In the traditional general construction contracting model, it is common for project bidders to specify in the bidding documents that "joint venture bids will not be accepted," which is generally accepted by bidders and has not attracted attention in the industry.

     But Article 10 of the Measures for the Administration of Engineering General Contracting of Housing Construction and Municipal Infrastructure Projects, which came into effect on March 1, 2020, clearly stipulates that the contractor of an engineering general contracting project must either have both design and construction qualifications, or be composed of a design unit and a construction unit as a joint venture.

However, there are not many market players with dual qualifications at present. In this context, whether the employer can reject joint venture bids has attracted attention.

II. The Legal Basis for the Employer's "Willful" Rejection

Although the "Measures for the Administration of Engineering General Contracting of Housing Construction and Municipal Infrastructure Projects" clearly stipulates that joint venture bidding is allowed, does the bidder have no right to refuse it?

I don't think so. The reasons are:

First of all, the "Measures for the Administration of Engineering General Contracting of Housing Construction and Municipal Infrastructure Projects" is a normative document jointly issued by the Ministry of Housing and Urban-Rural Development and the National Development and Reform Commission, and its legal status is very low. If the bidder does not comply with it, the "Administrative Measures" does not stipulate corresponding legal responsibilities.

If a legal norm does not impose corresponding legal responsibilities such as disciplinary measures on a legal act, the effect of the legal norm is mostly an advocacy guideline and does not have mandatory enforcement power.

Secondly, The reason why the bidder has the right to reject joint venture bids, I think, is still related to the legal nature of bidding activities.

Article 27 of the "Construction Law" stipulates: "Large-scale construction projects or construction projects with complex structures may be jointly contracted by two or more contracting units."

This may be the legal "admission ticket" for contractors to contract in the form of a joint venture. The joint venture is allowed to have the opportunity to contract, but it only stipulates "may", not "should" or "must".

Article 31, Paragraph 3 of the "Bidding Law" stipulates: "The bidder shall not force the bidder to form a joint venture to bid jointly, and shall not restrict competition among bidders."

Article 37 of the "Regulations for the Implementation of the Bidding Law" stipulates: "The bidder shall state in the pre-qualification announcement, bidding announcement or bidding invitation letter whether to accept joint venture bids."

It can be seen from this provision that the law prohibits bidders from forcing the formation of joint venture bids, and allows bidders to freely decide whether to accept joint venture bids.

The reason why the law stipulates this way has to be analyzed from the legal nature of bidding activities.

The legal nature of bidding is a way of negotiation for contracting.

Article 13 of the "Contract Law" stipulates: "The parties to a contract shall adopt the method of offer and acceptance."

Article 15 of the "Contract Law" stipulates that a bidding announcement is an invitation to offer; then, by the bidder bidding and the bidder issuing a notice of acceptance, the parties complete the process of concluding a contract.

The principle of equality stipulated in Article 3 and the principle of freedom of contract stipulated in Article 4 of the "Contract Law" stipulate from the legal principle level that the parties have the right to freely choose with whom to contract, but because engineering construction involves more social public interests and public safety, the state has promulgated the "Bidding Law" and the "Regulations on Engineering Projects that Must Be Bidded" to intervene to a certain extent in the conclusion of engineering construction contracting contracts, and mandatorily requires the conclusion of some contracts in this economic field to be carried out in the form of bidding. However, legal principles such as equality and freedom are still consistently followed in civil and commercial laws.

In summary, whether from the legal rules of the "Bidding Law" and its implementation regulations, or from the legal principles of the "Contract Law", the bidder should be given the autonomy to accept joint venture bids.

III. EPC Contractors Should Have a "Painful Realization"

Whether joint venture bidding is allowed for engineering general contracting projects, the deep-seated problem behind it is the matching of engineering general contracting qualifications and market demand.

China's qualification regulations for engineering general contractors are constantly evolving.

In 1992, the Ministry of Construction issued the "Interim Provisions on the Management of Qualifications of Engineering General Contracting Enterprises (for Trial Implementation)", and in 2002, the "Decision of the State Council on Canceling the First Batch of Administrative Approval Items" canceled the administrative approval of engineering general contracting qualification approval.

From the "Guiding Opinions on Cultivating and Developing Engineering General Contracting and Engineering Project Management Enterprises" issued by the former Ministry of Construction in 2003 to the official implementation of the "Measures for the Administration of Engineering General Contracting of Housing Construction and Municipal Infrastructure Projects" on March 1, 2020, there has always been controversy over engineering general contracting qualifications.

Even in the draft for comments on the "Measures for the Administration of Engineering General Contracting of Housing Construction and Municipal Infrastructure Projects", the Ministry of Housing and Urban-Rural Development announced in 2017 that either design qualification or construction qualification can be undertaken. When the draft for comments was released again in 2019, although it was still a two-for-one qualification requirement, the draft stipulated that engineering general contracting units with corresponding qualifications should be encouraged to implement construction drawing design and construction by themselves to promote the deep integration of design and construction.

Whether joint venture bidding is allowed has become a new focal point because there are not many market players with dual qualifications. Engineering general contracting projects are often large, and with the country's years of strong promotion, the market is also broad enough. Therefore, market players who do not yet have dual qualifications and want to get a share of the pie can only hope to participate in the form of a joint venture.

If the employer rejects the joint venture, it will undoubtedly be a blow to the group with a single qualification.

But I think, Instead of arguing with the employer about whether it has the right to reject joint venture bids, it is better to recognize the situation and actively prepare for how to have dual qualifications.

Article 12 of the "Measures for the Administration of Engineering General Contracting of Housing Construction and Municipal Infrastructure Projects" stipulates:

Encourage design firms to apply for construction qualifications. Units that have obtained comprehensive engineering design qualifications, Class A industry qualifications, and Class A qualifications for building engineering can directly apply for the corresponding Class I general construction contracting qualifications. Encourage construction companies to apply for engineering design qualifications. Units with Class I or above general construction contracting qualifications can directly apply for the corresponding category of Class A engineering design qualifications. The completed corresponding scale of engineering general contracting performance can be used as a design and construction performance declaration.

This is a very clear signal of the future market. Allowing consortiums to participate in the engineering general contracting market is only a phased protection measure for the country to cultivate the market. The deep integration of design and construction is the market demand for the introduction of the engineering general contracting model. This market demand is ultimately calling for companies with dual qualifications.

Companies that want to enter this field should either apply for the qualifications themselves or acquire companies with the corresponding qualifications.

In short, take action and don't waste time struggling with whether the employer has the right to reject consortium bids.