The government plans to reform its procurement system to allow the purchase of national strategic technologies that succeed in research and development (R&D) competitions without requiring a separate bidding process. This initiative aims to utilize the public procurement market, valued at 238 trillion won annually, as an initial demand source for innovative technologies, thereby reducing the gap between technology development and market entry.
On the morning of August 28, at the Seoul Government Complex, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol chaired a meeting of the Emergency Economic Headquarters, which also served as a meeting for the Economic Relations Ministers and a task force for special management of living prices. During this meeting, the government announced its plan for the 'Reform of the National Contract System to Promote Innovative Technologies.'
Under the current system, even if a technology is developed through government R&D projects, public institutions must undergo a competitive bidding process to purchase the results. This separation between development, governed by the National Research and Development Innovation Act, and procurement, governed by the National Contract Act, has led to delays in the introduction of advanced technologies in rapidly evolving fields.
The government will introduce three new innovative contract tracks: development-purchase linkage, performance goal-based, and pilot exceptions, which will relax or defer the principles of competitive bidding and pre-specification in national contracts.
The development-purchase linkage track allows for the procurement of successful outcomes without re-bidding if there was substantial competition in the selection process for the R&D performing organization. Successful developers can supply their products to public institutions under pre-announced conditions without undergoing a new bidding process.
This applies to national strategic technologies as defined by law. When a relevant central ministry applies, the Ministry of Economy and Finance's Procurement Policy Review Committee will review and grant the authority to link development and procurement contracts.
During the R&D proposal stage, the government will set criteria for success, the scope and duration of purchases, and purchase limits in advance, with specific quantities and unit prices confirmed after development. The government expects that this will encourage more participation from capable private companies by providing them with a clear initial market opportunity upon successful development.
However, success in development does not guarantee a purchase. If the goals are not met, demand disappears during the development process, or superior technologies emerge rendering the results obsolete, the contracting agency can adjust or terminate the contract through its innovative contract review committee.
The existing conditional purchase R&D and innovative product systems will remain in place. While the previous system focused on securing market access for small and venture businesses, the new tracks will primarily target the early commercialization of large and complex technology projects and national strategic technologies.
For high-difficulty and high-risk projects, a 'performance goal-based competitive dialogue' method will be introduced. Contracting agencies will present performance goals instead of specific specifications and engage in discussions with bidding companies to determine the most suitable technology and contract method. This approach can apply to both goods and service contracts.
In cases where it is difficult to set a contract price in advance, contracts can be made based on estimated prices, with post-settlement possible. Payments can be divided based on the achievement of project milestones, and contract amounts can be adjusted based on performance. Adjustments to required performance and contract amounts due to technological changes, as well as joint ownership of intellectual property rights between the state and companies, will also be permitted.
For 'good faith failures' where the obligation of good faith is met but goals are not achieved due to technical limitations, some sunk costs will be recognized, and administrative sanctions will be waived. Exemptions from audits will also apply to contract officials who follow the established review procedures.
In the case of the space launch vehicle project, the Korea Aerospace Administration will present performance goals such as launch costs and transportation services, and contracts can be established through competitive dialogue with companies. Payments will be made based on milestone achievements, and contract conditions can be adjusted according to the status of technology development.
The government will also expand the procurement sandbox that temporarily relaxes existing contract regulations. The scope of exceptions, currently limited to the method of selecting successful bidders, will be broadened to include contract signing and execution, payment, and contract modifications. A pilot project will be conducted for two years with the approval of the Minister of Economy and Finance, and if effective, it will be formally incorporated into national contract regulations.
The government plans to submit a bill amending the National Contract Act, which includes the three innovative contract tracks, in September. This will be bundled with the Special Act on Fostering Innovative Enterprises for Future New Security and the Defense Advanced Power Business Act, collectively referred to as the 'Three New Security Laws,' with the goal of implementation within the year. Following the legal amendments, a support team will be established at the Public Procurement Service to identify applicable projects starting in 2027.
* This article has been translated by AI.
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