Hello. This is Attorney Lee Young-kyung from Cheongchul Law Firm.
Today, I will provide detailed information about the estimated price for public institution and enterprise bidding officials.
[Question]
What does the term 'estimated price' mean in bidding, and what are the comparative concepts?
[Answer]
Concept and Legal Basis of Estimated Price
The estimated price refers to the price that is prepared and retained in advance as a basis for determining the winning bidder and the contract amount before the bidding or contract signing (Article 8-2 of the National Contract Act, Article 2 of the Enforcement Ordinance of the Local Contract Act).
Distinction Between Estimated Price, Estimated Amount, and Budget Price
The main price concepts used in public contracts are as follows:
Category | Concept | Value Added Tax | Cost of Government-Supplied Materials | Main Uses |
Estimated Price | Net price of the contract object | Excluding | Excluding | Whether it is subject to international bidding, determination of contract method, etc. |
Budget Price | Total amount received by the contractor | Including | Excluding | Determination of winning bidder, calculation of contract amount |
Estimated Amount | Total cost to be incurred for the project | Including | Including | Assessment of construction capacity, judgment of cost examination target, etc. |
Comparison of Key Concepts Related to Estimated Price
Category | Concept | Prepared By | Characteristics |
Estimated Price | Price based on the amounts included in the budget | Contract officer | - Excluding value added tax and government-supplied material costs - - Used to determine eligibility for international bidding and contract methods, etc. |
Design Price | Price written according to the design document based on transaction price or cost calculation | Technical or design officer | - Used as basic data for preparing the estimated price |
Survey Price | Price prepared by investigating direct market prices | Contract officer | - Used as basic data for preparing the estimated price |
Base Amount | Price written after reviewing the appropriateness of the design price or survey price | Contract officer | - Disclosed to bidding participants - Basis for preparing multiple estimated prices |
Multiple Estimated Prices | 15 prices within ±3% range of the base amount | Contract officer | - Basis for determining the budget price - Purpose of ensuring fairness of the estimated price |
In this regard, there is the following legal interpretation:
"When a national agency directly purchases and supplies some materials for construction contracts, the determination of whether the materials supplied for each construction project within the fiscal year are subject to Article 7-3 of the Enforcement Ordinance of the National Contract Act as 'individual procurement demands' must be made for each construction project, not based on the types of materials." (Ministry of Strategy and Finance Inquiry Response, Issue 45107-274, '97.2.10.)
4. Procedure for Preparing Estimated Price
The procedure for preparing the estimated price is as follows:
Step | Content |
1. Preparation of Estimated Price | Calculated based on amounts reflected in the budget, excluding costs of government-supplied materials |
2. Preparation of Design Price or Survey Price | Prepared according to the design document by a technical or design officer or directly surveyed by a contract officer |
3. Preparation and Disclosure of Base Amount | Prepared after reviewing the appropriateness of the design price or survey price, then disclosed |
4. Preparation of Multiple Estimated Prices | 15 different estimated prices prepared within ±3% range of the base amount |
5. Determination of Budget Price | Selection of 4 participants from bidders to draw 4 from the multiple estimated prices, the arithmetic average of which is confirmed as the budget price |
5. Exceptions in Preparing Budget Price
In cases of lump-sum bidding, basic design technical proposal bidding, and cost estimation contracts, an estimated price is not prepared; in cases of contracts by negotiation with national agencies and local governments, or small contracts, the preparation of the estimated price may be omitted.
In conclusion, we have looked into the concept of estimated price and related terms, as well as the preparation procedure. In the next posting, we will take a closer look at the specific methods for preparing the estimated price and precautions.
Cheongchul Law Firm has extensive experience and expertise in cases related to bidding, public procurement, and restrictions on bidding qualifications (penalties for unfair bidders). If you are contemplating a case related to this, please feel free to contact us.
Cheongchul Law Firm will be a reliable legal partner for you. If you need to consult with a lawyer, please contact us right away.
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