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Issues and challenges of public service procurement in China: a collaborative

governance perspective

Article  in  International Journal of Public Policy · January 2016

DOI: 10.1504/IJPP.2016.10000554

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Int. J. Public Policy, Vol. 12, Nos. 3/4/5/6, 2016 339

Issues and challenges of public service procurement

in China: a collaborative governance perspective

Bing Ran* and Huiting Qi

School of Public Affairs,
Penn State Harrisburg,
777 W. Harrisburg Pike,
Middletown, PA 17057, USA
Email: bingran@psu.edu
Email: huq104@psu.edu
*Corresponding author

Abstract: As a form of collaborative governance, government procurement of

public services from non-governmental organisations (NGOs) has become a
major channel for public service delivery. Different from the relative mature
practices of public service procurement in Western countries, China is
attempting to adopt this mechanism in recent years, calling for more research in
sense making the issues and challenges in the procurement process. This paper
discusses six major issues in Chinese Government procurement of public
services from the perspective of collaborative governance theory, analyses the
reasons that lead to these six challenges, and proposes some important solutions
to these issues.

Keywords: collaborative governance; non-governmental organisations; NGOs;

public service procurement; China.

Reference to this paper should be made as follows: Ran, B. and Qi, H. (2016)
‘Issues and challenges of public service procurement in China: a collaborative
governance perspective’, Int. J. Public Policy, Vol. 12, Nos. 3/4/5/6,
pp.339–358.

Biographical notes: Bing Ran is an Associate Professor of Public

Administration in the School of Public Affairs, Penn State Harrisburg. His
research interests focus on the dynamic interactions between society’s complex
infrastructure and human behaviour, tackling topics such as collaborative
governance networks, organisational identity, knowledge integration, social
entrepreneurship and hybrid organisations.

Huiting Qi is a doctoral student in the PhD program in Public Administration in

the School of Public Affairs, Penn State Harrisburg. Her research interests
include collaborative governance networks, behavioural public administration,
and organisational theory.

This paper is a revised and expanded version of a paper entitled ‘Government

procurement of public services in China: issues and challenges’ presented at
Administrative Sciences Association of Canada Annual Conference 2015,
Halifax, Nova Scotia, Canada, 15 June 2015.

Copyright © 2016 Inderscience Enterprises Ltd.

340 B. Ran and H. Qi

1 Introduction

As a form of government’s purchase activity, government procurement is an act of public

authority to obtain goods, service, and construction through purchase, lease, and rental,
based on procurement contracts which indicate the relationship of different actors and the
agreement on transparency and competition that allow all qualified organisations to
participate in (Arrowsmith, 1998; Chou, 2006; Jia and Su, 2009; Lu et al., 2012; Yang,
2014). The major purpose of government procurement is to make use of the market
principles to improve cost control, to promote government’s efficiency and transparency
in the use of public resources, and to provide public products and services (Boykin, 2005;
Chou, 2006). One crucial kind of government procurement is public service procurement.
Generally speaking, there are two types of public service: the services provided by the
government (such as education, health care, sanitation, environmental protection, and
public safety), or the services consumed by governments whose goal is to ensure the first
type of services conducted effectively (such as the personnel management, information
processing, maintenance of buildings and vehicles in public sectors (Mandell, 1991; Jing,
2008). This paper will concentrate on the procurement of the first type of services whose
purpose contributes to eliminate the monopoly of government in public service delivery
by relying more on non-public sectors to produce and provide public service for citizens.
In service procurement, the government’s role is to create procurement standards, to
choose the appropriate organisations that can perform the service according to certain
standards and regulations, and to evaluate the process and outcomes of service delivery.
The non-governmental organisations (NGOs), organisations that are independent from
government and not motivated by profit (Lewis and Kanji, 2009), have played a major
role in the service procurement arrangements. Since the 1980s, public service
procurement, in the form of contracting with and outsourcing to NGOs, has been
increasingly used by the governments of developed countries, especially by their local
governments (Bel and Warner, 2008; Hefetz and Warner, 2004) leading to a relatively
mature systems of implementing the service procurement.
In China, under the government’s reform and opening policy, the central and local
governments have been reconsidering their roles and functions. Government began to
encourage market-oriented economic system, cultivate cultural pluralism, and promote
the public service procurement. Public service procurement in China was practiced much
later compared to Western countries with the first attempt in Shanghai in 1990s, focusing
on the procurement of senior people service (Yang, 2014; Zhu and Zhong, 2013), and
then gradually extended to other public service areas and other cities in China (Qi, 2013;
Zhu and Zhong, 2013).
It should be noted that the Chinese central government and local governments play
different roles in public service procurement. The central government can conduct public
service procurement directly as well as formulate guiding policies, provide central
financial supports, and supervise local governments. (General Office of the State Council
of the People’s Republic of China, 2013). Local governments can make local policies of
service procurement according to the guidance of the central government, use the central
financial supports to implement procurement, develop procurement projects and
procedures, choose organisations that delivery relevant public service, supervise the
process of procurement, etc. (General Office of the State Council of the People’s
Republic of China, 2013). In sum, the central government generally guides and
 Issues and challenges of public service procurement in China 341

