Public Procurement Service rolls out 'fair procurement enhancement measures'

The Public Procurement Service said it will begin full enforcement of its "fair procurement enhancement measures" in step with the amended Procurement Business Act, which takes effect Friday. The measures are designed to protect suppliers from unreasonable demands by demand agencies. They also allow the agency to launch ex officio investigations into unfair procurement practices even without a formal complaint.

The plan revises and establishes sub-regulations built around three pillars: a strict response to unfair practices, substantive protection for suppliers, and stronger incentives for whistleblowers.

Until now, investigations into unfair practices had proceeded only on the basis of complaints from affected companies. This left a blind spot in which violations went undetected if companies were reluctant to come forward. Suppliers who could not refuse unreasonable demands from demand agencies sometimes suffered losses as a result.

Strict response to unfair practices by suppliers

Ex officio investigations without a complaint: Going forward, the agency can launch investigations on its own, even without a complaint, if there is substantial reason to suspect unfair practices. Such grounds include media reports, delivery inspection or quality-check results, or a history of repeated violations.

Through such ex officio investigations, the agency plans to respond swiftly to practices that undermine market order through illicit means. It also aims to build a procurement environment in which companies that compete fairly are not put at a disadvantage.

Fines of up to 10 million won ($7,200) for obstructing an investigation: Companies face such fines if they fail to comply with an investigating official's request for materials. They also face fines for submitting false, concealed or fabricated materials, or for refusing, obstructing or evading an on-site inspection. Fines are tiered according to the severity of the violation and are progressively increased for repeated violations.

Protecting suppliers from unreasonable demands by demand agencies

Types of unreasonable conduct by demand agencies and the reporting center: Demand agencies sometimes impose unreasonable contract terms, such as adding costs not part of the original bid. They may also make demands that violate the contract, such as requiring free delivery of goods not specified in the agreement. Suppliers can report such cases through the Demand Agency Unfair Practice Reporting Center.

From complaint to correction: After receiving a complaint, the Public Procurement Service will investigate. If unfair conduct is confirmed, it will demand corrective action from the demand agency concerned and, if necessary, recommend improvements to the relevant system. In addition, the agency will disclose cases of unfair conduct by demand agencies every quarter to prevent similar cases from recurring.

Doubling the reward for reporting unfair procurement practices

Following a 20 percent increase in rewards for sanctions-related reports in the first half, the agency will double rewards across the board in the category for recovering unjust profits. The move aims to further encourage reports of unfair procurement practices.

The agency expects the increase to significantly strengthen incentives to report unfair procurement practices and to enhance the market's capacity for self-correction.

"In public procurement, illicit and unreasonable practices ultimately become a burden on companies that compete honestly," said Baek Seung-bo, commissioner of the Public Procurement Service. "We will build a fair procurement ecosystem in which principle prevails over illicit means, and fair competition prevails over unreasonable practices."