Public Procurement Service: "Strong Response to Broker Involvement and Reckless Participation in Public Bidding"

The Public Procurement Service (PPS) will take strong measures against so-called indiscriminate participation in public bidding backed by brokers.

On the 13th, the PPS announced its plan to strongly respond to the problem of ordinary individuals or companies with insufficient supply capacity participating indiscriminately in public bidding through corporate brokers and private platforms.

This measure comes in response to recent cases where ordinary individuals register their business using their home addresses and use corporate brokers and private platforms to participate in purchase bids indiscriminately, gaining unfair profits.

In such cases, the winning bidder (ordinary individual) only collects a commission and transfers the bid to the broker, which the PPS explains leads to the disruption of the public bidding order.

In particular, some corporate brokers are encouraging ordinary individuals without supply capacity to register their business and register as vendors on the Korea ON-line E-Procurement System (KONEPS) through YouTube, SNS, and other channels, and then participate in public bidding.

The PPS plans to implement stringent measures starting next month to proactively respond to and eradicate such unfair practices.

First, the concept of brokers and types of unfair practices will be defined in the bidding and contracting process, and if unfair practices are detected, the broker’s registration for bidding participation will be canceled.

For example, a “broker” is defined as a person who is not a contracting party but intervenes in the bidding, contract conclusion, or contract execution process to directly obtain benefits or to enable the contracting party or a third party to gain benefits.

Also, unfair acts by brokers include inducing participation in bids on the condition of receiving part of the contract amount after winning the bid, or instigating the contracting party to avoid all or part of the direct performance obligations (transferring them to a third party) by concluding contracts or agreements with specific manufacturers or suppliers. In such cases, the broker’s registration for bidding participation will be canceled, according to the PPS.

Furthermore, contracting parties will be obligated to directly perform supplier selection and management for contracts concluded with the PPS, and involvement or cooperation in brokers’ unfair acts will be prohibited.

If these obligations are violated, penalties such as contract termination, forfeiture of contract deposits to the treasury, and restrictions on bidding participation for dishonest businesses will be imposed. If violations of direct performance obligations are detected after contract completion, a penalty amounting to 10% of the contract amount must be paid as liquidated damages.

Lee Jong-wook, Administrator of the PPS, said, “We hope that this measure, to be promoted through regulatory amendments, will lead to the prevention of ‘indiscriminate bidding’ in future public bids. The PPS will continue to strive to eradicate unfair tactics and cheating that undermine fair trade order in the public procurement market.”

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