Notice of the Huangpu District Reform and Development Bureau and Guangzhou Development District Reform and Development Bureau on the Issuance of the Measures for the Administration of the Construction Agent System for Basic Construction Projects Funded by Government Investment in Huangpu District and Guangzhou Development District

Sui Pu Fa Gai Gui Zi [2021] No. 3

To all government agencies, State-owned enterprises, mass organizations and public institutions directly subordinate to Huangpu district and Guangzhou Development District:

With the approval of the Huangpu district government and the Guangzhou Development District administrative committee, the Measures for the Administration of the Contractor System for Basic Construction Projects Funded by Government Investment in Huangpu District and Guangzhou Development District are hereby issued for your due implementation. Problems encountered during the course of implementation should be reported to the relevant district reform and development bureau.

Huangpu district reform and development bureau

Guangzhou Development District reform and development bureau

July 15, 2021

Measures for the Administration of the Contractor System for Basic Construction Projects Funded by Government Investment in Huangpu District and Guangzhou Development District

Chapter 1 General Provisions

Article 1 In order to further advance reforms of the investment system in Huangpu district and Guangzhou Development District, improve and standardize the management of basic construction projects funded by government investment, reasonably control project costs, ensure construction quality, enhance returns on government investments, and promote clean government, these measures are enacted pursuant to the relevant requirements of the Regulations on Government Investment (Guo Wu Yuan Ling No. 712), Provisions on the Management of Construction Costs for Basic Construction Projects (Cai Jian [2016] No. 504) and Measures for the Management of Basic Construction Projects Funded by Government Investment in Huangpu District and Guangzhou Development District (Sui Pu Fu Ban [2017] No. 35) in conjunction with the realities of the districts.

Article 2 These measures shall apply to the management of the contractor system for basic construction projects funded by government investment in Huangpu district and Guangzhou Development District.

Article 3 In these Measures, basic construction projects funded by government investment (hereinafter referred to as "project(s)") refer to construction projects included in annual investment plans for basic construction projects funded by investment from the district government, excluding projects purely involving land acquisition and resettlement (including compensation due to relocation or modification of utility pipelines), acquisition projects, and information technology projects.

In these measures, the contractor system refers to a mode of construction management where, with the approval of the district government and development district administrative committee, the project owner (construction owner) selects, through means such as tendering, a professional construction management firm (hereinafter referred to as the "contractor") to manage the entire project construction process.

Article 4 District reform and development bureaus shall guide and coordinate work related to the contractor system. Competent district authorities for housing and urban-rural development, water affairs, agriculture and rural affairs, natural resources, and ecology and environment shall manage work related to the contractor system within their respective sectors. Project owners (construction owners) shall be responsible for the implementation of relevant tasks.  District finance authorities shall exercise fiscal management and oversight over the financial activities of projects adopting the contractor system. District audit authorities and other relevant authorities will duly carry out oversight and management tasks in accordance with their respective duties.

Chapter 2 Applicability of the Contractor System

Article 5 Projects that may adopt the contractor system primarily include:

5.1. Administrative offices and operational (technical) premises for Party and government organs, people's congresses, people's political consultative conferences, public security organs, people's procuratorates, courts, justice departments, people's organizations, and public institutions;

5.2. Municipal infrastructure such as roads, bridges, tunnels, public transportation, and electricity, water and gas supply facilities;

5.3. Infrastructure for ecosystems, environmental protection and governance, agriculture, forestry, water affairs, and the ecological environment;

5.4. Infrastructure for science and technology, education, culture, sports and health programs, as well as for equal access to social welfare programs, such as labor services and social security, and other basic public services;

5.5. Infrastructure for public services and safety (including management of geological hazards)

5.6. Other projects as determined by the district government and development district administrative committee.

Article 6 Apart from projects where construction management is undertaken by the project owner, the contractor system may be adopted for projects that meet relevant requirements upon the approval of the district government and development district administrative committee. These are defined as projects that basically meet all construction criteria, have clear construction boundaries, and do not involve state security, state secrets, or disaster prevention and relief.                               

