Seoul City Expands Crackdown on 'Paper Company Construction Firms' to Include District-Ordered Projects

58 Ineligible Companies Detected and Administratively Sanctioned, 46% Decrease in Bidders Compared to Pre-Crackdown
43% Increase in Autonomous District Public Works Without Crackdown... Expansion of Ineligible Company Crackdown to Autonomous District Public Works
Jungnang-gu Pilot Crackdown, Gradual Expansion of Joint City and District Crackdown to Other District Public Works Planned

[Asia Economy Reporter Lim Cheol-young] Seoul City announced on the 7th that as a result of conducting intensive pre-crackdowns to completely block paper company construction firms from participating in bids, the bidding rate for Seoul City-commissioned construction projects has decreased to about half compared to before the crackdown. The city plans to expand the scope of crackdowns to include district-commissioned projects in the future.

To crack down on paper companies in the construction industry, Seoul City established a dedicated crackdown team in July last year and conducted crackdowns on all construction projects commissioned by Seoul City. As a result of inspecting 276 construction companies so far, 58 ineligible companies were detected. Among them, 35 companies were suspended from business, 4 companies had their registrations canceled, and the remaining 19 companies are undergoing hearing procedures for administrative sanctions.

After the crackdown, the number of companies participating in bids for Seoul City-commissioned projects decreased by an average of 46% compared to before the crackdown. It is interpreted that paper companies avoid participating in Seoul City-commissioned project bids to evade administrative sanctions such as business suspension due to the crackdown. However, during the same period, district-commissioned projects increased by 43%, and as a bidding concentration phenomenon appeared in district-commissioned projects without crackdowns, organizations such as the Construction Association have continuously requested the expansion of paper company crackdowns to district-commissioned projects.

Accordingly, Seoul City announced that it will expand crackdowns not only on Seoul City-commissioned projects but also on district-commissioned projects by posting pre-crackdown notices for ineligible companies in the bid announcements of 25 districts and held video conferences explaining the crackdown methods and procedures.

First, the city is currently conducting joint crackdowns with the district on projects commissioned by Jungnang-gu, and plans to gradually expand to other districts by reinforcing the crackdown personnel. Since the bid opening on the 15th of last month for Jungnang-gu projects with an estimated price of 1 billion KRW or more, two pilot crackdowns are underway, and the city is working on reinforcing personnel to expand crackdowns to other districts in the future.

The crackdown procedure first involves the district posting a pre-crackdown notice in the bid announcement, then after bid opening, receiving construction business registration-related documents from the top-ranked bidder, and jointly visiting the construction company by the city and district to verify the actual employment status of technicians and compliance with construction business registration standards.

In particular, this crackdown will focus on violations such as ▲failure to meet construction business registration standards ▲operating without employing technicians and merely borrowing certificates ▲illegal subcontracting such as re-subcontracting. If violations are detected, administrative measures such as exclusion from project contracts and business suspension will be enforced. Especially, if a company operates by borrowing another person's national technical qualification certificate, strong administrative actions such as registration cancellation and criminal charges will be pursued simultaneously.

Han Je-hyun, Director of Seoul City Safety General Office, said, “Paper company construction firms not only obstruct fair competition in the construction industry but also threaten citizen safety due to unfair subcontracting that pursues only profit, resulting in poor construction and safety accidents,” adding, “We will implement strong crackdowns and punishments to prevent ineligible companies from participating in bids.”

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