Are you curious about public procurement from around the world? What does it look like? How does it differ from Australia and New Zealand? Gary Mander, Senior Manager of Supply Chain & Operations, Public Procurement Advisory at EY, dives right in with this global series. This week, he’s exploring South Korea. Where will he visit next?
Scale of public procurement in South Korea
The national public procurement market in South Korea is estimated to be in the region of ₩140T KRW (approx. $160 billion). In 2023, this equated to 14.5 percent of GDP (compared with the OECD average of 12.9 percent).
The law
Public procurement in South Korea is governed under the 2018 ‘Act on Contracts to which the State is a Party‘ and the 2021 ‘Enforcement Decree of the Act on Contracts to which the State is a Party’.
Types of procedure
There are four main types of procurement process available:
- Open tender (which is by far the most widely used)
- Limited open tender
- Selective tender
- No-bid procedure
Where qualification conditions are necessary to participate in a tender process, the following may be considered (Article 12):
- Performance records
- Technical capacity
- Financial position
- Social reputation
- Level of fidelity to the performance of the contract
Thresholds
- For goods and services, a procurement process is not required below ₩20M KRW (approx. $23,000)
- There is a special exclusion for contracts that relate to academic research, specialist services and construction technology, which has a higher threshold of ₩50M KRW (approx. $57,000)
- For works, the threshold increases to ₩200M KRW (approx. $231,000).
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All public procurement tender opportunities are published centrally on KONEPS (Korea ON-line E-Procurement System), which is operated by the Public Procurement Service (PPS).
The PPS publishes monthly ‘Procurement Business Statistics’ which can be downloaded, and which contain a high level of granular detail about the types of enterprises who were awarded contracts (e.g. large, SME, social, etc.), as well as breaking down the amount of money spent and the procedure type it was spent under by sector (e.g. local government, central government, etc.)
Interesting nuances
Variant offers can only be generally submitted for construction contracts higher than ₩30B KRW (approx. $34,000,000).
Technology and digital procurement
The PPS operates the ‘e-Ordering System’, which is an online platform for proposal evaluating and writing RFP. The system has improved productivity by providing AI-based RFP writing and diagnosis tools (which are quite clever).
In addition to this, the KONEPS provides a single window for public procurement (i.e. e-Bidding, e-Contracting, online shopping mall and e-Payment).
Sustainable public procurement
In 2011, South Korea introduced the ‘Act on the Promotion of Purchase of Green Products’ which, amongst other things, places obligations on public procurement to adhere to a number of mandatory requirements.
Reciprocal access
South Korea has been signatory to the WTO GPA since 1997, and their obligation covers most goods and services, with some exclusions (e.g. certain telecommunications and R&D services).
Follow Gary Mander for more global procurement insights, and stay tuned to the Insider for next week’s destination.
