Hello, this is Attorney Park Jong-han from Cheongchul Law Firm.

The issue may arise whether those who have not participated in a competitive bidding and those who have entered into a performance guarantee contract instead of the main contract are included in the restrictions on bidding eligibility. Let's take a look at the Supreme Court ruling on this matter.

[Question]

Whether those who have 'not participated in the bidding' and 'performance guarantors' are included in the restrictions on bidding eligibility.

[Answer]

Article 27, paragraph 1 of the Act on Contracts to which the State is a Party (hereinafter referred to as the "State Contract Act") restricts the bidding eligibility of dishonest contractors and delegates specific matters to the Enforcement Decree of the same law under Article 76. Accordingly, Article 76, paragraph 2, sub-paragraph 2 of the Enforcement Decree of the State Contract Act defines those who have not entered into or performed a contract without justifiable reasons, while sub-paragraph 7 of the same article and paragraph defines those who have colluded for the successful bid of a specific individual as its target.

Regarding Article 76, paragraph 2, sub-paragraph 7 of the State Contract Act, it is reasonable to interpret the provision's 'Those who have colluded for the successful bid of a specific individual' as referring to those who have participated in the relevant competitive bidding and colluded with the purpose of ensuring that a specific individual wins the bid, and collusion that hinders the very formation of the competitive bidding by not participating in the bidding cannot be considered as corresponding to the aforementioned 'Contractor or Bidder' even if it is intended to lead to a negotiated contract by having the competitive bidding fail (see the Supreme Court ruling of February 28, 2008, 2007Du13791).

Therefore, even if collusion occurred, those who did not participate in the bidding are not subject to restrictions.

Regarding Article 76, paragraph 2, sub-paragraph 2 of the State Contract Act, the term 'Contractor' refers to the counterparty to the contract, meaning that the contract includes not only the contract entered into by the main contractor but also the performance guarantee contract entered into for the main contractor (see the Supreme Court ruling of May 23, 2013, 2011Du19666). Considering the entire execution of the contract, the performance guarantee is regarded as an element for the execution of the contract, thus the performance guarantee contractor can also be seen as a direct contractual party in public contracts.

Therefore, the performance guarantor of the bidding contract is also included among the contracting parties, so it must be noted that if the execution of the contract does not proceed smoothly, there may also be restrictions on bidding eligibility.

We have briefly examined whether those who have 'not participated in the bidding' and 'performance guarantee contracts' are included in the restrictions on bidding eligibility. In cases of disputes related to national contracts and public procurement, the related laws are very complex and subject to frequent amendments, so it is necessary to be knowledgeable about and have experience in this area, as well as to be well aware of not only court rulings but also the administrative interpretations and disposition cases. Therefore, it is recommended to seek the assistance of an attorney with expertise in national contract laws and experience in resolving disputes related to national contracts and procurement.

Cheongchul Law Firm consists solely of attorneys from Korea's top four law firms: Kim & Chang, Lee & Ko, Bae, Kim & Lee, and Sejong, and responds with a team of specialized attorneys in the relevant fields rather than a single attorney for each case. Cheongchul provides comprehensive solutions beyond merely resolving specific issues, ultimately focusing on achieving what the client desires. If you need assistance in achieving your goals, please do not hesitate to contact Cheongchul.