supervises local governments to conduct public service procurement, and local

governments implement the procurement concretely.
This paper will concentrate on the major issues and challenges in Chinese public
service procurement in both central and local government levels. Essentially, we argue
that public service procurement is an important but a yet-mature mechanism for Chinese
Governments to handle service delivery. To address the issues and challenges in public
service procurement, collaborative governance mechanisms should be used by Chinese
Governments as the possible solution. Collaborative governance is such a systematical
theoretical framework under which the deep-rooted reasons for issues and challenges of
service procurement and the relevant possible solutions can be explored. The major
contribution of our paper is to connect collaborative governance theory with issues and
challenges in Chinese public service procurement systematically, analysing some critical
issues in collaborative governance to shed light on the possible solutions. We claim that
neglecting the principles of collaborative governance is the major factor that results in the
six issues and challenges and the application of collaborative governance principles is the
most possible solution for these issues and challenges.
In the following sections, we will first provide a brief review of the theoretical
foundations of public service procurement with a focus on collaborative governance
literature. Then we analyse the six major issues and challenges in the Chinese
Governments’ public service procurement practices. We will end the paper by discussing
the essence and strategies of improving the public service procurement and thus further
improve the collaborative governance practices in Chinese context.

2 Collaborative governance as a theoretical perspective and an emerging

practice in China

With the booming practices of public service procurement in China in last 20 years (Zhu
and Zhong, 2013), there are prolific researches focusing on this important government
activity. However, the major theoretical perspectives taken by public service procurement
research in China only concentrated around new public management (NPM) and
public-private partnership (PPP).
NPM, which began in the late 1970s and early 1980s, presents a series of “tenets of
market-led restructuring of public sector” [Gruening, (2001), p.1]. The core of NPM is
attempts to convince the public sector to adopt corporate values and practices through
which the government is reduced to being a contractual agent for corporations and other
groups of citizens (Frederickson et al., 2011). NPM with its foundation of managerialism
based on public choice theories of efficiency and output sparked a sequence of
privatisation initiatives in the public service, resulting in the ‘hollowing out’ of
government (Peters and Pierre, 1998; Rhodes, 1994), a term referring to services
provided by NGO contractors as opposed to public employees. Public service
procurement is a good example of this by contracting out some public services to NGOs
instead of delivering public service by using fiscal funding directly (Jiang and Zhang,
2013; Wang, 2012). Clearly, advocates for a market-based approach to service delivery in
the Public sector believe this would bring about the best efficiency and accountability
(Denhardt and Denhardt, 2000). However, NPM implies that public employees serve a
secondary role, allowing non-government contractors to do the ‘real work’ of
342 B. Ran and H. Qi

government. NPM is thus undergone many criticisms and scholars are more and more
convinced that beyond market-based spirit, collaborative spirit and collaborative
relationship within diverse entities are also indispensable in providing public services and
facilities.
PPP is a set of cooperative institutional arrangements, relying on contracting
relationship and collaboration between public and private sector counterparts in public
goods and service delivery (Hodge and Greve, 2007; Ke et al., 2010a, 2010b; Norton and
Blanco, 2009). PPP was initially viewed as a type of privatisation and market mechanism
(Jamali, 2007), but slowly researchers realised that both individual indigenous objectives
and common goals among different actors in PPP are treated equally important (Jamali,
2007; Nijkamp et al., 2002), thus being treated as a new governance tool in public
administration that engages diverse private entities in public service delivery, especially
in the field of infrastructure projects (Hodge and Greve, 2007; Linder, 1999; Mu et al.,
2011; Osborne, 2002). It is argued recently that the essence of PPP can be interchanged
with the term of ‘contracting’ (Hodge and Greve, 2007) as one kind of collaborative
governance arrangements, thus it is necessary to dig into this more comprehensive
theoretical framework to not only explain service procurement activities from the angle
of its administrative form, but also in terms of its underlying logic and philosophy.
According to collaborative governance theory, as public problems have become more
and more complex, it is difficult for one actor to solve public problems alone.
Recognising this, there emerged many approaches and arrangements that engages various
participators from private, public, non-profit or civic realm to work together in order to
deal with some complex issues or achieve common goals that are difficult to handle or
accomplish by single organisation or individual (Ansell and Gash, 2008; Emerson et al.,
2012; Mandell and Keast, 2007; O’Leary and Vij, 2012). Collaborative governance is
also an important mechanism via which to meet societal or normative values of the public
sector with other goals in non-public organisations, such as the economic goals of the
private sector (Demirag et al., 2009; Tomaževiè et al., 2016). There are a host of similar
expressions of collaborative governance in the literature, including PPPs, network
governance, collaborative public management, collaborative decision making and so on
(Agranoff and McGuire,1999; Huxham and Vangen,1996; Mandell and Keast, 2007;
O’Leary and Vij, 2012; Weber and Khademian, 2008). Regardless which term is used,
the core essence of this emerging form of governance is collaboration, which focuses on
the inter-organisational networks, interdependent relationships, shared power and
responsibilities, thus, when we discuss collaborative governance, we need to concentrate
on the following major themes: participation and legitimacy; power and resource;
outcomes and impacts; structure and accountability.

