Public Procurement Opportunities for Local SMEs to be Further Expanded

Ministry of the Interior and Safety Announces Legislative Notice for 'Local Contract Act Enforcement Rules'

In the future, the threshold amount for regional restricted bidding on construction technology service contracts issued by local governments will be raised to less than 330 million KRW, and the requirements for government-supplied materials in facility construction contracts will be further strengthened.

The Ministry of the Interior and Safety announced on the 6th that it will publicly announce the amendment to the "Enforcement Rules of the Act on Contracts to Which Local Governments Are Parties," which includes these changes, for 40 days from tomorrow until the 17th of next month.

The main points of this amendment are as follows. First, the threshold amount for regional restricted bidding on construction technology service contracts will be raised from the current less than 220 million KRW to less than 330 million KRW. 'Regional restricted bidding' limits the eligibility to participate in bids to companies whose headquarters are located within the jurisdictional city or province for contracts with an estimated price below a certain amount when local governments issue contracts. This system is designed to protect local small and medium-sized enterprises (SMEs). This increase aims to realize the standards for regional restricted bidding and strengthen support for local SMEs. With the increase in the regional restricted bidding amount, it is expected that, based on 2021 order performance, there will be an expansion effect of approximately 273.5 billion KRW in orders for local companies.

Additionally, the requirements for applying government-supplied materials in facility construction will be strengthened. In facility construction, it is common for the contracting party to directly procure and install the necessary materials; however, for some materials, the ordering agency directly purchases and supplies them to the contractor (government-supplied materials). However, recently, as government-supplied materials have been widely used even in small-scale projects, issues such as deterioration in material quality, ambiguous responsibility when defects occur in construction parts, and delays in supply causing schedule disruptions have increased. To reduce the possibility of defects in facility construction and improve the quality of contracted objects, the criteria for applying government-supplied materials will be strengthened by adding 'project scale' as a judgment criterion and limiting application to cases where 'it is easy to distinguish responsibility for defects from other construction parts and does not interfere with schedule management.'

Choi Byung-kwan, Director of the Local Finance and Economy Office at the Ministry of the Interior and Safety, said, "This local contract system improvement plan was prepared considering the difficult situation of local companies and market realities," and added, "We hope it will help expand public bidding opportunities for local SMEs facing difficulties due to recent high interest rates and high inflation, and revitalize the local economy."