Court Citation Rate Reaches 90.6% Over the Past 5 Years
"Impose Fines Relative to Contract Amount and Profits"
There is an urgent need for countermeasures as most companies designated as debarred contractors (bidders restricted from participation) in procurement contracts with the government avoid sanctions through court injunction applications for suspension of execution and lawsuits.
According to data submitted by the Public Procurement Service to Ahn Do-gul, a member of the Democratic Party of Korea (Gwangju Dongnam-eul), the current "Act on Contracts to Which the State is a Party" stipulates that if a bidder or contracting party commits illegal acts during bidding, contract conclusion, or contract execution with the state or public institutions, they are defined as "debarred contractors" and are prohibited from participating in bids for a certain period.
Over the past five years (2019 to the end of August 2024), the Public Procurement Service has imposed sanctions on 1,703 cases of debarred contractors. During the same period, debarred contractors filed 527 injunction applications for suspension of execution against these sanctions in court, of which 454 were granted. The average approval rate reached 90.6%, meaning that most sanctions are avoided simply by applying.
The bigger problem is that once an injunction for suspension of execution is granted, the contractor can continue to participate in public bids until a final Supreme Court ruling is made. The average litigation period until the Supreme Court ruling was between a minimum of 1 year and 6 months and a maximum of 4 years and 2 months, averaging 2 years and 3 months. In practice, this means they can participate in bids for over two years.
The total contract amount won by debarred contractors during the suspension period through national project bids over the past five years reached 3.4885 trillion KRW: 287.6 billion KRW in 2019, 815.8 billion KRW in 2020, 955.4 billion KRW in 2021, 504.5 billion KRW in 2022, 700.4 billion KRW in 2023, and 224.8 billion KRW as of August 2024. Ten specific companies accounted for 246 contracts during the suspension period, totaling 2.2131 trillion KRW, representing 63.4% of the total.
For example, a major conglomerate-affiliated company A participated in 53 bids during the suspension period and signed contracts worth approximately 546.2 billion KRW, while major conglomerate D secured contracts worth 230.1 billion KRW from 102 bids.
Examining the detailed sanctions imposed on debarred contractors over the past five years, 732 cases received 1?3 month sanctions, 654 cases 4?6 months, 44 cases less than 7?12 months, and 71 cases 1?2 years, leading to criticism that the penalties are too lenient.
Representative Ahn stated, "Since court injunction applications for suspension of execution are abused as a means for debarred contractors to evade sanctions and thus have low effectiveness, related legal amendments or system improvements are necessary. If the injunction is confirmed as a result of litigation, in addition to the debarment sanction, imposing fines based on the contract amount, sales, or profits during the litigation period should be considered."
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