2.1 Participation and legitimacy

Collaboration requires extensive participation where interdependent participants or
stakeholders with diverse perspectives could work together in a network arrangement.
Many scholars emphasise the importance of broad-based inclusion as the symbol of open
and cooperative spirit of collaborative governance and the key source and reflection of
legitimacy of collaboration (Ansell and Gash, 2008; Emerson et al., 2012). It is also in
this sense that the legitimacy of collaboration can be strengthened by successful and
extensive engagement of stakeholders.
 Issues and challenges of public service procurement in China 343

According to Ansell and Gash (2008), a legitimation process in collaborative

governance is based on “(1) the opportunity for stakeholders to deliberate with others
about policy outcomes and (2) the claim that the policy outcome represents a broad-based
consensus” [Ansell and Gash, (2008), p.556]. When stakeholders feel that they have
enough opportunities to participate and negotiate in collaboration under a set of
transparent and fair rules, they will perceive the collaboration as legitimate. Otherwise,
they may give up collaboration and seek for other alternative arrangements or
mechanisms to achieve their goals. Therefore, participation and legitimacy are
interrelated factors that motivate stakeholders to adopt collaboration as a method to solve
public problems.
Besides the improvement of legitimacy by broad-based inclusion, the involvement of
actors beyond government can improve the supplement of diverse resources and
knowledge beyond those of government (Emerson et al., 2012). It should be noted that in
the context of collaborative governance, all participants engaged in collaboration should
also participate in decision making and achieve some degree of consensus (Ansell and
Gash, 2008) rather than some powerful participants dominating the process of decision
making.

2.2 Power and trust

Although it is commonly believed that collaborative governance should be based on

power sharing relationship, in practice, power is not distributed equally in collaboration
resulting in conflicts between stakeholders (Bryson et al., 2006; Purdy, 2012; Skelcher
and Sullivan, 2008). It is always a concern that some stakeholders would dominate the
process and affect the outcomes more than others with less power. Purdy (2012) has used
a power framework in collaboration that includes three sources of power (authority,
resource, and discursive legitimacy) and three arenas for power (participants, process
design, and content) to analyse power balancing in collaboration. Moreover, as Purdy
(2012) points out, resource is a source of power that influences the collaborative process.
Resource dependency and asymmetry will create the differentials in power distribution as
well as imbalance of interaction among stakeholders (Benson, 1975; Skelcher and
Sullivan, 2008). Consequently, analysing the power relationship is a useful approach to
understanding and explaining the collaborative behaviours of actors.
Besides forming appropriate power relationship in collaboration, building trust is also
a significant approach to nurturing collaborative relationship of stakeholders (Vangen and
Huxham, 2003). Trust is the glue that brings and keeps different stakeholders together
(Silvia, 2011). In any form of collaborative governance, trust can promote effective
negotiation (Zaheer et al., 1998), develop common values and norms (Das and Teng,
1998), facilitate discovery of solutions (Zaheer et al., 1998) and so forth. Partners’
willingness to initiate joint activities may be affected by the level of trust between them
(Brinkerhoff, 1999). Yet trust building is also a time-consuming process for collaborators
that requires collaborators to justify the necessary time and cost before embarking on
collaboration (Ansell and Gash, 2008).
344 B. Ran and H. Qi

2.3 Outcomes and impacts

To evaluate the effectiveness of collaboration, outcomes, impacts and other similar
concepts, such as outputs, consequences and effects, are commonly analysed in
collaborative governance literature (Thomas and Koontz, 2011). Rogers and Weber
(2010) present three types of outcomes in collaborative governance arrangements:
enhancing agency resources, developing and transferring technology, and outcomes
going beyond compliance. Innes and Booher (1999) also analyse tangible and intangible
products and their effects on consensus-building process in collaboration. The tangible
products refer to some formal agreements, new policies, new legislation and regulations,
and the intangible products may include new or stronger relationships and more trust
(Innes and Booher, 1999). Emerson et al. (2012) refer to several kinds of impacts such as
physical, environmental, social, economic and/or political, all of which are intentional or
unintentional changes through collaboration. Scholars agreed that compared with
traditional organisations, the outcomes and impacts of collaborative governance
arrangements are usually more complex, thus it is necessary to design a comprehensive
and effective evaluation system when assessing collaboration.

