No Heavy Tails
The Korean government recently announced that it would prevent cutthroat bidding competition among Korean shipbuilders and the conclusion of heavy-tail contracts. Industry experts are in doubt of the effectiveness of the plan, though.
According to them, data standardization has not been done to a sufficient degree when it comes to offshore plant construction planning and the like. Also, an accurate cost analysis, which should be the basis of a profitability assessment in the industry, is still difficult, even when dozens of experts focus on it. They also pointed out that a profitability assessment prior to contract signing could lead to information leakage.
“The roles of the in-house deliberative committees of the top three Korean shipbuilders covering the appropriateness of orders and contracts have been enhanced in the wake of their huge losses in the offshore plant engineering sector,” one of them remarked, continuing, “Under the circumstances, external examinations could hinder them from making timely business decisions during the course of bidding.”
He added that the government’s plan to ban heavy-tail contracts might result in international disputes with foreign trade organizations surrounding allegations of collusion. “These days, it is ordering parties that hold sway over bidding, and whether to accept a heavy-tail contract or not is one of the most important factors in their selecting contractors, meaning Korean shipbuilders can do nothing when it comes to such heavy-tail contracts,” he said.