The contractor system may be adopted for a project whereby the construction owner system has already been adopted if the following conditions are met:

6.1. The project involves an investment of 30 million yuan ($5 million) or more;

6.2.The construction project is one that has a relatively long management cycle and involves complex engineering technologies, requires a high degree of professional expertise or the construction of resettlement communities, or if project work has run into difficulties.

Article 7 Projects that adopt the contractor system must be reported by the project owner (construction owner) to the competent authorities for their review. The project owner (construction owner) must also seek the opinions of district development and reform authorities and finance authorities, and seek the approval from the district government and development district administrative committee.

The contractor system may be adopted for projects that have been granted express approval in the minutes of executive meetings of the district government and development district administrative committee, minutes of district officials' meetings, relevant documentary records of agreed matters, or received express written approval from district officials.

Article 8 Project owners (construction owners) should still fulfil relevant management obligations for projects that adopt the contractor system.

Article 9 In principle, projects that have been approved to adopt the contractor system should be entirely managed by the contractor. Construction management fees shall be calculated according to the provisions of Article 20 of these measures.

For projects that are not entirely managed by the contractor, the project owner (construction owner) and the contractor may define the scope of construction management through their contract. Where surveying, design tendering, conceptual design, preliminary design, budget estimate approvals, construction drawing reviews, and construction works tendering are completed by the project owner (construction owner), the construction management fees shall be correspondingly reduced, with the specific deduction ratios to be determined by both parties according to the contract.

Chapter 3 Organization and Implementation of Projects Adopting the Contractor System

Article 10 For projects that are not reported for approval through the joint review and decision-making procedure, the project owner (construction owner) should clearly indicate if the contractor system is adopted during the submission of the project proposal (feasibility study). For projects that are reported for approval through the joint review and decision-making procedure, the project owner (construction owner) should clearly indicate if the contractor system is adopted before the commencement of the joint review and decision-making procedure.

If the adoption of the contractor system is approved for a project, this shall be indicated by district development and reform authorities in their written approval of the project proposal (feasibility study).

Article 11 Procedures for the organization and implementation of projects adopting the contractor system:

11.1. Selection of contractor. The project owner (construction owner) shall select a contractor through tendering in accordance with relevant rules.

11.2. Signing of a construction management contract. The project owner (construction owner) shall timely execute a construction management contract with the contractor.

11.3. Conceptual design, preliminary design, and budget estimates and approval.

11.3.1. The contractor and the project owner (construction owner) shall jointly organize the formulation of conceptual designs, preliminary designs and budget estimates by the project design company. These shall be reported to competent district authorities for housing and urban-rural development, water affairs, agriculture and rural affairs, natural resources, and ecology and environment for their approval in accordance with relevant procedures. Approved project budget estimates shall form the basis for investment control and contractor evaluations.

11.3.2. In the project's conceptual design and preliminary design phases, the contractor should give due consideration to the opinions of the project owner (construction owner), users, and relevant competent authorities. In principle, the project's preliminary design and budget estimates cannot be changed once approved.  

11.4. Advancement of other preconstruction work. If the contractor provides preconstruction services, formalities involving the project's property rights should be completed together with the project owner (construction owner).

11.5. Construction works. The contractor shall organize and carry out construction works on behalf of the project owner (construction owner). During the construction period, the contractor shall, per the terms of the construction management contract and as a tenderee, organize the tendering and procurement of goods or services including but not limited to project surveying, design, quantity surveying, construction supervision, construction services, equipment and materials, and construction monitoring. The contractor will sign and perform relevant project contracts.

11.6. Project completion and delivery. The project owner (construction owner) shall organize the final project completion acceptance together with the relevant authorities. The contractor shall organize project settlement and the compilation and submission of final accounts. The contractor shall deliver all documents and facilities to the project owner (construction owner), complete asset transfer procedures, and assist the project owner (construction owner) in transferring construction documents and records to the district archives. 