2.4 Structure and accountability

The structure of collaborative governance tends to be a network that is different from
governmental structure, including multiple levels and blurring boundaries of all
participants (Bevir and Rhodes, 2003; Greenaway et al., 2007). In multiple levels, an
order cannot be externally imposed but is the result of interaction between different
actors (Kooiman and Van Vliet, 1993). Stakeholders in collaborative networks operate
differently than in linear and hierarchical structure, because networks are self-organising.
Members come to the table voluntarily, and they also come from different organisational
cultures (Agranoff, 2004).
Additionally, because of the blurring boundaries of participants, administrative and
political roles, decision makings and outcomes can rarely be distinguished from one
another in the networked structure (Himmelman, 2002).
The blurring boundaries of participants and networked structure of collaborative
governance make the accountability in collaboration more difficult to define and evaluate
than that in bureaucratic organisations (Ansell and Gash, 2008; Bryson et al., 2006;
Huxham et al., 2000; Sullivan et al., 2002). On the one hand, the accountability
mechanism in collaborative arrangements is quite different from or even in conflict with
the accountability mechanism in its participant organisations (Sullivan et al., 2002),
leading to the paradoxes for participants to integrate their own accountability
mechanisms into some holistic mechanisms for collaboration. On the other hand, an
effective accountability mechanism has to track inputs, processes, and outcomes as well
as to gather, interpret and use data in different ways (Bryson et al., 2006). All of these are
more difficult in collaboration in virtue of the diversity of stakeholders and complexity of
decision-making processes. Most of the concerns on accountability in collaboration focus
on two issues: “whom the collaborative is accountable to and for what” [Bryson et al.,
(2006), p.51]. Both researchers and practitioners are calling for new accountability
mechanisms in collaborative governance to relieve these worries. Willems and
van Dooren (2011) propose “a balance between the democratic, constitutional and
performance function of accountability” to deal with the ‘accountability paradox’ in
 Issues and challenges of public service procurement in China 345

collaborative arrangements. To solve the two issues of “whom the collaborative is

accountable to and for what” [Bryson et al., (2006), p.51], a coherent process framework
on collaborative governance from multiple perspectives has to be established and
implemented well.
In summary collaborative governance is a complex phenomenon and the four themes
we reviewed are the most relevant aspects that can illuminate the issues and challenges in
public service procurement in China. In the following section, we will analyse six issues
and challenges in the public service procurement in China based on these four aspects
derived from collaborative governance literature.

3 Six issues and challenges in public service procurement in China

In last 30 years, China has adopted a series of policies to drive the public service
procurement, however, compared with developed countries, China is facing six
significant challenges in managing public service procurement.

3.1 The excessive political interference from government in the procurement

process
Undoubtedly, what people talked most about difficulties in public service procurement in
China is the excessive political interference (He and Liu, 2010; Jia and Su, 2009; Li,
2012; Liu, 2014; Salamon and Wang, 2010; Wen, 2007; Xiang, 2014; Yang, 2014; Zhu
and Zhong, 2013).
Political interference relies on the exercise of political power by government
catalysed by the lack of trust between government and NGOs. In public service
procurement in China, the dominant role of political power wield by government that is
contrary to the dispersed and opaque power relationship in collaborative governance
undermines the legitimacy of the collaborative relationship since not all participants can
engage in decision making. It has been the practice that governments in China, both in
central level and local level, incline to be in charge of most aspects of procurement to a
great extent, leading to asymmetrical power relationship of participants. Excessive
interference from government also reflects the insufficient trust from government to
NGOs, which facilitates the government’s tendency to control procurement process to a
large extent.
The most excessive interference from the government is the selection of qualified
NGOs as the service providers. Rather than adopting the ‘competitive model’ (Geng and
Doberstein, 2008) in procurement, the NGOs toeing the line with the government will be
more likely to be chosen, most of which have the administrative affiliation to the
government. The political interference is also evident in the regulation of goods and
service that can be procured. The kinds of procured public goods and services have been
rigidly described and regulated by the central government which may not be suitable for
different provinces and areas in China.
The public service procurement for senior citizens in some local governments
exemplifies the excessive political inferences. In the city of Changsha, there are 188
services centres providing service for more than one hundred thousand senior citizens
(Li, 2011a). The services cover daily care, medical care, and cultural entertainment.
However, most of the service centres are funded by the local government, staffed by
346 B. Ran and H. Qi

government appointed personnel, and delivered service in the forms and contents
determined by the local government (Li, 2011b).
Clearly, if the public service procurement process is tightly controlled by the
government, the full participation and engagement of stakeholders will be hampered,
because the right of participation in competition of procurement and the independency of
NGOs will be hampered or even deprived by the tight control from the government.
Since full participation and engagement are important preconditions of legitimacy of
collaboration, the deprivation will further damage the legitimacy of public service
procurement.
Comparatively, in Canada, the department of Public Works and Government Services
Canada (PWGSC) regulates two types of governmental procurement process: competitive
and non-competitive procurement. The former one is carried out whenever it is possible
while the latter needs to be used in some special circumstances, such as emergency needs,
small scale procurement not exceeding $24,000 and some military projects (PWGSC,
2015). The regulation of PWCSC not only emphasises the importance of competitive
procurement approach, but also provides useful guideline for the application scope of
competitive procurement in practices, ensuring the transparency and fairness of the
service procurement. Under the competitive system, less political interferences can
impact the process of procurement. The full participation and engagement are protected
as much as possible, leading to increased legitimacy of collaboration.

