It appears unlikely that the government will be able to designate Hyundai Engineering & Construction as a "disqualified contractor" over its withdrawal from the site development work for the "Gadeokdo new airport." The Ministry of Economy and Finance has again issued an authoritative interpretation indicating that, in principle, it is difficult to sanction Hyundai Engineering & Construction under the National Contract Act. However, after the ministry handed over the final decision on sanctions to the Ministry of Land, Infrastructure and Transport (MOLIT), MOLIT began last-minute discussions with the Public Procurement Service on whether to sanction Hyundai Engineering & Construction. Under the National Contract Act, disqualified contractors are barred from participating in all national contract bids for up to two years.
According to MOLIT, the Ministry of Economy and Finance and other relevant ministries on the 10th, the Ministry of Economy and Finance replied at the end of January to MOLIT's request for an authoritative interpretation under the National Contract Act to designate Hyundai Engineering & Construction as a disqualified contractor. The ministry's interpretation was reportedly similar to its first legal reading in September last year. At the time, the ministry said Hyundai Engineering & Construction had no obligation to conclude the main contract for the construction of the Gadeokdo new airport and offered a basic interpretation that it would be difficult to sanction the company as a disqualified contractor.
A government official said, "The Ministry of Economy and Finance referenced its initial interpretation and again interpreted the law to say that matters concerning the specific facts are for the law enforcement agency to judge."
Earlier, MOLIT began reviewing a plan to designate Hyundai Engineering & Construction as a disqualified contractor and restrict its participation in public bids after the company declined to take part in the site development work for the Gadeokdo new airport last year, disrupting the project. Hyundai Engineering & Construction was selected in Oct. 2024 as the preferred bidder for the Busan Gadeokdo new airport site development work but declared it would not participate after differences with the government over the construction period.
MOLIT asked the Ministry of Economy and Finance (then the Ministry of Economy and Finance) to interpret, under Article 27, paragraphs 1 and 2 of the National Contract Act, whether Hyundai Engineering & Construction falls under "a person who, without just cause, does not perform or obstructs acts related to the conclusion or performance of a contract, thereby posing a risk to the proper performance of the contract."
At the time, the ministry said, "The constructor (Hyundai Engineering & Construction) merely submitted the basic design documents as a counterparty to a private contract, and since even a preliminary contract had not been concluded, it is difficult to view the company as having an obligation to enter into the main contract as an awardee or in a position close to that," effectively responding that it would be difficult to sanction Hyundai Engineering & Construction.
Even so, the ministry added, "(This legal interpretation) is based solely on the facts provided by MOLIT," and said, "Whether there is a specific obligation to conclude a contract, whether there is just cause for not concluding a contract, and whether there was any obstruction related to contract conclusion are matters judged by comprehensively considering each case," leaving room for sanctions.
Afterward, MOLIT again asked the Ministry of Government Legislation to interpret whether Hyundai Engineering & Construction could be sanctioned. But when the Ministry of Government Legislation replied that "any sanction on Hyundai Engineering & Construction is a matter to be decided by the ministry with jurisdiction over the law after determining the facts," MOLIT once more entrusted the judgment to the Ministry of Economy and Finance.
With the second authoritative interpretation by the Ministry of Economy and Finance also indicating, in principle, that it is difficult to designate Hyundai Engineering & Construction as a disqualified contractor, it has become more burdensome for MOLIT to push ahead with sanctions.
Even so, the possibility of sanctions against Hyundai Engineering & Construction has not completely disappeared. By leaving room in this interpretation for the law enforcement agency (MOLIT) to make specific factual determinations, MOLIT has entered final discussions with the Public Procurement Service on whether to impose sanctions. However, because the Public Procurement Service has long maintained that cases not involving the conclusion of a main contract do not fall under disqualified contractor sanctions, the likelihood of sanctions against Hyundai Engineering & Construction is not seen as high. A MOLIT official said, "Following the ministry's reply on the authoritative interpretation, we are holding discussions with the Public Procurement Service on sanctions (against Hyundai Engineering & Construction)."
After Hyundai Engineering & Construction walked away from the project, a Daewoo Engineering & Construction consortium was selected as the counterparty for a private contract for the Gadeokdo new airport site development work. MOLIT extended the construction period for the Gadeokdo new airport site development work from the original 84 months to 106 months and raised the construction cost from 10.53 trillion won to 10.7175 trillion won.