entrust the undertaking work that the government department should undertake to the intermediary agency.

5.3.3 Reasonably Determine the Legal Methods of the Undertaking Mechanism How to properly undertake is one of the important contents of the undertaking mechanism. Without a scientific undertaking mechanism, no undertaking subject willing to participate. According to the experience of various countries, most of the undertaking mechanisms for government procurement of public service should be based on the procurement contracts. These contracts are made by the government to directly allocate fees to the undertaking subject. Under special circumstances, the government may also adopt franchises, vouchers and volunteer services. The way in which direct government funding is received has been discussed above and will not be repeated. Here, we will focus on three kinds of undertaking mechanisms: franchise, voucher and volunteer service, which are of special significance in China. The franchise undertaking mechanism has unique advantages in China. For that at present, the major public service projects such as water and electricity needed by the people are controlled by public institutions or state-owned enterprises. These units

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are taking advantage of the monopoly position brought by the government’s franchise rights to seek benefits. With the steady progress of the government procurement of public services, the state should give the undertaking subject other than the abovementioned units an equal opportunity to obtain the franchise. So that the service recipients can obtain the highest quality services with the least money. In China, the government procurement of public services is unbalanced among regions and people’s needs are diversified. It is particularly meaningful to implement a voucher-based undertaking mechanism. Because the government can implement voucher-based payment for public service projects with uniform standards, small quantity, low amount, and many beneficiaries to meet the needs of different service objects. The voucher-based undertaking mechanism also allows the undertaking subject to increase the desire to improve service. Strictly speaking, volunteer service cannot be regarded as a mechanism for the government procurement of public services. However, it can enhance people’s moral awareness and sense of responsibility, and promote social harmony. Volunteer service work in China is led by the Communist Youth League, and it already has a very good social foundation and organizational conditions. As long as the government provides a little guidance, it will become a beautiful landscape in the government procurement mechanism for public services.

5.3.4 Public Disclosure of Statutory Information on the Undertaking Mechanism According to the “Regulations on the Disclosure of Government Information”, matters that involve the vital interests of the masses and require extensive public knowledge or participation must be publicly announced. The government procurement of public services is directly related to the vital interests of the public, and the government must actively promote the work of information disclosure. Different from general administrative parties, the undertaking subject is also responsible for information disclosure in government procurement. This is because in the mechanism of government procurement of public services, the undertaking subject has dual identities of “public” and “private”. In the corresponding relationship with the government, the undertaking subject exists in the identity of “private”. While in the relationship with the public service object, the undertaking subject replaces the government to perform some public functions and has the identity of “public”. It is a basic requirement for modern rule of law and democratic principles that the undertaking subject performs information disclosure in the identity of “public”. Public disclosure of information in the identity of “private” can enhance its own influence and brand benefits. Therefore, to build a good government procurement mechanism for public services, it is necessary to improve the information disclosure procedure. First of all, it is necessary to clarify the requirements for public disclosure. It means that all information related to the government procurement of public services

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must be publicly disclosed, and the undertaking subject should be held accountable for failing to perform the obligation of information disclosing. The second is to define the scope of public disclosure. The name, quality, quantity, price, performance period, etc. of the public service purchased by the government should be clarified; the basic information of the undertaking subject should be defined, including the name, institutional setup, personnel composition, office space, facilities and equipment, rules and regulations, credit status, development history, and purchase agreement. The government shall proactively publish the assessments and audit reports of the undertaking subject. Information involving state secrets, business secrets and personal privacy should not be made public. Other procurement information will be made public upon application. The third is to follow the principle of equality. Which means all the subjects related to the government procurement of public services are the subjects of public disclosure. Public disclosure requirements cannot be imposed only on the government or some of the undertaking subjects. The final step is to determine the public release carrier. It is necessary to change the traditional practice of only publishing information in local paper media and to advocate the use of the internet to carry out information disclosure work. There is a large amount of information about government procurement, and it is obviously not in line with the requirements of the situation to publish only on paper media. It is unreasonable for some local governments to only publish relevant information about government procurement on local media. Therefore, with the development of government procurement of public services, the government should establish various channels, especially the Internet, to carry out the work of public disclosure of information. The improvement on the government’s undertaking mechanism of public service is not a one-time achievement. It is necessary to formulate a national unified law on the undertaking mechanism of public service and have a considerable practical case to study the government’s procurement mechanism of public services.

Chapter 6

Statutory Ways for the Government Procurement of Public Services

The government has many ways of purchasing public services, including competitive purchases, commissions, leases, franchises, and strategic cooperation etc. No matter what kind of procurement method is adopted, it always will be realized through contract. The procurement contract is related to the realization of the government procurement of public service system goals. It is the core and cornerstone of the government procurement of public service. The government procurement of public services is the product of the transition from authoritarian governance to contractual governance, and contractualization is its essential feature. However, since the government procurement contracts is a kind of public services, and the characteristics of public services are more complex than those of general civil contracts. Only by clarifying the characteristics of the procurement contract which is different from the general civil contract, can the contract be signed and performed better. Due to the different legal systems in various countries, the definition of the form, nature, different links and stages of the procurement contract is also different. For example, there are many ways to divide the links and stages of the procurement contract. Scholar Savas called all the links and stages of a procurement contract the “signing process”, including considering the implementation of contract outsourcing, selecting services to be outsourced, conducting feasibility studies, promoting competition, understanding bidding intentions and qualifications, planning employee transitions, preparing bidding contract details, conducting public relations activities, planning competitions involving managers, implementing fair bidding, evaluating bids and signing contracts, monitoring and evaluating, and promoting contract performance.1 In China, the links and stages of the procurement contract are mainly divided according to the “Contract Law”. The “Contract Law” divides the contract process into the links of offer, commitment, conclusion, performance, supervision and management. Correspondingly, the procurement contract can also be divided into 1

[America] E. S. Savas: Privatization and the Partnership between the Public and Private Sectors, translated by Zhou Zhiren, etc., Renmin University of China Press, 2002, pp. 185–212.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 X. Xiansheng, Public Procurement in Chinese Law and Practice, State Governance, https://doi.org/10.1007/978-981-99-1047-2_6

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negotiation, signing, performance, supervision and management. This paper focuses on the signing, performance, supervision and management. To study those parts, it is necessary to study the contract form and nature.

6.1 Forms, Legal Nature and Privileges of Procurement Contract A contract is essentially an agreement, which is the product of the agreement of different parties.2 A procurement contract is an agreement between the purchasing subject and the undertaking subject regarding the rights and obligations of both parties in the procurement process. Specifically, a procurement contract is a contract in which the government uses financial funds to purchase public services from the undertaking subject in order to perform its function of providing public services.

6.1.1 The Basic Forms of the Procurement Contract Examining the different forms of the procurement contract is conducive to accurately grasping the legal nature of the procurement contract, so as to strengthen the supervision and management of the procurement contract. Due to the various forms of government procurement, the forms of procurement contracts are also diversified. From the perspective of government procurement forms in various countries, there are four main forms of government procurement contracts: contract-based procurement, public–private cooperation, direct funding and project application. Contract-based procurement is a form of procurement contract used in various countries. It refers to the form of a procurement contract in which the purchasing subject and the undertaking subject sign a contract and use financial funds to purchase public services that meet the requirements from the undertaking subject. In the form of contract-based procurement, the purchasing subject supervises and manages the performance of the undertaking subject according to the contract, and pays fees according to whether the public services provided conform to the contract. In this form, the legal status of the purchasing subject and the undertaking subject is equal, and both parties can sign contracts according to market rules, but the purchasing subject has the privilege (or administrative privilege) of the procurement contract. Contract-based procurement is the most typical form in developed countries such as the United Kingdom and the United States. In the United States, contract purchases are widely used at all levels of government. According to statistics, there are at least more than 200 kinds of services provided to the government by the undertaking subject in the United States, such as garbage collection, ambulance

2

Wang Liming: “Contract Law Research” (Volume 1), Renmin University of China Press, 2011 edition, p. 7.

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services, consulting services, data processing, entertainment services, street lamp maintenance, street maintenance, etc. A public–private partnership is a special form of procurement contract. In this form, the purchasing subject does not need to directly contribute capital to purchase public services from the undertaking subject. Instead, it attracts the undertaking subject to participate in the production of a public service through government charter, allowing the undertaking subject to have the right to return on investment, or other forms. The advantage of this form is that the government makes reasonable use of the monopoly power of social resources, so that the undertaking subject can obtain benefits through the special empowerment of the government. At the same time, the government also reduces the financial burden because it invests none or less financial funds. This is a win–win institutional arrangement, especially suitable for public services with large capital investment, long cycle and high public welfare, such as sewage treatment. Direct funding is also one of the common forms of government procurement contracts. It refers to the contract form in which the purchasing subject subsidizes the undertaking subject through direct government grants, in-kind subsidies, etc. Direct government funding can appropriately reduce the operating costs of the undertaking subject and provide diversified public services with preferential prices. There are many forms of direct funding, including direct government grants (such as Hungary, South Korea, etc.), special tax regulations (such as Hungary, the United States, etc.), loans or loan guarantees (such as England). In Germany, France and Hong Kong, another way for the government to directly subsidize public social service providers is to provide public spaces for free.3 In addition to the above forms, direct funding also has the form of government consumption coupons (vouchers). Consumption coupons are a form of valuable coupons, which can be regarded as a type of cash, but they are very different from cash. First, consumption coupons can only be used to purchase a certain type of product (service). Second, the consumption coupons have a validity period, and it is invalid if expires. Therefore, the consumption coupons have the characteristics of forced consumption.4 People can often choose different service producers with coupons (such as choosing different hospitals in the community for medical examination and care), which is more popular in countries such as France. Consumption coupons can create a more market-oriented mechanism for providing social services.5 Project application refers to a contract whereby the undertaking subject proactively submits a project application for a public service to the purchasing subject 3

Wang Pujiao, [America] Lester M. Salamon, etc.: “Research on government procurement of Public Services from Social Organizations: An Analysis of China and Global Experience”, Peking University Press, 2010, p. 297. 4 Wang Pujiao, [America] Lester M. Salamon, etc.: “Research on government procurement of Public Services from Social Organizations: An Analysis of China and Global Experience”, Peking University Press, 2010, p. 19. 5 Wang Pujiao, [America] Lester M. Salamon, etc.: “Research on the Government’s Purchase of Public Services from Social Organizations: An Analysis of China and the Global Experience”, Peking University Press, 2010, p. 233.

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according to the needs of the public. Upon approval by the purchasing subject or the public service management agency, the undertaking subject obtains the project and the purchasing subject provides project financial support. It has the characteristics of strong pertinence, simple procedures and low operating costs. However, if the supervision is not in place, it is easy to deviate from the purchase target and generate power rent-seeking. In practice, the three most commonly used forms of procurement contracts in China are contract purchase, direct funding and project application.

6.1.2 The Legal Nature of the Procurement Contract The legal nature of the procurement contract is a fundamental issue which involves the determination of the nature of government procurement. And the determination will affect the design of the government procurement system, especially some important designs, such as government procurement of public goods, the design of the service relief system and the role of the government in procurement and the boundaries of its powers, etc. Therefore, scientifically defining the legal nature of the government procurement contract is of great significance to improve the government procurement system and to promote its healthy development. From the analysis above, it can be seen that the procurement contract is essentially an administrative contract. So for the question of whether there is an administrative contract in China, there are two completely different views in the academic circles. Scholars represented by Liang Huixing and Cui Jianyuan believe that there is no so-called administrative contract. Professor Liang Huixing believes that if there is no state interference, a civil contract will become an administrative contract. “It is essentially a market transaction. Even if one party is an administrative agency (such as a government procurement contract), or a mandatory contract (such as a grain order), it is still a civil contract, which is fundamentally different from the so-called administrative contract. Moderate intervention in some market transaction behaviors by administrative organization does not change the nature of these market transaction behaviors. And of course it is impossible to turn these market transaction relationships into so-called administrative contracts.”6 Cui Jianyuan started from the analysis of the French administrative contract system and its theory. He believes that there are problems in Chinese law to determine the standard of administrative contract according to the French administrative contract theory; therefore, Chinese law should not follow the French administrative contract system and its theory.7 However, scholars represented by Ying Songnian, Liu Xin and Jiang Bixin believe that not only should administrative contracts not be confused with civil contracts, 6

Liang Huixing: “Civil Law Doctrine Cases and Legislative Research” (Series 2), National School of Administration Press, 1999 edition, p. 191. 7 Cui Jianyuan: “My Views on Administrative Contracts”, in “Journal of Henan Provincial Political and Legal Management Cadre College”, No. 1, 2004, pp. 99–102.

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but an independent system of administrative contracts must be established as soon as possible. Scholar Jiang Bixin believes that administrative contracts are the most typical practice form of governance by contract, which is objective, long-term and ubiquitous in practice.8 Scholar Liu Xin believes that administrative organizations are not just ordinary civil subjects, they are more important administrative subjects. In this capacity, the contract they sign with the opposite party for the public interest is, after all, different from ordinary contracts and needs to be protected by administrative privileges. If they are confined to the theory of civil contracts and cannot be given their due position in the law, it will undoubtedly bring great confusion to the theory and law enforcement practice. Therefore, it is recommended to formulate and promulgate the Administrative Contract Law and establish an administrative contract system according to the specific national conditions of China to solve the problems we are facing.9 Although there are different views in the academic circle, it is certain that administrative contracts exist objectively. First, in practice, administrative contracts exist objectively in various forms. For example, there are government franchise contracts, public works contracts, land contracts, state-owned land transfer contracts, government procurement contracts, public housing lease contracts, administrative expropriation or compensation contracts, civil servant employment contracts, policy credit contracts, environmental protection administrative agreements, Government scientific research contracts, educational administrative contracts (such as student entrustment training contracts), family planning contracts, public security punishment guarantee agreements, official entrustment contracts, administrative law enforcement reconciliation contracts, law enforcement target responsibility letters, fire safety responsibility letters, etc.10 Second, although there are no special legal provisions for administrative contracts, they have long been mentioned in some important policy documents in China. For example, the “Outline for the Implementation of Comprehensively Promoting Administration by Law” issued by the State Council mentioned “administrative contracts” many times. The law also pointed out that more attention should be paid to the role of administrative planning, administrative guidance and administrative contracts in government management. The government should actively explore the negotiation, selection, and indirect management mechanism to win people’s understanding, trust and support; at the same time, in the provision of public services, the government should actively introduce market operation mechanisms, and explore ways to reduce public service costs through administrative contracts, guidance, subsidies, etc. to provide fast and easy public service. 8

Jiang Bixin: “China’s Legal System of Administrative Contracts: System, Content and Construction”, in “Chinese and Foreign Law”, No. 6, 2012, p. 1166. 9 Liu Xin: “A Humble Opinion on Administrative Contracts”, in “China Law”, No. 5, 1995, pp. 68– 70. 10 Yang Jiejun and Chen Yongmei: “Dispute Resolution of Administrative Contracts in Mainland China: Status Quo, Problems and Path Choices”, in “Administrative Law Research”, No. 1, 2014, p. 62.

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Third, the judicial interpretation recognizes the administrative contract. The Supreme People’s Court issued the “Notice on Regulating the Cause of Action of Administrative Cases” ([2004] No. 2), which listed administrative contracts as one of the 27 types of administrative acts that could be accepted. And the regulation placed it in the “elements and determination methods of the cause of action in cases of omission”. The regulation also takes it as an example of a document for performance of duties - the case of “suing XX (administrative subject) for not performing administrative contract obligations”. Fourth, as mentioned above, according to existing laws, contract law applies to procurement contracts. However, legislators are not determined enough to apply contract law to procurement contracts, and the law is not consistent enough. When there is a dispute over a procurement contract, if the contract law is applied, the dispute must be resolved by means of private law. However, there are public law dispute resolution methods, such as complaint handling, administrative reconsideration and administrative litigation in the existing regulations. This kind of dispute resolution method, which stipulates public law and private law, can also show that legislators have not denied the difference between a procurement contract and a civil contract. Which means a procurement contract is a type of administrative contract with obvious administrative characteristics. In fact, defining the procurement contract as an administrative contract and incorporating it into the adjustment scope of public law rules can better protect the procurement interest and ensure the smooth development of the procurement behavior. This is because, from the perspective of supervision and management, administrative contracts enjoy administrative privileges, which can better handle the problems that arise in the performance of procurement contracts. The undertaking’s procurement is more for the realization of public interests, while the undertaking subject’s participation in the procurement process is more for private interests. A reasonable balance of the two interests is the pursuit of the government procurement system. However, in practice, the two are often out of touch, especially the behavior of collusion that may damage public interests between the undertaking subjects or between the undertaking subject and the purchasing subject. In these cases, the exercise of privileges or administrative privileges can stop harmful behaviors in a timely manner, and can better compensate for losses. From the perspective of protecting the scope of interests, a procurement contract that incorporates the adjustment of public law rules can more comprehensively protect various interests. Compared with the private law model, the public law model protects the rights and interests of the parties to the contract, and the legitimate rights and interests of third parties. The model protects economic, personal, administrative, political, and social rights and interests. The model protects the immediate interests of the people, and its long-term interests and fundamental interests. The model not only protect actual interests, but also protect “reliable interests”. Accordingly, from the perspective of sufficiency of protection, the public law model has a higher degree of protection than the private law model.11 From the

11

See Footnote 8.

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perspective of litigation, incorporating the procurement contract as an administrative contract into the administrative litigation procedure can better achieve judicial justice and enhance judicial protection. The seemingly clear division of labor between civil trial and administrative trial lurks great litigation risk of infringing interests of the public or the counterparty. The deficiencies caused by the entry of administrative contracts into civil trials, such as insufficient attention to public interests, unprepared protection of the rights and interests of the counterparty, and difficulties in the execution of judgments, can be significantly improved in administrative trials. Considering that the conclusion and performance of an administrative contract are often accompanied by related administrative actions, the formation and modification of an agreement is difficult to equate to a completely equal civil contract. The administrative litigation system with the administrative legal relationship can prevent risks in a unified manner. The administrative contract litigation model may be the future.12 It is most suitable for administrative contract cases to be tried by the administrative division of the court in accordance with the relevant provisions of the Administrative Procedure Law and the Civil Procedure Law. The substantive law basis in the trial should be the relevant administrative laws and ordinary contract rules. An important reason is that administrative procedure law is more or less born out of civil procedure law. Compared with civil trial experts, administrative trial experts can better grasp the essence of administrative contracts.13

6.1.3 The Procurement Contract Contains Privileges The procurement contract’s privilege or administrative privilege is the special power possessed by the procurement contract as a kind of administrative contract. It can be summarized as a mandatory privilege to exercise public power unilaterally by a contracting party for the purpose of public interest confirmed in the administrative law or stipulated in the terms of the administrative contract. Because the contract often exists in the form of equal rights and obligations. But the administrative subject as a party to the contract maintains its original public power status, so it is named “special”.14 The privilege of the procurement contract has the characteristics of exclusivity, unilaterality, the unity of the right to rescind and to change.15 The privilege of procurement contract is not an optional or destructive power to the contract itself, but the need to safeguard public interests and achieve administrative goals. The government implements national governance through procurement 12

Zheng Chunyan: “Current Situation and Predicament of the Review of Administrative Contracts in Mainland China”, in Zhejiang Social Sciences, No. 11, 2014, pp. 106–115. 13 Zhu Xinli: “Basic Characteristics of Administrative Contracts”, in “Journal of Zhejiang University (Humanities and Social Sciences Edition)”, No. 2, 2002, p. 24. 14 Qi Jiangang and Li Xueyao: “The Privilege and Legal Control of Administrative Contracts”, in “Law and Business Studies”, No. 2, 1998, pp. 65–66. 15 Guo Yue, Li Zhongping: “On Administrative Preferential Rights”, in “Journal of Anhui Agricultural University (Social Science Edition)”, No. 1, 2005, pp. 49–50.

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contracts, but this does not mean the disappearance or weakening of government functions. The procurement contract is only a way of changing the government’s governance. And it does not change the administrative responsibilities that the government should perform. The emergence of administrative contracts only weakens the unilateral, imperative and mandatory nature of administrative actions. It also strengthens the communication between the administrative subject and the counterparty. But it does not fundamentally change the nature of administrative power. The one-way and mandatory nature of the administrative contract is still the main feature of the administrative contract.16 There are differences between civil law countries and common law countries on whether to recognize administrative contracts, but they both recognize the contractual privileges to safeguard public interests. The amount of contractual privileges is different. France, which created the legal system of administrative contracts, has complete provisions on contractual privileges. It includes: (1) the counterparty must have the special trust of the government based on the contract, and the administrative subject has the right to veto the legal tender; (2) the right to require the counterparty to perform the contractual obligations; (3) the command power over the performance of the contract, including the right to perform the contract; (4) The right to unilaterally change the subject matter of the contract on the premise of compensating the other party; (5) The right to unilaterally terminate the contract on the premise of compensation; (6) The sanction rights of the contract include monetary sanctions (liquidated damages and damages), coercive means (acting on the parties who fail to perform their obligations, the administrative agency will take measures to realize the obligations stipulated in the contract according to their powers) and the termination of the contract without any compensation. What is more distinctive is that even if the above rights are not stipulated in the contract or clearly stipulated in the law, the administrative subject also enjoys it.17 In the UK, contractual privileges are established in the form of special provisions. The British regard the administrative contract as a civil act. But out of practical needs, by specifying the privilege in the contract (For example, it is stipulated in some clauses that the government enjoys the right to unilaterally change and unilaterally terminate the contract), the government requires the administrative subject to comply with the contract when concluding the contract.18 From a legislative point of view, there is no written law on administrative contracts in China, and naturally there is no specific content of administrative contract privileges. The privilege content of the existing administrative contract is based on the understanding and elaboration of the scholars. Therefore, the specific content of the administrative contract privilege is also defined differently. The main points of view are: (1) When supervising or commanding the performance of the administrative 16

Lu Xiaochuan: “On the Legal Control of Administrative Contract Corruption in my country: From the Perspective of Administrative Preferential Rights”, in Journal of Liaoning Administration Institute, No. 8, 2014, p. 29. 17 Zhu Xinli: “Basic Characteristics of Administrative Contracts”, in “Journal of Zhejiang University (Humanities and Social Sciences Edition)”, No. 2, 2002, p. 21. 18 Qi Jiangang, Li Xueyao: “The Privilege and Legal Control of Administrative Contracts”, in “Law and Business Studies”, No. 2, 1998, p. 66.

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contract, or executing the power to unilaterally change or rescind the contract, if the other party to the administrative contract violates the contract, the party has the right to sanction.19 (2) The right to choose the opposite party to the contract. The common terms of the administrative contract shall be determined by the government. The price clause shall be subject to the review of the relevant government departments. The right to require the other party to perform its obligations, and to supervise and direct the performance of the contract. The administrative contract cannot be used to restrain the exercise of the discretionary power of the administrative organization. The right to unilaterally change or terminate the contract. And the right to sanction the counterparty who fails to perform or improperly performs the contractual obligations.20 (3) Have the right to decide the subject matter of the contract, to choose the counterparty, to supervise and command the performance of the contract, to unilaterally change and rescind the contract, and to sanction.21 (4) Right to unilaterally change the content of an administrative contract and the right to unilaterally rescind.22 (5) The right to decide the subject matter of the contract, to veto the legal tender, to unilaterally terminate the contract or change the subject matter of the contract following the practice of English law, in the contract terms or in the administrative law, according to the content and type of the contract.23 The above viewpoints have different descriptions of the content of contractual privileges, but they are all set around the main purpose of ensuring the public interest, and they are all for the government to better perform its procurement duties. The privileged content of the procurement contract can be set by referring to the above administrative contract, combining the actual situation in China and the relevant provisions of the administrative law. It mainly includes the following aspects: (1) The right to choose. The purchasing subject has the unilateral option on whether to buy, what to buy and who to undertake it. Government procurement is one of government’s functions. The government can decide whether to carry out the government procurement according to the actual administrative needs. The actual administrative needs are mainly reflected in the following aspects: whether the people need it, whether the government has a financial burden, whether the government itself can produce and provide, and whether the procurement is more efficient than the government’s performance. The government can choose the target of procurement according to the list of public services and the needs of local people. However, it must be limited to the needs of the public and affordable public finance. The government selects the undertaking subject, but the government need to conform to the standard 19

Liu Xin: “A Humble Opinion on Administrative Contracts”, in “China Law”, No. 5, 1995, pp. 71– 72. 20 Yang Jianshun: “Administrative Regulation and Rights Protection”, Renmin University of China Press, 2007 edition, pp. 402–403. 21 Wu Junshan: “On the Legal Control of Administrative Contract Privileges”, in “Theoretical Exploration”, No. 2, 2004, p. 92. 22 Guo Yue, Li Zhongping: “On Administrative Preferential Rights”, in “Journal of Anhui Agricultural University (Social Science Edition)”, No. 1, 2005, p. 49. 23 Qi Jiangang, Li Xueyao: “The Privilege and Legal Control of Administrative Contracts”, in “Law and Business Studies”, No. 2, 1998, pp. 67–68.

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undertaking procedure, choose scientific undertaking way.24 (2) Management right refers to supervising and managing the procurement contract. In a standard contract, the two parties have equal status, and there is no supervision and management of one party over the other. In the procurement contract, to maintain public interests and ensure that people can enjoy practical benefits, the government must be empowered to supervise and manage the contract. In the procurement contract, the management right is reflected in checking whether the undertaking subject fully fulfills the procurement contract and whether it fulfills the procurement contract timely. Failing to fully perform procurement contract will damage the interests of the oblige. For example, in nursing care for the elderly, according to the regulations, one visit to the home is required every day. If the undertaking subject fails to visit the home as stipulated in the contract, causing failing to know that the elderly have a cold or fever or eventually causing the death of the elderly due to lack of timely treatment, it violated the elderly and his family members’ rights. Some procurement program has a strong timeliness requirement. If not timely performed, the program may also cause rights violations, such as cleaning the pavement of snow in winter. The government buys this project to provide convenience for people to travel. If the undertaking subject fails to complete the snow cleaning in time as required. It will be a breach of contract, and a violation of residents’ travel. Therefore, when the undertaking subject fails to fully perform the procurement contract promptly, the purchasing subject or its management department can exercise the right of supervision and management to urge the undertaking subject to fully perform the contract promptly. (3) Right to change. In the process of performing the procurement contract, it is generally performed in strict accordance with the provisions of the contract. However, in case of changes in national laws, policies, or the environment of the contract, the government have the power to change the contract or even cancel the contract for the public interest. For example, a specific undertaking subject undertakes the garbage collection project of a particular section of the inland river in the city. However, due to the occurrence of drought, the inland river is short of water, and the flow is cut off. There is no river at all, let alone the contract content of picking up river garbage. In this case, if the contract is not changed or canceled, it will be a waste of monetary funds. Therefore, the contract can be changed or canceled. However, if the contract is changed or terminated, reasonable compensation shall be given to the counterparty of the contract. (4) Right to sanction. When the undertaking subject fails to perform according to the agreement or procurement contract, it may exercise the right of sanction according to law. The right to sanction is not only a negative evaluation of the parties who violate the contract, but more importantly a way to ensure the realization of the national administrative objectives. Therefore, in the procurement contract, the right to sanction can be exercised once the parties violate the agreement or the provisions of the contract, regardless of whether the contract provides for it or not. The main forms of exercising the right to sanction are as follows: one is to demand the payment of liquidated damages. The second is damage compensation. 24

Xiang Xiansheng: On China’s Government Purchasing Public Service Undertaking Mechanism, Henan Social Sciences, no. 10, 2014, pp. 58–59.

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The third is to be included in the blacklist of government-purchased services. Article 37 of the Measures stipulates that, in addition to imposing administrative penalties on those who engage in fraud, falsely claiming financial funds or other illegal acts, they will also be put on the government’s blacklist for procurement services. Fourth, administrative punishment and criminal responsibility. For the undertaking subject’s major breach of contract, the relevant state department shall give administrative punishment, and criminal responsibility shall be investigated if a crime is constituted. Fifth, the right to participate in procurement is canceled within a certain period. Sixth, terminate the contract. The privilege of procurement contact guarantees the performance of the contract and the realization of administrative objectives. However, just as any power has the characteristics of aggression and expansion and may lead to abuse if it is not restricted, the privilege of procurement contract will also be abused if it is not restricted and standardized. Therefore, rules must be established to ensure the proper use of procurement contract privileges. First, it is necessary to be clear about the premise of the privilege. The privilege of procurement contract is a legal right, not an extra-legal privilege. Therefore, when exercising it, the precondition must be clear. Only when the public interests are damaged or the administrative objectives cannot be realized can the contract privilege be exercised. “Public interests are damaged” and “administrative objectives cannot be achieved” are subjective conditions as well as categories of discretionary power. Therefore, it is difficult to achieve clear boundaries. Because of this, the procurement contract privilege is easy to abuse. In practice, the purchasing subject and its management department often use this as an excuse to infringe the legitimate rights and interests of the undertaking subject. In order to correctly exercise the procurement contract privilege, when the purchasing subject and its management department want to exercise the privilege, they must hold expert discussion meetings, hearing or listen to the undertaking subject’s argument to safeguard the legitimate rights and interests of the undertaking subject. Second, it is necessary to clarify the subject of the privilege. The exercise of the procurement contract privilege has its exclusive property. Not everyone can exercise it. Only the purchasing subject or its management department can exercise it. Otherwise, any units or individuals can not exercise the contract privilege. It is easier to understand the purchasing subject as the exercising subject of contract privilege. But the difficult part is understanding the meaning of the purchasing subject management department. In China, a unit often has many business management departments. It is generally unclear whether these departments enjoy contractual privileges, which leads to the offside exercise of contractual privileges in practice. In order to make good use of the contract privilege, it is necessary to make clear the subject exercising the contract privilege. Not all the units or departments related to the purchase subject or the purchase activity enjoy the contract privilege. Only the specialized organization responsible for government procurement have the contract privilege. The agency itself has the function of supervising and managing the performance of procurement contracts.

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Third, it is necessary to standardize the utilization of privilege procedures.25 Sound procedures can improve the transparency, fairness and correctness of administrative decisions, ensure the orderly realization of administrative goals and the legitimate rights and interests of administrative parties are not harmed “through the implementation of procedures, promote the legitimacy of administrative decisions, to reduce the intention of ‘player-referee’ suspicion”.26 In exercising the privilege of procurement contract, apart from exercising the privilege according to the existing legal procedure, we should also establish the standard procedure of using the privilege. Specifically, the first is to establish the hearing system. When the privileged subject intends to exercise the contractual privilege, a hearing shall be held with experts, scholars, parties to the contract and a third party without interest. Opinions of all parties shall be fully heard. The second is to establish a notification system. When the privileged subject intends to exercise the contractual privilege, it must inform the undertaking subject and the interested parties of the content, basis and remedy of the exercised contractual privilege. Third is to establish an information disclosure system. Because the government procurement are related to the public interest, therefore, when the privileged subject wants to exercise the contractual privilege, the relevant information must be made public, so that the public can understand, to facilitate supervision. Fourth is to establish the contract value of fairness and justice. When the privileged subject wants to exercise the contractual prerogative, especially for the national interest or the public interest to change the procurement contract, rescinding the contract to cause losses to the undertaking subject, the contract value of fairness and justice should be followed. Although it is accepted by most countries that public interests take precedence over individual interests, it is not right to deny or infringe upon individual interests by emphasizing public interests. Therefore, when the privileged subject exercising the contractual privilege causes losses to the undertaking subject, it must adhere to the principle of fairness and justice. Compensating the undertaking subject for losses without fault is needed. This kind of compensation should not stay in words but must have the corresponding system guarantee, such as establishing the procurement contract risk compensation system, to ensure that the subject can obtain compensation. Fifth, establish an effective relief mechanism. No remedy means no right. In the procurement contract, the government, as the party has a strong position, is easy to infringe the interests of the undertaking subject; If the contract privilege is abused, the interests of the undertaking subject will be greatly harmed. The undertaking subject is often unable to sue the government violations. Therefore, an effective relief mechanism must be established to protect the interests of the undertaking subject. The content of the relief mechanism is discussed in a special chapter below.

25

Xiang Xiansheng: Research on the Establishment of Government Purchasing Public Service Management Institutions, Journal of fujian Provincial Party School, 2012, No. 3, pp. 43–45. 26 Weng Yuesheng, Administrative Law, China Legal Publishing House, 2009, p. 920.

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6.2 Signing of Procurement Contracts The signing of the contract mainly solves the problem of how to sign the procurement contract, who to sign with, and what to sign. Specifically, it refers to the behavioral process of establishing the contract between the purchasing subject and the undertaking subject through negotiation, bidding and other procedures. Generally, the signing of a contract must go through two stages of offer and commitment. While the signing of a procurement contract is relatively complicated. Between offer and commitment, the signing of a procurement contract must go through procedures such as public bidding, invitation bidding, competitive negotiation, single-source purchase, inquiry, etc. The form of offer and acceptance is no different from that of an ordinary civil contract. Therefore, the key to signing the procurement contract is to solve the problems with independent characteristics, including the allocation of rights, the drafting of contract terms and how to draft contract terms and so on.

6.2.1 Allocation of Rights of the Subject of the Procurement Contract Scientific and reasonable allocation of rights and obligations is the basis to ensure the smooth performance of the procurement contract. One of the critical factors for the successful signing of a procurement contract is whether it can stimulate the interest of the parties involved in the contract. To stimulate the procurement interest of the parties to the contract, it is necessary to allocate scientific and reasonable rights and obligations. For the purchasing subjects, the government procurement is designed to save monetary funds, improve the efficiency of public service supply, and finally realize the maximization of public interests. For most of the undertaking subjects, participating in government procurement is to realize the interests of units or individuals. When configuring the rights and obligations of the procurement contract subject, on the one hand, it is necessary to consider how to integrate the goals of the administrative counterparts into the goals of the administrative subjects, mobilize the enthusiasm of the administrative counterparts, and make the goals of the administrative subjects be realized through the behavior of the administrative counterparts. Therefore, it is necessary to allocate contractual rights and obligations between the two, and to meet the utilitarian needs of the administrative counterparts based on the principle of economic balance, thereby enhancing public welfare. On the other hand, it is necessary to consider how to ensure the expected goals of the administrative contract and avoid its possible shortcomings, such as “selling out public power” or using public power to oppress the other party in the administrative contract. So it is necessary to allocate administrative rights and obligations, to make the administrative body in the administrative contract has the dominance. It is also subject to the administrative procedure law. That is to say, in government procurement, the purchasing subject shall be given binding contract leadership; the undertaking subject shall be

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given incentive contract rights. The dominant right of the contract with the binding force of the purchasing subject mainly includes: First, the right to organize the procurement activity. Article 16 of the Measures stipulates that purchasing subjects shall organize and implement government procurement of services by following the principles of flexible methods, simple procedures, open and transparent, orderly competition and evaluation of results, according to factors such as the characteristics of supply and demand of procurement contents and the development degree of the market. Second, the right to determine the undertaking subject. Article 17 of the Measures stipulates that the purchasing subject shall, in accordance with the relevant provisions of the Government Procurement Law, adopt such methods as public bidding, invitation bidding, competitive negotiation and single-source procurement to determine the undertaking subject. Third, the implementation right to purchase the target. Article 18 of the Measures stipulates that the purchasing subject shall, after the purchase budget is issued, work out a government procurement implementation plan in accordance with the requirements of government procurement management. And the subject shall report it to the government procurement supervision department at the same level for the record before carrying out procurement activities. Fourth, the right of signing a procurement contract. Article 19 of the Measures stipulates that after the undertaking subject is determined according to the prescribed procedure, the purchasing subject shall sign a contract with the undertaking subject. Fifth, the right of procurement contract supervision and management. Article 20 of the Measures stipulates that the purchasing subject shall strengthen the management of the procurement contract and urge the undertaking subject to perform the contract strictly. The purchasing subjects should also be subject to the restraint and supervision of the financial department when exercising the right to lead the contract. The incentive contract right of undertaking subject includes: one is the option of signing the contract. The undertaking subject has a certain right to choose whether to sign a procurement contract and the specific content of the procurement contract. The second is to obtain the right of contractual consideration. After performing the contract, the undertaking subject may obtain the corresponding contractual consideration right according to the procurement contract or require the purchasing subject to fulfill its commitment. Third, the right to change circumstances. When the performance of the procurement contract can not be performed or more significant losses will be caused by the performance of the procurement contract, the undertaking subject may require the contract to be adjusted or terminated. Fourth, the right of injury compensation. When the undertaking subject’s own legitimate and legal rights are infringed, it has the right to demand compensation from the violator. Fifth, equal right to participation and to know. These two rights that show respect to the undertaking subject are conducive to stimulating the undertaking subject to participate in the government procurement activities.

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6.2.2 Requirements for Drafting Contract Terms From the perspective of legal documents, the contract’s content is the terms of the contract, which is the centralized expression and fixation of the agreement between the two parties. And it is the basis for determining the rights and obligations of the parties.27 The procurement contract terms are a specific form of the procurement contract, which reflects the will of the purchasing subject and the receiver. And it is the expression of the rights and obligations of both parties in words and languages. Realistic procurement contract terms can create good conditions for procurement activities. It also can lay a foundation for the follow-up standardized management of procurement contracts and effective risk prevention. In a sense, the terms of the contract often decide the success or failure of the procurement activity. So one cannot pay too much attention to the drafting of the terms of the contract. However, drawing up the contract terms is pretty tricky, which often becomes a “stumbling block” inadvertently. And it is the difficult part for the purchasing subject or the government procurement management departments. For example, what are the terms of the contract? What does each clause of the contract contain? How is the quality of public services purchased reflected in the contract terms? How to ensure that the proposed contract terms can reduce the purchase cost and attract more undertaking subjects to participate in the purchase activities? To solve the above problems, we must find a way to draw up reasonable contract terms. To achieve that, first of all, it is necessary to have an in-depth understanding and analysis of the projects purchased by the government. It is also necessary to make clear the objectives and significance of the procurement to have a clear idea and aim at the target. The second is to understand the domestic and foreign procurement of the same public service contract terms. Take comparative analysis and dialectical methods to fully learn the differences. The third is to take various forms to solicit opinions from potential undertaking subjects. This can be achieved by holding symposiums, demonstration meetings, and seminars, face-to-face and open discussions with the undertaking subject about the procurement item. Valuable information can also be widely collected from relevant personnel through issuing questionnaires or opinion collection forms. When formulating the specific terms of the procurement contract, the following requirements must be met.

The Terms of the Contract Shall Be Accurate and Unambiguous If the procurement contract terms have improper wording, inconsistency or ambiguity, it will cause the parties to have different understandings of the contract terms. This will result in disputes. For example, a procurement contract that only says “municipal services” can be interpreted differently. Because “municipal services” include much content, including urban drainage, lighting facilities maintenance, city, 27

Yao Wensheng: Research on The Legal System of Government Procurement, Law Publishing House, 2009, p. 241.

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bridge, tunnel facilities maintenance, urban squares, roads, road signs maintenance and other public services. The purchasing subject intends to purchase the maintenance of urban, bridge and tunnel facilities, while the undertaking subject provides the maintenance of road signs, leading to the inconsistency between the content performed by the undertaking subject and the content purchased by the purchasing subject. Therefore, the terms of the contract must be accurate and unambiguous. Accurate and unambiguous means that the terms of the procurement contract must be accurate, clear, complete, intelligible, well-formed, rigorous, and cannot be abbreviated, substituted or ambiguous. The clauses should not be inconsistent or contradict with each other. Especially the issues involving the boundaries of public services should be clearly defined and explained without ambiguity. So that ordinary people can correctly understand. The terms and conditions must generally be described in Chinese. Terms and conditions must generally be described in Chinese. If a foreign language is used, it must have a Chinese text, and the Chinese text must be the original.

The Proposed Contract Terms Shall Pay Attention to the Functions of the Terms and Shall Not Interfere with the Business Activities of the Undertaking Subject Without Limitation One of the functions of a contract clause is to define and reflect the rights and obligations of the parties. In the procurement contract, the undertaking subject must perform the procurement contract and produce public services. At the same time, the subject enjoys the right to obtain the contract consideration and corresponding remuneration. The purchasing subject shall have the right to urge the undertaking subject to produce public services promptly with high quality and quantity. And it shall undertake the obligation to make payment as agreed in the contract. This is a reasonable provision of rights and obligations between the parties in the procurement contract. However, if the contract terms set unnecessary restrictions on the parties, or even unreasonable content, the terms will deviate from the value and function of the terms. For example, some procurement contracts stipulate that the contractor must use a specific brand of equipment or tools, recruit a specific employee, and the employee’s working hours and remuneration. The content of these provisions does not necessarily relate to the performance of the procurement contract. However, if the procurement contract makes such provisions, it will increase the procurement cost and damage the undertaking subject’s procurement enthusiasm. Therefore, the contractual terms of the rights and obligations should be limited. Otherwise, it may be “gilding the lily” or even run counter to the purchase goal.

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Not All Contract Terms Should Be Clear and Specific, Some Vague Terms Are More Conducive to the Realization of Contract Objectives By formulating a detailed and rigorous procurement contract, the rights and obligations of the parties to the contract can be clarified. The connotation of the procurement of public services and the responsibilities for violation of the contract also can be clarified. However, due to the complexity of the subject matter in the contract, some contractual obligations are difficult to determine in the form of a contract. Moreover, as the contract performance environment is complex and changeable, it is impossible to predict what will happen during the contract performance when the procurement contract is drawn up. For example, force majeure events such as government change, war, strike and natural disasters may occur during the performance of public services in a long term. The occurrence of these events will affect the performance of the procurement contract. If the contract cannot be performed, there may be conflicts and contradictions with the originally designed contract terms. What is worse, if we blindly look for specific, it may provide convenience for some specific recipients to illegally undertake public services, and create opportunities for rent-seeking, internal and external collusion to purchase the power of the main body. Therefore, in the procurement contract, in addition to considering the contract risk, we also need to pay attention to the drafting skills. For some contract terms, it is more beneficial to adopt more vague provisions to achieve the contract goals. As Scholar Judy Freeman has pointed out, incomplete contracts are inevitable for many essential services and functions. No contract can be explicit enough to anticipate all the private suppliers’ scenarios. Instead, a contract is a framework, a set of default rules for future remediation. In fact, there are situations where you want contracts to be ambiguous.28

The Terms of the Contract Should Be Moderate for the Size of the Procurement Contracts An appropriate procurement contract scale is of great significance to realizing government procurement. If the size of the procurement contract is too small, no economies of scale can be formed, resulting in the increasing of procurement cost. If the procurement contract scale is too large, it will exclude the competition and cannot attract the undertaking subject to participate in the competition. Therefore, when compiling the procurement project, it is necessary to determine the procurement scale in combination with the actual local purchase. In practice, large procurement contracts have a more significant impact on procurement activities. Both academic and practical circles attach great importance to the problem of the large-scale procurement contract. Savas’s policy for large procurement contracts are: offering several small contracts without sacrificing economies of scale; giving bidders sufficient time to prepare; 28

[US] Judy Freeman, Cooperative Governance and new Administrative Law, translated by Bi Honghai and Chen Biaohong, The Commercial Press, 2010, pp. 513–514.

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extensive publicity of bidding; providing bidders with adequate information; contract diversification, to avoid excessive dependence on one supplier, giving a fair proportion of qualified bidders opportunities, encouraging losers to bid again next year; adjust contract terms to ensure that a certain number of services are put out to tender each year in order to maintain the interest of potential suppliers; establishing a lower ceiling on the total number of contracts to be signed by tenders; handling of issues with a fair manner and timely payment, so that bidders are willing to maintain business relations.29 In practice, some of them break up the procurement contract directly through regulations. As stipulated in Article 29 of the Interim Measures for the Administration of JZ Provincial Government’s Purchase of Services, if the public service projects with a large amount of money are procured from a single source, the purchasing subject shall require the undertaking subject to properly split the contract when performing the contract. The non-core part or a specific share (in principle, no more than 30% of the total project share) shall be subcontracted to small and medium-sized social organizations, and the undertaking subject shall be actively cultivated except where the contract is not suitable for splitting.

Drafting Procurement Contract Should Also Pay Attention to the Choice of Contract Texts According to government procurement Law and Regulations, China should have a more standard procurement contract text. Article 45 of the Government Procurement Law stipulates that the government procurement supervision department of the State Council shall, in conjunction with the relevant departments of the State Council, stipulate the terms that must be included in government procurement contracts. Article 47 of the Regulations stipulates that the financial department of The State Council shall formulate the standard text of government procurement contracts jointly with relevant departments. Although the law has hard and fast provisions, China has not yet unified government procurement contract model text. At present, there are various contract texts used by purchasing subjects. Some use model texts formulated by industry authorities. For example, the contract text of international bidding and the contract model text of the Ministry of Commerce, and the computer system integration contract model text of the information management department. There are also model texts formulated by industry associations, and contract texts provided by suppliers, etc.30 However, the contract text used varies significantly due to different regions and types of public services purchased. Therefore, the state should formulate the procurement contract model text as soon as possible to avoid the different rights and obligations of the contract parties caused by the different contract text. At the

29

[US] · S. Savas, Privatization and Public–private Partnership, translated by Zhou Zhiren et al., China Renmin University Press, 2002, p. 194. 30 Wang Zhouhuan: Current Problems and Countermeasures of Government Procurement Contract Management in China, Chinese Government Procurement, no. 6, 2009, p. 48.

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same time, electronic contract text should be enabled as soon as possible to facilitate use, save costs and improve efficiency.

6.2.3 Main Contents of the Procurement Contract The content of the procurement contract is the concrete embodiment of government procurement. It is also one of the bases for judging whether the contract is established or not. Article 12 of the Contract Law is the general provisions of the contract content. The contract’s content generally includes the name and address of the parties, subject matter, quantity, quality, price or remuneration, liability for breach of contract, method of dispute settlement, time limit, place and method of performance, etc. As mentioned above, the Government Procurement Law and the Regulations stipulate that relevant departments should formulate the necessary terms and model contracts. However, there is neither the model contract nor the list of contract contents. Only Article 19 of the Measures stipulates the terms required in the procurement contract. That is, the contract shall specify the content, time limit, quantity, quality, price and other requirements of the purchased service, as well as the method of capital settlement, rights and obligations of both parties and liabilities for breach of contract. The procurement contract contents in the Method, are not different from the content of the general provisions of the contract. However, due to the difference in the subject matter purchased in a procurement contract and an ordinary contract, although the terms used in the contract content are the same, the specific meanings are different (for example, the specific meaning of “quality” in a procurement contract is different from that in an ordinary civil contract., discussed below). The subject matter of procurement contract is public service. Besides tangible public goods, public service is primarily provided in the form of intangible output, which is a collection of abstract and general government activities.31 As a special kind of service, public service must have the general attributes of service, such as intangibility (no perception), simultaneity (indivisibility), heterogeneity (variability or difference), perishable (non-storage), etc. According to the Supreme People’s Court’s “Interpretation (II) on Several Issues concerning the Application of The Contract Law of the People’s Republic of China”, a procurement contract can generally be established as long as it contains the name, subject matter and quantity of the parties concerned. The establishment of the procurement contract is only the legal element of the procurement contract. For the procurement contract, it is more important whether the content of the contract can reflect the government’s procurement goal, whether it can distinguish the connotation of the content of the procurement contract, and whether it can reflect the characteristics of the special subject matter of public services. Therefore, this article will discuss the content of the procurement contract, which is of great significance and is significantly different from the ordinary contract, such as the quality of public services, price and risk, etc. 31

Chen Zhenming et al.: Introduction to Public Service, Peking University Press, 2011, p. 15.

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Formulation of Public Service Quality Provisions The quality of public service is the core content of the procurement contract and an essential guarantee of whether the government can meet the needs of the public when purchasing public service. However, due to the particularity of public service, the definition of the connotation of public service quality has been controversial. There are many viewpoints, such as “normative quality theory”, “satisfactory quality theory”, “standard realization theory”, “subjective and objective quality theory” and “performance quality theory”. Each theory puts forward the view of quality from different aspects of public service, which is reasonable to some extent, but cannot reflect the real connotation of quality. The quality of public service is the attribute of public service, which is reflected in the characteristics that can meet the needs of specific people and the satisfaction or recognition of people. It is not a fixed concept, but a dynamic, changing and evolving concept. Its meaning will constantly change with time, place, the object of use, social environment, technological progress and people’s awareness. The quality of public service has inherent attributes such as interactivity, fuzziness and dependence, as well as external value attributes such as fairness and justice, participation, standardization and target compatibility. These attributes may be tangible and can be perceived, experienced and evaluated by the public. Or they can be invisible, not directly perceived by the public. However, both tangible and intangible are determined by the public nature of public service. When the quality of public service is endowed with more characteristics such as fairness and justice, participation, standardization and goal compatibility, it can better highlight the pursuit of public value and public responsibility.32 The attribute of public service quality makes it very difficult to evaluate it. Its invisibility makes public service more of a performance than a specific product, making it difficult to determine the service standard and evaluate its quality. Its heterogeneity makes it more challenging to evaluate public services. There are various types of public services, and the evaluation standards of different public services should be different. For example, the public service standards of hospitals and schools are different. Similarly, due to the differences between the service personnel, the customer and service time, the public evaluation results have significant differences. Due to the performance of different service personnel, the same service will receive different public evaluation; For the same service, due to the different service objects, evaluation results are also different.33 Although it is difficult to determine the evaluation and connotation of public service quality, it cannot be ignored or bypassed. Public service quality can be divided into public service quality representation standard and non-representation standard according to whether public service quality has an externality representation standard or not. The standard of public service quality representation refers to 32

Zhang Ruixin, Dong Li. Public Service Quality: Trait Attributes and Evaluation Strategies. Journal of Beijing Institute of Administration, 2014, 6, pp. 10–11. 33 Lv Weixia: On public Perception and Evaluation of Government Public Service Quality, East China Economic Management, no. 9, 2010, p. 130.

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that public service quality can be reflected through certain evaluation indexes. Public service quality representation standards include public service support facilities or supporting equipment, service products, service personnel attitude, service quantity, etc. Supporting facilities or supporting equipment refers to the material resources necessary for the realization of public services. The service product is the service content that the service object gets directly. The attitude of the service personnel refers to the quality of the service personnel’s speech and behavior to the service object during the service process. The quantity of services refers to the quantity of services provided to meet the requirements of public services. Taking community elderly blood pressure monitoring as an example to illustrate the specific meaning of public service quality characterization standards: supporting facilities or ancillary equipment are devices such as blood pressure monitors that are configured to test blood pressure; the service product is the process of testing the blood pressure of the elderly and the test results obtained; the attitude of the service personnel is whether the test personnel have censure, verbal injury and other behaviors to the elderly; the quantity of service is the tester must test blood pressure regularly according to the stipulation of the procurement contract; the stipulation is once a month, not once every two months. Representation standards have the advantages of being intuitive, quantifiable and easy to evaluate. Therefore, public services that can formulate representation standards should be formulated in the formulation of characterization standards. If there are national standards or industrial standards, the national standards or industrial standards shall be followed. If there is no national standard or industrial standard, it can be agreed by the purchasing subject and the undertaking subject without violating the compulsory provisions of laws and administrative regulations. When defining the standard of representation, it should be as clear and specific as possible. Scholar Savas listed detailed standards for building cleaning service quality (see the Table 6.1), which is a good reference example.34 The nonrepresentational standard is the perception of the public, that is, the satisfaction or recognition of the public service. Public perception is a method of evaluation based on intangibility, perishable, simultaneity of production and consumption in the service process. Its potential premise is that the accuracy of government public service evaluation can be obtained in the subjective perception of service objects. In other words, the quality of service is defined by customers, who can accurately perceive the actual performance of government public service through their own experience and feelings in the process of service acceptance.35 Non-representational standards are mainly aimed at the quality of public services that cannot be measured by quantitative standards, such as hairdressing services provided to the elderly. Hairdressing services themselves are difficult to evaluate by unified standards for different people with different hairstyle requirements. Only

34

[US] E. S. Savas, privatization and Public-private Partnership, translated by Zhou Zhiren, China Renmin University Press, 2002, pp. 198-199. 35 Lv Weixia: On public Perception and Evaluation of Government Public Service Quality, East China Economic Management, no. 9, 2010, p. 129.

