The Introduction of Standard Documentation for the Construction Industry in China
The Chinese authorities recently published the draft Simplified Standard Construction Project Bidding Documents and Standard Project Design and Construction Main Contractor Bidding Documents (the "Draft Documents") for public consultation until the end of December 2010. The Draft Documents are to be read in conjunction with the other two standard documents published in 2007, the aim of which is to promote a unified standard system of construction tendering documents.
Introducing Standard Construction Documentation
China has been developing standard documents for construction projects since the early 1990s. For example, the Chinese authorities issued a circular concerning a first edition of the Chinese standard form construction contract in 1991 (GF-91-0201), followed by a second edition in 1999 (GF-1999-0201) as a consequence of the rapid growth of the construction industry in China over the previous decade.
In 2007, two sets of standard documents for tendering of construction projects were published by the Chinese authorities, namely the Standard Documents for Preliminary Assessment of Qualifications for Tendering of Construction Projects and the Standard Documents for Tendering of Construction Projects (the "2007 Documents"). The Draft Documents have now been initiated following the successful introduction of these standard documents for the tendering of construction projects.
Outline of the Draft Documents
In brief, the Simplified Standard Construction Project Bidding Documents are to be used for biddings for small construction projects which are expected to be completed within 12 months with relatively low technical requirements. It is the simplified version of the Standard Documents for Tendering of Construction Projects issued in 2007.
The Standard Project Design and Construction Main Contractor Bidding Documents are intended to be used for biddings for construction projects which have a certain level of complexity. It is envisaged that such projects are to be undertaken by a single contractor responsible for both the project design and the construction work, in contrast to the 2007 Documents which enable different parties to undertake the project design and the construction work. These documents complement the Standard Documents for Tendering of Construction Projects issued in 2007. The Draft Documents also have provisions that are similar to those found in other standard forms such as the FIDIC contracts.
Way Forward
It is anticipated that the Draft Documents will be given its official status in the near future and together with the 2007 Documents, a documentation system for the tendering of construction projects in China will be established. In addition, the Ministry of Housing and Urban-Rural Development recently issued a Notice regarding its Work Plan 2011 in which it declared that the Chinese standard form construction contract (i.e. GF-1999-0201) will be revised and that it intended to publish a new standard form of construction contract for general contractors in the near future.
In many circumstances, it is important for foreign companies to use or at least to understand the Chinese standard forms of contract. When considering such standard documents, clients should be aware of the balance of risk under the standard documents and adopt the best practice principles of clarity, simplicity and mutual cooperation.
For inquiries related to this Legal Update, please contact:
Geoffrey Chan (geoffrey.chan@mayerbrown.com)
Tom Fu (tom.fu@mayerbrown.com)
