Rep. Lee Hyung-seok Proposes Partial Amendment to 'Local Contract Act' to Prevent Faulty Contracts

Expectations to Eliminate Unfair Practices Such as the Memorandum of "No Objection to Raising Issues During Contract Execution"

[Asia Economy Honam Reporting Headquarters Reporter Yoon Jamin] A bill has been proposed to protect the rights of companies participating in projects commissioned by local governments and to prevent poor contract performance caused by low-price bidding competition.

On the 28th, Representative Lee Hyung-seok (The Democratic Party of Korea, Gwangju Buk-gu Eul) announced that he had taken the lead in proposing a partial amendment to the "Act on Contracts to Which Local Governments Are Parties" (hereinafter referred to as the Local Contract Act).

The bill includes provisions to invalidate special clauses or conditions that unfairly restrict the interests of contracting parties and to allow objections to unfair special clauses.

Once the bill is amended, unfair practices such as requiring a written pledge stating "no objections will be raised regarding various issues during contract execution" are expected to disappear.

Additionally, to prevent poor construction caused by low-price bidding competition, the bill stipulates that bidders offering less than 98% of the net construction cost for projects under 10 billion won will be excluded from winning the bid.

Through this, appropriate construction costs for small-scale projects will be secured, which is expected to resolve issues related to poor construction and insufficient safety measures.

Representative Lee said, "The Act on Contracts to Which the State Is a Party already prohibits unfair special clauses and includes provisions to secure appropriate construction costs and prevent poor construction, but these have not been reflected in the Local Contract Act. It is necessary to include the same provisions in the Local Contract Act to improve the unreasonable realities faced by local companies entering into contracts with local governments and others."

He added, "By protecting the rights of local companies participating in local government projects and institutionally preventing issues such as insufficient safety measures and poor construction, the business conditions of local small and medium-sized construction companies will improve, contributing to the revitalization of the local economy."