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No. 41 - Brief Analysis of Amendment to Government Procurement Act – Fake or Untrue Documents 2019.10.07

 

Chien Yeh Law Offices|E-News|No. 41

Brief Analysis of Amendment to Government Procurement Act – Fake or Untrue Documents

 

Author: Lester C.H. Lin, Attorney at Law

 

I. Preface

The Government Procurement Act (hereinafter referred to as the “Act”) was promulgated on May 27, 1998 and came into effect on May 27, 1999. The Act has since been amended five times, respectively on January 10, 2001, February 6, 2002, July 4, 2007, January 26, 2012, and January 6, 2016. The amendment this time aims to simplify the procurement procedures, improve efficiency and quality of procurement, and strengthen fairness of government procurement through reinforcing measures for fraud prevention to promote healthy competition among industries. The amendment to the Act (this “Amendment”) passed third reading on April 30, 2019, in which a total of 21 provisions were amended or added (18 were amended and 3 were added). The Amendment was promulgated by the President on May 22, 2019 and became effective on May 24 of the same year.

 

 

II. Key Provisions in the Amendment

Compared to previous amendments, the content of this Amendment is subject to major change. Key amendments are listed as follows:

1. Amendment to Article 4: Specifies that the Act does not apply to procurements for cultural purposes.

2. Amendment to Paragraph 1 of Article 11: Adds the operation mechanism of “Procurement Evaluation Group” in accordance with the existing “Establishment and Operation Guideline for Procurement Evaluation Group of Government Agencies,” which expressly provides for the current standards for the procurement evaluation group and makes procurement procedures more comprehensive.

3. Amendment to Article 15: Amends the target and applicable scope of the rules of conflicts of interest for procurement personnel and procurement supervision personnel.

4. Amendment to Article 17: Adds a prior-review mechanism for any procurement involving national security; authorizes the making of restrictions on and review procedures for domestic or foreign suppliers to prevent foreign suppliers from participating in procurement that may pose potential threat to national security of the country (including information security) without the supervision of the competent authorities.

5. Amendment to Article 22: Considering the complex nature of social services and difficulty in estimating their costs and effectiveness, it is explicitly stipulated in this Article that social welfare services may be procured through limited tendering procedures, with public selection of suppliers. The Article also authorizes the establishment of selection and payment methods for social welfare services.

6. Amendment to Article 26-1: Provides for the prescribing of technical specifications and measures to promote conservation of natural resources and environmental protection.

7. Amendment to Article 30: Payment methods for bid bond and guarantee bond for procurement of services are amended for payment of such bond to be waived in principle.

8. Amendment to Article 31: According to the resolution of the First Joint Meeting of the Presiding Judges and Judges of the Supreme Administrative Court in November 2013, “The agency may, by its unilateral administrative action, recover the bid bond already returned, which is the exercise of its right of claim under public law against the tenderer.” Thus, the conditions applicable for not returning the bid bond are amended therein. In addition, the amount, time limit, and the starting point of the recovery of bid bond not paid according to the Act are also added to prevent the unjust situation of not being able to make the recovery if the tenderer fails to pay the bid bond.

9. Amendment to Article 52: Given that purposes, needs, desired functions, and quality requirements of procurements may vary from one agency to another, applicable conditions to the most advantageous tender are simplified for the agencies to flexibly use procurement strategies. In addition, considering the non-profit and quasi-market characteristics of social welfare services, a further provision is added under which no government estimate is set for the most advantageous tender.

10. Amendment to Article 59: Amends punitive provisions and the applicable scope for cases of giving improper benefits to promote the constitution of procurement contracts in order to achieve the effect of punishment and to maintain fairness of government procurement.

11. Amendment to Article 70-1: Since occupational safety is vital to the life, body, health, property, and family of the worker, the management mechanism for occupational safety and health is strengthened in order to improve and implement the management mechanism for safety and health of public construction workers, which demands the supplier to pay more attention to construction safety. The agencies shall also assume greater responsibility for supervision and management of execution of the contract to ensure construction safety and protect workers from occupational harm.