11.7. Completion of construction management. Construction management comes to an end after the contractor completes all construction management work stipulated in the construction management contract, the expiry of the construction quality warranty period, the issuance of final payments, and the completion of contractor evaluations and issuance of evaluation reports by the project owner (construction owner). Copies of the evaluation report shall be forwarded to competent district authorities in the following sectors: development and reform, finance, housing and urban-rural development, water affairs, agriculture and rural affairs, natural resources, and ecology and environment.

Article 12 Contractors should meet the following criteria:

12.1. Be a self-financing economic entity with independent legal person status.

12.2. Have one or more qualifications in project design, construction works, construction supervision, construction consulting or real estate development commensurate with construction management for the project.

12.3. Have management capabilities and technical capacities commensurate with construction management for the project.

12.4. Have experience in construction management for similar projects. 

12.5. Have financial capabilities commensurate with construction management for the project.

12.6. Have good levels of credibility, which includes but is not limited to:

12.6.1. The contractor and its main professionals in charge of the project do not have administrative penalty records or records of bad faith in the social credit system or the credit reference systems of relevant authorities.

12.6.2. No occurrence of major construction safety or quality incidents for which the contractor was responsible and held liable within the past three years.

12.6.3.   Not listed in contractor blacklists by relevant authorities.

12.6.4. No other circumstances such as inability to fulfil construction management duties or inability to furnish a banker's guarantee.

Article 13 The selection of a contractor should comply with relevant state, provincial and municipal provisions. Tendering should be carried out for projects that are required by law to do so. If government procurement is involved, relevant provisions of government procurement shall apply.

Article 14 If selection of a contractor is carried out through open tendering, relevant tendering formalities should be completed at legal venues for tendering and bidding transactions such as the Guangzhou Public Resources Trading Center. The tenderee is responsible for the legality of contractors' tender proposals. Tendering activities shall be subject to oversight by relevant authorities in accordance with the law.

Article 15 For projects with construction management fees (including management service fees, profits and taxes) lower than the amount whereby tendering is required by law, the project owner (construction owner) may appoint a contractor in accordance with relevant provisions and accept the oversight of relevant authorities.

Article 16 Upon selection of a contractor, the project owner (construction owner) and the contractor shall execute a construction management contract based on the specific content of the tendering documents and bidding documents. The contents of the contract shall include:

16.1. Project overview;

16.2. Construction management scope, schedule, content, targets and quality requirements;

16.3. Duties of both parties;

16.4. Construction management fees and mode of payment;

16.5. Disbursement and use of project funds;

16.6. Incentives and penalties pertaining to project targets and liabilities for breach of contract;

16.7. Other items agreed upon by both parties.

Templates for construction management contracts shall be drafted by competent district authorities for housing and urban-rural development and submitted to the district government and development district administrative committee for their approval.

Article 17 The performance guarantee system shall apply to projects adopting the contractor system. Before a construction management contract comes into force, the contractor should provide to the project owner (construction owner) a banker's guarantee for an amount not exceeding 10 percent of the price of the construction management contract (or other forms of performance guarantee agreed to by the tenderee). The size of the performance guarantee shall be specified in advance in the tendersdocuments based on the relevant circumstances of each project.

Article 18 Under the guidance of competent district authorities for development and reform, finance, housing and urban-rural development, water affairs, agriculture and rural affairs, natural resources, and ecology and environment, the project owner (construction owner) will select a contractor through means such as tendering, execute a construction management contract, and through the contract delegate all construction management work to the contractor. The project owner (construction owner) should ensure that the following tasks are duly completed:

18.1. Management, supervision and evaluation of the contractor.

18.2. Assistance to the contractor in completing review and approval procedures pertaining to construction plans, municipal planning, land, construction works, environmental protection, fire safety, and civil defense, as well as cooperate in and supervise the tendering and procurement of items such as project surveying, design, quantity surveying, construction supervision, construction services, equipment and materials, and construction monitoring.

