"Minimum Bidding Price for Public Procurement of Goods Should Be Raised to 88?89%"

Current Minimum Bidding Price Triggers Cutthroat Competition
SMEs Struggle as Supply Prices Fail to Reflect Rising Raw Material Costs
Experts: "Minimum Bidding Price for Goods Should Be Raised Like Construction Contracts"

There have been concerns that the minimum bidding price applied to public procurement contracts is set too low, forcing small and medium-sized enterprises (SMEs) into cutthroat price competition without properly reflecting their production costs.

The Korea Federation of SMEs announced on November 14 that it held the "5th SME Public Procurement Policy Research Forum" at its headquarters in Yeouido, Seoul, to discuss the need for improvements in the public procurement system regarding goods purchases.

The research forum, launched in August last year, has been identifying agendas in areas requiring improvement within public procurement policies, which have traditionally focused on budget savings and management. The forum is developing improvement measures through expert discussions.

Seoul Yeouido Korea Federation of Small and Medium Business. Korea Federation of Small and Medium Business

On this day, discussions were held on the minimum bidding price within the eligibility screening system for goods purchases in the public procurement market. According to the "Act on Contracts to Which the State is a Party" (National Contract Act), the eligibility screening system is most commonly used when the government or public institutions select suppliers for goods purchases in the public procurement market. However, the minimum bidding price applied is so low that SMEs continue to face difficulties.

Kim Daesik, Head of Procurement Law Research at the Korea Institute of Procurement Research, who conducted the study commissioned by the Korea Federation of SMEs, stated, "Unlike construction contracts, where the minimum bidding price has been continuously raised, the minimum bidding price for goods purchases has only been revised once, in 2017, and only for contracts below the threshold announced by the Ministry of Economy and Finance. There has been no change for contracts above the threshold," adding, "The minimum bidding price for goods purchase contracts should also be raised."

Experts attending the forum pointed out that, despite the continued increase in raw material prices, SMEs have not been able to reflect these increases in their supply prices, making it urgent to improve the relevant system. They unanimously agreed that, since the minimum bidding price in the eligibility screening system acts as the lower limit for possible bids and ultimately lowers supply prices, it is essential to raise it to prevent excessive price competition and ensure the quality of goods.

Yang Chanhoe, Head of the Innovation Growth Division at the Korea Federation of SMEs, emphasized, "It is urgently necessary to raise the minimum bidding price for goods purchases-which has remained unchanged for a long time-to the level of 88-89%, in line with the manufacturing cost rate for SMEs and the minimum bidding price for construction contracts. Based on the opinions gathered through the research forum, we will continue to propose improvements to the government."

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