Hello, this is Attorney Park Jong-han from the law firm Cheongchul.

Among the types of construction contracts, the method where the contractor drafts the design documents for the construction object desired by the principal and carries out the construction themselves based on that is called the Turn-Key Base method.

In the Turn-Key Base method, the contractor first prepares the design documents to participate in the bidding, and according to the national contract law, if they bid with the prepared design documents but are not selected as the successful bidder, there is a provision for partially compensating the design costs for those who were not selected.

However, if the selected contractor and the non-selected contractor engaged in collusion, it is necessary to examine what happens to the design compensation costs paid to the non-selected contractor.

[Question]

Whether there is an obligation to return the design compensation cost of colluding firms in a lump-sum bidding contract (turnkey construction)

[Answer]

A contract based on the Turn-Key Base method means that the contractor understands the installation purpose of the construction object desired by the principal, prepares the design documents suitable for that purpose, and carries out the construction themselves while guaranteeing its performance, ultimately achieving the construction purpose desired by the principal (refer to the Supreme Court ruling on August 23, 1996, ruling 96Da16650).

In the case of Turn-Key Bidding, the contractor first prepares the necessary design and construction documents according to the basic plan and guidelines for the lump-sum bidding presented by the principal, participates in the bidding, and after being selected as the successful bidder, estimates the costs necessary for the completion of the construction based on the design documents they prepared, and then carries out the construction at their own responsibility and risk.

Regarding the bidding method related to the preparation and submission of design documents, Article 89 of the National Contract Act Enforcement Decree provides compensation for design costs. The main legislative intent of the design cost compensation regulations is to enhance the fairness and public nature of national contract matters by increasing the number of participants in public construction bidding through their genuine competition.

It should be found that there is no reason to compensate the amount of design cost in advance for those who have engaged in acts that limit competition, such as colluding, and if it is later revealed that design compensation was paid to someone who cannot be a legitimate compensation recipient, then the return of the design compensation fee based on that is also consistent with the legislative intent of the design cost compensation regulations.

Therefore, since the joint conduct that qualifies as a reason for invalidating the bid has been revealed afterward, regardless of the validity of the bid, the state can seek the return of the design compensation fee from those involved in the collusion (refer to the Supreme Court ruling on August 29, 2019, ruling 2017Da276679).

As such, we briefly examined whether there is an obligation to return the design compensation fee of colluding firms in a lump-sum bidding contract (turnkey construction). In disputes related to national contracts and public procurement, the relevant laws are very complex, and there are frequent amendments, so familiarity and experience in this area are necessary, and one must also be well-versed in the court's rulings as well as administrative interpretations and disposition cases. Therefore, it is strongly recommended that you seek the assistance of Attorney Park Jong-han, who has expertise in national contract law and experience in resolving various disputes in national contracts and procurements.

The law firm Cheongchul consists only of lawyers from large law firms such as Kim & Chang, Gwangjang, Taepyungyang, Sejong, and Yulchon, as well as legal teams from major corporations, and instead of relying on a single lawyer, a team of specialized attorneys in the relevant fields related to the case is formed to respond. Cheongchul provides legal consulting focused on achieving the clients' goals by offering comprehensive solutions across entire projects, going beyond merely resolving specific issues. If you need assistance in achieving your goals, please do not hesitate to contact Cheongchul.