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Source: Coal Chemical Industry Network Over the past 10 years, the coal chemical industry in China has seen many negative news stories that have had a significant impact on the environment. Coal chemical projects also frequently appear in various reports issued by environmental protection agencies. Illegal discharge of pollutants, pollution caused by high-concentration saline wastewater, high carbon dioxide emissions, and air pollution that directly affects the lives of residents in the vicinity… There are an endless array of environmental problems. In recent interviews, reporters found that when discussing these issues, whether it was manufacturing companies, environmental protection firms, or industry experts, everyone pointed the finger at winning bids at low prices. Winning a bid at a low price was originally considered a fair, impartial, open, and transparent bidding method. According to Article 41 of the Bid Invitation and Bidding Law of the People’s Republic of China, a bidder’s proposal must \"meet the substantive requirements specified in the bid documents, and have the lowest evaluated bid price…\" However, in the bidding process for coal chemical industry environmental protection projects, winning a bid at a low price has become an unspoken rule that is criticized as something that \"kills competitors, exhausts the bidder themselves, and harms the project owner.\" So, how did this situation arise? The huge investment costs are unaffordable, forcing manufacturing companies to cut costs wherever possible. According to reporters, the unwritten rule of low-bid winning for coal chemical industry environmental protection projects dates back to the early days of this industry. The coal chemical industry made significant progress in terms of engineering development only during the 12th Five-Year Plan period, and at that time there were no readily available treatment technologies for coal chemical wastewater, waste gas, and waste residues. Especially in terms of wastewater treatment, given its complex composition and the requirement for near-zero emissions, it represents a truly unsolved challenge. According to requirements set by the Ministry of Environmental Protection, coal chemical projects must achieve zero emissions. To basically achieve this goal, environmental protection investments in the project must account for at least 5% to 8% of the total project investment, with investments in water treatment accounting for around 30% of those environmental protection expenditures. The huge investment proves too much for many manufacturing companies, forcing them to cut costs wherever possible. “When we started working on coal chemical projects, there were no precedents for the application of water treatment technologies aimed at zero emissions; we had no idea that the wastewater generated by coal chemical processes was so difficult to treat. The investment in the project is already so high; to save on costs, the only option is to reduce the price of environmental protection technologies and equipment. ”An enterprise leader who wished to remain anonymous said. This was the common mindset of early coalification industry owners. Even when they are aware of good technologies, the tendering companies still give them up. In the EPC general contracting tender for Shenhua Ningmei’s coal chemical zero-emission project, the bid prices submitted by domestic companies were around 300 million yuan, while those submitted by the American company General Electric and the French company Veolia were around 800 million yuan; as a result, the first tender was declared unsuccessful. In China’s coal chemical water treatment market, where price competition is fierce, foreign environmental protection companies that opt for a premium pricing strategy can only watch helplessly, despite having full confidence in their own technologies. Under the principle of “cutting costs wherever possible” adopted by manufacturing enterprises, the coal chemical industry’s environmental protection sector fell into a vicious cycle of cutthroat price competition right from the outset. What’s more, some manufacturing companies are unwilling to contribute the necessary funds, and instead force environmental protection firms to cover the costs themselves. For example, the tender documents for a certain wastewater advanced treatment and reuse project specify that the project will be constructed with funds provided by Party B; after the project is completed and passes the commissioning tests, a 72-hour performance test is conducted for acceptance, followed by an one-year period of operational evaluation. Only if all the required indicators are met throughout this year will the payment for the project be made to Party B over three years. This means that the environmental protection company that wins the bid in the end has to bear all the risks and invest nearly 100 million yuan to secure the project. “In reality, when manufacturing companies bid for contracts, the prices offered are often very low. However, the more they build, the more money they have to invest; thus, winning bids at low prices does not actually lead to cost savings. ”Han Hongjun, a professor at Harbin Institute of Technology, said, “We often say that this saves money on physical exercise and disease prevention, but in reality, more money is spent on seeking medical treatment after it’s built.” ” According to journalists, in the later stages, the Datang Keqi coal-to-natural gas project made an additional investment of nearly 2 billion yuan in water treatment. “What was sacrificed in the design phase to keep costs low has to be added back in the end. Environmental protection projects are carried out through continuous modifications like this, and sometimes the cost of those modifications can even equal the bid price. ”An insider revealed. Even with substantial additional investment, the Datang Keqi coal-to-natural gas project still has to face treatment costs of up to 7 yuan per ton of water. Experts analyze that the typical cost for wastewater treatment is around 4 yuan per ton of water. Considering that a coal chemical plant handles tens of thousands of tons of water per day, it is not worthwhile to win bids at low prices by focusing only on the initial investment and ignoring the subsequent operating costs. Yang Chuanwu, deputy general manager of China National Chemical Engineering Group Corporation, commented on the cost-saving measures adopted by manufacturing enterprises in this regard: \"With the raising of emission standards, and unlike the previous basic treatment methods, to meet these new standards, the costs associated with the ‘final stage’ of wastewater treatment also increase accordingly.