Suhyup Development, a subsidiary of the National Federation of Fisheries Cooperatives, relies on no-bid contracts with entities inside the federation for 99.7% of its total revenue, according to data obtained by a lawmaker. Critics say the practice of assigning work to the subsidiary without competition, based on internal rules, has left Suhyup Development without market competitiveness while depriving the federation of chances to cut costs.
Suhyup Development, which handles facility maintenance and construction, posted average annual revenue of 43.5 billion won over the past five years, according to data submitted by the federation to the office of Rep. Lee Jae-kwan of the Democratic Party of Korea, a member of the National Assembly's Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee, on the 18th. Only 0.3% of that revenue came from outside clients. The remaining 99.7% was generated through internal transactions, including those with the federation's headquarters.
Suhyup Development won all of its work from member cooperatives nationwide through no-bid contracts as well, not just from the federation's headquarters. Over the past five years, 162 construction projects ordered by member cooperatives, worth about 100.5 billion won, were awarded to Suhyup Development without competitive bidding. Many of those were large projects valued at 1 billion won or more.
Internal rules at the federation underpin this contract structure. Suhyup has an exemption clause allowing no-bid contracts when the federation signs deals with subsidiaries in which it holds a stake of 50% or more. Critics note that the rules are still being used improperly, even after a parliamentary audit of government agencies in 2023 flagged the problem of funneling work to subsidiaries by exploiting the clause.
Some observers worry that the entrenched practice of no-bid contracting could produce deals that fail to meet best-price standards in the procurement market. The extremely low share of outside revenue is also seen as evidence of Suhyup Development's weak competitiveness in the market.
"Using an exemption clause as a de facto free pass for funneling work, simply because it is a subsidiary, and relying on internal transactions can hardly be seen as normal management," Lee said. "I have to ask who this management serves, when it guarantees the subsidiary's revenue while giving up even the chance to cut costs through competitive bidding."