Public Procurement Service Introduces 'Multiple Supplier Contract System' for Software Supply

The Public Procurement Service (PPS) will introduce and apply the Multiple Supplier Contract System for the supply of commercial software (SW).

The PPS announced that starting from the 26th of this month, it will supply commercial SW through the Multiple Supplier Contract System. Commercial SW refers to software released as a single product for commercial sales purposes, and the PPS supplies commercial SW to national and public institutions. Currently, there are a total of 698 commercial SW companies registered on the Korea ON-line E-Procurement System (KONEPS), and the supply scale to the public sector reached 958.6 billion KRW as of last year.

The application of the Multiple Supplier Contract System to commercial SW supply was driven by field opinions that small and medium-sized enterprises (SMEs) were relatively disadvantaged because mid-sized and large companies, as well as foreign products, were supplied under single-price contracts without distinction from SMEs’ developed products.

Improvements to the Commercial Software Unit Price Contract System. Provided by the Public Procurement Service

Reflecting these industry voices, the PPS established the "Commercial SW Multiple Supplier Contract Operation Regulations." The existing single-price contracts for SW will apply only to small manufacturing companies, while other products will be subject to the Multiple Supplier Contract System to enhance competitiveness, which is the purpose of establishing these regulations.

Through this, it is expected that commercial SW developing SMEs will secure public market channels more stably. The PPS also anticipates that this will improve the quality of the commercial SW industry by strengthening technological competitiveness and create a fair trading environment.

In the future, in the Multiple Supplier Contract System, mid-sized and large companies and foreign SW products will be included in the second-stage competition if the contract amount is 50 million KRW or more, and SW manufactured and supplied by SMEs will be included if the amount is 100 million KRW or more. In the second-stage competition, evaluations of SW functionality and usability will be conducted.

The functionality evaluation is a procedure to verify the inherent quality of SW, such as ▲function implementation ▲compatibility ▲information security, and it serves to prevent commercial SW purchase decisions from being made based on factors other than quality, such as brand recognition and sales power.

Usability evaluation includes items such as ▲possibility of environment setting changes ▲ease of updates, which assess whether the SW is suitable for user tasks and the projects being promoted.

Through the establishment of these regulations, the PPS will also realize support for preventing cutthroat competition and ensuring fair pricing for SW. The price evaluation score will be reduced, setting the price evaluation score for the second-stage competition of commercial SW at 10 to 30 points, which is more lenient compared to goods (20 to 60 points) and services (50 to 70 points), and a price floor rate (90%) will be introduced and applied.

According to the investigation, 237 companies (34%) out of the total 698 commercial SW registered companies (based on KONEPS registered companies) will switch from the existing single-price contracts to the Multiple Supplier Contract System. By company size, they are classified as 173 SMEs, 13 mid-sized companies, 10 large companies, and 41 foreign companies.

The PPS plans to conclude Multiple Supplier Contracts for commercial SW to be supplied to the public sector by the end of June and register them collectively on the KONEPS Digital Service Mall starting July 1.

Lim Gi-geun, Administrator of the PPS, said, “By supplying commercial SW products to the public sector through the Multiple Supplier Contract System, we expect to protect small and medium SW manufacturing companies and strengthen competitiveness within the public SW market.” He added, “The PPS will continue to operate this system while gathering additional industry feedback to implement procurement policies that procurement companies can truly feel.”