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Public SW Seeks Breakthrough for 'Fair Pricing'; Industry Urges Faster Improvement of National Contract System

Policy2 min read

Korea's software industry group ITSA heard a proposal to fix how government software projects are paid for. The plan asks buyers to set clear workloads and to change national contract rules so extra work is paid fairly.

A push to get fair pay for public software projects

At an ITSA board meeting in Seoul, Yang Chang-ho, head of the Public Industry Policy Research Institute, presented a plan to change national contract rules. He said the main problem is that when public software projects grow in scope, companies often pay the extra cost. He wants the government agency that orders the work to be responsible for measuring the workload from the start.

Why the problem keeps coming back

Software work becomes clearer only after the contract is signed, during analysis and design. The first estimate of work, measured in function points (FP), is hard to use as the contract standard. So disputes about pay for extra work keep happening. A function point is a unit that measures how big a software job is.

Key points of the plan

  • Buyers should state the workload clearly before bidding.
  • Companies would bid a price for each item, called item-based bidding.
  • If the workload changes after design, the contract amount can also change.
  • Rules for these steps and the extra cost formula should go into enforcement decrees and contract guidelines.
  • If the budget is short, less urgent tasks can be removed or ordered separately the next year.

Why it matters

If buyers set clear workloads and pay for changes, software companies can make a fair profit and keep public software quality high. The plan also says that a review committee's agreement is not enough. The change must be written into the contract and actually paid. Yang said the National Assembly and the government both need to be persuaded at the same time.

What to watch

  • Whether the government changes national contract rules to use FP as a basis for extra work.
  • Progress on the revision of the Software Industry Promotion Act and its lower-level rules.
  • Progress on the National Contract Act amendment bill.
  • How ITSA carries member company views to the National Assembly.

Glossary

ITSA
Korea IT Services Industry Association, a trade group for software and IT service companies.

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