18.3. Participation in the supervision of construction quality and construction progress, and participation in project acceptance. Supervision of the usage of fiscal funds for the project by the contractor.

18.4. Review of proposals by the contractor pertaining to major design changes and submission for approval in accordance with relevant district provisions and procedures.

18.5. Raising of funds for the self-financed portion of the project, and issuance of payments in accordance with contractual terms.

18.6. Organization of final project completion acceptance and completion of asset transfer procedures for the project together with the contractor.

18.7. Establishment of dedicated project infrastructure accounts, which shall be subject to independent accounting, managed by dedicated personnel, and used only for designated purposes. Strict implementation of financial accounting and financial management on financial activities in project construction. Supervision of the usage of fiscal funds for the project by the contractor and implementation of relevant provisions and systems such as the Regulations on Guaranteeing the Payment of Wages of Migrant Workers together with the contractor.

Article 19 Main duties and tasks of the contractor include:

19.1. Advancement of preconstruction work: After the execution of a construction management contract, the contractor shall organize tendering for preconstruction services such as project surveying, design and quantity surveying, and complete relevant formalities related to municipal planning, construction works, land use, housing management, environmental protection, drainage, sewerage, traffic, electricity supply, water supply, gas supply, civil defense, energy conservation, work safety, sanitation and epidemic prevention, geological hazards, agriculture, forestry, and water affairs.

19.2. Project design and management:

19.2.1 The contractor shall liaise and coordinate with the project design company during all stages of preliminary design and construction design drawings, organize work on the optimization and submission of designs, and ensure that project designs are smoothly implemented according to the approved project scale, functions, standards and schedules.

19.2.2. The contractor shall organize technical clarifications and technical coordination pertaining to project design and construction works during the construction process.

19.2.3. Review of major design modifications and submission of modification proposals to the project owner (construction owner), who shall then declare and submit such changes for review according to relevant district rules and procedures.

19.3. Organization of tendering for construction supervision services, construction services, materials, and equipment in strict accordance with relevant laws and regulations on tendering and bidding.

19.4. Drafting, negotiations and management of the various project-related contracts, and exercise of rights and fulfilment of duties and obligations in accordance with the terms of the construction management contract.

19.5. Management of construction progress:

19.5.1. The contractor shall formulate overall plans for project progress in accordance with the requirements of the construction schedule, and report the same to competent district authorities overseeing construction and the project owner (construction owner) for their approval.

19.5.2. The contractor shall carry out construction works based on the approved schedule and ensure that the project is completed on schedule.

19.5.3. The contractor shall regularly convene project meetings to timely analyze, coordinate, balance and adjust project schedules. Information, statements and existing problems pertaining to construction progress during the previous month shall be submitted to competent district authorities for development and reform, finance, housing and urban-rural development, water affairs, agriculture and rural affairs, natural resources, and ecology and environment, as well as the project owner (construction owner), before the fifth day of each month. The contractor shall also provide the basis for the data in fixed asset investment statements to the project owner (construction owner) before the 5th day of each month.

19.6. Management of construction quality:

19.6.1. The contractor shall establish a quality assurance system and implement strict management in accordance with laws, regulations and construction specifications pertaining to construction management, as well as requirements relating to construction standards and technical specifications, so as to ensure construction quality meets predetermined targets.

19.6.2. The contractor shall be responsible for construction quality. In the event of quality incidents, the contractor should timely ascertain the underlying reasons and specific liabilities, and timely implement incident response plans.

19.6.3. The contractor shall supervise the organization of partial project acceptance by the construction supervision company during the construction process, including the acceptance of concealed work and various forms of materials and equipment. The contractor shall also organize the preliminary acceptance and completion acceptance of the project.

