How #publicprocurement rules seem to be diminishing #competition in #China: A wake up call

The latest edition of the China Competition Bulletin reports on the state of affairs in Chinese public procurement markets, where inadequate rules and procedures seemingly fail to ensure value for money as a result of a lack of transparency and accountability.

According to the report, 
The principles of openness and transparency, fair competition, impartiality, and good faith are required to be observed in government procurement. China’s government procurement system provides general rules on competition, transparency, and fairness. However, the implementation of the rules is less than ideal. Insufficient disclosure of information, conflicts of interest, discriminatory treatment of enterprises, excessive prices, and poor quality purchasing have been frequently reported and raised the public’s concern in recent years. The newly released Blue Book of Rule of Law: Annual Report on China’s Rule of Law No. 11 (2013) provides an empirical report on the current state of government procurement.
Remarkably, other than the difficulties in having access to comparable data (and, generally, to data), the report evidences that
Data and price comparison results revealed that certain government procured goods can be much more expensive than average market prices. An extreme example mentioned in the report was a desktop computer that was procured at a cost of CNY 98,730 when the average market price for a computer with the same specifications was CNY 2,649. [...] In the end, the prices of 19,020 items were compared. These goods covered 29 product categories such as uninterruptible power systems, laptops, dehumidifiers, printers, and fax machines. The results show that the prices of 15,190 items were higher than the average market prices and that taxpayers had paid an extra CNY 20,743,897.50. On the positive side, the price comparison results show that 68,025 items purchased through the centralised procurement of the Central Government had saved taxpayers CNY 5,543,185. The 68,025 items, covering desktops, workstations, and printers, were chosen from 85,963 records collected for the research.
In view of such findings, 
the report notes that transparency is the foundation of fair competition, impartiality, and good faith. Transparency can effectively facilitate fair competition, deter corruption, and prevent China, the world’s largest procurement market, from turning into the world’s largest market for public corruption.
It seems that the Chinese public procurement system would benefit from a revision along the lines suggested by the report itself, which includes recommendations for the revision and improvement of the legal system for government procurement; which should be coupled with those in the OECD July 2012 Recommendation and, more generally, it offers a clear example of the interaction between public procurement and competition, as well as the need to consider  effects of public procurement regulations on competitive markets, as Prof. Yukins and Lt. Col. Cora have just emphasised in their featured comment in Government Contractor, March 6, 2013, Vol. 55, No. 9, ¶ 64.

When analysing the situation in the USA, Yukins and Cora conclude that
a substantial body of literature confirms that procurement rules can have a significant negative impact on competitive commercial markets. Procurement rules can, for example, raise new barriers to entry in the commercial marketplace, facilitate collusion in the commercial space, or artificially buoy commercial prices. Federal procurement regulators have not, as a regular matter, assessed those possible impacts in past rulemaking, but sound practice and legal authority, including an executive order, seem to call for such assessments. Assessing procurement rules’ likely impact on competitive markets would be in accord with best practices in rulemaking, and would help ensure that the federal procurement system integrates efficiently, and not disruptively, into the broader economy.
Their views and recommendations, which I fully share [Sanchez Graells, Public Procurement and the EU Competition Rules (Oxford, Hart Publishing, 2011)], are relevant for procurement reform in all major jurisdictions, such as the USA, the EU and  China. Hopefully, too, such revisions can lead to an exchange of best practices and, to the extent desirable, certain global convergence.