PPS to curb ‘lottery-style bidding’ for military supplies, impose bid bonds and strengthen quality control

[Financial News] The Public Procurement Service (PPS) will curb reckless bidding by underqualified firms unable to fulfill their contracts in the military-supplies market, where procurement is directly tied to the safety and mission performance of service members, and will substantially strengthen procurement quality control.
The PPS said Deputy Administrator Kang Seong-min visited a factory in Seoul that makes military combat vests on the 3rd, where he reviewed production and quality-control practices, including raw-material management, manufacturing processes and finished-product inspections, and held an on-site meeting. The visit was intended to extend measures to eliminate reckless bidding to military supplies and directly verify compliance at manufacturing sites.
After establishing a comprehensive plan to eliminate reckless bidding in January this year, the PPS began piloting bid bonds for nine items of concern in August. As a result, the average number of companies bidding per tender fell by 83.9%, from 355 to 57, while the average winning rank improved dramatically, from 41st to 1.5th, according to the analysis.
The PPS plans to extend these results across military-supplies procurement. In consultation with the Ministry of National Defense, it will require all companies bidding to supply military goods to post bid bonds and introduce an evaluation system to verify their actual ability to fulfill contracts. It also plans to continue the contract-performance reviews and advance production-capacity checks introduced this year, closing gaps in oversight from bidding through delivery.
The quality-control system will also be overhauled. The sampling-inspection rate will be raised for items directly related to service members’ safety, and inspections currently conducted by the requesting military (military units) will be shifted to specialized institutions to improve objectivity and reliability.
Since general military-supplies procurement, including military clothing and equipment, was transferred from the Defense Acquisition Program Administration (DAPA) to the PPS in 2020, the introduction of a specialized procurement system has helped improve transparency and efficiency. However, concerns have repeatedly been raised that institutional loopholes need to be addressed, as ‘paper companies’ with no production facilities or specialized staff have continued to win contracts by chance for some items, then subcontract the work or deliver shoddy products—a practice dubbed ‘lottery-style bidding.’
PPS Deputy Administrator Kang Seong-min said, “Because military supplies are directly tied to service members’ safety and mission performance, a fair bidding process and rigorous quality control are more important than anything else.” He added, “We will closely oversee every stage to ensure that deserving companies receive fair opportunities and establish a procurement system that the public can trust.”
[email protected] Kim Won-jun Reporter