Promotion of Innovation Plans for 102 Projects in 4 Major Areas
Improvement of Bidder Qualifications Aligned with Global Market Standards
The Public Procurement Service (PPS) is set to ease the restrictions on bidder qualification and apply stamp tax only to procurement contracts, among other regulatory innovations. It also plans to diversify contract methods to allow innovative products to be contracted in the form of leases or subscriptions.
On the 17th, the PPS announced the ‘2024 Public Procurement Killer Regulation Innovation Plan’ with these details at the Economic Ministers’ Meeting.
The innovation plan was developed by identifying and reflecting unnecessary regulations felt by procurement companies through over 40 on-site meetings and contests, as well as a survey (a full census) of more than 1,500 procurement companies. It is a result that reflects the criticism from field officials that despite extensive on-site regulatory improvements, the perceived impact remains low.
The most notable feature of the innovation plan is its focus on resolving 17 killer regulations and 85 shadow regulations in the field, which had not been resolved for a long time due to conflicting interests among multiple ministries. The PPS has set a total of 102 tasks across four major areas to implement the innovation plan.
First, the innovation plan includes improvements to the ‘bidder qualification restriction system,’ which had been applied punitively, aligning it with standards commonly accepted in the global market. The core is to expand the scope of exemption and mitigation for sanctions against unfair business operators, which is currently limited to about half.
Additionally, the PPS explained that the criteria for imposing fines on annual unit price contracts will be improved from the contract amount (the desired delivery amount during the contract period) to the actual delivery amount, and related procedures will be simplified from four steps to three for faster decisions.
Through this, it is expected that the burden of litigation related to about 200 cases annually will be reduced for companies in the field, making it relatively easier for companies to recover.
The scope of stamp tax imposition will be reduced from all contracts to procurement contracts that align with the purpose of stamp tax imposition, and unreasonable cost burdens arising during procurement transactions will be reduced by significantly revising the credit rating system that burdens procurement companies. Through this, the PPS expects to reduce the stamp tax burden for about 16,000 cases annually.
Hidden inefficiencies in the procurement process and the complex and complicated work procedures will also be streamlined and simplified as part of the innovation plan. Reflecting suggestions continuously raised by field officials during meetings, the PPS plans to reduce the number of interim inspections for Multiple Award Schedule (MAS) contracts from two to one, thereby reducing the burden on about 9,000 procurement companies.
Furthermore, the ‘self-standard table’ for each company, which caused excessive document burdens on manufacturers under the direct production verification system, will be abolished, and the criteria for judging violations of direct production will be completely revamped into a negative system limited to deliveries of finished products from other companies and subcontracted production throughout the entire process.
In addition, to enable youth and startup companies to use public procurement as a ladder for growth, the limit for negotiated contracts will be significantly expanded, and in response to the spread of the private subscription economy, contract methods will be diversified to allow innovative products to be leased or subscribed.
Commissioner Im Gi-geun emphasized, “To make regulatory innovation felt on the ground, ‘speedy implementation’ is most important,” adding, “The PPS will take preemptive action on 40 of the 102 innovation tasks and is currently rushing to amend contract laws and regulations to resolve the remaining 62 tasks.”
He continued, “The PPS will make every effort to provide guidance, education, and publicity so that procurement companies on the ground can be fully informed about the progress of the innovation plan,” and said, “Going forward, with the mindset that ‘small drops wear away big rocks,’ we will discover and eliminate unreasonable regulations in the procurement field and create significant changes in the procurement environment.”
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