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Table 6.1 Quality standards for cleaning service contracts Task

Standard

1. Clean out trash cans and change bags every day

1a. Do not spill during cleaning 1b. Clean all designated bins 1c. Complete the work according to the schedule set by the supervisor

2. Dust office furniture and Windows every day

2a. Do not disturb other objects when cleaning 2b. Conscientiously perform duties 2c. Complete the work according to the schedule set by the supervisor 2d. Furniture and glass must look clean after cleaning

3a. Conscientiously perform duties 3. Clean washbasin, toilet, urinal, mirror every day, change toilet paper, soap, mop, implement a 3b. Complete the work according to the disinfection treatment to the toilet schedule set by the supervisor 3c. Restrooms have clean appearance and fresh air 3d. Toilets rarely lack toilet paper, soap and other phenomena 3e. Complaints from bathroom users are minimized 4. Report plumbing and lighting problems to supervisors

4a. Report problems to supervisors in a timely manner and generally provide details

5. Clean dining room counters, tables and chairs, 5a. Conscientiously perform duties electrical equipment 5b. Complete the work according to the schedule set by the supervisor 5c. Dining room counters, tables and chairs, electrical equipment without stains, clean appearance 6. Clean and wax/polish office furniture once a week

6a. Conscientiously perform duties 6b. Complete the work according to the schedule set by the supervisor 6c. Office furniture is clean and shiny

7. Clean walls and Windows to shoulder-high once a week

7a. Conscientiously perform duties 7b. Complete the work according to the schedule set by the supervisor 7c. Wall, glass appearance neat and clean

8. Polish polished fixtures once a week

8a. Polish according to operating rules 8b. Complete the work according to the schedule set by the supervisor (continued)

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Table 6.1 (continued) Task

Standard

9. Open the doors, turn on the lights, check the boilers and elevators to ensure their normal operation, clear the sidewalks if necessary, raise the national flag and carry away the rubbish according to the stipulated time

9a. Open the building door at the time specified by the supervisor 9b. Inspections of buildings and facilities should be thorough 9c. Make sure the sidewalks are clear and tidy 9d. Report the abnormal operation of facilities and other major problems in time 9e. Consciously perform the above duties

10. Wash and wax floors thoroughly once a month

10a. Conscientiously perform duties 10b. Complete the work according to the schedule set by the supervisor 10c. Clean and bright floor

non-representational standards can be adopted for such public services. The nonrepresentational standard is mainly achieved through the public satisfaction evaluation. The public service management department or the purchasing subject evaluates the satisfaction of the public service organization according to the performance of the procurement contract. The evaluation object is mainly the perception and recognition of the service object. Of course, it can also test the relevant personnel, such as the supervision and management personnel of the purchase subject. In practice, it is generally carried out in a satisfaction questionnaire or on-site meeting. Therefore, the type of public service must be analyzed and studied when the procurement contract is signed. Then, the public service quality standard should be determined according to the attributes of public service. Specific provisions should be made in the procurement contract to avoid disputes in the future.

Formulation of Price Clauses The public service price clause is the main clause of the procurement contract. If the parties in the procurement contract do not reach an agreement on the public service price, the procurement contract will lack establishment elements and the contract will not be established. At the same time, the price of public services is closely related to the purchasing subjects, undertaking subjects, service objects and ordinary people. This is because the price of public services determines the scale and quantity of public services purchased. If the purchase price is inflated in the case of a certain quantity of public services, the purchasing subjects will have to pay more funds, and ordinary people will have to pay more taxes. The number of public services enjoyed by the service objects may be reduced, and the only one who makes profits is the undertaking subject.

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Conversely, if the purchase price is low, the undertaking subject will take the damage in the short term. And the purchasing subject, the service object, and the public will benefit. However, in the long-term, the damage on the undertaking subject will affect the enthusiasm of the procurement, affecting the formation of a competitive market for procurement. Eventually, the government will not be able to buy highquality public services at low prices. Therefore, the determination of a reasonable public service price is related to the establishment of the procurement contract and one of the elements of the smooth promotion of the procurement activity. In the procurement contract, the price of public service is usually determined by the type of public service. According to whether the public service produced is single, the evaluation standard is clear, is there any variable in the supply process and the incentive mechanism is used or not. Four models are used to determine the price of public service: fixed unit price, fixed total price, fixed unit price plus reward and adjustable fixed total price. The price model to be used in the procurement contract depends on the specific type of public service. For public services with a single type, specific evaluation criteria and no variables in the supply process, a fixed unit price can be adopted. The unit price of a public service is multiplied by the number of public services produced to give the total price of the entire procurement of public services. The advantages of the fixed unit price are: the unit price of public service is constant and convenient to calculate; the purchasing subject has less risk because there will be no additional contract terms, which helps to control the cost. The deficiency is that detailed contract terms are required to be formulated. If there is any deviation in the contract terms, there may be a price deviation. Therefore, a lot of research and evaluation should be done in the early stage of the contract, which requires a lot of time and attention. Generally speaking, a fixed unit price can be used to determine the price of public services such as newborn disease screening, AIDS testing, matrimonial medical examination, prepregnancy healthy birth testing, street lamp, road sign maintenance and other public services. For public service that is complex, unable to formulate specific evaluation standards and prone to unpredictable disturbance factors in the process of supply, a fixed price model can be used to determine the price. The advantages of fixed total price model are: the total price of public services is clear at a glance, and does not require a lot of metering and pricing work; the buyer can pay the contract price as long as it is accepted and qualified as agreed. The deficiency is that the contract price may not conform to the actual price of public service. There are high or low situations; At the same time, due to the failure to fully consider the inflation and other unexpected problems in the process of contract performance, the cost may significantly increase, leading to the failure of the undertaking subject to bear. Then there will be employee strikes and the contract cannot be performed. Generally speaking, urban and rural roads, rivers and other public services such as cleaning and greening can adopt a fixed total price pricing model. Both fixed unit price and fixed total price have the characteristics of convenient calculation and low risk for the government. But their rigid price mechanism is not conducive to mobilizing the enthusiasm of undertaking subjects to improve work

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efficiency. Neither of these two price modes has an incentive mechanism for undertaking subjects. In the procurement contract, if an incentive mechanism is added to the price mechanism of public services, the undertaking subject can be encouraged to provide more public services at a lower cost than the contract. Road repair in North Ridge, California is the most successful example of price incentives. At 4.30 am on January 17, 1994, an earthquake measuring 6.6 on the Richter scale struck North Ridge, killing at least 60 people and causing extensive damage to private property and public facilities. The place was famous for there had lots of cars, while the highway was paralyzed. In particular, the crucial Santa Monica Freeway, which is used by more than 340,000 cars a day, was closed after some Bridges collapsed. The traffic disruption was a nightmare. Caltrans is bidding for contracts at a record pace, calling for road repairs to be completed by June 24. The contract allows the contractor to be paid an additional $200,000 per day for each day of early completion, but a penalty of the same amount for each day of missed deadlines. The contract must not allow for any delay in the work due to weather. In fact, the highway opened again on April 12, 74 days earlier than expected, meaning that the company that undertook the project will be awarded at least $14 million, compared with the original bidding price of just over $15 million.36 This example shows the critical role of incentive mechanism in the procurement contract price mechanism, especially in the medium and long-term public service supply. Therefore, according to whether the procurement contract provides incentive mechanism, fixed unit price and fixed total price model are derived from fixed unit price plus incentive and adjustable fixed total price respectively. Fixed unit price plus reward refers to the part of funds predetermined and fixed unit price to reward the undertaking subject with better quality and higher efficiency of public service production. Adjustable fixed total price means that on the basis of the fixed total price, a certain amount of funds are reserved to reward the undertaking subjects who complete the public service production tasks ahead of schedule or additionally. The public service price finally obtained by the undertaking subject may be higher or lower than the fixed total price. Whether it is a fixed unit price plus rewards or an adjustable fixed total price, the core of this is the use of rewards. In using the incentive mechanism, attention should also be paid to avoid the undertaking subject obtaining rewards at the expense of public service quality. When determining the terms of the public service price, the parties should also clarify the payment method to avoid payment disputes. Generally speaking, according to the number of payments, public service price payment can be divided into one-time payment and installment payment. Installment payment can be divided into payment according to the progress of contract performance, to the fixed time payment, etc. According to the form of payment, the price paid can be divided into cash payment, transfer payment, etc.

36

[America] Philip Cooper, Contract Governance: Challenges and Opportunities faced by Public Managers, translated by Zhu Ganwei, Lu Yi and Chen Zhuoxia, Fudan University Press, 2007, pp. 111–112.

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Determination and Burden of Risks The risk of buying public service is always performed throughout the procurement contract. The terms of the contract shall expressly be agreed upon the scope and burden of risks. The risk of a procurement contract refers to the damage caused by failure to perform the contract due to causes not attributable to both parties. The risk burden of a procurement contract refers to who should bear the risk of the procurement contract. There are various risks in the performance of procurement contract, but not all of them have burden problems. The risk of procurement contract caused by fault and no-fault liability can be shared according to the liability for breach of contract. Only the risks that can not be attributed to the parties’ fault and cannot be predicted are the procurement contract risks discussed in this paper. The risk of procurement contract mainly includes price risk, technology risk, natural disaster risk and political risks such as war and strike. “Price risk” refers to the failure to perform the procurement contract as the price of public services is far higher than expected due to the influence of market factors such as exchange rate, inflation or government price policy. Price is an important part of the procurement contract. Parties should anticipate the rise or fall of price when signing the contract and include the rise or fall of such price into the risk control of the contract. Therefore, reasonable price changes do not constitute the risk of the procurement contract. Only when inflation, exchange rate or government price policy changes exceed expectations can constitute the price risk of the procurement contract. The consequence of inflation is the devaluation of the currency, the rapid rise of all kinds of prices, and the increase in the cost of buying. When the cost increases to the point where the undertaking subject cannot bear, the procurement contract will not be performed. An exchange rate is how one currency is exchanged for another. The exchange rate will not have a great impact on the performance of the domestic procurement contract, because the support equipment, raw materials and employee wages of the purchase activities are calculated in the local currency. There is no exchange rate changes happen. So it has little impact on the cost. Even if some equipment, technology, and personnel are imported from abroad, these costs have been considered when the contract is signed and will not have a fatal impact on the failure to perform the procurement contract. Only when governments procurement of international public services happened, the exchange rates have an uncontrollable impact. For international procurement, the change of exchange rate will affect the quantity of production and sales, price, and cost. When the exchange rate is at an unbalanced transaction price for a long time, it will eventually lead to the failure of the undertaking subject to perform the procurement contract. Price policy is an important economic means for the government to intervene in the market. It is necessary at a particular time and place, but it can also have a significant and insurmountable impact on government procurements. From the national level, government procurement of public services are using financial capital. The price of the government policy will not harm buying activity. No matter the price is high or low, the government will have to pay the costs. The rise or fall of the price is only a problem for the government to pay. Furthermore, the undertaking main body’s interests will be protected. It will not affect

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the performance of the procurement contract because the individual undertaking subject can maintain its interests through the principle of situational change of the contract. In practice, however, purchasing is not just at the national level. government procurements can be divided into the national level and local level. Different levels of procurement use different financial funds. The change of government price policy may have little impact on the purchase activities at the national level. But it will have a great impact on the purchase activities at the local level, especially the specific purchase activities in specific regions. When the price sharply rises to the point that the undertaking subject cannot overcome, the consequences of the procurement contract cannot be fulfilled will occur. “Technical risk” refers to the failure of the undertaking subject to perform the procurement contract due to unexpected technical problems during the performance of the procurement contract. This mainly occurs in the purchase of areas with relatively high technical requirements, such as the compulsory national immunization against avian influenza, foot-and-mouth disease, swine fever, blue ear disease and other diseases such as rabies, as well as the early recovery of materials or the use of solid waste power generation and other technical issues. The main reason for undertaking these high-technology public services is that it has the corresponding technology. If the technical obstacles can not be overcome in the process, the risk of the procurement contract can not be performed will occur. “Natural disaster risk, war, strike and other political risks” refers to the risk that the procurement contract cannot be performed due to unforeseeable, unavoidable and insurmountable objective circumstances occurring during the performance of the procurement contract. According to China’s General Principles of Civil Law and Contract Law, natural disaster risk and political risks such as war and strike are collectively referred to as “force majeure”. There are three main causes of force majeure: First, natural disasters, such as typhoon, hail, earthquake, tsunami, flood, volcanic eruption and landslides. Second, government actions, such as expropriation and requisition. Third, abnormal social events, such as wars, armed conflicts, strikes, riots, etc. The occurrence of force majeure will inevitably affect the performance of the procurement contract. But not all force majeure will lead to fail to perform the contract. It also depends on whether the force majeure causes the procurement contract to be completely or partially unfulfilled. The risk of force majeure only occurs when the procurement contract cannot be performed in its entirety due to force majeure. For the burden of contract risk, there are creditor’s doctrine, debtor’s doctrine, owner’s doctrine, delivery doctrine and reasonable sharing doctrine in legislation. Creditor doctrine holds that the debtor can be exempted from debts and the risk should be borne by the creditor. The debtor’s doctrine advocates that the debtor bears the risk of failing to perform and the creditor’s treatment of payment is also exempted. Owner’s doctrine refers to the transfer of risk burden with the transfer of ownership; Delivery doctrine holds that the risk burden shifts with the delivery of the subject matter. The reasonable sharing doctrine means that the risk is reasonably

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borne by the parties concerned.37 Different liability rules apply to different contracts. Components procurement contract with general contract is significantly different. Such as for most contracts, the subject matter is visible. So whether the subject matter can be delivered can be seen as the marker for risk burden. But when the subject matter is public service, for there is no substantial public services delivery, the general contract of delivery will not be able to be applied for the burden of risk. Similarly, owner’s doctrine decides the risk burden based on the ownership of the subject matter in the contract. However, public service is an intangible service, and there is no ownership. Therefore, owner’s doctrine is obviously not suitable for the risk burden of the procurement contract. The premise of the application of creditor doctrine and debtor doctrine is the relativity of contract. The subject of contractual rights and obligations is constant, the party who delivers the subject of contract has the contract consideration, and the other party who obtains the subject of contract must pay for the contract consideration. In the procurement contract, it is the service object that acquires the contract object, the undertaking subject that delivers the contract object, and the purchasing subject that pays the contract consideration. The parties in different links of the contract are different. Therefore, the risk burden of creditor doctrine and debtor doctrine is not suitable for the risk burden of the procurement contract. The doctrine of reasonable sharing seems fair. Reasonable sharing is carried out according to the actual situation of the parties concerned. However, it is difficult to define what is reasonable sharing in practice, so the doctrine also has problems in operation. Some people think that since the modern rules of contract risk burden cannot solve the problem of procurement contract risk burden, it is better to adopt the most simple concept of risk burden since ancient times. That is, “Who enjoys the benefits, who bears the risks”. In the history of the contract risk burden rule, this concept did play a role, but since the beneficiary of the procurement contract is the service object and the service object of the purchase activity. It is impossible for it to bear the contract risk. To sum up, the risk-bearing rules of procurement contracts must be redefined. According to the different damage of risks to service objects, the rules of risk burden for procurement contract can be divided into reasonable sharing doctrine and foreseeing doctrine. The undertaking subject’s reasonable sharing doctrine means that when the risk caused by the service object no longer exists, the purchasing subject shall pay the amount already paid by the undertaking subject, and the undertaking subject shall bear the loss of the equipment invested by the undertaking subject in order to undertake the purchase project. For example, when a certain nursing home is washed away by a flood, the service object disappears, and the procurement contract has no meaning to be fulfilled. According to the reasonable sharing doctrine of the undertaking subject, the purchasing subject should not fail to perform the corresponding payment obligation because the procurement contract cannot be performed. But the purchasing subject should pay the contract payment to the undertaking subject to ensure that the undertaking subject can obtain the fulfilled contract 37

Liu Guixiang: Contract Performance and Risk Burden System, Application of Law, No. 9, 2000, p. 10.

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benefits. However, the undertaking subject should bear the loss caused by the flood. When the risks only cause partial damage to the service object, the foreseeing doctrine should be adopted. Foreseeing doctrine means that the parties who have the obligation of foreseeing the performance of the procurement contract bear the contract risks. That is to say, the party who has the obligation to foresee shall bear the risk, while the party who has no obligation to foresee shall not bear the risk. When both parties have obligation to foresee the risk, they shall bear the risk reasonably. When neither of parties have obligation to foresee the risk, they shall solve the problem by establishing a procurement contract insurance or find another way. If one or both parties bear contract risks, the interests of the service objects will not be harmed due to the subject of risk damage. However, in the case where neither party bears contract risks, the service objects will become the direct recipient of risk damage due to the absence of specific risk damage bearers. The service object is the direct beneficiary of the government’s public service purchase system, so it is impossible for them to bear the contract risk. Therefore, we must find a mechanism to solve the ultimate barer of the risk. This kind of risk can be cast by one of the purchasing subjects and the undertaking subjects or both of them to purchase insurance, and let the insurance company bear the risk. The specific application of foreseeing doctrine is: the technical risk is the obligation that the undertaking subject should foresee. If the undertaking subject foresees incorrectly, the risk should be bear by the undertaking subject. When signing the procurement contract, both the purchasing subject and the receiver have the obligation to foresee the price changes, so the price risks should be borne by both parties. In order to control the purchase cost, both parties can reach an agreement in the procurement contract for the maximum risk. We should not let the purchasing subject bear unlimited costs for the undertaking subject’s interests. If the purchaser bears excessive risk costs, it will be the purchasing subject that takes the risk alone instead of both parties bare the risk, which does not conform to the risk burden rule of foreseeing doctrine. For the risk of force majeure, if neither the purchasing subject nor the undertaking subject can foresee it, there is no obligation to foresee it. According to the risk burden rule of foreseeing doctrine, neither the purchasing subject nor the undertaking subject should bear the risk, but both parties should insure according to the contract price at the time of signing the procurement contract, and bear the risk loss by the premium. The quantity, performance method and time limit, acceptance, dispute settlement and liability for breach of contract of public service in the procurement contract are relatively simple and easy to understand. The author will not make specific discussions, but refer to the model text of the ordinary civil contract. The procurement contract must be detailed and feasible, the rights, obligations and liability for risks of both parties are clear. Only in this way can it be conducive to “prior control” and “active control”, to the full performance of the procurement contract, to the improvement of the management level of the contract and the relief benefit of government procurement.

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6.3 Principles of Performance of Procurement Contracts The core content of the government public service procurement system is procurement contract, and the key of the procurement contract is its fulfillment Only when the procurement contract is fully implemented can the government procurement the required public services, meet the needs of the public, and achieve the contract objectives of government procurement. It does not matter how well designed a contract is if it can’t be fulfilled. Therefore, the study of procurement contract must focus on the performance of procurement contracts. A procurement contract is an administrative contract, which embodies the characteristics of administration and contract. Generally speaking, the contractual characteristics of the procurement contract will be more obvious in the performance stage. Therefore, the provisions of contract performance in the Contract Law also apply to the performance of the procurement contract. However, because the performance of the procurement contract is a public service, its performance has different standards and requirements from ordinary contract performance. The focus of this book is on the differences between the performance of the procurement contract and the ordinary contracts, and some special issues. The performance principle of procurement contract has its special place. The principle of performance for procurement contract is the basic principle guiding the parties to perform the contract correctly. It is not the specific standard of performance but the guiding principle. It is the essence and gist that must be grasped in the performance of the procurement contract. As the specific forms of public service are complex and diverse, unified and applicable performance standards cannot be formulated. Therefore, in the performance process, contracts should be fully and honestly performed in accordance with the principle of contract performance.

6.3.1 The Principle of Full Implementation The principle of full performance means that both the purchasing subject and the undertaking subjects should fully perform the obligations of the contract in accordance with the provisions of the contract. They include the subject matter, quality, quantity, time limit, place, way of performance and subject of performance agreed in the contract. Otherwise, the contract will be breached. Clause 1, Article 60 of the Contract Law stipulates that “the parties shall fully perform their obligations as agreed” is the provision of the principle of full performance. Comprehensive performance of the principle is especially important in the procurement contract. Because in procurement contract, the subject matter of the beneficiary is not the parties to a contract, but the people outside of the contract. If the contract is not fully performed, the most direct victims are the people. In urban environmental governance, if the main body fails to perform, not fully performed or delay in performance, it will not have a direct impact on the purchasing subject. But the local people will become the victims, suffering from poor conditions. Similarly, if the undertaking subject fails

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to fulfill the obligations of public security as agreed in the contract, such as night patrol and video surveillance, the personal and property safety of the public will not be guaranteed. Therefore, the fulfillment of the procurement contract must give priority to the principle of full fulfillment. The principle of full performance requires the parties involved in the contract not to arbitrarily agree, change or terminate the contract terms, especially the undertaking subject who has direct obligations to the people’s livelihood.

6.3.2 The Principle of Good Faith The principle of good faith refers to that in the process of performing the procurement contract, the parties should fulfill their contractual obligations according to the nature, objectives and trading habits of the contract. Clause 2, Article 60 of the Contract Law stipulates: “The parties shall abide by the principle of good faith and perform the obligations of notification, assistance and confidentiality in accordance with the nature, objectives and trading practices of the contract.” This provision is the confirmation of the principle of good faith in the performance of the contract. The application premise of the principle of good faith is that there is no agreement or unclear agreement in the procurement contract. If there is no agreement or unclear agreement in the contract, the principle of good faith cannot be applied. But the comprehensive principle of contract performance should be adopted. The principle of good faith is mainly aimed at the collateral obligations and post-contractual obligations of the procurement contract. Although there is no clear provision in the procurement contract, the contract parties must consciously fulfill the obligations of notice, assistance and preservation according to the contract objectives and transaction habits. For the public service of social assistance, the undertaking subject must not only provide social assistance according to the procurement contract, but also inform the family members or relevant units of the situation of the aid object. Assistance is also a concrete embodiment of the principle of honesty and credit. For example, in the service of the disabled, the undertaking subject should provide more assistance services than the normal person in the process of providing services. Otherwise, the contract goal of caring for and supporting the disabled cannot be achieved. In addition to necessary notification and assistance, the undertaking subject should also provide confidentiality to the service object, especially for the service content of personal privacy, such as personal privacy or information known in medical service. Confidentiality of the information learned in the performance of the contract is due to the performance of the procurement contract. Otherwise, it is a breach of contract or infringement of the legitimate rights and interests of others. In addition, in some public services, some terms that should be clear are not clear. If the parties involved in the contract did not fulfil, it also could constitute a default. Such as the neighborhood of the mediation, any person with a reasonable mind knows the neighborhood mediation should be nice and friendly. If the undertake main body purposely creates the conflict, it is likely that it will constitute a breach of contract.

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6.3.3 The Principle of Change of Circumstances The principle of changed circumstances refers to before completion of the contract, due to the changes in the basics and the environment, the contract is allowed to change or terminate. The changes in this circumstance can not be attributable to any party. Moreover, continuing to perform the contract will be detrimental to the fairness and justice of the contract. The principle of changed circumstances is not explicitly stipulated in The Contract Law of China, but in Article 26 of the Judicial Interpretation of the Contract Law (II). The article provides that: “After the contract was formed, the objective conditions changed due to the parties can’t foresee or not force majeure does not belong to a major change in the business risk. When continuing to perform the contract is unfair to another party or the contract cannot be achieved, parties can request the people’s court for a change or rescind the contract. The people’s court shall, according to fair principle, determine whether to change or terminate the case according to the actual situation of the case”. The principle of changed circumstances can balance the interests of the parties involved in the contract and realize the contract’s fair value. However, this principle conflicts with the principle of full performance of the contract. Therefore, it should be used cautiously in practice in order to avoid being abused or encouraging speculative psychology. Of course, active use of the principle of changed circumstances should be encouraged where the public interest is involved. For example, when the undertaking subject undertakes three rural services, during the contract period, if the area is not related to agriculture, rural areas and farmers, there is no need to continue. If the government still pays according to the terms of the procurement contract to the undertake subject, it will be a clear waste of financial capital. Therefore, the main body represents the country’s purchasing subject must change or rescind the procurement contract.

6.4 Torts and Liability in Performance of Procurement Contracts 6.4.1 Occurrence of Infringement of Performance of Procurement Contracts According to the traditional contract theory, it is generally believed that the contract creditor’s rights have relativity. Only between the parties to a contract shall it be valid. Only the parties involved shall have the right to contract and shall assume the obligation of the contract. When a party breaches the contract, only the other party enjoys the right of contract claim. Any third party to the contract can not put forward any request. Moreover, setting obligations of the contract for the third person without authorization is not allowed. The relativity of the contract plays a vital role in safeguarding transaction security and protecting the rights and interests

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of the parties. It is the cornerstone of the contract system. Theoretically, government procurement contract, as a kind of contract, also applies the relativity principle of contract. However, if the government acts strictly according to the principle of relativity, it will not be able to deal with the procurement contract in the performance of the dispute. The following cases are designed for discussion. Purchasing subjects in Area H purchase care services for the aged over 80 from K Nursing Home. In the procurement contract, they agreed that K nursing home has a designated area for the elderly. It should provide life care, meal services, rehabilitation and health care, life care, culture and education, social activities, spiritual comfort, emergency services and other services to the people over 80 years old in the district as long as they want to go to K nursing home to enjoy free care services. The financial fund of H district shall bear the cost of pension service. There is one elderly named J, who needed to be helped to travel. One day, when the staff helped J to go to the canteen to have dinner, the mobile phone rang suddenly. The staff held J with one hand to get his phone. Due to the loss of balance, J fell to the ground, causing cerebral hemorrhage and paralysis in bed. When an elderly named Y entered the nursing home, he carried a piece of ancestral jade and often enjoyed it with other older people. One day, the jade was lost. The elderly named B was beaten by a person with a mental health condition in a nursing home while basking in the sun. J, Y and B were injured, stolen and beaten respectively in K nursing home. The three elderly people and their families were indignant and wanted to resort to law to claim their legal rights. For the three elderly people J, Y and B who were injured in K nursing home, things were stolen and people were injured. In the civil field, it can be brought against the contract breach and tort, but according to the existing legal provisions and judicial practice, it can not advocate the above two appeals. The three elderly people and their family members can not directly file a lawsuit against the purchasing subject in district H or K nursing home for breach of contract. The parties to the procurement contract are the buyer in Area H and K nursing home for the aged. According to the relativity principle of the contract, only the two parties have the contract claim right in case of breach of contract. The three elderly people and their family members are not the parties to the procurement contract. They can not exercise the right of contract claim. Can the three old people and their families sue for infringement? Whether a tort lawsuit can be constituted depends on whether the violator’s behavior conforms to the tort requirements, especially whether the violator is subjectively at fault and whether there is a causal relationship between the illegal behavior and the fact of damage. In this case, the staff still answered the mobile phone while knowing that the old man needed help, resulting in the old man J falling and becoming paralyzed. There was a fault and a causal relationship, which seemed to align with the infringement act. So it could be sued for infringement. But how could tort liability arise under the contract law? This is not consistent with the specific requirements of the adjustment object of each department law in China. In China, the liability of breach for contract arising from the breach of contract and the tort arising from the implementation of torts belong to the adjustment of contract law and tort law. There are many differences between the two departments of law, there will be no confusion of liability, and in law enforcement practice, the judge will not

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make a judgment of tort liability based on contract breach, so the old man J and his family members cannot bring a lawsuit of tort. The case that the jade pendant of old person Y is stolen also cannot bring a tort lawsuit. In this case, only the fact that the jade pendant was lost exists, but the infringer could not be determined (whether the pendant was taken by the staff of K nursing home or someone outside the nursing home), because the violator could not be determined. Whether the violator was at fault also can not be determined. From the causality analysis, only the thief has a direct causal relationship with the fact that the jade pendants were stolen. In contrast, K nursing home has no direct causal relationship with the fact that the jade pendants were stolen. In this case, the fault of the violator cannot be identified and there is no direct causal relationship between K nursing home and the fact that the jade pendants were stolen. The elderly Y and his family cannot file a lawsuit against K nursing home for infringement. In the case of elderly B while K nursing home did not fulfill the duty of care management, letting the person with a mental health condition enter nursing homes. However, the direct reason is the mental patient’s behavior rather than the lax care. K nursing home has no direct causal relationship with the elderly B. Therefore B and his family cannot bring a tort suit. Such an embarrassing and difficult situation is caused not only by the design of the legal system but also by people’s understanding of the law. In essence, the fact that damages can not be remedied in the performance of the procurement contract is caused by the collision between contract law and tort liability law and the trend of mutual integration of needs. Therefore, as long as the contract law and tort liability law can open the barriers between departmental laws, do not adhere to the existing rules, and adapt to social development needs from the perspective of development, the problem will be solved. For the convenience of discussion, this paper calls the behavior in the case “infringement in the performance of the procurement contract.” There is purchasing subject, undertaking subject and service object and other main bodies in the procurement contract. However, only the purchasing subject and undertaking subject are the parties of the procurement contract. And the service object is not the party of the contract, but the interested party of the procurement contract, or the third party of the interest. According to the different subjects of the torts, the torts in the performance of the procurement contract can be divided into the torts of the undertaking subject, the torts of the third party without interest and the torts of the service subject.

6.4.2 Torts and Liabilities of Non-interested Third Parties The tort of the third party without interest refers to the damage behavior that the third party outside the procurement contract is aware of the existence of the procurement contract, but still deliberately carries out some kind of tort to infringe the creditor’s right, so that part or all of the procurement contract cannot be performed. It is the enrichment and development of civil theory, the application of inviolability of

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obligatory rights theory and the breakthrough of the principle of relativity of contract that the third party without interest decides the infringement of procurement contract or the third party’s action against obligatory rights system. Based on the theory of creditor’s rights can’t be violated, the contract of creditor’s rights itself is a kind of property right. The property represents one part of the whole social wealth, and other civil rights have relative independence. In certain cases, its effectiveness can be involved in the third person outside of the parties to a contract. Therefore the obligation to contract creditors’ rights will be infringed by anyone.38 The creditor is entitled to legal remedies if no third party in the procurement contract infringes upon the contractual rights based on willful or bad faith. If the third party intentionally infringes the creditor’s right, the third party and the creditor have formed a relationship of tort compensation, so the rule of contract relativity can not be used to deny the creditor’s right to the third party in tort law.39 In practice, the torts of disinterested third parties mainly include: persuading a breach of contract, coercing a breach of contract, damaging the subject matter, malicious collusion between the third party and the debtor to infringe upon the creditor’s rights, and the third party restricting the debtor’s freedom or injuring his body. Injury, making it impossible to provide labor services to creditors or perform obligations, and third parties, in order to infringe on others’ contractual claims, damage the property of contractual obligations by breach of contract or tort, and make them lose the ability to perform the contract against the counterparty.40 Undertaking government-purchased projects do not necessarily mean huge profits, but because undertaking projects are safe and stable, it is a rare business, so it will attract more competitors. In government procurement, orderly competitive procurement should be encouraged, while disorderly and unfair competition should be denied. Otherwise, it will disrupt government procurements. The act of infringing the performance of the procurement contract by a third party with no interest is unfair competition to seek private interests. Such acts of infringing upon creditors’ rights should be included in the scope of tort law. In the procurement contract, treating the infringement of the creditor’s rights by the disinterested third party according to the tort law is a new development of the contract law and the protection principle of the tort law. It is the embodiment of the mutual integration of the two laws. Steady measures and strict restrictions should be adopted at this stage to ensure that the system will not go astray. For example, when determining whether the behavior of a third party with no interest is an infringement of creditor’s rights, in addition to determining whether the infringement caused damage and whether there is a causal relationship between the infringement and the result of the damage, it also depends on whether the third party with no interest is subjective.

38

Lu Wendao, Ying Zhenkun: Tort against Contractual Creditor’s Rights, Law Journal, 1994, 9, p. 14. 39 Wang Liming: A study on the concept of tort, Jurist, 2003, 3, p. 66. 40 Lu Wendao, Ying Zhenkun: “The Tort Act of Infringing Contractual Creditor’s Rights”, in Law Science, No. 9, 1994, p. 15.

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Intentional, that is, knowing that one’s behavior will infringe on the creditor’s rights of others and doing it intentionally.

6.4.3 The Torts and Liabilities of the Undertaking Subject The tort of the undertaking subject can be divided into two categories: the infringement of the service object and the infringement of the third party outside of the contract.

The Undertaking Subject’s Torts and Liability to the Service Objects The tort of the undertaking subject to the service object refers to the behavior of the undertaking subject causing damage to the personal and property of the service object due to its fault in the process of fulfilling the procurement contract. In the case, the three persons J, Y, and B were dropped, stolen, and injured respectively in the K Nursing Home, which is a typical example of the purchasing subject’s infringement on the service object. As mentioned above, according to the current legal system in China, the infringed acts of the service object cannot be relieved by contract law and tort law. (1) The Legal Forms of the Procurement Contract In order to solve the legal application of the purchasing subject’s tortious behavior to the service object, we must first analyze the legal form of the procurement contract. A procurement contract is a complex form of contract that based on a typical contract, and is a third-party benefit contract. A third-party benefit contract can also be called an altruistic contract, a contract for the benefit of a third party, a contract for a third party to acquire creditor’s rights, or a contract for the benefit of a third party. It means that the parties to the contract agree that the debtor directly performs contractual rights to a third party outside the contractual relationship. The debtor’s performance is based on the contract, a contract that does not require a third party to pay for consideration. Different from ordinary contracts, a third-party benefit contract has three parties, namely the contract creditor, the contract debtor and the third party; it includes three legal relationships, namely the contractual relationship between the creditor and the debtor, the contract between the debtor and the third party and the legal relationship between creditors and third parties. The contractual relationship between the creditor and the debtor can be called the basic relationship. While the legal relationship between the debtor and the third party can be called the payment interest relationship, and the legal relationship between the creditor and the third party can be called the causal relationship.41 These three relationships can be described in government 41

Zhu Yan: “Research on Contracts Benefiting the Third Party”, in Legal Science (Journal of Northwest University of Political Science and Law), No. 5, 2005, p. 58.

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procurement contracts as follows: the causal relationship refers to the legal relationship that occurs when the government needs to provide public services to the service object based on the performance of its duties; the basic relationship refers to the fact that the government adopts a contract procurement method to sign a contract with the undertaking subject to purchase public services. The legal relationship arising from the service contract; the payment interest relationship refers to the legal relationship arising from the provision of public services by the undertaking subject to the service object by the procurement contract. Article 64 of China’s Contract Law stipulates that if the parties agree that the debtor will perform the debt to a third party, the debtor fails to perform the debt to the third party or fails to perform the debt in compliance with the regulations, it shall bear the breach of contract liability to the creditor. Although this clause does not stipulate the rights and obligations of the third party, it stipulates that the debtor may not need to perform the creditor’s rights to the creditor but to the third party. Therefore, this clause has become the legal basis for the third-party benefit contract. (2) The Legal Status of the Service Objects of the Procurement Contract In a third-party benefit contract, the third party is the beneficiary of the contractual benefits, but not the party to the procurement contract. Therefore, the third party has different understandings of what rights it enjoys. Some scholars believe that the third party’s rights are contractual claims, and have the same effect as ordinary contractual claims. When they are infringed, the right to claim for damages can occur. At the same time they enjoy the right to dispose of debts, etc. Although the third party’s right is obtained directly, it can also refuse to accept the right. Once rejected, it is deemed that the right has not occurred from the beginning. The right of refusing to accept benefits is surely the embodiment of the independent personality of the third person.42 It is inappropriate to equate the rights of third parties with the rights of the contracting parties. The principle of privity of contract needs a breakthrough to meet reality’s needs. However, the breakthrough is not negation. If the third party is equal to the party involved in the contract, it will negate the principle of privity of contract, which will lead to the abuse of the rules of contract law to solve the problem of tort. This approach will shake the basic nature of contract law: contract law originally regulates the transaction relationship, and transaction subjects should have certain expectations for the consequences of their actions according to the contract. The expanded interpretation and application of contract law will inevitably make the transaction subject unable to make definite expectations for the consequences of its behavior in some cases. This not only weakens the function of tort law, and is not conducive to the healthy development of contract law.43 In judicial practice, there are still restrictions on the third party’s rights in the procurement contract, and the third party can only be a third party without independent claim rights in the proceedings. Article 16 in the Interpretation (2) of the Supreme 42

Ye Jinqiang: “Research on Third Party Interest Contracts”, in Comparative Law Research, No. 4, 2001, p. 75. 43 Zhang Xinbao: “General Provisions of Tort Law”, in Legal Research, No. 4, 2001, p. 54.

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People’s Court on Several Issues Concerning the Application of the Contract Law of the People’s Republic of China stipulates that the people’s court may, according to the specific circumstances of the case, apply the third clause of Articles 64 and 65 of the Contract Law. The person shall be listed as a third party without the right of independent claim, but shall not be listed as the defendant in the contract litigation case or as a third party with the right of independent claim. The reason is that although the contract has other factors, the third party is not a party stipulated in the contract after all, and his status is different from that of the parties to the contract, so he cannot appear as a litigant. However, the third party is also different from the debt performance assistant. If it is only an assistant, it can only be a witness and should not be a third party without independent claim rights. Therefore, the judicial interpretation adopts a compromise method, which neither recognizes the defendant’s status nor the third party with independent claim rights, but also considers that it is different from the debt assistant.44 The service object of the procurement contract can only be a third party without independent claim rights in the civil procedure. Therefore, even if the undertaking subject infringes the legitimate rights and interests of the service object, it cannot be relieved by the liability for breach of contract in contract law. (3) Choosing of Remedies for Service Objects’ Rights In order to obtain remedies and protection for victims, the extension of tort law to the field of contract law is forced by the situation and the need for social development. For service objects, they can only use the tort law to protect their rights. From the perspective of the effect of rights protection, clients seeking protection from tort law will have more excellent protection, more measures and more benefits than contract law. First, tort law protects more interests than contract law. The creditor’s rights protected by contract law are mainly the property interests of civil subjects. In contrast, the protection of tort law is all legitimate interests except contract creditors’ rights, that is, in addition to absolute rights such as personal rights and property rights, it also includes some legal rights and interests related to personal and property. Article 2 of the Tort Liability Law stipulates that the tort law protects the infringed civil rights and interests. Civil rights include the right to life, right to health, right to name, right to reputation, right to honor, right to portrait, right to privacy, right to marriage, right to guardianship, right to ownership, right to usufruct, right to security, copyright, right to patent, right to exclusive use of trademark, rights of discovery, equity, inheritance and other personal and property rights. Second, the victims receive more compensation benefits. The defaulter of the contract is only liable within the scope of the contract’s fault. That is, it bears part of the liability rather than all the liability for damage. Tort law requires the infringer to bear full responsibility for the infringement. Article 16 of the Tort Liability Law stipulates that those who infringe others and cause personal injury shall compensate for the reasonable expenses for treatment and rehabilitation, such as medical 44

Wang Liming: “Contract Law Research” (Volume 1), Renmin University of China Press, 2011 edition, p. 151.

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expenses, nursing expenses, transportation expenses, and the income reduced due to the absence of work. If a disability is caused, the fee for living aids and the disability compensation shall also be compensated. If death is caused, funeral expenses and death compensation shall also be paid. Article 22 stipulates that if personal rights and interests are infringed, causing severe mental damage to others, the infringed person may request the infringer to compensate for the mental damage. Finally, there are more forms of liability that infringers must bear. Chinese law stipulates that the breach of contract responsibilities borne by the breaching party mainly include: requiring the breaching party to continue to perform, take remedial measures, stop the breach of contract, compensate for losses, pay liquidated damages or apply a deposit. Remedies include repairs, replacements, redoes, returns and price reductions. The Tort Law stipulates that the infringer assumes tort liability in the following forms: cessation of infringement, elimination of nuisance, elimination of danger, return of property, restoration to the original state, compensation for losses, apology, elimination of influence, restoration of reputation, etc. The infringers may be liable individually or jointly. There are more forms of liability under tort law than those for breach of contract under contract law. (4) The Identification of the Tort Liability to the Service Object by the Undertaking Subjects Introducing the rules of tort law in the procurement contract to deal with the tortious behavior of the undertaking subject must solve the specific application of tort law. The application of tort law in the procurement contract mainly solves the problems of fault and causality in the performance of the contract. a. The principle of fault liability The basic principle pursued by traditional tort law is: no-fault means no liability. A person can only be liable for damages caused by his actions if he is at fault. The primary consideration for the assumption of liability is the subjective fault of the parties, and fault plays a role in limiting liability to some extent.45 Article 6 of the Tort Liability Law stipulates that a person who infringes upon the civil rights and interests of others due to his fault shall bear tort liability. According to the law, the perpetrator is presumed to be whether at fault or not. If the perpetrator cannot prove that he is not at fault, he shall bear tort liability. Fault includes intention and negligence. Whether it is a legal provision or a legal interpretation, it is one of the elements for determining a tort. It can be seen from the above case analysis that it is difficult to identify the subjective fault of the undertaking subject, especially the infringement caused by a third party other than the procurement contract relating to the service object. It is even more challenging to identify the fault of the undertaking subject. In this case, in practice, whether the undertaking subject has fulfilled its contractual obligations is used as the basis for determining fault. If the undertaking subject has fulfilled its contractual obligations, there is no fault; otherwise, there is a 45

Wang Liming: “Research on the Concept of Tort”, in Jurist, No. 3, 2003, p. 69.

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fault. For example, in the case of old man B being beaten by a person with a mental health condition. If the guards of the nursing home are strictly guarded, the fence cannot be climbed over, and the person with a mental health condition drove his car into the wall to break in and beat others. And if after the beating, the nursing home immediately called the police and sent him to the doctor. Then the nursing home has no subjective fault for the result of B’s assault. Otherwise, it can be presumed that the nursing home is at fault for B being beaten. The primary basis for judging the obligations of a contract are as follows: First, the agreement between parties. A contract is the product of the autonomy of the parties. Therefore, the content agreed by the parties establishes the rights and obligations of the parties, and takes precedence over the validity of the arbitrary provisions of the law. In this case, if the purchasing subject and the undertaking subject have an agreement, the nursing home must ensure the safety of the property of the elderly, and there will be no theft. The nursing home violates the contractual obligation and is at fault for the theft of the elderly jade pendant. Second, the stipulated laws and regulations. The expressly stipulated laws and regulations also known as legal obligations of a contract, refer to the obligations that the parties to a contract must undertake. For example, Article 37 of the Tort Liability Law stipulates that managers of public places such as hotels, shopping malls, banks, stations, and entertainment venues or organizers of mass activities that fail to fulfill their obligations of safety protection and cause damage to others should be liable for infringement. If the K Nursing Home did not fulfill its safety responsibilities and the floor was smooth, causing many elderly people to fall. It could be determined that the nursing home was at fault for the elderly’s fall. The third is based on common sense. Some contractual obligations are common sense or living habits that can be understood without agreement or legal provisions. If the party violates it, it can also be determined to be at fault. For example, it is a common sense to supplement the medicine with warm water for tablets that need to be taken with warm water. If the nursing home staff is feeding medicine to the elderly who cannot take care of themselves, they do not know they need to give water, which eventually leads to the elderly being choked. If the medicine chokes the elderly, then, because the staff lacks common sense and fails to fulfill their obligations, they can also be at fault. b. Causation The causal relationship is another element to determine whether the tort is established or not in the performance of the procurement contract. Due to the influence of causality in philosophy, causality in natural science and criminal law, the determination of causality in tortious acts has become a field of theoretical disputes. No theory can cover and explain all legal phenomena. Theoretical uncertainty also leads to many errors in practice.46 It is so difficult to determine causality in tort, and it is even more challenging to determine the causation of tort in the field of contract 46

Zhu Rugang: “On the Cause and Effect of Tort”, in Journal of Zhejiang University, Vol. 10, No. 4, 1996, p. 86.

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law. In contract law, the determination for the causality of tortious acts has been transformed into the consideration of the causal relationship between contractual acts and the consequences of damage. It is impossible to use the traditional theory of tort law or the theory of breach of contract alone to explain and construct the causal relationship between the breach of contract and the damage consequences. And it is necessary to discuss the causal relationship at the level of contract law.47 In contract law, the predictable theory is adopted to determine the causal relationship between the breach of contract and the consequences of damage. According to this theory, only if the damage caused by the breach of contract is foreseeable, dose it show that there is a causal relationship between the damage result and the breach of contract; if the damage is unforeseeable, there is no causal relationship, and the parties to the breach should not be liable for compensation for these damages.48 The foreseeable theory regards the foreseeable situation of the parties as the judgment standard of causality, and then decides the scope of damage compensation. This has positive significance for limiting the risks of transaction parties and encouraging transactions. However, it cannot solve the liability burden of torts in the performance of the procurement contract. According to this theory, in the above case, K nursing home should not be liable for the infringement of elderly J, Y and B, because as long as k nursing home proposes before signing the procurement contract, it cannot foresee that the elderly will fall, or being stolen or beaten by a third person, then it does not take responsibility. The foreseeable theory cannot solve the causal relationship between the breach of contract and the consequences of damage. Then we have to expand the search for theory to the field of tort law. In the civil law system, the theory of causality in tort law mainly includes “condition theory,” “cause theory”, “equivalent causality theory,” “the theory of the purpose and regulations,” and “the theory of objective attribution.” The common law system divides tort law causality into de facto and de jure causation.49 The dominant and dominant position in China’s judicial practice is “the theory of necessary causality.” Among the causality theories mentioned above, only the statute purpose theory is an appropriate theory to resolve the causal relationship between the breach of contract and the consequences of damage. “The theory of the purpose and regulations” advocates that whether the actor is liable for damages is not to explore whether there is a causal relationship between the behavior and the damage, but to explore the meaning and purpose of laws and regulations (including contracts). Suppose the contract objective is not achieved and there is a contract breach simultaneously. Then it can just be determined that there is a “causal relationship in contract law” between the breach and the consequences of damage. The value orientation of the theory of the purpose and regulations is to 47

Yang Jianjun: Personal Tort and Civil Liability in Contract Performance, Global Law Review, No. 1, 2009, p. 102. 48 Wang Liming: Research on Contract Law (Volume II), Renmin University of China Press, 2011 edition, p. 629. 49 Fang Ming: “On the Construction of the Theory of Causation in Tort Law in China”, in Shandong Social Science, No. 12, 2011, pp. 68–69.

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determine whether causality exists or not according to the objectives and content of laws or contracts, and to dilute the specific standards for measuring causality.50 According to the theory of the purpose and regulations, the causal relationship in the case is well resolved. The purchasing subject in District H and K Nursing Home signed a contract to purchase elderly care services. The purpose of the contract is to allow the elderly to get better care. However, the elderly J, Y, and B did not receive good care in the nursing home, and damaged themselves and their property. Therefore, the goal of the procurement contract was not achieved. The contract objective was not achieved due to the negligence of the staff at the nursing home or the poor management of the nursing home. The nursing home failed to fulfill its corresponding responsibilities in fulfilling the procurement contract. There is a fault in property damage. It can be concluded that it is because of the nursing home’s fault that the goal of the procurement contract has not been achieved. Although the nursing home does not have a direct causal relationship with the result of the infringement on the elderly, it is the nursing home’s fault that the contract objective is not achieved. At this point, the elderly J, Y, and B can file a lawsuit for damages against the nursing home according to the rules of tort law. Of course, in the case of B, the nursing home may exercise the right of recourse against the mentally ill guardian after compensating the old man B according to law.

The Undertaking Subject’s Torts and Liability on the Third Party Tort against a third party refers to an act that damages the legitimate rights and interests of a third party during the performance of the procurement contract by the undertaking subject. For example, the staff of D Company, which undertakes the maintenance of urban road street lamps, did not set up notices during the regular maintenance of street lamps, resulting in the incident of street lamps falling and injuring passersby. This is the tort of the undertaking subject to a third party. Since it was the fault of D Company that caused the injury to the passerby, and the behavior of D Company had a direct causal relationship with the injury of the passerby, so it complied with the constitutive elements of tort; in addition, the passerby had no contractual relationship with D Company, so it is impossible and unnecessary to discuss the breach of contract. Therefore, the undertaking subject initiates a tort lawsuit against the infringement of a third party by directly applying the tort liability law.

50

Yang Jianjun: Personal Tort and Civil Liability in Contract Performance, Global Law Review, No. 1, 2009, pp. 103-104. According to the statute purpose theory, it is very easy to solve the causal relationship in the case.

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6.4.4 Torts and Liability of Service Objects The tort of the service object refers to the tort of the service object against the undertaking subject or a third party. In this case, the old man Y was very angry because the nursing home did not respond to the report that his jade pendant had been stolen. One day, he destroyed the large-screen TV in the nursing home for everyone to watch. One day, the old man B saw a man downstairs on the balcony that looked like the person with a mental health condition who beat him that day. He thought the person with a mental health condition was making trouble again, so he grabbed the flower pot and threw it down. It happened that the flower pot injured a passerby. The behavior of the old man Y and B is the tort of the service object, the former is the infringement on the undertaking subject, and the latter is the infringement on the third party outside the procurement contract. Since the tortious behavior of the service object has nothing to do with the performance of the contract, the behavior of the service object is an ordinary tortious behavior, which can be dealt with under the tort law. In the procurement practice, although the infringing acts of the service object can be identified, many service objects cannot compensate for money. Therefore, the purchasing subject or the undertaking subject should resolve conflicts by insuring. The purchasing subject and the undertaking subject may agree on the range of insurance premiums to be borne. For example, if the agreed amount of compensation does not exceed 30% of the full procurement contract, the insurance premium shall be borne by the undertaking subject; if the amount of compensation exceeds 30% of the total procurement contract, the premium shall be borne by the purchasing subject.

6.5 Special Issues in the Performance of Procurement Contracts During the performance of the procurement contract, contract subcontracting, supplementary contracts and performance guarantees are areas that are more prone to problems. The reason is that some laws do not make provisions, and some legal provisions are not explicit and are exploited. Although these problems also occur in the performance of common civil contracts, and there are relatively complete solutions, due to the differences between procurement contracts and ordinary civil contracts, the key to the above problems in ordinary civil contracts is not necessarily applicable to procurement contracts. To solve the above problems, we must start with the government procurement target, and solve it systematically under the existing laws and regulations, drawing from the experience and practice of ordinary civil contracts.

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6.5.1 Subcontract Performance of the Procurement Contracts Whether the procurement contract can be subcontracted or not is stipulated by law. As long as it is agreed, subcontracting can be done. Article 48 of the Government Procurement Law stipulates that with purchasing subject’s consent, the winning bidder or the supplier may perform the contract by subcontracting by the law. Paragraph 2 of Article 48 in the Tendering and Bidding Law stipulates: “The winning bidder may, in accordance with the contract or with the consent of the tenderer, subcontract the non-subject and non-critical work of the winning bid for others to complete. Those who accept subcontracting shall have the corresponding qualifications and shall not be subcontracted again.” Article 28 of the Interim Measures for the Administration of Purchase of Services by the Provincial Government of ZJ also stipulates that with purchasing subjects’ consent or specified in the corresponding procurement documents, the contract may be performed by subcontracting according to the law. In some places, the procurement contract stipulates that not only can the contract be subcontracted, but even the government must require the undertaking subject to perform the contract by subcontracting. For example, Article 29 of the “Interim Measures for the Administration of Purchase of Services by the Provincial Government of ZJ” stipulates that for public service projects with a relatively large amount, if a single source is used for procurement, the purchasing subject shall require that the contract be properly carried out when performing the contract. The non-core part or a certain share (in principle, no more than 30% of the project share) will be subcontracted to small and medium-sized social organizations, and the main body of the project will be actively cultivated. Therefore, China’s existing laws and regulations recognize the subcontracting performance of procurement contracts, but prohibit subcontracting or subcontracting in disguised form. The first paragraph of Article 48 in the “Bidding Law” stipulates: “The winning bidder shall perform its obligations in accordance with the contract and complete the winning project. The winning bidder shall not transfer the winning project to others, nor shall the winning project be dismembered and then transferred to others respectively.” Article 23 of the “WZ Municipal Government Procurement Management Measures for Purchasing Services” stipulates, “The undertaking subject shall perform its obligations strictly in accordance with the contract, and complete the project on time with required quality and quantity. It is not allowed to transfer the undertaking project to others, nor to dismember the project and transfer it to others separately.” Article 21 of the “Measures” stipulates that “subcontracting is strictly prohibited.” Although the law gives conditional approval to subcontracting, it is still necessary to strictly grasp the procurement contract, especially for public services that are not suitable for subcontracting. First, what can be subcontracted must be public services with high homogeneity and measurable standardization. Public services have the characteristics of intangibility, perishability, and difference, and the service objects have different feelings and evaluations. Therefore, the government often chooses a specific undertaking subject to undertake a particular public service. And the entire procurement activity

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is highly targeted and directed. For example, in a legal aid project, the government chooses a certain subject mainly because the law firm that undertakes the project is robust, good at its work, and has many cases that are well handled. Subcontracting the project to other law firms may not meet the government procurement target. Subcontracting is impossible for such public services with strong professionalism, obvious individual characteristics, and no unified standard. Only those public services with high homogeneity and standard measurement are feasible for subcontracting. For example, monitoring services are generally carried out by using devices. As long as the person has certain professional knowledge, the task can be fulfilled. And the evaluation of such public services does not rely on one or two people or monitoring results, but has a long-term and group nature. The characteristics of cooperation, therefore, can only be subcontracted for such public services. Second, the purchasing subject must agree on the subcontracting performance or have stipulated in the procurement contract. As can be seen from the preceding, the particularity of public services determines that they cannot be subcontracted at will. In addition to considering whether the public service can be subcontracted, and whether it has the conditions of high homogeneity and standardized measurement conditions, it must also obtain the purchasing subject’s consent. In addition to satisfying the service object, the purchased public service also depends on whether the subcontracting performance of the public service conflicts with the functional requirements performed by the purchasing subject. The subcontract performance of the procurement contract can only be decided after a comprehensive evaluation by the purchasing subject. Therefore, without the purchasing subject’s consent, subcontracting performance is not allowed; the subcontracting decision made by the accepting party is not only invalid but also in breach of contract. In severe cases, compensation for losses is needed. Third, the subcontracted public services must be non-subject or non-critical items, and can not exceed a certain share of the total contract value. Under any circumstances, the undertaking subject can only subcontract non-subject and noncritical work to others to complete the subcontracting. The undertaking subject must complete the overall contract of the service target or the key work in person. The “Government Procurement Law”, “Implementation Regulations” and “Measures” do not stipulate which parts and shares of public services can be subcontracted. This is a kind of deficiency. But in practice, you can refer to the provisions of Article 29 of the “Construction Law.” The undertaking subject itself should complete the main part. On the one hand, this kind of regulation can ensure the overall performance and quality of the purchase project; on the other hand, it prevents the undertaking subject from achieving the goal of transferring the procurement contract through subcontracting. The key is to correctly apply this requirement, to understand “non-subject, non-critical work” correctly. Purchasing different public services has different requirements for “non-subject, non-critical work.” For example, for technical services, the core technology of the service should be completed by the undertaking subject; for quantifiable public services, such as public transportation services, the subcontracted work cannot exceed 40% of the total project value. According to

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Article 30 of the Tendering and Bidding Law, if the bidder intends to subcontract non-subject and non-critical work after winning the bid, it shall be stated in the bidding documents. Fourth, the undertaking subject shall bear the responsibility for subcontracting performance. A subcontract is a contractual relationship established between the undertaking subject and the subcontractor, and the subcontractor has no direct contractual relationship with the purchasing subject. According to the procurement contract, the purchasing subject cannot pursue the subcontractor’s liability for breach of contract. This is where the issue of contractual liability arises. According to the “Government Procurement Law” and the “Bidding and Bidding Law,” the undertaking subject and the subcontractor shall be jointly and severally liable for the subcontracted work. Paragraph 2 of Article 48 in the “Government Procurement Law” stipulates that if the government procurement contract is subcontracted, the winning bidder or the supplier shall be responsible for the purchasing subject for the procurement project and subcontracting project, and the subcontracting supplier shall be jointly and severally responsible for the subcontracting project. Paragraph 3 of Article 48 in the Bidding Law stipulates that the successful bidder shall be responsible to the tenderer for the subcontracted project. The person accepting the subcontract shall be jointly and severally liable for the subcontracted project. In the form of joint and several liabilities, the responsibility of the undertaking subject is increased. The undertaking subject is forced to complete the purchase project with high quality as much as possible. To achieve the goals of reducing contract disputes, reducing purchase costs, and improving the quality of public services. Fifth, no re-subcontracting is allowed. In practice, to avoid the legal provisions that the procurement contract shall not be subcontracted, the undertaking subject dismantles the subcontracted procurement contract through layers of subcontracting. To this end, our law stipulates that the procurement contract shall not be subcontracted again. Paragraph 2 of Article 48 of the Tendering and Bidding Law stipulates that those who accept subcontracting shall have corresponding qualifications and shall not subcontract again.

