Selling to the Korean government: KONEPS and public procurement

The size of the market

Korea’s 2025 Public Procurement Statistical Yearbook put total public procurement at KRW 238.5 trillion, up from KRW 225.1 trillion in 2024 and KRW 208.5 trillion in 2023 — about 8.9% of GDP. The buyers are central ministries and agencies, local governments, public enterprises and quasi-governmental institutions, schools, universities and public hospitals. The Public Procurement Service (조달청, jodalcheong) (PPS), under the Ministry of Economy and Finance, buys centrally for many of them and handles roughly 30% of the total; the rest is bought by the institutions themselves, mostly through the same electronic system. The large public enterprises — in power, rail, roads, housing, water and ports — run some of the biggest procurement programmes in the country, often with their own e-procurement portals alongside KONEPS, and are worth tracking separately by any supplier of industrial equipment, engineering services or materials.

That system is KONEPS (나라장터, narajangteo), the Korea Online E-Procurement System, launched in 2002 and widely copied abroad. At the end of 2024 it connected 71,757 buying institutions and 602,681 registered suppliers and carried KRW 156.8 trillion of transactions, about two-thirds of public procurement. The next-generation KONEPS, developed from 2021, went live on 6 January 2025 after two postponements; complaints in the first week ran at nearly a hundred times the usual level, mostly about certificates and logins, before the system settled.

The legal framework

Central government contracting is governed by the Act on Contracts to Which the State Is a Party and its Enforcement Decree, enacted in 1995 when Korea joined the WTO Government Procurement Agreement; local governments follow a nearly identical act of their own, and public enterprises follow rules issued under the public institutions legislation. A special decree implements international procurement under the GPA and Korea’s free trade agreements. PPS’s own operations, including multiple-award contracts, rest on the Procurement Business Act; SME preferences on the SME products purchasing act; and defence acquisition on the Defense Acquisition Program Act.

Korea is a party to the GPA and has procurement chapters in its FTAs with the United States, the European Union and others. Above the thresholds, covered entities must allow suppliers from the other parties to bid on equal terms, publish notices with minimum time limits and use non-discriminatory specifications. Below them, Korean rules still allow foreign bidders by default — each KONEPS tender has a setting for whether overseas companies may bid, and restricting a tender to domestic companies requires reasons — but SME set-asides and domestic preferences are lawful.

Thresholds for international tenders

The thresholds are set in Special Drawing Rights and converted to won every two years by the Ministry of Economy and Finance. For 1 January 2025 to 31 December 2026 they are:

Won figures for 2027–2028 are expected to be published around the end of 2026.

The central figures correspond to 130,000 SDR for goods and services and 5 million SDR for construction. FTA thresholds can differ — some FTAs cover entities or contracts that the GPA does not — so a supplier from a country with a Korean FTA should check both.

Registering and bidding as a foreign supplier

Every bidder registers in advance on KONEPS with business and corporate registration documents, and bids, contracts and multiple-award ordering require a Korean business digital certificate (사업자용 범용 공동인증서, saeopjayong beomyong gongdong injeungseo). Advisers differ on whether a foreign company can register without a Korean entity: practitioners report that registration in practice requires a Korean company or branch, while some vendor guides say no agent is legally required but Korean-language documents and support are. Either way, a foreign supplier without a Korean presence will struggle with certificates, notarised Korean translations, Korean bonds, tax invoices and after-sales obligations, and most foreign winners bid through a Korean subsidiary, a branch, or a Korean partner. See registering a Korean company and branch or subsidiary.

A Korean entity also brings tax and invoicing into order: public buyers pay against Korean electronic tax invoices with 10% VAT, and a foreign supplier performing services in Korea for a public contract risks a permanent establishment in any case — see permanent establishment risk. Products must hold the Korean certifications that apply — KC marks, MFDS approvals for medical products, and so on — before the bid, not after award; see KC certification.

