It has been found that 7,063 firms with 0-1 registered employees and residential addresses such as apartments or villas won 21,498 public procurement goods and services contracts over the past three years. The total winning bid amount they took was 1.3862 trillion won.
Rep. Hwang Jeong-a of the Democratic Party of Korea (Daejeon Yuseong-gu B) on the 4th released the findings of a full analysis, using an artificial intelligence (AI) agent, of public data on bid-opening results and procurement vendor registration information from the Public Procurement Service's Nara Market. The analysis covered all goods and services contracts opened from November 2023 to October this year.
Among 904,759 firms with a procurement vendor registration history (which may include closed or deregistered firms), 67,568 had 0-1 employees and a residential address. The 7,063 firms that posted winning bid records came from within this group.
Regardless of address, there were also 252 cases in which 109 firms that had registered only everyday business categories such as pharmacies, catering, funeral services and travel agencies, and held no other licenses, won bids for equipment and materials unrelated to their registered categories. In terms of amount, that comes to 22.6 billion won.
By case, a pharmacy in Gimhae, South Gyeongsang Province, has 'pharmacy' as its only registered category on Nara Market and has no registered employees, yet won 15 bids worth 2.06 billion won over the past three years. These included seismic rebar for a national museum construction site (995 million won), local government excavators and Navy signal generators.
Four contracts (7.93 billion won), including baggage handling system (BHS) materials and the passenger boarding bridge central control server at Incheon Airport, also went to firms with 0-1 employees at addresses in apartments, residential-commercial complexes or residential officetels. The control room display for the Korea Institute of Science and Technology Information (KISTI)'s sixth supercomputer (188.7 million won), for which 296 firms took part, was likewise won by a one-employee firm whose address is an apartment in Dalseo-gu, Daegu.
In Iksan, North Jeolla Province, two funeral firms that had registered only the 'funeral and burial services' category with the Public Procurement Service won bids for laboratory practice equipment for universities and research institutions, steel plates, oscilloscopes and more. One won 31 bids (2.27 billion won) and the other 27 bids (1.9 billion won).
Rep. Hwang pointed out that these firms register thousands of product names and, every time a notice is posted, submit prices close to the lower bid limit in hopes of winning by lottery. She added that after winning, they are known to receive goods from actual manufacturers or distributors and deliver them, or to transfer the right to deliver, meaning firms with no supply capacity are inserting themselves into the middle of public procurement.
"Since AI can be used to filter out in advance inappropriate bids by firms with no supply capacity, administrative innovation is needed to review and restrict inappropriate cases," Hwang said. "We should expand bid bonds and also devise ways to restrict brokerage-style bidding that merely sells delivery rights."