3.2 The insufficient funding for procurement leading to the limited service
procured
The funding for public service procurement is insufficient in most provinces in China,
accounting for approximately eight percent of the total government procurement funding
(Yang, 2014). Other procurement funding is used in construction, governmental logistics
and public management. Even though in Luohu District of Shenzhen, one of the most
developed areas in China, the public service procurement only accounted for no more
than eleven percent of the whole governmental fiscal expenditure in 2007 (Wen, 2007).
Moreover, the funding for public service procurement is generally not consistently
included in the government’s fiscal budget, leading to the imbalance of service
procurement in different areas in China (Yang, 2014).
Another factor contributing to the insufficient funding for service procurement is the
limited funding sources. In China, government is the major sponsor for the public service
procurement. Other funding channels, such as donations from foundations, corporations
and individuals are more or less non-existent or not preferred by the government since
these funding will weaken the government control and bring in complexity to the service
procurement.
The challenge of funding for public service procurement may result in at least two
problems. On the one hand, the insufficient funding will constrain the size and quantity of
procurement, weakening the outcomes and effects of service quality procured
(Wen, 2007). On the other hand, since funding is a crucial type of resource and resource
is an important source of power in collaborative governance (Purdy, 2012), too much
dependence on the funding from government will bring in power asymmetry in service
delivery between governments and NGOs, impacting the collaborative relations between
stakeholders.
 Issues and challenges of public service procurement in China 347

3.3 The void of legal identification and protection of procurement practices

The void of legal foundation for collaborative governance may cause a series of problems
such as lack of authority, transparency and accountability (Bingham, 2009). It is hard to
adjust power relationship, build mutual trust, distribute interest and evaluate
accountability among participants in collaboration without a mature legal foundation in
China. Two issues arise here:
Firstly, as the major law related to government procurement, the Government
Procurement Law of the People’s Republic of China (GPLPRC, 2002) simply covers the
procurement for government’s internal logistics service instead of the public service
delivery. Most services stated in the law, including printing and publishing service,
consulting, information gathering, maintaining and renting, belong to the logistics of
administration rather than the public service. Since public service can be either provided
by the government directly or procured from NGOs, the procurement law should make a
classification of these two channels.
The types of public service and goods that are mandatory for procurement should be
written explicitly into the law. Unfortunately, the GPLPRC lacks this regulation. By
contrast, in the United States, there are clear descriptions about the kinds of public
service that can be procured. According to the Office of Federal Procurement Policy
(OFPP) Policy Letter 92-1 (Office of Federal Procurement Policy, 1992), all of other
services can be procured except the service belonging to the ‘inherently governmental
function’. It defines the ‘inherently governmental function’ as “the function that is so
intimately related to the public interest as to mandate performance by government
employees” (Office of Federal Procurement Policy, 1992). In paragraph 1 and
paragraph 5 of OFPP Policy Letter 92-1 (1992), the ‘inherently governmental functions’
are listed in detail such as the functions that significantly affect the life, liberty or
property of private persons. As long as the public services procured to NGOs do not
belong to the ‘inherently governmental functions’, the procurement is legally protected.
Secondly, the qualifications required for NGOs need to be clarified further in the
Article 22 of the GPLPRC. According to the GPLPRC, a series of requirements shall be
satisfied by the suppliers that participate in government procurement. Most requirements
such as ‘fine business reputation’, ‘sound financial accounting system’ and ‘a fine record
of paying taxes’ are major requirements for profit-oriented organisations rather than
NGOs (Li, 2012) which leads to the shortage of standards to evaluate the competence of
NGOs in providing public service. In reality, different local governments tend to adopt
different standards when choosing qualified NGOs, which may cause too much
discretionary power and more risk of corruption.
Sound legislation and regulation are essential prerequisites and guarantee for
accountability system of public service procurement as well as sufficient trust from
NGOs to government. The procurement legislation and regulation in China fail to
identify the status of public service procurement, leading to the unavoidable issues in
accountability and lack of trust among partners in this process.
348 B. Ran and H. Qi