6.5.2 The Supplementary Contract of the Procurement Contracts A supplementary contract refers to that during the performance of the procurement contract. The purchasing subject needs to add the same services as the contract subject. In order to save the cost, the law empowers the purchasing subject to sign a new contract that exceeds less than 10% of the original procurement contract with the undertaking subject without changing other terms of the procurement contract. The legal basis for the supplementary contract is Article 49 of the Government Procurement Law, which stipulates that in the performance of a government procurement contract, if the purchasing subject needs to add the same goods, projects or

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services as those in the contract, it shall not change other terms of the contract. The purchasing subject can negotiate and sign supplementary contracts with suppliers, but the procurement amount of all supplementary contracts shall not exceed 10% of the amount in the original contract. A supplementary contract is a special issue in fulfilling a procurement contract. It can be understood as both a contract change during the fulfillment of the procurement contract and a new procurement contract. The reason for interpreting the supplementary contract as a change in the contract during the performance of the procurement contract is that the supplementary contract is developed based on the original procurement contract. Compared with the original procurement contract, except for the change in the quantity of public services purchased, other contract terms did not change. A supplementary contract is understood as a new procurement contract because the quantity of public services purchased in the supplementary contract has changed. According to Article 30 of the Contract Law, changes in the subject matter, quantity, quality, price, etc. of a contract are substantive changes in a contract, and a substantial change is a new offer, that is, a new contract. For the undertaking subject, whether the supplementary contract is a change in the performance of the procurement contract or a new procurement contract has little impact. It always will be the beneficiary anyway. But it may harm the entire procurement activity. The purchasing subject may seek power rents and seek personal interests in the form of supplementary contracts; for those who have not obtained the contract, they will lose the opportunity to sign the original contract. They will also lose the opportunity to add a new contract. This is very unfair. However, the existence of the supplementary contract also has its rationality. It can save the procurement cost and improve the efficiency. For the procurement of the same public service, if a new procedure is initiated, it will undoubtedly increase the procurement cost and waste time, which goes against the goal of efficient and economical procurement. In order to fully use the positive side of the supplementary contract and overcome its shortcomings, it must be regulated. According to the provisions of the law, the conditions for signing a supplementary contract are: first, the initiator must be the purchasing subject, and the undertaking subject is not qualified to file; second, the public service purchased must be the same as the public service purchased in the original procurement contract, not of a different type. The third is that the terms of the supplementary contract cannot be changed except for the number; the fourth is that the amount of the supplementary purchase must be small. It cannot exceed 10% of the original procurement contract amount. In practice, if the amount of the original procurement contract is particularly huge, the new procurement amount needs to be strictly controlled. At the same time, supplementary contracts should be disclosed on time and subject to supervision from all walks of life. Those who violate the above provisions shall be punished accordingly. Article 67 of the “Implementation Regulations” stipulates the violation. When the procurement amount of the supplementary contract exceeds 10% of the procurement amount of the original contract, it shall be ordered to make corrections within a time limit and a warning shall be given. And the person in charge and other directly responsible people shall be punished and notified according to law.

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6.5.3 The Performance Guarantee of the Procurement Contracts In a breach of an ordinary contract, the breaching party is usually required to continue to perform, take remedial measures, stop the breach of contract, compensate for losses, pay liquidated damages, apply a deposit, repair, redo, and reduce remuneration. If the undertaking subject breaches the contract for some public services, it will cause irreparable losses. For example, if patients are not treated in time in medical and health services, their lives will be in danger. This cannot be compensated by taking responsibility for breach of contract. Therefore, how to ensure that the undertaking subject actively performs the procurement contract is a practical problem. China’s legislation has paid attention to this problem and made provisions on performance bonds. Article 48 of the “Implementation Regulations” stipulates that if the procurement documents require the winning bidder or the supplier to submit the performance bond, the supplier shall submit it in the non-cash forms such as check, draft, promissory note or letter of guarantee issued by a financial institution or guarantee institution. The performance bond amount shall not exceed ten percent of the contract value in government procurement. Article 58 of the Regulations on the Implementation of the Tendering and Bidding Law has similar provisions: “If the bidding documents require the winning bidder to submit a performance bond, the winning bidder shall submit it by the requirements of the bidding documents. The performance bond shall not exceed 10% of the contract value of the winning bid.”. By submitting the performance bond in non-cash forms such as check, draft, promissory note or letter of guarantee issued by a financial institution or a guarantee institution, the occupation or misappropriation of the bond can be effectively avoided. The 10% maximum amount can avoid the sky-high price from the purchasing subject, which will damage the interests of the undertaking subject. For government procurement, the form of performance bond is a relatively feasible form of performance guarantee. But with the deepening of government procurement activities, this form can no longer meet the actual needs. First, the performance bond is for the undertaking subject, and there is no requirement for the purchasing subject. Although the purchasing subject has a strong ability to perform the contract, the government would default from time to time. Therefore, the performance bond cannot only be aimed at the undertaking subject, but the purchasing subject also has a performance guarantee. Second, the guarantee form is single in form. The guarantee forms stipulated in China’s “Guarantee Law” include guarantee, mortgage, pledge, lien and deposit. The law should consider setting up a variety of security forms for the parties to the procurement contract to choose, not only one security deposit. Finally, there is no provision for a guarantor. With the development of the market economy, various professional market entities have emerged as the times require, and many professional guarantee companies have also emerged in the field of guarantee. The performance of the performance guarantee by these professional guarantee companies will enhance the guarantee capacity and reduce the input cost of the parties to the procurement activity. Although China’s laws do not provide regulations for

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these issues, some places have already carried out explorations in this area, such as Article 30 of the “Interim Measures for the Administration of Purchase of Services by the Provincial Government of ZJ.” This article stipulates that the introduction of a government procurement credit guarantee system is encouraged for service projects with large amounts, long performance periods, wide social influence, or high reputation requirements for the undertaking subject. The purchasing subject may require the undertaking subject to provide a government procurement performance guarantee letter issued by a professional guarantee agency or other means of performance guarantee into ensure service effects and improve service levels. Guarantee costs can be integrated in the procurement balance funds. .

Chapter 7

Regulatory Mechanisms for Government Procurement of Public Services

Any viable institutional model must have the ability to correct itself. One of the conditions for generating this error correction ability is to have a scientific and sound supervision system. As a new type of government governance model, government procurement for public services must build a scientific and perfect supervision mechanism to achieve the goal of “improving administrative efficiency, reducing administrative expenses, and enriching the content of public services.” The establishment of a government procurement of public service supervision mechanism is to prevent and correct problems in government procurement and achieve the goal of doing good things well. There are many contents of the supervision mechanism for government procurement of public services. This paper focuses on studying the supervision mechanism of government procurement of public services from the perspective of public law.

7.1 Overview of Regulatory Mechanisms 7.1.1 The Meanings of the Regulatory Mechanism The supervision mechanism for government procurement of public services refers to the general term of the working mechanism in which different supervision and management entities conduct all-around and whole-process supervision and management of the content, process and effectiveness of government procurement for public services. As a governance model, government procurement of public services is still an act of government exercising public power, and the government’s power has not disappeared. This is because in the government procurement of public services, the role of the government is changed from a direct production producer of public services to a provider, and the production function of public services is assumed by the public service undertaking main body. However, the changing role of government has not changed the nature of government behavior. Specifically, from the © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 X. Xiansheng, Public Procurement in Chinese Law and Practice, State Governance, https://doi.org/10.1007/978-981-99-1047-2_7

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perspective of purchasing motives, the government procurement of public services is for the government to provide better public services for the people, rather than the abandonment or weakening of the government’s function of providing public services; from the perspective of role, the government still occupies a dominant position in all major links of purchase activities, such as the definition of purchase content, the supervision of contract performance, and the evaluation of effectiveness; from the perspective of service objects, the government procurement of public services is to meet the public needs of an unspecified majority of the people rather than self-contained; from the analysis of the source of funds used, the government procurement of activities use financial funds rather than social donations or other non-financial funds. Therefore, in essence, the government procurement of public services is a behavior of the government, and it is the behavior of the government to exercise its powers. But in the process, the government no longer performs the function of directly producing public services. Since the government procurement of public services is a government behavior and the exercise of public power, supervising and managing them is not only an inevitable requirement for the government to correctly perform its functions and powers, but also an important guarantee for realizing the inherent value of this new governance model.

7.1.2 Goals of the Regulatory Mechanism The goal of the government procurement of public service supervision mechanism is to improve the efficiency of government procurement. Therefore, the problems of inefficiency and high cost must be overcome. But in fact, there are problems such as opportunism, increased trust cost and economic externalities in the government procurement of public services. One of the keys to achieve the benefits of government procurement of public services is to have a suitable undertaking model. But no matter what kind of undertaking model is adopted, there are risks of opportunism. Overcoming the opportunistic risks of government procurements for public services requires a well-defined public service, broad advocacy and solicitation, objective reward decisions, and objective cost and performance monitoring processes. It is difficult to achieve both in reality. Even in an ideal competitive buying model, it is prone to opportunistic and illegal behavior, and may even cost more than the government to produce public services on its own. Therefore, opportunism is unavoidable, and the government can only minimize the increased cost of opportunism by improving the supervision mechanism and regulating working conditions. The government procurement of public services involves three parties: the government, the undertaking entity, and the service object. If these subjects can cooperate and support each other, then the procurement efficiency can be greatly improved. But in practice, the three parties have different degrees of distrust for the other parties. First, the undertaking subject lacks credibility among the public. Generally speaking, most public services, especially medical care, pension, education, etc., have always been produced and provided by the government. Once non-government contractors produce these services, they

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will arouse public suspicion and inner resistance, thereby increasing the cost of implementation. Second, the government lacks trust and support for the undertaking subject. For the government, on the one hand, it is necessary to cultivate and support the undertaking subject vigorously. However, on the other hand, it does not trust or rest assured about the provision level, management ability, professional ethics, and development scale of the undertaking subject. The government often worries that the project can not be completed well, and the funds will be misappropriated. It also worries about giving too much or too less resources. So the government have to engage in sharing, averaging, and balancing, resulting in the failure of the undertaking entity to form economies of scale Third, the undertaking subjects are also suspicious of the government’s integrity and work efficiency. Most of the time, they take a wait-and-see attitude, rather than actively innovating and taking measures to improve efficiency. Therefore, the increase of trust costs affects the efficiency of government procurement for public services. Government procurement of public services may also create economic externalities. The term “externality” refers to the fact that some costs or benefits are external to the decision-maker. Economic externalities arise when potential profits (or increased costs) are not captured (or borne) by the unit making the decision. Whenever these external costs and benefits exist, they are not optimal. Government procurement of public services also faces externality problems. This will inevitably lead to issues such as how to strengthen risk assessment, cost–benefit accounting, and supervision and management of undertaking entities.

7.1.3 The Functions of the Regulatory Mechanism Prevent the Governments from Abusing Public Power It can be seen from the above that since the government procurement of public services is an act of the government exercising its public power, then as Montesquieu said, “all people with power are prone to abuse their power. This is an experience that has never been proved by history. Power does not stop until it encounters a limit.”1 The possibility of government abusing power is inevitable in government procurement of public services. First, the government may get rid of the burden through the procurement of public services. Leaving the public service provision function that should be undertaken by the government to enterprises or the market; second, the government will purchase public services that the public does not need based on different goals, resulting in waste of funding. Third, the government may turn a blind eye to the effectiveness of purchasing public services, resulting in the inability of the public to enjoy high-quality public services.

1

[French] Montesquieu: “The Spirit of the Law”, translated by Zhang Yanshen, Commercial Press, 1986 edition, p. 151.

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Strengthen the Supervision of Undertaking Entities to Prevent and Reduce Corruption With the development of China’s economy, the scale of government procurement of public services has continued to expand. The investment capital has continued to increase, resulting in the market for government procurement of public services has become a place where many non-governmental organizations and individuals compete for profit. Their eagerness to participate increases the opportunity for rent-seeking power and induces corruption such as commercial bribery. “Supplier monopoly” is one of the concomitants of corruption in the government procurement of public services. According to scholars’ research, in the government procurement of public services, if the supervision is not in place, the problem of “supplier monopoly” will arise. For example, American scholars John Stone and Romzek found in their research on the purchase of elderly medical services in Kansas. The government only cooperated with non-profit organizations AAAs (Area Agencies on Aging) and did not look for more suppliers. Long-term cooperation has given AAAs the ability to negotiate with governments, and they influence the development of government standards for evaluating suppliers.2 Meeyoung Lamothe and Scott Lamothe’s study of the Florida government’s purchase targets also found that the number of projects being purchased is getting smaller and the amount purchased is increasing, which indicates that the more the contract is concentrated in the hands of large suppliers.3 This also means that a minority enjoys the economic benefits of monopoly. Therefore, strengthening the research on the supervision mechanism for government procurement of public services is an urgent need to ensure the integrity and efficiency of government procurement.

7.2 Statutory Regulatory Agencies As citizens’ needs for people’s livelihood security become increasingly diversified and complex, the government urgently needs to explore new ways of providing public services to realize the transformation from unified management functions to diversified public service functions. On the one hand, it can ease the relatively tight financial expenditure. On the other hand, it will reduce the pressure of personal, material and resources on social development. Therefore, as an important measure to meet the requirements of public service system reform, government procurement of public services has achieved vigorous development in countries around the world. It is of great significance to reduce service costs, improve service quality, promote the 2

[Jocelyn. M. Jonhston, Barbara S. Romzek. Contracting and Accountability in State Medicaid Reform: Rhetoric, Theories and Reality. Public Administration Review, 1999, 59(5): 384–385]. 3 [Meeyoung Lamothe, Scott Lamothe. Beyond the Search for Competition in Social Service Contracting: Procurement, Consolidation, and Accountability. The American Review of Public Administration, 2009, 39(2): 166–168].

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transformation of government functions, establish a partnership between government and society, and promote the development of market economy and civil society. In order to realize the purpose of the system above-mentioned, when the government procurements public services, it must first solve the problem of who will supervise it. Suppose the setting of the regulatory agency is unreasonable or inappropriate. In that case, the series of matters involved in the purchase process cannot be completed. The institutional goal of the government procurement of public services cannot be achieved. Therefore, the setting of regulatory agencies is a critical issue. Countries all over the world attach great importance to it and carefully design it.

7.2.1 Overview of Related Situations Outside the Territory It is because of the importance of regulators to the government procurement of public services that countries attach great importance to it. The United States implements a regulatory model that separates supervision, enforcement and relief to manage public service purchases. The oversight bodies are the Federal Accounting Office and the Office of Management and Budget. The Federal Accounting Office was established by the U.S. Congress and is accountable to Congress. One of its responsibilities is to oversee government procurement. It has the power to evaluate government procurement plans, audit projects and make recommendations; monitor the use of funds and receive complaints. The Office of Management and Budget is subordinate to the Executive Office of the President of the United States. It is an agency established by the U.S. executive authority to strengthen the government’s guidance and management of the procurement of public services. It is specifically responsible for formulating various rules and regulations for government procurement activities; issuing various management policies, and coordinating specific buying activities. The federal executive agency is the Directorate-General of Federal Affairs. Which is specifically responsible for the content of government procurement and sets the standards and specifications for services. The United States has a complex and comprehensive set of relief agencies, including the Federal General Accounting Office of an administrative nature, the Federal Compensation Court of the court system, and the United States Court of Appeals for the Federal Circuit. You can also apply to the Contract Appeals Council established within the administrative agency for adjudication for general government procurement contract disputes. New Zealand has established a special public service management committee to be responsible for the supervision and guidance of the national public service. Be responsible for signing performance contracts, negotiating prices and certifying product quality. Among Asian countries, South Korea is the country with better regulation of government procurement. It has set up a “Procurement Office” under the Ministry of Finance and Economy, dedicated to government procurement. The department is independent in business. Its director is directly appointed by the president, and is specifically responsible for the purchase of various governments across the country, including the purchase of government public services.

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7.2.2 The Setting Modes of China’s Regulatory Agencies China has continuously strengthened the research and exploration of the establishment of regulatory agencies to promote government procurement activities, and strive to make the establishment of regulatory agencies professional and systematic. Taking the promulgation of the “Guiding Opinions” as the boundary, establishing China’s government procurement of public services regulatory agencies can be divided into two stages.

The Setting Modes of Regulatory Agencies Before the Promulgation of the “Guiding Opinions” Before issuing the “Guiding Opinions,” all localities carried out multi-faceted practical explorations on the establishment of government procurement of public service regulatory agencies, and there are four specific types. (1) The Setting Mode of Supervision Led by Functional Departments This model stipulates that a certain functional department, currently the financial department in China, is the leading unit, specifically responsible for the macroguidance and policy formulation of government purchasing activities. For example, in the “Opinions on Establishing the Government’s Procurement of Social Organization Services,” CD City stipulates that “the municipal and district (city) and county financial departments are responsible for taking the lead in the procurement of social organization services, and work with relevant administrative departments to determine the accounting methods for the cost of procurement social organizations; formulate performance evaluation index system and evaluation methods in conjunction with government target inspection departments; be responsible for reviewing the projects for purchasing social organization services and incorporating their funds into the department’s comprehensive budget for overall arrangements; timely disbursing the funds required for social organization services to ensure funds are on time in place.” This model establishes a leading department responsible for the overall planning of government procurement activities; and also uses the financial department as the leading department. It can be said to be a good practice, because it can reduce the intermediate links in the use of funds and improve budget allocation and efficiency. However, the functional department established by this model is only the leading unit, not a full-time department. Supervising government procurement is only an additional work of the leading unit, not the essential work. From the perspective of departmental interests, it may not be so dedicated. And facing the increase in the procurement of public services and the ever-increasing demands for specialization, these leading regulators are objectively powerless. After introducing the “Guiding Opinions,” this model has become the mainstream in China.

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(2) The Regulatory Mode of Establishing a Special Committee to Take the Lead This model requires the establishment of a special committee outside each function to be responsible for the planning and guidance of government procurement activities; each functional department, under the leadership of the special committee, carries out specific procurement activities according to its responsibilities. For example, WX City stipulates in the “Guiding Opinions on Government Procurement for Public Services” (for trial implementation) that the municipal government establishes the “City Public Finance System Reform Office,” which is responsible for the comprehensive establishment of the government procurement of public services mechanism. The implementation of the activities, coordinate and deal with the problems arising from the specific implementation of various departments and procurement activities, implement the focus and scale of government procurement of public services according to the work deployment of the whole city center, and use them as the basis for the budget of the financial department. The feature of this model is that there is an organization that goes beyond each functional department to overall grasp and promote government procurement activities. It has a general plan and layout for government procurement activities in the region to avoid duplication of procurement content, unsuitable citizens’ needs or mutual shirk by various functional departments. Its disadvantage is that the so-called “committee” and “leading group” like this are mainly a temporary patchwork organization. The specific work has to be carried out by a certain functional department. Therefore, this regulatory model is inherently flawed. It cannot make legally enforceable decisions under laws and regulations. Of course, there is no decision-making power, and there is no need to assume obligations. Therefore, for the work errors and mistakes of such supervisory entities in their work, there are no other measures and ways to hold them accountable except at the decision-making level. (3) The Mode of Respective Supervision of Functional Departments As the name implies, the supervision of government procurement of public services is the responsibility of each functional government department. There are two types of this model in practice: the general and the specific models. The general model means that the government generally stipulates that various functional departments supervise the government procurement of public services; the specific model means that a special regulatory agency is designated to manage government procurement activity. The former is as stipulated in the “Implementation Opinions on Government Procurement of Public Services” (for trial implementation) in PD District of SH City. Each government department shall be responsible for formulating the implementation opinions and plans for the government procurement of public services in its department according to their respective responsibilities, and actively organize the implementation. It is responsible for the management of government procurement of public service within the system, stipulating contract management, avoiding the risk of signing and fulfilling service agreements, and preventing the occurrence of no written contracts and post-replenishment contracts. It should also track and

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supervise the service process, discover and solve problems on time, ensure service quality, establish an emergency working mechanism and stipulate emergency plans. The latter, such as the “Administrative Measures for Government Procurement of Community Public Health Service Projects” in TA District of JN City, clearly stipulates that the district health bureau, as the supervision and management department of government procurement activities, is responsible for the implementation of government procurement activities in its administrative area’s evaluation and assessment work. This supervision model gives functional departments much power, and the functional departments are responsible for the planning and implementation of procurement activities, and supervision and evaluation. From the perspective of administrative efficiency, this model can reduce administrative links and improve administrative efficiency; however, because too much power is given, it is also prone to abuse of power and corruption. Functional departments often sacrifice overall interests to maintain departmental interests, which is not conducive to public services. It is not conducive to realizing the government’s original intention to purchase public services. (4) The Model of Joint Supervision of Functional Departments The model of joint supervision means that several functional departments are jointly responsible for supervising the government procurement of public services. For example, in 2006, the Ministry of Finance, the National Development and Reform Commission, and the Ministry of Health jointly issued the “Opinions on Subsidy Policy for Urban Community Health Services”. The Opinion stipulates that the departments of finance, development and reform, and health at all levels shall, according to the division of responsibilities, allocate and use government subsidy funds for community health services by the law, implement whole-process supervision and management, and strengthen tracking and effectiveness. It is necessary to establish and improve community public health services. The health service performance evaluation system is responsible for evaluating health and public services. In China’s administrative culture, joint supervision and joint issuance of documents are common. Because people believe that “everyone picks up firewood and the flame will become higher”. It is easy to form a synergy in joint supervision at work, to achieve better supervision results. This so-called joint supervision only sees one side of the problem, but in practice, there is often a situation where “nine big caps cannot control a pig”. The reason is that the supervisory responsibilities of various functional departments are unclear, and it is easy to pass the buck to each other.

The Setting Modes of Regulatory Agencies After the Promulgation of the “Guiding Opinions” After the promulgation of the “Guiding Opinions,” China has made new explorations on establishing the government procurement of public service supervision agencies. According to the “Government Procurement Law,” “Guiding Opinions,” “Regulations,” “Measures,” and the normative documents formulated by local governments,

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China’s government procurement regulatory agencies can be divided into three levels of supervision: macro, micro and departmental coordination. (1) Macro-level Regulators From the perspective of regulatory content, macro-level regulatory agencies can be divided into broad and narrow senses. Regulatory agencies in a broad sense include people’s congresses at all levels and government financial departments at all levels. As a regulatory agency, the National People’s Congress mainly reflects the function of the National People’s Congress on the budget review of government procurement projects. Since the National People’s Congress’s supervision and management of the procurement project budget is relatively macro and abstract, the macro regulatory agency in the general sense refers to the financial institutions of the people’s governments at all levels in a narrow sense. The legal basis for the financial department as a supervisory agency is Article 13 of the Government Procurement Law. This article stipulates that the financial departments of the people’s governments at all levels are the departments responsible for the supervision and management of government procurement. And they should perform their duties of supervision and management of government procurement activities by the law. Specific responsibilities are: 1. Prepare the procurement project budget. Article 25 of the “Measures” stipulates that when arranging the annual budget preparation, the financial department shall put forward clear requirements for the relevant budget arrangements to purchase services, and formulate a special list of purchased services in the budget statement. 2. Review purchase items. Article 26 of the “Measures” stipulates that the financial department responsible for managing government procurement services shall review the government procurement service item filled in by the purchasing subject. 3. Formulate the standard text of the contract. Article 45 of the “Government Procurement Law” stipulates that the government procurement supervision department of the State Council shall, in conjunction with the relevant departments of the State Council, stipulate the terms that government procurement contracts must have. Article 47 of the Regulations stipulates that the finance department of the State Council shall, in conjunction with the relevant departments of the State Council, formulate standard texts of government procurement contracts. 4. Record the procurement contract. Article 47 of the “Government Procurement Law” stipulates that within seven working days from the date of signing the procurement contract for a government procurement project, the purchasing subject shall submit a copy of the contract to the government procurement supervision and management department and relevant departments at the same level for the record. 5. Supervision and management of the signing, addition, announcement, modification, suspension and termination of the procurement contract. The first paragraph of Article 67 of the “Regulations” stipulates that if the purchasing subject has any of the following circumstances, the financial department shall order it to rectify within a time limit, issue a warning, and impose sanctions on the direct person in charge and other directly responsible personnel according to law. It shall give a notice: Failure to sign a government procurement contract by the matters determined in the procurement documents; the purchase amount of additional

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services that are the same as the contract subject in the performance of the government procurement contract exceeds 10% of the original contract purchase amount; unauthorized modification, suspension or termination of the government procurement contract; failure to announce to the government by regulations procurement contract. (2) Micro-level Regulators The micro-level regulatory agency is mainly responsible for the supervision and management of the procurement contract by the purchasing subject. In government procurement, the role of the purchasing subject is complex, not only the party to the procurement contract, but also the representative of the public interest. As a party to the procurement contract, the purchasing subject, like the undertaking subject, must perform the contract as agreed; as the representative of the public interest, it must exercise the responsibility of supervision and management over the procurement contract. Compared with the supervision and management responsibilities of the financial department, purchasing subject’s responsibilities are relatively few and specific, mainly to supervise the performance of the procurement contract, the progress of the project implementation, the payment of contract payments and the acceptance of the contract. Article 20 of the “Measures” stipulates that the purchasing subject should strengthen the management of the procurement contract, to perform the contract strictly, keep abreast of the implementation progress of the purchase project, pay in strict accordance with the relevant regulations on the centralized payment management of the treasury and the progress of the contract implementation, and pay according to the actual situation. Demand and contract provisions actively help the undertaking subject communicate and coordinate with relevant government departments and service objects. Article 45 of the “Government Procurement Law” stipulates the acceptance of the purchasing subject, which stipulates that the purchasing subject shall organize the acceptance of the undertaking subject’s performance by the technical, service and safety standards stipulated in the procurement contract, and issue an acceptance letter. The acceptance letter shall include the performance of each technology, service and safety standard. For public service projects provided by the government to the general public, service recipients shall be invited to participate and provide opinions during the acceptance inspection. The acceptance results shall be announced to the public. Contract acceptance is an important responsibility of the purchasing subject for the supervision and management of procurement contracts. In addition to the regulations at the national level, the normative documents formulated by some places have also made detailed regulations on this subject, such as the Interim Measures for the Administration of government procurement Services in ZJ Province. Article 32 stipulates that after receiving the notification of the completion of the contract performance by the undertaking main body, the purchasing subject shall make timely preparations for the acceptance inspection, formulate an acceptance inspection plan, establish an acceptance inspection team, and organize the implementation of acceptance inspection and contract performance evaluation. For government-purchased service projects that are technically complex and highly specialized, relevant technical experts shall be invited to participate in the

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inspection and acceptance. A third-party institution with relevant qualifications shall be entrusted to conduct the inspection and acceptance. For public service projects provided by the government to the general public, the public’s evaluation of service content, service quality and service level shall be collected during the acceptance inspection. Service objects shall be invited to participate in the acceptance inspection according to a certain proportion. At the same time, Article 32 stipulates that the acceptance team shall issue an acceptance letter after the acceptance inspection. The acceptance letter shall include the performance of each technology, service, safety and other standards. The acceptance results of public service projects shall be announced to the public on the ZJ provincial government procurement service information platform and other media. (3) Departments Cooperate with Regulatory Agencies According to the “Guiding Opinions” requirements, China’s government procurement of public services should establish a supervision and management model of “Unified government leadership. Financial departments take the lead, civil affairs, business administration and industry authorities coordinate. Functional departments perform their duties. And supervisory departments ensure protection”. The financial department is the leading department, and it is undoubtedly the main responsible department for the supervision of the procurement of public services. Relevant functional departments should strengthen communication, so that each is responsible for its responsibility and joint management. That is to say, for government procurement contracts, in addition to the supervision and management of the National People’s Congress, the financial department and the purchasing subject, relevant government departments and social organizations also undertake supervision and management responsibilities. Articles 67, 68 and 69 of the “Government Procurement Law” stipulate that the relevant government departments, auditing agencies and supervisory agencies are responsible for administrative supervision over government procurement by laws and administrative regulations Contracts are responsible for supervision and management. Some local normative documents also make clear regulations on the supervision and management of a certain institution. For example, Article 17 of the “Measures for the Audit Supervision and Management of Government procurement Services from Social Forces” in HF City, AH Province stipulates that when signing a service procurement contract, The purchasing subject of the service shall specify in the contract that the service undertaking subject shall be subject to audit supervision. And it shall actively support and cooperate with the audit department to carry out the work during the audit, provide service-related materials and electronic data on time. Whether it is the four modes of setting up regulators before the introduction of the “Guiding Opinions”, or the three modes of setting up regulators after the introduction of the “Guiding Opinions,” they are all beneficial attempts and explorations under specific time and space conditions for the supervision of government procurement in China to solve the problems in the supervision process of government procurement for public services. However, from the national perspective, China’s government procurement public service regulators face overall shortcomings: First, there

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is no national government procurement public service regulator, which cannot make overall plans for national government procurement activities, nor can it form scale effects, to reduce the procurement cost and improve procurement efficiency. Second, due to information asymmetry, various functional departments are prone to repeat procurement of public services. For example, the same old-age care service can be purchased once at the provincial level, and the city and county (district) may also purchase it again, which will waste resources. On the contrary, there will be a gap in service procurement for some public service projects that should be purchased because there is no department responsible for supervising the procurement. The third is that the establishment of regulatory agencies is repeated, and there are much staff. Because they cannot be trained in an organized and planned manner, the quality of the responsible personnel is not high, and they cannot meet the requirements of the government procurement of public services. The government will not become a wise purchasing subject. Fourth, the establishment of various regulatory agencies cannot form a regulatory synergy, and it is not convenient to effectively supervise and evaluate them.

7.2.3 The Conception of China’s Regulatory Agencies China’s government procurement is still in its infancy, and many tasks, including government procurement regulatory agencies, need to be further improved or constructed. For the setting of regulatory agencies, it is necessary to reflect the requirements of high efficiency and appropriateness, that is to say, too many regulatory agencies should not be set up for the needs of supervision and management, which will increase procurement costs and reduce procurement efficiency; at the same time, the institutional settings should not be too small, resulting in the inability to carry out effective supervision and management, and a decline in the quality of the purchased items. The above examines setting up public service regulators in countries such as the United States, New Zealand, and South Korea. The United States has a special agency outside the administrative system to supervise government procurement activities; South Korea has a regulatory agency under the executive branch to supervise and manage government procurement activities. For the United States to set up another regulatory agency outside the executive branch, it is to adapt to the regulatory model required by the constitutional framework and administrative culture of the United States, because the United States is a country with three separate powers and the people have a natural defense against executive power. Therefore, outside the executive branch, it is an inevitable choice to set up another regulatory agency to check and counterbalance the administrative department. Generally speaking, most countries that implement the separation of powers will adopt this model of supervision. The regulatory model South Korea adopts is subordinate to the executive department, which is in line with the national political system of South Korea’s implementation of the presidential system and the Asian administrative culture. That is the leadership of the executive power and the priority

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of administrative efficiency. The four regulatory models that have emerged in practice in various parts of China are somewhat similar to those in South Korea. They all set up regulatory agencies within the administrative system. The author believes that the U.S. regulatory agency setting model does not conform to China’s national conditions and is not suitable for imitation. Although there are still unscientific and unreasonable aspects of South Korea’s setting model, such as the problem of organizational level, it is generally more suitable for China’s current conditions and can be used as a reference. Although the above-mentioned regulatory models in China have the advantages of being pioneering and experimental, they also have shortcomings, such as lack of rationality and operability. However, establishing a regulatory agency is a complex systematic project, which requires consideration of the actual needs and feasibility of government procurement, and cannot rest on its laurels. Certainly, it cannot be accomplished overnight. It is necessary and feasible to set up a special and independent regulatory agency from the actual analysis of the current purchase in China. The specialized independent regulatory agency here does not refer to an independent administrative system but is independent of the administrative department. An independent regulatory department is established in the administrative system. The regulatory agency can be specifically designed from the following three aspects.

Organizational Level All government procurement of public services regulatory agencies are constituent departments of governments at all levels rather than subordinate to an administrative department. Because the implementation of government procurement of public services is a major reform of China’s administrative management system, many functions of the original administrative departments will be transferred through government procurement. Therefore, in promoting the government procurement of public services, there will be many obstacles. Suppose a regulatory agency with a higher organizational level is not established. In that case, when it comes to matters that need to be coordinated, due to the low organizational level, effective coordination cannot be carried out. For example, for a second-level bureau under the Ministry of Finance, it is not an easy task to let it coordinate with other ministries and commissions. In addition, with the establishment of “service-oriented government,” the government is engaged in more and more service work. The administrative level of the newly established regulatory agency is too low to handle so many tasks that require scientific planning and reasonable distribution, because only higher-level agencies can eliminate the interference of various factors such as departmental interests and local interests. Moreover, the higher the organizational level of the institution, the more conducive it will be to solving the rank treatment of staff, attracting professional talents, and specializing in government procurement activities.

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Organization Types There are two types of organization of government procurement public service regulators: the committee system and the chief responsibility system. Both types of organizations are institutional models that regulate the operation of power and democracy. They are the crown of the human political civilization. The advantage of the committee system is that it emphasizes the equal expression of members, fully integrates public opinion, coordinates interests, and realizes collective decision-making and collective leadership. The chief responsibility system is characterized by giving the executive leader full decision-making power based on soliciting opinions. The two types of organizations have their advantages and are indistinguishable from each other. The choices about which type of organization to choose is according to the needs of specific political practice. “However, due to the constraints of historical conditions, the idea of subjective cognition and the complexity of objective things, public power has shown a dislocation of the mechanism under the support of the institutional carrier of the committee system and the chief responsibility system”4 must be overcome. The author believes that the supervisory system of government procurement of public services should be adopted. Because the supply of public services is a livelihood project, and only when the public enjoys the public services provided by the government promptly can the institutional value be reflected. Ensuring the timely delivery of public services is an important factor that must be considered in system design. Providing public services promptly requires the government to achieve “fast decision-making, fast implementation, and fast supervision”. “Fast decision-making” means that the government should adjust the scope, standard and amount of procurement of public services on time according to the needs of the people. “Fast implementation” requires the government to implement the decision immediately after it has been made. For this purpose, a mature and convenient execution system and procedures must be established. “Fast supervision” means that in implementing public services, when it is found that it violates the original intention of procurement or damages the legitimate rights and interests of the people, it is necessary to be able to supervise and remedy promptly. To achieve the “three fast” goals, we can only choose the type of organization that matches it, the headresponsibility system. One of the core values for the head-responsibility system is high efficiency, and the committee rules are the full expression of opinions. The government’s purchase of public services also involves the issue of how to pursue accountability. How should it be held accountable when there is an illegal purchase, improper purchase or inaction? The committee system emphasizes the pursuit of collective responsibility, and collective responsibility means no responsibility. If responsibility is not pursued, it will be challenging to ensure that the system of government procurement of public services can be well implemented. Therefore, the head-responsibility system with clear responsibilities as the main body is naturally 4

[Zhang Guanghui and Yang Yang: “The Committee System” A Comparative Analysis of the Power Operation Mechanism of the Chief Responsibility System”, in “Party and Government Cadres Forum”, No. 3, 2009, p. 6].

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the preferred choice for the government to purchase public services. Therefore, the government should implement the chief responsibility system for procurement of public services in terms of organizational type. As for the collective deliberation implemented in specific work, it is not an issue to be studied and discussed at the level of organization type.

Organizational System The organizational system of government procurement of public services regulatory agencies can generally be set up under China’s current administrative divisions and administrative levels, but there are slight differences. The specific idea is to set up regulatory agencies at the central, provincial and city (county) district levels, while prefecture-level cities do not have regulatory agencies. At present, the four-level administrative system of the central, provincial, prefecture-level cities and city (county) districts implemented in China is the need of China’s administrative management, considering the requirements of history and administrative regions. As a new model of government governance, government procurement of public services pursues efficient supply. Therefore, the organizational system that can achieve this goal is the one that should be adopted. At present, whether prefecture-level city governments in China can play a positive role in promoting administrative management remains to be assessed, and it is completely unnecessary to purchase public service systems. Because the central and provincial governments will announce the public service procurement catalogs and standards. As for the public services with local characteristics, the city (county) district government can solve it. There is no need to set up one between the provincial and city (county) district governments. The organizational system of government procurement of public service regulatory agencies should follow the principle of “reduction, flexibility, and efficiency.” The “reduction principle” requires that regulatory agencies and personnel be reduced, and posts should be set up according to events, not people. Because one of the purposes for the government to purchase public services is to reduce financial expenditures, reduce tax burdens, and promote overall social prosperity. If regulators are not set up to achieve that goal, then the system failed. Therefore, the reduction of institutions and personnel is the first principle in setting up the regulatory agency for government procurement of public services. Generally speaking, the regulatory agency for government procurement of public services only needs to set up three departments: integration, procurement and supervision. The “flexibility principle” refers to the staff of the supervisory agency. Except for a small part of the fixed staff, most of the staff can be temporarily hired, and a flexible management mechanism should be adopted. The reason for emphasizing the “principle of flexibility” is that the content and quantity of public services purchased by the government are constantly changing, and the procurement in specific periods and regions may also change. The regulatory agency personnel should also make timely adjustments according to the importance of the purchase task. From the perspective of the government procurement public service system itself, since public services are purchased and produced by main

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bodies other than the government, then as the government itself, must do its best and not waste taxpayers’ money to do it. The “principle of high efficiency” is a principle that must be followed in the setting of general administrative agencies. However, it is vital for the setting of regulatory agencies for government procurement of public services. To this end, the policymaker must follow: 1. The level is reasonable. As mentioned above, to reduce the administrative level, the prefecture-level government does not have a regulatory agency to improve procurement efficiency. 2. The procedure is simple. It is necessary to formulate simple and scientific working procedures, which can allow staff to follow the rules, and prevent the abuse of discretionary power. 3. Clear responsibilities. The principle of high efficiency emphasizes the division of labor and coordination between regulatory agencies and other government departments, between regulatory agencies, and among various units within the regulatory agency; the entire regulatory organization system must adhere to organizational control with clear powers and responsibilities to avoid supervision and management due to unclear powers and responsibilities. 4. Public participation. Regulatory agencies should strengthen communication with citizens, corporations, and social groups, keep abreast of problems arising from government procurement activities, create opportunities, and add channels to allow the public to participate and be informed fully. Achieving the public services purchased by the government is what the people need, and the public services the people need are what the government has purchased. 5. Scientific management. Regulatory agencies at all levels should make full use of scientific and information-based management methods, pay attention to scientific decision-making, make procurement information public, and share resources with each other, to maximize the value of the system.

7.2.4 The Statutory Powers of China’s Regulatory Agencies Scientifically configuring the functions of regulatory agencies by the law is the basis for effective supervision and management. Therefore, while scientifically setting up regulatory agencies, scientific regulations should also be made on the responsibilities of each regulatory agency by the law. In his book Privatization and Public–Private Sector Partnership, the scholar Sawas referred to the role of the contract manager, arguing that the role of the contract manager is to ensure that the contractor provides licenses, bonds and work insurance. The contractor should guarantee service delivery, inspect work and instruct contractors to correct unsatisfactory areas, monitor job performance to ensure compliance with budget, schedule and safety regulations. The contractor should ensure that contractor reports are timely and completely check the accuracy and completeness of the contractor’s receipts; if the contract uses a fixed price, the contractor should ensure that the funds are paid in proportion to the actual progress of the work; verify that the costs of equipment, labor and supplies are consistent with the contract; check whether penalties are required or withhold the security deposit. The contractor should verify that contractors have paid suppliers

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and sub-contractors. If necessary, propose amendments to the contract scope.5 The responsibilities of the contract mentioned above managers are relatively microscopic, mainly reflecting strict contractualism. The responsibility of the contract managers is to verify that the contractor has fulfilled the provisions of the contract. Although this practice of clearly defining the responsibilities of the contract manager is beneficial to implementing operations, it cannot cover all the contents of the supervision for the purchase work. Such as the procurement project target preparation and handling problems found in the procurement contract. However, clear regulations are always more conducive to realizing regulatory goals than unclear responsibilities. According to the practice of the Chinese government in public procurement services, the following powers should be given to the regulatory agency.

Responsible for Formulating Laws and Regulations Related to Government Procurement of Public Services According to relevant national legislation, relevant legislation, implementation regulations and measures or detailed implementation rules for government procurement should be formulated; implementation measures for government procurement bidding, invitation to tender, competitive negotiation, inquiry purchase, and singlesource purchase should be formulated; government procurement budget, plan management methods should be formulated; management methods for government procurement funds, direct payment methods for government procurement funds, financial management and accounting methods should be formulated; supervision and management methods for government procurement contracts should be formulated; government procurement information management methods; procurement complaints handling methods, etc. should be formulated.

Responsible for Researching and Formulating the Development Plan and Implementation Outline of Government Procurement of Public Services According to the needs for the transformation of government functions and social development, formulating related policies and implementation outlines to achieve equal public service supply and balanced development between the eastern and western regions is needed. There should be more policy preference for key regions and vulnerable groups to which the state attaches importance. At the same time, it is necessary to closely track global developments and formulate China’s response strategies promptly.

5

[America] E. S. Savas: Privatization and the Partnership between the Public and Private Sectors, translated by Zhou Zhiren et al., Renmin University of China Press, 2002, p. 213.

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Responsible for Drawing Up the Catalogue of Government Procurement of Public Services The regulatory authority should be responsible for formulating and revising the catalog of government procurement of public services. It should be responsible for adjusting the procurement catalog of the government to determine the quota standard for the procurement of public services. It should study and determine the allocation standards for government procurement of public services. Except for the supervision department, relevant departments should enhance their authority, and stipulate that other administrative departments can no longer publish public service procurement catalog.

Responsible for Supervising and Managing the Business Activities of Government Procurement of Public Service The main contents of supervision are: Whether the government procurement activities comply with relevant laws, regulations and rules. Whether the government procurement activities are carried out according to the approved plans and standards, and whether there are over planned, unplanned or over standard procurement. Whether the government procurement methods and procedures comply with the regulations. Whether the relevant government procurement documents are reported to the government procurement management agency as required. Whether the performance of the government procurement contract and the allocation of procurement funds comply with the provisions and other contents that should be supervised and inspected.

Responsible for Compiling and Implementing the Government Procurement Budget Compiling the budget for the government’s procurement public service is the fundamental work of government procurement management institutions. The budget is an important component of the departmental budget and can guarantee the government’s procurement of public services. The regulatory authority is responsible for compiling and implementing the budget, especially reviewing and implementing the budget according to the nature of the procurement funds and the government procurement catalogue and standards.

Responsible for Compiling and Examining the Government Procurement Plan and Determining the Ways of Government Procurement Compiling and examining the government procurement plan is an important function of government procurement management institutions. It is important for budget implementation. Compile the government procurement plan that is to compile the

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procurement demand according to the procurement category and item, to examine and determine the way and plan of government procurement, which is an important step for smooth government procurement activities. It is the key to standardizing government procurement behavior, improving government procurement efficiency, and facilitating procurement activities. Those who need competitive negotiation, inquiry, specified supplier, and other procurement ways due to a special reason need to ask approval from government procurement supervision and administration institutions to eliminate corruption in government procurement activities. Examining and determining the government procurement plan includes: whether the procurement items and funds are within the government budget; examine and determine the procurement items above the quota standard; examining and determining the procurement standards of special public service items; determine the way of government procurement, and introduce the government procurement plan implementation notice.

Supervising the Specified Account of Government Procurement Funds and Reviewing Government Procurement Contracts To supervise the specified account of government procurement funds. Its collection, allocation and liquidation should be supervised in cooperation with the Treasury Department according to the government procurement budget. The government procurement contract draft to be reviewed mainly include: whether the contract draft complies with the relevant laws and policies and the requirements of the government procurement budget and plan. Whether the main terms of this contract meet the requirements in bidding document. Whether the contract includes the special requirements for the acceptance and performance of the government procurement contract. These requirements are put forward by the government procurement management institutions. Handling direct allocation procedures for the government procurement funds in accordance with the treasury management measures. After the application for the appropriation of government procurement funds, government procurement contract, acceptance settlement, acceptance performance report, quality inspection report and all copies required for the contract payment by the purchasing unit are reviewed, the direct allocation procedures for government procurement funds will go through.

Responsible for Managing the Government Procurement Information Be responsible for collecting, publishing and counting government procurement information. Supervising and managing the announcement of government procurement information. Be responsible for designating newspapers, periodicals, networks and other media that publicly disclose the government procurement information. Be responsible for constructing, maintaining and managing the government procurement management, information and e-commerce network.

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Responsible for Organizing the Training of Government Procurement Personnel, and Responsible for Supervising, Inspecting and Guiding the Government Procurement in the Jurisdiction Be responsible for organizing business training for personnel of government procurement management institutions. Be responsible for supervising, inspecting and guiding the government procurement business within its jurisdiction. Responsible for supervising and inspecting the implementation of laws, regulations and policies by government procurement units, as well as government procurement budgets and plans, standards, ways and the performance of procurement contracts.

Responsible for Handling Government Procurement Complaints Responsible for handling government procurement complaints, and the acts violating the relevant laws, regulations, policies, systems and ways of government procurement made by government procurement parties.

7.3 Supervision of Government Procurement Contracts The government’s procurement of public services is essentially a contractual public service supply model. Government procurements are ultimately realized by contracts and agreements. Of course, whether the government can realize procurement of public services depends on the performance of public service contracts. Contract performance is an ordinary civil legal action, but it is of great significance for the performance of government procurement public service contracts. Because the government’s procurement of public service contracts is not only directly related to the people’s interests, but also related to the efficiency of financial funds. Of course, it also affects the government’s credibility and ruling ability. The government’s procurement of public services is a principal-agent behavior. Considering the particularity of public service contracts, it is particularly important to supervise the performance of public service contracts.6 Contract supervision is not only to ensure the government’s goal of procurement of public services, but also to prevent corruption which may increase the procurement cost. In government procurement, driven by maximizing interests, contractors always try their best to find loopholes in the contract in order to reduce costs. At the same time, contract signing is not only a technical process, but also a political process. Non-benign interaction between contractors and administrative officials can lead to corruption.7 Therefore, countries all over 6

Sun Lianfu, Wang Conghu, Zeng Li: Supervision of the performance of public service contracts purchased by the government, China government procurement, 2014, Issue 9, p. 72. 7 Gu Ping’an: promoting the contract management of government public services, published in theoretical frontier, No. 18, 2008, p. 26.

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the world attach great importance to the supervision of procurement contracts. For example, in order to ensure the employment services procurement from the government, Australia attaches great importance to the government’s tracking, evaluation, supervision and management. According to regulations, after the contract is signed, the Ministry of Employment will send a manager with fully responsibility to track and contact the implementation of this contract. The Ministry of Employment, the audit office and the productivity committee are jointly responsible for project evaluation, supervision and management. At the same time, each contracted employment service agency must also appoint a liaison person to be responsible for matters related to contract performance. The time limit of the contract is three years, which is divided into six implementation stages. Each stage has a tracking evaluation respectively, generally according to different contracted project standards in different employment areas. The rating standard is five-star system, and the standard above three stars is up to the standard. Below three stars will be shown the yellow card warning. After three consecutive yellow cards, the payment will be reduced or suspended, and will deal a blow to performance evaluation in the next stage. The contract has a rolling management. If it fails to meet the standard for three years, the membership shall be canceled and it shall not participate in the next round of bidding.8 Although the Chinese government has a short time in procurement of public services, it attaches great importance to the supervision of procurement contracts. China has carried out a good practical exploration in supervision contents and methods and responsibility requirements, and has accumulated some supervision and management experience.

7.3.1 Regulatory Bodies and Responsibilities Based on combing the establishment and responsibilities of the existing government procurement supervision institutions, China’s contract supervision institutions and their responsibilities can be divided into four levels: First, special agency supervision. The procurement contract work in China is mainly led by financial departments at all levels. It can be seen from the above analysis that since it is only the leading department, the financial department is often unable to supervise the procurement contract. Therefore, it is necessary to set up supervision institutions that can independently formulate the laws and regulations related to the procurement contract, determine the content and also supervise and manage the performance of this contract,9 whether the allocation of procurement funds meets the regulations and deal with disputes. The second is the supervision of the buyer. The procurement supplier is mainly responsible for supervising the contract performance, project implementation, payment and 8

Ma Yongtang: Australia: a new mechanism for the government to purchase employment service results, China labor, 2002, Issue 5, p. 57. 9 Xiang Xiansheng: Research on the establishment of government purchase public service management institutions, published in Journal of the Party School of the CPC Fujian Provincial Committee, No. 3, 2012, pp. 41–45.

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contract acceptance. Some of these responsibilities are the same as the supervision and management of the government’s public service procurement supervision institutions, such as supervising the performance of the contract. Some are that the buyer cannot perform its duties well, such as contract acceptance. Since the purchase subject and the undertaking subject are the contract parties, it is more reasonable that the purchase subject is mainly responsible for signing the procurement contract, tracking progress, supervising payment and contract acceptance with small bid amounts. It is a complex task to supervise the contract performance, which is more appropriate for the government procurement public services supervision institutions. The acceptance authority is divided according to the amount of the contract. A public service contract with a small amount can be accepted by the buyer. If this government procurement service project needs complex technology and strong professionalism, the government procurement supervision institutions shall invite relevant experts to acceptance, or entrust a third-party organization with relevant qualifications to conduct the acceptance. This responsibility is conducive to buyer’s work and ensures the effectiveness of supervision. Third, supervision by other forces. The supervision to contract is the legal responsibility of supervision institutions. The authority without empowerment can only perform social responsibility, but doesn’t have the legal effect of supervision. In addition to the special supervision institutions and the purchase subject, the law also endows certain institutions with the right of supervision. As the highest organ of state power, the National People’s Congress has a macro responsibility for the supervision of procurement contracts. As mentioned above, it only needs to review the target budget of contracts. In the supervision practice, the thorny problem is how to clarify the supervision responsibilities of the departments of industry and commerce, audit and supervision on the procurement contract. From the perspective of institutional nature, the departments of industry and commerce, audit and supervision have no direct responsibility requirements for the contract supervision. However, in order to form an effective joint supervision force, it is very necessary to give full play to their functions. According to Article 127 of the Contract Law, the industrial and commercial departments shall, within the scope of their functions and powers and in accordance with the provisions of laws and administrative regulations, be responsible for supervising and dealing with illegal acts that endanger the national interests and public interests by using contracts. If a crime is constituted, criminal responsibility shall be investigated according to law. In the process of government procurement, the supervision of the procurement contract by the industrial and commercial department is mainly responsible for timely reporting the performance ability of the undertaking subject found in the daily market supervision and the administrative management of the company to the procurement contract supervision institutions. The institutions should pay attention to the situation when it is found that the undertaking subject does not have the performance ability, so as to take effective measures and avoid significant or irreparable losses to the public interest. The audit department mainly examines and supervises the authenticity, correctness, compliance and legitimacy of the auditee’s contract performance, payment and relevant materials, so as to find problems and correct theses, improve management economic benefits. Through supervision activities, the supervision institutions urges the direct supervision organization to perform

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its duties according to law, plug the loopholes, and improve the management efficiency. At the same time, through punishing the supervisors who fail to perform their duties, are not in place and act disorderly, the buyer’s consciousness of supervision and enthusiasm over the procurement contract is improved.

