KOTRA has opened the public software procurement market, traditionally dominated by small and medium-sized enterprises (SMEs), to large corporations. The initiative centers around a 21 billion won ($16 million) project to establish an AI trade investment platform. With major system integrators like Samsung SDS expected to participate in the bidding, concerns are rising that the government software market is shifting from SMEs to large firms due to advancements in artificial intelligence (AI).
According to the IT industry, KOTRA published a request for proposals (RFP) for the "KOTRA Intelligent Trade Investment Platform Construction" project on May 15. The total project cost is 21 billion won, with a duration of 30 months, aimed at integrating 11 currently dispersed systems, including Trade Investment 24, Buy Korea, and Invest Korea, and introducing customer data platforms (generative AI, LLM, RAG, CDP). The deadline for proposals is July 7.
The core of the controversy lies in the allowance for large corporations to participate. Under Article 48 of the Software Promotion Act and a Ministry of Science and ICT announcement, large firms with sales exceeding 800 billion won can only engage in projects worth over 8 billion won, while those below that threshold can only participate in projects over 4 billion won. Companies within the inter-affiliated company group, such as Samsung SDS, are generally prohibited from bidding regardless of project size, unless the project is deemed unsuitable for private sector service due to national security concerns.
Previously, KOTRA's individual system construction and operation projects, such as Trade Investment 24 and Buy Korea, did not meet the minimum size for large firm participation, allowing SMEs to dominate this space. However, by increasing the project budget to 21 billion won and classifying it as a "private sector unsuitable project," KOTRA has created an opportunity for both general and inter-affiliated large corporations to bid.
A KOTRA official stated, "This is a large and complex project that integrates existing systems and introduces AI, so pursuing a designation for security from the Ministry of Science and ICT was an unavoidable choice. It is not intended to benefit any specific group, but simply opens the door for large firms as the project size increases."
The budget structure is also a point of contention. Of the total project budget of 21 billion won, 3.9 billion won is planned for this year, while the remaining 17.2 billion won (approximately 82%) is allocated for the 2027-2028 budget, which has not yet received approval from the Ministry of Economy and Finance, and is being issued as a single contract for three years.
KOTRA maintains that it has submitted the budget to the Ministry of Economy and Finance and believes there are no issues with the project size assessment, despite awaiting approval.
The symbolic significance of this project is substantial. By bundling individual projects under the guise of integration and AI introduction, a precedent may be set that effectively circumvents restrictions on large firm participation. If this approach spreads to other public institutions, it could undermine the foundation of the public procurement market that SMEs have maintained.
An official from a mid-sized IT company expressed concern, stating, "The expertise and investments that dozens of SMEs have built up over the years for government contracts are now at risk of being transferred to large corporations. If the market is handed over to large firms under the pretext of AI introduction and system integration, there will be no IT companies left in the country."
* This article has been translated by AI.
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