Ministry of Land, Infrastructure and Transport Preemptively Cracks Down on 'Paper Companies'... Up to 1 Year Business Suspension

Verification of Compliance with Construction Business Registration Standards for Construction Projects Ordered by Affiliated and Subsidiary Organizations
Continuous Crackdown on Unqualified Construction Operators Expected to Establish a Fair Construction Culture

[Asia Economy Reporter Kangwook Cho] From now on, continuous crackdowns will be conducted on 'paper companies' that lack construction capability. If caught, they will face business suspension for up to one year or less.

The Ministry of Land, Infrastructure and Transport (MOLIT) announced on the 31st that to establish a fair construction culture and ensure the quality and safety of construction work, it plans to continuously verify on-site whether construction companies participating in bids for construction projects ordered by MOLIT-affiliated and subordinate organizations meet the construction business registration standards.

MOLIT explained that this is to proactively detect so-called 'ineligible construction companies (hereafter paper companies)' that fall short of or falsely register under the construction business registration standards by conducting on-site inspections of facilities, equipment, technical personnel possession status, capital, and other factors. Until now, compliance with construction business registration standards was only verified based on documents submitted during bidding, and the successful bidder was selected accordingly.

The continuous crackdown targets construction companies participating in bids for construction projects ordered by 18 regional land management offices including 5 regional land management bureaus, and 6 subordinate organizations such as Korea Land and Housing Corporation, Korea Expressway Corporation, Korea Rail Network Authority, Korea Railroad Corporation, Korea Airports Corporation, and Incheon International Airport Corporation. This year, considering on-site conditions such as inspection personnel, continuous crackdowns will focus on 'region-restricted' construction projects with an estimated construction amount of less than 200 million KRW (approximately 1,100 cases based on 2021).

According to this continuous crackdown on paper companies, ordering agencies will post notices about the continuous inspection in the bid announcement and require participating companies to submit materials that verify compliance with construction business registration standards, such as the possession status of technical personnel. After reviewing these documents, on-site inspections will be conducted to verify consistency with the submitted documents.

If non-compliance with construction business registration standards is detected as a result of the inspection, the ordering agency will request administrative measures such as business suspension for up to one year from the registration authority (local government), and subsequently exclude the company from the selection of the successful bidder based on the registration authority’s disposition results.

Meanwhile, in Seoul and Gyeonggi Province, continuous crackdowns on paper companies have identified ineligible companies that do not possess technical personnel (such as those lending national technical certificates or construction technical career certificates) or share offices with other construction companies. It was confirmed that continuous crackdowns have led to a decrease in the number of companies participating in bids. In fact, the number of bidding companies decreased by about 40% compared to before and after the crackdown on paper companies (ineligible construction companies).

MOLIT expects that considering the construction sites of its affiliated and subordinate organizations are located nationwide, the effects of continuous crackdowns will spread, significantly reducing paper companies and yielding substantial results.

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