Court: "A '1-year bidding ban' is excessive for partially violating public bidding contract terms"

Seoul Administrative Court, Seocho-gu, Seoul / Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Daehyun] A court ruling has found that a sanction barring participation in all public bidding contracts for one year due to violating some contract conditions presented in a bidding announcement was unfair.

On the 3rd, the Administrative Court of Seoul, Administrative Division 6 (Presiding Judge Lee Jooyoung) announced that it recently ruled in favor of the plaintiff in a lawsuit filed by electronics manufacturer Company A against the Public Procurement Service head, seeking cancellation of the restriction on bidding participation.

Previously, in 2019, Company A participated in a bidding announcement by the Seoul Regional Public Procurement Service and won a contract for the production and installation of a lithium battery system. This contract included a clause stating that "if the contract is executed in violation of direct production conditions such as subcontracting production or delivering other companies' products, bidding participation qualifications may be restricted."

Company A submitted the delivery performance of this contract as execution performance and participated in a subsequent bidding the following year, where it was selected as the final successful bidder through a qualification review process and signed another contract.

However, after the 2019 contract, Company A subcontracted the production and delivery of goods, and a company that was the runner-up in the subsequent bidding reported this matter. The Public Procurement Service restricted Company A's bidding participation qualifications for one year, citing "violation of contract conditions." Company A filed a lawsuit arguing, "The subcontractor assisted in production work under the plaintiff's direction and management," and "It is unfair to evaluate that the plaintiff did not produce directly."

The court ruled in favor of Company A, stating, "The sanction is excessively harsh compared to the illegality of the violation."

First, the court acknowledged that Company A did violate the contract conditions. It stated, "It is reasonable to view that the plaintiff violated the prior contract condition of 'direct production' by not performing most of the assembly process directly," and "Submitting the necessary documents for performance proof in the subsequent bidding itself already hinders the fair execution of competition," according to the court's judgment.

However, the court pointed out the Public Procurement Service's sanction, saying, "If the plaintiff cannot participate in all bids issued by public institutions for one year, the plaintiff will inevitably suffer significant economic losses that could determine the continuation of the business."

Furthermore, the court added, "Among the two reasons for the sanction?violation of the direct production obligation and submission of false documents?the latter is relatively less blameworthy as it exploited the illegal situation created by the former," and "Considering that there seems to be no problem in being selected as the successful bidder even after submitting additional performance in the subsequent bidding, it does not appear that the plaintiff actively submitted false documents to falsely inflate their capabilities."

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