7.3.2 Regulatory Contents According to different standards, government procurement contract supervision contents are different. In terms of objects, it is divided into the supervision of the purchase subject and the undertaking subject. From the process, it is divided into the supervision of the performance and activities before the contract signing. According to the different entity contents involved, it can be divided into substantive and procedural supervision of procurement contracts. No matter what kind of division, it has its rationality. The key is to ensure that supervision is in place. The content of procurement contract supervision is extensive, whether it is the purchase subject or the undertaking subject, the legitimacy review stipulated by law or the content stipulated in the contract. As long as all activities related to the contract signing and performance are the supervision content.

Qualification Review of the Undertaking Subjects Before starting the procurement contract, the institutions (mainly the government procurement public service management department and the purchase subject) shall do a good job in the qualification examination of the undertaking subject. Through this examination, they can timely eliminate unqualified undertaking subjects to ensure a smooth contract signing and performance. The supervision subject shall review one by one according to Article 7 of the Measures and the provisions of the procurement contract. Once it is found that the undertaking subject does not meet one provision, it shall timely prevent it from entering into the signing, negotiation and competitive bidding procedures.

Legality Review of Procurement Contracts The government procurement law stipulates that the procurement contract is applicable to the Contract Law, but as mentioned above, the contract is different from the general civil contract. It’s a contract aimed at the public interest. Therefore, for the buyer, the contract signing is to better realize the public interest. For the undertaking subject, the contract signing is for private interests. Of course, the undertaking subject performing the procurement contract for private interests is to realize the public interests. Therefore, the procurement contract can’t be signed without public interest whether for the buyer or the undertaking subject. The legitimacy of the procurement

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contract must be reviewed because of public interest. Only by review can make the government’s procurement activities on the right track. The contents of the legitimacy review are as follows: First, review whether the project of the procurement contract exists. If the procurement item is not approved or listed in the procurement catalogue, the procurement contract is illegal, and all subsequent activities are invalid. Second, review whether the necessary terms of the procurement contract comply with the provisions. According to the provisions of the government procurement law and the Regulations, the Financial Department of the State Council will formulate basic terms and standards of the contract with the relevant departments of the State Council. Then, the text and necessary terms of the procurement contract must meet the requirements of the above provisions, otherwise, the contract will not have formal legitimacy. Third, review the filing and announcement. According to the government procurement law and regulations, a copy of the procurement contract shall be submitted to the government supervision institutions and relevant institutions at the same level for record within 7 working days from the date of signing. Within 2 working days from the date of signing, the procurement contract shall be announced on the media designated by the Financial Department of the people’s government at or above the provincial level, except those involving state and trade secrets.

Supervision of the Performance of the Procurement Contracts by the Undertaking Subjects The procurement contract is the key to ensuring the realization of the government’s procurement goal, and the performance of the procurement contract by the undertaking subject is the key to realizing the procurement contract. Therefore, only when the undertaking subject performs the obligations stipulated in the contract in strict accordance with the contract can the goal be realized. We must strengthen the supervision of the undertaking subject to realize its earnest performance. The supervision of the contract performance by the undertaking subject is mainly reflected in: First, the quality supervision of the public services procurement. The quality of public services directly determines the performance of procurement contracts and whether the service objects are satisfied with government procurements. However, the evaluation of the public services quality is a complex problem and must be treated differently. For public services with specific evaluation standards, the supervision subject just implements them in strict accordance with the standards. For some highly professional public services, relevant technical experts shall be invited to the acceptance, or a third-party organization with relevant qualifications shall be entrusted for acceptance. If necessary, the public shall be invited to evaluate the service content, quality and level, and the service objects shall be invited to the acceptance according to a certain proportion. The second is the supervision of the number of public services provided by the undertaking subject. Providing sufficient public services in accordance with the contract is an indispensable condition for the procurement contract. During the term of a general commodity contract, if it is found that the subject matter does not meet the quantity requirements, it may be made up.

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Public services are different from ordinary commodities. If they are not performed within the contract period, they will not be paid back, and some will cause serious consequences. For example, the timely rehabilitation services provided to the elderly should be monitored and rehabilitated within a certain period of time. Because the undertaking subject fails to perform in time as agreed, the service object cannot be monitored and rehabilitated in time, then cause irreversible organic damage to the body of the elderly. Therefore, in the procurement contract, we must supervise the quantity of public services provided by the undertaking subject. Third, restrict the conduct code of the undertaking subject to avoid infringement. When the undertaking subject performs the procurement contract, sometimes it will have improper behavior outside the contract. For example, when the undertaking subject is cleaning the street, the cleaning vehicle may crash the street lamp or pedestrian. These behaviors will affect the contract performance. Therefore, it is necessary to supervise the behavior of the undertaking subject and improve the standardization of the contract performance. Fourth, review the authenticity and accuracy of relevant documents of the undertaking subject contract. In the procurement contract, some undertaking subjects will resort to fraud and provide false documents for improper interests, so that the supervision institutions cannot judge the actual situation of the procurement contract according to the documents. In order to avoid discrepancies in documents, Article 28 of the Measures requires the undertaking subject to establish a government procurement service account, recording relevant documents, work plans, project and fund replies, project progress and fund payment, work report summary, major activities and other relevant information, accept and cooperate with relevant departments to supervise, inspect and evaluate the use of funds.

Supervision of the Contract Performance by the Buyer The buyer is one of the supervision institutions of the procurement contract, and the supervision of the contract is its responsibility. Why should we supervise them? This is because the buyer is not only the supervision institutions of the procurement contract, but also the party to the procurement contract. As a contract party, there is also the possibility of non-performance according to the contract. As the supervision institutions of the procurement contract, it is also possible to be lazy in performing its duties. Therefore, no matter what status the buyer is in the contract and what behavior it is engaged in, we all need to supervise them. The supervision of the buyer is mainly reflected in: First, urge the buyer to sign the government procurement contract according to the matters determined in the procurement documents. Articles 46 and 71 of the government procurement law stipulate that the buyer shall sign the procurement contract within 30 days from the date of issuing the notice of bid and transaction. If the buyer changes the bid winning and transaction results and does not sign the contract, it shall be ordered to make rectification within a time limit and have a legal warning and fine according to law. Second, urge the buyer to track the contract progress in time. The undertaking subject shall regularly and irregularly track the contract performance, and timely communicate and coordinate the

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relationship between the undertaking subject and relevant government departments and service objects. If the undertaking subject delays its contract performance, it shall be urged and reminded, and if losses are caused, it shall compensate or take other remedial measures. Third, urge the buyer to pay the contract progress payment in strict accordance with the contract. The contract payment is not necessarily paid by the buyer, but as a contract party, it is obliged to pay in time or urge relevant departments to pay according to the contract. Therefore, we should urge the undertaking subject to establish and improve the financial and financial reporting system. Article 29 of the Measures stipulates that the undertaking subject shall establish and improve the financial system, strictly abide by the relevant financial regulations, and carry out standardized financial management and accounting of the project funds for procurement services. It also strengthens its own supervision and ensures the standardized management and use of funds. Article 30 stipulates that the undertaking subject shall establish and improve the financial reporting system and provide the purchase subject with materials such as the use of funds, project implementation and achievement summary as required. Fourth, urge the buyer to strengthen the management of adding public services that are the same as the subject matter of the contract. According to regulations, in the contract performance, if the buyer needs to add the same service as the subject matter, it can sign a supplementary contract with the undertaking subject without changing other terms of the contract. But, the procurement amount of all supplementary contracts shall not exceed 10% of the original contract amount. If it is found that the amount of the buyer in signing the adding contract exceeds 10%, it must be corrected immediately. Fifth, urge the buyer not to change, suspend or terminate the contract at will. Once a procurement contract is signed, it has legal effect, and the contract parties may not change, suspend or terminate it without authorization. Once the performance of the contract will damage the national interests and public interests, the contract can be changed, suspended or terminated, but corresponding compensation shall be given to the other party according to the fault.

7.3.3 Regulatory Approaches Procurement contract supervision means how the procurement contract supervision institutions supervise the procurement contract activities. The choice of supervision approaches is of great significance for the realization of supervision. There are different supervision approaches according to different standards, such as active supervision and passive supervision, internal supervision and external supervision, supervision of national specialized agencies and supervision and entrusted social institutions. The size and complexity of the subject matter and the importance and urgency of the problems they face determine the different ways. Some procurement contracts can achieve the goal as long as they used one supervision way, while others can achieve the goal only through two or even more ways. The supervision approach

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adopted by the supervision institutions shall be determined according to the problems faced by the procurement contract and the supervision ability of human and material resources. At the same time, the selection of the supervision approach of the procurement contract must be combined with China’s supervision tradition and the requirements of government procurement as an innovative measure of government governance, and strive to make new breakthroughs in the ways and connotation. Based on the above reasons, the author focuses on the supervision approaches such as active supervision, complaint handling, satisfaction survey and third-party entrusted management.

Active Supervision This is the traditional way of supervision, which refers to the way that the supervisional institutions timely supervise the procurement contract activities in accordance with the provisions of its functions and powers. It has the following characteristics: First, the supervision is initiated by institutions. Second, supervision institutions have legal responsibilities for the contents of supervision. If institutions do not carry out supervision, it is dereliction of duty and should be investigated for corresponding responsibility. Third, autonomy in time selection. According to the contract problems, the institutions can carry out supervision regularly or irregularly. Fourth, the directness of problem handling. Due to the supervision carried out by the supervision institutions in accordance with their functions and powers, they can directly make decisions to handle problems found in accordance with the regulations, and give full play to the advantages of the special supervision organs to ensure the decision’s implementation. Of course, there are also deficiencies in this supervision approach. For example, it is not suitable for large-scale public services or public services with high technical standards and strong professionalism. Although supervision institutions have management and certain professional advantages, they are often powerless faced with large-scale and professional public services. Therefore, this supervision institutions approach is only suitable for the supervision with small scale, weak professionalism and no special requirements for time.

Complaint Handling Complaint handling refers to the supervision approach by which the supervision institutions deal with the complaint content, so as to achieve the goal of supervision of the procurement contract. Complaint handling has the advantages that other supervision approaches do not have: First, the problems reflect timely. Complaints are often made by the service object or the public about the failure to perform the procurement contract as required. These people feel the deepest about the problems existing in the performance and have the lowest tolerance. Therefore, they can timely reflect on the problems in the contract performance. Secondly, information sources and channels are wide. There is no restriction on the qualification of the complaint

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subject. As long as units and individuals have opinions on the procurement contract, they can complain to the supervision institutions. Therefore, it widens the information channel for the supervision institutions to obtain the contract performance. Third, the supervision cost is low. Because it is a direct complaint to the supervision institutions without an intermediate link is avoided. Moreover, the problems reflected in the complaint are clear, which can avoid a lot of manpower and material resources, so it has higher efficiency and lower cost. However, there are also deficiencies in complaint handling, that is, the quantity is large and it is difficult to distinguish true or false. The supervision institutions shall appoint a special person to handle complaints and timely identify whether they are valid or invalid. In order to overcome the problem that complaints are not handled, a standardized complaint-handling system should be established to ensure the registration and handling opinions for each complaint. If there is a clear complaint from the complainant, the handling opinions must also be fed back to the complainant.

Satisfaction Survey The government’s procurement of public services is to let the people enjoy satisfactory public services. Therefore, the satisfaction survey of the people is not only a way of supervision, but also a tool to monitor the satisfaction with public services. The satisfaction survey is a supervision way for supervision institutions to understand the public feeling of the undertaking subject’s production from the service object through questionnaires and other forms. Supervision institutions have the initiative of the supervision approach, and can decide whether to choose this supervision approach and how to realize it for different public services. Through the satisfaction survey, on the one hand, we can directly understand the feelings of service objects on the contract performance. On the other hand, the satisfaction of service objects can also be used as a reference for selecting the undertaking subject and the basis for supervision institutions to correct mistakes and adjust procurement policies in time. Therefore, this approach is often used to supervise the contract performance by the undertaking subject. As a way of supervision, satisfaction survey also has the problem of result distortion. The distortion is mainly related to the sensitivity of the problem and the communication between the government and the public. If the survey questions are highly sensitive, the respondents are afraid to speak the truth for fear of retaliation, so they do not tell the truth and do not make an objective evaluation. If the relationship between the government and the public is not harmonious in daily work, the respondents think their opinions will not be valued, and this is just a formality, so they will answer the questions randomly. In addition, the authenticity and objectivity will also be affected by the factors such as the intentional or unintentional inducement of the respondents or the limit on the survey means.10 Therefore,

10

Li Sanshan: Influencing factors and Countermeasures of distortion in satisfaction survey of government departments, Xiangchao, No. 1, 2011, p. 66.

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when taking a satisfaction survey, effective measures should be taken to solve the distortion problem.

Third Party Entrusted Management Third party entrusted management refers to the supervision institutions approach in which they entrust their supervision responsibilities to a third party. The third party performs the responsibilities within the entrusted scope on behalf of supervision institutions. The characteristics of this supervision approach are as follows: First, the third party entrusts the exercise of supervision responsibilities based on entrustment and can only be exercised within the scope of entrustment. Second, the consequences of supervision shall be borne by the supervision institutions, and the third party shall only be responsible for the entrusted matters. Third, the supervision of the third party is a paid behavior. Different from the supervision institution of the procurement contract, the third party is an independent operation and is responsible for its own profits and losses. Therefore, the supervision department should pay compensation for the supervision activities of the third party. Fourth, the supervision institutions content undertaken by the third party must comply with the principle of high efficiency and economy, that is to say, the third party can exercise not all of the content. Supervision institutions can only entrust public services with strong independence, high professionalism, complex technical standards or lower cost to be performed by a third party. For example, it is more advantageous for public services with high professionalism, complex technical standards and strong independence to be supervised by a third party, such as rescue rehabilitation services for disabled children, special disease inspection services, grass-roots animal compulsory immunization services, crop seed reproduction and storage services. Therefore, on the one hand, the supervision institutions should strictly review the qualification, integrity, strength and project management ability of the third party. On the other hand, the government should keep economic interests away from the third party, so that they can be in an independent position.11

7.3.4 Regulatory Principles Any system must have core values and souls to keep it on the track in the specific implementation. The supervision of procurement contracts must also have its core value and soul. This core value and soul are embodied in the principles that should be followed. In the supervision of procurement contracts, the key principles that should be followed are timeliness, objectivity and efficiency.

11

Wang Liguo, Jing Ya, Yao Xin: Innovation of China’s public project construction mode—Exploration of the third-party supervision mode, academic exchange, 2012, Issue 1, p. 99.

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Principle of Timeliness The principle of timeliness means that when the supervision institutions supervises the performance of the procurement contract by the undertaking subject, it should find and deal with the problems as soon as possible. It contains two meanings: First, the supervision institutions should timely arrange supervision according to the characteristics of public services and undertaking subjects. Problems found in supervision should be handled in time without delay. Second, the principle of timeliness is not to blindly seek speed, but to ensure the efficiency of supervision on the basis of speed. The principle of timeliness is of great significance to the supervision of procurement contracts. It can control the loss to the minimum and effectively protect the procurement interests of service objects. Timely supervising, managing and handling problems by supervision institutions can also save costs and improve efficiency.

Principle of Objectivity In the history of philosophy and science, objectivity has always been a category opposite to subjectivity. The principle of objectivity is a purely objective and material principle that completely excludes and opposes subjectivity. It is the most basic materialist principle.12 The principle of objectivity in the supervision of procurement contracts refers to that when the supervision is carried out by the supervision institutions, they should be objective and fair, and do not listen to biased beliefs, do not use subjective and artificial assumptions to give handling opinions. Only by adhering to the principle of objectivity can supervision institutions make scientific decisions, be recognized by the supervised objects, establish the authority of supervision, and achieve the goal of supervision. Only by adhering to the principle of objectivity can supervision institutions establish a trusting relationship with the undertaking subject and avoid supervision being regarded as “finding fault and picking”, which will lead to confrontation and conflict. This also requires the supervision staff to be fair, honest and public, and can not take advantage of the opportunity of supervision to seek personal interests.

Benefit Principle One of the values of the government’s procurement of public services is the pursuit of procurement benefits. As the supervision of procurement contracts, we should also take the pursuit of efficiency as an important value principle. The so-called benefit principle is to obtain the best supervision effect with the minimum investment. This requires: First, supervision should be carried out according to their ability. 12

Zeng Xiangyang: Dilemma and reconstruction of the principle of objectivity, Journal of Nanjing Institute of administration, Party School of the CPC Nanjing Municipal Committee, 2002, Issue 2, p. 8.

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When human and material resources are insufficient, we should act according to our ability and not blindly pursue more and faster. Second, choose science-based supervision approaches. As mentioned above, there are many ways to supervise the contract performance. Choose the appropriate supervision way according to the characteristics of the procurement contract. Don’t use complex supervision ways for simple procurement contracts or simple supervision ways for complex procurement contracts. Improper choice of supervision channels will increase costs, which is not in line with the goal of government procurement. Third, we should borrow force from society. The supervision ability of supervision institutions is limited. We should help to perform some supervision functions with the help of social forces. For example, the third-party entrusted management mentioned above is a good example. Fourth, the program setting is simple and easy. The supervision procedures shall be easy to operate and implement, not be complicated and lengthy, and shall be carried out and ended in time.

7.3.5 Regulatory Penalty System Only the system with punishment is rigid, can it be recognized and complied with. The problems found in the procurement contract must be dealt with, otherwise, any more supervision efforts will be in vain. At present, China has a relatively strict punishment system for the undertaking subject who violates the legal provisions or the procurement contract, involving criminal, administrative or contract responsibility.

Change, Suspension or Termination of the Contracts After the procurement contract is signed, it cannot be changed, suspended or terminated arbitrarily, unless it involves national interests or social interests. Article 50 of the government procurement law stipulates that both parties to a government procurement contract shall not change, suspend or terminate the contract without authorization. If the continued performance of the government procurement contract will damage the national interests and social interests, both parties shall change, suspend or terminate the contract. The party at fault shall be liable for compensation. If both parties are at fault, each shall bear corresponding liabilities. If it is really difficult for the undertaking subject to perform the procurement contract, the purchase subject can terminate the contract in advance as agreed. Article 31 of the Notice on the Interim Measures for the Administration of Service Procurement by the ZJ provincial government stipulates that during the implementation of the project, the undertaking subject is indeed difficult to meet the technical requirements or service quality, or the services provided fail to meet the service standards or quality requirements, and after satisfaction survey, there are more than one-third of the units or persons with poor overall evaluation, the service object have the right to cancel or terminate the contract in advance according to the procurement contract, and can select one or

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more undertaking subjects from other original bid winning (transaction) candidates to continue to provide the target service.

Punishment for Dishonesty and Implementation of Blacklist System In order to enable the undertaking subject to perform the procurement contract, China has established a punishment for dishonesty and implemented a blacklist system. Article 33 of the measures stipulates that the civil affairs, industrial and commercial administration, industry authorities and other departments shall, under the division of responsibilities, incorporate the credit records of the undertaking subjects the government’s procurement of services undertaking records into the annual inspection (reporting), evaluation, law enforcement and other regulatory systems, and constantly improve the incentive mechanism for keeping promises and the punishment mechanism for breaking promises. Article 37 stipulates that the financial department shall, together with relevant departments and purchase subjects, establish a credit record of the government’s procurement of services undertaken by the undertaking subject, impose administrative penalties for fraud, fraudulent claim of financial funds and other violations of laws and regulations, and include it in the blacklist of the government’s procurement of services. Article 73 of the measures stipulates that suppliers who fabricate facts, provide false materials or obtain supporting materials by illegal means to make complaints shall be included in the list of bad behavior records by the financial department, and shall be prohibited from participating in government procurement activities for one to three years.

Investigate Administrative and Criminal Responsibilities If the undertaking subject and the purchasing subject violate laws and disciplines in the performance of the procurement contract, they shall be investigated for administrative responsibility, and if a crime is constituted, they shall be investigated for criminal responsibility according to law. Administrative responsibility includes ordering correction, warning, fine, confiscation of illegal income and notification. For example, Article 67 of the measures stipulates that if the purchasing subject fails to sign the supplementary procurement contract or add more than 10% of the contract amount according to the regulations, changes, suspends or terminates the procurement contract without authorization, fails to announce the contract according to the regulations or fails to report the contract in time, it shall make corrections within a time limit, impose a fine, and punish the directly responsible person and notify it. Article 77 stipulates that if a financial department violates the provisions in the supervision performance, abuses its power, neglects its duty, engages in malpractices for personal gain, and the persons directly in charge and other persons directly responsible constitute a crime, they shall be investigated for criminal responsibility according to law.

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7.4 Improvement and Perfection of Supervision Mechanism 7.4.1 Dilemmas of Regulatory Mechanism At present, the supervision mechanism of government procurement of public services in China is mainly reflected in the guiding opinions, measures and normative documents formulated by various localities. The guiding opinions have special provisions on the supervision of China’s government’s procurement of public services, which stipulates that the buyer must establish and improve the internal supervision system. The undertaking subject shall improve the financial reporting system. The financial department should strengthen the organization and guidance of the public services implementation and strictly supervise the funds. Supervision and audit departments should strengthen supervision. Civil affairs, industrial and commercial administration and industry competent departments shall incorporate the government procurement-undertaking into the annual inspection, evaluation, law enforcement and other regulatory systems according to the division of functions. The Measures also make similar provisions on the supervision of government procurement of public services, but the contents of the provisions are more detailed and specific guiding opinions. For example, in addition to establishing a supervision and inspection mechanism, the buyer also requires to strengthen the whole process of supervision, and actively cooperate with relevant departments to incorporate the undertaking behavior into the annual inspection, evaluation, law enforcement and other supervision systems. The normative documents formulated by local governments also have similar provisions. For example, HZ City stipulates in the guiding opinions on the government’s procurement of social organization services that “the supervision and audit departments shall supervise, inspect and audit the performance, the arrangement, management, payment and fund use of the contract for the procurement of social organization services”. “Strengthen public supervision. Timely disclose the selection criteria, results, evaluation criteria, evaluation results and other information related to these activities, so as to strengthen the public’s supervision over the government’s procurement of social organization services. Any unit or individual has the right to report illegal acts in these activities. For illegal acts, the relevant departments shall be dealt with in a timely manner in accordance with their respective duties.” From the above analysis, it can be seen that the supervision mode of government procurement of public services in China mainly focuses on the internal supervision of government departments, that is, focusing on the self-improvement and repair role of the government. There are three main modes of this internal supervision mechanism in practice. The first is the supervision mode carried out by the functional departments of government procurement public services. As stipulated by PD District of SH City “Government departments at all levels shall be responsible for the target management of public service items purchased by the government within the scope of the system. Standardize contract management. Avoid the risk of signing and performing service agreements. Eliminate the occurrence of no written contract and subsequent supplementary contract. Record and supervise the service process, find

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and solve problems in time to ensure service quality. Establish emergency working mechanism and formulate an emergency plan”. The second is the joint supervision mode composed of government finance, audit, supervision and other departments. For example, CD city of SC province stipulates in the opinions on the establishment of the system of government procurement of social organization services that “the government procurement of social organization services shall be included in the government target management, and this department shall organize the financial, audit, supervision and other departments to supervise the work of the administrative functional departments of procurement social organization services and evaluate the annual performance”. The third is that the government forms a special organization to supervise. SZ city adopts this model, that is, when the effectiveness of the public service contract expires, relevant government departments shall form an evaluation team or introduce social evaluation institutions, listen to the report completed by the entrusted unit, and review the work summary and relevant explanatory materials provided by the entrusted unit according to the evaluation methods and matters determined in advance, evaluate and accept the performance of the entrusted unit. At present, although China has explored the supervision mechanism of government procurement of public services and established corresponding mechanisms, there are still some problems, such as inconsistent basis, imperfect mechanism, absence of supervised objects and weak supervision ability.

Lack of Unified Basis for Supervision and Management Because there is no unified national law on government procurement of public services in China, the supervision of government procurement of public services lacks a unified basis. The lack of a unified regulatory basis can easily lead to a poor overall situation, different standards and weak operability of supervision.

No Scientific Regulatory Mechanism The existing supervision mechanism of government procurement of public services in China focuses on the internal supervision of administrative departments, while the external social and professional supervision are insufficient. Such a supervision mechanism initiated by government departments has some problems, such as weak effectiveness and lack of objectivity. The lack of professionalism and social external forces is easy to cause that the institutions make their own principles in government departments. The government often uses its strong administrative power to avoid legal responsibility and accept the obligation of supervision. Some government departments are also inextricably linked with the undertaking subjects of public services. Complex interest disputes often make supervision weak and easy to breed corruption. Due to the limitations of human and material resources, the government supervision is often careless and can not be carried out in depth. In addition, due to the limitation of professional knowledge and technology, it is impossible for government staff to

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be experts and proficient in the knowledge of each public service project. In this case, once the government procurement violates the contract or infringes upon the legitimate rights and interests of others, the government department will not be able to carry out substantive supervision. On the other hand, only paying attention to the internal supervision of government departments can not give full play to the enthusiasm of various supervision forces let alone to form a joint force to produce overall efficiency. According to the theory of supervision, external supervision and social supervision are also organic parts of supervision. People’s Congress and judicial supervision are indispensable supervision forces. As consumers of public services, the people have the deepest feelings and have the most strongest voice about the advantages and disadvantages of public services, and should become a powerful subject of supervision. However, the existing supervision mechanism arrangements have failed to give full play to the role of external, social and public supervision.

Ambiguous Regulatory Contents One of the conditions for supervision to achieve the expected objectives is that the supervision content should be clear. However, the content of supervision in China is vague and difficult to grasp. Some supervision contents focus on performance. For example, JA District of SH City stipulates that “work performance, benefit and public satisfaction” shall be taken as the contents of supervision. Some focus on the implementation of standards. For example, WX city of JS province stipulates “the qualification of service suppliers, service quality standards, service calculation standards, service achievement evaluation standards, etc.” as the content of supervision. Some require supervision according to the performance of the contract. For example, SZ City, GD province stipulates that “after the entrusted parties sign the entrustment agreement, all relevant government departments shall conduct whole process guidance, supervision and inspection on the work undertaken by the entrusted unit to ensure the quality and efficiency of the work”. “After a certain work item is completed, the entrusted unit must summarize the undertaking work and attach relevant explanatory materials in accordance with the requirements of the entrustment agreement”. In contrast, in the countries and regions with advanced government procurements public services, the government has made clear provisions on the procurement content. For example, Hong Kong has made clear provisions on the supervision content. In the “reference guidelines for the evaluation mode of sixteen service quality standards”, there are 19 service quality standards to evaluate social work institutions, and each service quality standard has corresponding indicators, evaluation steps and methods. The supervision department only needs to carry out supervision in accordance with the guidelines.

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Absence of Supervision Objects From the practice of Chinese government’s procurement of public services, the main regulatory object is the undertaking subject of public services. The subject has a special position in the procurement activity, so it is understandable to list it as the object of supervision, but the undertaking subject cannot be the only subject to supervision in the procurement activity. The functional departments of the government procurement of public services and the internal elements of the undertaking subject should also become the object of supervision. The functional department of government purchasing public services is a special and independent management organization. That does not mean independence from the administrative system, but independence from the administrative department.13 This department is the organizer and implementer of the procurement activity, and its behavior often determines the progress and final effect of the whole procurement activity. If they are not included in the supervision object, not only can they not achieve the procurement goal, but on the contrary, they may also make use of their favorable position to seek profits for themselves, and then damage the national and public interests. Therefore, it is unscientific and undesirable to let the functional departments of the government purchasing public services dissociate from the whole supervision system. The problem of internal supervision of the undertaking subject is easy to be ignored. Although the internal supervision of the undertaking subject is an internal problem of the organization, if the supervision is not in place in the procurement activity, it will inevitably affect the overall supervision effect of the undertaking subject. This is because the internal qualification of the undertaking subject, the use standard of service products and the dedication and specialization of employees will deeply affect the service quality of the undertaking subject. For example, the use standard of service products is one of the micro elements within the undertaking subject, but if it is not included in the supervision object, the undertaking subject may not produce public services according to the standard. Public services not produced according to standards will be non-quantitative, non-qualitative and uncontrollable, which will directly affect the cognition and judgment of supervisors and consumers on the relatively stable and operational supply of public services. The dedication and specialization of employees is an important condition to ensure high-quality public services. This is because employees are responsible for producing public services or directly contacting service objects, and their behavior is directly related to the quality of public services. If the undertaking subject does not strengthen the education and training of employees and improve the management system, it may not be able to perform the contract smoothly, resulting in the breach of contract or infringement. Therefore, in the government procurement public services, it can not only supervise the undertaking subject, but also ignore the supervision of the functional departments and internal elements of the undertaking subject. 13

Xiang Xiansheng: Research on the establishment of government purchasing public services management organization, published in Journal of the Party School of Fujian Provincial Committee of the Communist Party of China, 2012, Issue 3, p. 43.

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Weak Supervision Ability Supervision ability is the main indicator of supervision. At present, China’s ability to supervise procurement activities is relatively weak, such as the ability of supervisors is low and the mean is backward. There are three main reasons for the low ability of supervisors: First, the professional level of supervisors is not high. Public services have a wide range of contents, wide coverage and strong professionalism, but a considerable number of supervisors can not meet this need currently. Second, supervisors do not have a strong sense of responsibility. Because procurement public services use financial funds, safeguard public interests and serve specific groups, which are not closely related to the personal interests of supervisors. Therefore, supervisors often have the view of “convenience”, and lack the sense of responsibility to actively carry out supervision. Third, the dereliction of duty of supervisors. Before the market of the undertaking subject is fully mature, some supervisors will not be able to carry out fair supervision due to personal interests. Some even offer advice or convenience on how to evade supervision. Backward supervision means is another important reason for the weak supervision ability. At present, government procurement of public services mainly depends on manual file supervision. Although this type of supervision has a direct effect, it obviously can not meet the needs of the new supervision situation. The first is inefficiency. The efficiency of manual file supervision is far lower than information supervision. According to statistics, in 1999, the Audit Department organized 23,000 auditors to audit ICBC and China Construction Bank mainly by manual audit. In the audit of ICBC in 2003, due to the use of computer technology, all the personnel participating in the audit were only 10% of the number in 1999, while the discipline violation was 38 times that in 1999.14 Secondly, the cost is high. Manual file supervision will produce the travel expenses, vehicle oil expenses and other expenses of supervision personnel, which are obviously increased for the purpose of supervision. Third, supervision information cannot be shared. Since there is no unified information platform, the problems and good experiences found in the process of supervision cannot be shared. Some clues of violation of law and discipline cannot be transferred in time, and the violators cannot be punished as they should be. Others lead to duplication of work due to information asymmetry or information island. For example, for some government procurement projects, various supervision institutions carry out “turn over bombing” supervision. It seems that the supervision is in place, but actually, much supervision work is “skimming the water”, and there are no problems found or relevant personnel are not held accountable for what they deserved. This supervision mode wastes resources and increases the procurement cost. Therefore, in order to improve the supervision level of government procurement of public services, we must improve the quality of supervision personnel and adopt advanced and convenient means like information supervision.

14

Mei Yuehua: On the informatization construction of financial supervision (Part I), published in financial supervision, No. 3, 2008, p. 33.

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7.4.2 Legal Assumption of Perfecting Supervision Mechanism The construction of the supervision mechanism of government procurement of public services is a complex systematic project. It should follow the principles of integrity, effectiveness, self-operation and covering all supervision objects and contents, and make steady progress in stages. Based on this, and combined with China’s current national conditions, the author believes that from the perspective of public law, the supervision mechanism of government procurement of public services should be constructed in a three-dimensional way from the aspects of completing system, more clear content and improving ability.

Establish a Complete Supervision System In establishing and improving the supervision system of government procurement of public services, the author believes that the most urgent thing is to strengthen the construction of self-supervision, external supervision and accountability mechanism. Among the three mechanisms, the self-regulation mechanism is the foundation, the external regulation mechanism is the supplement, and the accountability mechanism is the key. Each supervision subject in the self-regulation mechanism is closely related to the supervised object, and can carry out daily supervision in time according to the subtle changes of the supervised object. However, this supervision mechanism has the deficiency that the supervision subject is both an authority and a player, which can not ensure the objectivity and impartiality of the supervision effect. Therefore, it is particularly necessary to establish an external supervision mechanism that can make up for the lack of objectivity and injustice in the self-regulation mechanism. Compared with the self-regulation mechanism, the external supervision mechanism also has defects, mainly because the supervision subject has no direct contact with the supervised object, and the start of supervision is often passive and afterwards. Therefore, in order to give full play to the advantages of external supervision, it must be endowed with responsive function. Otherwise, its supervision effect will be discounted. To ensure the realization of self-regulation and external regulation mechanism, we must establish a strict accountability mechanism. (1) Establish a Normalized Self-regulation Mechanism The self-regulation mechanism of government procurement of public services refers to the working mechanism of daily self-supervision of various elements and links of government procurement of public services. According to the different roles of each supervision subject in the supervision mechanism, it can be divided into two types: functional department supervision and undertaking subject self-supervision. Broadly speaking, the functional supervision department of government procurement of public services should be all government departments related to government procurement activities, such as government procurement of public services

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management, finance, audit, supervision and other departments, as well as departments related to the quality of public services, such as industry and commerce, quality supervision and so on. In a narrow sense, the functional supervision department is the management department and financial department of government procurement of public services. The functional supervision department here refers to the supervision of functional departments in a narrow sense, that is, the supervision of government procurement of public services and financial departments. The main contents of the supervision of the government’s procurement of public services management department are the establishment of procurement projects, the determination of procurement methods, the performance of the undertaking subject, the quality and quantity of public services and the payment of funds. The financial department mainly supervises the management and use of project funds by the financial department, such as whether the procurement project belongs to the budget list, whether the funds are misappropriated and whether the funds are paid according to the contract. The undertaking subject of public services is the most important element in government procurement activities. Its code of conduct and performance directly determine the effectiveness of procurement activities. Therefore, in the supervision mechanism of government procurement of public services, the undertaking subject is the main supervised object. However, only such external supervision is not enough, and supervision must be carried out internally. The undertaking subject shall establish sound rules and regulations, and strictly define the work requirements. Meanwhile, it needs to forge a team of professional managers and dedicated employees to ensure that the public services produced to meet the needs and interests of the service objects. (2) Establish Responsive External Supervision Mechanism The responsive external supervision mechanism of government procurement of public services refers to the supervision forces outside the functional supervision departments that can timely and actively carry out various supervision work on government procurement activities. It is a useful supplement to the self-regulation system of government procurement of public services. According to the different roles of the supervision subject in the external supervision mechanism, it can be divided into NPC supervision, judicial supervision, inspective supervision and social supervision. The common point of these four kinds of supervision is that the start of these supervision procedures is passive, that is, only supervision clues can start the corresponding procedures. This is the deficiency of the external supervision system, but compared with the self-regulation of the government’s procurement of public services, it has the advantages of objectivity, impartiality and strength. Therefore, we must optimize the passive and rigid features of the external regulatory mechanism, so as to endow it with positive response. a. Supervision of the National People’s Congress It refers to the supervision of the people’s Congress at or above the county level and its Standing Committee over the government’s procurement of public services, which is the highest level of supervision. The supervision of the National People’s Congress focuses on some fundamental, overall and universal problems in the government’s

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procurement of public services. First, supervise and review the procurement catalogue, plan and funds. Second, the supervision institutions and personnel for the procurement of public services shall be verified according to the scale of social and economic development, financial strength and the number of service objects. Third, regularly listen to the reports on the budget and final accounts and the use of funds, and urge the financial department to allocate funds in time according to the progress. Fourth, fully exercise the right to question, inquire, investigate major issues and recall in accordance with the law. Government officials and deputies to the National People’s Congress who fail to comply with the law in the procurement process may propose a recall proposal to remove relevant officials from their posts. For major issues, a special investigation team may be established and carry on according to regulations. b. Judicial Supervision In China, judicial supervision mainly refers to the supervision of procuratorial and judicial organs. The procuratorial organ is the legal supervision organ in China, which can supervise the government procurement activities according to law. The focus of supervision is to see whether the staff of the government’s procurement of public service management institutions have dereliction of duty and corruption, and punish them in time. If there is an infringement on the public service object, it is difficult for an individual to correct it or no one has filed a lawsuit, or the individual has no right to file a lawsuit on this issue, the state needs to give a public authority the right to put forward specific corrective opinions on the case according to law. At this time, the procuratorate not only has the right to file a lawsuit against this illegal act, but also is obliged to bring a lawsuit.15 Therefore, the procuratorial organ should be given the power of public prosecution in order to protect the legitimate rights and interests of the people from the perspective of justice. Judicial supervision is the supervision of the judicial organ over the government’s procurement activities in the form of case judgment, which reflects the final judicial effectiveness. The specific forms of judicial supervision: First, civil judgment. When the parties to the procurement activity have disputes over the contract performance, they can bring a lawsuit in the court. Resolve disputes through court decisions, correct mistakes and make up for the losses of the injured party. Second, administrative judgment. When undertaking subject, service object or relevant stakeholders find that the procurement behavior infringes upon their legitimate rights and interests, they can file an administrative lawsuit according to law. Third, criminal judgment. For acts involving criminal offences in government procurement activities, criminal judgments may be made according to law and violators shall be severely punished. c. Supervision Supervision refers to the supervision of government departments performing the supervision over government procurement activities. The main supervision contents 15

Yang Shuguang, et al.: Study on the principles and procedures of administrative law enforcement supervision, China procuratorial press, 2009 edition, p. 423.

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are the acts and omissions of government functional departments and the maintenance of the legitimate rights and interests of staff, including supervision and audit supervision. The supervision department shall establish a corresponding reporting-clue acceptance mechanism, accept the reports of the public in time and carry out investigation and handle it. The staff members of the organs who violate the regulations shall be given corresponding administrative sanctions. We should also resolutely stop acts that falsely accuse, fabricate facts and damage the legitimate rights and interests of government functionaries. We should safeguard the legitimate rights and interests of government functionaries and create a good working environment. Audit supervision is the supervision of audit institutions on the use of funds in government procurement activities. It plays a unique role in promoting the healthy development of government procurement of public services, which can not be replaced by other supervision ways. d. Social Supervision The social supervision of the government’s procurement of public services includes media and public supervision. As a tool of public opinion, news media not only publicize the government’s policy and working system of procurement of public services, but also play an important supervisory role. In government procurement activities, the news media can track and report the violations in government procurement activities, which plays a role of guidance and education. At the same time, it can use its own characteristics of fast information dissemination, wide radiation and great influence to timely collect public opinions and reflect on the problems. The supervision department of government procurement of public services shall appoint special personnel to track and collect major criticism and exposure problems reflected by the news media, promptly organize the investigation and handling of problems involving the unit, and reply to the media in a timely and responsible manner. For clues involving violations of law and discipline, the investigation procedure shall be started and the investigation conclusion shall be made in time. As beneficiaries of public services, people feel the deepest and pay the highest attention to government procurement activities. Therefore, the supervision and administration departments should pay close attention to and listen to the opinions and suggestions of public service objects, and adjust the work arrangement and deployment in time. At the same time, it is necessary to establish working mechanisms and procedures for public service objects to respond to demands, especially complaint and challenge procedures, and timely deal with problems in procurement activities through these procedures. (3) Establish a Strict Accountability Mechanism Whether the supervision can achieve the expected goal depends on whether the problems found in the supervision can be rectified and whether the relevant personnel can be held accountable. Otherwise, any scientific supervision system is useless. The connotation of the strict accountability mechanism is as follows: First, we should raise awareness. That is to let the participants in the government procurement activities fully realize the significance of responsibility. The supervision institutions should

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not have the wrong understanding of letting law breakers go, turning big things into small ones, turning small things into nothing, or favoring and indulgence. Second, we should distinguish responsibilities. Functional departments at all levels shall establish a work responsibility system, quantify the tasks to posts and people, and clarify the work requirements and responsibility methods, so as to prevent the occurrence of responsibility blind spots and mutual buck passing. Third, accountability must be strict. The problems found in the supervision shall be carefully investigated and studied to the end. Any violation of laws and regulations will be investigated for responsibility, and we will resolutely maintain the seriousness of accountability. At the same time, we should strictly distinguish responsibilities, and distinguish between the unit and individual responsibility, leadership and executor responsibility, fault and intentional responsibility. Fourth, pay attention to the application of regulatory results. We should combine the accountability with the promotion and salary of government staff who procures public services, and we can’t “just thunder without rain”.

Scientifically Define the Content of Supervision Scientifically defining the content of supervision can ensure the effectiveness of supervision of government’s procurement public service. The content of supervision should be proper. Expanding the content of supervision will overwhelm the supervision institutions, and narrowing the content will make the supervision unrealistic. Therefore, it is necessary to scientifically define the content of supervision. Currently, the initiation, implementation and data collection and entry of government’s procurement public service are within the key regulatory scope. (1) Initiation Supervision Project initiation is the source of the entire government’s procurement public service. Only by strengthening this supervision can we ensure that the whole procurement activities are scientific and standardized. The main points in this supervision are: First, the supervision of legality, that is, the procurement of public services must comply with the regulations of national law, and not violate the legal provisions of the procurement or artificially narrow the scope of procurement. Local government’s procurement public services must take full account of the requirements in relevant local regulatory documents, and strictly follow the provisions of laws and regulations and regulatory documents to carry out this procurement. At the same time, the government also needs to check whether the procurement of public services belong to the procurement plan in this year or just a specific phase. Second, the necessity of supervision. The government should conduct surveys on the public and the undertaking subjects through consultation, discussion, questionnaires and other forms to understand whether the procurement public services meet the current public demand, and whether the project in the procurement plan should not exist or not meet the procurement requirements. Third, compliance supervision is, to monitor whether the procurement project is in line with the technical standards or specifications drawn

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by government departments, relevant associations and societies. Fourth, the feasibility of supervision. The supervision institutions should assess the risk and cost of the procurement project, determine whether the procurement project has sufficient financial resources, whether it will infringe the people’s rights and interests and whether there are special agencies and personnel responsible for government procurement activities. Fifth, document supervision. It is mainly to supervise whether the project proposal, feasibility analysis report, government approvals and other documents are not missed and whether they are presented in a text format that conforms to the regulations. (2) Execution Supervision The government procurement starts after the initiation of the procurement project. The implementation is the dynamic embodiment and the goal realization of the government procurement activities. Therefore, strengthening the implementation of supervision guarantees the achievement of goals. The implementation of government procurement activities has multi-points, extensive scope and it’s difficult to supervise, such as the need to supervise whether the procurement content is consistent with the procurement plan, whether the behavior of various participants is legal and whether the participants are beyond the authority or abusing power. However, the most important thing is to supervise the bidding, contract management and fund allocation activities. The bidding supervision mainly occurs in the competitive procurement. Under this procedure, the bidding is the focus of supervision. In the bidding stage, the main supervision is whether the bidding information is open and transparent, whether different undertaking bodies have equal access to bidding information and ways, whether the bidding documents are uniform, whether there is a fair, impartial and scientific bidding evaluation, and whether there is a prevention and control plan and solution measures for the bidding evaluation, such as the emergence of artificially invalidated bids and aborted bids. In this stage, we mainly supervise whether the evaluation experts are from the expert pool, whether the evaluation experts formed are qualified, whether the procedures for determining the experts are scientific, random, anonymous, and the expert name are notified on site, notarized on site and keep confidentiality of the expert list, whether the recusal system and the principle of expert independent evaluation are established and strictly enforced and whether the evaluation expert questioning system is established and implemented. In the contract management stage, the main supervision is the performance of the procurement contract. For example, whether the inspection plan of the contract performance is formulated and these supervision elements are refined according to contract amount, potential risks, importance and criticality. Whether the contract terms, supervision time, procedures and steps are agreed with the undertaking subject. Whether the supervision situation is recorded and files are established. At the same time, it should also supervise whether the undertaking subject performs the contract according to the quantity, amount and standard stated in the procurement contract. Whether the corresponding management system is established for the procurement projects needed and designate a person responsible for the implementation. In the fund disbursement stage, the main supervision is whether the procurement funds are included in the

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financial budget. Whether the funds are disbursed in accordance with the contract. Whether there is misappropriation of funds, delayed disbursement or unreasonable refusal to disbursement and other circumstances. (3) Data Collection and Entry Supervision To gain a better outcome of supervision, it is necessary to improve the way of supervision. Among these, information-based supervision is one of the improved measures in the supervision of government procurement activities. The key to achieving this is the collection and entry of relevant data in government procurement. Therefore, data collection and entry has become an indispensable part of the supervision of government’s procurement of public services. The key in this process is to solve the problems of “full”, “real”, “new” and “protection”. The “full” is whether the data collected is complete and whether it can fully and objectively reflect the elements of government procurements. These data specifically include the procurement basis, project proposal, feasibility report, various approval instruments, bidding instruments, contract text and quality standards, procurement project name and amount, project procurement unit, regulatory agencies and personnel, undertaking subject qualifications, contact information of the person in charge, scope of service recipients and notes, procurement method, payment method, dispute resolution and fund allocation, evaluation experts and the undertaking subject files, etc. The “real” is that all the data must be real and valid. The supervisory subject may verify them regularly or irregularly through field visits, telephone consultations. “New” means that the data must be updated timely. This requires timely data collection and entry. Protection mainly depends on whether the special personnel and institutions are equipped, special funds are arranged and whether necessary hardware and fixed workplace are equipped.

Improve Regulatory Capacity The supervisory capacity directly determines the effectiveness of supervision. In response to the weak supervision capacity in our government’s procurement public services, we should focus on strengthening the information-based construction, comprehensive third-party professional supervision and the staff quality. (1) Strengthen the Information-based Construction of Government’s Procurement Public Services Strengthening the information-based construction of the government’s procurement of public services is critical to achieving effective supervision. Information-based supervision is to transplant the business management matters and workflow of government procurement activities to the information management system through an information platform, and carry out real-time dynamic supervision of the procurement in all aspects and links according to the operation standard. The traditional supervision mainly relies on manual supervision, which, as mentioned above, brings

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about high costs, low efficiency, poor timeliness, and lack of prior prevention and control in the process. Information-based supervision meets the needs of the situation and corrects the shortcomings in the traditional mode. It can obtain the most real and complete data and find the existing problems in the first time so that to achieve online real-time online supervision through online inspection and tracking. It can timely collect, analyse and determine the tendencies, origins, universal and other issues to ensure the synchronization of supervision. At the same time, it also frees the supervisory personnel from the tedious collection, analysis and determination, and improves the efficiency of supervision. The basic idea to establish the information supervision is to establish “one database and two platforms”. “One database” refers to building a universal basic database of national government’s procurement public services, and making the database as the center to unify and integrate the relevant procurement data so as to achieve the sharing and integration of information. “Two platforms” are the “government’s procurement public services information platform” and the “government’s procurement public services supervision platform”. The former is an operational platform about basic information on government’s procurement public services, including various information such as project initiation, bidding, execution of procurement contracts, feedback, etc. The latter is mainly for the main supervisory institution of government procurement activities, with the aim of implementing the whole supervision of government procurement in all respects through the platform. Information-based supervision construction should adhere to the principle of “integration and sharing, convenient operation, safety and reliability, economic and practical”. The principle of integration and sharing is to integrate and collect all kinds of data in the government’s procurement activities, and realize that all kinds of information can be entered once and used many times, one person can enter, and many people can share, so that everyone is both the contributor and the beneficiary of the information in this platform. The principle of convenient operation requires that the operation can better meet the user’s humanized needs and operating habits, easy to learn and understand. Also, there should be a warning function to find and correct the problems timely. The principle of security and reliability means that the platform should not only ensure consistence and highly reliability of data, but also have a strong error-checking and handling mechanism to ensure that abnormal information can be found as early as possible in case of abnormality and repair it correctly. The principle of economy and practicality is the embodiment of the value of the government’s procurement public service system. During its construction, we should make full use of the existing information resources around the country, adhere to the top-level design, scientific plan and effectiveness, and not be greedy. (2) Comprehensive Third-party Professional Supervision Third-party professional supervision refers to the supervision of procurement activities carried out by experts and scholars with professional knowledge or specialized agencies. Independent third-party professional supervision institutions include accounting firms, legal firms, audit firms, professional investigation companies, etc. For government procurement work, an independent third-party specialized supervision mechanism is very necessary because the accounting of costs, determination of

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prices, and approval of service quality standards in the field of public services are highly specialized and require independent supervision agencies or professionals to evaluate the authenticity and validity of the assessed information. Therefore, it has obvious advantages in comparison with other supervision methods. First, it maintains objectivity and impartiality. Since third-party supervisory agencies or personnel, independent of government purchasing activities, do not have direct personal interests, they can carry out their supervision work in a professional and impartial spirit without the supervision contradictions of authority and players all in one. Second, they have professional talents, resulting in more professional and scientific supervision. Third-party supervisors are generally experts in the field of the procurement project, so they can make professional and authoritative judgments and supervision of the problems that arise in government procurement activities. Thirdly, the supervision object is wide. Generally speaking, the main supervision object of the government supervision department is the undertaking subject. While the professional supervision object can be both the undertaking subject, but also the public service procurement of government departments. Therefore, supervision can be carried out according to the needs of supervision on institutions and personnel related to government procurements. (3) Improve the Quality of Supervisory Personnel Another key to improving the ability of the third-party professional supervision is to improve the quality of personnel. Improving the quality of personnel, first of all, is to strengthen professional ethics education. Each staff member can abide by the law, become self-disciplined, honest and trustworthy, diligent and accountable, keep secrets, comply with social morality and consciously protect the public interest through education. Second, strengthen business learning. They should seriously study the relevant government procurement laws and regulations as well as understand the content and characteristics of government procurement services. Third, these staff need to study business actively, expand horizons, familiar with the procurement workflow, and constantly improving their business. The supervisory mechanism of government’s procurement of public services is a systematic and long-term project with national characteristics. Different countries and regions will have different building requirements at different historical stages. Here, I just put forward the urgently needed supervision measures in a pragmatic way targeting the existing problems in the supervision of China’s government procurement public services. Of course, the effectiveness of these measures needs to be improved through practice.

Chapter 8

The Legal Remedy System for Government’s Procurement Public Services

“A good system lowers the cost of doing good things for good people and thus directs people to do good things. Likewise, a good system makes cost higher for bad people to do bad things and lower the benefits that bad people get by doing bad things, thus lowering the impulse for bad people to do bad things”, and vice versa.1 It is true that a good system will promote good and suppress evil, and guide people to achieve the value goal pursued by the system designer. But no matter how perfect the system is, it must ultimately be implemented by the people. Pursuing benefits and avoiding harm is human’s nature. Therefore, more or less personal interests are involved when implementing this system, and they will try to find the loopholes of the system by all means and then maximize it through the loopholes.2 On the other hand, as for the system, with the development of the times and changes in the external environment, no matter how perfect the system is, the lag and defects of the system will also appear in the implementation. Therefore, the system needs self-repair and remedy because of the human nature and objective defects in the system. That means, if a system cannot timely correct appearing problems and effective remedy, then it is not a good system and cannot achieve the original purpose and goal. The government’s procurement public services system also has the above-mentioned institutional characteristics and requirements. As an innovative measure to promote the transformation of government functions, improve the way the government supplies public services and enhance government governance, the government’s procurement of public services carries an important historical mission and requirements. Although China’s government procurement of public services is still in the initial stage of exploration, and the related institutional measures have not been fully advanced, it is not yet possible to conduct a comprehensive and objective test and evaluation of the existing government procurement system. But from the current reflected problems can also be found some clues, such as the procurement of the main body does not act, disorderly action, 1

You Quanrong: “System is more reliable”, in “Leadership Welfare” 2012 No.12, p. 16. Cheng Liaoyuan, Wang Renbo: “Rights and Its Relief ”, Shandong People’s Publishing House 1998, p. 349.

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unfair treatment of the main body and the lack of service object claims, etc. If these problems are not solved, the legitimate interests of the government to procure the subjects will be violated, and the process of the government to procurement public services system will be hindered. In order to solve these controversial problems that have emerged and will occur in the future, it is imperative to establish a scientific and perfect remedy system for government procurement of public services. At present, the main documents directly related to the system of government procurement of public services in China are the “Guidance”, “Measures” and “Regulations”. Among these three documents, the Guiding Opinions are policy documents, whose value of policy declaration is greater than the value of operation in legal sense. The Measures are departmental regulations, which have legal operation value, but are of low rank in China’s legal system. The Regulations are administrative regulations, which are the highest legal basis of China’s government procurement public service system. Although the Regulations are the implementation regulations and subordinate law of the Government Procurement Law, the Regulations are the highest level of government procurement of public services because the Government Procurement Law does not specify the content of public services. The Regulations have special legal provisions to provide for the procurement of public services by the government. Article 2(4) of the Regulations stipulates that the services referred to in Article 2 of the Government Procurement Law include public services provided by the government to the public. Article 15, paragraph 2 provides that the government provides public service projects to the public, and the public shall be consulted on the determination of procurement needs. Article 27 provides that the public service projects with special requirements, in accordance with the provisions of Article 31, paragraph 1, of the Government Procurement Law may use a single-source procurement. Article 45 provides that the government provides public service projects to the public, acceptance should invite service recipients to participate and issue comments, and acceptance results should be announced to the public. From the body and provisions of the Regulations, the legislative purpose is to address the specific circumstances of government procurement, but the second article will be “services” to expand the “public services”. The expansion is a “plus” of the Regulations, because many of the procedures and methods of public service procurements are very different from those of government procurement to maintain its own operations. And the draft of the “Regulations” does not specify that the “services” of government procurement include “public services”. It is clear from the above that there is no special legal basis for the procurement of public services by the National People’s Congress, and the existing law is a “plus” of the government procurement law system, which is dependent on the government procurement law system. Similarly, there is no independent and perfect remedy system for the procurement of public services in China, and it is also dependent on the remedy system of government procurement. This legal dependence has shortcomings, but from the objective effectiveness, the government procurement system has a legal basis that is better than none. Since the initiation of the Government Procurement Law in 2002, one of the reasons why China’s government procurement has been effective is the government procurement remedy system. However, with the comprehensive promotion of government procurement, the defects

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of the remedy system are becoming increasingly apparent, and the breadth and depth of the protection of the legitimate rights and interests of the parties in the behavior and the realistic needs cannot be met. At present, the government purchase remedy system has to rely on the government procurement remedy system, and if the government procurement remedy system itself still has defects, then the government purchase remedy system cannot achieve its proper remedy function, not to mention that the government purchase remedy system has its own special characteristics and is obviously different from the government procurement remedy system. Therefore, the focus is how to make the government procurement remedy system take advantage of the functional advantages of the government procurement remedy system during the transition period, and how to build a special government purchase remedy system under the principle of adhering to the top-level design. This chapter will start from the necessity of establishing the government purchase remedy system, analyze the objects of government procurement remedy, the types of remedy rights and interests and the existing remedy methods and their defects, and construct a scientific and perfect, independent and diversified, and administratively modest government procurement remedy system under the adherence to the values of fairness, efficiency, order and pluralism.

