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Newsletter | November 2015, Issue 3
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ENGINEERING & CONSTRUCTION DISPUTES
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Seoul Administrative Court Sets Precedent in Correcting the Wrongful Practice of the Public Procurement Service Administrator
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Recently, the Seoul Administrative Court rendered a decision that, in a case where a local government entrusts the conclusion of a contract and the construction bidding to the administrator of Public Procurement Service (“PPS”), the individual at the disposition agency1, who would have the authority to impose a sanction is the chief of the relevant local government, and not the administrator of PPS.
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Prior to the February 2009 amendment to the Act on Contracts to Which a Local Government is a Party (“Local Contracts Act”)2, the PPS held the position that when a local government entrusts the bidding and the conclusion of a contract (for the construction it orders) to the administrator of PPS, the Act on Contracts to Which the State is a Party (“State Contracts Act”) applies. And this application of the State Contracts Act thereby grants the PPS administrator the right to impose sanctions in the matter.
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The right to sanction is a right protected under public law following the imposition of an act, and this right is considered “non-transferrable,” unless there is a special regulation specifying its transfer. The PPS took the position which states that the administrator, who was only entrusted by a local government to bid and conclude a contract for the construction the government orders, can exercise the right to sanction without any explicit statement in any act. This raised some concerns about PPS’ position as being against the principle of rule of law for administrative authorities.
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On this, the Seoul Administrative Court declared that:
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| (1) |
Since the Local Contracts Act applies to this construction contract (as its bidding was notified before February 6, 2009), the chief of the local government (not the PPS administrator) holds the right to sanction; and
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| (2) |
Although the PPS administrator is the contracting party under private law, the PPS administrator has no sanctioning right unless there is a specific rule entrusting the sanctioning right under public law (by Local Contracts Law), to the PPS administrator.
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This is the first precedent to correct the wrong practice of the PPS administrator, who self-granted the sanctioning right by an arbitrary application of the State Contracts Act. The PPS administrator did so despite the existence of the relevant ministry’s authoritative interpretations, and that the chief of a local government (who is the business entity of the construction contract, and who has the actual interest of business) can now impose fair and equitable sanctions, giving full consideration to the particularities of the construction contract, and the tacit collusions.
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| 1 |
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Disposition agency is the agency that has the authority to impose a restriction on the eligibility for participating in the tendering for the construction firms’ collusion.
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| 2 |
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Act No. 9423, enacted on February 6, 2009.
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