From Next Year, Contracting Parties Also Exempt from Liability for Defects Arising from Use of Innovative Products

Ministry of Economy and Finance Revises 'Contract Regulations' as Follow-up to Contract System Innovation TF

[Sejong=Asia Economy Reporter Joo Sang-don] Starting next year, not only ordering agencies but also contractors will be exempt from liability if defects occur after purchasing and using innovative products.

On the 28th, the Ministry of Economy and Finance announced the revision and promulgation of contract regulations containing these details.

Previously, the Ministry of Economy and Finance operated a 'Contract System Innovation Task Force (TF)' involving ministries, public institutions, and industry to gather field opinions. Based on this, the 'Three Major Innovation Plans for the Public Contract System' were established and announced in October this year.

First, exemption from liability is guaranteed not only for ordering agencies* but also for contractors who purchase and use innovative products. If defects in innovative products used in construction directly cause delays in completion or defects, contractors are exempt from liquidated damages and liability for defects.

With the abolition of the construction business category, the evaluation criteria, which are currently operated differently between general and specialized construction works, have been reorganized. The scope of joint contracting by the main contractor has been expanded to allow specialized construction companies to participate as main contractors in bidding (from projects over 30 billion KRW to all projects), and the regulation limiting main contractors to general construction companies has been removed.

Additionally, the system has been institutionalized to actively use non-face-to-face online proposal evaluation methods during public project ordering (contracts by negotiation), and the credit rating standard for selecting successful bidders in construction contracts has been relaxed from 'A-' to 'BB0'. This aims to expand participation opportunities in the public procurement market for small and medium-sized enterprises facing difficulties such as decreased sales.

The practice of omitting expenses such as security and general administrative costs when public institutions order goods including installation work will also be improved. Costs that must be included in contracts for goods with installation conditions have been clearly defined to ensure appropriate payment.

The revised contract regulations will take effect from January 1 next year. However, the expansion of exemption for innovative products requiring detailed criteria revision for ordering agencies and the activation of online evaluation for contracts by negotiation will be implemented three months after the promulgation date.

A Ministry of Economy and Finance official said, "Expanding exemption for purchasing innovative products is expected to promote the purchase of innovative and new industry products in the public procurement market, while contributing to reducing the burden on procurement companies and expanding participation opportunities through the establishment of reasonable evaluation criteria, improvement of unreasonable practices, and simplification of procedures." He added, "The Ministry will continue to steadily promote contract system improvements through the Procurement Policy Deliberation Committee and other channels."

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