Gansu No. 1 Construction Group Co., Ltd. v. Jingyuan Changtaiyuan Real Estate Co., Ltd. for a construction project contract dispute [(2022) Zui Gao Fa Min Zhong No. 118].

1. Regarding the validity of the contract:

The Supreme People's Court held that: The 'Construction Project Contract' and 'Supplementary Agreement' in this case were signed in 2014 and 2016, and the project in this case was also delivered in August 2017. The construction period of the project in this case was earlier than the promulgation and implementation date of the 'Regulations on Projects that Must Be Tendered' and the 'Scope Regulations on Infrastructure and Public Utility Projects that Must Be Tendered'. The first-instance court's determination that the project in this case belongs to the project that must be tendered according to the relevant laws and regulations at the time of the act is not inappropriate.

In addition, even for projects that do not require mandatory bidding, if the parties voluntarily choose to enter into a contract through bidding procedures, they shall also be bound by the 'Bidding Law of the People's Republic of China'. Article 55 of the 'Bidding Law of the People's Republic of China' stipulates that 'For projects that must be tendered according to law, if the tenderer violates the provisions of this Law and negotiates with the bidder on substantive matters such as the bid price and bid plan, a warning shall be given, and the directly responsible person in charge and other directly responsible persons of the unit shall be given sanctions according to law. If the aforementioned act affects the bid-winning result, the bid shall be invalid.' In this case, Gansu No. 1 Construction and Changtaiyuan Company signed the 'BT Framework Agreement' before the bidding, stipulating that the project scope includes the construction and installation of civil engineering, installation, and decoration projects, and the fee standard is based on the 'Gansu Provincial Construction and Installation Engineering Cost Quota' issued by Gan Jian Jia [2009] No. 358, which is calculated according to the third-class standard, which can be regarded as the two parties negotiating on substantive matters such as the bid price before the bidding, and Gansu No. 1 Construction has actually entered the site for construction. Therefore, the first-instance court's determination that the two parties had conducted substantial consultations on the project before signing the bidding contract, violating the mandatory provisions that the tenderer and bidder shall not negotiate on the substantive content of the bid, the bid won by Gansu No. 1 Construction is invalid, and the 'Construction Project Contract' and 'Supplementary Agreement' signed by it are invalid, is not inappropriate.

2. Regarding subcontract management fees:

The Supreme People's Court held that: Regarding the subcontracting cooperation fee for broken bridge aluminum alloy doors and windows, household doors, electronic intercom doors, fire doors, and fire-resistant rolling shutters A. Gansu No. 1 Construction claimed that the above projects belong to the general contracting scope of the 'Construction Project Contract', and Changtaiyuan Company subcontracted it to others for construction, and should pay Gansu No. 1 Construction a subcontract management fee of 2508742.31 yuan in accordance with the 'BT Framework Agreement' which stipulates that 'for professional projects directly contracted by Party A or materials and equipment purchased by Party A, Party B shall record a subcontract management fee of 1%-2% of the contract value of the professional subcontract project'. Because the project in this case was a project that must be tendered when it was under construction, the parties agreed on the construction party, construction scope, project price, etc. by signing the 'BT Framework Agreement' before the bidding, which violated the mandatory provisions, so the 'BT Framework Agreement' is invalid, and the agreement on recording subcontract management fees is also invalid. The court does not support this appeal request of Gansu No. 1 Construction.

From this case of the Supreme People's Court, if the contract is invalid, the agreement on the subcontract management fee is invalid, and the general contractor has no right to claim it.

1. Article 157 of the 'Civil Code' stipulates that if a civil legal act is invalid, revoked, or determined to be ineffective, the property acquired by the actor due to the act shall be returned; if it cannot be returned or is not necessary to be returned, it shall be compensated at a discounted price.

2. Article 24 of the 'Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Construction Project Contract Dispute Cases (I)' (Fa Shi [2020] No. 25) stipulates that if several construction project contracts concluded by the parties for the same construction project are invalid, but the quality of the construction project is qualified, and one party requests to compensate the contractor at a discounted price with reference to the agreement on the project price in the actually performed contract, the people's court shall support it.

It can be seen from the above provisions that if the contract is invalid, the agreement on the general contracting management fee is naturally invalid. If the general contractor has indeed performed the relevant duties of the general contracting, it can only request the construction unit to give corresponding compensation.

1. 'Construction Engineering Quantity List Pricing Specification' (GB50500-2013) stipulates that the general contracting service fee refers to the fees required by the general contractor to cooperate and coordinate the professional project contracting carried out by the employer, to keep the materials and engineering equipment purchased by the employer, and to provide on-site management, summary and collation of completion data, etc., including three items: general contracting management fee, general contracting cooperation fee, and general contracting storage fee.

