Twenty-two of the 60 public procurement exceptions that allowed public institutions to apply different standards and procedures from national contract laws will be repealed or revised. The management system will also be restructured, including clarifying approval requirements for exceptions and applying a maximum three-year review period for new exceptions.
Heo Chang, the Second Vice Minister of the Ministry of Economy and Finance, discussed the overhaul of public institution contract exceptions and improvements to the management system during the fourth Procurement Policy Review Committee meeting held at the Government Seoul Building on September 22.
Revisions to Limit Competition and Protect Rights; New 3+3 Year Review for Exceptions
Public institution contract exceptions allow these entities to operate under different contract standards and procedures with the approval of the Minister of Economy and Finance. This system has been utilized to support the execution of projects tailored to the unique characteristics of public institutions and to back national policies.
A comprehensive review conducted by the Ministry of Economy and Finance in July and August revealed that a total of 60 exceptions are currently in operation. Among these, 22 exceptions that either limit competition or have become ineffective due to changes in the procurement environment, as well as those that could infringe on the rights of procurement companies due to advantageous contract conditions for issuing agencies, will be repealed or revised.
Of these, 18 will be repealed and four will be modified. One example cited for limiting competition is an exception that allows contracts with companies related to retired employees for the stable maintenance of heating and cooling systems at business locations. Other exceptions that allow contracts without estimates for consulting services in law, accounting, and taxation based on customary practices, as well as those that significantly reduce the conditions for adjusting contract amounts due to design changes or price fluctuations, are also targeted for revision due to maintaining practices and infringing on rights.
Conversely, 38 exceptions aimed at creating jobs and supporting businesses in abandoned mining areas and around nuclear power plants, enhancing the quality of public services at commercial facilities in highways and airports, and ensuring stable supply of essential public services such as electricity will be maintained.
The management system for exceptions will also change. Approval requirements will be specified based on clear needs such as performing unique agency tasks, supporting national policies, and providing public services. A review period of up to three years will be introduced for new exceptions, with the possibility of one extension.
Utilization performance of exceptions will be evaluated annually, and the approval and review processes will involve consultations with an advisory committee composed of external experts. The current status of contract exceptions will be publicly disclosed as a principle.
Expansion of Innovation Product Designation Authority to Local Governments; Streamlined Process
The system for designating innovative products will also be restructured. The innovative product system, introduced in 2020, aims to support the initial market entry of innovative companies by leveraging public demand.
This system designates products based on research and development (R&D) outcomes and technology certifications from 17 central government ministries. As of last year, a total of 3,078 products had been designated, with public procurement sales reaching 11 trillion won.
With this restructuring, the authority to designate innovative products, currently held only by central government heads, will be expanded to local governments. Initially, Seoul and Gyeonggi Province will pilot the designation of innovative products, followed by amendments to the Procurement Business Act enforcement decree to institutionalize the process.
The criteria for designating innovative products will also be revised. Products that have been designated as excellent procurement items or have a history of multiple supplier contracts will generally be excluded from new designations and extensions. A fast-track basis will also be established to exempt certain verified public, innovative, and field evaluation criteria from the innovative product assessment.
The designation extension system will be restructured from the existing two-tier system of one year for the first extension and two years for the second to a single extension system of up to three years.
This restructuring plan will be implemented sequentially after distributing standard guidelines and amending related laws.
Heo stated, "The government will continue to support the smooth entry of innovative products and technologies into the public market while boldly reforming unreasonable or outdated practices and systems in the procurement contract system."
* This article has been translated by AI.
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