How contracts are awarded

Contracts are awarded by open competition by default, but limited competition, nominated competition and direct contracts are common; by value in 2019, limited competition accounted for 43.6%, open competition 35.9% and direct contracts 20.3%. The main award methods are:

• Adequate screening (적격심사, jeokgyeok simsa) — the default for many goods and works. Bids below the estimated price are examined from the lowest upwards for capability, track record and finances, and the first bidder above a minimum score and above the lowest acceptable bid rate — around 85% of the estimated price for many contracts — wins.
• Comprehensive evaluation — price, technical capability and social responsibility scored together, used for larger works and services.
• Negotiated contracts (협상에 의한 계약, hyeopsang-e uihan gyeyak) — technical proposals evaluated first and the price negotiated, used where expertise, security or urgency matter: IT systems, consulting, research.
• Multiple-award schedules (다수공급자계약 (MAS), dasu gonggeupja gyeyak) — PPS awards framework contracts to several suppliers of a product category at fixed prices, and any public body orders from them through the KONEPS shopping mall; a second-stage competition among MAS suppliers is required for larger orders, from KRW 50 million or KRW 100 million depending on the category under the standards most recently published.
• Innovative procurement — since 2019 PPS designates innovative products that public bodies may buy without a conventional tender, as first buyer of new technology; 1,858 products and KRW 273 billion had been bought by 2023, with a target of KRW 2.5 trillion and about 5,000 products by 2030 in AI, climate technology and robotics.
• Excellent procurement products (우수조달물품, usu jodal mulpum) — a PPS designation for high-quality and technology products, giving advantages in public purchasing; designation rules favour products made in Korea.

Finding tenders and reading a notice

KONEPS classifies goods by a product classification number based on the UN Standard Products and Services Code, and suppliers register the codes they sell under so that the system alerts them to matching notices. Notices state whether foreign companies may bid, the qualification criteria, the evaluation method, the bid security, the delivery terms and the deadline; international tenders above the GPA thresholds must allow at least the agreement’s minimum period between notice and bid deadline, usually 40 days, while domestic tenders can be much shorter. Many tenders hold briefings and accept written questions, and the answers become part of the tender.

The pricing mechanics surprise foreign bidders. For many competitive tenders the buyer sets a base amount, generates fifteen multiple reserve prices (복수예비가격, boksu yebi gagyeok) within a narrow band around it, and each bidder selects some of them when submitting; the average of the four most frequently selected becomes the estimated price (예정가격, yejeong gagyeok) against which bids are measured. Combined with a lowest acceptable bid rate, the result is that the winning bid is often the one closest above a floor rather than the lowest — a system designed to deter dumping and collusion that rewards understanding of the formula.

Performance, payment and price adjustment

Once a contract is signed, delivery is inspected by the buyer, normally within 14 days of completion, and payment is due within days of a valid request after inspection — public bodies in Korea pay quickly and reliably, which is part of the market’s appeal. Advance payments are available for many contracts against an advance-payment guarantee. Long contracts include price adjustment (물가변동 조정, mulga byeondong jojeong): where at least 90 days have passed since signing and the relevant prices have moved by 3% or more, either side can ask for the contract price to be adjusted, a mechanism that protected suppliers during the 2022 inflation spike and that foreign suppliers pricing in euros or dollars should combine with their own currency hedging.

Challenging a tender

A bidder that believes a tender or award breaks the rules can raise an objection with the contracting authority, and for international tenders under the GPA and FTAs can bring the dispute to the State Contract Dispute Mediation Committee (국가계약분쟁조정위원회, gukga gyeyak bunjaeng jojeong wiwonhoe), which can recommend suspension of the procedure while it decides. Korean courts also grant injunctions against awards and hear damages claims, and debarment decisions can be challenged in the administrative courts. Time limits are short — measured in days from the event — so a foreign bidder needs Korean counsel watching its tenders, not one engaged after the award.

Bonds, liabilities and sanctions

Bidders post bid security (입찰보증금, ipchal bojeunggeum) of at least 5% of the bid price, reduced to 2.5% in periods the government declares an economic crisis; winners post contract security (계약보증금, gyeyak bojeunggeum) of at least 10% of the contract value, with higher rates for some construction contracts, and warranty security for defects. Security is usually given as a guarantee from a Korean guarantee institution, insurer or bank, which is another reason for a Korean entity with a credit history. Late delivery attracts liquidated damages at daily rates set by the decree.

The sanction that worries bidders most is debarment (부정당업자 제재, bujeongdang eopja jeje): under Article 27 of the State Contract Act, a supplier that colludes, bribes, submits false documents, fails to perform without justification or commits other listed misconduct can be barred from all public bidding for up to two years. A June 2024 Supreme Court decision placed the burden of proving the grounds on the public institution. The Fair Trade Commission prosecutes bid rigging aggressively, and the government’s November 2025 procurement reform announced a one-strike approach to illicit acts. A foreign group whose Korean distributor colludes with competitors will find its products excluded too.

