Kyungsillyeon "Suspicion of Bid Rigging in LH Construction Project Management Service Tender"

Analysis of 92 Contracts... "Strong Influence of Internal Members"
Over 90% of Bids Win When LH Internal Members Give High Evaluations

[Asia Economy Reporter Onyu Lim] A civic group has raised suspicions of collusion as only a few companies have participated in the bids for construction project management services of Korea Land and Housing Corporation (LH).

The Citizens' Coalition for Economic Justice (CCEJ) held a press conference on the 20th and announced the results of an analysis of 92 LH construction project management service contracts made from last year to March this year.

The related data obtained by CCEJ through a tip-off was organized into categories such as bid announcements, bid results, evaluation committee members, and evaluation results.

The analysis showed that among the 92 projects with a total contract amount of 450.5 billion KRW, 66 projects (72%) had only two companies participating in the bids, and 17 projects (19%) had only three companies participating. Additionally, 85 projects were evaluated under the comprehensive evaluation system (종심제), of which 65 projects (77%) had only two participating companies.

The comprehensive evaluation system combines technical scores (80 points) and price scores (20 points) into an integrated evaluation method, applied to projects worth over 2 billion KRW.

CCEJ stated that the fact that most bids had only two participating companies strongly indicates signs of collusion. Since the Enforcement Decree of the State Contract Act recognizes bids with two or more participants as valid, companies may have participated in bids by taking turns in a sequential manner as a 'trick.'

In fact, the top 10 companies won 49 contracts, accounting for 53.3% of the total, securing a total contract amount of 289.88 billion KRW.

When comparing bid prices, 80% of the projects (74 cases) had a bid price difference of less than 1% between the winning bidder and the second-place bidder, and among these, 63% (58 cases) showed a difference of less than 0.5%, strongly suggesting price collusion, CCEJ explained.

CCEJ pointed out that LH internal committee members have a decisive influence on the selection of winning bidders.

According to CCEJ, in 90.2% (83 cases) of the projects, the company that received the highest evaluation score from internal committee members won the bid. Only 9.8% (9 cases) of projects were evaluated first by internal members but failed to win the contract.

They also noted that LH internal evaluation committee members have more experience participating in service evaluations than external members, making it likely that they play a leading role in the evaluation process. For example, among evaluation committee members with six participations in service evaluations, five were LH employees and two were external members.

CCEJ claimed that the 'forced differential scoring system,' which applies mandatory score differences by company ranking during service evaluations, particularly benefits former officials hired by companies that recruited retired LH personnel.

Among the top 10 projects by individual contract amount, companies that hired former LH officials won six projects. The architectural firm that won the largest contract recruited three former LH officials.

Compared to facility projects where price collusion results in winning bid rates exceeding 95%, LH construction project management service projects showed a winning bid rate of about 81.2%.

Regarding this, CCEJ analyzed that due to the government inflating the standards for calculating design service fees, contractors secure profits even when winning bids at around 81.2%.

CCEJ urged, "Fair Trade Commission, prosecutors, police, and other investigative agencies must thoroughly investigate signs of bid collusion," and called for "immediate improvement of related standards to prevent budget waste by stopping the inflation of design service fee standards."

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