[2023 National Audit] ‘No Competition’ in Gwan-su Ready-Mix Concrete Competitive Bidding Contract

Concerns have been raised that the competitive bidding contracts for water-supply ready-mixed concrete (Remicon) have largely been concluded through sole bids resulting in negotiated contracts, thereby diminishing the meaning of fair 'competition' among companies. Above all, there are calls for drastic measures to eradicate the collusion still existing between cooperatives and companies during the negotiated contract process.

According to data on the 'Status of negotiated contracts and successful bids due to failed competitive bidding over the past four years' submitted by the Public Procurement Service to Jin Sun-mi, a member of the National Assembly's Planning and Finance Committee (Democratic Party of Korea, Gangdong-gu Gap) on the 12th, a total of 847 competitive bidding contracts for water-supply Remicon were concluded in the past four years.

However, only 107 contracts (12.6%) were actually concluded through competitive bidding, while the remaining 740 contracts (87.4%) proceeded as negotiated contracts.

In particular, the proportion of negotiated contracts due to sole bids has been increasing annually, from 82% in 2020 to 88% in 2021, and 91% from last year to August this year, indicating that competitive bidding contracts for water-supply Remicon have effectively been transformed into negotiated contracts through sole bids.

By region, the Jeonbuk area concluded all 55 contracts over the past four years as negotiated contracts through sole bids, and the Seoul metropolitan area and Chungbuk area also proceeded with negotiated contracts for all contracts except one.

Moreover, most of the actual contracts concluded through negotiated contracts were confirmed to be by Remicon cooperatives.

For example, among the 740 negotiated contracts concluded in competitive bidding for water-supply Remicon over the past four years, 674 contracts (91.1%) were concluded as negotiated contracts through sole bids by local Remicon cooperatives. Conversely, individual Remicon companies concluded only 66 contracts (8.9%).

The problem lies in collusion between Remicon cooperatives and companies. This issue has been consistently raised, and in a 2016 audit by the Board of Audit and Inspection, the monopoly structure and collusion of cooperatives were pointed out.

Recently, the Korea Fair Trade Commission detected five cases of collusion between local Remicon cooperatives and companies, imposing fines, and the Public Procurement Service imposed a six-month bidding participation ban on the involved companies.

All five detected cases involved participation in water-supply Remicon bidding, where regional cooperatives in each area met in advance to agree on the proportion of bid quantities, allocate winning quantities, or pre-agree on the expected successful bidders, constituting collusive behavior, according to Representative Jin's remarks.

Representative Jin stated, “Collusion includes various forms such as price, quantity, and order allocation,” and emphasized, “It is necessary to closely monitor the water-supply Remicon procurement market to prevent collusion and to thoroughly review the entire water-supply Remicon bidding system.”

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