Public Procurement Innovation Purchase Target System, Mandatory → Incentive... Restriction on Reemployment of Retirees from Ordering Agencies

Innovating Public Procurement System and Restoring Trust... 'Strategic Procurement' Supporting National Policies Kicks Off

[Asia Economy Sejong=Reporter Kwon Haeyoung] The government will improve the innovation product purchase target system by providing incentives to institutions that purchase innovative products in the public procurement market. It plans to strengthen the re-designation requirements for excellent procurement products and select private shopping malls as consignment operators. To reform unfair procurement practices in the public procurement market, reemployment of retirees from ordering institutions will also be restricted.

On the 14th, the government announced this at an emergency economic ministers' meeting chaired by Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho.

First, the innovation product purchase target system will be rationally adjusted considering the characteristics of each institution. Currently, public institutions are forced to purchase 1-2% of their goods purchase amount as innovative products, but going forward, a minimum purchase ratio will be set, and incentives will be given for exceeding the target. The innovation product designation system will be simplified, and products with low effectiveness will be excluded from the innovation product designation.

The government will also promote strategic use of public procurement linked to major government policies. In particular, from an industrial policy perspective, support for procurement of material and component companies will be strengthened, and to prevent a second urea solution crisis, the stockpile of six non-ferrous metals (aluminum, copper, zinc, lead, tin, nickel) will be expanded, and the scope of public stockpiling will be extended to items closely related to daily life and core industrial materials (activated carbon, urea, calcium chloride).

The government has decided to open the public procurement market to private shopping malls, which had been closed until now. It plans to review selecting private shopping malls as consignment operators for office supplies and electronic products with standardized prices and quality, and for small purchases under 20 million KRW.

Additionally, the government will strengthen the re-designation requirements for the excellent procurement product system and reduce benefits for long-term companies. Although outstanding small and medium-sized manufacturing products with excellent performance and technology were selected and given benefits such as negotiated contracts, quality issues have been raised due to benefits being given without proper evaluation and monopolization. Accordingly, the evaluation scoring and items will be revised to be more technology-friendly, a pre-screening system will be introduced, and the passing score for long-term designated companies will be raised. Excessive oligopoly structures will also be resolved by excluding unit price contracts for items with an excessive market share of excellent procurement products in the public procurement market.

Management of reemployed retirees will also be strengthened. To prevent interference in work and favoritism through retirees from ordering institutions, the government plans to exclude retirees from consignment work to related associations and manage retiree contacts.

Furthermore, the government will strengthen the overall coordination function of the Procurement Policy Deliberation Committee to consistently coordinate the procurement special systems currently operated separately by each ministry. To establish a systematic policy role for public procurement, it is also considering expanding and reorganizing the current Procurement Business Act, which focuses on procurement projects, into a Public Procurement Basic Act.

Yoo Hyung-cheol, Director of the Treasury Bureau at the Ministry of Economy and Finance, said, "Public procurement is a large-scale market worth 184 trillion KRW and needs to be strategically utilized as a policy tool supporting major national policies such as industry, innovation, and environment," adding, "To restore trust in public procurement and support national policies, we will strengthen the linkage with policies based on innovation in practices and systems."