Are there any restrictions or legislative regimes affecting procurement?
Yes. For both public and private actors competition restrictions apply. The most important restrictions are the prohibition of exclusivity clauses/agreements and the prohibition of anti-competitive cooperation where the cooperating contractors could submit bids individually/separately.
For public employers, further restrictions apply according to the Public Procurement Act of 2016 and its corresponding regulations. The Act regulates the procedure for conducting tender competitions, and shall ensure the most efficient use of resources in public procurement based on business and equal treatment.
Private actors are basically free to manage their procurements, as long as they are in compliance with the competition rules and within the limits of pre-contractual liability.
There is no legislation on procurement for private employers. Private employers are free to procure their project in the way they want. The Public Procurement Act (which is based on the EU directives) applies to public procurement of construction works.
In Hong Kong, developers generally are free to choose any contractor to carry out construction works for their projects. In the private sector, the primary statutory requirement is that the contractors must have been registered in the appropriate categories of registered contractors under the Buildings Ordinance (Cap. 123). In the public sector, procurement is controlled through administrative rules promulgated by the relevant government departments. For example, the Development Bureau maintains an approved list of contractors as suitable candidates for tendering public sector works in various categories.
In Hong Kong, and as would be expected, a large proportion of work in the construction industry is procured by way of tendering. This either is on a competitive basis or a negotiated basis – or sometimes a combination of both. The methods of tendering commonly used are open competitive tendering, selective competitive tendering and negotiated tendering.
In formal competitive bid situations, to ensure fair and open competitive tendering, it is essential that the tenders submitted by each contractor be based on the identical tender documentation. Once tenders have been opened, comparatively lower tenders are noted, but the award of contract is not necessarily made to the lowest priced bidder. The focus is put on whether the contractor is a responsible bidder, with the necessary technical, managerial and financial capability and integrity to undertake and complete the work in a satisfactory manner. In practice, where tenders are invited, an explicit statement is made that the employer does not guarantee to accept the lowest tender.
The public procurement process is governed by the Stores and Procurement Regulations issued by the Financial Secretary under the Public Finance Ordinance (Cap. 2). These regulations are supplemented by circulars / memoranda issued by relevant Government departments. The procedures laid down in these Regulations and circulars memoranda are fully consistent with the World Trade Organisation Agreement on Government Procurement (WTO GPA), to which Hong Kong has been a signatory since 20 May 1997. Quasi-government bodies such as the Airport Authority, Hospital Authority, Housing Authority and the West Kowloon Cultural District Authority may have a different procurement process and strictly speaking are not bound by the Public Finance Ordinance and the Stores and Procurement Regulations (although the WTO guidelines are regarded by them as being persuasive guides to good practice).
Public procurement is governed by the EU procurement rules, which have been implemented into English law by the Public Contracts Regulations 2015, the Utilities Contracts Regulations 2016 and the Concession Contracts Regulations 2016. These regulations are intended to open up competition throughout the EU and to ensure that contracts are awarded fairly and transparently without national bias.
If the rules apply (there are exceptions), the contract must be advertised in the Official Journal of the European Union and tendered using one of five available procedures. The process can take between 6 weeks to 18 months depending on the procedure chosen and the complexity of the contract.
There are no material restrictions or legislative regimes that affect private construction procurement. However, some states have enacted statutes that impact the rights and obligations of parties to a construction contract. For instance, some states prohibit certain kinds of contractual indemnification obligations, and some states also have statutes governing payment, such as the Prompt Payment Act. Where contracts contain provisions in conflict with state law, such provisions are considered void and unenforceable. Additionally, there are numerous state and federal statutory frameworks affecting public construction procurement.
Save for public procurements, which are to be conducted based on the Law on Public Procurement of the Republic of Serbia, there are no restrictions affecting procurements specifically. The parties that are obliged to apply the Law on Public Procurement are governmental bodies of the Republic of Serbia, bodies of the autonomous provinces of the same republic, as well as local self-government bodies – that are all referred as to contracting authorities. Amongst other reasons, any public procurement contracts, which were concluded without having conducted the public procurement procedure, which the contracting authority has been obliged to conduct according to the provisions of the Law on Public Procurement, as well as if the same contracts are concluded contrary to the provisions of the said law that are governing the prevention of corruption and conflict of interest, shall be null and void.