It has been revealed that companies sanctioned by the Fair Trade Commission for bid-rigging in public housing construction project management (CM) contracts have secured construction projects worth nearly 300 billion won even after the decision was made. Not a single won of the 87.5 billion won in damages claimed by the Korea Land and Housing Corporation (LH) from these companies has been recovered, even after the payment deadline has passed.
According to an analysis of data received on September 30 from the Public Procurement Service and LH by Rep. Heo Young of the Democratic Party of Korea, a member of the National Assembly’s Land, Infrastructure, and Transport Committee, 19 of the 20 companies for which the Fair Trade Commission confirmed bid-rigging on June 24 of last year were awarded 43 newly announced CM and design projects following the commission’s ruling. The total contract value, reflecting the joint venture share ratios, was approximately 294.1 billion won, of which 98 percent—about 288 billion won—was for CM projects.
By company, Muyeong CM Architects secured 13 CM projects following the ruling, including Goyang Changneung, Yangsan Sasong, Incheon Gyeyang, and Seongnam Bokjeong 2. Samwoo CM Architects also secured 13 projects, including Goyang Changneung S-3BL and S-4BL (approximately 11.2 billion won) and the Bucheon Sports Complex Station Area (approximately 8.7 billion won).
Under current regulations, sanctions imposed by the Fair Trade Commission are not reflected in the bid evaluations for the year in which the decision is made; instead, penalty points are applied starting with projects announced the following year. However, if litigation regarding the sanction is still ongoing the following year, the application of the penalty is postponed again until a final judgment is rendered. Of the 20 companies involved in the bid-rigging case, 15 are currently challenging the FTC’s sanctions in court.
According to data from the Public Procurement Service, among the projects newly announced this year, the 11 companies implicated in the bid-rigging scandal secured 18 contracts (17 construction management contracts and 1 design contract), including those awarded through joint ventures. Of these, 16 contracts—excluding one company that was exempted from sanctions by a Fair Trade Commission resolution and one that did not file a lawsuit—were awarded without penalty points due to the pending litigation. In terms of value, approximately 70.92 billion won—86.3% of the total contract value subject to point deductions (approximately 82.14 billion won)—was awarded without any point deductions.
In fact, for the Goyang Changneung S-3BL and S-4BL construction project management services announced in January of this year, a 0.2-point deduction was applied to a company that did not file a lawsuit, while another company—which would have been subject to a 0.3-point deduction—avoided the penalty on the grounds that it was involved in litigation.
Damages awards have also remained unchanged. LH calculated the damages resulting from this collusion at approximately 35.6 billion won and, reflecting joint and several liability, claimed a total of 87.58468 billion won from the 20 companies. The amounts claimed from each firm were as follows: KDN Engineering & Architects (approximately 9.8 billion won), Tomun Engineering & Architects (approximately 9.6 billion won), and Muyeong CM Architects (approximately 9.5 billion won). However, as of the payment deadline of August 21, the full amounts remain unpaid.
Under current regulations, if the payment deadline is missed, late interest is charged at the average loan interest rate, and LH is permitted to deduct the amount first from other payments it is due to make. However, in response to an inquiry from Rep. Heo’s office regarding follow-up measures, LH replied, “No follow-up actions, such as payment demands, have been taken, and we are currently reviewing the possibility of filing a lawsuit for damages.”
Representative Heo Young stated, “Even if the Fair Trade Commission issues a ruling, it is not reflected in the bidding evaluation for the current year; and even after the company becomes subject to point deductions the following year, if litigation continues, the application of the ruling is postponed until a final judgment is issued,” adding “While we must fully guarantee contractors’ legitimate rights to redress, we must assess the effectiveness of the system to determine whether the timing and method by which the Fair Trade Commission’s sanctions for collusion are reflected in actual bid evaluations are appropriate.” He continued, “Since not a single penny of the damages claimed by LH has been recovered by the payment deadline, we must review the entire post-enforcement management system to ensure that the detection of collusion leads to actual sanctions and the recovery of damages.”