3.4 The deficiencies of supervisory systems in procurement processes leading to

more corruption
Collaborative governance inherently has differences in power distribution and ambiguity
in accountability attribution, thus an effective supervisory system is needed to exercise
power and evaluate accountability. With effective supervisory systems, potential risks of
bias, inefficiency and corruption can be controlled and reduced. Yet the supervisory
system of government in China has several deficiencies, which exposes the procurement
process to the risk of corruption and other potential adverse effects on the public service
delivery.
The first deficiency is the unspecified restrictions on the supervisory system
(Li, 2012). The lack of enough supervision for public power and leaving more
concentration of power or authority in the hands of the government will give rise to more
serious corruption (Deysine, 1980; Collier, 2000; Treisman, 2000). According to Article
13 of GPLPRC, the Ministry of Finance of the State Council and its subordinate
institutions in local governments are responsible for supervising the government
procurement activities, but it does not specify which activities should be supervised and
how to supervise them, leaving different level governments to adopt their own principles
and approaches to supervise the service procurement. All of this may increase the risk of
corruption.
The second deficiency is the lack of supervision from independent third-parties
(Jia and Su, 2009; Yang and Chen, 2014). In China, the supervision systems for
procurement include three models (Xiang, 2014):
1 the department in charge of the related procurement projects conducts the
supervision
2 the specialise departments such as the finance department, the audit department and
the inspection department jointly conduct the supervision
3 the experts selected from the government-sponsored public service institutions such
as hospitals, research institutions, and universities conduct the supervision.
Regardless which of these three models, it is obvious that the government dominates the
process of supervision. However, as a dominant stakeholder itself, the government also
needs to be supervised. Since the NGOs nepotistic to the government are more likely to
access more information of the procurement to win the procurement competition which
will bring in more rent-seeking behaviours and corruption, it is necessary to have
independent third-parties to supervise the procurement process.
The third deficiency is the incompetent officials who conduct the supervision (Xiang,
2014). Chosen from different departments of the government, most of the supervision
officials lack auditing and financial skills and legal knowledge required in the supervision
of procurement. Moreover, the joint supervision from different departments will result in
inefficiency, because the procurement information usually fails to be shared in timely
manner among these departments.
Essentially, from the collaborative governance perspective, government entities are
one stakeholder in service procurement that should share some power with other
participants to avoid potential corruption, to strengthen the legitimacy and to improve the
accountability. The power imbalance and lack of supervision will not only undermine the
 Issues and challenges of public service procurement in China 349

development of service procurement, but also lead to corruption, damaging the

legitimacy of procurement.
In contrast, Canada has the Office of the Procurement Ombudsman (OPO) to
supervise and address procurement-related issues in public service delivery as well as
promote performance and accountability in procurement (Kuye and Kakumba, 2008).
Lunau et al. (2007) argues that besides OPO as a supervisory institution, four major
statutes, including Auditor General Act (AGA), Financial Administration Act (FAA),
Department of Public Works and Government Services Act (DPWGSA) and Access to
Information Act (AIA), play a significant role in regulating and supervising Canadian
government contracting and procurement. AGA is to ensure the supervisory power and
protect them from criminal or civil proceedings. FAA regulates cabinet power in
regulations pertaining to the disclosure of information about contract and behaviour in
bidding process. DPWGSA created ombudsman responsible for supervising the federal
procurement process to ensure fairness, openness, and transparency. AIA establishes that
government officials will enhance the access to information of procurement and all
government institutions should disclose the information to the public. Consequently, the
institutional design and relevant legal acts in Canada form a stronger supervisory system
for procurement.

3.5 A weak assessment of the effectiveness of procured services

The outcomes and impacts of collaborative governance are complex, which calls for the
evolvement of performance-based management in government (Kapucu and Demiroz,
2011; O’Toole, 1997). The performance of public service procurement is produced by the
collaboration of both government and NGOs, and public service is related to diverse
citizens. Therefore, the assessment of the effectiveness of procured services becomes
critical in the public service delivery. Like the supervision system of procurement, the
Chinese Government is dominant in the assessment of the effectiveness of the procured
services as well which could be harmful to the transparency and neutrality in supervision
(Liu, 2014; Xiang, 2014).
Firstly, the assessment of the effectiveness in service procurement is biased when the
NGOs affiliated to government are preferably chosen. Secondly, rather than measuring
the service quality, the effectiveness of the procured service is measured more in a
quantitative way, such as the cost of procurement, the number of beneficiaries, the
frequency of activities, and the coverage of service (Yang, 2014). These ‘quantitative
standards’ are indeed significant in the measurement of NGOs performance but cannot
evaluate the quality of service delivery. It is suggested in recent years that citizens
receiving the service should play a crucial role in evaluating the quality of service they
received (Jia and Su, 2009). However, this has not built into the system of assessment.
Therefore, as a kind of collaborative governance process, public service procurement
needs to be evaluated based on the potential multiple outcomes and from multiple
stakeholders who are part of the collaborative process.
In contrast, the Social Welfare Department of Hong Kong established 16 service
quality standards (SQSs) “to clearly define the purposes and objectives of the service and
make its mode of delivery transparent to the public; to manage resources effectively with
flexibility, innovation and continuous quality improvement; to identify and
respond to specific service users’ needs; and to respect the rights of service users”
350 B. Ran and H. Qi

[The Social Welfare Department, (2014), p.1]. The 16 SQSs includes the assessment of
the objectives, the modes, the procedures, the responsibilities, the transparency, the legal
obligations, the meeting with citizens’ needs, and some other vital factors in NGOs’
public service delivery. It seems necessary for mainland China to establish similar
multidimensional and consistent assessment standards to assess the NGOs’ public service
delivery.

