연구보고서

The Inducement Plan of Lowest Price Award System and Some Institutional Improvements to Establish That System


The purpose of this study is to clarify the nessecity of inducement of the lowest price award system, to suggest incremental inducement plan and
some institutional improvements to establish that system. The main research questions can be summarized as follows :

  ·Theoretically, what is the meaning and nessecity of the lowest price award system?
   And what''s the behavior and strategy of owner and bidder under that system(Ch. 2)?

  ·We have induced lowest price award system for 4 times(about 35 years), but the
   system has not worked properly. What''s the reason(Ch. 3)?  

What''s the structutral problem of current PQ and contract award system? Is it inevitable
for inducing lowest price award system(Ch. 4)?

  ·Government announced the inducement of lowest price award system recently. Can
   the lowest price award system be successfully worked within the

government''s institutional arrangements? Willl another institutional improvements be nessessary(Ch. 5)?

  · In foreign countries, how they operate the lowest price award system? And what  
   implications we can learn(Ch. 6)?

  · What''s the incremental inducement plan of lowest price award system? And In order
   to prevent anticipated problems(such as dumping etc.), what  institutions should be
   improved(Ch. 7).

The lowest price award system doesn''t mean only the lowest bidder can be awarded. Theoretically, the lowest bidder must have the full ability to

implement contract. And the owner must establish some institutional arrangements to prevent post-contractual opportunism.

The main reason why we could not establish lowest price award system was, in my thought, due to the everlasting collusive structure(or culture) in
construction industry. Under the collusive structure, the most important thing was to obtain  more contract award even if the contracts were dumping.
But the collusive structure was collapsed after August 1998, and nowadays profit margin is increasingly important than ever. So, the environments afford
to the inducement of lowest price award system is gradually shapped. On the other hand, current PQ and contract award system can not solve the validity

problem and award by luck problem, etc. The efforts to solve these problems were proved to be failed. The thought that only the inducement of lowest price

award system can cure the problems of current PQ and contract award system is prevailing in construction industry and government. That was the
backgrounds of the inducement of lowest price award system by government.

Acoording to the government''s announcements, performance bond can be effective policy instruments against dumping. But it''s not enough. Under the

lowest price award system, the most important thing is to reduce bidder numbers and this can be achieved through enhancing PQ permittance score. If
the performance bond would be effective policy instrument, bond market entry barrier should be demolished. Bill of quantities must be improved to utilize

bidder''s knowledge and experiences. Until the effective working of lowest price award system, we can use foreign consultants for 2 or 3 years. In the long

run, the inducement of diverse bidding system(CM, Turn-Key, Design-Build, Alternative Bidding etc.), the transformation of long-term continuuing contract
to full funding contract, and the improvements of owner''s ability are especially important to establish lowest price award system.

The lowest price award system can be used to every design-bid-build contruction procurement, and the speed of that system''s incremental inducement

should be fast as soon as possible. In accordance with suggested institutional improvements, the belief that the lowest price award system will be the only

principal award system should be memorized to all of the constuct