Tencent wins Xiamen government cloud contract for RMB 0.01

Updated: 17 Mar 2017
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Chinese internet giant Tencent has won a contract to provide internet-based cloud services to a government department in Xiamen for just 0.01 yuan, according to Caixin, raising concerns about the validity of the bid.

The project to provide cloud-hosting services for the Xiamen Information Center with a budget of 4.95 million yuan, and attracted bids from five parties, including all three of China’s state-run telecom carriers and a local Xiamen company. Bids from the other four ranged from 1.7 million yuan from the local unit of China Telecom Corp. to 3.09 million yuan from the local unit of China Unicom.

Industry observers noted that 0.01 yuan, or 1 fen, is the lowest possible bid, and that such lowball offers are relatively common in emerging industries like cloud services.

One notable case was e-commerce giant Alibaba Group, which previously acknowledged its cloud unit had basically helped China’s rail operator to set up its online ticket website for free. Since then, the operator has become a major client.

“It’s quite apparent that (Tencent’s) intention was to win the bidding first, and then to get later profitable value-added services through this initial contract,” Caixin quoted one industry observer, speaking on condition of anonymity. “For them, several million yuan is just a marketing cost.”

A Tencent spokeswoman had no comment on the matter.

But at least some experts from the legal community said such lowball bidding may be invalid or at least require an explanation from the bidder in an effort to avoid substandard products or lower the risk of failure to meet contractual obligations.

“A bid of 0.01 yuan is obviously not honest and therefore could affect the quality of the product delivered,” said Xue Qitang, a Beijing-based lawyer and expert on laws that govern such bidding processes. “It could raise doubts about their ability to complete the project… We should also look at the comments accompanying the bid document and comments from the committee members considering the bid.”
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