Blanket Purchase and Private Contract System to be Maintained for One to Two Years

The government has decided to maintain the blanket purchase and private contract system in public institutions for one to two years, reversing its initial plan to abolish the system from as early as the end of this year. Government institutions make blanket purchases of certain items through a private contract with the Korea Federation of Small and Medium Business.

Director of the Bureau of Corporate Growth Support Lee Ki-woo at the Small and Medium Business Administration (SMBA) said in a telephone interview with this paper yesterday that “as the Uri Party decided to consider postponing the abolishment of the blanket purchase and private contract system, the government also decided to postpone the plan to abolish the contract system.”

“We will consult the timeline with the Uri Party and come up with follow-up measures,” added Director Lee.

Such a decision came after the announcement of the SMBA on July 22 that it would change the current blanket purchase and private contract system into a competitive bidding system among small- and medium-sized enterprises as soon as the relevant laws pass the extra session of the National Assembly in October.

The Board of Audit and Inspection said that it found more that 63,000 illegal and unjust cases after auditing the operation of blanket purchase agreements under private contracts.

Some are expressing concern over another policy difference between the government and the ruling Uri Party because Rep. Hong Jae-hyung, chairman of the Uri Party policy committee, announced a one-to-two-year delay of the abolishment of the contract system at a meeting with the Korea Federation of Small and Medium Business. The ruling party and the government had different views on the publication of apartment construction costs.

“Although we will delay the abolishment of the system in line with the party’s decision, relevant laws will be submitted to the October session of the Assembly as planned.”

Implementation of laws and a bidding system will not be easy as the small business community is against the plan to abolish the current system.

As countermeasures to possible side effects of the abolishment such as market domination by large companies and importing companies, the government said it would set new quality standards for products manufactured by small- and medium-sized businesses and apply different bidding systems considering the capability of each company.

Ki-Jeong Ko koh@donga.com