Korea Railroad Corporation (KORAIL) filed a fraud complaint against railcar manufacturer Dawonsys, which caused a delay in train deliveries, and decided to terminate some train purchase contracts. This is a follow-up step by KORAIL after President Lee Jae-myung publicly rebuked the company by saying it "seems government agencies were defrauded."
Acting President Jung Jeong-rae of KORAIL said at a Ministry of Land, Infrastructure and Transport-affiliated agencies' briefing held at the Government Complex Sejong on the 14th, "We take seriously the criticisms raised over the Dawonsys ITX-Maum delivery delays," adding, "Along with a fraud complaint, we are moving to terminate the contracts."
Earlier, on the 12th at a Ministry of Land, Infrastructure and Transport (MOLIT) briefing, President Lee mentioned Dawonsys' delivery delays, said it "seems government agencies were defrauded," and strongly criticized the practice of excessive advance payments in public procurement projects.
KORAIL is moving to terminate the contract for 116 ITX-Maum (EMU-150) cars (242.9 billion won) signed in Apr. 2024. To that end, it launched a "contract termination and expedited delivery task force (TF)" and filed a fraud complaint against Dawonsys.
The delivery delays have accumulated over a long period. Of the 358 cars under the first and second contracts signed since 2018, about 61% have yet to be delivered, and there are growing concerns about further delays for the third contract as preliminary design for car production has not been carried out.
While prioritizing a negotiated termination with Dawonsys, KORAIL is also preparing for the possibility of a forced termination by seeking legal advice from 10 law firms. It also plans to operate a dedicated TF of 34 people by adding 13 internal and external accountants to strengthen checks on the use of advance payments and on-site inspections of the delivery process.
It will also push institutional reforms to prevent a recurrence. For train purchases, it will lower the advance payment ratio to the minimum level of 30% and revise the contract structure to pay according to production progress. It will also prepare measures to block revolving-door favoritism for KORAIL retirees.
On the same day, Minister Kim Yun-duk of the Ministry of Land, Infrastructure and Transport also rebuked KORAIL, saying, "In the project to replace old trains, you could have taken sufficient action midway but failed to do so," and added, "You should recognize that you need to apologize to the public."
Acting President Jung said, "We deeply reflect on how delivery delays slowed the rollout of new train services and heightened safety concerns," and added, "We will work with the Ministry of Land, Infrastructure and Transport (MOLIT) to minimize inconvenience to the public."