19.7. Management of project investment:

19.7.1. The contractor shall select construction contractors and suppliers of equipment and materials through tendering in accordance with the law. During the tendering process, the contractor should set reasonable bidding limits based on relevant provisions on tendering and bidding. During construction works, the contractor should implement sound management and exercise strict control over quantity surveying.

19.7.2. The contractor shall prepare annual investment plans and quarterly and monthly fund usage plans, and strictly abide by relevant provisions of the Regulations on Guaranteeing the Payment of Wages of Migrant Workers. Based on the project contract and project progress, the contractor should timely submit requests to the project owner (construction owner) for the disbursement of funds. The contractor should complete procedures for the disbursement of funds by district finance authorities after the project owner (construction owner) reviews and appends their opinion onthe application, or otherwise submit a request to the project owner (construction owner) for the issuance of payments from their self-raised funds. After the completion of the project, the contractor is responsible for project settlement and compilation of post-completion final accounts, application for review of final accounts, and processing of final payments for various professional segments within the warranty period.

19.7.3. The contractor shall organize construction works in strict accordance with project scale, functions, standards and budget estimates, and ensure that project investment does not exceed project budget estimates. During the course of the project, if there are changes in construction works or investment due to major technical modifications in construction drawings due to force majeure natural disasters, major national policy adjustments, or constraints of geological or other natural conditions, the review and approval of project modifications and investment adjustments shall be handled according to relevant district provisions.

19.7.4. The contractor shall cooperate in inspections, audits and performance evaluations by relevant authorities.

19.8. The contractor shall carry out safety management and civilized construction works management in accordance with relevant rules.

19.9. The contractor shall be responsible for the management of construction records, documents and information.

19.10. The contractor shall assist the project owner (construction owner) in final project completion acceptance and transfer formalities:

19.10.1.The contractor is responsible for liaising with the project owner (construction owner), project design company, construction contractor, and construction supervision company to complete professional acceptance and final completion acceptance and declaration procedures for the project in accordance with prevailing national acceptance standards. The contractor shall also assist the project owner (construction owner) in professional acceptance and final completion acceptance of the project.

19.10.2. The contractor should complete procedures for the transfer of assets to the project owner (construction owner) based on the asset value approved by finance authorities within three months of the final project completion acceptance date.

19.10.3. The contractor is responsible for resolving construction quality issues discovered during project completion acceptance, and responsible for ensuring that construction contractors resolve construction quality issues within the quality warranty period.

19.10.4. After successfully completing final project completion acceptance, relevant drawings, documents, accounts, and facilities and inventory items financed by government investment shall be transferred to the project owner (construction owner) as soon as possible. All handover procedures shall be completed according to relevant regulations.

19.11. Other construction management tasks

The contractor and its subsidiaries, parent company, or affiliated enterprises may not undertake the surveying, design, construction works, construction supervision, or supply of equipment or materials for construction projects undertaken by the contractor.

Chapter 4 Construction Management Fees

Article 20 Construction management fees (including management service fees, profits and taxes) are included in project budget estimates and disbursed under amortized project investments. Construction management fees may be calculated via overall consideration of the scale, scope, content, depth, application of new technology and complexity of the project. However, it should comply with the provisions of Provisions on the Management of Construction Costs for Basic Construction Projects (Cai Jian [2016] No. 504), and in principle not exceed the following standards:

20.1. For projects with approved investment of 10 million yuan or lower, maximum limit for construction management fees shall be calculated by the following formula: estimated investment value × 2 percent.

20.2. For projects with approved investment greater than 10 million yuan but lower than 50 million yuan (inclusive), maximum limit for construction management fees shall be calculated by the following formula: 200,000 yuan + (estimated investment value – 10 million yuan) × 1.5 percent.

20.3. For projects with approved investment greater than 50 million yuan but lower than 100 million yuan (inclusive), maximum limit for construction management fees shall be calculated by the following formula: 800,000 yuan + (estimated investment value – 50 million yuan) × 1.2 percent.

