2026.10.24. The Fair Economy — The Public Procurement Service has established "Measures to Eradicate Reckless Bidding in Goods Procurement" to prevent companies without the capacity to fulfill contracts from participating indiscriminately in bidding.
The Public Procurement Service announced that it will fully implement the measures starting November 16.
The measures include three key tasks: imposing bid bonds on suspected paper companies, requiring credit rating certificates for companies registering more than 500 other supply items, and restricting bidding eligibility for companies that habitually abandon bid evaluations.
Bid bonds will be imposed on companies suspected of being paper companies. A pilot program run since August found that the average number of bidding companies per bid fell 83.9%, from 355 to 57, while the average winning rank improved from 41st to 1.5th.
Starting in 2027, companies registering more than 500 other supply items must submit a credit rating certificate. The certificate will be valid for one year.
Oversight of companies that habitually abandon winning-bid screening will be strengthened. Companies that fail to submit screening documents or abandon the screening process without justifiable reason will have their bidding eligibility restricted.
The threshold for the number of habitual evaluation abandonments that triggers a bid bond requirement will also be tightened from five to two or more. This measure is scheduled to take effect in January 2027.
The Public Procurement Service has undertaken follow-up actions, including revising related regulations and building a system, to implement the measures.
The core of the plan is to move away from imposing sanctions after problems occur, and instead to preemptively block the indiscriminate participation of companies with insufficient supply capacity or unclear corporate substance, from market entry into public procurement through the bidding and contracting stages.
Public Procurement Service Administrator Baek Seung-bo said, "In public procurement, creating an environment where companies can compete fairly is of utmost importance." He added, "We will eradicate the reckless bidding practices of companies without contract performance capability that undermine public contract order, and build a fair procurement ecosystem so that sound companies can win contracts."
Since 2021, the Public Procurement Service has pursued three rounds of improvement measures, including shifting to manufacturing bidding and establishing new direct performance obligations, to prevent indiscriminate bidding in the goods procurement sector.
However, criticism has been raised that the approach has limitations because it is difficult to verify broker involvement and relies on post-hoc measures. Accordingly, in January this year, a fourth set of eradication measures was prepared, and after follow-up actions such as revising relevant regulations and building systems, full implementation has begun.
In the public procurement goods bidding market, so-called "unchil-gisam" (literally "seven parts luck, three parts skill") lottery bidding has long been cited as a chronic abuse: hundreds of shell companies or name-lending firms are mobilized to place bids, and the winning bidder then hands the contract over to a broker or the actual manufacturer for a fee.
This has led to persistent criticism that honest small and medium-sized enterprises with proper facilities and manpower are denied winning opportunities, and that it leads to abandonment of contract performance or quality deterioration after winning, causing project delays and administrative waste for public institutions.
In July, the Public Procurement Service revised the "Internal Procurement Business Handling Regulations" to gradually strengthen the criteria for imposing bid security deposits. Starting August 3 of the same year, it imposed bid security deposits on all firms participating in items with a high risk of indiscriminate bidding, and from November 1, it planned to impose deposits on firms suspected of being paper companies selected through data analysis.
On July 23, the agency designated nine items at high risk of reckless bidding: liquid chromatography equipment, mass spectrometers, drug dispensers and packaging machines, semiconductor inspection equipment, oscilloscopes, education and training equipment, vacuum deposition equipment, helmets, and infrared spectrometers. These items were selected through a comprehensive review of factors including the number of notices issued over the past three years, whether industry restrictions applied, the average number of bidders, and winning-bid rankings.
Starting Aug. 31, for facility construction contracts subject to the National Contract Act, a measure was implemented to forfeit the bid bonds of companies that do not meet construction business registration standards to the national treasury. This is a strong sanction that goes beyond excluding companies from winning bids through deductions in eligibility review, confiscating bonds equivalent to 5 percent of the bid amount. The Public Procurement Service plans to expand this measure to projects subject to the Local Contract Act.
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