September 2012

Da-un, Jeong Deputy director, Public Contract and Procurement Policy Division

Ministry of Strategy and Finance, the Republic of Korea

Coverage

1. Authorities Responsible for Public Procurement

2. Regulatory Framework

3. Liberalization of Government Procurement Market

4. Public Procurement Service

5. Volume of Korean Government Procurement Market

6. G.P. Process overview

7. Merits and Demerits of Centralized Procurement

Legal and regulatory framework for central government procurement

Ministry of Strategy and Finance (MOSF)

Executive agency under MOSF

Public Procurement Service (PPS)

Oversees public procurement policies and strategies

Procures goods, services and construction works for central government entities

Legal and regulatory framework for local government procurement

Ministry of Public Administration and Security (MOPAS)

Provides procurement services for local government entities and public enterprises upon request

Legislation of Korean Government Procurement

Act on Procurement to Which the State is a Party

• Guideline on bidding and contracting for the

central government : method of contracting and

awarding

Act on Procurement to Which a Local Government is a Party

• Guideline on bidding and contracting for local

governments

Act on the Management of Government-invested

Institutions

• Guideline on bidding and contracting for public

enterprises and other government-invested orgs.

Public Procurement Act • Mandates the establishment of central

government procurement agency (PPS) and its

responsibilities

Act relating to the Contract to which the State is a Party

Presidential Decree of Act relating to the Contract

to which the State is a Party

Enforcement rule of Act relating to the Contract

to which the State is a Party

「Special Decree of Act and Special enforcement rule of Act relating to the specific contract to which the State is a party」for International Bidding

Acceded to the 1994 Government Procurement

Agreement (GPA) under the WTO

Bilateral Free Trade Agreement

- Korea- Chile FTA , Korea-Singapore FTA, Korea-US FTA,

Korea-EU FTA, Korea-Peru FTA, Korea-EFTA FTA etc.

Category Thresholds of Central Government

Goods 130,000 SDR

(≒ US$ 2,200,000)

Services 130,000 SDR

(≒ US$ 2,200,000 )

Construction Contracts 5,000,000 SDR

(≒ US$ 8,500,000)

l Buys goods and services

l Contracts for construction services

l Stockpiles raw materials such as aluminum, copper, etc.

l Manages government-owned properties

l Operates Korea on-line e-Procurement System (KONEPS)

- - Foreign aid materials management

Established as Office of Foreign Supply (1949)

History

Developed into central government procurement agency

- Became responsible for domestic and foreign procurement, and contracting for public construction projects (1961)

- Management of government-owned goods (1971)

- - Procurement of goods and services from abroad

- Operation of the government e-Procurement system (2002)

Organization

Administrator

Deputy Administrator

Audit and Inspection Officer General Services Division

Office of Planning & Coordination

e-Procurement Service Bureau

International Goods Bureau

Procurement Service Bureau

Construction Works Bureau

Quality Management Office

11 Regional Offices Overseas Procurement Attachés in

Chicago, London, Beijing

Vice-ministerial level organization

945 Staff

Combination of Centralized and Decentralized Procurement

Central government entities

Construction Works

Above US$ 100,000

Above US$ 3,000,000

Goods & Services

- Centralized procurement

Local government entities and public enterprises

- Decentralized (autonomous) procurement

- Legally required to procure through Public Procurement Service (central procurement agency) for requirements above threshold

[ thresholds for centralized procurement]

Centralized

33%

Decentralized

67%

- Centralized : US$ 33 billion

- Decentralized : US$ 67 billion

Public Procurement Total (2011) : US$ 100 billion (10% of GDP)

PPS recovers its operational costs from procurement service fees from

public entities

PPS

Public

Entities Suppliers

• Contracting

• Payment

Supply of Goods

& Services

• Procurement Request

• Payment

Reimbursement

• Procurement Service

Fee

Operation

PPS offers its procurement services upon receiving procurement requests

Procurement Workflow (Goods & Services)

PPS

Public Buyer

2. Public disclosure of PR Details

3. Review of Requirements

4. Determining Procurement Method

5. Tender Notice

6. Preparation of Estimated Value

7. Bid Evaluation and Awarding

13. Contract Closure

1. Purchase Request (PR)

Contractor

12. Reimbursement 11. Payment

9. Contract Delivery

8. Notification of Contract

10. Inspection

Determining the most suitable contract and award method, considering the

purpose, characteristics and size of the contract.

Limited

Tendering Selective

Tendering Single

Tendering

LOW

Competitiveness

HIGH

Open

Tendering

l Tendering Methods

l Awarding Methods

Lowest Price

Awarding

Qualification

Evaluation

Contract by

Negotiation

Local gov’t

Gov’t Corp

Educational

institute

Independent org

Central

gov’t

Services

Construction

Goods

Foreign Procurement

User of PPS’s Procurement Services

Merits Demerits

Centralized

Procurement

• Volume purchasing

• Accumulated know-

how

• Closer monitoring for

transparency

• Effectively utilizes

GP as economic

policy tool

• Complex and longer

procurement process

• Limited choice for the

procuring entity

Decentralized

Procurement

• Freer choices for the

procuring entity

• Urgent procurement

• Tend to be more

expensive

• Difficulties in

standardization and

quality monitoring

• Loose monitoring –

risk of moral hazard

Complemented with

e-Procurement:

• Reduced lead time

via e-Processing

• Convenient

e-Ordering for

commercial goods

Da-un, Jeong

e-mail: leina@mosf.go.kr