3.6 The increasing need for independent and competent NGOs to deliver
services in demand
Independent and competent NGOs can provide resources beyond governments, as
mentioned in the previous section, to public service delivery through procurement. This is
one benefit of collaborative governance model. As one major participant, NGOs have
been playing a crucial role in delivering public service in China, providing a variety of
public services. Although Chinese NGOs have been developing to a considerable degree
since China’s economic and political transitions from the 1990s (Ma, 2002), their
development still fails to catch up with the increasing needs of public service. This
situation creates difficulties for NGOs to take the lead role in social service delivery.
The difficulties, firstly, come from an obstacle in governance system that NGOs
confront. In China, the government uses double registration and management mechanism
to manage the NGOs. All NGOs are required to be registered in the Civil Affair
Department and in the corresponding department that in charge of their specific business
(Liu and Yao, 2011). For example, NGOs providing daycare service have to register in
the Education Department as well as Civil Affairs Department. NGOs are thus regulated
rigidly, needing to obey the regulations from both departments in order to obtain the legal
identity through registration, hindering their rapid development.
Secondly, a lot of NGOs lack funding and human resources to design their projects
and future development path. With the close ties to the government, NGOs rely on the
government through direct funding support and shared personnel management
(Galaskiewicz and Lan, 2012). The dependence on the government limits NGOs’
autonomy in choosing their own path of development. Moreover, the funding from the
government is not adequate and stable, and is usually in the form of appropriation for
procurement projects. Once NGOs fail in competition of procurement projects, there is
little opportunity for them to receive other funding. Since in China, almost no NGO, even
the registered ones, can enjoy tax credits (Jia and Su, 2009), this exacerbates the shortage
of funding, one of the greatest challenges in the survival and development of competent
and independent NGOs.
Thirdly, the professional competencies in Chinese NGOs are not high. Professional
skills are of great importance in certain fields of public service. For example, the
organisations providing service for senior citizens are required to have adequate medical
knowledge and skills, and the organisations which help the autistic children need to have
psychological knowledge.
However, few NGOs in China are competent enough to provide quality professional
services for the public. A lot of employees are part-time, unprofessional, and extremely
transient (He and Liu, 2010). Additionally, since NGOs cannot provide high salary and
decent status to employees compared to some other occupations, there are few
professional people or graduates with higher degrees willing to work in NGOs.
 Issues and challenges of public service procurement in China 351

Enough capacity is one of the most important capitals for NGOs to participate in
public service procurement and undertake their relevant accountability in service
delivery. The desirable outcomes and effects of public service procurement also rely on
the capacity of NGOs to a large extent. In this regard, Chinese NGOs have a long way to
go before it becomes a competent and independent participant in the collaborative
governance arrangement.

4 Discussion

Based on the six issues and challenges in Chinese public service procurement, two
underlying factors emerge from this collaborative governance arrangement.
For one thing, the excessive political interference from government, the insufficient
funding for procurement, the void of legal identification and protection of procurement
practices, the weak assessment system, and the deficiencies of supervisory systems in
procurement all indicate the significant institutional challenges to collaborative
governance. Because of the differences or even conflicts between collaborative
governance and bureaucratic arrangements, the government and public officials may be
vigilant to the development of collaborative governance practice, let alone that most
public officials may have few skills to participate in this practice (Booher, 2004). The
unwillingness of public officials to give up bureaucratic power to a more democratic
governance structure greatly hinders the development of collaborative governance in
solving public problems that are unsolvable by public institutions alone. This paradox
calls on political reform changing institutional structure, training new knowledge and
skill, cultivating collaborative culture and so forth.
Additionally, the increasing need for independent and competent NGOs indicates that
the civil society should also be developed in which diverse non-governmental
participants can grow. The shift of theory underlying the development of collaborative
governance practice is from governing to governance, indicating the decrease of direct
control by the state and the increase of engaging civil society (Newman et al., 2004).
Therefore, a less mature civil society dominated by the government cannot cultivate a
wide range of high-level participants. Civil society in China also has crucial values and
merits in rebuilding a more balanced power relationship among private, social and state
spheres that can benefit the collaborative governance (Ying, 2007). In this sense, the civil
society is the soil for the growth of collaborative governance. Reflecting on the six issues
and the two underlying factors in Chinese public service procurement, we can suggest
three solutions to deal with these challenges.

4.1 Building the competitive model in public service procurement

‘Competitive model’ (Geng and Doberstein, 2008) is needed to select NGOs that can
provide high quality public service at lower cost. Because the funding for service
procurement is usually insufficient in China, competitive model is an effective
mechanism achieves the increase of scale and satisfies the various requirements of
service procurement. The ‘competitive model’ is built under the following two
conditions. Firstly, the information of service procurement projects needs to be disclosed
to all NGOs for their successful biding. Secondly, a set of clear and consistent standards
352 B. Ran and H. Qi

is required for the fairness in choosing and evaluating NGOs, so that the government has
to conduct the service procurement on the basis of open, legitimate and strict procedures
to avoid making biased choices on the affiliated NGOs.