Software, cloud and security products

Technology sold to the Korean public sector faces certifications of its own. Cloud services used by public institutions need the Cloud Security Assurance Program (클라우드 보안인증 (CSAP), keullaudeu boan injeung) certification administered by KISA; since a 2023 reform the scheme is tiered by the sensitivity of the data, and foreign providers have begun obtaining certification for the lower tier, while higher tiers still effectively require physical and logical separation in Korea. Information security products bought by public bodies generally need Common Criteria certification or a security function verification recognised by the National Intelligence Service, and software is favoured in public purchasing when it holds the Korean Good Software (GS 인증, GS injeung) quality certification. Large public IT projects are restricted for Korea’s biggest conglomerates’ IT affiliates, which has made mid-sized Korean integrators the natural partners for foreign software vendors. A foreign vendor planning to sell to Korean ministries should budget a year for certification before its first serious tender.

SME preferences and how foreign suppliers work with them

Korean public bodies must buy at least half of their goods and services from SMEs, with further targets for SME technology products and for women-owned and disabled-owned businesses, and certain product categories are reserved for competition among Korean SMEs. In 2023 SMEs won 64.7% of public procurement. Foreign companies are generally outside the SME categories, so in reserved categories the route is to supply a Korean SME that bids — with a supply agreement that allocates warranty, specifications and liabilities — or to form a consortium. The November 2025 reform also moves some purchasing from PPS to local governments, starting with a 2026 pilot for 120 electronic items in Gyeonggi and North Jeolla and extending to all local governments in 2027, which multiplies the buyers a supplier must track.

Defence procurement

Defence acquisition is run by the Defense Acquisition Program Administration (방위사업청, bangwi saeopcheong) (DAPA). Foreign purchases follow DAPA’s own procedures, and foreign purchases of USD 10 million or more per programme generally carry industrial cooperation (산업협력, saneop hyeomnyeok) obligations — the successor to offsets since 2018 — through MOUs with Korean industry participants, a memorandum of agreement with DAPA and a performance bond, with export volumes of Korean SMEs counted at a multiplier. Exemptions cover repair parts, core R&D components, raw materials and government-to-government purchases. A Korean partner is a practical necessity, and security clearances, technology protection and export-control approvals from the supplier’s own government run in parallel. See export controls.

A worked example

A Finnish maker of water-quality sensors wants to sell to Korean local governments and the national environment agency. It sets up a small Korean subsidiary, obtains the KC and radio registrations for its sensors in the subsidiary’s name, registers on KONEPS and obtains a business digital certificate. Its first tender, from a central agency for a monitoring network worth KRW 1.2 billion, is above the GPA threshold and open to foreign-owned bidders; the subsidiary bids with notarised Korean translations of test reports, a bid guarantee of 5% from a Korean guarantee institution, and a track record from Finnish and Danish municipalities translated and certified.

It comes second under adequate screening, losing on track-record points to a Korean integrator. For the next year it applies for innovative product designation, which is granted for its low-power sensor, and three local governments buy pilot units without a tender. It then wins a place on a PPS multiple-award schedule for monitoring equipment, from which other local governments order directly. Its Korean subsidiary invoices with VAT, provides maintenance in Korea and builds the Korean track record that wins the next central tender.

Mistakes we see

1. Bidding without Korean certifications for the goods offered.
2. Underestimating the digital certificate and KONEPS registration lead time.
3. Foreign track record presented without Korean translations and certification, losing qualification points.
4. No Korean guarantor lined up for bid and performance bonds.
5. Relying on a distributor without controls on collusion and inducements — debarment follows the products.
6. Ignoring SME-reserved categories and bidding where foreign firms cannot win.
7. Watching only PPS tenders when local governments and public companies buy directly.

Korean terms you will meet

Questions readers ask

About the author

Alexander Baranov

Founder of the BCA Group · cross-border corporate and tax adviser since 2008

Alexander advises foreign founders and groups on company formation, tax structuring and corporate law in more than 40 jurisdictions across Europe, the Gulf, Asia and Latin America. He is the author of nine books on international business and tax and writes regularly for professional finance and tax journals. He works in English, German, Spanish and Russian.

This guide is based on the Korean statutes cited in the text and on our own filings. It is reviewed when the law or official rates change.

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