POSCO Construction Loses First Trial Against Public Procurement Service Over Request to Cancel Point Deduction

Technical Bidding Decided by 1-2 Point Difference
Confirmed Ruling Results in 2-Point Deduction for 1 Year

[Asia Economy Reporter Seongpil Cho] POSCO Engineering & Construction filed a lawsuit against the Public Procurement Service (PPS) to cancel the penalty points imposed for corruption but lost in the first trial. The company stated that it will appeal. If this ruling is finalized in future trials, POSCO Engineering & Construction will face significant disadvantages in technology-based bidding for one year. The total amount of technology-based bidding projects scheduled for this year reaches 11 trillion KRW.

According to the legal community on the 23rd, the Seoul Administrative Court Administrative Division 11 (Chief Judge Hyungsoon Park) ruled against POSCO Engineering & Construction in the lawsuit filed against the head of the PPS, requesting the cancellation of the penalty points for corruption. The court stated, "The degree of infringement on legal interests does not appear to be excessive compared to the public interest gained by imposing the penalty points."

In 2016, POSCO Engineering & Construction was selected as the contractor for the "Korean-type Heavy Ion Accelerator Facility Construction Project." However, it was later revealed that the company requested consulting services and paid consulting fees to a review committee member of another national project, resulting in a two-point penalty for one year imposed by the PPS. According to related regulations, if consulting, research, or advisory services are requested from a review committee member within one year without prior notification, a two-point penalty is imposed. The penalty points act as a disadvantage in evaluations conducted by ordering agencies referencing the Ministry of Land, Infrastructure and Transport standards. In technology-based bidding such as turnkey (design and construction integrated bidding), the winning bidder can be decided by a difference of 1 to 2 points in design review scores.

POSCO Engineering & Construction filed a lawsuit opposing this penalty, arguing that the payment of consulting fees was not a retrospective reward for winning the contract and therefore should not be subject to corruption penalty points. However, the court judged, "There is a need to ensure fairness in the public contract process," and "It is difficult to find a reasonable basis for the plaintiff's claim, which is based on a narrow interpretation of the relevant regulation."

The effect of the penalty points has been suspended since the court accepted POSCO Engineering & Construction’s injunction request last October until the final judgment of the case. POSCO Engineering & Construction is concerned that if the penalty points take effect upon final judgment, it will be significantly disadvantaged in technology-based bidding worth 11.0333 trillion KRW (as of this year). A POSCO Engineering & Construction official said, "There is still room for dispute," and "We will appeal and seek a judgment from a higher court."

This content was produced with the assistance of AI translation services.