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Why is the rate of scrapping furniture purchase increased?
In the furniture procurement sector, project scrapping is a common occurrence. However, this year has seen a sharp rise in the scrap rate, reaching 8% of all projects. This increase has raised concerns: what caused this sudden surge, and how can it be addressed? This article will explore these issues in detail.
Government initiatives aimed at reducing procurement costs have not only led to fewer furniture projects being awarded but have also indirectly contributed to an increase in project scrapping. According to data from "Government Procurement Information," in the first half of 2014, there were 2,156 national furniture procurement projects, with 169 of them scrapped—accounting for 8% of the total. While this percentage may seem small, it represents a noticeable upward trend compared to previous years. Moreover, most of the scrapped projects are concentrated in second- and third-tier cities.
Why is the furniture project scrapping rate so high? To help government procurement agencies better understand the underlying causes, reporters from "Government Procurement Information News" conducted interviews and identified several key reasons.
**Reason One: Unreasonable Budget Preparation**
Budget preparation is the foundation of any government procurement project. A well-prepared budget is crucial for successful bidding. According to Article 36 of the Government Procurement Law, if a bidder’s quote exceeds the purchase budget and the buyer cannot afford it, the bid is automatically scrapped. This means that even a slight overage can disqualify a bid.
In the first half of the year, low budgets emerged as a major cause of project scrapping. For example, in January, a furniture procurement project at Gannan Weinan Teachers College was canceled because all three suppliers submitted bids that exceeded the budget. Similarly, in March, a furniture project for the National Youth Jinggangshan Revolutionary Traditional Education Base was scrapped due to insufficient bidders, primarily because the budget was too low to allow for reasonable profit margins.
Liu Kuan, General Manager of Shandong Jinnuo Furniture Group, noted that many projects this year had budgets set too tightly, significantly lower than in previous years. He suggested that this could be linked to government efforts to cut costs. When budgets are too low, suppliers often choose not to participate, leading to fewer bidders and ultimately, project failure.
**Reason Two: Unreasonable Subcontracting**
Data shows that most scrapped projects occur in second- and third-tier cities. According to the Government Procurement Law, projects worth between 1 million and 1.2 million yuan must undergo public bidding. Projects below this threshold can use alternative procurement methods such as competitive negotiation or invitation to tender.
However, local governments often set different thresholds. In some smaller cities or county-level units, even a 100,000-yuan project is considered significant. As a result, open tenders are frequently used, which can be highly competitive. For small purchases, companies may lack the incentive to participate.
For instance, in July, a furniture and appliance procurement project in Zhuhai City failed due to a lack of bidders. The project, valued at just 100,000 yuan, involved both furniture and electrical appliances. Although the procurement unit initially planned to split the project into two packages, the reduced budget per package discouraged participation. Combining them into one package proved unworkable, as no single supplier could fulfill both requirements, resulting in project rejection.
**Reason Three: Fraudulent or Incomplete Qualifications**
Another common reason for project scrapping is the lack of qualified bidders. Many project announcements cite “fewer than three suppliers†as the cause. This often happens when bidders fail to meet the technical requirements, such as providing false or incomplete test reports or failing to meet social insurance standards.
In furniture procurement, buyers often require suppliers to provide quality inspection reports for materials and finished products. For wooden furniture, formaldehyde emission reports are particularly important. If these documents are missing or falsified, the bid is typically rejected.
In Guangxi, many furniture projects were scrapped this year. Tang Zan, head of the procurement department at the Guangxi Government Procurement Center, explained that a major issue was the lack of qualified bidders, especially those who actually purchased bid documents. Another problem was during the evaluation stage, where some bidders submitted fake test reports. In some cases, even after winning the bid, other participants raised doubts, and the winning bidder's report was later found to be fraudulent.
These challenges highlight the need for more realistic budgeting, careful subcontracting strategies, and stricter verification of supplier qualifications to reduce the number of scrapped projects and improve the efficiency of government procurement.