8.1 The Value of Legal Remedy System for Government’s Procurement Public Services Government’s procurement public services remedy system refers to the system of legal remedy or de facto behavior of the legal rights and interests of the infringed subjects through excluding infringement, supervising performance, compensating or compensating losses in order to ensure the state of rights and interests is successful or realized. In particularly when the legal rights and interests of the participating subjects and their stakeholders are infringed or about to be infringed in the procurement process. The concept has these following meanings: First, the premise of starting remedy is that the legitimate rights and interests are infringed or about to be infringed. Secondly, the complexity of the remedy object and the rights and interests. Government procurement is a new initiative of government governance, and it is crucial to deal with the balance of public interest and individual interest. The balance involves many procurement subjects and stakeholders. Among them, there are procurement subjects representing public interest, and there are undertaking subjects, service recipients or ordinary people who pursue personal or partial interests. Third, the way of remedy is diverse. The government procurement is a complex of multiple interest demands, and the procurement participant has complex interest demands or disputes, so that only one or several remedy measures cannot ensure the interest demands or resolve procurement disputes. That means we need several remedies. Remedies should have both the remedy from public power and social forces. At the same time, it is supposed to self-reconciliation between the infringing subject

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and the infringed subject. Fourth, the two-way of the remedy. In the general remedy system, mostly the infringed subject will take a one-way remedy path, which is often referred to the “no complaints no trails”, but the government’s procurement public services remedy system involves public interest, in order to avoid the expansion of the infringement scope, we should give the actively remedy right to the remedy responsible subject. In other words, the right to remedy should be exercised even without notifying the interest subjects. In the beginning, the correct understanding and definition of the remedy system have profound significance for establishing a sound procurement system.

8.1.1 Important Guarantee to Realize the Procurement Rights The original right and the remedy right are two aspects of the right. Without the original right, there is no remedy right. However, it is difficult to realize the original right successfully without the remedy right, In the right theory, there is a saying that “no remedy, no right,” which is a bit absolute but reveals the importance of the remedy right to the realization of the rights. Why do rights need remedies? It is due to the alienation or deviation in exercising rights. “If each kind of right can be realized correctly, there is no need for remedy. If different problems will hinder the legal realization of rights from society, then it is necessary to remove the hindrances and realize the remedy. In fact, rights are not only limited to the political, economic, cultural and other objective conditions of society, but are also affected by various factors. The law should not only define the rights, but also configure various remedy procedures.” The emergence of remedy rights is also due to people’s retaliation. On March 22, 2004, the State Council’s initiated the nation [2004] No. 10, “Comprehensively Promoting the Implementation of Lawful Administration.” It stated that “retaliation is a human instinct that tends to retaliate against the perpetrator when receiving a violation, in order to obtain material and mental satisfaction. In primitive society, because there was no public authority such as the government and the judiciary, people retaliated through individuals and clans when they were harmed, which is called private remedy in jurisprudence. This kind of remedy is barbaric and backward, and often brings more damage because of endless retaliations. With the progress of social civilization, people gradually realized that it was necessary to have a public authority to settle disputes and use the state power to ensure that the infringed rights and interests were remedied. As a result, the private remedy was transformed into public remedy. The state has to bear the responsibility to ensure that citizens can get remedies after their legitimate rights and interests are violated, which is a great progress in human civilization.” Each subject’s rights in the government’s procurement of public services are rich. The procurement subject has the right to edit the procurement content, the right to choose the undertaking subject, the right to supervise the contract performance and the contract privilege. The undertaking

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subject has the right to know, the right to fair competition and the right to remuneration for contract performance. The service recipients have the right to know, the right to participate and the right to fair treatment. The general public also has the right to know, the right to fair treatment and the basic right to material help. The abovementioned rights are enjoyed by every procurement subject according to the law. However, not every subject can enjoy these rights equally in real life. For example, if City A wants to purchase legal aid services for the disabled, it is required to publish the information on the platform designated by the government or news media, like the legal aid services content for the disabled, the qualification conditions of the undertaking subjects and the procurement amount and requirements. However, since the head of the procurement department in city A had a special relationship with the undertaking subject D, the head instructed the contractor to publish the procurement information in a less well-known local media. Since many qualified contractors didn’t know this situation, contractor D with weak strength was awarded the project and signed a procurement contract with City A. In this case, although there is a provision for public procurement, the relevant leader abuses its right to choose the undertaking subject, and infringing the right to know and fair competition of other contractors. From this analysis, it can be seen that without a remedy system, the legitimate rights and interests of the procurement subject cannot be realized. Therefore, the realization of the right to procurement cannot be achieved without the guarantee of the remedy system.

8.1.2 The Necessary Elements to Improve the Procurement System As an administrative initiative for the modernization of government governance, it is inevitable that the government’s procurement of public services will deviate from the procurement objective during its implementation. “Any public policy, regardless of whether it meets the needs of social development and satisfies citizens’ interest, all produce a continuous influence based on the system’s operating circuit once it operates. When the policy output meets citizens’ interest demands, it eliminates people’s dissatisfaction and avoids large-scale social conflicts. When the policy output does not meet or contradicts citizens’ interest demands, it generates negative feedback.” From the existing practice of government’s procurement of public services, it is because the loops in the institutional policy operation that make the legitimate rights and interests of interest holders infringed., The situation like the right of undertaking subjects, such as the right to know and the right to fair competition, can not be guaranteed, the right to participate of service recipients can not be exercised, and the contractual rights and interests of procurement subjects can not be realized. Since the infringement on rights and interests is concomitant with the system and policy implementation, it is necessary to find ways to stop the infringement and fill the losses in time in addition to a comprehensive systematic review. In the government’s

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procurement of public services, if the rights and interests of the infringed subjects are not timely remedied, it seems like the legitimate rights and interests of single or partial subjects are damaged, but in fact, the entire procurement system is damaged. For instance, if the legitimate rights and interests of the undertaking subject are infringed and cannot get remedy, it will lose its confidence in the procurement system. Without the participation of the undertaking subject, the government cannot form a procurement market. If the rights and interests of the service recipients are not remedied, it will interfere the government procurement activities. The procurement subject is the dominant subject, but if its inherent rights and interests are not remedied in time, it will also affect the internal driver of procurement system. Therefore, it is an objective requirement to improve and promote the government procurement system for all kinds of subjects to get timely remedies for their damaged rights and interests. The remedy system of government’s procurement public services is also an objective requirement for the internationalization of government procurement system. In the context of global economic integration, public services have become the main content of trade transactions among countries. With the deepening of China’s government procurement activities, it has become possible that the government procurement public services produced by foreign contractors. By the same token, it is also a trend for China to undertake procurement public services by foreign governments. From the foreign government procurement practice, although the procedures, ways and boundaries of the government procurement system in each country are different. It is a common requirement to establish a remedy system. Therefore, the establishment of a remedy system corresponding to the remedy system of government procurement in the world today is not only a requirement of the times, but also conducive to China’s undertaking subjects to participate in the competition of the international procurement market. More importantly, it can enable China’s government procurement system to play a late-stage advantage, establish and improve the government procurement system at a higher starting point.

8.1.3 The Inevitable Initiative to Exert Administration According to Law In October 2014, the “decision of the CPC Central Committee on a number of major issues to comprehensively promote the rule of law” pointed out that the governing nation by law is the essential requirement and important guarantee to uphold socialism with Chinese characteristics, and is an inevitable requirement to achieve the modernization of the national governance system and governance capacity. This act is related to China’s party’s ruling and country’s prosperity, the happiness and well-being of the people, and the long-term stability of the party and the state. This requires the rule of law to become the basis for developing the national

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beliefs and the introduction of various systems.3 However, in reality, people’s faith in the rule of law is not as good as it should be. “Perhaps the most important reason is that China’s current political, economic, cultural and social systems have not yet formed and created an overall mechanism that makes China’s people keep improving their faith in the rule of law. If we gradually create this mechanism through the reform of China’s political, economic, cultural and social systems, so that laws can practice smoothly, public power is strictly restrained, violations of the law are powerfully sanctioned, social justice is effectively maintained, and the culture of the rule of law is deeply rooted in the hearts of the people, the nation will naturally build up its faith in the rule of law”.4 The government’s procurement public services, as a reform measure of the public service supply system, also needs to follow the spirit of the rule of law and the principle of acting in accordance with the law, and also to become a specific system of national faith in the rule of law. How can government’s procurement public services become a vivid system of national belief in the rule of law? That requires the services have credibility, and let the people see the authority of the law. “The static law authority is not enough to arouse people’s admiration, only the living dynamic legal authority can win people’s faith and obedience”.5 For the government’s procurement public service system, the remedy system is the way to establish the dynamic law authority. To become the dynamic legal authority, the government procurement remedy system should not only be the declaration of legal provisions, but also further play its remedy function to stop the infringement and fill the loss in time. Through a series of remedy activities, people can really know the government procurement remedy system is “red line”, which can effectively protect the legitimate rights and interests of the subjects in government procurement, so that nationals can consciously comply with the various rules and regulations of government procurement, establish consciousness of respecting the law and abiding by the law, and develop the habit. Therefore, the government procurement public services remedy system is not only the protection of the rights and interests of the subjects of government procurement, but also an objective requirement to improve the procurement system, and is also a specific measure to implement the national strategy.

8.2 Remedy Objects and Remedy Rights and Interests The government procurement public services remedy system should first clarify the remedy object and remedy rights and interests. The remedy object is the subject whose legitimate rights and interests are infringed in the government procurement. It 3

Wang Puqu Gong Hongling: “Analysis of the Mechanism of Administrative Letters and Visits Influencing Public Policy”, in “China Administration” 2012 No.7, p. 16. 4 Jiang Mingan: “How to make the legal system become national beliefs”, in “People Forum” 2013 No.6, p. 96. 5 He Rikai: “On Judicial Authority and Judicial Reform”, in “law comments” No. 5, p. 1.

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includes the procurement subject, the undertaking subject, the service object and the general public. From the analysis of the infringement of rights, including the subject who got substantive infringement and the subject who is imminent or possible to get infringement. There are both state organs, institutions, non-profit organizations, profit-making organizations, and natural persons in nature analysis. In a word, in the government procurement remedy system, as long as the subject whose legitimate rights and interests are infringed, regardless of its organizational form, nature and the actual state of rights and interests, is the remedy object. Remedy rights and interests refer to the rights and interests that the subject of government procurement should enjoy in the procurement activities according to the law. The law here includes the special law of government procurement and other related laws that set the rights and interests of government procurement. At present, the legal provisions related to government procurement include the Government Procurement Law, Regulations and Measures, and the rights and interests of the subjects determined in these legal provisions are the content of government procurement remedy. With the improvement of the legal system of government procurement, in the future, the state will introduce separate laws on government procurement, such as the Law on Government’s Procurement Public Services, etc. The legitimate rights and interests of each right subject set are also the content of the remedy. In addition to the special laws on government procurement, the rights set by the laws supporting government procurement, such as the Contract Law, the Bidding Law and its regulations, are the rights enjoyed by the subjects of government procurement, and are also the content of government procurement remedy. The rights and interests set by the laws mentioned above, whether substantive rights or procedural rights, original rights or remedial rights, etc. are all remedial rights and interests. It is easy to see that the rights enjoyed by the subjects of government procurement are very wealthy, and the remedy rights and interests are also in various forms. Since the ordinary rights and interests such as personal rights and property rights have been deeply understood and recognized, and there are mature remedy mechanisms, they are not taken as the focus of the study. The author’s research focuses on the rights and interests that are easily infringed and urgently need to be focused on the remedy, which is unique to each subject of government procurement.

8.2.1 The Procurement Subjects and Its Remedy Rights and Interests The procurement subject acts as the organizer, executor and supervisor and director in the government procurement. In order for the procurement subject to perform its functions smoothly, the state allocates more ample rights and stronger remedy mechanisms to the procurement subject. First of all, the procurement subject has the content of rights backed by administrative power. In the procurement activity, the procurement subject not only enjoys rights, but also has powers. For example, the

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procurement subject enjoys the right to conclude the procurement contract and the right to perform the contract, and at the same time, it is the determiner of the subject of the procurement contract, the selector of the subject of the undertaking and the corrector of the contract performance. According to Article 50 of the Government Procurement Law, if the continued performance of the government procurement contract will harm the national interest and public interest, the parties shall change, suspend or terminate the contract. Although the provision provides that the parties may change, suspend or terminate the execution of the contract when there is damage to the public interest, but the actual exercise of the provision is more often used in the procurement subject, because in government procurement, the purpose and goal of the procurement subject to carry out activities are for the public interest, obviously, the procurement subject should be the loyal defender of the public interest, the use of the law to protect the public interest is due. Second, the procurement subject’s rights and interests remedy system is sound. Procurement subject legitimate rights and interests in addition to the exercise of civil rights to claim claims, the state also gives an internal remedy system. For example, Article 13 of the Government Procurement Law provides that the financial departments of the people’s governments at all levels are responsible for the supervision of government procurement, in accordance with the law to perform the supervision of government procurement activities. Other relevant departments of the people’s governments at all levels perform supervisory duties related to government procurement activities in accordance with the law. According to the article, the financial departments of the people’s governments at all levels are responsible for the supervision of government procurement, and government procurement is the main responsibility of the government’s financial departments. Finance departments are both supervisory administrators and executors, so it is not difficult to understand that the balance of remedy in favor of the purchasing subject. In designing the specific remedy system, the Government Procurement Law stipulates in the chapter of question and complaint that the question must be made to the procurement subject before the complaint can be made to the finance department, and only if the supervision department is not satisfied with the processing decision or overdue processing, it can apply for administrative reconsideration or file an administrative lawsuit with the people’s court. The above provisions show that the procurement subject has more remedial rights and a perfect remedy mechanism. Does the full remedy mechanism mean that no remedy is required for the rights and interests of the procurement subject? The answer is no. First of all, according to the analysis of rights theory, since it is a right, there is a risk of infringement, there is no right that is completely free from the risk of infringement. Secondly, in the practice of government procurement, the procurement subject is infringed by the situation that has occurred repeatedly. First, the contract rights and interests are infringed. Specifically, the undertaking subject does not sign the contract after winning the bid, without legitimate reasons to change, suspend or terminate the contract, delay in the implementation of the contract, the production of public services do not meet the contract requirements, etc., resulting in the procurement subject can not provide public services on time and in full quality, and then to bear the corresponding administrative responsibility. The second is to assume the responsibility of the state guarantee.

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Government procurement is a change in the role of the government, not a weakening of responsibility, not to mention the elimination of responsibility. The government should assume state guarantee responsibility for government procurement, that is to say, if there is infringement in public service produced by the undertaking subject, the government should bear the remaining responsibility after the undertaking subject undertakes their respective duties. The procurement subject assumes the responsibility of the state guarantee is its own legitimate rights and interests of impairment. In order to avoid the impairment of rights and interests must have the corresponding remedy mechanism. Third, the collusion happened between the undertaking subject or the undertaking subject and part of the procurement subject. They take the act of infringing the legitimate rights and interests of the procurement subject. Such as collusion bidding, bid-rigging, producing public services with inferior quality and high price, etc. Fourth, although the remedy system of the procurement subject is more perfect, but compared with the undertaking subject, there are also weak, such as the undertaking subject’s legitimate rights and interests are infringed, there are criminal, civil, administrative and other ways of remedy, while the procurement subject is not so sound remedy embodied, such as the special nature of the role of the procurement subject is not to apply for administrative reconsideration or file administrative lawsuit remedy channels. Therefore, whether from the procurement theory or from the procurement practice, the legitimate rights and interests of the procurement subject have been infringed by the possibility and reality, in order to ensure the fairness of the remedy and ensure the smooth implementation of the government procurement, the procurement subject and its legitimate rights and interests into the remedy system has its necessity and practical significance.

8.2.2 The Undertaking Subjects and Its Remedy Rights and Interests In the remedy system of government procurement of public services, it is particularly important to provide remedy to the subjects and their rights and interests. If the main body lacks the motivation and ability to participate, it cannot form a competitive buyer’s market. If there is no competitive buyer’s market, it cannot play the market advantage and then affect the realization of the government’s procurement efficiency goal. On the other hand, compared with the strong purchasing subject, the undertaking subject is relatively weak, and its rights and interests are more likely to be infringed. There are many legitimate rights and interests enjoyed by the subject, and in practice, the rights and interests that are most easily infringed and need to be focused on remedy are the right to know and the right to fair competition.

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Right to Know and Infringement Form The right to know of the undertaking subject is the right of the undertaking subject to obtain information about the procurement from the procurement subject by the law. “As a specific right—the right to know, but also because of the importance of ‘feelings’ (interests), citizens generate the demand for information and claim the ‘right to know’ (right) to achieve the recognition and guarantee their interests (the realization of interests)”.6 This reveals the essential attribute of undertaking subject to claim the right to know, that is, the right to know is not simply information to know, but can bring tangible benefits. However, “the right to know does not necessarily follow that it will become an institutional right. Suppose there is no legal system that explicitly guarantees the right to know. In that case, the right to know exists and is called for more as a background right that is valued for political and moral reasons, and does not ipso facto become the basis for people’s actions and demands. The guarantee of the right to know can be realized only when the system is legalized or the right to know is made a culture”.7 In recent years, China has increased the protection of citizens’ right to know, and has formulated a series of legal systems such as the Regulations on Government Information Disclosure. In government procurement, Article 11 of the Government Procurement Law provides that information on government procurement shall be released to the public in a timely manner in the media designated by the government procurement supervision department, except for those involving commercial secrets. Article 68(1)(2) of the Regulations stipulates that the procurement and the procurement agency shall be held legally responsible for failure to publish information on government procurement projects in the designated media in accordance with the law. This provides the basis for the right to know of the undertaking subject to legalize and become a culture. In government procurement, there are cases where the purchasing entity violates the right to know of the undertaking subject. For example, the city government of J wants to procurement public services of urban sanitation, and because the subject matter of the procurement is large, it must be procurement through public competition according to the regulations of the city government of J. For some reason, the main body of the project procurement wants enterprise D to win the bid. If the competitive procurement is adopted, the purchasing subject cannot control the result of the bid, so the purchasing subject does something in the information announcement, i.e., does not publish the government procurement information as required, as a result, except for Enterprise D, no undertaking subject knows the procurement information. In the bidding, enterprise D found three enterprises as a companion, as the other three are companion enterprises, the procurement of the main body belonged to enterprise D successfully won the project. This is a way to infringe on the right to know of the subject of the procurement by using information announcement. The

6

He Shenggen: “The Academic Research of Immisive Right Attributes”, in “Legal Science” 2005, 5th, p. 14. 7 Liu Yi: “Discussion on the Rights of Realism”, in “Modern Law” 2004, No. 4, p. 69.

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procurement subject will also use the information announcement content is incomplete, the announcement time is not timely, the announcement matters unknown and other forms of infringement of the right to know to the undertaking subject. It is based on the right to know is of great significance to the procurement behavior of the undertaking subject, China’s law in addition to the “Government Procurement Law” and “Regulations” specifically set legal provisions for remedy, China’s “Administrative Litigation Law”, “Administrative Reconsideration Law”, “Government Information Disclosure Regulations” also have corresponding legal provisions. Paragraph 2 of Article 12 of the Administrative Litigation Law provides that, except for the provisions of the preceding paragraph, the people’s court accept other litigation cases that can be brought under the laws and regulations. That is to say, although not included in the administrative litigation of the enumerated scope of matters, but, as long as the laws and regulations have special provisions, citizens can sue. For the procurement of the main body to infringe on the right to know the information procurement by the main body, according to the “Government Information Disclosure Regulations” Article 33, paragraph 2, “citizens, legal persons or other organizations that the administrative organs in the work of government information disclosure of the specific administrative action infringes on their legitimate rights and interests, may apply for administrative reconsideration or bring an administrative lawsuit.” Since the law has special provisions on information disclosure, the subject can file administrative reconsideration or administrative litigation in accordance with the law. This provides a more complete legal protection system for the protection of the right to know of the undertaking subject.

Right to Fair Competition The right to fair competition is the right of the undertaking subject to enjoy fair competition in government procurement of items, which is another important right that the undertaking subject must focus on remedy. “According to the nature of these obligation subject and the different roles assumed, fair competition right infringement, there are three types of government infringement, market subject infringement and consumer infringement”.8 The procurement subjects, other undertaking subjects and service recipients in the government procurement may be the infringing subjects of the right to fair competition. According to the provisions of Articles 32–37 of the Anti-monopoly Law, the procurement subject has abused its administrative power to commit acts infringing on the right to fair competition: First, to limit or disguise the procurement of goods designated by it to units or individuals. Second, to take various measures to restrict foreign undertaking subjects from undertaking public services locally. Third, to set discriminatory qualification requirements, and evaluation standards or to exclude by not releasing information based on or restrict the participation

8

Zhou Yinlin, Yin Jiguo: “On Fair Competit Rights Infringement and Legal Relief ”, in “Theoretical Monthly” 2012 No. 1, p. 117.

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of foreign contractors in local bidding activities. Fourth, the development of provisions contains the exclusion and restriction of competition. According to Article 7 of the Anti-Unfair Competition Law, the purchasing subject may infringe upon the right to fair competition of the undertaking subject by limiting the undertaking subject to procurement the public services it is designated to operate, or by restricting the foreign undertaking subject from entering the local purchasing market, or by restricting the local undertaking subject from undertaking public services abroad. Other undertaking subjects can infringe on the right to fair competition by reaching monopoly agreements, false propaganda, and malicious competition. The service recipients are the beneficiaries of the government procurement system and should not be the subject of infringement, but when they are influenced by misinformation, personal errors in judgment and abatement of other contractors, they may also directly or indirectly infringe the right to fair competition of the contractors, such as spreading unfavorable news about the contractors or issuing inaccurate evaluation opinions when evaluating the procurement public services. All these acts may constitute infringement of the right to fair competition of the undertaking subject. It is because the right to fair competition of the undertaking subject is so important and so vulnerable to infringement, China’s “Government Procurement Law”, “Regulations” and “Measures” have more provisions for provisions and remedies. Article 3 of the Government Procurement Law provides that government procurement shall follow the principle of fair competition. Article 5 provides that no unit or individual shall use any means to obstruct and restrict the free access of suppliers to the government procurement market in the region and industry. Article 22, paragraph 2 provides that the supplier shall not apply differential or discriminatory treatment to suppliers on unreasonable terms. Article 83 provides that any unit or individual Obstruction and restriction of suppliers entering the region or the industry’s government procurement market, be ordered to correct the deadline. It refuses to correct, the unit, the individual’s higher administrative authority or the relevant authorities to the unit responsible or personal discipline. Article 20 of the Regulations specifies differential or discriminatory treatment identification: (a) On the same procurement project to provide suppliers with differential project information. (b) Setting qualifications, technical and commercial conditions are not compatible with the specific characteristics and actual needs of the procurement project or unrelated to the performance of the contract. (c) The procurement requirements of technology, services and other requirements point to specific suppliers and specific products. (d) A specific administrative region or a specific industry performance, awards as extra points or winning or closing conditions. (e) To adopt different qualifications or evaluation criteria for suppliers. (f) Restrict or specify a specific patent, trademark, brand or supplier. (g) Illegally limit the form of ownership, the form of organization or location of the supplier. (h) Other unreasonable conditions to limit or exclude potential suppliers. Article 11 of the “Measures” stipulates that the main body of the procurement should guarantee equal competition among all types of the undertaking subject, and shall not discriminate against subjects to undertake unreasonable conditions of differentiation. For the procurement of the main infringement of the right to fair competition, the “Administrative Procedure Law” provides that the infringed to the undertaking

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subject can bring an administrative lawsuit. Article 13(1)(8) of the Administrative Procedure Law stipulates that an administrative subject may bring an administrative lawsuit if it believes that the administrative organ has abused its administrative power to exclude or restrict competition. For the infringement of other undertaking subjects and service objects, the Anti-Unfair Competition Law, the Anti-Monopoly Law and the relevant civil tort law can be applied to seek remedy.

8.2.3 The Service Recipients and Their Remedy Rights In addition to the infringement of personal rights and property rights in the government procurement, the right to justice is the right to special remedy. Service recipients’ right to justice refers to the right of service recipients to enjoy public services equally in the government procurement according to law. “In this sense, we can say that ‘justice is equality of rights’. With equal rights for members of society, there will be an equal starting point for them to participate in the social competition and equal opportunity to share social benefits. In today’s society, without equality of rights, there is absolutely no justice to speak of. Guaranteeing equal rights for members of society is the basic principle of modern social morality and the basic goal of the revolutionary struggle of the Chinese people for social justice over the past century.”9 The right to justice and equality of service recipients is an important value content embodied by government procurement. On July 31, 2013, the executive meeting held by the State Council pointed out that through government procurement to promote the transformation of government functions, release the reform dividend, and effectively solve the shortage of some public service products, quality and efficiency are not high, so that the masses get more convenience and benefit. In other words, the market means to pry up the power of the private sector, cohesion, and effectively mobilize the people’s sense of ownership and ingenuity, so as to effectively guide society to gather positive energy and release positive effects. To achieve these goals, the government must ensure the right to justice for service recipients. “Among all the functions of government, providing and maintaining justice is its most basic content, and public administration with government as the carrier provides justice, insists on justice and pursues justice in every link, and takes justice as the eternal goal”.10 The right to justice of service recipients is violated in the following situations: First, service recipients with the same conditions do not receive the same public services. Second, there is a discriminatory difference in the quantity of public services provided by the purchasing subject to service recipients. Third, the quality of public services provided by the purchasing subject to service recipients is different, good or bad. Fourth, the types of public services provided by the purchasing subject are

9

Cheng Lixian: “On Social Justice, Equity and Efficiency”, in “JChina’snal of Peking University (Philosophy and Social Science Edition)” 1999, No. 3, p. 60. 10 Zhang Kangzhi: “Government: Public is just”, in “Southeast Academic” 2000, No. 1, p. 89.

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different and are treated differently.11 Fifth, there is no justifiable reason for the public services provided by the purchasing subjects differ in time and do not reflect the principle of parity or the first to be provided in a hurry. The violation of the right to justice of the service recipients will greatly affect the enthusiasm of the people, and will also sow dissatisfaction and resentment among the people, which may create new social problems and hidden dangers. Therefore, in order to do a good job, it is necessary to provide a timely remedy to people’s violated right to justice. The remedy measures for the right to justice of the service recipients are: First, the violation must be stopped immediately and the public services of uniform quality, quantity and quality must be provided to the service recipients in time. Second, if the service recipients have suffered losses as a result, they should be given reasonable compensation or indemnity. Third, the service recipients must be given good ideological work to eliminate misunderstandings and build consensus. Finally, the behavior of the procurement subject should be dealt with in accordance with the law to avoid the recurrence of the same infringement and to enhance the image and credibility of the procurement subject.12

8.2.4 The General Public and Their Remedy Rights and Interests From a narrow analysis, the general public should not be included in the various subjects of government procurement, because in government procurement, the general public has no direct rights and obligations with other subjects, but, as a government governance measure, government procurement, which undertakes the functions of government function transformation and efficient supply of public services, and the transformation of government function and the good or bad supply of public services directly involves the vital interests of the general public. Thus, the rights and interests of the general public have a stake in government procurement activities. The general public enjoys many rights and interests in government procurement, such as the right to know, the right to participate, and the right to equal treatment. Among them, the right to participate is the most closely related to the government procurement activities, and is also the most vulnerable to infringement. How to protect the success of the general public’s right to participate is naturally an important part of the government procurement remedy system. The right of participation of the general public refers to the right of the public to participate in government procurement activities through various channels. The ways of participation include

11

Deng Youwen: “Legal Guarantee for Administrative Participation Right”, containing “China Administration” 2012, Issue 10, p. 49. 12 Jiang Bixin and Shao Changmao, “Understanding and Application on New Administrative Litigation Law Revised Provisions”, China Legal Publishing House, 2015, pp. 56–57.

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consultation, symposiums, debates, hearings, criticism, suggestions and even litigation. The exercise of the people’s right to participate reflects the sense of ownership that “the people are the masters of the country”, and is the requirement and embodiment of the value of democratic human rights, as well as the most important and effective means to monitor the active exercise of the state organs’ powers in accordance with the law.13 “The government must meet the public’s right to participate, whether in administrative legislation, or in administrative decision-making and administrative law enforcement activities, as long as the law does not explicitly exclude the public’s right to participate and in emergency situations, government agencies should absorb the public’s participation in administrative activities, listen to public demands and opinions, and make administrative decisions based on the public’s will. Otherwise, the relator can pursue his legal responsibility through administrative reconsideration or administrative litigation and other remedial systems, and resume the exercise of the right to administrative participation, and if it cannot be restored, other remedial measures should be takeN”.14 Government procurement also has special provisions for ensuring the people’s right to participate. The Guiding Opinions require that the subject of procurement should consciously accept social supervision, actively respond to the concerns of the public, and fully mobilize the enthusiasm of social participation. The second paragraph of Article 15 of the Regulations provides that the government provides public service projects to the public, and the public should be consulted on the determination of procurement needs. Article 45 provides that the government to the public provision of public service projects, and acceptance should invite service recipients to participate and issue comments, acceptance results should be announced to the community. In the government purchasing activities, people’s right to participate is violated in the following forms: First, the public is not consulted on the procurement of public service projects as required. Second, although the purchasing subject has consulted the public, it does not adopt the public’s rationalized suggestions and opinions. Third, it operates in the dark, deliberately suppressing or excluding the public participation. Fourth, it does not ensure the public has appropriate forms of participation, such as holding hearings as required but using the form of talks. If the purchasing subject violates the people’s right to participate, it may deviate from the value track of government procurement. For example, the government procurement public services that are not needed by the public, but not purchased by the public. Public services that should be procurement by the government are not purchased and public services that should not be purchased by the government are purchased by the government by mistake, etc. This is a typical manifestation of the deviation of government procurement from the value track. For example, the government of District T in City G, when preparing government procurement projects, included the procurement of white-collar lunches. This kind of government procurement has been hotly debated and criticized by the public. People could ask what is the basis for the government to procure white-collar 13

Ma Qinghong, Zhang Huiping: “Theoretical View of the People’s Participation Right”, in “The Theoretical Exploration” 2001, No. 6, p. 63. 14 See footnote 11.

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lunches as a government procurement item? How does the government’s procurement of lunches for white-collar workers, but not for blue-collar workers with high workloads and low pay, reflect the fairness of the government’s procurement? Even if the government wants to enlist white-collar workers, lunch is an individualized item, and it is difficult to adjust to the crowd, so how can it achieve the goal of government spending money and white-collar workers’ satisfaction? Therefore, no matter from which angle the analysis is made, the procurement program is inappropriate. One of the many reasons for such an inappropriate procurement to occur is the government’s failure to ensure that the people’s right to participate is actually fulfilled. If the government had ensured people’s right to participate, most people would not have agreed that the government should use financial resources to procure projects that are not always needed by the people they serve and that do not satisfy them. This is a typical example of government procurement that is not done properly because the people’s right to participate has been violated.

8.3 Existing Remedy Methods The remedy methods and their connotation are the important contents of the government procurement remedy system, which reflect the improvement and construction of the government procurement remedy system. According to different standards, there are three remedy methods: substantive remedy and procedural remedy, judicial remedy and administrative power remedy, public remedy, private remedy and social remedy. The first two remedies are defined by “dichotomy”, which cannot fully describe the remedy methods and their connotations. Therefore, I think that the public remedy, private remedy and social remedy are more in line with the realistic needs of the government procurement remedy system. Currently, China doesn’t have a unified law on government’s procurement of public services, but according to the above analysis, the remedy system of government’s procurement of public services can also use and refer to the remedy methods of government procurement. Therefore, it is necessary to study the existing remedy methods of government procurement, that is to say, the remedy methods of government’s procurement of public services and their content discussed in this section are both the remedy methods and contents suited for the government’s procurement public services in a general sense, as well as for government procurement.

8.3.1 Public Remedy Public remedy refers to the way of remedy when legitimate rights and interests are infringed in the government procurement. The specialized organs use the state public power to solve the dispute. Public remedy is not only to remedy the infringed rights, but also to maintain the law’s authority and restore the existed social order. In general,

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public remedies are based on strict procedures and substantive laws, and rely on the state’s coercive power to ensure the remedy effect. According to different remedy organs, public remedies have judicial remedies, administrative power remedies and letters and visits in China. The reason letters and visits are a separate type of public remedy is that it involves both the content of judicial remedy and administrative power remedy, which is not appropriate to be classified into any type.

Judicial Remedy Judicial remedy is a common and standardized remedy. In China, there are three main ways to resolve government procurement disputes through judicial remedies: criminal liability, administrative litigation and civil litigation. (1) Criminal Liability Criminal liability is the most severe remedy mainly through the state power. In government procurement activities, when the public interests are infringed beyond the administrative and civil remedy boundaries, the state will start the remedy procedure in criminal level. In other words, when the public interests are infringed, the criminal remedy procedure is initiated when the damaged rights and interests cannot be compensated by administrative and civil remedies. This remedy achieves the remedy goal by cracking down the infringing subject. In addition to the restricting and depriving the infringing subject’s personal freedom, the criminal remedy can also compensate the legitimate rights and interests of the infringed subject by criminal judgment. According to the different crime object infringed and criminal acts, the principal crimes caused by the tort subjects are: crime of illegally making profits for relatives and friends, the crime of signing and performing contracts in duty dereliction and being cheated, the crime of duty dereliction by personnel of state-owned companies, enterprises and institutions, the crime of power abuse by personnel of state-owned companies, enterprises and institutions, crime of collusion in entering bids, the crime of contract fraud, the crime of false advertising, crime of damaging commercial goodwill and commodity reputation, crime of negligent homicide, crime of negligence causing serious injury, crime of job occupation crime, crime of corruption, crime of misappropriating public funds, crime of acceptance of bribes, crime of offering bribes, crime of acceptance of bribes in units, crime of bribes against units, crime of units offering bribes, crime of bribery introduction, crime of privately dividing the state property, crime of power abuse, crime of neglect of duty, crime of intentional destruction of accounting documents, accounting books, financial accounting reports, crime of bribery to non-state employees, crime of bribery against non-state employees and other crimes. Among them, the Government Procurement Law requires criminal liability as follows: crime of acceptance of bribes, crime of offering bribes, crime of power abuse, crime of neglect of duty, crime of favoritism and malpractice, crime of intentional destruction of accounting documents, accounting books, financial accounting reports, crime of providing false documents, issuing material documents inaccurately, crime of collusion in voting,

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crime of producing and sale counterfeit and shoddy products. Article 72, paragraph 1, item 2 and Article 77, paragraph 1, item 4 in the Government Procurement Law and Article 72, paragraph 1, item 1 in the Regulations provides that if the procurement subject and the undertaking subject in the government procurement accept bribes and other improper benefits, or bribes and other improper benefits, they will be investigated for criminal liability. The main crime involved in the provision is crime of acceptance of bribes and crime of offering bribes. Article 80 in the Government Procurement Law, Article 77 in the Regulations provides that if the government procurement supervision departments and their staff abuse their power, neglect their duty or have favoritism and malpractice, the unit’s directly responsible manager and other directly responsible personnel are be held criminally liable for crime of power abuse, crime of neglect of duty and crime of favoritism and malpractice. Article 76 in the Government Procurement Law provides that if the procurement subject has concealed or destroyed the procurement documents which should be kept or forged or altered procurement documents, he will be held for criminal liability for crime of intentional destruction of accounting documents, accounting books, financial accounting reports, crime of providing false documents, issuing material documents inaccurately. Article 72, paragraph 1, item 1 in the Government Procurement Law and Article 74 in the Regulations stipulate that the purchasing subject and the undertaking subject will take criminal liability for the crime of collusion in entering bids if they did the following things: The party collude bad faith, disclose the bid standards before bid opening, obtain the relevant information of other undertaking subjects and modify their bid documents and corresponding documents, The undertaking subject withdraws or modifies its bid documents or corresponding documents under the suggestion of the purchasing subject. The parties negotiate between the undertaking subjects for the substantive content of the bid documents or corresponding documents like quotations, and technical proposals. The undertaking subject from the same group, association, chamber of commerce and other organizations comply with the requirements of the organization to participate in government procurement activities. The undertaking subjects agreed in advance that a specific subject will undertake the bid or deal. The undertaking subjects agreed that part of the subjects give up participating in government procurement activities or give up the bid or deal. The undertaking subjects and the procurement subjects, or between the undertaking subjects, in order to seek a specific subject getting the bid, deal or exclude other collusive behaviors from other subjects. Article 72 in the Regulations provides that if the undertaking subject to provide counterfeit and shoddy products, it will be held criminally liable for the crime of producing and selling shoddy goods. If the infringement subject implements above acts, it will be held criminally liable for the corresponding crime. (2) Administrative Litigation Administrative litigation refers to the way of remedy for the undertaking subject to resolve the procurement dispute and protect the legitimate rights and interests through administrative litigation, which is also the most important remedy for the

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government’s procurement of public services. The administrative litigation is applicable to the procurement dispute between the procurement subject and the undertaking subject, which has a strict procedure and high credibility. However, the strict procedure is time-consuming and labor-intensive, so, it is not suggested to take this remedy unless it was a procurement dispute with a huge amount or large impact. On November 1, 2014, the amended Administrative Litigation Law of the People’s Republic of China expanded the litigation scope and further improved the protection of the legitimate rights and interests in government procurement activities. According to the amended Administrative Litigation Law, the following acts in government procurement can be subject to administrative litigation: First, the act of being imposed a warning or fine. In the government procurement activities, (A) The following fines are for the following acts can take administrative litigation: collusive bidding, providing false materials to obtain the bid or deal; taking improper means to discredit and exclude other suppliers; refusing the inspection from the supervision units or providing false information. No dodging when the evaluation experts and the undertaking subjects have an interest; evaluation experts accept bribes or other improper interests from the procurement subject and the undertaking subject. (B) The following single warning behavior can take administrative litigation: not in accordance with the provisions of the preparation of the government procurement implementation plan or not in accordance with the provisions of the government procurement implementation plan for the record of the financial department of the people’s government at this level; diving the project to be bidden into a small project or using any other way to avoid public bidding; bid not in accordance with the committee, competitive negotiation group or inquiry group recommended or the supplier and manufacturer not from the candidates recommended by the committee, competitive negotiation group or inquiry group. The government procurement contract is not signed in accordance with items determined in the procurement documents; the government procurement contract is performed with additional goods, works or services of the same subject matter as the contract; the procurement amount exceeds 10% of the original contract procurement amount; the government procurement contract is changed, suspended or terminated without authorization. The government procurement contract is not announced in accordance with the provisions; the copy of the government procurement contract is not submitted to the financial department of the people’s government at this level and the relevant departments for the record in accordance with the stipulation. (C) The following acts of a warning and can be fined can take an administrative lawsuit: one should use public bidding but unauthorized use other methods of procurement; unauthorized increase the procurement standards; apply differential or discriminatory treatment for the undertaking subject with unreasonable conditions; negotiate with the bidders in the bidding process; fail to sign the procurement contrast with the bid supplier and manufacturer after sending the notice of the transaction; refuse the relevant departments to implement supervision and inspection in accordance with the law; fail to publish information of the government procurement projects on designated media; fail to implement the government procurement policy in accordance with the provisions; illegal interference in the procurement evaluation activities; fail

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to deal with the inquiries from supplier or the queries are overdue; fail to organize the acceptance of the performance of the undertaking subject in accordance with the provisions; alter the evaluation results by testing samples, and inspecting the suppliers. Second, it is believed that the administrative organs abuse administrative power to exclude or restrict competition. Keeping the market competition is the soul of government procurement. To maintain the competitiveness of the procurement market, it is necessary to curb the administrative organs’ power abuse to exclude or restrict market competition. Article 22, item 2 of the Government Procurement Law stipulates that no differential or discriminatory treatment on suppliers with unreasonable conditions shall be allowed. Article 64 stipulates that no unit or individual can required to make procurement from specific suppliers. The procurement subject excluding or restricting competition will be investigated according to law. If the undertaking subjects, the general public and service recipients found the procurement subject or administrative organs have above behavior, they can bring administrative litigation in accordance with the law. Third, it is believed that the administrative organs do not perform in accordance with the law, fail to perform as agreed or illegally change or cancel the government franchise and other agreements. As can be seen from the previous discussion, in government procurement, there are a variety of procurement methods corresponding to a variety of procurement agreements: there are procurement contracts signed through public competition, and procurement agreements such as franchise and commission agreements. These agreements mentioned above have different characteristics from civil contracts, because whether these agreements are valid, legal, revocable, and can be performed is often related to the judgment of the validity and legality of administrative acts. Although, they fit the Contract Law and the General Principles of Civil Law, it is not enough and these belong to administrative contracts. From the practical situation, much civil litigation often repeated complaints and adjudication, the reason is that civil litigation can not resolve and adjust the administrative legal relationship, there are many legal and procedural barriers.15 The amended Administrative Litigation Law includes agreements such as Government franchise into the scope of administrative litigation, and then disputes over government procurement agreements can also take administrative litigation. Fourth, the administrative organs violate its personal rights, property rights and other legitimate rights and interests. If the legitimate rights and interests of personal rights of each subject in the government procurement are infringed by the administrative organs or procurement subject, it can file an administrative lawsuit. Infringement of personal rights mainly refers to the right to life and health for a natural person, the right to name, portrait rights, and the right to the name of the unit, the right to reputation. Infringement of property rights includes infringement of the ownership rights, patent rights, trademark rights and other property rights of each procurement subject. In addition, infringement of the rights to know, participation, fair competition, justice and other rights and interests as mentioned before can also be filed in accordance with the Administrative Procedure Law. Article 53 of the amended Administrative 15

See footnote 12.

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Procedure Law provides that if a citizen, legal person or other organization considers that the normative documents designated by the departments of the State Council and local people’s governments and their departments on which the administrative act is based are unlawful, it may request a review of the normative documents together with the administrative action, and the normative documents here do not include regulations. On April 22, 2015, the Supreme People’s Court formulated an interpretation of several issues on the application of the Administrative Litigation Law of the People’s Republic of China, which makes provisions on how to review normative documents. According to Article 20 of the interpretation, if a citizen, legal person or other organization requests the people’s court to review a normative document together, it shall be raised before the first trial hearing. If there are justifiable reasons, they may also be raised during the court investigation. Article 21 stipulates that if the reviewed normative document is not legal, the people’s court shall not take it as the basis for finding the administrative act legal, and shall clarify it in the reasons for adjudication. The people’s court that makes the effective adjudication shall propose to the organ that made the normative document to deal with it, and may copy to the people’s government of the same level of the organ that made it or to the administrative organ at a higher level. The review of normative documents by the people’s courts can expose a large number of unlawful so-called “official documents” under judicial supervision, which is a great progress of China’s legal system. As described by Li Guangyu, vice president of the administrative division of the Supreme People’s Court, “official documents” are illegal and harmful. “The so-called normative documents, or what we commonly call ‘official documents’, we have a large number of official documents, and because it can be repeatedly applied to the public, often have a wide range and sustained effect. And if once illegal, the damage caused is more harm than a specific administrative act.”16 Before the introduction of the revised Administrative Procedure Law and its interpretation, a large number of regulatory documents for the government’s procurement public services were not included in the judicial review, which led to illegal procurement and infringement cases occurring occasionally. Now there are normative documents for judicial review that can also promote the administrative organs, the procurement subject prudently stipulating the procurement documents in line with the standards, rather than introduce normative documents by simple thinking. (3) Civil Litigation Civil litigation is a remedy for each subject of government procurement to resolve the procurement dispute through civil procedures. According to Article 43 of the Government Procurement Law, the government procurement contract is applicable to the Contract Law. Article 50 stipulates that both parties of the government procurement contract shall not change, suspend or terminate the contract without authorization. If the continued performance of the government procurement contract will damage the national interest and public interest, both the parties shall change, suspend or 16

See website: http://news.ifeng.com/a/20150427/43642710_0.shtml. Supreme Court: Courts can directly determine the legality of “red-headed documents”, April 27, 2015.

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terminate the contract. The party at fault shall be liable for compensation, and if both parties are at fault, each shall bear the corresponding responsibility. This provides a legal basis for each subject in government procurement to resolve disputes through civil litigation. The resolution of rights remedy in the Contract Law is also applicable to the resolution of government procurement disputes. The counterargument right for simultaneous performance, counterargument right of plea against the advance performance, counterargument right for security, right of rescission, right of cancellation, which are provided in the Contract Law, can be enjoyed by the infringed subjects in government procurement and can be remedied through civil litigation.

Administrative Power Remedy Administrative power remedy refers to the way of using administrative power for remedy. The remedy method has the following characteristics: Firstly, the remedy organ is the administrative organ, and all remedy acts occur within the administrative organ. Secondly, it is less time-consuming and quicker in execution. Since the dispute is related to the administrative organ, it is the objective requirement of administrative power to solve the problem quickly, and the delay not only doesn’t bring the solution, but also increases the administrative cost, and even generates new social problems. Thirdly, the filing subject does not need to pay for it. Unlike judicial remedies, administrative remedies are free, which can reduce the burden of vulnerable groups and are more conducive to realize the remedy justice. Government procurement, as an administrative measure of government governance, using administrative power to resolve procurement disputes is the best choice. Administrative power remedy mainly includes administrative reconsideration, inquiry, question, complaint, accusation, prosecution and application for recusal. (1) Application for Administrative Reconsideration Administrative reconsideration is a remedy with judicial nature within the administrative organ. The remedy is mainly applicable to the undertaking subject against the procurement subject of infringement. The remedy method has the following advantages: First, the scope of the remedy is wide. The scope of the administrative reconsideration is wide, and the undertaking subject can apply for administrative reconsideration not only for the specific infringement of the procurement subject, but also for the legality of the normative documents based on the administrative act. At present, in China’s procurement activities, because the country does not have a unified government procurement law, the government procurement implementation is mainly based on normative documents. These documents can regulate, guide, and promote the advancement of government procurement activities to a certain extent, however, these normative documents also have the problem of inappropriate procurement items, or even make provisions that violate the law. Reconsideration organs can make a review decision on these normative documents, which is of great significance for the regulation of government procurement activities. Second, the remedy is efficient. Administrative reconsideration can quickly and efficiently correct illegal and

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improper behavior due to the simplicity and convenience of the procedure. The efficiency of remedy is mainly reflected in: (1) Most administrative reconsideration is a written review, which generally does not require the presence of the undertaking subject, so the subject will not delay other work because of the application for administrative reconsideration. (2) Administrative reconsideration period is short, generally within sixty days to respond, the longest does not exceed ninety days. (3) Administrative reconsideration does not charge, which is conducive for the procurement subject to save costs. Third, the remedy effect is good. Because the review organs are composed of personnel who are familiar with the field or the department’s administrative management organs, this personnel can easily solve and deal with professional, technical procurement disputes. And review organs are generally located within the administrative system, which can rely on its leadership advantage, use administrative orders or other administrative means to quickly identify the facts, timely correct the violations or misconduct, and urge the review unit to timely implement the decision. Therefore, administrative reconsideration is an economic, efficient and fast way of remedy. (2) Inquiry, Question, Complaint Inquiry, refers to the undertaking subject that can ask the procurement subject if it has questions on the government procurement activities, and the procurement subject should make a timely reply, but the content of the reply shall not involve commercial secrets. The procurement subject should respond to the inquiries from the undertaking subject in accordance with the law within three working days. Government procurement evaluation experts shall cooperate with the procurement subject to answer the inquiries and questions from the asking subject. The legal basis for the inquiry is Article 51of the Government Procurement Law and Article 52 of the Provisions. Inquiry is the most simple and convenient way to exercise the remedy right, but the inquiry can only understand the situation, but will not solve the actual problem. In practice, if the procurement subject does not respond to the inquiry or does not respond truthfully, comprehensively and accurately as required by the inquiry, the undertaking subject has no further means and ways of remedy. Question refers to the undertaking subjects, who think that the procurement documents, the procurement process and the results of the transaction damage their rights and interests, can question the procurement subject in the written document within seven working days from the date they know or should know that their rights and interests are damaged. The procurement subject shall respond within seven working days after receiving the written question from the undertaking subject, and notify the questioning subject and other relevant undertaking subjects in writing, but the content of the response shall not involve commercial secrets. The legal basis for the question is the provisions of Article 52 and Article 53 of the Government Procurement Law. The Regulations specifically define undertaking subject should know the date of damaging its rights and interests: (a) The procurement documents can be questioned for the date of receipt of the procurement documents or the date of expiration of the procurement documents announcement period. (b) The procurement process to question the date of the end of the procurement process. (c) The winning bid or

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transaction results to question the date of expiration of the announcement period of the winning bid or transaction results. Questioning and inquiry function is similar, but they are different. First of all, the inquiries’ content is different. The inquiry is for the entire procurement activity, the question is only for the procurement documents and other content. Second, the role in the overall remedial process is different. Questioning is the pre-procedure of complaint, inquiry is only the general content understanding, and has no connection with the later remedy. Complaint, questioning that the undertaking subject is not satisfied with the procurement subject’s response or the procurement subject did not make a reply within the specified time, the undertaking subject can complain to the same level of government procurement supervision department within fifteen working days after the expiry of the response period. Supervision department will make a decision to this complaint, and notify the complainant and the relevant parties in writing. If the complainant is not satisfied with the government procurement supervision department’s decision or the department is overdue, it can apply for administrative reconsideration or bring an administrative lawsuit to the people’s court. The specific implementation of the complaint is based on Article 55 and Article 58 of the Government Procurement Law. Complaint is a higher stage of the question remedy, because the challenge is answered by the procurement subject, while the complaint is handled by the supervision department of the procurement subject, which is a specific administrative act. The inquiry, question, and complaint is the internal remedy of government procurement, but the remedy results are different. If the inquiry or question matters may affect the results of the winning bid or deal, the procurement subject shall suspend the contract, and if the contract has been signed, the performance of the contract shall be suspended. When the government procurement supervision department is dealing with the complaint matters, it can make the decision to suspend the procurement according to the specific circumstances, but the maximum suspension period shall not exceed thirty days. (3) Accusation, Prosecution The right to accuse and prosecute is a constitutional right granted to citizens. Government procurement is a specific inquiry of the government to perform its functions, and its activities should be subject to the supervision of the state and the people. Accusation and prosecution is a specific way for the people to monitor government procurement activities. According to Article 70 of the Government Procurement Law, any unit or individual has the right to sue and report on illegal acts in government procurement, and relevant departments and organs shall handle them in accordance with their respective responsibilities. Although the accusation and prosecution is only the citizens’ right to supervise the exercise of government procurement, it is also a form of remedy, because the relevant departments should investigate and deal with the content of the accusation and prosecution, which itself is also a form of remedy without strict procedural provisions and requirements as judicial remedies.

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(4) Application for Recusal Application for recusal can prevent favoritism and ensure the fairness of government procurement activities. According to the Government Procurement Law and the Regulations, there are two types of government procurement activities, active recusal and application for recusal. Active recusal is proposed for the procurement subject. When the procurement subject and the undertaking subject have one of the following interests, should take the initiative to recuse themselves: (a) Within three years before the procurement activities, there is a labor relationship with the undertaking subject. (b) Within three years before the procurement activities, as a director or supervisor of the unit of the undertaking subject. (c) Within three years before the procurement activities, it is the controlling shareholder or actual controller of the undertaking subject. (d) Has a relationship with the legal representative or the person in charge of the undertaking subject, there are husband and wife, blood relatives in the direct line, blood relatives within three generations or close in-laws relationship with the undertaking subject. (e) Other relationships with the undertaking subject that may affect the fair and impartial conduct of government procurement activities. The opposite of active recusal is the application for recusal of the undertaking subject. Undertaking subject believes that the procurement subject has an interest with other subjects, it can apply for recusal, and explain the reasons. After investigation, the application for recusal is justified, the person recused should be recused.

