State Contracts Act Lawyer
State Contracts Act Lawyer | Advisory on bidding, awards, and contract disputes with government agencies
The Act on Contracts to Which the State Is a Party (국가를 당사자로 하는 계약에 관한 법률, commonly called the "State Contracts Act") governs how central government agencies procure goods, services, and construction works, while a parallel statute governs local government contracts (지방자치단체를 당사자로 하는 계약에 관한 법률). Because these contracts are formed and performed under public-law principles layered on top of private contract law, companies face risks — such as bid disqualification, restriction on participation in bidding, and contract termination — that do not exist in ordinary commercial dealings. This page is written for companies and individuals who bid on, negotiate, or perform government contracts and want to understand where the statutory pressure points are before a dispute happens.
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
Review of the bid documents, contract, change-order correspondence, and any notice of disposition received from the agency to identify the actual point of dispute.
Assessment of whether an administrative disposition (such as restriction on participation in bidding) is likely, and whether parallel civil, criminal, or antitrust exposure exists on the same facts.
Preparation of a response to the agency (opinion statement, request for hearing) or, where a disposition has already issued, preparation for an administrative appeal or suspension-of-execution request.
Where informal resolution is not possible, pursuing administrative litigation to cancel a disposition, or civil litigation/arbitration for unpaid contract price or damages.
For companies bidding regularly, structuring internal compliance procedures (documentation of change orders, bid-preparation records) to reduce recurring exposure.
State Contracts Act | How Fees Are Set
For ongoing advisory relationships (reviewing bid documents, contract drafts, or responding to agency inquiries), fees are typically structured as a periodic retainer scaled to the expected volume of matters.
For a specific administrative appeal, litigation, or arbitration matter, an initial fee is set based on the complexity of the dispute and the value of the contract or sanction at issue.
Where a matter involves a monetary claim (unpaid contract price, damages) or cancellation of a disposition with quantifiable value, a portion of the fee may be structured as contingent on the outcome, agreed in advance.
Costs such as filing fees, expert appraisal fees (for delay or defect claims), and document translation are billed separately as incurred.
※ 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
1️⃣ Before Submitting a Bid
- Have you confirmed your company meets the qualification (PQ) criteria stated in the tender notice?
- Have you documented how your joint venture share or subcontracting structure was calculated?
- Do you have a record of your past performance figures in case the agency disputes them?
2️⃣ If You Received a Notice of Restriction on Bidding Participation
- Have you checked the deadline for filing an administrative appeal or lawsuit against the disposition?
- Do you have documentation showing the disputed conduct did not occur, or was not attributable to your company?
- Have you considered whether a suspension-of-execution request is needed before the restriction takes effect?
3️⃣ During Contract Performance
- Are change orders and additional work requests documented in writing before the work is performed?
- Have you tracked delays separately by cause (your company's delay vs. agency-caused delay)?
- Have you checked the deadline for filing a price-adjustment request under the escalation clause?
4️⃣ At Contract Termination or Payment Dispute
- Has the agency specified the exact ground for termination, and does it match the facts?
- Have you calculated whether the liquidated damages or bond forfeiture amount matches the contract terms?
- Do you have a record of all invoices and payment requests submitted under the contract's own procedure?
