LH "Cancellation of Existing Contracts Worth 64.8 Billion KRW with Former Officials' Companies... Revision of Bidding Regulations" (Comprehensive)

11 Service Contracts Conducted After July 31 Canceled After Review and Selection
LH Former Officials Job Change DB Established
Won Hee-ryong "Former Officials' Interest Cartel Destroys Fair Economic Order"

Regarding the ‘rebar omission’ incident, Korea Land and Housing Corporation (LH) has decided to completely halt the procedures for signing service contracts such as design and supervision, and furthermore, to terminate all existing service contracts with former officials’ companies.

On the 20th, LH announced this at an ‘Emergency Meeting on LH Service Former Officials Cartel’ held at the Seoul Regional Headquarters, chaired by Won Hee-ryong, Minister of Land, Infrastructure and Transport.

The contracts subject to termination are those signed with former officials’ companies after the announcement of the rebar omission in LH apartment complexes on the 31st of last month, totaling 11 cases worth 64.8 billion KRW. This includes 10 design competitions (56.1 billion KRW) and 1 supervision service (8.7 billion KRW).

LH will maintain contracts with companies confirmed to have no former officials, but will terminate contracts if former officials’ companies are identified.

For bids announced after July 31st but whose evaluation and selection have not yet been completed, LH plans to cancel all such announcements.

[Image source=Yonhap News]

Among the design and supervision services for which bidding announcements and evaluation procedures have been conducted after July 31st, there are 11 design cases and 12 supervision cases currently in progress, totaling 89.2 billion KRW.

LH stated that it will promptly revise internal regulations related to contracts and evaluations to exclude former officials’ companies from bidding, ensuring no disruption to canceled contracts or future service projects.

LH will immediately implement measures to award additional points during evaluations to companies without LH retirees and make the submission of retiree lists mandatory.

LH President Lee Han-jun said, “(Contract cancellations) may have legal issues, but please understand this as LH’s stance to sever the former officials’ connections this time.” He added, “Although there is concern about project delays, we will swiftly revise internal regulations to ensure no disruption in the overall volume of projects.”

The Ministry of Land, Infrastructure and Transport plans to announce measures to eradicate construction sector cartels by October. First, the ministry will conduct a full survey of LH retirees and former officials’ companies and build a related database (DB). Currently, employment screening under the Public Officials Ethics Act applies only to retirees of grade 2 or higher, so those retiring at lower grades face virtually no employment restrictions. Grade 2 or higher employees constitute only 5.4% of all LH staff.

The scope of companies subject to employment restrictions for LH retirees will also be revised. Currently, employment screening is required only when joining companies with capital of 1 billion KRW or more and sales of 10 billion KRW or more. However, many design and supervision companies involved in the recent rebar omission controversy are smaller than this, prompting calls to broaden the scope of employment screening.

However, the reform of the employment screening system and restrictions on contracts with former officials’ companies, which the ministry intends to address, require consultation with the Ministry of Personnel Management and the Ministry of Economy and Finance. The Ministry of Land, Infrastructure and Transport and LH will first proceed with measures that can be implemented by revising internal regulations (such as building the DB), and plan to consult with relevant ministries or the National Assembly in the future.

Minister Won Hee-ryong said, “The cartel based on former officials is not only a betrayal of the public role but also distorts the private free competition market and directly destroys fair economic order.” He added, “We will carry out comprehensive institutional reforms including former officials and collusion with evaluation committee members in public sectors such as roads and railways, not just LH.”

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