12. Amendment to Article 76: Considering that the agencies receiving administrative appeals mainly focus on those appeals concerning regulations under their purview, and it is also unreasonable that similar dispute cases may be dealt with under different remedy proceedings due to differences in the amount of money involved, thus the Article is amended to also specify that appeals related to the bid bond not being returned or bid bond being recovered shall not be subject to the restriction of the value of procurement reaching the threshold for publication.

13. Amendment to Article 85: Adds the time limit for procuring entity to proceed with lawful alternative where a review decision specifies that the procuring entity is in breach of Acts and Regulations.

14. Amendment to Article 93: Although Article 93 of the Act offers the legal basis for inter-entity supply contract, the detailed content thereof only contains the implementation method, and the scope of relevant legal authorization is not clear. Since there were doubts as to whether the Act applies to such inter-entity supply contract, the Amendment provides authorization for matters related to inter-entity supply contract to be separately prescribed.

15. Amendment to Article 94: Deleted the upper limit on the number of evaluation committee members and added the restriction for selection of experts and scholars of the evaluation committee in order for the evaluation to be independent and fair.

16. Amendment to Article 95: Government procurement cases usually require expertise and involve various laws and regulations. In order to ensure efficiency and quality of government procurement, procurement work shall be conducted by professional procurement personnel. Thus, the Amendment provides that where the value of procurement reaches the threshold of a certain amount, such procurement shall be conducted by professional procurement personnel in order to implement the system of professional procurement personnel.

17. Amendment to Article 101: In order to eliminate the “illegal” act or “material breach” of unscrupulous suppliers and prevent such suppliers from harming other agencies, as well as to establish an environment of fair competition among suppliers and amend the suspension standard for unscrupulous suppliers to comply with the principle of proportionality (including the reasons of suspension for breach of contract), the requirements and considerations of “seriousness” of the conditions for discretion of agencies are added in this provision. The Amendment also provides for three-year suspension when the suspension is due to bribery. In addition, since the notification to suppliers will be published on the Government Procurement Gazette and is an administrative act that is a restraint on the supplier’s rights and deprive the suppliers of the same, all conditions in favor of or against the suppliers shall be taken into consideration. Therefore, a provision is added ensuring that the supplier shall have the opportunity to make statement prior to the notification of suspension of such supplier by the agency. The agency shall establish a “Procurement and Review Team” to determine whether the supplier shall be suspended.

18. Amendment to Article 103: Added the term of suspension for “material breach,” where the term of suspension is cumulative as punishment.

 

III. Brief Analysis of “Fake or Untrue Documents” in this Amendment

In this Amendment, additions and amendments to this Act are numerous, serving as improvements to establish and supplement mechanisms, or to have mechanisms that are already operating be expressly stated in the provisions. On examination of the Amendment to the Government Procurement Act, subtleties can be found in the requirements for “fake or untrue documents” under Subparagraph 1 of Paragraph 2 of Article 31, Subparagraph 4 of Paragraph 1 of Article 50, and Subparagraph 4 of Paragraph 1 of Article 101. The following explicates such provisions:

 

(1) Bid Bond Forfeited or Not Returned

Paragraph 2 of Article 31

Circumstances under which bid bond shall not be returned or refunded

Before the Amendment

After the Amendment

1. Subparagraph 1: The tenderer used forged or altered documents to tender.

1. Subparagraph 1: The tenderer used fake or untrue documents to tender.

Before the Amendment, Subparagraph 1 of Paragraph 2 of Article 31 of the Government Procurement Act read: “The tenderer used forged or altered documents to tender”; After theAmendment, the Subparagraph now reads: “The tenderer used fake or untrue documents to tender” to specify the circumstances under which bid bond shall not be returned or refunded.

The amendment to this Subparagraph is based upon the legislative purpose of the Act, which is “to maintain the government procurement procedures and to ensure the quality of procurement” and is on such a basis extended to “forged or altered documents,” where there is a difference in interpretation between the Government Procurement Act and the Criminal Code of the Republic of China. “Forged or altered documents” referred to in this Act are not limited to documents that contain untrue content produced by persons not authorized to do so. Simply put, compared to the Criminal Code, the Government Procurement Act adopts a broader interpretation and scope of “forged or altered documents,” and this difference is illustrated by this Amendment. After the Amendment, the Act specifies that any documents offered by the tenderer that contain fake or untrue content shall be classified as such documents, no matter who produced them and whether such person had authorization to do so. However, for purpose and reasonableness of this provision, this provision is subject to the premise that the tenderer is responsible.