Letters and Visits Letter and visits is a system of rights and remedies characteristic of China, which refers to the activities of citizens, legal persons or other organizations using letters, e-mails, faxes, telephone calls, visits and other forms to reflect the situation and put forward suggestions, opinions or requests for complaints to the people’s governments at all levels and working departments of people’s governments above the county level, and then these questions are handled by the relevant administrative organs according to law.17 The system of letters and visits contains functions such as maintaining political stability, implementing comprehensive management, resolving social conflicts, expressing public opinion demands, implementing rights remedy, and supervising the work of the government, providing public power expectation trust and proxy entrustment for the livelihood needs and rights remedy of social members and citizens. Essentially, it is an institutional arrangement for realizing, maintaining and relieving individual rights with public power.18 At the same time, the letter and visit is also an alternative way when the administrative litigation, arbitration, administrative reconsideration and other remedies can not cover, it has a strong complementary: one is the complementarity of the scope. The scope of the letter and 17

State Council: Regulations on Letters and Visits, Chapter 1, Article 2. Wang Pu-chi: “Realizing the livelihood of the society by governance democracy—Interpretation of the attributes of China’s administrative petition system”, in Journal of Peking University (Philosophy and Social Science Edition), 2011, No. 6, pp. 83–89.

18

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visit includes the internal administrative acts of administrative organs, abstract acts and state acts that do not belong to the scope of administrative litigation, administrative reconsideration, administrative compensation and arbitration. Second, the complementarity of intervention time. According to the provisions, after the application period the parties can not apply for reconsideration, litigation, compensation, or arbitration of remedy matters, but can use the letter and visit remedy. Third, the complementarity of processing. The letter and visit work institution cannot replace the authority to deal with the organ for substantive judgment, but only the role of referral or triage.19 Therefore, the nature of the letter and visit system is actually a mechanism for repairing or correcting the previous acts of the state, initiated by the petitioners and handled by the petitioning organs. On the one hand, through the letter and visit, the people can demand a new treatment of the rights and interests that have been damaged by the state’s actions. On the other hand, through the letter and visit, the petition organ can carry out the recommended and compulsory corrective activities on the actions of the petitioned organ, which is an “immune” system that combines remedy, supervision and repair.20 In the government procurement, in addition to the various remedy advantages mentioned above, the remedy by the letter and visit also has the following remedy advantages: First, the remedy by the letter and visit applies to a wider range of subjects, and in addition to the undertaking subjects, the rights and interests of the general public can also be infringed by way of remedy by the letter and visit. In addition, in the circumstances that administrative litigation, administrative reconsideration, arbitration and other remedy methods can not achieve the goal of the remedy, the letter and visit remedy is more meaningful to the general public. Ordinary people can reflect their demands and make suggestions through letters and visits. Second, the applicable scope of acceptance is wider. Infringed people can petition as long as they believe that their legitimate rights and interests are infringed, without limiting the content and the form of the letter and visit. For example, the scope of the question is only the procurement documents, the procurement process and the winning bid, and the results of the transaction, while the scope of the letter and visit is not subject to this restriction, as long as the administrative organs and their staff behavior infringes on their legitimate rights and interests, it can file a petition, and do not need to consider whether it has been resolved through litigation, arbitration, administrative reconsideration and other legal channels. Third, there are various channels for letter and visit. According to the Regulations on Letters and Visits and the Opinions on Handling Law-Related Letters and Visits According to Law, letters, e-mails, faxes, hotlines, online letters and visits, video visits, green channels and oral reflections are all convenient channels for the infringed subjects to reflect their problems in government procurement.

19

Wang Kingland and Yang Fuzhong, “On the Complementarity of Letter and Petition remedy”, in Legal and Commercial Research, No. 4, 2011, pp. 49–50. 20 Tian Wenli, “The Nature, Function, Structure and Principles of the Petition System”, in Administrative Law Research, 2011, No. 1, pp. 59–62.

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8.3.2 Social Remedy Social remedy, which some scholars called public-assistant remedy, is a kind of “law-like” remedy, and is between the private remedy and the public remedy, mainly including arbitration and mediation. This remedy is characterized with an intermediary third party empowered by the national law or relied on by the parties, to eliminate the dispute by persuading the two parties, proposing a dispute resolution or making a binding decision.21 One of the goals of government’s procurement of public services is to improve citizens’ awareness of participation, management and self-service in social affairs by nurturing social organizations. The use of the social remedy in the government procurement remedy system is a specific example to achieve the above goal.

Arbitration Arbitration has a long history as a form of dispute resolution. It is a system in which dispute subjects enter into an arbitration agreement and voluntarily submit their procurement dispute to an arbitral tribunal composed of non-judicial arbitrators for adjudication and are voluntarily subject to such adjudication. Arbitration has undergone a transformation from “a purely private remedy to authorized remedy recognized by state law and judicial supervision, and modern arbitration is a mechanism of dispute resolution formed by the mutual cooperation of civil society and the political state”.22 Compared with general remedies, it has the following advantages: First, the parties’ wishes are respected and neither party may compel the other party to arbitrate. Second, the adjudication is generally final with huge binding. Third, the dispute is resolved quickly, easily and economically. Fourth, the parties’ secrets are kept, which is conducive to keeping commercial secrets and maintaining the business reputation. Fifth, it is highly professional and flexible. Sixth is independent and impartial, free from the interference of administrative organs, social groups and individuals. Seventh, it has a friendly atmosphere without going to the court, which is conducive to increasing the trust between the parties and the further development of future trade.23 Although arbitration has many advantages, it is not applicable to all disputes and controversies. According to Article 2 of China’s Arbitration Law, disputes over personal relationships such as marriage, adoption, guardianship, support, inheritance and other administrative disputes that should be handled by administrative organs according to the law are not arbitrable. According to 21

Jiao Fumin, “Research on Government Procurement remedy System”, Fudan University Press, 2010, p. 54. 22 Hu Binbin, “On the Nature of Arbitration and its Relationship with the General Agreement on Trade in Services”, in Nanjing Normal University Journal (Social Science Edition), No. 7, 2006, p. 34. 23 Chen Yin: “Arbitration—an effective way to deal with economic and trade disputes in today’s world”, in Journal of Guangxi University Wuzhou, No. 2, 1997, pp. 62–63.

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the spirit of this provision, most procurement disputes of government procurement are arbitrable, because such disputes are neither disputes about personal relations nor all administrative disputes that should be handled exclusively by administrative organs. Although the Government Procurement Law, the Regulations stipulate that the disputes of the infringement in the procurement documents, the procurement process and the bid, the deal must be firstly responded and dealt with by the procurement subject and the procurement supervision departments, but this is not a statutory restriction on the way of arbitration remedy. According to the spirit of the Arbitration Law, arbitration is the voluntary choice of the parties. In addition to the non-arbitrable matters provided in the Arbitration Law, the solution of all disputes should be chosen by parties. “Arbitration is based on party’s aspiration, and the effect of arbitration does not derive from the compulsion of the state, but from the parties’ choice and recognition of the arbitration, that is to say, it all depends on parties’ choice. Therefore, as long as the dispute over the substantive rights and interests is within the parties’ free disposal, the parties should be allowed to choose arbitration as a means of dispute resolution.”.24 Most tort disputes over government procurement can bring the arbitration, but in practice, arbitration is mainly applied to disputes over procurement contracts between the undertaking subject and the procurement subject. The arbitration can also be applied to tort disputes between the procurement subject and the service recipient, and between the undertaking subject and the service recipient, but it is not recommended. This is because the disputes between these subjects have no direct civil rights and obligations. There is no direct civil right and obligation relationship between the procurement subject and the service recipient, as well as the undertaking subject and the service recipient. The undertaking subject only produces public services replacing the procurement subject, and the responsibility for the result is ultimately borne by the procurement subject. There is no direct relationship between the undertaking subject and the service recipient. It is better to choose a direct relationship remedy rather than arbitration for procurement disputes where there is no direct civil right and obligation relationship between the parties. There is not only a legal basis but also legal support for the procurement subject and the undertaking subject to submit to arbitration for infringement disputes. Article 43 of the Government Procurement Law provides that the Contract Law shall apply to government procurement contracts. Article 128 of the Contract Law provides that if the parties are unwilling to reconcile or mediate or if reconciliation or mediation fails, they may apply to an arbitration institution for arbitration in accordance with the arbitration agreement. Parties to foreign-related contracts may apply for arbitration to a Chinese arbitration institution or other arbitration institutions in accordance with the arbitration agreement. If the parties do not enter into an arbitration agreement or if the arbitration agreement is invalid, they may sue to the people’s court. The parties shall perform the legally effective judgment, arbitration agreement or mediation. If they refuse to perform, the other party may request the people’s court to enforce it. According to Article 19 of the Arbitration Law, the arbitration agreement exists 24

Wang Liming, “A Comparative Study of Arbitration Legislation Across the Strait,” in Law Review, 2004, No. 1, p. 43.

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independently, and the change, dissolution, termination or invalidity of the contract shall not affect the validity of the arbitration agreement. Therefore, arbitration is an effective remedy to resolve the infringement dispute between the procurement subject and the undertaking subject.

Mediation Mediation refers to the remedy way that the People’s Mediation Committee urges the subjects involved in government procurement to voluntarily reach a mediation agreement on the basis of equal consultation, resolving procurement disputes through persuasion and facilitation. “The people’s mediation system is an important part of China’s legal system of civil procedures and a democratic legal system with Chinese characteristics, and it plays an important role in social life, especially in judicial activities.”25 Mediation has an important role in the government procurement remedy system, because “law is not absolutely universal and not all the social problems can be transformed into legal problems, and not all disputes can be solved by law. And because of the informal nature of the mediation system, the parties do not always have to be in an adversarial position in the litigation, ‘mediation with humanity, litigation with law’, and the possible intervention of various third parties, emotions, language, customs, and factors of public opinion, play a positive role in the dispute.”26 In August 2010, China promulgated the People’s Mediation Law to improve the people’s mediation system. As a result, mediation in China has a law to follow. The People’s Mediation Law makes clear provisions on the basic principles of the mediation, the composition of the People’s Mediation Committee, the generation of people’s mediators, the mediation procedures, and the nature of mediation agreements. Article 1 of the People’s Mediation Law stipulates that the mediation agreement reached through the mediation of the People’s Mediation Committee have legally binding and the parties shall perform as agreed. If one party refuses to perform or fails to perform in full, the other party may apply to the People’s Court for compulsory enforcement. In government procurement, the infringed subject can resolve the procurement dispute according to the People’s Mediation Law, especially in some procurement disputes with little professionalism and small infringement amount. For example, the undertaking subject thinks that the information disclosure of the government procurement subject is not comprehensive, the notification method is inappropriate, and the payment period and method stipulated in the procurement agreement are not clear. The service recipient thinks that the quantity of public services produced by the undertaking subject is insufficient, the procurement subject solicits opinions in an inappropriate way and the coverage is small. These problems, 25

Wu Jun, “The Re-improvement of the People’s Mediation System,” in Study and Exploration, No. 1, 2012, p. 90. 26 Chen Pu: “Rethinking and Improving the Mediation System—Evaluating the Supreme People’s CChina’st’s Working Principle of “Prioritizing Mediation and Combining Mediation and Judgment”, in Hubei Social Science, No. 3, 2011, p. 132.

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which are closely related to the daily life of the infringed subject, can usually be solved quickly through the grassroots people’s mediation committee. If we use the remedy of the question, complaint, administrative reconsideration, administrative litigation, and civil litigation rather than mediation, not only the remedy is long and cumbersome, but also costs a lot of human and material resources. Therefore, as an ancient dispute resolution, mediation can continue to play an active role in the government procurement remedy system.

8.3.3 Self-Remedy Self-remedy, which some scholars call private remedy, is a remedy that the parties believe that their rights have been infringed, and in the absence of a third party to intervene in the dispute resolution in the name of neutrality, they do not go through state organs and statutory procedures, but rely on their own strength or private strength to resolve the dispute and protect their rights. Private remedy has a small scope and a large scope. In a broad sense, it includes pre-prior, defense, passive private remedy, including post-occurrence, aggressive, and active private remedy.27 Different classification criteria divide different types, for example, according to their motives of dispute resolution, these can be divided into retaliation type, which is only for venting anger rather than for dispute resolution, and treatment type, which is for dispute resolution. According to the means to resolve disputes, these can be divided into violent type, which resolves the dispute by violence or force, and peaceful type, which resolves the dispute by peaceful means. Modern society does not allow retaliation type and violent means type to resolve disputes, and all dispute resolution must be within the legal framework or in line with the values of society such as public order and morality, i.e., its way, procedure or physical content must be in line with the requirements of the law, morality and other social norms. Dispute resolution and processing through peaceful means are encouraged and supported by modern society, such as settlement between parties is one of the private remedies in modern society. Settlement, one of dispute resolution, is both internally recognized by the parties and has a legal basis and guarantee. Therefore, it is feasible and necessary to introduce the remedy in the government procurement dispute resolution. Settlement is generally regarded as a dispute resolution method in which the parties reach an agreement on their own to settle the dispute without the participation of a neutral third party. Compared with mediation, arbitration and litigation, settlement is characterized by a high degree of autonomy and non-strict normality. Whether it is self-settlement in litigation or settlement outside litigation, there is generally no direct intervention of a neutral third party, and there are no strict procedural norms and substantive law basis, and its results and processes depend on the autonomy of the parties to the 27

Zhou Linjing and Yin Jiwei, “On Fair Competition Right Infringement and Legal Remedies”, in Theory Monthly, No. 1, 2012, p. 119.

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dispute.28 After a dispute arises between the parties, communication, consultation and tolerance should be encouraged on the basis of distinguishing between right and wrong, and the parties should encourage mutual understanding and accommodation to resolve the dispute by reaching a settlement agreement. The settlement system has also been traditionally recognized by China’s judiciary, and in the course of litigation, as long as the parties voluntarily settle, the litigation can be ended. For the settlement agreement reached in the course of litigation, the parties can apply to the People’s Court for confirmation and production of a mediation letter, and the settlement agreement has the effect of compulsory enforcement. Settlement is applicable to a wide range of disputes, such as contract debts, tort debts and some disputes over causeless management, unjust enrichment, property disputes, intellectual property disputes, marriage and family, which in principle allow the parties to settle by reaching settlement agreements.29 Settlement is a very worthy way to resolve government procurement tort disputes. First, it has a wide range for the remedy object. Disputes arising from procurement subjects, undertaking subjects, service recipients, and the general public in government procurement can be solved by the remedy of settlement. Unlike other remedies, such as administrative reconsideration, which can only resolve disputes between the procurement subject and the undertaking subject, service recipients and the general public, disputes between the undertaking subject and the service recipients cannot be applied. Secondly, the coverage of the dispute resolution is huge. Whether it is a dispute over the implementation of the procurement agreement, a dispute over the infringement of the procurement activity or a dispute over the government’s inaction or misconduct in the government procurement, the remedy of settlement is applicable. Of course, if the content of the settlement violates the national interest, public interest and public order and morality, the settlement system cannot be applied. Third, the settlement of disputes is strong. Settlement can solve the original procurement dispute content, or can abandon the original procurement dispute and create a new settlement content. For example, if the original procurement dispute was about the quantity of public services provided, after settlement, the parties can change the issue to one of how to improve the quality of public services or the timely provision of public services without mentioning the quantity. At the same time, the settlement can either expand or narrow the original dispute content. Fourth, the dispute settlement is highly enforceable. Settlement is a manifestation of the parties’ autonomy, and both parties have a common willingness to resolve the procurement dispute without external pressure. All acts and agreement results are voluntarily reached by both parties in the spirit of mutual understanding and accommodation with a common inner confirmation. Therefore, the parties have a subjective willingness to actively perform the settlement results. The law also provides for the performance of the settlement agreement, that is, if one party does not perform the settlement agreement, the court may resume the performance of the original effective judgment, thus rendering the settlement 28

Yan Bohui, “Problems and Improvements of the Operation of China’s Settlement System,” in Journal of China Youth Politics College, Vol. 6, 2013, pp. 125–126. 29 Wang Liming, “On Settlement Agreements,” in Politics and Law, No. 1, 2014, pp. 51–52.

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agreement reached invalid. For example, Article 230 of the Civil Procedure Law stipulates that in the execution, if the parties reach an agreement by their own settlement, the executor shall write the content of the agreement into the transcript and have it signed or sealed by both parties. If the applicant for enforcement reaches a settlement agreement with the execute due to fraud or coercion, or if the parties do not fulfill the settlement agreement, the people’s court may, upon application of the parties, resume the enforcement of the original legal instrument in force.

8.4 Deficiencies of the Remedy System China’s government procurement public services has initially established a remedy system covering criminal liability, administrative litigation, administrative reconsideration, inquiries, questions, complaints, letters and visits, prosecutions, accusations, mediation and reconciliation. The remedy system is characterized by the following: First, there are various ways of remedy. There are both judicial and administrative remedies, both public and private remedies. For the dispute appeared in the primary stage of the government procurement, the infringed subject can find a suitable remedy. Second, focusing on the final role of judicial remedy. In all kinds of remedies, in addition to the final arbitration or the final decision of the administrative reconsideration, if the infringed subject is not satisfied with the results of other remedies, he can receive judicial remedy ultimately. Third, the remedy object is comprehensive. In government procurement, whether the procurement subject, the undertaking subject, or service recipients and the general public, as long as the legitimate rights and interests are infringed, they all have corresponding remedy channels. Fourth, the remedy rights and interests are rich. In the existing remedy system, the rights and interests that are truly infringed are generally remedied. These system advantages are important to smoothly promote the government’s procurement of public services. However, the current remedy system is not perfect, especially as a new type of government governance system, there are still many defects and shortcomings.

8.4.1 Lack of an Independent Remedy System Any system must have independent institutional content. The government procurement remedy system must also have its own institutional content and characteristics, but, at present, it is not easy to construct an independent and complete government procurement remedy system because scholars do not have a unified understanding of the position of the government procurement system, and there are still different understandings on whether there is an inclusive relationship between government procurement and government procurement. As mentioned above, the Regulations and Measures include the procurement of public services into the scope of government procurement, so a series of government procurement systems, including the

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remedy system, are naturally applicable to government procurement, easily leading that the “government procurement” and “government procurement” are in the same boat. That is to say, the advantages of the government procurement remedy system become the advantages of the government procurement remedy system, and the defects become the defects of the government procurement remedy system. This characteristic of no independence and autonomy itself is the defect of the remedy system. The government procurement public service has its own unique purpose and functional positioning, and its remedy system should also have its own remedy objects and remedy content. Even if the government procurement remedy system can sometimes draw on some good experience and practices of the government procurement remedy system, the two must not be confused, let alone copy completely. In fact, the government procurement remedy system can not solve the various types of disputes that occur in government procurement. For example, as far as the procurement method, there are more ways of government procurement than government procurement. As far as the disputes arising from the procurement method are concerned, there are also more disputes arising from the government procurement method than government procurement. Article 26 of the Government Procurement Law stipulates that there are open bidding, invitation to bid, competitive negotiation, single-source procurement, inquiry and other procurement methods identified by the government procurement supervision department under the State Council. At the same time, it is stipulated that open bidding shall be the main procurement method of government procurement. And according to the Measures, the government procurement methods are more than the government procurement methods. Article 19 of the Measures stipulates that, according to the prescribed procedures to determine the undertaking subject, the procurement subject shall sign a contract with the undertaking subject, and according to the characteristics of the service project demand, take the form of procurement, commissioning, leasing, franchising, strategic cooperation. In other words, in addition to all the ways of government procurement, there are leasing, franchising, strategic cooperation and other forms of special procurement in government procurement. By the same token, this will also lead to more procurement disputes and increase the need for the remedy of rights and interests. Therefore, if we only take the government procurement remedy system to resolve disputes arising from government procurement, just like “wearing a small hat in a big head”, which cannot solve all disputes of government procurement.

8.4.2 The Administrative Power Tends to Dominate the Remedy Administrative power remedy is an efficient and economical way of dispute resolution. All countries’ government procurement remedy systems pay attention to playing the role of administrative power remedy. In China’s government procurement remedy system, many administrative power remedies are also set, such as inquiry,

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question, complaint, and administrative reconsideration. These administrative power remedy methods have played a positive role in solving the procurement disputes in China. However, if the role of administrative power in the government procurement remedy system is overemphasized, then the remedy of administrative power will no longer be a tool to solve disputes in government procurement, but become a political activity or an opportunity to implement national policies. At present, the scope of the involvement of administrative power in procurement remedy in China is too wide, too deep, too much compulsory and too demanding. In reality, the supervisory power is concentrated in the government finance department, which cannot ensure the justness of the remedy. According to the Government Procurement Law, the financial departments of the people’s governments at all levels is the supervision of government procurement, and will perform their supervision responsibilities according to the law. The Measures further refine the provisions on the financial sector to perform the supervision responsibilities. The Article 25, 26, 27, 30, 32 and 37 of the Measures stipulates the provisions on the financial sector to exercise the procurement of project preparation, review, approval, performance evaluation, supervision and punishment. Article 25 of the Measures stipulates that the finance department shall make clear requirements for budgetary arrangements related to the procurement services when arranging the annual budget preparation, and develop a special catalog of procurement service projects in the budget statement. Article 26 stipulates that the management body of the government procurement services shall review the government procurement services project list filled out by the purchasing subject. Article 27 stipulates that the procurement services project list reviewed by the financial department will be issued to the relevant purchasing subject along with the departmental budget approval. The procurement subject should organize the procurement services in accordance with the procurement services project list issued by the financial sector. Article 30 provides that the finance department shall, in accordance with the requirements of establishing a whole process budget performance management mechanism, strengthen the cost–benefit analysis, and promote the performance evaluation of government procurement services. Article 32 provides that the financial, audit and other relevant departments shall strengthen the supervision and audit of government procurement services to ensure that the government procurement services funds have standardized management and reasonable use. Article 37 stipulates that the finance department shall, in conjunction with relevant departments, the procurement subject to establish a credit record of the undertaking subject for its undertaking activities, give administrative penalties in accordance with law for activities like falsify, fraudulent receipt of financial funds and other illegal and irregular behavior of the undertaking subject, and include this subject into the government procurement services blacklist. From the above provisions, the government procurement project preparation, review, approval, performance evaluation, supervision and punishment are exercised by the centralized financial sector, the financial sector is the role of government procurement “athletes” and “referee”, so it is difficult to ensure timely and fair remedy for infringed rights and interests, and its impartiality in the remedy of procurement disputes cause concerns. The reasons are: First of all, the above-mentioned government procurement activities are carried out at the request

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and intervention of the financial department, and there are inextricable relations between the financial department and the procurement subject. Once the procurement subject infringes on the rights and interests of the undertaking subject or service recipients or the general public, it is difficult to ensure that the financial department can judge objectively and handle fairly. Second, the administrative power to questions, complaints and other remedies set a number of mandatory requirements. First, the restrictions on the acceptance subject. Questions can only from the undertaking subject to procurement subject, and it not directly to the supervision department. And complaints can only be sent to the supervision department. Second, the restrictions on the acceptance content. Questions and complaints can only relate to the infringed rights and interests of the undertaking subject in the procurement documents, the procurement process and the bid and deal. Third, there are strict requirements for the materials provided. Article 55 of the Regulations provides that the questions and complaints should have a clear request and the necessary supporting materials. The matter of the complaint shall not exceed the content of the matter questioned. Fourth, the order of processing procedures has mandatory provisions. If you want to complain must first question, only if you are not satisfied with the response to the question or fail to respond within the specified time, you can complain. Undertaking subject who is not satisfied with the questioning answer or does not get the answer within the specified time can not directly apply for administrative reconsideration or issue the administrative litigation to the people’s court. only after the complaint, and the subject is not satisfied with the complaint or the supervision department is overdue for processing, the undertaking subject can directly apply for administrative reconsideration or issue the administrative litigation to the people’s court. These provisions strengthen the administrative organs leading role in dealing with the procurement disputes. Although this practice has high efficiency and professionalism, it deprives the undertaking subject’s freedom to choose the remedy and reduces the fairness of the remedy.

8.4.3 The Remedy Scope is Narrow Whether the scope of the remedy is moderate is the key to the success or failure of the remedy system. Generally speaking, the scope of remedy is too narrow to achieve the goal of remedy. Therefore, it becomes inevitable to expand the scope of the remedy. From a theoretical analysis, a wide range of remedies should be more conducive to protecting the people’s legitimate rights and interests, compared with a small scope. In fact, if the remedy system is designed with a wide range of remedies, and the realistic conditions can not provide remedy to the infringed rights and interests, then not only will the remedy goal not be achieved, but it will also lead to people’s complaints and distrust of the remedy system. Therefore, unrealistically expanding the remedy scope is not a good choice. The scope of government procurement remedies in China can generally meet the need to protect the procurement rights and interests, but by

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comparing the remedy system in foreign countries and other remedy systems in China, the scope of government procurement remedies is still narrow. First, the potential rights and interests infringed are not remedied. Government procurement rights and interests can be divided into substantive rights and interests and potential rights and interests, both of which are protected legal rights and interests. However, in China’s existing government procurement remedy system, the law only provides the remedy for damaged substantive rights and interests, but not for potential rights and interests. Article 51 of the Government Procurement Law stipulates that suppliers who believe that the procurement documents, the procurement process and the results of the winning bids and deals have infringed their rights and interests can only question. From this article, it can be seen that the undertaking subject here is the undertaking subject participating in the procurement process, but for the potential undertaking subject who did not participate in the procurement process due to the infringement, because it can not meet the conditions of substantial damage to the rights and interests, therefore, the potential undertaking subject can not question. From the perspective of rights and interests, this provision requires that only the rights and interests of the undertaking subject are real be damaged, they can question excepting the potential condition. From the above, it can be seen that China’s government procurement remedy system protects substantive rights and interests rather than substantive and potential rights and interests together. In practice, the potential rights and interests are not remedied, and the harm may be greater than the substantive rights and interests are not remedied. Potential rights and interests are often infringed upon between the undertaking subjects or collusion between the undertaking subjects and the procurement subjects, and if there is no remedy for potential rights and interests, then it is the connivance and favoritism to the irregularities and violations. This not only is not conducive to the orderly competition of government procurement, but also will form a social culture of speculation, which is not conducive to the healthy development of government procurement. For potential subjects, this is also a kind of “secondary damage”, the first time due to infringement, they do not have the qualification to enter the procurement process. And then, they would like to make up for the damaged rights and interests by way of remedy, but the law provides that there is no substantive damage so they don’t have the question right. For the potential subject, they have been excluded from the procedure, and there is no substantive damage, and because of it, they don’t have the right to question, so they can not get the remedy, which is the “secondary injury”. Second, the general public does not have a special way to get remedy. The government’s procurement of public services is not only a move to modernize the government’s governance model, but also a move to benefit the people. It is the trend of the times to provide high-quality and diversified public services to the people through government procurement, and it is also the requirement to share the fruits of reform to the general public. The remedy of the general public’s procurement rights and interests is an important element of the government procurement remedy system. However, except for the right to sue and report and the right to letters and visits under Article 70 of the Government Procurement Law, there is no special remedy

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channel for the general public in the remedy system. In the government procurement remedy system, the remedy channels of the undertaking subject are inquiries, questions, complaints, administrative reconsideration and administrative litigation. The procurement subject also uses civil litigation, arbitration, mediation, reconciliation and other remedy methods according to the procurement contract. the service recipient also has the right to evaluate the service item, such as according to Article 30 of the Measures, the financial department shall promote the establishment of the comprehensive evaluation mechanism consisting of the procurement subject, the service recipient and professional institutions, promote third-party evaluation and evaluate the procurement project quantity, quality and performance of the funds use in accordance with the combination of process evaluation and results evaluation, short-term effect evaluation and long-term effect evaluation, social benefit evaluation and benefit evaluation. Evaluation results are an important reference for selecting the undertaking subject. The procurement subject, the undertaking subject and the service recipient in the government procurement have special remedy channels, while the general public has no special remedy channels, which on the one hand undermines the integrity of the government procurement remedy system. On the other hand, it will also violate the fairness of the rights and interests remedy.

8.4.4 The Singularity of Legal Remedies Various remedies are available for victims to choose the most suitable dispute resolution according to the reality. Therefore, it is a necessity to have various remedy types in its development. At the same time, the competition among remedy types is also conducive to their improvement and advancement. China has various remedy types in the government procurement system, including judicial remedy, administrative power remedy, social remedy and self-help remedy. Victims are generally allowed to select a suitable remedy in a free sense according to their needs, except several particular types according to regulations. In the long run, the established remedy types of government procurement are still far from enough to meet the needs of remedy variation.

The Absence of Public Interest Litigation Public interest litigation refers to allowing citizens, legal persons, other organizations or specific agencies, other than those with direct interests, to file a lawsuit for acts that violate the law and infringe on the national and social public interests, and the court will hold the offenders accountable. Public interest litigation is designed to protect national, social and public interests. Public interest litigation examines illegal acts that infringe on the public interest, not acts that purely infringe on private interests, or acts that infringe on private interests as the main and public interests as the second. The subjects of public interest litigation are not limited to those whose specific legal

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rights are directly infringed. Other agencies, groups, and individuals can also file lawsuits on behalf of the state and the public. Since public rights are damaged, every subject protected by public rights will be indirectly infringed by illegal acts.30 Public interest litigation stands a longer history in western countries while still in its exploration in China. Article 55 in the Civil Procedure Law states that authorities and relevant organizations may file for lawsuits against behaviors that infringe public interests. These behaviors may lead to environmental pollution and infringement on legitimate rights and interests of many consumers. This is the first time that Chinese law has made provisions on public interest litigation, which is of great significance for protecting public interests. However, the regulation is less practical without the supporting system. First, the qualifications of the subject who can file a lawsuit are not clear as “authorities and relevant organizations” is not clearly defined. Second, the scope of protection is narrow. Only “environmental pollution and infringement on the legitimate rights and interests of many consumers” is protected, and there is no legal provision for a large number of public interests that require public interest litigation. This is not only inconsistent with the development trend of litigation, but also is not conducive to safeguarding the public interests. “In administrative management, some administrative organs’ actions or omissions do not directly or obviously damage the rights and interests of a particular citizen, legal person or other organizations, but have serious consequences for public social interests and economic and social order. Public interest litigation is needed when no one files for a lawsuit.”31 In government procurement, it is easy to decrease responsibilities of the procurement subject and condone the infringement on public interests if lacking public interest litigation. In the process, all present parties don’t share the same incentives and goals. The inconsistency of various incentives and goals may lead to disputes. The motive of the procurement subject is to enhance the government’s service function and improve the quality and level of public services; the main motivation of the undertaking subject lies in the individual’s remedy interests. Guided by benefitoriented thoughts, the undertaking subject may infringe the interests of citizens or the procurement subjects for the sake of profit. Under this circumstance, if the state fails to supervise and guarantee, there may be a danger of state responsibility escaping into private laws, causing heavy losses to public interests and at the same time losing or weakening the state responsibility. Under the traditional concept of “no interest means no right to sue”, the aggrieved person who has no direct interest in the lawsuit cannot file a public interest lawsuit. In government procurement, sometimes it is not enough to rely on direct stakeholders to supervise the behavior of the government and the procurement subject. Especially when procurement of public service infringes on public interests, and the direct stakeholders who cause such infringements may be the beneficiaries, while the real 30

Tian Kai: “Administrative Public Prosecution”, China Procuratorial Press, 2009 edition, pp. 16– 17. 31 Ying Songnian: “The Perfection of the Administrative Remedy System”, in “Administrative Law Research”, No. 2, 2012, pp. 8–9.

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victims are the general public who are indirectly infringed due to the infringement on public interests. Under such circumstances, there will be a situation in which the damaged rights and interests cannot be remedied because most people who have been infringed do not have the right to file a lawsuit. This kind of system that benefits the violators and damages the victims is contrary to the value of the government procurement system. It not only fails to protect the legitimate rights and interests of the people, but also does not meet the system value requirements of government procurement of public services that transform government functions and improve governance.

The Absence of Specialized Third-Party Remedy Modes Specialized third-party remedy means that a dispute occurred in the government procurement is solved by a third party, which is independent of the government, the procurement subject, the undertaking subject, and the service object. The third-party remedy is not only a need for innovation in remedy types, but also a manifestation of the principle of “social coordination and public participation” in the social management innovation requirements. “Because the third-party organization has little or no stake in the disputes involved, it can analyze and judge the disputes from a relatively independent and objective perspective, which is more conducive to finding out the truth and resolving conflicts.”32 This remedy type shares the common cultural understanding of “fairness and justice, honesty and integrity, thoughtfulness and consideration, care and respect, public interests and devotion, constancy and persistence.” Therefore, fully leveraging the unique abilities of third parties in economic, social and judicial governance is a common sense in modern social management.33 China has recognized the role of third parties in government procurement. For example, Article 31 of the Measures proposed that when evaluating government procurement, a comprehensive third-party evaluation mechanism should be established, which consists of the procurement subject, service objects and professional institutions. Although the third-party remedy type of government procurement remedies is different from the concept and connotation of the third-party evaluation mechanism defined in the Measures, it reflects the trend of the times to give full play to the role of third parties in government procurement. Therefore, the lack of a specialized third-party remedy type represents a shortcoming in the government procurement remedy system.

32

Pei Li, Pan Qiang]: “Independent Third Party Ferry to Social Management”, in China Reform News, December 9, 2011. 33 Zhang Zhiming: “Third Party Culture: The Spiritual Support for Social Organizations’ Effective Participation in Social Governance”, in Journal of Dalian University of Technology (Social Science Edition), 2014, No. 7, p. 112.

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8.4.5 Incomplete Supporting Mechanism The great performance of a system needs both a reasonable system and other supporting systems. In the same vein, the government procurement remedy system not only needs to study the value, content and performance of the system, but also study other supporting systems. China’s existing government procurement remedy system not only has defects in the system itself, but also has shortcomings in the supporting mechanism.

People’s Weak Awareness of Relieving Rights With weak awareness of rights and safeguarding rights, Chinese citizens have been hating litigation since ancient times. Besides, they believe the litigation costs would be high, which further restrains them from seeking authorities or lawsuits to protect their rights. Therefore, when being violated, people often conceal their losses instead of directly accusing other relevant parties to remedy their interests. In terms of remedy types, rather than seeking to the court, people strategically tend to choose reconciliation and intercession and other remedy types, which aren’t intensively controversial or offending in nature. Though remedies like reconciliation and intercession are effective, they are easy to allow violators to evade their administrative responsibilities, and even criminal liability through transforming economic interests. In some sense, this kind of remedy type decreases violating costs and increases the risks of rights being violated.

The Absence of Establishing a Supporting Mechanism Government procurement is a new model of government governance, about which people have superficial knowledge. Once infringement occurred, people tend to have no idea dealing with it. For example, when seeking a remedy from the court, the parties have different claims on whether to file an infringement lawsuit or a contract performance lawsuit; there are also disputes over whether the court should be heard by the administrative tribunal, or by the economic tribunal or the civil tribunal. This will lead to many obstacles when disputes are brought to judicial remedies. Therefore, it is an urgent requirement to establish a supporting remedy system in order to fully leverage the role of remedy rights.

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8.5 Legal Measures to Improve the Remedy System 8.5.1 To Figure Out the Value of the Remedy System “The design and construction of any legal system is based on certain legal values, social values and political positions, and is realized through specific normative design. In a certain sense, the design and structure of the system aren’t determined by a normative design, but by the influence of different ideas.”34 The excellence of a good system doesn’t lie in the system itself but in its values and philosophies. In the same vein, the good operation of the system can also promote the realization of the system values. “Systems and philosophies can be reasonably reinforced; great philosophies facilitate the establishment of good systems. Otherwise, they can also drop into a vicious circle.”35 The establishment and improvement of the remedy system for government procurement of public services must be guided by advanced philosophies and reasonable values. Only in this way, will the system fully play its role in remedy. As a part of government procurement of public services, the remedy system must follow the principle of cooperation, market competition and efficiency, responsibility, law reservation and due process. On this basis, the remedy system takes equity, efficiency, order and variety as its values.

Equity Equity is an ancient and important value that is often used as an important criterion for measuring the rationality of social systems. In the remedy system, equity refers to allocating the remedy rights and obligations in a fair and just way, both in formality and essence. It is needed to achieve this: “The law equally protects everyone’s legitimate rights. No matter who they are nor their authority and wealth, everyone gets equal remedy from laws once his or her legitimate rights get infringed”.36 If the relief system cannot be fair and just, “not only will the original disputes not be resolved, but new disputes will also arise.”37 In practice, even if the law provides detailed and complete provisions on substantive rights and procedures, substantive rights will become nothing if both parties to the rights cannot participate equally in the remedy system. In this aspect, if laws 34

Liu Kai: “The Deviation and Adjustment of the Concept of Construction of China’s Government Procurement Remedy System”, in “Journal of Hunan Police College”, No. 2, 2015, p. 72. 35 Jiang Ming’an: “Administration by Law must prescribe the right medicine”, in “People’s Forum”, No. 10, 2011, p. 12. 36 Jiang Mingan: “How to Make the Rule of Law a National Belief”, in People’s Forum, No. 6, 2013, p. 99. 37 Ying Songnian: “The Perfection of Administrative Relief System”, in Administrative Law Research, No. 2, 2012, p. 6.

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can’t guarantee an equal, fair and real remedy system, the protection of substantive rights has no actual effects.38 In the remedy system, equity has the following several contents. First, the allocation of remedy rights should be equal and shared by everyone. However, there is an unfair situation in the allocation of remedies in the Government Procurement Law. For example, in the challenge procedure, it is stipulated that only suppliers who have suffered substantial damages can raise challenges, while potential suppliers cannot exercise their right to challenge even if they suffer damages. This allocation of remedy rights not only fails to reflect the value of equity, but also infringes upon the legitimate rights and interests of potential subjects. As mentioned above, in government procurement, if the undertaking subject obtains the purchased item through improper means, then it as the winner will not initiate the remedy procedure on its own initiative. On the contrary, other undertaking subjects who have been infringed and feel the deepest and most urgent need to initiate remedy procedures are excluded from the remedy system according to the existing regulations. Second, the selective remedy isn’t allowed. According to Article 52 in the Government Procurement Law, suppliers can only challenge if they believe that their rights and interests have been damaged in the procurement documents, the procurement process, the winning bid, and the results of the transaction. Otherwise, the undertaking subjects can’t challenge and be remedied if other interests are infringed. This kind of selective remedy is scarcely aligned with the value of equity. In government procurement, as long as the legitimate rights and interests of the undertaking subjects are infringed, they must receive fair remedy instead of selective protection. Otherwise, it is trampling and disregarding the value of equity. As a remedy system for damaged rights, the government procurement remedy system should also be in line with all aspects of the procurement process. It also needs to ensure that the subjects who are adversely affected in the process can also receive remedies, so as to achieve an equal remedy value. Therefore, the equity should be the primary value in establishing and improving the remedy system.

Efficiency “From the point of view of legal economists, all legal systems should aim at effectively distributing social resources.”39 That is to say, to get the maximum output return with the least cost input. The efficiency value of the government procurement remedy system refers to whether the legal rights and interests of the aggrieved subjects can be remedied in a quick and efficient way in the remedy mechanism. It demands the following aspects.

38

Cheng Liaoyuan and Wang Renbo: The Theory of Rights, Guangxi Normal University Press, 2014 edition, p. 383. 39 Zhang Jiansheng: Basic Theory of Modern Administrative Law, Law Press, 2008, p. 34.

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(1) To Quickly Launch the Remedy Process Convenience is needed to launch the remedy process and no man-made barriers are allowed at the beginning of the process. For example, the start-up method should be convenient and smooth, the aggrieved subject can apply for remedies through various convenient methods, including written letters, oral sayings and networks. However, in China, obstacles have been set up for aggrieved subjects to launch the process. For example, according to Article 52 of the Government Procurement Law, the aggrieved subject can only challenge in writing. In the digital era, people get used to communicating in convenient ways, while the regulation mentioned above in the law apparently can’t demonstrate the value of efficiency. (2) To Conclude the Procedures in a Timely Manner In the remedy system, aggrieved subjects will spend their time, efforts and money on waiting for the remedy process and result no matter choosing what kinds of remedies. Therefore, the value of efficiency is designed to finish the process in a timely manner. There are provisions in the Chinese government remedy system obviously violate this requirement, such as the procedural prerequisites for remedies. Article 55 and 58 of the Government Procurement Law stipulate that challenge is ahead of a complaint, and a complaint is ahead of applying for administrative reconsideration or filing an administrative lawsuit. Since all aggrieved subjects can exercise judicial remedies, why are there so many procedural prerequisites? These procedures are no sense except causing low efficiency to the remedy system. (3) To Shorten the Time on Designing the Remedy Process The existing remedy procedures in China are designed with a long-time limit, which does not meet the value of efficiency. Take the case that the undertaking subject believes that the result of winning the bid has been violated as an example. The undertaking subject shall raise a challenge within 7 working days from the date when it knows or should know that the rights and interests are damaged; the accepting authority shall reply within 7 working days; in case of dissatisfaction with the reply or failure to reply within the time limit, a complaint shall be filed within 15 working days; the accepting authority shall reply within 30 working days; those who are not satisfied with the handling decision or fail to handle it within the time limit may apply for administrative reconsideration within 60 days; the reconsideration organ shall make a reconsideration decision within 60 days; if the situation is complex, it may be extended by 30 days with the approval of the person in charge; if they are not satisfied with the reconsideration decision, they may bring a lawsuit within 15 days from the date of receiving the reconsideration decision; the trial period of the first instance is 6 months; if the party is not satisfied with the judgment of first instance, the party shall file an appeal within 15 days from the date of receiving the judgment; the trial period of the second instance is 3 months. If the judgment of the second instance is final and the undertaking subject does not file another retrial, it will take 509 days for the undertaking subject to complete the time specified by the law. It’s a long-time limit. Therefore, how to improve the remedy efficiency and shorten the remedy time is an urgent research topic.

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Variety The value of a variety of the government procurement remedy system means that a variety of remedy types should be adopted to remedy the violated legitimate rights and interests. There are many types of subjects participating in government procurement, including the procurement subject representing public interests, the undertaking subjects who are responsible for the production of public services, service objects enjoying abundant public services, and ordinary people who always pay attention to the quality of public service supply. Different parties enjoy different interests, which all should be protected. They also have various expectations and demands on realizing their interests, with some expecting material interests while others demanding mental interests; some seek for remedy efficiency while others for equity and justice. Different remedy types lead to different remedy results. Administrative remedy focuses on efficiency while its equity can’t be ensured. “Once the remedy system is connected with the administration, its equity will always be questioned.”40 Judicial remedy seeks equity, justice and procure fairness, but its procedures are complicated and require a lot of time and financial resources. Though quick disputes solution made by the independent third party can prevent people from questioning its equity, the solution may not align with the facts of the disputes. This is because the procedures applicable to this remedy are often agreed upon by both parties to the dispute. Due to the limitations of knowledge and expertise, the disputing parties do not necessarily understand the substantive content. Therefore, sometimes due to procedural defects, respect and compliance with the handling results will be affected. Moreover, the professional level and professional ethics of the personnel presiding over the dispute resolution will also affect the reasonableness of the settlement results. Since all remedy types have their own pros and cons, the establishment of the remedy system should be based on the value of variety to provide different ways and not be constrained from man-made restrictions to various remedy demands of aggrieved entities. As mentioned above, among the existing remedy types in China, the priority of administration-oriented remedy has caused the dominance of administrative remedy, including challenge, compliance, administrative reconsideration and administrative lawsuit. This kind of remedy system is not conducive to encouraging victims to freely choose remedy types.

Order Order is one of the fundamental values of law and it plays an important role in the values of the law. “The order value of the law means that order exerts regulation on the subject’s behaviors. The normative functions of the law on subject’s behaviors, including guidance, evaluation, education, anticipation and enforcement, actually 40

Ying Songnian: The Perfection of Administrative Relief System, in “Administrative Law Research”, No. 2, 2012, p. 6.

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reflect the fundamental contents of order value of the law. The order value of the law allows entities to act on the regulation of the law.” “As the order is the premise of all social activities, the order value of the law also represents the precondition of interests, justice and other values of the law. The order value of the law is the basis or the elementary phase of other values of the law, which in turn is the goal or the advanced phase that order seeks.”41 The realization of equity, efficiency and variety of the remedy system must be guaranteed by the value of order. The value of order can make the remedy system stable, constant, regulated and safe, so that each object that receives remedies can predict the remedy results and trust the remedy functions of the remedy system. When the legitimate rights and interests are violated, relevant parties will first think of starting the legal remedy mechanism, rather than making disputes that impact and destroy social order and stability. Through the conscious compliance and obedience of the subjects that receive remedies, the perfection of rights can be realized and then the order of government procurement activities and the order of the remedy mechanism itself can be ensured. The order value of the government procurement remedy system is reflected in the following aspects. First, the remedy right should be allocated based on a scientific approach. It is necessary to rationally distribute the remedy rights according to the actual procurement conditions of the Chinese government and national conditions. Neither too many remedy rights should be allocated to a certain subject nor should the due relief rights be reduced. There should be a certain reasonable space for the remedy rights, which cannot be expanded indefinitely nor without expanding space. Second, the remedies should be established with a science-based method. As mentioned above, different subjects have different remedy expectations. Therefore, the ways and means of remedy are also different. Only by providing multiple remedy types can the aggrieved subjects choose remedies according to their remedy expectation, and ensure the order of remedy activities. On the contrary, if there is no appropriate way of remedy, the infringed subjects may take non-official ways. Then the remedy system cannot play its remedy function, which even causes a negative impact on the whole government procurement activities. Third, the order is not necessarily the restriction to freedom, but on the contrary, it is the guarantee to realize freedom. Each aggrieved subject can freely choose remedies, but this free choice has its scope and boundary. That is, the right of free choice cannot be abused. If the aggrieved subject chooses administrative procedure remedy and social remedy such as arbitration at the same time, this choice will lead to different results for the same tort. This both affects the seriousness of remedies and wastes social resources. Therefore, the law must restrain the remedy right from being abused. The reason lies in that the whole remedy resources are limited, and the improper remedy of one subject will inevitably damage the remedy of other subjects. Therefore, the order is not to suppress freedom, but to achieve more free choices and ensure the validity and possibility of each subject’s free choice.

41

Zhou Wangsheng: On the Order Value of Law, in The Jurist, No. 5, 2003, pp. 36–37.

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8.5.2 To Select a Remedy Mode with a Science-Based Approach The establishment and improvement of any system lie in the correct analysis and scientific judgment on the existing problems in the system. Only by finding the crux of the problem can we put forward science-based ideas. Similarly, the establishment of China’s government procurement remedy system must be based on overcoming the existing defects and creating a new system. Although the government procurement remedy system has made initial development in China, as mentioned above, there are still many defects. Therefore, the establishment of the remedy system must be conducive to overcoming the defects of the existing remedy system, and follow the law of the remedy system. Due to the limited space, the author cannot respond to all the problems. The focus is to study the content of the remedy system that is urgently needed and established, such as remedy mode, remedy mechanism and remedy ways. The remedy mode refers to the standard remedy style adopted when relieving the infringed rights and interests. The government procurement remedy mode is a working mechanism to relieve the infringed rights and interests in a relatively stable and sustainable standard manner. The choice for a remedy mode plays an important and fundamental role in the design of a remedy system. From the perspective of laws, the remedy system, as a tool to solve disputes, relieves the party whose legitimate rights and interests are damaged by applying specific rules. In this way, the established structural balance of the society is maintained, which in turn guarantees the order of the society and the order of the rules themselves.42 According to different standards, the government procurement remedy mode has different classifications, including internal remedy mode and external remedy mode, judicial remedy mode and non-judicial remedy mode, substantive remedy mode and procedural remedy mode, public law remedy mode and private law remedy mode. In government procurement, according to the different nature of the procurement, it can also be divided into different stages of remedy modes, such as remedy in advance, remedy in the matter, and remedy afterward. The division of different remedy modes only provides people with the idea of selecting remedy modes. The key is to find the most suitable remedy mode to solve institutional disputes. Due to the complexity of government procurement activities and the diversity of behaviors, any remedy mode cannot meet the remedy needs of infringed rights and interests alone. Therefore, we must establish diversified remedy modes. First, the remedy value should be diverse. As mentioned above, the government procurement remedy system must realize the value of “equity, efficiency, order and variety” of the remedy mode on the basis of following the government procurement principle of cooperation, market competition and efficiency, responsibility and trust, legal reservation and due process.

42

Guo Qiyang: Research on Government Procurement Relief Mechanism and Its Mode Selection, in China Government Procurement, No. 12, 2014, p. 73.

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Second, remedy types should be various. In the government procurement remedy system, in addition to giving full play to the role of administrative reconsideration, administrative litigation, mediation, reconciliation, arbitration and other relief methods, it is also necessary to establish a specialized third-party remedy mechanism and public interest litigation as soon as possible. Third, remedies should be carried out according to the nature of the act. The nature of government procurement is extremely complex, so different remedy types should be designed according to the specific nature of the behavior. From the perspective of the behavior between the procurement subject and the undertaking subject, the behavior can be divided into the conclusion of the procurement contract and the performance of the procurement contract. The specific content and nature of the two acts are also different. At the conclusion stage of the procurement contract, the procurement subject has great discretion in the preparation and approval of the purchase project, project technical standards and requirements, the selection to choose the undertaking subject, and the signing of the contract text. This discretion is determined by the authority of the procurement subject, and it is also an objective need to promote government procurement. However, it is often the discretion of the procurement subject that easily infringes on the rights and interests of the undertaking subject. The remedy received by the subject depends on the choice of specific remedy types, which depends on the nature of the infringed action. If the behavior of the procurement subject at this stage is considered to be a behavior approved by the public law, public law remedies such as administrative reconsideration and administrative litigation should be adopted; if the act is determined to be a behavior approved by the private law, civil remedies should be taken. From the above analysis, it can be seen that the behavior of the procurement subject is a kind of duty performance behavior, which has the characteristics of behaviors approved by public laws. Therefore, it is more appropriate for the undertaking subject to choose public law remedy. From the perspective of the burden of proof, public law remedy is more conducive to realizing the remedy equity. The reason lies in that the civil remedy follows the principle of “the person who claims is responsible for providing pieces of evidence.” However, it is impossible for the undertaking subject to bear the burden of proof for the performance of duties and internal acts of the procurement subject. Therefore, the public law remedy in which the procurement subject bears the burden of proof is more conducive to the remedy equity. In the performance stage of the government procurement contract, it mainly involves the bilateral relationship between the two parties of the contract. The private law principles such as equality, compensation for equal value and good faith are more prominent. The rights and obligations of the two parties are generally listed in the contract, and most national laws have clear and improved rules for the remedy of the contract. In China, the General Principles of the Civil Law, Contract Law and other laws have clear and improved provisions on the performance and remedy of the procurement contract. Therefore, it is more appropriate at this stage to carry out the private law remedy to solve disputes between the procurement subject and the undertaking subject.

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From the perspective of the procurement subject and the service object, the former as the party providing services and the latter being served, there is no restriction on the purchase contract. Therefore, the disputes between them are mainly tort disputes caused by the improper performance of the procurement subject, and the public law remedy mode should be adopted for such disputes. From the perspective of the undertaking subject and service object, there is neither job-related behavior nor direct contractual relationship between them, and the disputes are mainly tort disputes. Therefore, it is more appropriate to adopt civil remedies for such disputes.

8.5.3 To Establish a Remedy Mechanism of Administrative Modesty and Restraint As mentioned above, in China’s government procurement remedy system, the tendency of administration-oriented remedies is obvious. In order to overcome the defects caused by this remedy type, the state must establish a government procurement remedy mechanism of administrative modesty and restraint. “Modesty and restraint” is originally an anthropomorphic concept introduced into the field of criminal law. It means that punishment, as the most severe means of punishment, should be as modest and tolerant as human beings and cannot be abused. The government procurement remedy mechanism of administrative modesty means that in the government procurement remedy, any remedy type must be kept introverted, especially when the administrative power is involved. It is necessary not to abuse or infringe on the rights and interests of citizens and cannot rashly cross the boundaries of other remedy types. Specifically, the modesty of administrative power emphasizes the strict control of administrative power in law, the reduction of administrative force in exercise, the administration according to procedures and the handling of public affairs by a modest and flexible means.43 In the process of system establishment in reality, political, legal and social systems do not appear in a pure form. The design of any system is not only based on laws, politics and society as the only dimension, but the result of considering one main dimension and other supported dimensions. When a certain dimension dominates and becomes the core concept and guiding principle in the process of system establishment, this dimension becomes the dominant one in the system design, so the dominance-oriented system design is formed. Specifically, when focusing on politics and paying attention to the leading role of administrative power in system design, this system design is power-oriented system design.44 The power-oriented system 43

Wang Chunye: On the Modest Character of Administrative Power, in Journal of Guangdong Administration Institute, vol. 27, No. 1, 2015, p. 50. 44 Xiao Beigeng and Liu Ping: The Conceptual Deviation of the Design of Government Procurement Relief System and Its Correction, in Finance and Economics Theory and Practice (Bimonthly), 2014, vol. 35, No. 192, p. 136.