\" However, whether they are state-owned enterprises or private enterprises, they all put immediate profits first. ” After several years of unsuccessful attempts at debugging, the environmental protection company was forced to shut down. Under the pressure from the companies issuing the tenders, the environmental protection company reluctantly went ahead with it. “The environmental protection in the coal chemical industry is ruined by those within the industry itself. ”A senior executive at an environmental protection company said helplessly. “The desire to achieve results quickly is the driving force behind all environmental protection companies, as well as their weakness. To make inroads in an emerging market, price competition is a fast track. ”Many environmental protection companies use immature technologies to pursue this path. Coal chemical industry water treatment involves many technologies, such as membrane filtration and electrodialysis; at present, none of these technologies is fully mature. Zero emissions refer to zero emissions across the entire system; that is, starting from the gasification furnace and all the way to the final treatment of solid waste, this system involves 6 to 7 different specialties. At present, no environmental protection company is able to develop the entire system on its own; many companies need to work together. “At present, there are no particularly mature and effective water treatment technologies for the coal chemical industry; most environmental protection companies simply combine existing technologies. ”Han Hongjun said. “Technical fragmentation and low integration levels are common problems. Poor compatibility among the technologies of various units, difficulties in effective integration, and low levels of integration are widespread. ” said Xu Yanhua, dean of the School of Environment at Nanjing Tech University. In reality, there are already coal chemical enterprises that have encountered such a predicament: after the environmental protection company completed the construction of the facility, it took 3 years to get it operational, but they were still unable to do so; in the end, they gave up on the remaining payment and disappeared. Furthermore, since environmental protection companies that win bids at low prices must rely on limited funds to carry out project construction, it is not surprising that issues such as shoddy work and the use of substandard materials arise in terms of project quality. According to journalists, some environmental protection companies have used substandard underwater equipment. Each time the equipment malfunctions, all the water must be drained, resulting in substantial losses for the manufacturers. A worker from a coal-to-liquids company revealed that there was a batch of valves awarded through a low-price bidding process; however, it turned out that they simply couldn’t meet the requirements for use in coal chemical engineering projects. Upon discovery, the company was forced to replace them. Using such defective products will pose significant safety hazards. According to industry insiders, the low bids for desulfurization projects have also led to serious consequences: the anti-corrosion coating on the anti-corrosion equipment was supposed to be applied in 3 layers, but only 2 layers were used; high-quality imported stainless steel was intended to be used for the steel components, but ordinary domestic materials were used instead; the spray coating layer on the equipment was supposed to have 4 layers, yet only 3 layers were installed in the design... As a result, many desulfurization facilities were unable to operate properly shortly after being put into use. Even desulfurization facilities that are barely operating are prone to problems such as gypsum scaling, severe equipment corrosion, and low efficiency. “Most companies that take on orders at low prices are only concerned with short-term gains, and these seemingly forced individual choices are harming the healthy development of the entire industry. Moreover, such a business model also deprives companies of the ability to develop products and innovate in manufacturing processes, narrowing their path for growth until it ultimately turns into a dead end. ”said Jiang Hongfeng, the chief consultant at Beijing Tianqi Consulting and Training Group. Experts recommend establishing an integrity assessment system and regularly publishing blacklists. After a period of chaotic competition, the coal chemical industry’s environmental protection sector has suffered losses on all sides. Because environmental protection is not properly managed, many manufacturing enterprises can only react passively to the problems that arise during production. It is claimed that zero wastewater discharge has been achieved, but the actual treatment processes and the destinations for reusing the water are not clear. Due to the lack of effective monitoring and supervision mechanisms, it is difficult to determine the actual wastewater treatment efficiency, the rate of recycled water reuse, and the water consumption per unit of product in enterprises. Environmental protection companies, on the other hand, \"make decisions at the time of bidding, promise things when signing contracts, and then shirk responsibility when they can’t carry it out.