Q: Can I bid on construction work in China by myself or must I have a local partner?

A: Generally, China is moving to open its markets to more foreign competition. The process is slow and proper qualifications are required to bid on construction projects, regardless of whether you have a local partner.

The decision as to whether to bid alone on construction work or look for a local partner often depends on the project. As a first matter, however, the proper licensor is required to qualify to bid on any domestic Chinese construction project. Once properly licensed, a wholly owned foreign contractor is permitted to bid on certain projects in China.

For instance, a properly qualified and licensed wholly foreign owned contractor may bid alone on construction projects: 1) which are wholly funded by foreign investments or grants; 2) which are financed by international financial organizations and awarded through an international tendering process in accordance with the financial documents; and 3) on which the foreign investment is more than 50%. Other construction projects may be bid on under certain circumstances, such as when a required technical expertise is not available through local Chinese firms. Bidding on such projects by wholly owned foreign contractors requires prior approval from the appropriate governmental department. A foreign contractor in partnership with a local Chinese contractor has a broader range of projects to bid upon.

Penalties can be imposed for violation of the applicable Chinese bidding laws. Those penalties can range from a simple -- but not necessarily nominal -- fine to complete revocation of a business license and return of all contractual payments on the illegally acquired contract. Therefore, prior to bidding any project, proper legal advice should be sought to determine whether the wholly foreign owned contractor meets the qualifications necessary for the bid.

Thanks to George J. Pierson, P.E., Esq., who is a partner at Peckar & Abramson, P.C., and director of the firm's International Construction Practice Group. His expertise includes all aspects of domestic and international construction and contract law. Previously, he was the executive vice president/legal director of Kvaerner E&C, the international engineering and construction company. His e-mail is gpierson@pecklaw.com.

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