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design in the government procurement remedy system presents as the administrative power remedy. That is, the administrative power crosses its own remedy boundary and endangers the normal exercise of other remedy types. Therefore, in order to correctly carry out administrative remedies, we must build a remedy mechanism of administrative modesty and constraint in the government procurement remedy system. First of all, we should change the situation in which the administrative power supervises itself. Under the power-led remedy mechanism, the undertaking subject should raise challenges to the procurement subject; the complaints of the undertaking subject shall be handled by the supervision department procured by the government, that is, the financial departments of governments at all levels. Whether it is the procurement subject or the financial department, they are all working departments under the leadership of the government, which reflects the practical application of administrative power. To restrain the administrative power, we should first change the situation where administrative power review its own behavior, and appropriately postposition or disperse the administrative power remedy, so that other remedy types can play their remedy functions in a balanced way. Secondly, change the mandatory provision of putting administrative power ahead. The administrative remedies are driven by the expansion and coercion of administrative power, which is realized by convenient management and information dominance. The priority of administrative remedy presents the expansion and coercion of administrative power remedy. In government procurement, the undertaking subject cannot directly apply for administrative reconsideration or file an administrative lawsuit for the damage caused by the procure documents, procure process, bid winning and transaction results. Only when the party is dissatisfied with the handling of complaints or not handled within the time limit can the undertaking subject apply for administrative reconsideration. The undertaking entity also cannot complain directly. It can only complain if the question is not answered or the reply is not made within the specified time. From challenge and complaint to administrative reconsideration and administrative litigation, various priority requirements and coercion have been set up for the administrative power remedy. Therefore, to establish the remedy mechanism of administrative modesty and restraint, we must change this priority and mandatory setting. In this way, the undertaking subject can decide remedy types according to the damage of rights and interests. Thirdly, expand the scope of the remedy. The essence of a remedy system is to restore the damaged rights. Therefore, all damaged rights and interests should be remedied. There are many reasons why the damaged rights and interests cannot get remedies. People may not only didn’t predict the possible infringement of rights and interests when establishing the remedy system, but also artificially decrease the remedy rights and interests. The former situation is determined by the lag of the law, which is universal, and there is no proper solution for the time being. The latter is caused by some force’s arrogance or shirking responsibility when establishing the remedy system. In the administrative remedy mechanism, the administrative power will narrow the scope of remedy in order to ensure its priority and bear less responsibility, resulting

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in many legitimate rights and interests cannot be remedied. Therefore, the remedy mechanism of administrative modesty and restraint must overcome the defect of narrowing the remedy scope and comprehensively remedy the damaged legitimate rights and interests. First, we should take the abstract administrative tort into the remedy scope. In the Chinese government procurement remedy, the infringement caused by the abstract administrative act cannot be remedied by an administrative reconsideration or administrative litigation. However, the infringement caused by abstract acts exists objectively. In particular, the normative documents formulated by the local governments on the government’s procurement of public services pose a greater risk of indirect infringement on citizens. Although Administrative Reconsideration Law and the revised Administrative Litigation Law have provisions on the review of normative documents, they both stipulate that the review of normative documents can only be initiated when the specific administrative act is reviewed, rather than the review of normative documents alone. Article 7 of the Administrative Reconsideration Law stipulates that citizens, legal persons or other organizations may apply to the administrative reconsideration organ for examining the provisions at the same time when applying for administrative reconsideration of the specific administrative acts if they believe that the following specific administrative acts of the administrative organ are illegal: (1) the provisions of Departments of the State Council; (2) provisions of the people’s governments at or above the county level and their working departments; (3) provisions of governments at township and town level. The provisions listed above do not include rules of the State Council, the Commission and local governments. Article 53 of the Administrative Litigation Law stipulates that if citizens, legal persons or other organizations believe that the normative documents formulated by the Departments of the State Council and the local people’s governments and their departments are illegal, they may request the examination of the normative documents when bringing a lawsuit against the administrative act. The normative documents specified above do not contain rules. At the same time, the above provisions also limit the review of rules. In practice, the infringement caused by rules also occurs from time to time. Therefore, bringing abstract acts such as rules into the scope of review is also an inevitable requirement for the remedy expansion. Second, expand the scope of subjects who can receive remedies. The parties involved in government procurement usually include the procurement subject, the undertaking subject, the service object and the ordinary people. Undertaking subjects include potential undertaking subjects, bidding undertaking subjects and bid winners. In the current remedy system, when the bidding undertaking subject and the bid winner are violated, remedies such as challenge, complaint, administrative reconsideration and administrative litigation are provided. However, there is no remedy type for the potential undertaking subject, the procurement subject, the service object and the ordinary people when their potential rights and interests are damaged. In government procurement, the participating subjects present as a complete entity, and no subject can exist independently. In the complete entity, the behavior of each subject may violate the rights and interests of other subjects. For example, if the

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procurement subject exercises the right of contract priority in the contract performance stage, it may damage the legitimate rights and interests of other subjects, including the undertaking subject. Therefore, strengthening the equal protection of the rights and interests of the subject has become a requirement for the government procurement remedy system. Expanding the remedy scope is to include the substantive and potential rights and interests of the undertaking subject, the procurement subject, the service object and the ordinary people in the government procurement remedy system, and the remedy scope can not only protect the substantive rights and interests of a specific subject.

8.5.4 To Establish a Specialized Third-Party Mechanism In order to ensure the equity of the government procurement remedy system, realize the diversity of remedy types and meet the requirements of the times, a specialized third-party remedy mechanism must be established. The specialized third-party remedy mechanism refers to a mechanism that is independent of administrative power and different from judicial remedy. Both parties to the dispute voluntarily submit the dispute to the adjudication committee composed of independent professionals, and the adjudication result has the force of enforcement.

The Principle of Establishing a Specialized Third-Party Mechanism (1) Follow the Principle of Independence The administrative power in China’s government procurement remedy has great priority, which is not conducive to ensuring the equity, objectivity and independence of remedies. In order to change the situation where administrative power is heavily involved in the procurement remedy system, we must take independence as the primary principle of establishing the third-party remedy mechanism. The principle of independence requires the adjudication institution to be independent. That is, the adjudication institution should be independent of the government, the procurement subject and other units; at the same time, the adjudicators should be independent, that is, the personnel who responsible for disputes and dispute’s resolution must have no direct interest with the disputed parties. If there is a direct interest, the dispute adjudication personnel must be replaced by taking the initiative to withdraw or applying for withdrawal. Only when the adjudication body and adjudicators achieve independence can they ensure independent and impartial adjudication of purchase disputes. (2) Follow the Principle of Professionalism Government procurement is highly professional and technical. It requires specialized adjudication institutions and professional personnel. The establishment of a

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specialized adjudication institution can make the dispute solution constant, stable and professional; professionals are responsible for the adjudication, which can ensure the equity and reasonableness of adjudication results. If it involves the purchased items such as sanitation, education and social security, the adjudication results made by personnel with professional knowledge or work experience in this field will be more authoritative and scientific. The nation can set up or establish an expert database for government procurement of public services to take the experts in each field as members of the expert database. The nation can adopt dynamic management to update and adjust members of the expert database in time so as to ensure that the knowledge and professional level of these experts can meet the needs of the new situation of government procurement. (3) Follow the Principle of Efficiency One of the important functions of establishing a specialized third-party remedy mechanism is to overcome the defects of complex procedures, low efficiency and high investment cost of other remedy types. Therefore, the principle of high efficiency should become an institutional pursuit of the remedy mechanism. The high efficiency in the third-party remedy mechanism means a fast start of the procedure, timely review of the process, and efficient implementation of results. A fast start of the procedure means that both parties to the purchase dispute shall get resolutions whether using written, oral or other forms; the acceptance shall not be refused or delayed because of the improper way of filing. Timely process review means shortening the adjudication time by designing a convenient procedure to achieve the goal of a fast adjudication process. The efficient implementation of results means that the ruling results shall be implemented in time. (4) Follow the Principle of Authority The fundamental reason why the specialized third-party remedy mechanism can be recognized and respected by the parties to the purchase dispute lies in whether the authority of the remedy mechanism can be ensured. In order to realize the authority of the remedy mechanism, the authority and equity of the settlement results must be realized. According to the authoritative requirements, the result made by the third party is legally effective, and both parties must follow it. If one party fails to perform the result, the other party may apply to the court for compulsory performance. If there is any objection to the result, unless the result involves infringement of national interests, public interests and the legitimate rights and interests of others, or the ruling personnel is cheated or coerced to make a ruling, the parties shall not bring a judicial review to the court. The results should be respected and implemented to ensure the authority of the third-party remedy mechanism. (5) Follow the Principle of Cooperation The third-party remedy is a kind of the government procurement remedy type, but it is not a necessary procedure or a procedure that the parties must choose; whether to choose the third-party remedy shall be determined by the involved parties through

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equal consultation. Either party cannot choose the third-party remedy without the consent of the other party; in other words, the initiation of the third-party remedy is an agreement of the involved parties. Only when the parties express the same intention can they further achieve the objectives of high efficiency and authority of the remedy mechanism and better protect the legitimate rights and interests of the aggrieved subject.

The Assumption on Establishing a Specialized Third-Party Remedy According to the above principles, a specialized third-party remedy that separates trial from office should be established. The specific idea is to establish a Dispute Adjudication Committee for government procurement under the approval of the People’s Congress. The adjudication committee is composed of adjudication experts and clerks, and implements the working mechanism of separating adjudication experts from clerks. (1) The Administrative Office and Obligations of the Adjudication Committee The administrative office of the adjudication committee is governed by the People’s Congress and is a permanent organ of the adjudication committee. According to the guideline of civil servants, its member comes from the People’s Congress. This institution is specifically responsible for the acceptance of disputes and the issuance of adjudication documents, and is responsible for presiding over the procedural work of the adjudication tribunal, such as the determination of adjudication time, the process, the avoidance matters, etc. However, the office personnel of the adjudication committee only preside over the adjudication procedure and have no right to vote. The agency is also responsible for daily supervision and inspection of government procurement activities. It can take the initiative to supervise once it found that the procurement subject violates the government procurement regulations or received reports, complaints, or charges that the procurement subject violates the purchase regulations. If the procurement subject violates the provisions slightly and does not cause infringement, the staff of the office can correct it in time; if the behavior of the procurement subject has involved infringement on the legitimate rights and interests of the undertaking subject and the service object, it can ask whether the undertaking subject and other aggrieved subjects and the procurement subject are willing to accept the ruling of the Committee. If they agree to accept the ruling, they can launch the third-party remedy. (2) The Establishment and Composition of an Adjudication Tribunal Once a purchase dispute needs to be judged, an adjudication tribunal composed of the adjudication committee shall be responsible for the adjudication. The adjudication tribunal is composed of project experts, lawyers, and other personnel with procurement experiences. The adjudication experts take a part-time job and usually work in their respective posts. After the establishment of the adjudication tribunal, they are

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responsible for the adjudication of procurement disputes. The arbitration tribunal is composed of experts selected by the parties who have disputes. Generally speaking, the adjudication tribunal of each purchase project is composed of three adjudication experts, who are selected by both parties to the dispute from the database mentioned above. In principle, one party can only select one expert. If the number of adjudication experts is even, the parties to the dispute shall jointly select another adjudication expert. If the adjudication experts cannot be selected jointly, the staff presiding over the adjudication tribunal can be entrusted to select from the expert pool or select a subject who has the right to choose by drawing lots. (3) The Working System of an Adjudication Tribunal Based on the negotiation between the parties to the procurement dispute, the adjudication committee can determine whether the hearing shall be conducted in written form or the on-site form. If the parties do not choose a specific adjudication mechanism, the adjudication tribunal may decide according to the reality. If the facts involved in the dispute are clear, the case and the claim are simple, the dispute can be heard in a written form; if the dispute is complex and professional, it can be heard in the on-site form. The adjudication tribunal may further find out the facts through hearings, symposiums or investigations with other informed persons. (4) The Determination of the Adjudication Result The adjudication expert must express an independent adjudication opinion according to the dispute, and the chairman of the adjudication tribunal shall vote on the opinion. The principle of the minority obeying the majority shall be adopted in the voting to determine the result. Different opinions shall be attached to the ruling document. (5) The Costs All procurement disputes judged by the adjudication committee shall be free. The fees of the adjudication expert shall be paid by the office of the adjudication committee in accordance with relevant provisions. The expenses required for the ruling shall be borne by the state finance and subject to audit supervision. All expenses incurred in the adjudication process shall be borne by the office of the adjudication committee.

8.5.5 To Establish and Improve the Public Interest Litigation System The Consistent Features Between Public Interest Litigation and the Government Procurement of Public Services Public interest litigation is a remedy to protect public interests. It is highly consistent with the government procurement system.

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(1) Public Interest Litigation and the Government Procurement of Remedies are Consistent from the Perspective of Aims and Functions Public interest litigation is a lawsuit against infringement on public interests; government procurement of public services is to realize the public interest by providing public services. In essence, government procurement of remedies is a system to protect the public interest. Therefore, from the perspective of protecting the public interest, the two are highly consistent. (2) Public Interest Litigation and the Government Procurement of Remedies Have extensive Subject of Participants There is a wide range of plaintiffs in public interest litigation. State organs, inspection authorities, social organizations and individuals can bring a lawsuit if they believe that public interests have been damaged. Government procurement is an activity in which public rights and interests are widely shared. It means that a wide range of subjects can enjoy the benefits brought by social progress through government procurement. Therefore, there is a wide range of subjects enjoying their rights and interests. Qualified service objects in the specified area can enjoy them equally. Government procurement of remedies is to ensure that the subject can effectively enjoy the benefits brought by the government procurement system. Therefore, this determines the universality of remedy objects and rights to remedies. (3) Public Interest Litigation and the Government Procurement of Remedies Have the Unspecified Aggrieved Parties Public interests include kinds of rights, which are enjoyed by all members of the society. The infringement on public interests will cause infringement at different levels and among different subjects. Parties who get violated are not specific. It means that qualified subjects will be violated directly or indirectly. Public interest litigation and government procurement of remedies are facing common requirements in protecting the rights and interests of the aggrieved subject, that is, how to realize the effective protection of the damaged unspecified rights and interests through the system design. Because the public interest litigation and the government remedy system share common features, public interest litigation must be established to make up for the shortcomings of other remedy types. Although there are administrative litigation, administrative reconsideration, civil litigation, accusation, mediation and reconciliation, these relief types cannot directly protect public interests, while the protection of public interests is an important part of the government procurement remedy system. For example, although administrative litigation and administrative reconsideration are the remedies brought by the undertaking subject against the infringement on the procurement subject, they both have strict restrictions on the qualification and appeal. That is, the person who must be directly infringed by a specific act can bring administrative litigation or administrative reconsideration; although there are primary provisions on public interest litigation in civil litigation, as mentioned above, due to its narrow scope of application and unclear qualification of the plaintiff, it cannot be

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put into practice. In view of this, in order to provide timely and effective remedies to the public interests purchased by the government, the public interest litigation system must be established.

The Assumption on Establishing a Public Interests Litigation System for Government Procurement of Public Services The specific establishment assumption takes as follows: (1) Relevant Laws Should be Definite In China’s three major procedural laws, in addition to the Criminal Procedure Law, the government must clarify the legal provisions of public interest litigation in the Civil Procedure Law and the Administrative Procedure Law. In the Administrative Procedure Law, it should be clear that when the state organs infringe on public interests in government procurement, inspection authorities, social organizations and individuals can file administrative proceedings. In the Civil Procedure Law, Article 55 should be amended to stipulate that as long as there are acts infringing on the public interest in the procurement activities, state organs, purchase subjects, inspection authorities, social organizations, ordinary people and service objects can launch public interest litigation according to laws. (2) The Scope of Parties Who File a Lawsuit Should be Expanded The existing litigation system regulates that only parties who have direct interests can bring a lawsuit. The regulation should be revised. In public interest litigation, there should have more qualified plaintiffs. If the procurement subject breaks the rules, the undertaking subject, inspection authorities, social organizations, service objects and ordinary people can launch public interest litigation; if the undertaking subject breaks the rules, state organs, specialized management institutions for government procurement of public services, the procurement subject, inspection authorities, service objects and ordinary people can launch public interest litigation. (3) Cases Should be Accepted in a Science-based Manner The scope of accepting cases is of great significance to the realization of public interest litigation. In public interest litigation, the scope of accepting cases should be scientifically and reasonably defined. Not all acts involving the infringement on public interests need to be solved through public interest litigation. For example, the public interests dispute involved in the contract performance between the procurement subject and the undertaking subject can be solved through civil litigation. The scope of accepting cases in public interest litigation for government procurement can be determined according to different forms of infringements: (1) From the perspective of the procurement subject, it can be divided into the failure to procure, the failure to procure according to the regulations, and the purchase is illegal. Generally speaking, it means that the procurement subject should have been procured or it

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shouldn’t have been procured, or the procured public services go against the requirements. (2) From the perspective of the undertaking subject, it can be divided into the following situations: the undertaking subject obtains the procured project through concealment, deception and other means, and the public services provided by the undertaking subject do not meet the requirements, or the public services provided by the undertaking subject infringe on the legitimate rights and interests of unspecified subjects. (3) From the perspective of the specialized management agency for government procurement of public services, there are some behaviors, such as failure to formulate the government procurement plan and compile the government procurement catalog, formulating discriminatory regulations, shielding and conniving the procurement subject and undertaking subject to infringe on the public interest. (4) The Burden of Proof Should be Reasonably Distributed The rational distribution of the burden of proof is of great significance for safeguarding the rights and interests of all subjects and realizing procedural justice; unreasonable distribution of the burden of proof will directly hinder the public interest litigation system. In public interest litigation, the burden of proof should be distributed according to the public interest litigation filed by different subjects. For the public interest litigation brought by the inspection authority and administrative organ, they should take a relatively large responsibility for providing pieces of evidence. Unless the defendant obtains the evidence more conveniently and economically, the rest of the evidence should be borne by the inspection authority and administrative organ. If it is a public interest lawsuit filed by the undertaking subject, social organization or individual, the principle of inversion of the burden of proof shall be applied in principle; only the basic facts that infringe the public interests are required to be proved, while other evidence is borne by the defendant, but the burden of proof related to the technical standards of the purchased project shall be borne by the undertaking subject. In judicial practice, the judge can also be given the discretion of the burden of proof, and the judge can decide the distribution of the burden of proof according to the complexity of the procurement dispute. (5) A Complete Award System Should be Established Government procurement is a kind of empowerment behavior. People are always willing to enjoy the benefits or services provided at no cost. When the public interest is damaged, people may not take action to prevent the infringement or safeguard the public interest. Therefore, in order to give full play to the public interest litigation, an incentive mechanism must be established to stimulate the enthusiasm of citizens or organizations to participate in maintaining the public interests. On the one side, the issue of litigation costs should be solved. It can be stipulated that the public interest litigation filed by administrative organs, inspection authority and procurement subjects is free, and the expenses shall be borne by the state. If it is a public interest lawsuit filed by the undertaking subject, service object, social organization and ordinary people, the costs shall be exempted first, and finally, the court shall decide the payment. If the defendant loses the lawsuit, the defendant shall

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bear the legal costs; if the plaintiff loses the lawsuit, in principle, the plaintiff shall bear the litigation costs, but the court may reduce the litigation costs as appropriate. On the other hand, the reward of public interest litigation should be settled. Certain rewards may be given to those who win the public interest litigation. If the public interest litigation filed by the administrative organ, the inspection authority and the procurement subject wins, the fine shall be turned over to the state treasury, but the specific host may be given certain material and spiritual rewards; if a public interest lawsuit is filed by the undertaking subject, service object, social organization or ordinary people wins, the fine can be owned by them. If there is no judgment fine, the state can give a certain reward. The government procurement remedy system is a complex field, especially when the government procurement of public services in China has not been fully launched. Therefore, it is more difficult to study the government procurement remedy system as there are few cases. Although faced with many difficulties, the government procurement remedy system is a dispensable system for the government to purchase public services. In a sense, without an advanced remedy system, it is impossible to ensure the smooth progress of the government procurement of public services. Therefore, the establishment of a government procurement remedy system is an inevitable requirement to promote the government procurement of public services. At present, the position and attitude are of great significance for the establishment of the government procurement remedy system. Some people think that we should adhere to the top-level design and establish a forward-looking remedy system; others believe that it is adaptable to use the existing remedies in China. The author believes that the government procurement of public services, the new administrative measure of government governance, must be different from the previous governance system. That is, it must be innovative and meet the requirements of the times. If the old remedy system lasts, it will not reflect the characteristics of the new government governance, but also may produce new governance problems. Therefore, the author adheres to the top-level design and constructs a forwardlooking remedy system. To adhere to the top-level design, we must comprehensively analyze the success and failure of all governments’ procurement remedy systems, and deeply study their internal law, but it is not easy to achieve these two points in specific researches. Although foreign countries procured public services earlier than China, it is less than a hundred years. At present, countries are also developing and improving their procurement, so various practices need to be tested. In addition to the short time for the government procurement remedy system, the systems are also different due to different national conditions. For example, the remedy system in the United States is different from that in Australia, and there are few successful experiences that can be used for reference; even for reference, we should also consider the localization of the system. Some successful practices in foreign countries may not work in China. Therefore, when analyzing the remedy systems of various countries, we should also pay attention to the regional characteristics and national characteristics, and pay attention to the localization and adaptability of the remedy system. It is certain that any system has its internal law, and the government procurement remedy

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system also has its own internal law. When establishing the government procurement remedy system, we should adhere to the viewpoint of development, carefully study the internal law of the remedy system, and find a system suitable for China’s national conditions. Only by looking for the internal law from the system itself and summarizing the experience from specific practices can we scientifically establish the government procurement remedy system.

Chapter 9

How to Improve the Legal System of Government Procurement of Public Services

At present, China’s central and local governments have formulated regulatory bases such as guiding opinions and assessment and evaluation basis for government procurement of public services. These bases have effectively solved many specific problems related to government procurement within provinces and cities and departments of the State Council to promote the development of government procurement of public services. However, China still lacks national and systematic laws and regulations to guide the government procurement of public services. This phenomenon reduces the expected value of the public service supply mechanism and delays improving public service supplies to a certain extent. Therefore, we should implement the principle of governing the country and administration according to laws, take effective legal regulation measures. In this way, we can further promote the legalization of government procurement of public services and solve the problems existing in the development of government procurement of public services.

9.1 The Situation of Law System for Chinese Government Procurement of Public Services Since the 1990s, with the transformation of China’s government functions, the government procurement of public services has been continuously promoted. In this process, China’s practical and academic entities have gradually deepened their understanding of the nature, function, boundary, procurement procedure, supervision mechanism and other issues of government procurement. This understanding results from practical exploration and the summary of experiences and lessons. At the same time, consolidating the achievements we have made is inseparable from the establishment and improvement of legal norms and the legalization of government procurement. © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2023 X. Xiansheng, Public Procurement in Chinese Law and Practice, State Governance, https://doi.org/10.1007/978-981-99-1047-2_9

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From the practice of various countries, foreign countries attach importance to the role of law in government procurement, and laws do play a positive role in it. Although China’s government procurement of public services started later than foreign countries, thanks to the improvement of governance ability and the reference to the advanced experiences of foreign countries, China’s understanding of the role of law in the government procurement are not backward at the specific stage of government procurement, and even have the advantage of late development.

9.1.1 The General Situations China is a unitary country and a country with written laws. The current legislative system is a unitary one with multiple levels. Based on the constitution, there are two primary levels: the central level and local level. There are organs at different levels to formulate laws, regulations or rules with different effects.1 China is in a period of comprehensively deepening reform and transformation, so the reality often needs the law to play its regulatory role, but the lag of the law is difficult to meet the needs of the actual society and reforms. Therefore, the contradiction between the needs of reforms and the lag of the law has become a barrier to development and innovation. The legalization process of China’s government procurement of public services also verifies the contradiction between the lag of law and the needs for reform and development. The government procurement of public services is a new mechanism of governance, the starting point for transforming government’s social governance and public service functions, and it plays an important role in the national development strategy. Therefore, when introducing the government procurement of public services mechanism, we should adhere to law-based governance, establish and improve relevant laws and regulations so as to play the regulatory and guarantee role of the law. However, due to the difficulty of promulgating laws, Chinese government often replaces laws with policy documents for procurement public services, and replaces national laws with departmental or local regulations. Nevertheless, the government has formulated many normative documents with guiding significance in practice. At the central level, in 2002, 11 departments including the Ministry of Health jointly issued the Opinions on Accelerating the Development of Urban Community Health Services.2 It proposed that public health services such as prevention and health care in communities can be provided by community health service agencies organized by the government in accordance with relevant regulations, or can be provided by other community health service agencies through government procurement. This is an earlier regulation at the central level regarding government procurement of services. 1

Editor-in-chief of Shen Zongling: Jurisprudence (Second Edition), Peking University Press, 2000 edition, p. 294. 2 http://www.mca.gov.cn/article/zwgk/zcwj/200711/20071100002865.SHHtml.

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In 2004, the State Council issued the Outline for Promoting Law-based Administration in an All-round Way.3 It required that a competition mechanism can also be introduced in the providing public services, and the government can purchase services from enterprises and social organizations to reduce service costs and improve service quality. In 2006, the State Council issued the Guiding Opinions on the Development of Urban Community Health Services.4 It stipulated that local governments should approve financial subsidies according to the way of procurement services, service objects, and the number, quality and related costs of public health services provided by community health service institutions. Although the regulation did not directly stipulate government procurement, the provisions represent the recognition of the local government procurement of community health services and the calculation of the cost in government procurement. In 2006, the Ministry of Finance, the National Development and Reform Commission, and the Ministry of Health jointly issued the Opinions on Subsidy Policies for Urban Community Health Services.5 It clearly stated that the government could focus on improving the use of funds and the efficiency of services by implementing performance appraisals and procurement services. In 2007, the Ministry of Finance issued the Guiding Opinions on Carrying out the Pilot Program of Government Procurement of Community Public Health Services.6 Although this guideline only stipulated the government procurement of public health services for communities, it was the first time at the central level regulating the scope of government procurement, the type of institutions that provide public services, the organization and management of procurement work, and the way of determining public service providers, contract signing, purchase performance evaluation, fund raising and payment, procurement workflow and supervision and management. Although the content of these regulations is not exactly the same as the current regulations on government procurement of public services, they still have important reference value for the ways and basic procedures of government procurement. In 2007, the General Office of the State Council issued the Several Opinions on Accelerating the Reform and Development of Industry Associations and Chambers of Commerce.7 It also proposed to establish a system for services of industry associations in the government procurement. In 2011, 18 departments, including the Organization Department of the Central Committee of the Communist Party of China, jointly issued the Opinions on Strengthening the Construction of Social Work Professionals.8 It required governments at all levels to guide and encourage public welfare and charitable social organizations and

3

http://www.gov.cn/ztzl/yfxz/content_374160.htm. http://www.gov.cn/zwgk/2006-02/23/content_208882.htm. 5 http://www.gov.cn/zwgk/2006-08/10/content_359226.htm. 6 http://www.51wf.com/law/166044.html. 7 http://www.gov.cn/gongbao/content/2007/content_663678.htm. 8 http://www.mca.gov.cn/article/zwgk/fvfg/shhgz/201111/20111100197275.SHHtml. 4

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private non-enterprise units to absorb social work professionals through government procurement of services. In 2011, the State Council issued the Guiding Opinions on Promoting the Reform of Public Institutions by Category,9 which proposed to innovate the way of providing public services, improve the mechanism for procurement services, and improve the quality and efficiency of services. Since 2012, the development of policies and laws for the Chinese government procurement of public service has entered a new stage. Documents issued by the Central Committee of the Communist Party of China, the State Council, and various departments of the State Council have accelerated the development of the law on government procurement of public services. In March 2012, the State Council approved and forwarded the Opinions on the Key Work of Deepening Economic System Reform in 2012.10 It required the Ministry of Civil Affairs, the National Development and Reform Commission, the Ministry of Finance, etc. to be responsible for researching and formulating policies and measures to support the development of social organizations, and to establish and improve the system for the government to procure services from social organizations. On September 26, 2013, the General Office of the State Council issued the Guiding Opinions. It pointed out that “promoting the government procurement of services from social forces is an important path to innovate the way of providing public services, accelerate the development of the service industry, and guide effective demands. It is also important for deepening social reforms, promoting the transformation of government functions, integrating and utilizing social resources, enhancing public awareness of participation, stimulating economic and social vitality, increasing the supply of public services, and improving the level and efficiency of public services.” It also proposed to establish a relatively complete system for government procurement of services from social forces in 2020; it also provided regulations on the guiding ideologies, basic principles, qualifications of the procurement party, qualifications of the undertaking party, purchased contents, procurement mechanisms, fund management, performance management and promoting government procurement of public services. It is the most comprehensive regulation on government procurement of public services at the national level. In November 2013, the Third Plenary Session of the Eighteenth Central Committee of the Communist Party of China approved the Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening the Reform.11 It further emphasized the government procurement of public services. That is, in principle, for routine management services, a competition mechanism must be introduced to procure from the society through contracts, commissions, etc., and encourage social forces to

9

http://www.gov.cn/gongbao/content/2012/content_2121699.htm. http://www.gov.cn/zwgk/2012-03/22/content_2097110.htm. 11 See website: http://www.gov.cn/jrzg/2013-11/15/content_2528179.htm, accessed October 3, 2015. 10

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promote education and employ college graduates through government procurement of services. In December 2013, in order to implement the Guiding Opinions issued at the Third Plenary Session of the Eighteenth Central Committee of the Communist Party of China by the State Council, the Ministry of Finance issued the Notice on Issues Concerning Doing a Good Job in Government Procurement Services.12 It required all regions and departments to take government procurement of services as a priority in development and reform, enhance a sense of urgency, mission and responsibility, take active actions, and take the initiative to do works like establishing rules and regulations, improving procedures, scientifically organizing and vigorously promoting. On December 15, 2014, the Ministry of Finance, the Ministry of Civil Affairs and the State Administration for Industry and Commerce jointly issued the Measures. The Measures refines and legalizes the guiding contents of the Guiding Opinions. The Measures defines the government procurement of services, points out the principles that government procurement should follow, clarifies the connotation and qualifications of the procurement subject and the undertaking subject, determines procurement ways, procedures and procured contents, standardizes budgets and financial management, and strengthens performance valuation and supervision. The Measures legally presents special provisions for government procurement of public services, and its promulgation and implementation are of great significance to promote government procurement of public services in China. In 2014, in order to effectively promote government procurement of services, the Ministry of Finance formulated the Notice on Issues Concerning Promoting and Improving Government Procurement of Service Projects13 and Notice on Budget Management Issues Concerning Government Procurement of Services.14 The Ministry of Finance and the Ministry of Civil Affairs also issued the Notice on Supporting and Regulating Social Organizations to Undertake Government Procurement Services.15 The ministries and commissions of the State Council also made regulations on government procurement of services within their responsibilities. In April 2014, six departments including the Ministry of Finance jointly formulated the Opinions on Doing a Good Job in the Pilot Program of government procurement of Services for Persons with Disabilities.16 In August 2014, four departments including the Ministry of Finance jointly formulated the Notice on Doing a Good

12

http://www.gov.cn/gzdt/2013-12/09/content_2545041.htm. See website: http://gks.mof.gov.cn/redianzhuanti/zhengfucaigouguanli/201404/t20140422_107 0486.html, accessed October 3, 2015. 14 See website: http://www.gov.cn/zwgk/2014-02/11/content_2587140.htm, October 2015 Visited on the 3rd. 15 See website: http://www.law-lib.com/law/law_view.asp?id=477275, 2015 Visited 2 October 2019. 16 See website: http://www.law-lib.com/law/law_view.asp?id=451069, 2015 Visited 10/3/2019. 13

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Job in government procurement of Elderly Care Services.17 It made clear regulations on the basic principles, work objectives, work development and work responsibilities of the government procurement of elderly care services. In October 2014, the Ministry of Civil Affairs formulated the Guidelines for Civil Affairs Departments to Use Welfare Lottery to Purchase Services from Social Forces,18 which pointed out that promoting procurement services through welfare lottery is an important task to ensure and improve people’s livelihood. Civil affairs departments at all levels should put this work on the important agenda and place it in an important position, speed up researches and deployment, take the initiative to communicate and coordinate, and establish a good environment and working mechanism for joint promotion inside and outside the civil affairs system as soon as possible. On January 30, 2015, the Regulations, which has an important impact on the government procurement of public services, was officially promulgated. The Regulations made special provisions on the government procurement of public services and clarified its legal status. Paragraph 4, Article 2 of the Regulations stipulated that the services referred in Article 2 of the Government Procurement Law include public services provided by the government to the public. Paragraph 2 of Article 15 stipulated that for public services provided by the government to the public, public opinions shall be solicited on determining procurement needs. Article 27 stipulated that public service projects have special requirements and may be purchased through a single source according to Article 31, Paragraph 1 of the Government Procurement Law. Article 45 stipulated that the acceptance of public services provided by the government to the public shall invite service objects to participate and issue opinions, and the acceptance results shall be announced to the public. The Regulations clarifies that the Government Procurement Law as a national law is applicable to government procurement of services. Therefore, from this perspective, Chinese government procurement of services also has a higher legal basis. Generally speaking, in a country with a unitary system, to ensure the central government’s authority and the unity of national laws, the establishment and implementation of the system often follows the top-down system. That is, the institutional framework and specific measures are first set at the central level. Then the measures will be implemented by local departments. In China, the establishment and implementation of the system generally follows this rule. However, the general rule taken by China does not deny the role of local exploration and innovation. In practice, there are also a few cases where local governments try and innovate the system first and then the local system becomes a national decision. The rural land contract responsibility system in Xiaogang Village, Fengyang, Anhui Province is a typical example, which turned from a local system to the national rural land policy. Therefore, whether the implementation of a system adopts the topdown mode or the bottom-up mode mainly depends on the social conditions. If the

17

See website: http://www.law-lib.com/law/law_view.asp?id=461325, 2015 Visited October 3rd. See website: http://www.gov.cn/xinwen/2014-10/28/content_2771871.htm, October 2015 Visited on the 3rd.

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social conditions are enough to establish a system, it is better to adopt the top-down mode; if not, it is more advantageous to adopt the bottom-up mode. The top-down system mode is conducive to making the system integrated, systematic and operable, and can ensure that the system can achieve the objectives within the expected time, but there are also overall risks caused by the failure of system design; although the bottom-up system may have limits, it is conducive to accumulating experiences in the first trial, overcoming the deficiencies, ensuring the feasibility of system implementation and reducing the risk of system promotion. In the process of promoting the procurement of public services, China’s government has neither followed the top-down system mode that is often taken by the unitary country, nor the bottom-up mode, but created a combination of these two modes. The system is to be firstly explored by local practices and then unified and standardized by the central government. Therefore, in the process of improving policies and laws for China’s government procurement of public service, there are both legal norms at the central level and legal norms at the local level. Local governments will issue more policies and laws than the central government. With the Guiding Opinions issued by the State Council on September 26, 2013 as the boundary, the formulation of policies and laws for local government procurement of public services can be divided into two stages. The first stage was to initiate and explore. At this stage, policies and laws were mainly formulated according to the specific needs of government procurements. Therefore, the policies and laws formulated in this period have the characteristics of conceptual differences, regional procuring contents and exploratory purchase methods. Although the policies and laws formulated in the exploration period have deficiencies, they had played a strong role in ensuring the government’s smooth progress in public services. Before the introduction of the Guiding Opinions, dozens of local authorities across the country issued policies and legal documents. For example, in 2006, HD District in BJ City issued the Guiding Opinions on Government Procurement of Public Services (Trial). In 2007, PD District in SH City issued the Implementation Opinions on Government Procurement of Public Services,19 which stipulated the guiding ideology, basic connotation, implementation principles, working objectives, procurement work and organizations of government procurement of public services. In 2008, HS District, NB City, ZJ Province issued the Implementation Opinions on Carrying out Government Procurement of Public Services in the Field of Social Work (Trial).20 It pointed out that the government procurement of public services is to further transform government functions and improve the efficiency of government procurement of public services, and it made provisions on project identification, project bidding, project contract signing, project execution management, and project performance management for government procurement of public services.

19

See website: http://www.pudong.gov.cn/website/html/pdzw/pudong_code_18868-/Info/Detail_ 191136.htm, accessed October 4, 2015. 20 See website: http://www.nbhsda.gov.cn/info.aspx?Id=205906, accessed October 5, 2015.

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In 2009, NB City, ZJ Province issued the Interim Measures for Government Service Outsourcing,21 which proposed that in order to innovate the system and mechanism of public services, improve the efficiency and quality of public services, build a service-oriented government, government services will be outsourced. The principles, procedures, implementation systems, supervision and services of outsourcing are also provided. In 2009, CD City, SC Province issued the Opinions on Establishing a System for Government Procurement of Social Organization Services,22 which stipulated the guiding ideology, basic principles, overall objectives, main contents, division of responsibilities of various departments, work procedures and safeguard measures for government procurement. It also proposed to explore and establish a new mechanism for the government to provide public services and improve the efficiency and quality of the government’s public service supplies so as to constantly meet the people’s needs for public services and promote the transformation of government functions. In 2010, the MH District of SH City formulated the Implementation Opinions on Regulating the Government’s Procurement of Public Services from Social Organizations (Provisional).23 It made provisions on the basic connotation, implementing principles, and operating procedures of government procurement of public services. In 2010, SZ City, GD Province issued the Implementation Plan for Promoting the Transfer of Government Functions and Work. It proposed that all the problems that the society can solve independently, the market mechanism that can adjust itself, and the industry organization that can solve with self-discipline, must be entrusted. In this way, it can enhance the government’s responses to public needs, improve the efficiency and level of government social management and public services, and build a service-oriented government. Although this method uses the concept of “transfer and entrust”, its overall objectives and stipulations are in line with government procurement. In 2011, ZS City, GD Province issued the Interim Measures for Government Procurement of Services.24 Provisions were made on the connotation, principles, conditions of procurement services, supplier conditions, and procurement work plans, etc. It is particularly worth mentioning that the Measures have established a joint review team for government procurement, which is responsible for work planning, guidance, approval and supervision. In 2012, FS City, GD Province issued the Implementation Measures for government procurement of Services from Social Organizations,25 which clearly stipulated the guiding ideology, basic principles, the procurement subjects, procurement scope, procured service catalogs, supplier conditions, funding sources, procedures 21

See website: http://www.law-lib.com/law/law_view.asp?id=308310, accessed 3 October 2015. See website: http://www.110.com/fagui/law_365983.html, 2015 Visited October 5. 23 See website: http://www.fsou.com/html/text/lar/174161/17416103.html, accessed October 4, 2015. 24 See website: http://www.zsmz.gov.cn/display.php?id=1358, 2015 Visited 5 October 2009. 25 See website: http://www.foSHHan.gov.cn/zwgk/zfgb/rmzfbgswj/201211/t20121128_4206220. html, accessed 4 October 2015. 22

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and methods, and labor division for the government to procure services from social organizations. In 2012, GD Province formulated the Implementation Measures for government procurement of Services from Social Organizations,26 which stipulated in more detail the guiding ideology, basic principles, procurement subjects, procurement scope, procured service catalog, supplier conditions, procurement procedures and methods, capital arrangement, payment and organizational guarantee of government procurement. The content of the regulation has a high overlap with the content of the Measures, and it is a relatively scientific and complete policy and law formulated by the local government. In 2013, JS Province issued the Interim Measures for the Reform of Provincial government procurement of Public Services,27 which proposed to actively carry out the reform of government procurement of public services, establish a standardized system for government procurement, promote the transformation of government functions, improve the efficiency and quality of public services, and made specified regulations on the procurement subject, scope, method, procedure, and fund allocation. The second stage is to promote and deepen cooperation. After the Guiding Opinions was issued by the State Council, local laws spewed out for government procurement of public services. All provinces and cities across the country have issued corresponding “Implementation Opinions” or “Measures”. BJ City, ZJ Province and SC Province issued the Implementation Opinions on government procurement of Services from Social Forces28 ,29 in June in 2014. In July 2014, SC Province issued the Opinions on Promoting Government Procurement of Services from Social Forces.30 The content of these implementation opinions is similar to the content of the Guiding Opinions, and they are all about the importance of government procurement of services, the guiding ideology, the basic principles, the goals and tasks, the connotation of procurement subjects and objects, contents, mechanisms, funding and performance management, and how to conduct government procurement. However, the implementation opinions formulated by local governments are not all consistent with the style and content of the Guiding Opinions. In October 2013, JS Province issued the Guiding Opinions on Promoting Government Procurement of Public Services.31 It was different from the State Council’s Guiding Opinions in terms of style. It only set up four parts, including overall goals, basic principles, main contents and related measures. Not only was the structure more 26

See website: http://zwgk.gd.gov.cn/006939748/201205/t20120531_317083.html, 2015 Visited 5 October 2009. 27 See website: http://www.zfcg.com/guide/2013-01-15/A370998.html, accessed 5 October 2015. 28 See website: http://zhengwu.beijing.gov.cn/gzdt/gggs/t1359075.htm, accessed 5 October 2015. 29 See website: http://www.zj.gov.cn/art/2014/6/30/art_32432_165201.html, accessed October 5, 2015. 30 See website: http://www.sc.gov.cn/10462/10883/11066/2014/7/19/10307825.SHHtml, accessed 5 October 2015. 31 See website: http://www.jiangsu.gov.cn/jsgov/tj/bgt/201311/t20131104_405119.html, accessed October 5, 2015.

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refined, but the specific content of each part also highlighted local characteristics and feasibility. For example, it is stipulated that the procurement subject is the person who is directly responsible for the supply of public services and is responsible for implementing the procurement of public service in the industry and system. It proposed specific procure needs, access conditions and evaluation standards, and supervision and inspection over the whole process of public services produced by the undertaking projects. It is even more commendable to use the expression “government procurement of public services” instead of “government procurement of services”. It also clearly pointed out that promoting the reform of government procurement of public services is to enhance the supply of public services, improve the level and efficiency of public services, and highlight the public nature and public welfare nature of government procurement. It is in line with the national goal of promoting the government procurement mechanism. All local authorities implement the Guiding Opinions with a high sense of responsibility and mission. The provincial governments quickly formulate implementation opinions and carry them out. For example, FJ Province formulated the Implementation Opinions on Promoting Government Procurement of Services32 in July 2014 and carried it out across the province. In August 2014, HL District, XM City, FJ Province and in December, ND City also issued the Implementation Opinions. When formulating implementation opinions, all local authorities also issued supporting regulations. For example, BJ Municipal Finance Bureau issued the Interim Measures for the Budget Management of Beijing Municipal Government’s Procurement of Services from Social Forces33 and ZJ Provincial Department of Finance issued the ZJ Provincial Government Procurement of Service Budget Management Measures34 in September 2014. In September 2014, HF City, AH Province issued the Measures for the Audit Supervision and Administration of government procurement of Services from Social Forces.35 In December 2014, the ZJ Provincial Department of Finance issued the Administrative Measures for the Procurement of Services.36 In the process of implementing the Guiding Opinions, the names of policies and laws issued by various places are not completely consistent. Some use “Interim Measures”, some use “Administrative Measures”, and some use “Measures”. For example, in July 2014, GD Province formulated the Interim Measures for the Government to Procure Services from Social Forces.37 In September 2014, XY City, HB Province formulated the Administrative Measures for the Procurement of Services 32

See website: http://www.fujian.gov.cn/zwgk/zxwj/szfwj/201408/t20140803_763377.htm, accessed October 5, 2015. 33 See website: http://www.zfcg.com/guide/2014-08-21/A381445.html, accessed October 5, 2015. 34 See website: http://www.zjczt.gov.cn/pub/zjsczt/zwgk/zcfg/zxwj/201409/t20140916_351981. htm, accessed October 5, 2014. 35 See website: http://www.hefei.gov.cn/n1070/n304559/n310576/n478894/n480073/36293150. html, accessed 5 October 2014. 36 See website: http://www.zj.gov.cn/art/2015/1/4/art_28711_187419.html, accessed 5 October 2015. 37 See website: http://www.gdaudit.gov.cn/infoview.jsp?info_id=a16ca052-78a7-4d16-9fd2-70a 71ced101e, accessed 5 October 2015.

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from Social Forces by the Municipal Government of XY City.38 In July 2014, RZ City, SD Province issued the Measures for the Government to Procure Services from Social Forces.39 In addition to the inconsistent names of policies and laws, the forms of implementing the Guiding Opinions are also different. In some places, they use notices instead of formulating implementation opinions. For example, in January 2015, the Finance Bureau of GZ City, GD Province issued a notice concerning about the implementation of the Interim Measures for Government Procurement of Services from Social Forces40 instead of an official document. After the Measures, local authorities have also formulated corresponding implementation measures to ensure the legitimacy and effectiveness of government procurement. For example, in April 2015, CD City, SC Province formulated the Interim Measures for government procurement of Services.41 Most of the provisions of the document were consistent with the Measures, but it also had its special provisions, such as the issue of merged procurement and the issue of the validity period. Merged procurement refers to the purchase items that different departments and units have consistency in terms of service content, the undertaking subject, work carrier, etc. The financial department takes the lead in sorting out the items that can be merged, and after reporting to the government for approval, the service is purchased in the form of a merged procurement. It also specifically stipulated that the validity period was 2 years. To sum up, it can be seen that when local governments formulate policies and laws for government procurement of public services, they are not simply implemented, but formulated in combination with the current situation of local public service supply and the transformation of government functions, which reflects the local initiative and activity in implementation.

9.1.2 Basic Features From administrative supply to contract-oriented supply, the government procurement of public services from social forces reflects three aspects. The first is the transformation of government functions, the second is the reform of public service supply mechanism, and the last is the innovation of government governance.

38

See website: http://cjszwx.com.cn/xy/gonggao/201409305648.html, 2015 Visited 5 October 2009. 39 See website: http://www.rzfzb.gov.cn/view.php?id=2688, accessed 5 October 2015. 40 See website: http://www.gzfinance.gov.cn/zwgk/zfxxgk/bmwj/qtwj/t20150104_61408.html, accessed October 5, 2015. 41 See website: http://www.chengdu.gov.cn/GovInfoOpens2/detail_ruleOfLaw.jsp?id=azGiPUhNj 1ldmBrs9t2u, accessed 5 October 2015.

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In practice, the social conditions vary for the emergence and development of government procurement of public services in various countries. Therefore, the policies and laws will present respective characteristics. The emergence and development of Chinese government procurement of public services are also closely related to national conditions. Therefore, the policies and laws in China also have their own characteristics.

Backward Forcing Feature in Laws Are Obvious Backward force means that policies and laws for the government procurement of public service is not formulated by the top-down manner, but the down-up one. The feature of backward force in laws and policies related to government procurement of public service is mainly reflected in two aspects. First, there is a policy and law for a certain procurement object, and then the government gradually formulate a system of policies and laws for the whole procurement objects. This backward force is more obvious in formulating policies, laws and regulations at the central level. For example, 11 departments including the Ministry of Health jointly issued the Opinions on Accelerating the Development of Urban Community Health Services in 2002. It regulated that public health services such as community health care can be available through government procurement. Subsequently, the central government issued a lot of separate regulations for a certain procurement object, such as the procurement of social work professionals and employment for college students. Although the regulations were relatively simple, they were the results from practical experiences of various central departments in government procurement. They served as a model for the central government to formulate national policies and legal norms for government procurement. Second, local governments issue policies and legal regulations for government procurement firstly. On the basis, the central government uniformly issues policies and legal regulations. Government procurement of public services in China first appeared in the 1990s, and corresponding policies and laws were also formulated in various places. The policies and laws formulated by local governments are not achieved overnight, but are closely related to the efforts of local governments to promote government procurement. In some places, due to reasons such as insufficient understanding and unsound supporting facilities, they eventually failed. While some places had deep understanding on government procurement and had convenient conditions. Therefore, government procurement as an effective tool for official governance was continuously improved in these places. Judging from the actual situation, few policies and laws with important research and promotion value can be issued in places where it is difficult to promote government procurement. On the contrary, valuable policies and laws are generally formulated to ensure the smooth progress in places where government procurement are reasonably carried out. From 2006 to 2012, several places have issued relative policies for government procurement, including BJ city, SH city, NB city, ZS city and FS city.

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These policies and laws didn’t come alone, but inherited and learned from each other. That is to say, new policies and laws often absorb the good experience and good practices of existing regulations, thus forming a public policy diffusion model with Chinese characteristics. With time passing, this model can improve the level of local policies and laws, so that the policies and laws can better reflect the essential requirements of the government procurement system. Therefore, the promulgation of local policies and laws can not only effectively ensure the smooth progress of local government procurement work, but also provide a model for the central government to issue corresponding policies and legal norms. This prompts the central government to speed up the pace of formulating unified government procurement policies and legal norms.

The Obviously Overlapped Contents of Policies and Laws The overlapping refers to the high degree of overlapped contents in terms of contents and frameworks between the local version and the national version after the State Council issued the Guiding Opinions and Measures. From the perspective of implementing the system, it is understandable that the implementation opinions or measures formulated by various local authorities generally overlap in terms of content and framework. But for the government procurement of public services, the implementation opinions or measures should still be based on local conditions. The reason lies in three aspects. First, the Guiding Opinions and Measures, as the normative documents to guide the whole country, should be based on the overall situation rather than being specific. As a public service supply model and a governance tool, government procurement of public services still has its policy-oriented feature. The feature requires that the executors should be given corresponding initiative. That is, the policy executors can flexibly handle issues according to the actual situation with the premise of no violation to the principles and objectives of the system. Therefore, in terms of the policy-oriented feature, the policies and laws formulated should have a certain amount of flexibility. Various departments and local authorities should be given certain autonomy for legal policies. Second, from the perspective of the objectives of government procurement, it mainly strives to meet the multi-level needs of the public and reduce government financial burden. The apparent problems in procurement lie in the procurement objects and scale. It is the local executive agencies that are most aware of the essence of these two issues. Therefore, if the local regions are not given a certain degree of autonomy, the government objects and scale cannot be scientifically determined. Third, from the perspective of objective conditions for government procurement, it is deeply influenced by economic and social development and cultural traditions of various regions. For China, the economic and social development of various regions is unbalanced and the cultural traditions are very different. Therefore, it is impossible to uniformly promote government procurement. Local governments must be given a certain degree of autonomy. The primary content of autonomy refers to

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having freedom to formulate policies and laws. Therefore, the central level must fully consider the national conditions when formulating policies and laws for government procurement, and shouldn’t be bossy to deprive the local governments of initiative. Local governments must strictly and fully implement the policies and laws formulated by the central government. At the same time, local authorities should be based on local conditions to adjust the policies. Regarding how to correctly implement the Guiding Opinions, the Ministry of Finance issued the Notice on Issues Concerning the Government Procurement of Services.42 All local authorities were required to quickly formulate implementation opinions, methods and specific measures for government procurement of services in their own regions and departments, and to form a highly operable system that connects the central and local governments. Where relevant documents have been issued, the relevant policies and measures shall be further refined and improved in accordance with the Guiding Opinions. The government procurement system shall be continuously improved to match the local economic and social development. For those that have not yet issued a document, they shall actively launch pilot projects, and gradually expand them in accordance with the requirements of the Guiding Opinions and in combination with the actual conditions. In fact, the policies and laws promulgated by various places are not completely copied from the Guiding Opinions and Measures. Most local policies and laws can meet national requirements. These policies and laws not only overcome the overlapped content, but also form their own distinctive local experiences. The first is to simplify as much as possible and focus on practical results. For example, ZD City formulated the Interim Measures for Government Procurement of Services. It only provided several titles but did not expand in detail. The second is to refine the terms and further clarify the connotation. For example, the Administrative Measures for the Government Procurement of Services in ZJ Province stipulated which situations can be purchased from a single source; the Interim Measures for the Budget Management of the Municipal Government Procurement of Services from Social Forces in BJ City stipulated the situations in which performance evaluation must be carried out. The third is to add new regulatory contents to enhance the operability of policies and laws. For example, the Interim Measures for Government Procurement of Services in CD City added “service object satisfaction” as an important indicator. Management Measures for ZJ Provincial government procurement of Service specified the purchasing subject’s responsibilities after the indicators of procurement objects were issued. The Interim Measures for the Government to Purchase Services from Social Forces in GD Province added “administrative and public welfare primary and secondary institutions” as the procuring subjects, and clarified the special undertaking subjects.

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See website: http://www.gov.cn/gzdt/2013-12/09/content_2545041.htm, accessed October 6, 2015.

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The fourth is to clarify the responsibility entities, tasks division and time requirements. For example, in July 2014, HF City, AH Province formulated the Implementation Opinions on the Government’s Purchase of Services from Social Forces. It established a joint meeting system for government procurement of services, refined the tasks, clarified the responsibility entities, set the time limit and targets. ZJ province also established the joint meeting system and FJ province even clarified specific units to take tasks. If local governments totally copy the relevant laws and regulations of the central government or other places, it will become a problem related to the formulation of laws and regulations. In some places, when formulating the local implementation opinions and measures, in addition to the different issuing units and document numbers, the contents are almost totally copied from the Guiding Opinions and Measures. This obviously violates the law of system promotion and the unified deployment of the central government.

