Our Ref: SN/1
17 January 2018
Mr Brent Snyder
Chief Executive Officer
Room 3601, 36/F, Wu Chung House
213 Queen’s Road East
Wanchai, Hong Kong
"Model Non-Collusion Clauses and Non-Collusive Tendering Certificate"
We refer to the above documents, which were published on the Commission's website on 18 December 2017.
We understand that the objective of these documents is to assist in deterring bid-rigging. However, some of our members have expressed concerns that these documents will also deter many legitimate bidding arrangements, due to the overly-broad nature of the drafting. We were unable to put these concerns to you before the documents were published because, as far as we are aware, there was no public consultation on them before publication. In particular:
We appreciate that the model clauses and certificate are not legally-binding, and that procuring organisations are free not to adopt them, or to adopt alternative wording. However, we are concerned that procuring organisations will regard the Commission's suggested drafting as representing the safest "default" position, particularly given the Commission's strong encouragement (in its accompanying Press Release of 18 December 2017) to consider using these model clauses and certificate. The inclusion of this wording in tender documents would preclude many legitimate bidding arrangements, or at least place an unfair and inefficient burden on potential bidders in trying to justify bona fide changes to the drafting to meet their legitimate concerns, as expressed above.
Deterring (or placing obstacles in the way of) consortium bids is a particularly serious matter for Hong Kong, where over 98 per cent of businesses are SMEs. By definition, SMEs often lack the scale to bid for major projects, and joining up with other businesses in a consortium is the only way they can compete for them. To deter SMEs from competing not only tilts the playing field against SMEs in favour of larger firms, to the detriment of SMEs, thereby distorting competition, it is also against the public interest by preventing procuring organisations from benefitting from the fullest competition in public bids, resulting in less competitive and innovative goods and services.
These concerns have been explicitly recognised by Ireland's competition authority, the Competition and Consumer Protection Commission (CCPC):
"Excluding efficient SMEs from public procurement could potentially have a detrimental impact on competition. For example, it may have the effect of excluding smaller firms or new entrants with innovative solutions, thereby reducing the value for money that the state can achieve…Consortium bidding offers an opportunity for SMEs to pool their knowledge and submit joint bids that offer higher quality products and more innovative solutions to the purchasing body".
For these reasons, and to encourage SMEs to bid for projects through forming consortia, the CCPC issued a Guide for SMEs on how to engage in consortia while complying with the competition rules.
In terms of possible solutions to address the above concerns, we suggest that the Commission considers adopting the following steps:
We welcome a meeting with you and your colleagues to elaborate on our concerns and suggested solutions, if the Commission finds this useful.
I look forward to hearing from you.
 First paragraph of the model non-collusion wording in an invitation to tender, and in paragraph 2(b) of the model non-collusive tendering certificate.
 Paragraph 3(b) of the model non-collusive tendering certificate.
 See n 2 above.
 CCPC "Consortium Bidding: How to comply with competition law when tendering as Part of a Consortium": A Guide for Small and Medium Enterprises" December 2014 p 5.
 See n 4 above.
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