State Contracts Act Lawyer | Advisory on bidding, awards, and contract disputes with government agencies

State Contracts Act | Bid Qualification and Restriction on Participation in Bidding

Whether a company can even submit a bid, and whether it can be barred from future bids, is often decided long before any contract dispute begins. This is one of the most consequential — and most contested — areas of practice under the Act.

Qualification screening (PQ)

Public agencies may require prequalification screening based on technical capacity, financial soundness, and past performance before accepting a bid (국가계약법 제7조). Companies are frequently excluded at this stage for reasons they dispute, such as how past performance records were calculated or how joint venture shares were counted.

Restriction on participation in bidding (입찰참가자격 제한)

If a company is found to have engaged in bid rigging, submitted false documents, or performed a contract defectively, the contracting agency can restrict that company from participating in any government bid for up to two years (국가계약법 제27조). This sanction attaches to the company (and can extend to affiliated entities) and is separate from any criminal liability, so a company can face both a criminal investigation and an administrative restriction arising from the same conduct.

Challenging the restriction

A restriction on participation in bidding is an administrative disposition, so it can be challenged through an administrative appeal or administrative litigation seeking cancellation, and a request to suspend its execution can be filed where the restriction would otherwise take effect before the case is decided. Whether the underlying facts actually meet the statutory grounds, and whether the length of the restriction was proportionate, are the two issues most often litigated.

State Contracts Act | Sanctions for Bid Rigging, False Documents, and Defective Performance

The Act builds in several layers of sanction beyond simple contract termination, and companies are often surprised to learn how they interact with each other.

Bid rigging (담합)

Coordinating bid prices or allocating winning bidders among competitors is grounds for restriction on participation in bidding under the State Contracts Act and can independently trigger a Fair Trade Commission investigation and corrective order under the Monopoly Regulation and Fair Trade Act, as well as criminal referral. The overlap means a company under review by the contracting agency should assume a parallel antitrust exposure exists.

Forfeiture of the bid/performance bond

Bid bonds and contract performance bonds submitted at the bidding and contract stages are forfeited to the State if the bidder withdraws after winning or the contractor fails to perform, without the agency needing to prove actual damages first (국가계약법 제12조, 제13조). Whether the forfeiture clause was properly triggered — and whether it can be reduced as an unreasonably excessive liquidated damages clause — is a recurring point of negotiation.

Liquidated damages for delay

Government contracts routinely set a per-day liquidated damages rate for delayed completion, calculated against the contract price. Companies should review whether delays were caused by the agency itself (design changes, late site handover) before liquidated damages are deducted, since agency-caused delay periods are generally excluded from the calculation.

State Contracts Act | Contract Formation, Changes, and Payment Disputes

Once a contract is awarded, disputes tend to cluster around whether a change order was properly requested, and whether payment for extra work was properly claimed under the contract's own procedure.

Design changes and price adjustment

When site conditions differ from the design, or the agency requires additional work, the contractor may be entitled to a contract price adjustment, but this generally requires following the agency's own change-order procedure rather than simply performing the extra work and billing for it afterward. Contractors who perform undocumented extra work often find it difficult to recover payment later.

Escalation clause (물가변동) and cost adjustment

Long-term contracts may allow for a price adjustment where a price fluctuation index moves beyond a set threshold during performance, subject to conditions on timing and the portion of the contract remaining unperformed. Missing the procedural window to request this adjustment can mean losing the right to claim it even if the underlying price movement clearly occurred.

Termination and damages

An agency may terminate the contract for the contractor's default, but termination itself does not resolve whether the default was in fact attributable to the contractor or partly to the agency's own conduct. This determination affects not only liquidated damages exposure but also whether the termination can support a follow-on restriction on participation in bidding.

State Contracts Act | From Initial Review to Resolution

State Contracts Act | How Fees Are Set

※ Costs vary depending on case complexity and specific circumstances; exact fees will be provided during consultation. No specific outcome is guaranteed.

State Contracts Act | Self-Check for Companies Contracting with Government Agencies

Frequently Asked Questions

Official References

• Korea Law Information Center — https://www.law.go.kr
• Easy-to-Find Everyday Legal Information — https://easylaw.go.kr
• Korea Legal Aid Corporation — https://www.klac.or.kr
• Ministry of Employment and Labor — https://www.moel.go.kr