2. 'Guangxi Construction Engineering Cost Quota' (Gui Jian Biao [2016] No. 16) stipulates that the general contracting service fee refers to the fees required by the general contractor to cooperate and coordinate the professional project contracting carried out by the employer, to keep the materials purchased by the employer, and to provide on-site management, summary and collation of completion data, etc. It generally includes general subcontract management fees, general subcontract cooperation fees, and procurement and storage fees for materials supplied by Party A. The general subcontract management fee refers to the expenses incurred by the department contractor for the overall management of the subcontract project and the subcontractor, and generally includes the expenses incurred in the construction organization, construction site management coordination, summary and collation of completion data, etc. involving the subcontract project. The general subcontract cooperation fee refers to the fees paid by the subcontractor for using the existing facilities of the general contractor. It generally includes the use of scaffolding, vertical transportation machinery and equipment, temporary facilities, temporary water and electricity pipelines, the provision of construction water and electricity, and other expenses agreed upon by the general contractor and the subcontractor.

It can be seen from the above provisions that the subcontract management fee in the (2022) Zui Gao Fa Min Zhong No. 118 case is the general subcontract management fee stipulated above.

1. Longyuan Construction Group Co., Ltd. v. Chengdu Southwest Jiaotong University Fuheyuan Training Center Co., Ltd. for a construction project contract dispute, ([2022] Zui Gao Fa Min Zhong No. 24). The Supreme People's Court held that: The '2012 Contract' and the two 'Filing Contracts' and their three supplementary agreements all violated mandatory legal provisions and should be invalid. Regarding the general contracting service fee. The Supreme People's Court held that Fuheyuan Company recognized in the second instance that the two parties had agreed on a general contracting service fee of 2 million yuan, but believed that Longyuan Group had not effectively performed the general contracting obligations, and there were acts such as hindering the entry of subcontractors, failing to effectively manage each subcontractor, and failing to reserve time for subcontractors, which delayed the construction period and should not charge the general contracting service fee. The court believes that, first of all, whether it is the evidence in the case or the construction practice, it can be proved that Longyuan Group objectively provided construction cooperation, material management, general contracting management and other services, so it has the right to charge the general contracting service fee.

It can be seen from this case that even if the contract is determined to be invalid, the construction unit shall pay the agreed general contracting service fee because the general contracting unit provides general contracting services. Of course, it includes the general contracting management fee.

2. The case of construction project contract dispute between China Construction Second Engineering Bureau Fourth Construction Engineering Co., Ltd. (hereinafter referred to as China Construction Second Bureau Fourth Company) and Heilongjiang Sunrise Kangcheng Real Estate Development Co., Ltd. (hereinafter referred to as Sunrise Kangcheng Company) ([2018] Zui Gao Fa Min Zhong 922). The Supreme People's Court held that the act of the parties signing the contract before bidding violated the statutory bidding procedure, and the parties had reached an agreement and actually performed the 'Construction Project Contract' before performing the statutory bidding procedure, which essentially determined the project contractor in advance, violating the mandatory provisions of laws and administrative regulations, and the contract was invalid.

Regarding the issue of general contracting management fees. China Construction Second Bureau Fourth Company claimed that 13 subcontracting units should be charged general contracting management fees, but according to the facts ascertained in the first instance, only 5 of the 13 subcontracting units met the agreed scope of work for calculating fees. Among these 5 subcontracting units, the construction period of 2 subcontracting units extended to 2 years after China Construction Second Bureau Fourth Company withdrew from the site. China Construction Second Bureau Fourth Company did not provide evidence to prove that it fully performed the general contracting management and cooperation service obligations for the above 2 subcontracting units. Therefore, the first instance court's determination of the general contracting management fee at 2% of the contract price of the remaining 3 subcontracting units according to the agreement between China Construction Second Bureau Fourth Company and Sunrise Kangcheng Company was appropriate, and this court upholds it.

It can be seen from this case that the construction project contract is invalid, and the general contracting management fee can still be calculated, but it should be based on the actual performance of the general contracting management and cooperation service obligations.

1. If the construction project contract is invalid, if the general contracting unit has indeed performed the corresponding general contracting management obligations, it can claim from the construction unit accordingly.

2. 'Construction Project Quantity Survey Pricing Specification' and 'Guangxi Construction Project Cost Quota' both stipulate the specific work content of the general contracting management fee. In daily construction management, the general contracting unit should pay attention to the collection of evidence for fulfilling the general contracting obligations.

3. In many construction project contracts, the general contracting management fee is calculated based on the subcontracted project quantity. Since many subcontracted projects are directly signed by the construction unit and the subcontracting unit, it is easy to have difficulties in providing evidence in litigation. It is recommended to agree in the contract that the project quantity of the general contracting unit should be used as the calculation base.