Seoul City to Crack Down on Construction Companies' Paper Companies... "Strong Punishment for Swarm Bidding"

Expansion of Crackdowns from City-Ordered Construction Sites Over 200 Million to All City-Ordered Sites, Dedicated Team Established

[Asia Economy Reporter Onyu Lim] # Construction company A is a single company, but it prepared documents as if it operated six specialized construction companies with plumbing and sewage facility construction licenses on the same floor of the same building. They mobilized six fake companies, or paper companies, and submitted different bid amounts to increase their chances of winning bids for construction projects commissioned by Seoul City, engaging in swarm bidding, but were caught in a Seoul City crackdown.

# Construction companies B and C moved into a knowledge industry center located in Guro-gu, where manufacturing and knowledge-based industry companies can reside, violating the "Construction Industry Basic Act," yet they enjoyed various tax reduction benefits. Additionally, both companies failed to meet one of the construction business registration requirements, which is having an office. They did not have their own offices, sharing entrances and break rooms. As a result of the Seoul City crackdown, they were caught and received a four-month business suspension.

Seoul City will conduct a large-scale crackdown on disqualified companies at all construction sites commissioned by the city to catch paper company construction firms that fail to meet the standards required as construction companies.

On the 28th, the city announced that it will expand the crackdown on disqualified construction companies, which had been conducted since February last year targeting city-commissioned construction sites with a scale of 200 million KRW or more, to all approximately 700 city-commissioned construction sites. In July of this year, a dedicated team (Construction Industry Guidance Team) was also newly established.

The city will focus on cracking down on violations such as ▲ failing to meet construction business registration standards (which require employing an adequate number of engineers, holding a certain scale of capital, and possessing facilities, equipment, and offices), ▲ operating without employing engineers and merely borrowing certificates, ▲ borrowing construction licenses from other places to operate, and ▲ illegal subcontracting such as re-subcontracting.

If violations are detected, administrative measures such as exclusion from future city construction bids and business suspension will be enforced. In particular, if someone borrows another person's national technical qualification certificate, strong administrative actions including registration cancellation and criminal penalties will be applied.

The city stated that paper company construction firms not only obstruct fair competition in the construction industry but also cause deterioration in construction quality, poor construction, and safety accidents through unfair subcontracting that pursues only profit, thereby threatening citizen safety. Therefore, the city will detect and eradicate them through crackdowns.

Since February last year, the crackdown on paper company construction firms has identified 38 disqualified companies. Among them, 21 received business suspensions, one received a corrective order, and procedures such as hearings are currently underway for 16 companies.

The city also requested active public interest reporting from citizens. If disqualified construction companies are found, reports can be made to the Seoul City Response Center or the Seoul City Construction Innovation Division.

Han Je-hyun, Director of the Seoul City Safety General Office, said, “Swarm bidding by paper company construction firms deprives sound construction companies of opportunities to win contracts and undermines fair competition order, which is illegal.” He added, “The city will enforce strong crackdowns and punishments to prevent disqualified companies from participating in bids and will regularly disclose detected cases.”