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Trade and Industry Department The Government of the Hong Kong Special Administrative Region
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Review Body on Bid Challenges

Summary of Case No. 01/2001

The rejection of a tender proposal for the supply, installation and maintenance of a system of Speed Enforcement Camera (SEC) to the Government of the Hong Kong Special Administrative Region (HKSARG)

Company A (the complainant) lodged a bid challenge to the Review Body against the HKSARG (the respondent) for breaching Articles III.1 and XIII.4 of the World Trade Organization Agreement on Government Procurement (GPA) in a tender exercise for the supply, installation and maintenance of a SEC system.

The respondent rejected the complainant's tender because the former claimed that the latter's proposed SEC system failed to meet tender specifications in respect of the system power supply and the photo image resolution requirement. However, the complainant alleged that the respondent had wrongfully and in breach of GPA rejected its offer. The complainant also alleged that the successful tenderer, Company B, was incapable of undertaking the contract in accordance with the requirements of the tender without breaching its intellectual property rights (IPR). Apart from compensation for loss and damage suffered, the complainant requested the suspension of the procurement procedures under the tender.

A Panel comprising the Chairman and two Members of the Review Body was set up to consider the bid challenge. Having preliminarily examined the case, the Panel recommended the respondent to suspend the procurement procedures until the end of the hearing as a Rapid Interim Measure (RIM). The respondent accepted the Panel's recommendation.

A two-day hearing was conducted to look into the case. The decision of the Panel is summarised as follows -

  1. The respondent made an error in rejecting the complainant's tender. There was a breach of Article III.1 of the GPA by the respondent in that the complainant's tender was incorrectly rejected for alleged "non-compliance". Accordingly, a less favourable treatment was accorded to the complainant when compared to the treatment afforded to other tenderers. The respondent also breached Article XIII.4(c) of the GPA because the award was not made in accordance with "the criteria and essential requirement" specified in the tender, since there was no justifiable cause for rejection of an otherwise compliant tender.
  2. The Panel considered that it was not the correct body to determine the claims relating to IPR. In any event, the complainant failed to satisfy the Panel that Company B was not "capable" as alleged to undertake the contract.
  3. The Panel agreed to lift the RIM imposed on the respondent because the complainant's tender price was considerably higher than all the other tenders, and even if it had reached the evaluation stage, it would not have been successful on the ground of price.
  4. The complainant brought this case to the Panel relying on two separate grounds of challenge, i.e. its tender was wrongfully rejected and the successful tenderer, Company B, was not capable of undertaking the contract without infringing its IPR. The first was upheld but the second was rejected. The Panel therefore ruled that the respondent should pay the complainant one half of its reasonable costs of the hearing.
  5. This decision explains the working of the GPA and sets out some of its material terms. It also explains the circumstances of its adoption in Hong Kong and also attaches the Rules of Operation of the Review Body on Bid Challenges.