Should the price adjustment clause in bidding contract be deemed invalid?

On June 20 15, Company A (wholly state-owned) invited tenders for the heating equipment needed for the residential district it developed. The tender document states that "the bidder should fully consider the market risk and policy adjustment during the execution of the contract, and incorporate the risk factors into the tender offer". Company C issued a tender acceptance letter, indicating that it fully accepted and strictly performed the contract. After Company C won the bid, Company A signed a material procurement contract with the owner, with Company B as the contractor and Company C as the heating equipment supplier, and agreed on the unit price, quantity, quality standard and delivery time of the heating equipment to be supplied, and agreed that "if the product price needs to be adjusted, it must be adjusted within five working days agreed by the three parties". After three months of supply, Party C requires the upstream raw material price to increase by 30% as a whole according to the contract price adjustment clause. The three parties reached an agreement to increase the total contract price by 30%.

divergence

There are two opinions on whether the price adjustment clause in the sales contract signed by bidding should be deemed invalid:

The first view is that commercial behavior should fully respect the autonomy of the parties, and the terms of the contract are based on the autonomy of the parties. According to the contract, the change of the contract price shall be regarded as effective.

The second opinion is that the agreement on adjusting the contract price belongs to the situation of "concluding an agreement that deviates from the substantive content of the contract" as stipulated in Article 59 of the Bidding Law of People's Republic of China (PRC), which violates the mandatory provisions of the law and should be invalid.

Comment and analysis

I agree with the second view for the following reasons:

The preceding paragraph of Article 59 of the Bidding Law of People's Republic of China (PRC) stipulates that "if the tenderer and the winning bidder fail to conclude a contract according to the bidding documents and the bidding documents of the winning bidder, or the tenderer and the winning bidder conclude an agreement that deviates from the substantive contents of the contract, they shall be ordered to make corrections", and the first paragraph of Article 57 of the Regulations for the Implementation of the Bidding Law of People's Republic of China (PRC) stipulates that "the tenderer and the winning bidder shall sign a written contract in accordance with the bidding law and these regulations.

According to the foregoing provisions, the tenderer and the winning bidder shall sign the contract in accordance with the tender documents and the bidding documents of the winning bidder. The main terms of the contract include the subject matter, price, quality, performance period and other substantive contents, which shall be consistent with the tender documents and the bid documents of the winning bidder, and no other agreement that deviates from the substantive contents of the contract shall be concluded.

In bidding, price is one of the core factors to decide whether to win the bid. Bidding, bidding, negotiation, winning the bid, signing a contract and a series of bidding behaviors all compete and choose around the price terms. The tenderer and the winning bidder shall sign a contract consistent with the main terms of the tender documents. Its essence is that the tenderer and the winning bidder ensure the certainty and invariability of the price terms formed through competition by signing the contract, so as to realize the legislative purpose of "People's Republic of China (PRC) Bidding Law" of "protecting national interests, social interests and the legitimate rights and interests of the parties involved in bidding activities, improving economic benefits and ensuring project quality".

The so-called "other agreements that deviate from the substantive content of the contract" means that the tenderer and the winning bidder sign other agreements after signing the contract that is consistent with the bidding documents, substantially changing the main terms of the contract that have been determined, or allowing both parties to negotiate to change the aforementioned substantive content, thus changing the "substantive content of the contract" that has been determined through bidding in disguise. The mode of price determination in bidding mode is "bidding mode" and the mode of price adjustment is "bargaining mode", which deviates from the competition principle and legislative intention of bidding procedure, and there should be no "bargaining mode" as the applicable space of "back door agreement" in bidding procedure and performance of related contracts.

The "back door agreement" not only makes the bidding procedure a mere formality, but also harms the interests of other bidders and the public because of the malicious collusion between the tenderer and the bidder. If unforeseen external events that have a significant impact on the performance of the contract do occur during the performance of the contract, they should be adjusted according to the principle of changed circumstances, and the parties should not be allowed to solve them through "back door agreement".

In this case, on the surface, a 30% increase in the total contract price is the result agreed by all three parties. In essence, it is an act of maliciously evading the Bidding Law of People's Republic of China (PRC), which obviously violates the stipulation that "the bidder should consider the price risk during the performance of the contract" in the bidding documents, constitutes substantial exclusion and damage to other bidders, and is "other agreements that deviate from the substantive content of the contract". This behavior violates the provisions of the Bidding Law of People's Republic of China (PRC), and is in line with the situation that the contract in Item (5) of Article 52 of the People's Republic of China (PRC) Contract Law "violates the mandatory provisions of laws and administrative regulations", so the clause shall be deemed invalid.