\" ”There are very few that can truly provide exemplary cases. It is commendable that, amid such chaos, there are still companies that manage to stay ahead – the Tuk project of China Coal Ordos Energy Chemical Co., Ltd. was the first in the country to achieve full reuse of wastewater with zero emissions. The first phase of this project, with an annual production capacity of 1 million tons of synthetic ammonia and 1.75 million tons of urea, required an actual investment of 9.32 billion yuan. The company has built a comprehensive treatment system for dealing with wastewater with complex compositions, investing 1.48 billion yuan in this effort, which accounts for 15.8% of the total investment. The project can treat approximately 1,030 tons of wastewater per hour, with 4.702 million tons of wastewater being recycled each year; thus, the wastewater reuse rate reaches 98%. And what seemed to be large upfront investments ultimately yielded returns later on. Thanks to this environmental protection system, the company’s one workshop can save around 5 million yuan per year. Industry experts have concluded that only by being willing to invest in environmental protection can one hope to achieve greater returns. One owner remarked, “When it comes to environmental protection abroad, there are no low-cost options; foreign companies believe that environmental protection should come at a high price.” ” Faced with these positive and negative examples, industry professionals have also offered their own views on the environmental protection efforts in the coal chemical industry. “I don’t think there is anything wrong with winning bids at low prices per se; the problem lies in the lack of supporting measures in the process of adopting such low-price bidding. ”Wang Honghai, chairman of Beijing Zhuxin Zhuheng Engineering Design Consulting Co., Ltd., suggested that a detailed project definition should be established during the bidding phase. Before issuing a tender, the owner should prepare some design options and constraints in advance, then conduct an open tender based on those established conditions, with the bid offering the lowest price winning the contract. This ensures that the winning bidder has the capability to complete the project. Zhu Shengfeng, head of the Environmental Protection Department at CNOOC Headquarters, suggested that the bids and specifications submitted by manufacturing enterprises must be clear and precise. “CNOOC follows a Build-Own-Operate (BOO) model in the field of environmental protection. During bidding, the standards for pollutants to be discharged and emissions are specified; the processes are determined by the bidders, who also bear the costs. This allows them to win the bid at the lowest possible price. If it’s impossible to determine the emission standards, then we’ll simply purchase the top 10 processes in the world. ”Zhu Shengfeng also suggested that the Ministry of Ecology and Environment establish a evaluation system for environmental protection technologies, regularly update technical guidelines, and foster an academic atmosphere conducive to fair discussion. Meanwhile, industry associations should develop a credibility evaluation system for enterprises and periodically publish blacklists to ensure fair competition. Yang Chuanwu suggested that measures should be taken at the source to ensure proper environmental impact assessments. If a company fails to pass the environmental compliance inspection, it must not be allowed to start operations under any circumstances – this gap needs to be closed. Otherwise, once a company starts production, it becomes difficult to stop it; even if its emissions do not meet the standards, it has to be allowed to continue operating. Therefore, it is necessary to ensure that environmental protection measures are incorporated from the initial design and construction phase of enterprises, so as to meet the new environmental standards; this will make subsequent emission control easier. The approach of building first and then modifying and upgrading it once the standards are not met actually results in a significant increase in the company’s costs. As an industry expert, Han Hongjun advises companies to give greater emphasis to technical factors when conducting bid evaluation. During the bidding process, it is necessary to find a balance between technology and price; selecting the most advanced technology at a reasonable price is the correct approach to winning bids at low costs – achieving a low bid price while giving importance to technology. Zhu Tong, president of Liuhe Tianrong Environmental Protection Technology Co., Ltd., recommends adopting the method of determining the bid price based on a benchmark figure; in this approach, the owner engages a third-party consulting firm to conduct a series of evaluations on the project, thereby arriving at a cost that meets the owner’s requirements as well as current market prices. Finally, the bid that is closest to this base price wins the contract. This bidding method ensures both the quality of construction projects and the profits of environmental protection enterprises. Thankfully, as environmental awareness grows, more and more coal chemical enterprises are also willing to take the right path in terms of environmental protection and invest heavily in it. Ma Xinyuan, General Manager of Procurement at Xinjiang Tianye Group, said that each time the tender documents are issued by Xinjiang Tianye Group, the requirement that the winner of the bid is not necessarily the one who offers the lowest price is specified. She said that our core requirements for suppliers are reasonable prices and good service, in order to ensure that the company’s future production and operations can proceed smoothly. It seems that it will be a long and arduous task to restore order to the coal chemical industry’s environmental protection sector, which has been ruined by bids at low prices.