Government Procurement

The head of a demanding agency must, as a general rule, request the Administrator of the Public Procurement Service to enter into a contract when concluding a contract for goods or construction above a certain amount.

The Administrator supplies goods to demanding agencies through methods such as unit-price contracts for the benefit of third parties and multiple award schedule (MAS) contracts.

A company therefore needs to first understand how it can take part within this contract structure.

A multiple award schedule contract is a method under which two or more parties are designated as contractors for goods of the same or similar quality and performance, allowing the demanding agency to choose among them.

Under this arrangement, the contractor is obligated to keep its contract price at or below the market transaction price.

If a contractor breaches this obligation without justification, the Administrator of the Public Procurement Service may deduct the difference from the contract amount out of the delivery payment or claim it directly from the contractor.

A delivering company must not engage in the unfair procurement practices listed below.

When a delivering company's unfair procurement conduct is confirmed, the Administrator of the Public Procurement Service may issue a corrective order and recover the gains obtained from the violation.

Beyond that, a suspension of transactions may be imposed as shown below, which results in exclusion from all contracts with the Public Procurement Service.

The Administrator of the Public Procurement Service holds broad quality control authority, including confirming whether a manufacturer directly produces goods, conducting delivery inspections, and overseeing after-delivery quality control.

Accordingly, a delivering company must cooperate in good faith with quality checks and delivery inspections, and refusing or obstructing them subjects the company to an administrative fine.

Quality control obligations are heightened in particular for items designated as safety-management goods, meaning goods related to public safety in daily life, the protection of life, and health and hygiene.

Designation as excellent procurement goods is a system that strengthens the competitiveness of small and medium-sized and mid-cap enterprises in entering the public market, but it also carries strict obligations to maintain that status.

If a company falls short of the initial designation standards or obtained the designation by false or improper means, the designation may be suspended or revoked, and because this is treated as an unfair procurement practice, it can even lead to recovery of gains.

To deliver to the Public Procurement Service, there is a requirement that the company directly produce the goods in question.

Delivering goods manufactured through subcontracting or outsourcing as if they had been directly produced results in sanctions for an unfair procurement practice.

When the Public Procurement Service contract price differs from the price actually supplied in the market, it constitutes a breach of contract.

In particular, selling at a discount on online shopping malls while keeping the procurement price high makes the company subject to a claim for deduction of the difference.

In competitive bidding among joint supply groups, coordinating prices in advance or cooperating to secure a particular company's award is treated as bid rigging, leading to cancellation of the award, rescission of the contract, and restriction on bidding eligibility.

Informal coordination carried out as an industry custom is no exception.

The Administrator of the Public Procurement Service may require a contractor to submit data or visit the business site to conduct an investigation into unfair procurement practices.

Failing to submit data or submitting false data subjects the company to an administrative fine of up to 10 million won (effective September 11, 2026).