Hyundai E&C, which pulled out of the construction of the new airport on Gadeokdo, has escaped the risk of being restricted from public bidding due to designation as an unscrupulous contractor. As Hyundai E&C declined to take part in the site development work for the Gadeokdo new airport, causing setbacks to the project, the Ministry of Land, Infrastructure and Transport considered designating Hyundai E&C as an unscrupulous contractor under the State Contracts Act and restricting its participation in public tenders.
However, the Ministry of Economy and Finance, the ministry in charge of the State Contracts Act, put the brakes on the move by issuing an authoritative interpretation of the law that said Hyundai E&C has no obligation to conclude the main contract for the Gadeokdo new airport construction, making it difficult to sanction the company as an unscrupulous contractor.
According to the document "Reply to request for legal interpretation on whether sanctions are possible against unscrupulous contractors under the State Contracts Act," obtained on the 18th from the office of Rep. Oh Ki-hyung of the Strategy and Finance Committee, the Ministry of Economy and Finance conveyed to the land ministry the previous day that "it is difficult to regard Hyundai E&C as subject to sanctions as an unscrupulous contractor."
Earlier, Hyundai E&C was selected in Oct. last year as the preferred negotiation partner for the site development work of the Gadeokdo new airport in Busan. After competitive bidding failed four times, the process proceeded as a private contract. Hyundai E&C then negotiated with the government over the construction period but in May declared it would not participate, saying it could not safely complete the work within the 84 months proposed by the government. Hyundai E&C argued for a construction period of 108 months.
As the target of opening the Gadeokdo new airport in 2029 effectively fell through due to Hyundai E&C's nonparticipation, the land ministry reviewed measures to designate Hyundai E&C as an unscrupulous contractor and impose restrictions on its eligibility to bid. Minister Kim Yoon-duk said at a confirmation hearing in Jul. that "as I understand it, the land ministry has requested a legal interpretation from the Ministry of Economy and Finance, which oversees the State Contracts Act, on whether it is possible to restrict bidding eligibility for unscrupulous contractors," adding, "in accordance with the Ministry of Economy and Finance's authoritative interpretation, we will take lawful action after consulting with related agencies such as the Public Procurement Service."
At the request of the land ministry, the Ministry of Economy and Finance interpreted, under Article 27(1) and (2) of the State Contracts Act, whether Hyundai E&C falls under "a person who, without a justifiable reason, fails to perform acts related to the conclusion or performance of a contract or obstructs such acts, thereby posing a concern that the proper performance of the contract may be harmed."
As a result of the interpretation, the Ministry of Economy and Finance concluded that it is difficult to treat Hyundai E&C as subject to sanctions as an unscrupulous contractor. The ministry said, "If a party is selected as the successful bidder through competitive bidding, it can be regarded that the counterparty has an obligation to conclude the main contract," adding, "the procuring agency can expect the counterparty to agree to the contract."
At the same time, the ministry said, "In contracts by negotiation, cases such as ▲ when a preferred negotiation partner abandons negotiations ▲ when, in design-build bidding, the detailed designer abandons detailed design ▲ when the counterpart in a private contract refuses to conclude a contract during the private negotiation process, are deemed not to recognize an obligation to perform each act," adding, "accordingly, it is difficult to make (Hyundai E&C) a subject of sanctions simply because it did not conclude the contract."
The ministry went on to explain, "In this case, the contractor (Hyundai E&C) merely submitted the basic design documents as the counterparty in a private contract, and since it was before even a preliminary contract was concluded, it is difficult to view that it had an obligation to conclude the main contract as a successful bidder or in a position close to that."
The ministry also interpreted that even if Hyundai E&C had an obligation to conclude the contract, additional review is needed on whether there was a justifiable reason for not carrying out the contract conclusion. The ministry said, "It appears additional review is needed on whether the counterparty in the private contract's claim that the construction period specified in the bid notice is insufficient constitutes a justifiable reason."
However, the ministry did not completely rule out the possibility of sanctioning Hyundai E&C. The ministry said, "(This legal interpretation) is based solely on the facts provided by the land ministry," adding, "whether there is a specific obligation to conclude a contract, whether there is a justifiable reason for not concluding the contract, and whether there was any obstruction related to concluding the contract, should be determined by comprehensively considering each individual case."