The case holding that the application for provisional disposition by a small and medium enterprise that produces and sells a "ordinary leisure machine", etc. to seek for the progress of the tendering procedure for the above construction project is illegal, since it can be viewed that it is illegal for the local government that ordered construction works for the sewage treatment plant to install sewage facilities, etc., even though the "ordinary leisure machine", etc. to be used in the construction is an item eligible for direct purchase of construction materials under the main sentence of Article 12 (3) of the Act without properly going through the procedures under the proviso to Article 12 (3) of the same Act.

The case holding that the application for provisional disposition filed by a small and medium enterprise that produces and sells a "ordinary leisure machine", etc. to seek whether it is eligible for direct purchase of construction materials under the main sentence of Article 12 (3) of the Act on the Promotion of Purchase of Small and Medium Enterprises and the Development of Market Support, on the grounds that it is difficult for the construction to directly purchase construction materials pursuant to the proviso of Article 12 (3) of the same Act on the grounds that the local government, which ordered construction works to extend through the construction of sewage treatment facilities and the construction of facilities for the sewage treatment plant designated by the Administrator of the Small and Medium Business Administration, is an item for direct purchase of construction materials, etc. to be used for the construction works, is unlawful without undergoing consultation with the Administrator of the Small and Medium Business Administration.

Articles 2 subparag. 2(b), 6, and 12 of the Act on Promotion of Purchase of Small and Medium Enterprise Products and Support for Development of Market Markets, Article 11 of the Enforcement Decree of the Act on Promotion of Purchase of Small and Medium Enterprise Products and Development of Market Products

Applicant Co., Ltd. (Law Firm Sam Young, Attorneys Hong-soo et al., Counsel for the plaintiff

Cheongju-si (Attorney Lee Il-sung, Counsel for the defendant-appellant)

1. Subject to the condition that the applicant deposits 1,00,000,000 won as security for the respondent or submits a payment guarantee entrustment contract document with the above amount as the insured amount:

The respondent shall not proceed with the bid procedures publicly announced on December 11, 2009 by the Public Notice of Facilities of the Public Procurement Service No. 2091, Dec. 11, 2009 with respect to the expanded construction of sewage treatment facilities in a sewage treatment plant and incineration.

2. Litigation costs shall be borne by the respondent;

Except for orders to provide security, the same shall apply to the disposition.

1. Basic facts

Comprehensively taking account of the overall purport of records and examinations, the following facts are substantiated.

A. The applicant is a stock company with the purpose of selective-type industrial machinery export and import business, and the business of manufacturing automation facilities, and is a small and medium enterprise as defined in Article 2 of the Framework Act on Small and Medium Enterprises. The respondent is a local government that ordered the extension of construction work through the construction and incineration of leisure facilities in the sewage treatment plant at Cheongju-si, which is a public institution as defined in the Act on the Promotion of Purchase of Small and Medium Enterprise Products and Support for Development of Market Products (amended by Act No. 9894, Dec. 30, 2009; hereinafter “Small and Medium Enterprise Products Promotion Act”).

B. On January 13, 2008, the respondent planned the extension work of the public sewage treatment plant (three stages) to an estimated price of 61 billion won for total construction cost, 40.8 billion won for total construction cost, Cheongju-si’s construction work for the extension work for the extension of the sewage treatment plant (hereinafter “construction work for leisure facilities”) to the incineration of Cheongju-si’s sewage waste, and 14.8 billion won for total construction cost. The above construction work constitutes a large construction work with an estimated price of at least 30 billion won for total construction cost, on the ground that it constitutes a large construction work with an estimated price of at least 30 billion won for total construction cost. In accordance with the Act on Contracts to Which a Local Government Is a Party, and the relevant provisions of the Enforcement Decree of the same Act, the respondent requested deliberation on the method of bidding for large construction works in Chungcheongbuk-do.

C. On March 26, 2008, Chungcheongbuk-do held a local construction technology deliberation committee established under the Construction Technology Management Act. The committee considered that each of the above construction works should be conducted on a package deal basis, and that it should be treated as one of the construction works for leisure facilities installation and incineration.

