‘Idle’ Busan National Demonstration City… “We need to change the competition guidelines”

Re-announcement of recruitment of private business operators within this year due to two contract failures
Need to change business model that is not profitable, public offering guidelines that do not reflect reality
It will be difficult to continue the business beyond this year… We need to reflect the voice of the private sector

The national pilot city of Busan, which had attracted attention as the Moon Jae-in government’s biggest innovation project, is idle as the contract with a private company has failed, let alone the launch of a business operator. In the wake of a series of breakdowns in negotiations, criticism of the public side’s guidelines for collusion continues. The argument that the private sector needs to find a way to revive business feasibility in order to realize the purpose of creating a smart city by making profits and reinvesting in innovative services is convincing. The issue of overly passive public service providers also came to the fore.

According to related organizations and industries on the 26th, the Ministry of Land, Infrastructure and Transport and Korea Water Resources Corporation plan to conduct a re-opening of business operators within this year after undergoing a legal review of the second failure of negotiations for the Busan Smart City National Demonstration City.

The Ministry of Land, Infrastructure and Transport plans to establish a special purpose corporation (SPC) that will build and operate a smart city after selecting a negotiator for a private business after re-announcement and signing a contract again. If a preferred bidder is selected, it negotiates with the Korea Water Resources Corporation, which will become the public service provider of SPC, enters into a contract, and then obtains a private business license. After that, the public and private sector jointly establish the SPC after meeting the requirements such as capital input. In the early stages of this process, the contract failed twice, so even a private contractor could not be selected.

Even if the announcement is made again within this year, some point out that the same situation may be repeated if the public service provider, Korea Water Resources Corporation, insists on the existing method. It’s not just a matter of time delay. There is a high possibility that it will be mass-produced before various lawsuits due to the problem of the bid deposit or the cost for preparing the bid.

Both the ‘The Grand Consortium’, which was the preferred bidder, and the ‘The Soo Consortium,’ the next-priority bidder, are raising problems with the proposal request form, the public offering guidelines and the public service negotiation attitude. The public explained that the negotiations failed due to internal problems within each consortium. On the other hand, both consortiums point out the same problem in the broadest sense. It should be a negotiated contract, but even the immediately obvious problem is that the competition guidelines are not changed and insisted on. Private operators, who have to invest trillions of won, complained that they did not make up for it even though it was obvious that they would not make a profit. When this situation happened, the Ministry of Land, Infrastructure and Transport began to review the revision of the competition guidelines.

As contracts become more difficult, there are concerns that the business itself may become futile. If the current government doesn’t tie the knot, it is unlikely that the next government that envisions a new business will inherit it.

Even though the contract failed at the beginning of this month, public hearings and re-announcements are not being held due to follow-up administrative processing. As it is the world’s first public-private joint smart city model, even now, there are voices saying that the next government can continue the project only if the public actively solves the problem.

An expert familiar with the smart city field said, “Even if the negotiations are broken due to different issues, the fact that the negotiations have happened twice can only be seen as a problem on the other side as well.” We need to first hear the voices of the private sector as to what the problems of the negotiations were,” he pointed out.

Gyeonggi Moon [email protected]


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