4.2 Forming an effective evaluation system

The evaluation of the process and outcomes of service procurement is a vital issue since
it not only reflects the quality of past procurement projects, but also provides some
enlightenment and lessons for the upcoming ones. It is necessary for the central
government to add the performance of public service procurement into the performance
management system of local governments, and local governments also have to promote
evaluation systems in public service procurement. To improve the current evaluation
system, the first channel is to listen to the citizens’ voices in public service procurement
(Hefetz and Warner, 2004). Organising a systematic survey before, during and after the
process of service delivery is significant for the government and the NGOs to collect
information that reflects the real feeling and opinions of citizens. Refining the public
service projects gradually based on the analysis of the citizens’ feedback, is a major
approach to improving the public service quality. The second channel is to improve laws
and regulations that clearly identify the roles, status, rights, and responsibilities of
government and NGOs in the process of service procurement. Separate legislation
specific for procurement in public service delivery is required to regulate how to conduct
and evaluate the service procurement at different levels of government. The third channel
is to bring in independent ‘third party’ (Li, 2011b) to supervise the procurement in order
to supervise the tendering process, to promote the information disclosure, and to ensure
the procurement opportunity is available to all qualified NGOs fairly.

4.3 Strengthening the competency of NGOs in China

As a crucial participant of providing service in procurement, NGOs’ competency has
crucial impacts on the quality of service; therefore, promoting the development of NGOs
is a significant solution that needs the endeavour from both governments and NGOs. For
the central government, besides ensuring the legal role and status of NGOs in public
service delivery, it is also important to provide policies that are conducive to the healthy
development of NGOs, such as providing stable and enough funding, tax deduction or
exemptions or even financial awards. The government, especially local governments,
should also decrease the interference in NGOs, especially in the NGOs’ internal affairs,
including service projects design, staffing issues, and internal management system. All in
all, both the central government and local governments should regard NGOs as a valuable
partner in promoting the public service for citizens, rather than a potential threat to their
bureaucratic power. For NGOs, stable and professional staff is the key factor of the
competency-building. They need to attract more professional staff or volunteers by
improving their salaries and benefit, as well as providing better training.

5 Conclusions

This paper contributes to the public service procurement literature in four aspects. Firstly,
public service procurement was analysed from a procedure perspective, from the
 Issues and challenges of public service procurement in China 353

planning of procurement to the selection of NGO, from the implementation of

procurement projects to the assessment of the service outcomes. Secondly, the issues in
public service procurement were analysed from the two major stakeholders’ perspectives-
-governments and NGOs. For governments, the most vital issue is to support and guide
the public service procurement appropriately without excessive interference. For NGOs,
the most important mission is to improve their competence to provide higher quality
service effectively. Thirdly, the major challenges and issues of public service
procurement in China were analysed from the collaborative governance perspective,
hinting the need for this governance trend to solve issues related to public service
delivery. We suggest that the six challenges may not only exist in public service
procurement, but are possibly involved in other fields of governance in China. Lastly, this
paper points out the potential for comparative studies in public service procurement
between China and developed countries which have more mature practices in
collaborative governance.
Three important limitations of this paper should be noted. Firstly, this paper is a
conceptual paper that could use more empirical data to strengthen the argument and
analyses. Our next research step is to draw on first-hand empirical data to further
examine these issues in public service procurement in China. Secondly, we are confined
by the length of the paper to introduce more contextual information in this paper. The
public service procurement practices in China have been developed based on its own
political climate and historical background, thus providing more information will help
readers to appreciate the importance of the issues discussed in the paper. Thirdly, the
issues of public service procurement have been discussed at both central and local
government levels without distinguishing them between these two levels, therefore, our
interpretations on these issues should be carefully generalised across China. In the next
step of this research, we will focus on the public service procurement differences between
developed areas and underdeveloped areas in China to bring nuances in our analysis.
The essence of government procurement for public service delivery is collaborative
governance, which is a useful theoretical tool to interpret and deal with challenges and
issues in public service procurement. Through in-depth analyses of public service
procurement in China, the six issues and challenges discussed in this paper provide an
insight on collaborative governance in Chinese context. This is a significant insight,
because in China, the government dominates many public functions, covering diverse
fields in society. The space for collaborative governance is thus relatively limited and a
bridge is needed to connect the government, private organisations, NGOs and many other
types of stakeholders to cultivate collaborative governance. The procurement for public
service delivery could serve as an appropriate bridge. By contracting, outsourcing and
privatisation, the function of providing public service that is undertaken by the
government traditionally can be transformed to other types of organisations such as
NGOs. During this transformation, necessary political preconditions, including the
political willingness and good planning is essential (Metaxas and Preza, 2015). To
motivate political willingness and good planning, it is important for governments to
increase its confidence on the benefits of collaborative governance model in public
service delivery, rather than concerning too much about its challenges to its authority.
With sufficient confidence from government, the collaborative governance in public
service delivery could be implicitly promoted to encourage and drive the pluralistic value
and practice in governance in China.
354 B. Ran and H. Qi

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