 

(2) Not Opening the Tender or Awarding the Contract to the Tenderer or Supplier

Subparagraphs 3 and 4 of Paragraph 1 of Article 50

Circumstances under which the tender shall not be opened to the tenderer

Before the Amendment

After the Amendment

3. The tendererborrows or assumes any other's name or certificate, or uses forged or altered documents to tender.

4. The tenderer forges or alters tender documents.

3. The tenderer borrows or assumes any other's name or certificate to tender.

4. The tenderer uses untrue documents to tender.

Before the Amendment, the latter part of Subparagraph 3 of Paragraph 1 of Article 50 read: “…or uses forged or altered documents to tender” and Subparagraph 4 read: “The tenderer forges or alters tender documents,” specifying circumstances under which a government agency shall not open the tender or award the contract. Through this Amendment, the original Subparagraph 3 has become Subparagraph 4 and reads: “The tenderer uses untrue documents to tender,” with the original Subparagraph 4 removed accordingly.

Amendments to these Subparagraphs are made according to the legislative purpose of the Act, “to maintain fairness and correctness of government procurement and to improve the operations of tender evaluation.” “Forged or altered documents” in the latter part of Subparagraph 3 herein prior to the Amendment, as well as those in Subparagraph 1 of Paragraph 2 of Article 31 after the Amendment, can be explained and construed the same way. However, technically speaking, Subparagraph 4 of Paragraph 1 of Article 50 after the Amendment shall find itself applicable if the tenderer does use untrue documents, regardless of whether the use is intentional or with negligence. In essence, this Subparagraph does not require the premise that the tenderer is responsible.

 

(3) Publication on the Government Procurement Gazette (Debarment of Unscrupulous Supplier)

Subparagraphs 2 and 4 of Paragraph 1 of Article 101

The addition of “substantiality” as a requisite constituent element

Before the Amendment

After the Amendment

2. The supplier borrows or assumes any other's name or certificate or uses forged documents or documents with unauthorized alteration to tender for, make, or execute a contract.

4. The supplierforges or alters the documents regarding the tender, the contract, or execution of the contract.

2. The supplier borrows or assumes any other's name or certificate to tender.

4. The supplier uses substantially fake or untrue documents to tender for, make, or execute a contract.

Before the Amendment, the latter half of the original Subparagraph 2 of Paragraph 1 of Article 101 read: “…or uses forged documents or documents with unauthorized alteration to tender, contract, or execute a contract.” The original Subparagraph 4 has been removed after this Amendment. Meanwhile, the aforementioned latter half of Subparagraph 2 has become Subparagraph 4 and has been amended to read: “The supplier uses substantially fake or untrue documents to tender for, make, or execute a contract.”

The reason for such amendments is based upon the same consideration of “forged or altered documents” (explanations for which reflect a difference in meaning between the Act and the Criminal Code), as can be found in Subparagraph 1 of Paragraph 2 of Article 32 as well as Subparagraph 4 of Paragraph 1 of Article 50 after the Amendment. However, for purposes of such stipulation, Subparagraph 4 herein shall still require the premise of the supplier being responsible. (Note:To eliminate illegal act or material breach by unscrupulous suppliers and to prevent other agencies from harm and to create an environment of fair, healthy competition for tenderers and suppliers.” Of particular note is the addition of “substantiality” as a requisite constituent element in this Amendment to better comply with the principle of proportionality.

 

IV. Conclusion

(1) Through a comprehensive analysis, differences and similarities between the amended provisions can be better illustrated and guidance may also be provided to procuring entities on proper application of the provisions to prevent procuring entities from being held responsible due to momentary oversight. In addition, such comprehensive analysis also serves as reference for tenderers and suppliers to manage potential risks in tendering.

Amended Articles

Subparagraph 1 of Paragraph 2 of Article 31: “The tenderer uses fake or untrue documents to tender.”

Subparagraph 4 of Paragraph 1 of Article 50: “The tenderer uses untrue documents to tender.”

