Gyeonggi Province Teams Up with Ministry of Land, Infrastructure and Transport to Root Out 'Swarm Bidding' in Third New Cities

[Suwon Ilbo=Reporter Park No-hoon] Gyeonggi Province, which is taking the lead in creating a 'fair construction environment' including the eradication of shell companies, has decided to crack down on 'swarm bidding' for third new city public land development projects within the province this year.

Gyeonggi Province announced on the 22nd that it plans to establish and implement a 'crackdown plan for swarm bidding in third new city land sales' through consultations with the Ministry of Land, Infrastructure and Transport and Korea Land & Housing Corporation (LH).

Under current law, the principle is that each company can exercise only one bidding right per apartment site, but it is a well-known fact in the industry that some enterprises use loopholes such as 'swarm bidding' by mobilizing dozens of shell companies to increase the likelihood of winning.

According to an announcement by the Citizens' Coalition for Economic Justice in August 2019, a survey showed that five specific construction companies monopolized 30% of apartment sites (valued at approximately 10.5 trillion won) from Korea Land & Housing Corporation (LH) over the past 10 years (2008-2018) using shell companies.

This was also revealed in a pilot investigation of apartment site swarm bidding conducted by Gyeonggi Province from January to March this year. When three winning companies from LH-supplied apartment sites from the previous year were investigated, one company was confirmed to be a shell company established by a major mid-sized construction company.

Such 'swarm bidding' not only unfairly increases the probability of winning, but also passes company establishment and maintenance costs to the sale price, compromising bidding fairness and raising the cost of 'securing a home,' which is identified as a problem.

Accordingly, since pre-sales for the third new cities are being launched this year, the province plans to join hands with the Ministry of Land, Infrastructure and Transport and LH to root out swarm bidding through joint inspections of third new city land projects, utilizing the expertise gained from cracking down on shell construction companies in public construction projects.

To this end, the province plans to consult with the Ministry of Land, Infrastructure and Transport and LH on crackdown measures by May, and will form joint inspection teams starting in the second half of this year to begin full-scale crackdowns.

Currently, the Ministry of Land, Infrastructure and Transport and LH share the province's proposal and intent, and LH is reviewing methods to include advance crackdown details in sales announcements.

The inspection targets are third new city public land projects, with current quantities in the province reaching 23 sites including Namyangju Wangsuk and Goyang Changneung, 4,217 million square meters, and 235,000 units.

The inspection will proceed as follows: when supply entities such as LH or GH provide information on winning companies, the joint investigation team will investigate them, and if violations of laws and regulations such as swarm bidding are found, the winning bid will be cancelled and administrative measures will be taken.

Lee Seong-hoon, Director of the Construction Bureau, stated, "It is the basic responsibility of the state, local governments, and public institutions promoting new city development projects to fairly distribute land secured through public acquisition," adding, "We will strengthen cooperation with related agencies including the Ministry of Land, Infrastructure and Transport and do our best to eradicate shell companies so that third new city projects can proceed in a fair environment."

Meanwhile, following Governor Lee Jae-myung's policy initiative to "completely eliminate corrupt practices in the construction industry, the province has been continuously conducting surveys on construction companies registered in the province since October 2019 to the present.