GS Engineering and Construction and HDC Hyundai Development Company are locked in a legal dispute over the selection of a contractor for a reconstruction apartment project in Gangnam, Seoul. After GS Engineering and Construction was caught having lunch with some association members ahead of the contractor selection bid, HDC Hyundai Development Company noted that the "bid is null and void from the outset," fueling controversy. HDC Hyundai Development Company is even arguing that GS Engineering and Construction's eligibility to participate in the bid should be revoked.
If this claim stands, the bid involving GS Engineering and Construction would be invalidated, and if GS Engineering and Construction's eligibility is revoked, the 60 billion won bid deposit GS Engineering and Construction paid to the association would be forfeited. Because of this, the association, GS Engineering and Construction, and HDC Hyundai Development Company each sought legal advice from multiple law firms, and the association plans to determine whether the bid conducted on 4th is valid and report the decision to Songpa District, the public administrator.
According to the maintenance and redevelopment industry on 16th, the "Songpa Hanyang 2nd" Reconstruction Maintenance Project Association, located around 151 Songpa-dong, Songpa District, is conducting a final review of whether the contractor selection bid held on 4th, in which only GS Engineering and Construction participated, was a valid bid. An association official said, "The association received advice from three law firms, will send it to Songpa District, the public administrator, and after receiving Songpa District's opinion, will determine the bid's validity through a board meeting and a delegates' meeting."
The reason the association is making a legal judgment on the bid's validity is that GS Engineering and Construction violated related rules prohibiting contact between construction companies participating in the contractor selection bid and individual association members during the bidding process. Before participating in the bid, the GS Engineering and Construction sales team had lunch with some association members at a nearby galbi restaurant, and Songpa District also confirmed this.
Seoul City's "standards for selecting contractors for publicly supported maintenance projects" stipulate restrictions (Article 10) on bid eligibility for those who have been punished for offering money, entertainment, or other property benefits, indicating an intention to provide such benefits, or promising to provide them, or whose bid or selection has been rendered null and void or canceled. Article 15 also prohibits construction company executives and employees from conducting individual promotions targeting association members.
After confirming the lunch meeting between GS Engineering and Construction and association members, Songpa District sent an official letter to the association on 4th, the day of the bid. In the letter, Songpa District requested, "Proceed with bid participation in compliance with the relevant regulations, and report the bid results." On the same day, HDC Hyundai Development Company, which had been considering participating in the bid, issued an official statement saying, "GS Engineering and Construction's individual promotional activities were detected by Songpa District Office, and we officially requested the association to review the eligibility of the company's bid qualifications, and we decided not to participate in this bid," and did not participate. HDC Hyundai Development Company formally objected, arguing that GS Engineering and Construction's bid eligibility should be revoked due to the lunch with association members.
GS Engineering and Construction paid a 60 billion won deposit to the association to participate in the bid. If its bid eligibility is revoked, the deposit will be forfeited under the relevant provisions. In that case, GS Engineering and Construction is likely to pursue a lawsuit seeking the return of the deposit.
GS Engineering and Construction and HDC Hyundai Development Company have begun legal reviews. HDC Hyundai Development Company received advice from two law firms, including Lee & Ko, and submitted an opinion to the association that GS Engineering and Construction's bid eligibility should be revoked. GS Engineering and Construction also received advice from two law firms, including KIM&CHANG, and submitted its opinion to the association. GS Engineering and Construction is said to argue, based on the Ministry of Land, Infrastructure and Transport's notice "standards for handling contract work for maintenance projects," that while individual contact violates the rules, it is not a violation sufficient to invalidate bid eligibility.
In the maintenance and redevelopment industry, the conflict between the two construction companies is an unusual case. Typically, once construction companies participate in the contractor selection bid and competitive bidding is established, and the schedule for the contractor selection general meeting is set, each company's individual promotion is prohibited. It is rare, as in this case, to challenge the bid itself as invalid over individual contact prior to bid participation and to demand forfeiture of the deposit.
Song Seung-hyeon, head of Urban and Economy, said, "This is a case of raising strong objections to the exclusion of fairness before the bid (by HDC Hyundai Development Company)."