Subparagraph 4 of Paragraph 1 of Article 101: “The supplier uses substantially fake or untrue documents to tender for, make, or execute a contract.”

Phases of Procurement

Under Chapter II of the Act, this Article is provided for the phase of Invitation of Tenders. (Regulations on bid bond, guarantee bond, or other guarantees are not addressed herein.)

Under Chapter III of the Act, this Article is provided for the phase of Awarding the Contract.

Under Chapter VIIIof the Act, this Article is one of the Supplementary Provisions that are applicable to all phases of procurement.

Conditions for Application

  1. Legal Entity: The tenderer (supplier)[1]
  2. Objective Element(s): The documents used or provided contain fake or untrue content.
  3. Subjective Element(s): Tenderer is responsible.
  1. Legal Entity: The tenderer
  2. Objective Element(s): The documents used or provided are inconsistent with the facts.
  3. Subjective Element(s): The two points listed above, “Legal Entity” and “Objective Element(s),” are sufficient to constitute a breach of this Subparagraph, regardless of whether the use of untrue documents is intentional or with negligence.
  1. Legal Entity: The tenderer
  2. Objective Element(s): The documents used or provided are fake or untrue.
  3. Subjective Element(s): The tenderer is responsible.
  4. Special Element(s): “Substantiality” as a requisite constituent element.

Requirement(s)

Both subjective and objective element(s) are required.

Only objective element(s) is required.

In addition to both subjective and objective element(s) being required, “substantiality” is also a requisite element.

Basic Legal Effect(s)

  1. The bid bond shall not be refunded or returned; or
  2. The returned bid bond shall be recovered from the tenderer.
  1. The tender shall not be opened if discovered before the the tender is opened; or
  2. The contract shall not be awarded if discovered after the tender is opened.

The tenderer may not participate in tenders for a period of time, nor shall they be awarded a contract or be awarded as a subcontractor.

 

(2) This Amendment has specified the application of “fake or untrue documents” under the Act and how their interpretations differ from those of “forged or altered documents” in the Criminal Code. The Amendment broadens the Act’s scope of protection and at the same time strengthens the procurement procedures against fraud. However, upon closer examination, there is still a difference in meaning and requirements between “fake or untrue documents” and “untrue documents.” The interpretation seems to be stricter by having the wording of “fake” removed but is actually not so in substance. In principle, if the tenderer is found to provide any untrue document, the procuring entity may already trigger the effect provided by this Article with just the requirement of the “objective element(s),” whether before or after the tender is opened. In general, the greater impact the law has on the tenderer or supplier, the stricter the requirements shall be. Nevertheless, that is not the case for Subparagraph 4 of Paragraph 1 of Article 50 after the Amendment. Before the Amendment, if a breach of Subparagraph 4 of Paragraph 1 of Article 50 (as in the tenderer forged or altered tender documents) occurred before or after the tender was opened, the tenderer would, in most cases, also have breached Subparagraph 1 of Paragraph 2 of Article 31. Nonetheless, after the Amendment, it is clearly specified that only when the tenderer is responsible could the bid bond be forfeited or recovered in addition to not opening the tender or awarding the contract.

Furthermore, the requirements have become stricter for Subparagraph 4 of Paragraph 1 of Article 101 after the Amendment. Although the amendment was well-intentioned, more experiences and further observations are needed to determine whether concrete standards should be set to avoid highly subjective determination of the requisite element “substantiality” in real-life practices. Perhaps in the future, conditions applicable to the Subparagraph can be provided in Enforcement Rules of the Government Procurement Act as reference for procuring entities as well as tenderers.

(3) An overview of the Amendment shows that its main purpose seems to be the prevention of fraud, and there were few beneficial measures for promoting positive improvement among industries. That being said, after this Amendment, enforcement rules as well as other complementary measures regarding details or technicalities should be properly prescribed and enacted at the earliest to maintain the effectiveness and functions of government procurement so as to avoid the situation where procurement procedures are operating without being guided by proper measures.  



[1]Article 8 of the Government Procurement Act: The term “supplier” referred to in this Act means any company, industrial or commercial firm under partnership or sole proprietorship, or any natural person, juridical person, institution or organization that may offer construction work, property or service to the entity.

 

  

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