D. On March 28, 2008, according to the deliberation of the committee, Chungcheongbuk-do announced a large scale construction method with regard to the extension of the public sewage treatment plant (three-stage) construction, leisure facilities installation construction, and incineration construction in Chungcheong-si as a result of the committee’s deliberation, it indicated that the construction is based on a package deal tender.

E. In order to reduce the scale of the above construction, the Cheongju-si tried to promote only the construction of leisure facilities and the extension of incineration facilities (hereinafter “instant construction”) with an estimated total construction cost of KRW 37.68,00,000 (34,254,545,460 + value-added tax 3,425,454,54,540 won + value-added tax 3,425,540 won).

F. However, as the scale of the construction has been reduced as above, the Administrator of the Small and Medium Business Administration, etc. requested the Local Construction Technology Deliberation Committee to review the methods of tender, etc. of the instant construction on the grounds that the term “ordinary leisure machine” or “sewage treatment equipment and components (including products for raw water, excreta, drainage and rainwater pumps)” designated by the Administrator of the Small and Medium Business Administration constitutes “items subject to direct purchase of competing products and construction materials by small and medium enterprise proprietors in 209.”

G. On November 6, 2009, the respondent published that the “ordinary leisure machine” and “sewage treatment equipment and components” fall under the item subject to direct purchase, but if they are directly purchased and supplied as a unit product, the performance of the entire facilities cannot be guaranteed, and it is difficult to identify the place of responsibility, and compelling the use of only the products of small and medium enterprises in the package deal deal method does not comply with the purpose of the package deal tender.

H. As the respondent requested the Administrator of the Public Procurement Service to conclude a contract in accordance with the revised plan thereafter, on December 11, 2009, the contract officer of the Public Procurement Service published the notice of tender under Article 20091209120915153-11 of the Public Notice of Facilities of the Public Procurement Service (hereinafter “instant public notice of tender”). The instant public notice of tender appears to be erroneous in the Enforcement Decree of the Act on Contracts to Which the State is a Party (hereinafter “Enforcement Decree of the Act on Contracts to Which a Local Government is a Party”) and indicated that the instant public corporation is a package deal tender for design and construction under Chapter

2. Determination

(a) the existence of preserved rights;

(1) Applicable Acts

The instant construction project is a construction project with a project cost of at least two billion won, and since the instant public announcement of tender was made on December 11, 2009, the Act on the Encouragement of Purchase of Small and Medium Enterprise Products applies pursuant to Articles 1 and 3 of the Addenda to the Act on the Encouragement of Purchase of Small and Medium Enterprise Products.

(2) Relevant provisions

Article 12(2) of the Act on the Encouragement of Purchase of Small and Medium Enterprises of Small and Medium Enterprises provides that "The Administrator of the Small and Medium Business Administration shall select and publicly announce items suitable for directly purchasing and supplying by public institutions to the extent that they do not impair the quality and efficiency of construction, among competing products, as materials necessary for construction ordered by public institutions." Paragraph (3) of the same Article provides that "The head of a public institution who intends to place an order for construction exceeding the scale prescribed by Presidential Decree shall examine whether the items publicly notified by the Administrator of the Small and Medium Business Administration pursuant to paragraph (2) are directly purchased and take necessary measures for direct purchase: Provided, That this shall not apply where the Administrator

On the other hand, Article 22-2 subparag. 3 of the Operating Guidelines for the Public Purchase System of Small and Medium Enterprises of the Small and Medium Business Administration (Public Notice No. 2009-50) provides that “Where the head of a public institution and the head of the competent local Small and Medium Business Administration have consulted with him/her that it is difficult to directly purchase construction materials due to any cause falling under any of the items of subparagraph 3, the head of the public institution may not directly purchase the items subject to direct purchase of construction materials.”

(3) In the case of a package deal design and construction, whether the provision of “direct purchase” under the main sentence of Article 12(3) of the Act on the Promotion of Purchase of Small and Medium Enterprise Products is excluded.

