[Contract Types Based on Competition Types and Presence] – (1) Limited Competitive Bidding Contract – Performance Limit

Hello, I am Attorney Lee Young-kyung from Cheongchul Law Firm.

Today, I am presenting the first session explaining 'limited competitive bidding contracts' to the contract managers of national, local governments, and public institutions, as well as the practitioners participating in the bidding.

[Question]

What is a limited competitive bidding contract? Please inform us about the subjects and limitations, particularly the performance and capability restrictions.

[Answer]

1. What is a Limited Competitive Contract?

A limited competitive contract is a contract method that conducts competitive bidding by restricting the qualifications of bidding participants. According to Article 7 of the National Contract Act and Article 9 of the Local Contract Act, when necessary based on the purpose and nature of the contract, the qualifications for bidding participants can be limited based on certain criteria such as performance and technical possession status, and bids can be conducted, allowing for a contract to be executed with the successful bidder.

However, it is not applicable to all bids and is only possible when it meets the requirements set forth in the relevant regulations of the National and Local Contract Acts.

2. Subjects and Limitation Requirements of Limited Competitive Contracts

The subjects of limited competitive contracts are defined in Articles 21 and 22 of the Enforcement Decree of the National Contract Act and Articles 20 and 21 of the Enforcement Decree of the Local Contract Act. The main content includes 1) performance and capability limitations, 2) regional restrictions, 3) limitations for small and medium enterprises, and 4) limitations on financial status, among others.

Today, we will take a closer look at the performance and capability limitations.

3. Performance and Capability Limitations

a. Limitations on Construction Contracts Exceeding a Certain Amount

Construction projects with an estimated price of 3 billion won or more (excluding specialized construction) and specialized construction projects with an estimated price of 300 million won or more and other construction projects can restrict the eligibility of bidding participants based on their construction capability or the performance in projects of the same type as the applicable construction.

Here, "performance" refers to the amount or scale of a single past construction, manufacturing, or service achievement (this includes total achievements in long-term continuous construction, manufacturing, or services) that is substantially identical to the contract intended for bidding or is recognized as capable of achieving the contract's purpose.

According to authoritative interpretation, if a contract partner has subcontracted, the performance of both the contract partner and the subcontractor must be recognized based on the actual work completed, respectively. However, performances of illegal subcontracting contracts that violate the relevant laws and regulations on construction are not recognized. (Ministry of Economy and Finance Accounting Department-2348, '06.10.19.)

b. Construction Contracts Requiring Special Techniques or Methods

The types of construction that require special techniques or methods are defined in Article 4 of the