The Confusion of Policies, Laws and Regulations Between Government Procurement of Public Services and Government Procurement According to the Government Procurement Law, government procurement refers to the behavior of state organs, institutions and organizations at all levels to use fiscal funds to purchase goods, projects and services within the catalogs formulated according to the law or above the procurement quotas. The government procurement of public services refers to the act of using the market mechanism to transfer part of the public services directly provided by the government to qualified social forces, and the government pays them according to the contract. There are many similarities and overlaps between government procurement of public services and government procurement, such as advocating open bidding, encouraging competition, and emphasizing the role of market mechanisms. Nonetheless, such similarities and overlaps cannot obliterate the differences between the two, let alone replace the system of government procurement of public services with the system of government procurement. If the difference between the two cannot be noticed, then the country doesn’t need to implement the government procurement of public services, but only needs to implement the government procurement system. The main differences between government procurement of public services and government procurement lie in the following aspects. First, the motivations are different. Government procurement originated in the early formation of capitalism in the late 18th and early nineteenth centuries. At that time, with western capitalism in a period of free development, the state’s intervention in the economy was less. The state carried out government procurement to save money in daily public management not for other purposes. Under the influence of the “New Public Management” movement, the government procurement of public services mainly emerged from the late 1970s, aiming to gradually transfer the main supplier of social public services from government departments to non-government departments or multiple departments. It also was designed to make services more

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efficient through introducing market mechanisms. Therefore, it is not difficult to see that the purpose of government procurement is to save money for the government, while the purpose of government procurement of public services is to change the government’s functions and service methods. If the two are placed in the same law, it is obvious that there will be confusion in the system purpose. Second, the applicable objects are different. The biggest feature of government procurement of public services is publicity. It is designed to meet the needs of the public. Its beneficiaries are the general public, not government agencies. The scope of government procurement is wider than that of government procurement of public services. In addition to services, there are also goods and projects. The services regulated by the Regulations include the services required by the government itself and the public services provided by the government to the public. However, it can be seen from the analysis above that this provision is not in line with the goal of government procurement of public services. Therefore, the applicable objects of government procurement of public services and government procurement are completely different. Third, the complexity of legal subjects is different. The relationship of the legal entities in government procurement originates from the government to supplier and then to the government. The procurement is initiated by the government, and the subject matter of the procurement is ultimately consumed by the government directly or indirectly. The government is both responsible for procurement and for the supervision and evaluation on the subject matter of procurement. The supplier is the provider of the subject matter and must provide the subject matter that meets the requirements. The civil contract signed between the supplier and the government is subject to civil law regulation, except in a few cases where the government has the contractual preferential right. The relationship of legal entities in government procurement of public services originates from the procurement subject to the undertaking subject and then to the service object. Although the government procurement of public services is initiated by the government, the motivation is different from that of government procurement. Government procurement is for the government’s own direct or indirect consumption, while government procurement of public services is for the public’s consumption. Therefore, the motivation can be the government’s understanding of the situation, or it can be the promotion of the public’s consumption demand. In government procurement, suppliers simply provide the subject matter. While in government procurement of public service, the undertaking subject must not only produce qualified public services, but also perform some government functions. The evaluation subject is also different. Government procurement is evaluated and supervised by the government itself. However, the evaluation subject of government procurement is much more complicated, including the procurement subjects, beneficiaries, public media and independent organizations. Therefore, the legal subject is more complicated in the government procurement of public services than in the government procurement. Fourth, the procurement methods are different. Due to the procurement objectives and consumers, government procurement generally adopts the project-based procurement. Due to differences in consumers, the goal of government procurement can’t

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be achieved only by procurement projects. In terms of practices in China and other countries in the world, government procurement of public services are often realized by a combination of post procurement and project procurement. Compared with project procurement, post procurement is easier to formulate standards and normative procedures, and it is simple and easy to operate. However, project procurement also has the advantages of overall planning, unified management, and reduction of supervision and management links. Therefore, the combination of project procurement and post procurement is a better procurement method. But in the long run, government procurement of public services will gradually follow the project-based way. The difference in procurement methods between government procurement and government procurement of public services determines that the two have different procedures, supervision and management, and fund allocation. Therefore, it is obviously inappropriate to confuse the difference of procurement methods between the two. Fifth, the beneficiaries are different. The beneficiaries in government procurement of public services refer to a certain group of people with certain public needs, who are the third party in the procurement contract. While the consumers of government procurement mainly or at least include the government itself. If the government procurement of public services and government procurement are confused, it is bound to obliterate the difference between the two in the beneficiaries of public services. Sixth, the evaluation criteria are different. The evaluation standard of government procurement is mainly the government’s satisfaction with the procurement objectives and appraisal on the results of the service. The evaluation standard of government procurement of public services is much more complicated. It not only meets the requirements of the procurement subject, but also the satisfaction of the service object; the standard not only pays attention to the result of service, but also the process of public service. Seventh, the certainty of the scope of public services is different. The service scope of government procurement is more certain, and the minimum and maximum scope can be determined according to the principle of necessity. But for public services, it is difficult to have a definite scope, which is often related to the degree of social development, national cultural traditions, and the appearance and disappearance of public service demand. It can be said that as long as the public services that are outside the basic functions of the government and demanded by some people are likely to be satisfied through government procurement. There are differences between government procurement of public services and government procurement as mentioned above. However, in the practice of local governments in China, the laws and regulations formulated by local governments on the procurement of public services do not identify these differences. There is a tendency to copy laws or policies for government procurement, and even confuse the policies and laws of the two.

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9.2 The Main Problems When government procurement of public services develops into a state function, it is necessary to regulate it with laws. If there is no legal regulation to clarify the connotation and extension of government procurement of public services, then the government procurement may deviate from the original intention of the system. The institutional value of government procurement of jobs cannot be fully realized if there are no corresponding laws. It can be seen that the law plays an irreplaceable and important role in promoting government procurement. In recent years, while promoting government procurement, China has also actively promoted the formulation of policies and laws and made certain achievements. However, reviewing the relevant laws, regulations and rules and measures of the government procurement of public services, it is not difficult to find that in the process of development, the relevant laws, regulations and institutional arrangements have the following problems.

9.2.1 The Unclear Objects of Legal Regulations Any legal regulation must clarify the object of regulation firstly. If the object of regulation is inappropriate, it will not only be detrimental to the implementation of the system, but even subvert or change the goal of the system. At present, one of the important problems in the legal regulation of government procurement of public services in China is that the object of regulation is not clear. The object may be the “government procurement of public services” or “government procurement of services”. From the perspective of aiming to transform state functions, improve the efficiency of public service supply and reduce fiscal expenditure, the object of legal regulation should be government procurement of public services. If government procurement of services and government procurement of public service in the Guiding Opinions and Measures are only different in “services” and “public services”, then, before the State Council’s Guiding Opinions and Measures were promulgated, the normative documents formulated all over the country are even more various. For example, the norms specified in PDX District, JA District of SH City, and WX City of JS Province clearly used the concept of “government procurement of public services”. While the norms issued by NB City of ZJ Province used the concept of “government service outsourcing”. After the Guiding Opinions and Measures were promulgated, all parts of the country formulated corresponding implementation opinions or measures as required, basically following the concept of “government procurement of services”. However, some places used the concept of “government procurement of public services”, such as the Guiding Opinions on Promoting Government Procurement of Public Services issued by JS Province and Implementation Opinions on Promoting Government Procurement of Public Services formulated by NJ City.

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A system has different concepts, and it involves the understanding of the system essence. From the perspective of institutional objectives, government procurement is a way of reforming the supply mode of public services. Therefore, the object of legal regulation should be the “public services” rather than “services”. From the perspective of institutional implementation, if the central level uses the concept of “government procurement of services”, then the policies and laws formulated by local governments should follow the same way. The reasons for the unclear legal regulation are complex. The most important of which is that the similarities and differences between “public services” and “services” have not been effectively distinguished. “Service” is also known as “labor service”, which is not in the form of providing physical objects but providing services to meet others’ needs.43 Services can be divided into public services, private services and social services according to the different service providers. There is no explain for “public services” but for “public goods” in Cihai, a Chinese dictionary. Public goods refers to objects or services that are not possessive nor exclusive in the consumption. It has no price, no market, and is not allowed to be freely bought and sold by private entrepreneurs, but can only be deployed by the state. It includes national defense, public security justice, compulsory education, etc. For such goods or services, it is impossible or difficult to exclude some people from enjoying them.44 Different scholars have different understandings and interpretations of “public service”. However, from the perspective of legal regulation, public service refers to the government’s use of public resources to meet the general needs of the unspecified majority in a specific period and a specific area.45 It can be seen from the above analysis that public service is one kind of service, and its content is less than that of service. The most prominent feature of public service compared with other services is publicity and seeks no interests. Therefore, there are overlaps and differences between public services and services. The overlap cannot be used to obliterate the differences between the two, and government procurement of public services cannot be expanded into government procurement of services.

9.2.2 The Lack of a Comprehensive Legal System Legal norms can not only guarantee the legitimacy and justice of the system, but also highlight the uniqueness of the system. As the manifestation of the system, the greatest value of legal norms is that they can highlight the characteristics of the system, including the goal, value and content of the system. In other words, with legal norms, there are standards by which this system is different from other systems.

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Cihai editorial board: “Cihai”, Shanghai Dictionary Publishing House, 2009 edition, p. 638. Cihai editorial board: “Cihai”, Shanghai Dictionary Publishing House, 2009 edition, p. 718. 45 Xiang Xiansheng: “Research on the Boundary Issues of my country’s Government Procurement Public Services”, in “China Administration”, No. 6, 2015, p. 39. 44

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As a system, government procurement of public services should also have a set of mature legal norms, so that it can become a complete and independent governance system. However, in the existing legal norms, the content of government procurement of public services is often covered by the Government Procurement Law, and the uniqueness of the system is diluted by the characteristics of government procurement. This is also one of the reasons why there is no complete legal regulation norm for government procurement of public services. The Government Procurement Law actually does not clearly stipulate whether government procurement uses government procurement of public services. The law only stipulates that the contents of government procurement are goods, projects and services, of which services refer to other procurement things other than goods and projects. In past practices, the service here is often understood as the service required to ensure the administrative affairs and its actual operation. Only after the promulgation of the Regulations did it explicitly take public services as the object of government procurement. Both the Government Procurement Law and the Regulations have stipulated that the contents of government procurement includes the public services provided by the government to the public. Based on the logic of law, then the Government Procurement Law and the Regulations are the legal sources and basis for the system of government procurement of public services. Based on the overlap of contents and characteristics between government procurement and government procurement of public services, incorporating government procurement of public services into the adjustment scope of the Government Procurement Law can solve the overlapping contents between the two. However, as it can be seen from the above analysis, there are many differences between the two, which cannot be resolved by the Government Procurement Law. For example, the procurement method set by the Government Procurement Law may not necessarily suitable for government procurement. In 2014, more than 20 projects involving agriculture in TH County, HN Province were procured competitively in accordance with the Government Procurement Law. However, this strictly competitive procurement procedure does not take into account the agricultural issues, including public welfare, productivity, seasonality of public services and the standard of specific services. At the same time, government procurement should be open to the public for public bidding. Although some non-local companies won the bid, due to the complex village administration and interpersonal relationships, it is difficult to coordinate with the local government, or actively work for they are unfamiliar with the local situation. For example, a company in Beijing, with little understanding about the status quo of TH, spent a lot of time in understanding the situation and then affected the progress of the project. In addition, under the Government Procurement Law, the price of public services cannot be settled. When the project team conducted researches and discussions at the Civil Affairs Bureau of District W, CD City, SC Province, some participants reflected that: government procurement is a new thing in recent years, and there is still a lack of systematic methods for procurement; now government procurement is mainly based on the Government Procurement Law, which is originally designed for stipulating the government procurement projects and items, and lacks reasonable and detailed design for government procurement

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of public services, such as the price of public services; it is not clear how the price should be set and what the standard should be based on; it is not easy to operate in practice, and the price of public services is often different for different people.

9.2.3 Insufficient Authority of Legal Regulations Authority is the convincing power and prestige. The authority of legal regulations means that people consciously abide by and maintain the law based on their belief in and obedience to the law. The authority of legal regulations not only comes from the guarantee of the state’s force, but also lies in the legality and legitimacy of the law. A law that has only coercive forces without legality and legitimacy is a threat rather than legal authority. On the contrary, although the law has legality and legitimacy, if there is no coercive force to back it up, then the law will become a preaching. Therefore, the coercive force of the law and the legality and legitimacy of the law are not an either-or relationship, but are interconnected and mutually reinforcing, and both are aimed at achieving the goal of the law. The realization of the law does not rely solely on coercive force to ensure the implementation of the law, but more importantly, to obtain the obedience and belief of the public. As far as the realization of a law is concerned, it reflects the relationship between the law and the public. When the public agrees with the formulation and implementation of a law, it is in a state of realization; on the contrary, when a law is passed through and is implemented, but there is still public resistance to the terms of the law and the enforcement of the law, then the law is not realized. That is to say, coercive force, legality and legitimacy are all equally important for laws, but they have different forms and stages. Coercive force is mainly reflected in the implementation of laws, while legality and legitimacy are mainly reflected in the introduction and text of laws. The role of coercive force in the enforcement of the law is self-evident, and what is easily overlooked is the legality and legitimacy of the law and the text. The legality and legitimacy of law introduction and text are mainly reflected in the legitimacy of the law makers, the legality of formulation procedures, the scientific nature of contents and the normative nature of legal texts. At present, the legal regulation of normative documents for government procurement of public services in China is not authoritative enough. In addition to the lack of a complete and independent legal system, it is also manifested as followed.

The Obvious Policy-Oriented Nature of Regulations It is a trend that policy plays an increasingly important role in social management, but policy cannot replace the role of law. An important difference between policy and law is that policy does not have legal certainty. In fact, it is the certainty of the law that can ensure the stability of the system and the public predictability to the operation of the system.

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The policy-oriented nature of the regulation for government procurement of public services in China means that the regulation is mainly policy-oriented documents of governments at all levels, rather than legal normative documents. From the above analysis, we can see that Chinese regulatory basis for government procurement work is mainly the policies issued by governments at all levels. These policies have clear policy requirements for the promotion of government procurement work, but have insufficient legal provisions for government procurement work. This has resulted in strong subjective awareness in the process of promotion and insufficient objectivity of statutory responsibilities. Although the government procurement of public services is being promoted, it has not been strictly regulated in the form of written law, so the relevant subjects do not actually have legal responsibilities. Judging from the current grassroots situation, the phenomenon of rule of man in government procurement is still relatively serious, especially the dependence on leaders. If leaders attach importance to it, the promotion of the work is fluent. If the leaders do not attach importance to it, there will be no promotion or insufficient promotion. At the same time, for grass-roots leaders, the motivation for promoting government procurement is often not to perform statutory duties. For them, it is better to use government procurement to reduce pressure than to invest in solving problems such as maintaining stability. Therefore, the motivation for promoting the government procurement is not the need to improve the work, but the need to relieve the work pressure and responsibilities faced.

Insufficient Authority of Law Makers The authority of legal regulation is also reflected in the low level of the law makers and the randomness in norms formulation. Judging from the operation of local governments, at present, most of the regulatory and normative forms of government procurement of public services are red-headed documents in the form of “work opinions” and “guidance opinions”. These red-headed documents are not only less effective than laws, but also more arbitrary. For example, there is a serious phenomenon in the regulations and norms formulated by some localities. They are not based on the people and facts, but according to one or some leaders. At the same time, because the regulations and norms are formulated by various departments and localities, the rigor and openness of their formulation procedures are also insufficient. This situation, in addition to causing problems in the technical, normative, scientific use of language in the normative texts for the government procurement of public services, has also led to other problems, like lacking of obvious local characteristics, less targeted and innovative provisions. In fact, before the State Council issued the Guiding Opinions and Measures, there was even plagiarism among different local governments. Whether this approach can formulate scientific regulatory norms remains to be seen, but it at least affects the authority, seriousness and social credibility of legal regulation.

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Insufficient Quality of Legal Normative Texts At present, the normative documents for government procurement of public services formulated by local governments have rarely been publicly discussed by experts, scholars, and the public. Therefore, the normative documents formulated often cannot well reflect the actual situation of government procurement of public services. At the same time, due to the rough legislative techniques of normative texts, there are errors, omissions, ambiguities and even unscientific and unreasonable aspects of the normative documents. For example, some regulations are very unscientific, such as the Opinions on Doing a Good Job in the Pilot Program of Government Procurement of Services for Disabled Persons on project performance evaluation, which emphasized the role of the Disabled Persons’ Federation as an important third party. Organizations for disabled people and social organizations that meet the conditions of Disabled Persons’ Federation are encouraged to participate in the government procurement of disabled services on an equal footing. In the process of government procurement, it will appear that the Disabled Persons’ Federation is not only the undertaking subject of the service for the disabled, but also the third party of the project performance evaluation. This kind of regulation is obviously not an objective and independent evaluation mechanism for the third party in the true sense, and it is not conducive to ensuring impartiality of performance evaluations. Some regulations are also unreasonable. For example, the Notice on Supporting and Regulating Social Organizations to Undertake Government Procurement of Services stipulated the qualifications of social organizations. But it didn’t take into account the reality of Chinese social organizations. Different from western countries, an important problem faced by China in promoting government procurement is the lack of the undertaking subject. Therefore, the government must take various measures to cultivate the undertaking party. However, the notice didn’t distinguish different situations when specifying the qualifications of social organizations. It required social organizations to provide registration certificates, annual inspection conclusions, annual reports, financial audit reports, payment of taxes and social insurance fees when undertaking services. Declarations of no major violation records and other relevant certification materials also should be available for review by the procurement subject. The qualifications of social organizations certainly should be reviewed, but the key issue here is that the qualifications of newly established social organizations are ignored. According to the stipulations of the notice, it is virtually impossible for a newly established social organization to have the qualifications and conditions to undertake it.

9.2.4 Messy and Fuzzy Legal Norms Another problem in China’s existing legal system for government procurement of public services is that the relevant legal norms are messy and lack a clear legislative design.

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Firstly, there are various forms of legal norms, and their names are different. The names of legal norms mainly include regulations, work opinions, guiding opinions, measures, implementation opinions and so on. Secondly, the subjects of formulating legal norms are diverse. Among them, there are not only authorities at the central level, but also the main body of each province, city, district, and even the neighborhood committee level. The different subjects and their own departmental or local interests vary, and there is no very clear boundary to observe. Therefore, when formulating legal norms for government procurement of public services, it is unavoidable to consider or pursue their own interests, which will inevitably damage the fairness and performance of legal norms. Thirdly, the content of legal norms is vague. Due to the different subjects mentioned above, the content of the norms is also different. At present, the content of laws and regulations on government procurement of public services in China is slightly different, and the boundaries are unclear. Some stipulate in detail the guiding principles, contents, procedures, supervision procedures and fund allocation procedures of purchase, such as the Implementation Opinions of PDX District on Government Procurement of Public Services; some regulations are more principled, such as Regulations on the Qualification of JA District Social Organizations to Undertake Government Procurements of (Newly Added) Public Service Projects.

9.2.5 The Lack of Supporting Laws Any system must have both the main law and the supporting legal system. In addition to the main law, the legal system for the government procurement of public services must also have corresponding supporting laws. However, the supporting laws for government procurement of public services in China are not enough. That is to say, in accordance with the requirements of government procurement, supporting legal norms should be formulated and issued. But in reality, there are no such laws. There are many supporting laws and regulations that should be formulated and promulgated for government procurement, both substantive and procedural, as well as financially guaranteed and organizationally guaranteed. These supporting legal systems are necessary and urgently needed for government procurement. However, at present, governments at all levels in China have not issued these supporting laws and regulations. The absence of these laws and regulations has led to many problems in promoting government procurement of public services, such as the issue of funds. According to national requirements, government procurement funds should be included in the fiscal budget. However, there are actually different practices in various places, among which matching funds is a typical problem. Taking the river management in TH County, HN Province as an example, the required cost is to use supporting funds. At present, the state is responsible for 80% of the funds, the county take 20% and individuals take 10%. In addition, project supervision fees, supervision fees and post-management fees are not included in the project funds. The county and township cannot afford these supporting funds. In fact, not only did they

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fail to achieve the goal of saving expenses and reducing the local financial burden, but on the contrary, they further increased the local government’s financial burden. Issues such as the low degree of public participation and the imperfect relief system have been discussed in the previous section, so they will not be repeated in this section.

9.3 The Characteristics of the Legal System for Procurement of Public Services Outside the Territory Advocating the rule of laws is an essential feature of a modern country, and doing things according to law is its basic behavior. Since the 1960s and 1970s, western countries have taken various measures to actively improve the government procurement of public services. Among of them, it is a common practice to formulate and introduce a sound legal system. Due to the differences in legal traditions, values and government governance, the specific manifestations of the legal systems issued by the western countries for procurement of public services are different.

9.3.1 The Influence of Legal Tradition on Legal Forms Due to the different features of laws and historical traditions, the western legal civilization includes two major legal systems: the civil law system and the common law system. The difference between the two legal systems is that the civil law system takes the legal documents formulated by the competent authorities of the state as the official source of the law, and often takes the code as the main form; the common law system is mainly based on case law and statute law as its legal sources, and rarely formulates codes. Influenced by different legal systems, governments have different laws for procurement of public services. The laws for government procurement of public services in civil law countries is generally codified or specialized laws; while common law countries often provide government procurement of public services with the form of a series of separate laws. France and Germany are representatives of civil law countries, and Japan is also a civil law country. In terms of the legal form of government procurement of public services, Japan regulates the government procurement of public services in the form of specialized laws. Japanese government procurement of public services is based on a series of relevant domestic and international laws and regulations, such as the Accounting Law, the Regulations on the Disclosure of Budget and Accounts, and the Regulations on Contractual Commercial Transactions. At the same time, the procurement is also subject to international agreements. In addition, the Japanese government has a special legal basis for procurement of public services, namely the Law on Introducing

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a Competition Mechanism to Reform Public Services, which was enacted in 2006. The law defined the basic principles of public service reform, and clarified the goals and significance of the reform; it regulated the procedures for bidding between official and private parties and private bidding, including the qualifications, recruitment and determination of bidders; it also stipulated necessary measures for the implementation by private bidders, including the signing and termination of contracts and supervision matters in the implementation process. This law provided guidelines for government procurement of purchase public services, making it have a solid legal basis. Due to the influence of the legal tradition of the common law system, the United States does not formulate special laws to regulate government procurement of public services like Japan, but regulates it through a series of separate laws. The U.S. government’s legal system for procurement of social and public services is not a self-contained entity, but is actually governed by the Social Security Act, the Federal Government Acquisition Regulations, the Elderly Welfare Act, the Disabled Persons Education Act, the Federal Property and Administration Act, the Competition of Contracts Act, the Small Business Act, the Freedom of Information Act, the Prompt Payment Act and a series of legal documents, as well as the work plans formulated based on these legal documents. There are more than 500 directly or indirectly related laws and regulations and more than 4000 clauses. Through a series of legal documents, the United States stipulates the scope of government procurement, procurement objectives, principles, methods, procedures, procurement disputes and resolution, financial budgets, supervision and evaluation. Therefore, although western countries all attach great importance to the role of laws for procurement, their specific forms are different due to the influence of different legal traditions.

9.3.2 The Reflection of Market Contracts The rise of government procurement of public services is mainly because it can effectively solve the problems of lacking market allocation function, insufficient competition, and low supply efficiency in traditional public service supply. Therefore, how to effectively exert market advantages and promote supply competition is a priority issue in the construction of the system. One of the important missions of the procurement is to ensure that market allocation plays a fundamental role in the supply of public services. In order to give full play to the allocation role of the market, western countries have enacted many laws that are closely related to the market mechanism, such as ensuring fair competition for all undertaking subjects, full performance of procurement contracts, cultivating undertaking subjects, and scientific evaluation and supervision. For example, the United Kingdom has made clear provisions to ensure fair competition for the undertaking subjects. In the 1980s, the reform of the social welfare system in the UK involved housing, education, social security, public health and

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other fields. After the introduction of the market mechanism, the social welfare system in the UK changed from a welfare-oriented to a market-oriented one. In 1980, the government formulated the Local Government Planning and Land Law, which introduced “Compulsory Competitive Tender” (CCT) for the first time. It began to introduce market mechanisms in the field of social public services provided by local governments, and clearly stipulated the requirements of introducing competitive bidding, the scope and work areas of the competitive bidding system. In terms of contract signing and performance, there are also corresponding legal norms. For example, the United States has formulated the Contract Competition Law, Federal Property and Administrative Services Act, Federal Acquisition Regulations and so on, which stipulated the signing, performance, dispute resolution, and supervision and management of procurement contracts. In terms of procurement performance, countries also have specific regulations. The Federal Government Performance and Results Act in the United States, stipulated the cost, supply efficiency and service quality of government procurement projects, emphasizing that performance should focus on the final effect or object of the service. It is necessary to pay fees based on service results, not based on the behavior of service providers; the premise of performance evaluation is to fully and comprehensively obtain relevant service information.

9.3.3 The Guiding and Safeguarding Role of Laws Government procurement laws and government procurement are complementary to each other. The emergence of government procurement gave birth to the introduction of government procurement laws; the introduction of government procurement laws also pointed out the direction for government procurement of public services and provided legal guarantees for it and ensured its smooth development. New Zealand’s government procurement of public services is one of the most successful models. In addition to theoretical guidance in line with national conditions, its success is inseparable from a relatively complete legal system guarantee. At the beginning of the implementation of government procurement of public services, the New Zealand government established the ideas, directions and principles of the reform through laws. This not only increased the legitimacy of the reform, but also ensured that the direction of the reform could continue in accordance with the established route. New Zealand’s implementation of government procurement of public services is mainly based on these four important laws: the State-owned Enterprises Act 1986, the State Sectors Act 1988, the Public Finance Act 1989, and The Employment Contract Law 1991. They have respectively laid an institutionalized foundation and legal basis for the corporatization and privatization reform of the public sector, the reform of government institutions and the civil service system, the reform of the public finance system, and the adjustment of labor contract relations and labor-management relations. This carefully detailed plan clearly defines the goals and means to be achieved by public sector reform and provides foresight in many

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aspects. In practice, some countries do not pay attention to the role of guidance and guarantee of laws for government procurement of public services, which will affect the smooth progress of government procurement activities.

9.4 Strategies and Ways to Solve the Defects 9.4.1 Path Selection Path selection refers to the path or method chosen for the improvement of the legal system. In different countries and different historical periods, the paths to enhance the legal system are different. Among them, there are mainly differences -between the macro path and the micro path. The choice of macro-path refers to the macrocontent involving legal regulation, such as the choice of legal system, which has stability and persistence. The choice of the micro-path includes the form and time limit of the law, which is of the times and flexibility. The choice of a perfect path for a country’s legal system is compatible with the country’s political system at the macro level. For example, the path chosen by common law countries to improve their legal system is compatible with their legal culture and traditional political system. For a country’s system, it generally does not involve the macro content, but mainly solves the micro content of the legal system, namely the specific micro realization path. In the path of micro-realization, the main content is nothing more than two aspects: one is the stage of the path, and the other is the realization form of the law.

The Trajectories for Improving Legal System of Government Procurement of Public Services Generally speaking, the improvement of the legal system of government procurement of public services has to go through a development process from a primary to an advanced level, from exploration to maturity. Therefore, according to the development stage, the improving process of the legal system of government procurement of public services in China can be divided into three stages: exploration stage, start-up stage and advanced stage. The so-called exploration stage is mainly the normative documents formulated by the central and local governments in the process of exploring the government procurement of public services. The time division should be based on the introduction of the Guiding Opinions issued by the State Council in 2013. That is, from the 1990s to 2013, this stage was the exploratory stage of legal regulation. The reason why the introduction of the Guiding Opinions is the classification standard is mainly because, before the Guiding Opinions was issued, there was no unified policies and regulations on government procurement of public services

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in China. The policies and laws issued were separate normative documents for a specific public service mainly issued by particular central departments or a few local governments. From the above analysis, it can be seen that these documents formulated by particular central departments are not systematic legal regulations on government procurement of public services. They are more about the main contents of the legal regulation of government procurement of public services in the process of introducing a certain policy system. At this stage, a small number of local governments also formulated some normative documents for government procurement. These documents are more of an exploratory feature, and do not form a unified legal regulation content. As mentioned above, some places have special legal documents for government procurement, while others completely copy the Government Procurement Law. From this, it can be seen that in the exploration stage, there is no unified understanding of the content and how to regulate the government procurement. However, the exploratory stage provided a valuable practical basis for further unifying and improving the law on government procurement of public services. The start-up stage means that the legal system for government procurement of public services in China has gradually changed from a single, independent and incomplete one to a unified and systematic way. At this stage, the State Council issued the Guiding Opinions, which clearly stipulated the guiding ideology, basic principles, the procurement subject, the undertaking subject, procurement contents and work requirements for government procurement of public services. This has made the government procurement of public services from a controversial stage to a clear stage, and pointed out the direction for the improvement of its legal system. In the initial stage, although the academic circles had different understandings of the application of the law on government procurement of public services, Chinese official documents stipulated that the government procurement of public services shall be governed by the Government Procurement Law. That is to say, although the definition of government procurement of public services in the Guiding Opinions is clearly different from that of government procurement, government procurement of public services shall be applied to the Government Procurement Law. This practice of using the Government Procurement Law as the basis for government procurement of public services can solve the situation where the government procurement of public services has no legal basis. But it cannot accurately determine the legal connotation that the government procurement of public services should have. Although there were many deficiencies, the policies and laws promulgated at this stage were the link between the previous and the next stage of the legal system of government procurement of public services. This phase resolved the confusion of the exploratory phase, while also provided a practical sample for the refinement phase of the law on government procurement of public services. The refinement stage means that the government procurement of public services has an independent and unified legal system, such as the unified Government Procurement of Public Services Law and supporting laws. At this stage, the legal system has the characteristics of high level, comprehensive contents, perfect procedures, and proper supervision and evaluation.

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Legal Forms of Government Procurement of Public Services Legal form refers to the representation of legal content, that is, how to express and reflect the spirit and content of the law. The legal form of the government procurement of public services is how to achieve legal regulation. That is, what kind of legislation should be adopted to legalize the government’s service awareness and responsibilities. The core issue of the legal form of government procurement of public services is how to deal with the relationship between government procurement of public services and government procurement. In this regard, countries around the world have three main approaches. First, to include government procurement of public services into the scope of government procurement; second, to separate government procurement of public services from government procurement; third, the regulations are not clear, leaving the government to use the form of procurement catalogs to determine. The academic circles also have different views on which legislation model should be adopted in China. Some scholars advocate the revision of the Government Procurement Law and establish it as the basic law for government procurement of public services. By amending the Government Procurement Law, general provisions are clarified, such as the scope of procurement, the qualifications for social organizations to undertake public service functions, and the scope and boundaries of social organizations’ information disclosure obligations. This claim seems simple as long as the relevant content of the government procurement of public services is included in the Government Procurement Law. But it largely ignores the uniqueness of the government procurement of public services. Some scholars have criticized this mode and pointed out that this proposition does not clearly distinguish between “government procurement of public services” and “government procurement”. In reality, among the guiding documents of some cities, it is also required that the government procurement of public services should follow the relevant provisions of the Government Procurement Law. In fact, there are essential differences between government procurement of public services and government procurement in terms of objectives, subject matter, suppliers, and procedures, so the current Government Procurement Law should not be used as a basis. In China, the legal forms of government procurement of public services are no more than three forms: the codified form of government procurement of public services, the legal form of incorporating the government procurement of public services into the Government Procurement Law, and taking the Government Procurement Law as the main form with the corresponding single-line regulations of government procurement of public services. (1) Government Procurement of Public Services Codified The codification of government procurement of public services refers to the formulation of a unified Government Procurement of Public Services Law to legally regulate government procurement of public services. The content of the code may include the connotation of government procurement of public services, the basic principles to

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be followed, the boundary of the procurement content, the establishment of management agencies, the procedures to be followed, supervision and evaluation, and relief measures. Under the unified code model, there are also supporting legal systems, such as the social organization law, the bidding Law, etc.; the State Council, its various departments, and the people’s governments at all levels make specific regulations for specific government procurement of public services. This codified form has the characteristics of authority, unity and strong operability. Its authority means that the Law on Government Procurement of Public Services is formulated by the National People’s Congress in accordance with the requirements of the Legislation Law, and has universal binding force on the whole country. Its unity means that it lays the foundation for the promotion of government procurement of public services across the country. That is, there is no need to formulate various legal norms for government procurement of public services. It is sufficient to promote the government procurement of public services in strict accordance with the provisions of the Law on Government Procurement of Public Services. Its strong operability is means that with a unified law on government procurement of public services, it can provide a legal basis and work method for how to specifically promote the government procurement of public services. Therefore, the codification of government procurement of public services is an inevitable choice for the improvement of the legal system of government procurement. However, the codification of government procurement of public services also faces problems such as difficulties in formulation. In China, the introduction of a law requires a mature social and political environment and a strict legislative procedure. At present, China’s government procurement of public services is still in the initial stage of exploration. People still have different understandings of government procurement activities. There is still a gap of mechanism and the essential requirements between the public policies, working measures stipulated by the government, the existing laws and the systems for government procurement of public services. In other words, no consensus has yet been reached for some questions, such as “what is government procurement of public services”, “why should the government to purchase public services”, “what is the goal of the government procurement of public services” and “how to carry out the government procurement of public services”. Under such conditions, it is obviously not enough to formulate and issue the Law on Government Procurement of Public Services. At the same time, the introduction of the law is not an easy task. It is strictly limited by the Legislation Law. That is to say, under the current circumstances, it is difficult to immediately introduce the Law on Government Procurement of Public Services. On the other hand, it should be noted that China is promoting the government procurement of public services in an all-round way. If the procurement is not regulated and guaranteed by the law, then its promotion will face huge legal risks. For example, since there is no clear legal regulation on what procurement form the government should take, it seems that it provides the procurement subject with a space for discretion. But in fact, there is a huge potential procurement risk. If the procurement goal cannot be achieved due to the improper method, who will take

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the responsibility won’t be solved and the specific purchaser may also become the person with unlimited liability. (2) The Legal Forms Incorporated into the Government Procurement Law The legal form of incorporating the government procurement of public services into the Government Procurement Law is the usual practice in China. According to the Government Procurement Law and the Regulations, the government procurement of public services shall be incorporated into the scope of the Government Procurement Law. This mode can solve the problem of lacking legal basis for government procurement in China. At the same time, it can also use the existing legal provisions on government procurement to solve the problem of government procurement. In terms of government procurement at the current stage, it has a certain positive significance. However, from the previous analysis, we can see that there are many differences between government procurement and government procurement of public services in terms of their institutional sources, basic principles, and contents. If the government procurement of public services is artificially included in the Government Procurement Law, it is obviously not conducive to achieving the institutional goal and highlighting the uniqueness of government procurement. At the same time, the legal subject relationship of government procurement is complex, and it is also decided that it is not appropriate to include government procurement of public services in the Government Procurement Law. This is because, from the perspective of the content of the code, it is difficult to comprehensively cover such a complex law relationship formed by government procurement of public services. At the same time, it is also difficult to arrange them in the form of a code. (3) Based on the Government Procurement Law, with the Corresponding Government Procurement of Public Services in the Form of a Combination of Separate Regulations Taking the Government Procurement Law as the main form with the corresponding single-line regulations of government procurement of public services. This form seems not only using the existing government procurement law to solve the problem of government procurement of public services, but also reflecting the characteristics of government procurement of public services through the formulation of separate regulations. It is a multi-faceted choice. However, this path selection is not essentially divorced from the Government Procurement Law. That is to say, the differences between the two systems have not been clarified. In the final analysis, the goal and value of the government procurement system cannot be achieved. All three modes are not the best choice. Only the formulation of a unified Codification of Government Procurement of Public Services can completely solve the problem of multiple laws and low effectiveness.

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The Choice for Improving the Legal System of Government Procurement of Public Services The choice for improving the legal system of government procurement of public service is often affected by its development stage and objective environment. Therefore, it is necessary to properly handle the relationship between stage and long-term, practical necessity and feasibility. With the development of the government procurement of public services, it has become an objective and urgent requirement to issue a corresponding law on the government procurement of public services as soon as possible. A sound law can not only point out the direction for the promotion of government procurement of public services, but also avoid various legal risks arising from the promotion. However, as can be seen from the analysis above, the establishment and improvement of the law on government procurement of public services is not achieved overnight, it must go through a gradual development process. That is, in different stages of government procurement of public services, different forms of legal regulation should be adopted. In the exploration stage, there can be different samples of legal regulations; in the initial stage, the government procurement of public services can be handled in accordance with the provisions of the Government Procurement Law; however, in the end, a unified Law on Government Procurement of Public Services must be promulgated. That is to say, during the period of refining legal regulation, China must formulate unified laws from the perspective of top-level design. In fact, only by formulating a unified and advanced law on government procurement of public services can we comprehensively, scientifically and deeply promote government procurement activities and ensure the expected goals. In terms of specific implementation, the local government and functional departments can first issue guiding opinions. After earnestly summarizing the practical experience of reforms, mastering the laws and rules of government procurement of services, and clarifying the legal relationship, some mature policies should be standardized in a timely manner so that they have legal status. Then provincial local governments or provincial people’s congresses issue administrative rules or laws, and then the State Council issues regulations. Finally, the National People’s Congress Standing Committee formulates and promulgates the Law on Government Procurement of Service, forming a combination of bottom-up and top-down legislative dual paths and legislative practice.

9.4.2 The Main Contents of Improvement Optimizing the content is the core for the improvement of the legal system of government procurement of public services. Due to the practical characteristics of government procurement, optimizing laws must be determined according to the promotion stage of government procurement of public services. Since the exploration stage has

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completed its due mission, it is meaningless to study and discuss its problems. Therefore, the improvement of the legal system content is mainly to study the optimization problems in the initial stage and the refinement stage.

The Main Contents of the Improvement of the Legal System of Government Procurement of Public Services in the Initial Stage At the current start-up stage, the main legal basis for the government procurement is the Government Procurement Law and its Regulations. Regardless of whether the Government Procurement Law and its Regulations are scientific or not, from the perspective of legal regulation, the government procurement of public services has a legal basis for its implementation. Therefore, at this stage, the main content of optimization should still be to formulate or amend relevant laws to promote the government procurement of public services. The specific contents are: (1) To Set and Improve the Procurement Procedure It is necessary to clarify the procurement methods and procedures adopted by the government. Specifically, it is necessary to check the contents of the current Government Procurement Law and Bidding Law, screen out the procedural regulations that conform to the government procurement of public services, and exclude some that do not conform, establish and improve the lack of procedural provisions. (2) To Clarify the Qualifications of the Undertaking Subjects Although the Guiding Opinions and the Measures have already discussed the qualifications of the undertaking subject, some of these discussions are unreasonable and some are inoperable as mentioned above. Therefore, it is necessary to formulate scientific and reasonable qualifications for undertaking subjects according to the reality. (3) To Repeal Laws Restricting the Development of Undertaking Subjects In order to further expand the scope of undertaking subjects, there is an urgent need to repeal the legal provisions restricting the development of social organizations. To this end, the work that needs to be carried out mainly includes: Firstly, it is necessary to get rid of the embarrassing situation that there is currently no special law regulating civil organizations in China. There are only a few administrative regulations and departmental rules. We need to speed up the formulation of a unified civil organization law, which will regulate the establishment, nature, status, function, code of conduct and scope of activities of civil organizations. Make provisions to give full play to its functions of self-service, self-management and self-education, and create a new environment for the development of civil organizations. Secondly, it is necessary to timely revise and improve many laws and regulations that are incompatible with the normative development of non-governmental

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organizations, such as the Regulations on the Registration and Administration of Social Organizations, the Interim Regulations on the Registration and Administration of Private Non-Enterprise Units, and the Interim Measures for the Registration and Administration of Private Non-Enterprise Units Improve. Some outdated departmental regulations should be abolished in time. Thirdly, the registration and filing system should be clearly stipulated in the law. For those who meet the registration conditions can be approved for registration, and the non-governmental organizations that do not meet the registration conditions can be recorded. The strict and cumbersome examination and approval procedures should be legally abolished. A convenient application and registration system should be implemented to determine its corresponding legal status and make it better perform management functions. Industry associations, chambers of commerce, science and technology, public welfare and charitable organizations, urban and rural community service organizations can apply for registration directly to the civil affairs department in accordance with the law and they will no longer be reviewed and managed by the business supervisory unit. In this way, not only can it be supervised and reviewed, but also the legality problem of unregistered civil organizations can be solved. “If the registration threshold is set too high and strict restrictions are attached (such as the necessity of having a competent authority), it will in fact become the government’s choice for the society based on management needs. This will undoubtedly lead to a large number of civil society organizations without a legitimate living space, which is not conducive to the healthy development of civil society organizations”.46 Fourthly, corresponding normative documents should be issued in fiscal and taxation to support the development of non-governmental organizations. For example, the GD Provincial Department of Finance issued the Opinions on the Pilot Program of Government Procurement of Services from Social Organizations, which included the government procurement of services funds in the financial budget. This innovative provision undoubtedly provides a financial justification for the government procurement. (4) To Improve the Legal Guarantee of Expenses China’s existing budget for government procurement of public services is under the existing government budget items without a separate item, which is obviously not conducive to the promotion and development of government procurement of public services. To this end, it is necessary to revise the Budget Law to treat government procurement of public services as a separate item. At the same time, the Tax Law should be revised. For some public service projects undertaken by non-profit undertaking subjects, the taxation should be different from that of for-profit undertaking subjects. Through the leverage of taxation, it can stimulate and promote the development of social organizations and the enthusiasm of social organizations to undertake public services. 46

Hu Hai: “My country’s NGOs and Mass Incident Governance”, in “Journal of Hunan University (Social Science Edition)”, No. 4, 2011, p. 49.

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(5) To Clarify the Regulatory agencies for Government Procurement At present, there are many departments involved in the procurement of public services in China, and their responsibilities are divided artificially, which is obviously not conducive to the government procurement of public services. As a whole system to promote, it is necessary for the state to further clarify the competent departments of the government procurement of public services and the corresponding assistance departments, clarify the responsibilities, contents, rights and obligations of each department. (6) To Clarify Central and Local Procurement Authority The public services purchased by the government often involve the content of people’s livelihood, and the development in the east and the west in China is unbalanced, Therefore, in the process of realizing the equalization of public services, the interests of all parties must be fully taken into account. It is necessary to clarify the procurement authority of the central and local governments. That is to say, which public services must be purchased by the central government and which are purchased by the local finance itself must be clarified. The former includes the nine-year compulsory education, the latter includes the management functions of public services of governments at all levels.

The Main Contents of the Legal System of Government Procurement of Public Services in the Refinement Stage The start-up stage is a transitional stage. For government procurement of public services, the focus of legal optimization should be on the regulatory content of the refinement stage. The optimization of the refinement stage should be marked by the formulation and promulgation of the Law on Government Procurement of Public Services, but it is not the only law. The legal norms in the refinement stage can be divided into different levels according to the content of the regulation. (1) The Substantive and Procedural Laws The substantive law mainly regulates the substantive content of the government procurement of public services, such as the procurement subject, the undertaking subject, the procurement content, and the guarantee of funds. The procedural law mainly regulates the government procurement procedures, hearing procedures and public participation procedures. (2) Main and Supporting Laws The main law refers to the Law on Government Procurement of Public Services. The entities and procedures of government procurement of public services are the main regulatory content of this law, which has the characteristics of complete content

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and feasible operation. The supporting law refers to the formulation or revision of the corresponding legal provisions in order to ensure the promotion of the government procurement of public services, such as the Budget Law, the Tax Law, and the Tendering and Bidding Law. (3) Operational and Supervision Laws The operation law is mainly the corresponding laws and regulations formulated to ensure the smooth progress of government procurement of public services. It includes the provisions on the qualifications of the undertaking subject, the reward and punishment mechanism for the undertaking subject, the accountability of the procurement subject, and the signing of the purchase contract, etc. In order to solve the problem of supervision and management in government procurement of public services, it is necessary to establish sound and corresponding supervision laws and regulations, and at the same time introduce corresponding supervision and management mechanisms to give full play to social forces, especially independent third parties. Therefore, in the legal refinement stage of government procurement of public services, its legal forms are diverse, including newly promulgated legal norms, as well as revisions and improvements to the original legal norms; there are unified code norms and corresponding supporting regulations. However, at this stage, the most obvious feature is the formulation and promulgation of the Law on Government Procurement of Public Services. In addition to clarifying the purpose and principles of government procurement, the law should focus on the following: (1) Defining Participating Subjects with Science-based Approach There are many participants in government procurement of public services. To this end, the type of participants must be clearly defined. The main types of subjects involved in government procurement of public services mainly include service objects, undertaking subjects, procurement subjects, ordinary people, regulatory agencies, supervisory agencies, and evaluation agencies. Then it is necessary to clarify the scope of each subject. The procurement subject is a state institution that uses financial funds to perform public service functions, including state organs and public institutions. It must be clarified here that if the public service belongs to the responsibility of the public institution, it cannot generally be repurchased. In addition to the for-profit and non-profit undertaking subjects, other undertaking subjects should also be granted the qualification of natural persons to fully expand the scope of the undertaking subject. The scope of the service object is mainly determined according to the social development and financial situation. It is not necessary to blindly purchase regardless of the financial situation, nor to reduce the procurement content without doing research. Otherwise, it may damage the interests of the service object. Then, it is needed to clarify the rights and obligations of each subject. The procurement subject must fulfill the obligations of determining the target of the procurement item, the selection of the undertaking subject and defining the service object. The undertaking subject must provide public services in a timely manner with guaranteed

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quality and quantity in accordance with the provisions of the procurement contract. The service object must report the public service situation to the procurement subject in a timely manner and there must be no infringement. Ordinary people should use hearings, symposiums and other channels to fully reflect their opinions and exercise their right to supervise. Regulatory agencies must do a good job of macro guidance and project planning for government procurement of public services in accordance with their respective functions, and must conscientiously perform supervision and management functions to ensure the expected goals. The evaluation agency must do the evaluation work in a professional spirit and in accordance with the requirements of the entrusting party. Scientifically setting the qualifications is mainly the qualifications of the undertaking subject and the enjoyment of the service objects. The qualifications of the undertaking subject are mainly set around the undertaking capacity, and specific provisions can be made in terms of the undertaking subject’s industrial and commercial registration, venue, funds, professionals, etc. The enjoyment eligibility of service objects should be set according to the coverage of public services, such as age status, physical condition and citizenship status. (2) Defining the Procurement Contents Scientifically Procurement content is also a matter of procurement boundaries. China can define the boundary of government public services according to three levels in legislation, that is, prohibitive procurement, compulsory procurement and discretionary procurement. Prohibited procurement of public services mainly refers to the fundamental government functions such as national defense, foreign affairs, legislation, justice, criminal investigation, nuclear energy, intelligence, and internal government management. Compulsory procurement of public services mainly refers to sanitation and cleaning, landscaping, road maintenance, medical care, pension, culture and entertainment, protection of citizens’ rights and interests, employment training, employment guidance and services, and community services. Discretionary procurement of public services mainly means that the government has the discretion whether to provide public services by procurement. That is, the government can make a decision to purchase or not public services whose nature is difficult to define, such as compulsory education, funerals and burials. (3) Improving the Procurement Procedures The standardized procurement procedure is the core content of the scientific procurement mechanism. The procurement procedure of public services in China follows the principle of competitive procurement procedure as the main and non-competitive procurement procedure as a supplement. That is, all public service projects purchased by the government must be carried out in the form of public bidding; non-competitive procurement procedures are only used in extremely exceptional circumstances. Under normal circumstances, the non-competitive procurement procedure can only be adopted if the following conditions are met: First, there is only one or a very

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small number of undertaking subjects, which cannot meet the quantity requirements of public bidding undertaking subjects; second, the public services purchased by the government are particularly urgently needed by the public. If it is not provided in time, it will damage the legitimate rights and interests of the public. This loss is irreparable and public bidding is too time-consuming. Third, the number and funds involved in government procurement of public services is not large, which is not suitable for public bidding. Only if the above conditions are met, the government can use the non-competitive procurement procedure to select the undertaking subject. Procurement items that adopt competitive procurement procedures can be carried out in accordance with the relevant provisions of China’s Tendering and Bidding Law. Procurement items that adopt non-competitive procurement procedures can be purchased in accordance with the provisions of the Government Procurement Law on inquiry procurement or single-source procurement. Other non-competitive selection procedures such as invitation to bid and solicitation of bids should be minimized or prohibited. After the procurement procedure is started, the management department for government procurement of public service can entrust the specific work to the intermediary organization. The entrusted intermediary must be evaluated before entrusting. It can be entrusted if they can achieve higher efficiency and lower costs. Otherwise, the procurement that should be undertaken by government departments cannot be entrusted to intermediaries. (4) Standardizing Supervision and Management It is necessary to strengthen the construction of self-supervision mechanism, external supervision mechanism and accountability mechanism. Among these three mechanisms, the self-supervision mechanism is the foundation, the external supervision mechanism is the supplement, and the accountability mechanism is the key. Each supervisory subject in the self-supervision mechanism is closely related to the supervised object, and can carry out daily supervision in a timely manner according to the subtle changes of the supervised object. However, this kind of supervision mechanism cannot ensure the objectivity and fairness of the supervision effect. Therefore, it is particularly necessary to establish an external supervision mechanism that makes up for the lack of objectivity and injustice in the self-supervision mechanism. Compared with the self-supervision mechanism, the external supervision mechanism also has shortcomings, mainly because the supervision subject has no direct contact with the supervised object. The initiation of supervision is often passive and post-event, so there is a lag and negativity in supervision. Therefore, in order to give full play to the advantages of the external supervision mechanism, it must be given a response function, otherwise, its supervision effect will be reduced. To ensure the realization of the supervision functions of the self-supervision mechanism and the external supervision mechanism, a strict accountability mechanism must be established.

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(5) Advancing Remedy Measures Sound relief measures are an inevitable requirement of the government procurement of public service relief system. At present, the focus is to enlarge urgent and fundamental relief, and to establish a multi-dimensional government procurement relief mechanism with administrative modesty.

9.4.3 The Legislative Principles As an intrinsic part of the legal system, legal principles embody the close connection between legal and social value concepts. In the process of promulgating the law, the law-making agency must design the content as a whole according to the legalized political and moral principles. Therefore, legal principles are the core of the law. In the process of advancing the legal system of government procurement of public services in China, legislative work is inseparable from either the initial stage or the refinement stage. The legislative work of government procurement of public services should follow the legal principles of government procurement of public services. That is to say, in addition to the general legislative principles, the legislation of government procurement of public services should also follow the legislative principles of government procurement. Localities in China will determine and follow some principles in formulating the norms for the government procurement of public services. For example, in the Guiding Opinions on Government Procurement of Public Services (for trial implementation) issued by WX City, JS Province established the principle of “clarifying powers and responsibilities, aligning responsibilities and powers, strengthening budgets, improving efficiency, and promoting proactively and prudently.” These so-called principles only address the problem of how government procurement of services operates. They are not really legislative guidelines. Only the principle of “adhering to openness and transparency, competition, fairness, and good faith” in the Interim Measures for Government Service Outsourcing formulated by NB City, ZJ Province and the Interim Measures for Government Service Outsourcing issued by DXAL District, HLJ Province, is similar to the legislation principle of government procurement of public services. Then, what are the principles that Chinese government should follow in the legislation for government procurement of public services? The author believes that we should fully learn from and absorb the successful principles of developed countries and China’s leading regions. On the basis of practices in various parts in China, the government should make the combination of openness, fairness, justice, competition, proper procedures, efficiency and effectiveness, internationalization, principle and flexibility and so on as the basic legal principle for the legislation of government procurement of public services.

9.4 Strategies and Ways to Solve the Defects

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The Principle of Competition The government procurement is conducted with an open and transparent manner, reflecting the need for fair competition in the market economy, and giving public service providers equal opportunities to compete. This can not only avoid the influence of administrative power on procurement, but also effectively prevent corruption such as power-money transactions. This principle is not only an objective requirement for government procurement of public services, but also is conducive to giving play to the important role of the market mechanism in government management activities. Therefore, this principle is the first principle to be followed in the legislation of government procurement of public services.

The Principle of Due Process The beneficiaries of government procurement of public services are the general public, so the principle of due process is particularly important in the legislation of government procurement of public services. Through this principle, the government can be required to disclose to the public the procurement information, except information involving state secrets, business secrets protected by law, and personal privacy, so that citizens have the right to know; at the same time, the government should protect people’s right to participate, to choose, to know and to make suggestions, and fully listen to their opinions and suggestions. Government staff must perform their duties impartially, and cannot be involved in procurement as the undertaking subject and should avoid occurred interests.

The Principle of Efficiency This principle includes efficiency and effectiveness. Both capital effectiveness and social effectiveness should be achieved. Capital effectiveness refers to the using effectiveness of financial funds, that is the public services obtained by a certain amount of financial funds. Social effectiveness refers to the overall interests of the society. Namely, government procurement must not only achieve financial benefits, but also supply efficiency and customer satisfaction. The goal of implementing government procurement of public services is to transform functions, save financial expenditures, and improve public service benefits. Therefore, the legislative principle of government procurement of public services should fully reflect the combination of efficiency and effectiveness. Efficiency should be fully reflected in the legislative design of procurement procedures. Effectiveness should be realized in the legislative design of the supervision and evaluation system.

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9 How to Improve the Legal System of Government Procurement …

The Principle of Internationalization In the context of globalization, the legal regulation of government procurement of public services in China should also follow the principle of internationalization. The so-called internationalization principle here means that when China uses legal means to regulate the government procurement of public services, it should be consistent with the internationalization trend of the government procurement of public services. Sometimes it is necessary to guide the Chinese government march on the international road.

The Principle of Flexibility Combined with Principle The principle of combining principled and flexible means that there should be both principled regulations and flexible handling requirements in government procurement, and there should be no uniformity without work flexibility. For the diversity of public services, their procurement methods can also show diversity. For public services with a relatively mature market (such as cleaning services), it is necessary to fully consider competition factors and implement public bidding; for public services with underdeveloped social organizations (such as community management, etc.), targeted commissions and project subsidies can be used. For projects with many and scattered public service objects (such as home-based elderly care services), it can be realized through voucher consumption or government-funded joint organizations’ procurement.