The respondent asserts that the provision of direct purchase in the main sentence of Article 12(3) of the Act on the Promotion of Purchase of Small and Medium Enterprise Products is excluded in the case of a package deal design and construction as in the instant construction project.

Article 95 subparag. 5 of the Enforcement Decree of the Act on Contracts to Which a Local Government Is a Party, provides that "a package deal tender means a package deal tender for the design and construction which is submitted along with a tender by preparing the design of the construction and other drawings and documents necessary for the execution at the time of a tender in accordance with the master plan and guidelines for a package deal tender

However, in light of the following points, even if it is based on a package deal contract for design and construction, it is difficult to conclude that the direct purchase provision of the main sentence of Article 12(3) of the Act on the Promotion of Purchase of Small and Medium

First, Article 12(3) of the Act on the Promotion of Purchase of Small and Medium Enterprise Products provides that "the head of a public institution that intends to place an order for construction more than the scale prescribed by Presidential Decree" shall examine whether the items publicly notified by the Administrator of the Small and Medium Business Administration are directly purchased, and take necessary measures so that direct purchase may be made. There is no different application of direct purchase regulations depending on whether the method of tender by a public institution is based on a package deal tender method

Second, the purpose of the Act on the Promotion of Purchase of Small and Medium Enterprises is to prevent the transfer of construction materials to a subcontractor in a large construction company, etc., and to support the management stability of small and medium enterprises by expanding the purchase of small and medium products. The Act on the Promotion of Purchase of Small and Medium Enterprises and Encouragement of Purchase of Small and Medium Enterprises, which was enforced before the Act on the Promotion of Purchase of Small and Medium Enterprises was enacted, comprehensively provides that the system of direct purchase of construction materials was not properly established. The Act on the Promotion of Purchase of Small and Medium Enterprises provides that the Act on the Promotion of Purchase of Small and Medium Enterprises specifically gives notice of the exceptional reasons to enhance the effectiveness of the system of direct purchase of construction materials, and that the head of a public institution who intends to place an order for construction works larger than the scale prescribed by Presidential Decree shall take necessary measures so that a direct purchase may be made. If a construction work ordered by a public institution is naturally excluded from the provision of direct purchase in the case of a package deal tender method, the meaning of Article 12(3) of the Act on the Promotion of Purchase of Small and Medium Enterprises Products.

Third, in the case of a package deal design and construction work, if there is a reason why it is difficult to secure the quality of construction works when directly purchasing construction materials, the head of a public institution may not directly purchase construction materials by consulting with the Administrator of the competent Small and Medium Business Administration pursuant to the proviso of Article 12(3) of the Act on the Encouragement of Purchase of

Ultimately, it is reasonable to deem that the respondent's failure to publicly announce the fact that the respondent is subject to direct purchase of construction materials in accordance with the main sentence of Article 12 (3) of the Act on the Promotion of Purchase of Small and Medium Enterprise Products without undergoing consultation with the Administrator of the Local Small and Medium Business Administration as to whether it is difficult for the respondent to directly purchase construction materials to be used in the construction of this case pursuant to the proviso of Article 12 (3) of the Act on the Promotion of Purchase of Small and Medium Enterprise Products. Therefore, the respondent who produces and sells ordinary leisure machines, etc. as a small and medium enterprise can claim that the respondent shall not proceed to the bid of the construction of this case without undergoing the above procedure, and therefore, the application

B. Necessity of conservation

The tender procedure for the instant construction project is expected to be submitted to the tender in March 9, 2010 during the current process. If the tender procedure for the instant construction project is in progress, there is a concern that the legal dispute will be complicated and that the applicant’s rights may be infringed and difficult to recover. Therefore, the need to preserve the said tender procedure to be urgently suspended is recognized.

3. Conclusion

Thus, the application of provisional disposition of this case shall be accepted as a condition of the offer of security and it shall be decided as per the Disposition.

Judges Jeon Jong-tae (Presiding Judge)