PV Industry Association's "Four Consecutive Questions" Challenge the Low-Price Winning Bid Result of Central State-Owned Enterprise Projects

"Has the project strictly implemented the requirements of the Central Economic Work Conference? Has it excluded the lowest bid in accordance with the relevant provisions of the Bidding Law? Has it selected the most cost-effective option based on the life cycle as required by the State-owned Assets Supervision and Administration Commission (SASAC) and the National Development and Reform Commission (NDRC)? Is it a formality?" Last night, the China Photovoltaic Industry Association issued a statement with unusually harsh wording, raising a series of questions about the bidding process for a PV module project under a subsidiary of the State Energy Group. The reason is that, against the backdrop of the association publishing the lowest cost price of modules for two consecutive months, the bidding unit of this project still selected companies with bid prices below the "bottom-line price" as candidates for the winning bid.

The full text is as follows:

Has the project strictly implemented the requirements of the Central Economic Work Conference?

Has it excluded the lowest bid in accordance with the relevant provisions of the Bidding Law?

Has it selected the most cost-effective option based on the life cycle as required by SASAC and NDRC?

Is it a formality?

On December 17, 2024, the Xinjiang Electric Power Bayingolin Mongolian Autonomous Prefecture Power Generation Company announced the candidates for the winning bid of the PV module equipment procurement project for the 600,000 kW PV project in Bohu County, which is part of the supporting facilities for the National Energy Bayingolin Pumped Storage Project. Previously, the bidding unit, the Bayingolin Power Generation Company under the State Energy Group, explicitly set a maximum bid price of 0.6313 yuan/W in its procurement information. As early as November 18, we issued a "Risk Warning Letter" to the bidding unit, advising them not to set unreasonable price limits based on actual conditions. However, as of now, no response has been received.

Subsequently, during the bidding price stage of the project, apart from a small number of companies not listed in the "PV Manufacturing Industry Normative Conditions" directory quoting prices within the limit, other recognized industry leaders and key enterprises quoted prices that included the minimum necessary costs.

However, judging from the recently announced candidates for the winning bid, the bidding unit, Bayingolin Power Generation Company, still insisted on selecting companies with prices within the limit, even choosing the companies with the lowest and second-lowest bids as candidates for the winning bid.

In this regard, we have four questions and hope the relevant units will respond:

First, the recently concluded Central Economic Work Conference outlined the key tasks for next year's economic work, explicitly stating for the first time the need to "comprehensively address 'cut-throat competition' and regulate the behavior of local governments and enterprises." The entire industry is currently actively implementing the important instructions from the central and State Council leaders on the healthy development of the PV industry, striving to resolve the issue of "cut-throat" competition in the PV industry. The Party Committee of the State Energy Group also recently conveyed and studied the spirit of the Central Economic Work Conference on December 16.

As a subsidiary of the group, has the bidding unit implemented the latest requirements of the central government? Is it preventing "cut-throat" competition or exacerbating it? Has it regulated its own behavior?

Second, based on the cost model rigorously reviewed and verified by an expert team recommended by us in conjunction with the Ministry of Industry and Information Technology, NDRC, and the National Energy Administration, and calculated on the basis of extensive surveys, the minimum cost of PV modules (including the minimum necessary expenses) in November was 0.69 yuan/W. According to Article 27 of the "Regulations for the Implementation of the Bidding Law of the People's Republic of China" (hereinafter referred to as the "Bidding Law"), if the bidder sets a maximum bid price, it should specify the maximum bid price or the calculation method for the maximum bid price in the bidding documents.

We ask, with the project's maximum price nearly 10% lower than our calculated minimum price, and given that the PV manufacturing industry is currently experiencing industry-wide losses, we assume that the cost calculation of Bayingolin Power Generation Company is also based on reasonable and legal grounds. However, with such a significant discrepancy, we would like to know the basis for their calculations.

According to Article 41 of the "Bidding Law," the winning bid must meet one of the following conditions: first, it maximizes the satisfaction of the comprehensive evaluation criteria specified in the bidding documents; second, it meets the substantive requirements of the bidding documents and has the lowest evaluated bid price, except for bids below cost.

Two of the three candidate companies for the winning bid are located in Jiangsu and Zhejiang. Considering the industry fair freight rate of 0.015 yuan/W per 1,000 km, including tax and freight, and deducting the freight cost for over 4,000 km, what is the actual price of the modules themselves? Is it below cost? Does it comply with the requirements of the Bidding Law?

Third, according to the 2024 "Guiding Opinions on Regulating the Procurement Management of Central Enterprises" issued by SASAC and NDRC, central enterprises should "adhere to competitive selection, extensively search for supply resources, fully activate market competition, and select suppliers, contractors, or service providers with the best performance-price ratio and the most optimal comprehensive life cycle cost."

Furthermore, according to the "Several Opinions on Strictly Implementing Bidding Laws and Regulations and Further Regulating the Behavior of Bidding Entities" issued by NDRC and other departments (Document No. 1,117 of 2022), Article 1, Clause 5 states, "Whether an analysis and judgment have been conducted on abnormally low bids that may be below cost or affect contract performance, and on seriously unbalanced bids; increase the transparency of bid evaluation, actively promote the disclosure of scoring results to the public, and disclose the reasons for bid rejection to bidders."

From the project bid announcement, it is evident that the lowest bid was selected. We also request Bayingolin Power Generation Company to clarify whether the selection criteria comply with the requirements of "selecting suppliers with the best performance-price ratio and the most optimal comprehensive life cycle cost" and "analyzing and judging abnormally low bids that may be below cost or affect contract performance." At the same time, we request Bayingolin Power Generation Company to disclose the relevant basis to the public as required.

Fourth, "formalism is harmful." Our Party has always resolutely opposed and vigorously rectified formalism. The Central Economic Work Conference once again emphasized the need to "resolutely oppose formalism and bureaucracy that focus on pleasing superiors without being accountable to subordinates or considering practical results." A key feature of formalism is "focusing only on process, not results." Such low prices, with companies that clearly have technical and capability gaps winning the bid, are nothing more than "lowest price"—"whether the contract can be fulfilled or the quality guaranteed is not the responsibility of the bidding officer!" Is this formalism?

We will continue to monitor the procurement information for the 290,000 kW PV module equipment for Phase II of the 600,000 kW PV project in the Midong District of the National Energy Urumqi PV Company in Xinjiang. This project has also set a maximum bid price of 0.6314 yuan/W.