DAEJEON — South Korea will bar shell companies from the public procurement market to stop firms with no real ability to perform contracts from flooding bids.
The Public Procurement Service said on the 23rd that it has drawn up a set of measures to curb indiscriminate bidding in goods purchases and will put them into force from Nov. 16, in a move to protect legitimate chances of winning contracts and foster fair competition.
The agency ran a pilot program from August, designating items at risk of indiscriminate bidding and requiring bid bonds for them. The average number of bidders per tender fell 83.9% to 57 from 355, and the average rank of the winning bid dropped to 1.5 from 41st, indicating that excessive participation eased and the selection process improved.
From Nov. 16, the agency will require bid bonds from companies suspected of being shell companies. It will screen for such firms using business registration records and contract data.
From 2027, companies registering more than 500 entries under the "other supply items" category will be required to submit a credit rating certificate, valid for one year.
The agency will also tighten oversight of companies that habitually drop out of the screening process for winning bidders.
Firms that fail to submit screening documents or abandon the review without a valid reason will face restrictions on bidding eligibility, to be pursued within this year. The threshold for imposing bid bonds on repeat dropouts will be tightened to two or more occasions from the current five, effective January 2027.
The agency said it will continuously manage business registration and other related data to keep firms without contract performance capacity out of the public procurement market.
"The core of these measures is to move away from imposing sanctions after problems arise, and instead block indiscriminate participation by firms that lack supply capacity or whose substance is unclear — from entry into the public procurement market through the bidding and contracting stages," said Kang Sung-min, vice commissioner of the Public Procurement Service. "We will root out conduct that undermines order in public contracting through indiscriminate bidding by firms with no ability to perform, so that companies running sound operations under difficult conditions can win public procurement contracts."
