It has been revealed that construction management companies caught for bid-rigging in projects commissioned by the Korea Land and Housing Corporation (LH) have secured nearly 300 billion won worth of LH projects despite being penalized by the Fair Trade Commission (FTC) last year.

This loophole was exploited because even if companies become subject to sanctions for fair trade violations, point deductions are only applied starting the following year, and sanctions are suspended while lawsuits are underway.

According to data analyzed by Representative Huh Young of the Democratic Party of Korea from the Public Procurement Service and LH on September 30, 19 out of 20 construction management companies identified as engaging in bid rigging by the FTC on June 24 of last year won 43 construction management and design projects announced after the FTC decision.

The total contract value of these projects, reflecting joint-supply stakes, amounted to 294.1 billion won, with 98% (288 billion won) of it being construction management projects.

Under current standards, the results of FTC decisions are not reflected in bidding evaluations for the current year and are only applied starting from announcements made the following year.

Consequently, the 20 companies penalized with point deductions for collusion last year faced no restrictions on winning projects last year, but became subject to point deductions in public bidding starting this year.

However, out of the 20 companies judged to have engaged in collusion, 15 filed lawsuits against the FTC penalties, effectively bypassing the sanctions.

This is due to the time lag where FTC penalties are postponed until a final ruling is made when lawsuits are underway.

An analysis of data submitted by the Public Procurement Service to Representative Huh Young showed that among these companies found guilty of collusion, 11 secured 17 construction management projects commissioned by LH this year. Excluding one project won by Company A, which was exempt from FTC sanctions, and one project won by Company B, which did not file a lawsuit, 15 projects were confirmed to have evaded point deduction sanctions through litigation.

In monetary terms, out of approximately 82.14 billion won in project values subject to point deductions, about 70.92 billion won, or 86.3%, was contracted without any point deduction penalties.

In the actual 'Goyang Changneung S-3 Block and S-4 Block Construction Management Services' announced this year, Company C, which did not file a separate lawsuit against the FTC penalty, received a 0.2-point deduction. In contrast, Company D, which was subject to a 0.3-point deduction, filed a related lawsuit and avoided the penalty.

Compensation for damages resulting from bid rigging has not been recovered by the payment deadline either.

The damages calculated by LH for this collusion case amount to approximately 35.6 billion won. Reflecting joint and several liability, LH claimed a total of 87.58468 billion won from the 20 companies involved in the collusion.

However, as the payment deadline of August 21 passed, the amount remains entirely unpaid.

Under current standards, if the payment deadline is exceeded, delay interest is calculated using the average lending rate of financial institutions for the month in which the delay occurs, and LH can deduct it preferentially from other payments it owes to the companies.

Consequently, voices are pointing out systemic loopholes, such as lenient penalties for entities subject to punishment for collusion and other offenses.

Representative Huh Young stated, "The problematic cycle persists where FTC decisions are not reflected in the current year's bidding evaluations, and even after becoming subject to point deductions the following year, companies file lawsuits to postpone enforcement until a final ruling. While the legitimate right of companies to seek relief must be fully guaranteed, we must examine the effectiveness of the system to see if the timing and method of reflecting FTC collusion sanctions in actual bidding evaluations are appropriate."

(Photo: Provided by LH, Yonhap News)