20.4. For projects with approved investment greater than 100 million yuan but lower than 500 million yuan (inclusive), maximum limit for construction management fees shall be calculated by the following formula: 1.4 million yuan + (estimated investment value – 100 million yuan × 1 percent.

20.5. For projects with approved investment greater than 500 million yuan but lower than 1 billion yuan (inclusive), maximum limit for construction management fees shall be calculated by the following formula: 5.4 million yuan + (estimated investment value – 500 million yuan) × 0.8 percent.

20.6. For projects with approved investment greater than 1 billion yuan, maximum limit for construction management fees shall be calculated by the following formula:  9.4 million yuan + (estimated investment value – 1 billion yuan) × 0.4 percent.

Article 21 In principle, once construction management fees are confirmed, they will not be adjusted by reason of changes in project investment scale or changes in labor costs, price levels, tax rates, exchange rates or interest rates. If the project is terminated due to circumstances not attributable to the contractor, both parties to the contract may in principle agree on the proportion of construction management work completed and relevant payment settlements, which shall be indicated via the construction management contract and supplementary addendums upon review by competent authorities for the project.

Chapter 5 Provisions on Incentives and Penalties

Article 22 During the process of project construction and management, a contractor that fails to carry out tendering and bidding in accordance with relevant provisions, and is found to have violated relevant laws or regulations, will be subject to penalties by relevant authorities in accordance with the law.

Article 23 If a contractor fails to fully perform its obligations under the construction management contract, changes construction plans without prior authorization, and fails to effectively manage the control of investments, thereby causing final project accounts to exceed budget estimates, the excess costs shall be borne by the contractor. If the contractor, by reasons of its own doing, causes relevant government authorities to levy upon it administrative penalties as per relevant provisions on ensuring the payment of wages for migrant workers, or include it in government credit evaluation systems, the contractor shall bear the relevant losses and liabilities.

Article 24 During the liability period stipulated in the construction management contract, the contractor shall bear relevant legal liabilities for any construction safety or quality incidents arising from errors on its part.

Article 25 If the contractor is required to compensate the project owner (construction owner) owing to violations of laws, regulations, or terms in their construction management contract, the project owner (construction owner) shall apply for compensation from the bank issuing the banker's guarantee provided by the contractor within 15 days of confirming the compensation amount. If the banker's guarantee is insufficient to meet the compensation amount or if the bank refuses to issue payment, the construction management fee will be reduced accordingly. If the construction management fee is insufficient, the contractor shall issue payment from its own funds. The amount of compensation received by the project owner (construction owner) shall be turned over to the district finance authority in accordance with relevant provisions.

Contractors that have been found to have engaged in and held liable for violations of laws or regulations, or acts in bad faith, as specified in Articles 22, 23 and 24 of these Measures, will be disqualified for the next three years from acting as contractors for projects funded by government or other state-owned funds in Huangpu district and Guangzhou Development District.

Article 26 If a contractor fails to complete and transfer the project as required due to ineffective organization and management, the project owner (construction owner) has the right to deduct construction management fees by not less than 10 percent, depending on the severity of the case, as well as hold the contractor liable in accordance with relevant laws and regulations.

Article 27 After the project is completed on schedule, passed final acceptance and undergone project settlement review, the contractor may be awarded a monetary bonus from relevant savings if its work performance has resulted in a project settlement price lower than approved construction and installation budget estimates while maintaining excellent construction quality. This will be dispensed from unforeseen project expenses, but in principle should not exceed 10 percent of the construction management fee. Specific monetary bonuses for the contractor shall be determined in the contractor tendering proposals depending on the circumstances of each project, and may be included in the tendering documents. For projects where tendering is not required by law, this may be written into construction management contracts upon mutual agreement.

Chapter 6 Supplementary Provisions

Article 28 These measures shall be valid for a period of five years from the date of issuance.

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