Rising Suspicion over Preferential Treatment in Defense Procurement Process

Allegations have been raised concerning Chang Shin Textile that it received preferential treatment in the process of supplying the Defense Ministry with blankets in 2001. It has been reported that the textile company is owned by Kang Kum-won who bought a plot of land in Yongin, Gyeonggi Province from Lee Ki-myung, former head of one of the President`s support groups.

The land has been at the center of the controversial land transaction scandal involving President Roh`s older brother.

Regarding rising suspicions, reporters at the Dong-a daily newspaper gathered data from the Defense Ministry and bidders who had participated in an open bidding for teh supply of blankets to the Ministry in 2001. According to the collected data, in 2001, the textile company was selected to provide high-quality blankets to the ROK Armed Forces and supplied a total of 2.4 billion worth of blankets to the Defense Ministry in 2001 and 2002.

Sources from the relevant industry said that Chang Shin Textile became the sole provider by beating rival S company in an open bid, the first of its kind held by the Defense Ministry, in 2001. At that time, around 10 companies showed their willingness to take part in the open bid, but most gave up their willingness to do so after they saw the “qualification criteria” presented by the procurement headquarters of the Defense Ministry.

The rival S company and Chang Shin remained in the running, but S company was finally excluded in the qualification process.

In 2002, Chang Shin and W company were qualified as military blanket providers to the Defense Ministry. However, in 2003, W company decided not to take part in this year`s open bid because it received a bidding restriction order from the Ministry during the qualification process. This year`s open bid was held in April and four companies including the company in question participated as bidders. Three companies however, were eliminated in the qualification process, except for Chang Shin.

The reason for Chang Shin Textile having been selected as the blanket provider in those open biddings is that the requirements were included in the qualification criteria presented by the Ministry and some of them were high-priced equipment that other blanket makers except for Chang Shin could afford to purchase.

Meanwhile, other suspicions are being brought up that the Defense Ministry intentionally lowered the size of fines so that Chang Shin would be prevented from being eliminated from the following year`s bid after the Ministry found that blankets made by the company failed to meet the requirements of anti-static processing in 2002.

Initially, fines imposed by the Ministry on the company exceeded 102 million won, the standard that a company can be restricted from taking part in the relevant year`s open bids held by the Ministry. However, it was alleged that in a readjustment process, the fines that Chang Shin had to pay were reduced to 84,600,000 won.

Regarding rising suspicions over Chang Shin, Kang In-won, executive director of the company explained, “Our company is very proud of holding a patent on newly developed polyester blankets. We are providing blankets to the Defense Ministry to preserve our reputation. However, some are now trying to tarnish our reputation, which greatly affects the company. The company is currently considering not participating in this year`s bidding.”

Jin-Suk Huh jameshuh@donga.com