The Environmental Protection Administration (EPA) was complained for adding new qualifications on the bidder's nationality for constructing garbage recycling plants in Pingtung and other areas

Chinese Taipei

Case:

The Environmental Protection Administration (EPA) was complained for adding new qualifications on the bidder's nationality for constructing garbage recycling plants in Pingtung and other areas

Key Words:

harmonization of competition policy and environmental protection policy, EPA, incinerator, limitation on nationality

Reference:

Fair Trade Commission Decision of June 11, 1997 (the 293rd Commission Meeting); Letter of (85) Kung Er Tze 8412940-025

Industry:

government agency (9111)

Relevant Laws:

Article 19(ii) of the Fair Trade Law

Summary:

1. JDMC (Taiwan agent of CKD Dukla of Czech, an incinerator manufacturer) filed a complaint to the Fair Trade Commission alleging that the EPA added qualification requirements in the second bidding for the Project of Three Contracts for the Construction of Six Incinerators. The EPA's new requirements in the second bidding stated that a bidder must have had a record of operating 12,000 hours of every incinerator in each plant in a period of two years, and that the foreign bidders of certain key components are limited to be from one of the eleven EPA-selected countries. Bidders from the Czech Republic are excluded from tendering bids and supplying components and parts, since it is not one of those eleven countries.

2. The Commission's investigation showed that each incinerator is uniquely built as an integral whole-plant construction rather than a set of standardized product. The plant is composed of numerous units and systems, including feeding system, incinerator body, co-generation system, second pollution control system, ash discharge, panel control, utilities, and civil construction. The design, manufacture and installation of incinerator body, exhaust treatment and waste heat recovery system are the key technologies for the construction of the incinerator plant. The part of the incinerator body may be patented. In view of the fact that the construction of incinerators demands advanced technologies to ensure the quality of construction and the performance of the incinerator, it is necessary to set requirements for a bidder's capability in relation to procurement, design, construction, management and integration of the whole plant. In determining the bidders' qualification and technical capability, the government agency which is in charge of the project shall review the bidding requirements such as the bidder's capability of constructing the incinerator body, providing related equipment, and installing an emission control system to meet the environmental standards, specified in the invitation to bid and the screening process.

In a response to this Commission, the EPA stated that the original bidding of Keelung-Pingtung Garbage Recycling Plants Turn-key Project was limited to domestic bidders only, and one of the three contracts (each to construct two plants) was awarded to Tang Eng Iron Works Co., Ltd. However, this contract was terminated later due to Tang Eng's incapability to perform the contract. After reviewing its method of invitation to bid, the EPA changed the bidding to be one contract for constructing one plant and opened the bidding to both domestic and foreign manufacturers. If EPA's requirements on domestic's capability set in the original bidding on supplier's capability -- the record of commercial operation for a minimum of 12,000 hours in two years after the test run -- were applied to the second bidding open to foreign bidders, manufacturers from Czech should be eligible to bid. However, the EPA asserted that since construction of incinerators requires an integrated whole-plant design and the future bidding is open to both domestic and foreign bidders, the eventual contractor, whether domestic or foreign, must undertake the overall responsibility of integrating the entire construction.

Therefore, it was necessary for the EPA to clearly specify the capability requirements of the prospective contractor who can ensure the quality of construction and its compliance with environmental standards. Based on results of investigation and analysis from technical consulting firms, the EPA considered it necessary to limit bidders to manufacturers from eleven countries such as the United States, Italy, Netherlands, Germany, Belgium, Denmark, Japan, Switzerland, France, the United Kingdom and Sweden with advanced incineration technologies and environmental protection technologies.

3. The EPA's nationality restriction to only those eleven countries for its garbage recycling plants were set primarily in consideration that major equipment for the incinerators will be purchased from foreign countries and the sources of equipment will determine the performance of the incinerator. Equipment supplied from countries with advanced industrial and incineration technologies and with higher environmental standards will ensure quality of construction. The EPA has selected those eleven countries based on their advanced incineration technologies higher environmental protection standards, equipments with design and manufacturer emission regulations which are on a par with or more stringent than similar regulations in our country, and emission control equipments with design and manufacture widely recognized and accepted around the world.

4. Article 19 (ii) of the Fair Trade Law specifies that an enterprise shall not give discriminatory treatment to another enterprise without due cause where such discriminatory treatment is likely to impede fair competition. This provision establishes two prerequisites: due cause and likelihood of impeding fair competition. The FTC considers that the EPA has not violated Article 19(ii) of the Fair Trade Law, based upon the following reasons:

(1) From the legal point of view, bidding opening to manufacturers from those eleven foreign countries is apparently sufficient to fulfill the purpose of maintaining a competition order. The EPA also expanded its bidding, originally open only to domestic manufacturers, to include foreign manufacturers. The entry for eligible bidders has increased. A lack of restriction on the bidders' nationality may create difficulties for the government agency which is in charge of the bidding to carry out works related to inspection or final takeover.

(2) In view of the complexity of constructing an incinerator, the key contractor must have sufficient professional background, experience and technical capability for undertaking the whole-plant planning, design, procurement, management, and system integration. Initially, incinerator projects were open to international bidders only because of a lack of know-how by domestic bidders. This resulted in the high cost of construction of incinerators and incineration projects had been monopolized by foreign contractors. Later, incinerator projects opened to domestic bidders only. This inadvertently resulted in serious delay in the construction due to domestic contractor's lack of practical experience and capability to carry out the project. After reviewing the above facts, the EPA concluded that the new bidding practice of opening to domestic and foreign bidders is expected to have the effect of inviting manufacturers with higher capability. From the perspective of harmonizing environmental protection policy and competition policy, the EPA's restriction on the nationality of foreign bidders in the invitation to bid for incinerator projects is reasonable.

(3) In addition, in regard to protecting the interest of trading counterparts as required by competition law, a determination must be made as to whether the requirement is satisfied only when each and every (potential) trading counterpart's interest is protected, or the requirement may be met when a sufficient number of trading counterparts is protected. Where this present case is concerned, it is unlikely to expect that the interest of each and every trading counterpart will be protected. In other words, it should have satisfied the requirement when a sufficient member of trading counterparts' interest is sustained.

Summarized by Chen, Yi-cheng
Supervised by You, Su-su

＃: For information of translation, click here

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