ITS quality drop is inevitable… cases where SW companies have bankrupted
Spread from simple product purchase in national defense into edge cutting
Needs to be changed to negotiation based contract…T
Intelligent transportation system and Cooperative-Intelligent transportation system are the smart transportation infrastructure, which are one of the most important means the 4th industrial evolution. This is one of the reasons why the government is putting ITS·C-ITS projects into the major task of New-Deal. Transportation related software companies are judging that if low bidding continues in ITS·C-ITS projects, the quality of intelligent transportation will go down, and also put more difficulties on software companies. Because ITS·C-ITS uses cutting edge SW, and not a simple equipment purchasing, they should use negotiation-based contract method.
◇ Spread of the second lowest bid
The second lowest bid is usually used in national defense field. It is used to reduce usage of budget for products purchase with simple functions such as IP Telephony. It is not suitable for edge cutting technology such as Artificial Intelligence (AI) or Digital twin. A few years ago, the Seoul Metro placed an order for the subway integrated network (LTE-R) project with the second lowest bid, causing controversy. This is because advanced information and communication technologies (ICT), including long-term evolution (LTE) wireless communication, are used in LTE-R. Concerns are growing as second lowest bidding method is spreading into ICT·C-ICS field beyond regular telecommunication field. Qualification screening is different in each Ministry of National Defense, Ministry of Trade, Industry and Energy and Public Procurement Service, with even small details. In the ITS·C-ICT project, companies are selected based on basic business performance capabilities such as finance through documents, and then the lowest priced company will be selected.
◇Difficult to secure profits for specialized software companies
If ITS·C-ITS equipment manufacturing purchase and installation projects is ordered through low bid process, it is impossible for the companies working in video reading artificial intelligence (AI), database management system (DBMS), linked middleware, digital twin SW to avoid dagames. It is common that SW is not reflected in RFP in ITS·C-ITS projects. Equipment suppliers usually offers SW for free at the time of proposal. In this situation, it is practically difficult for a SW company to secure a profit even if they win an order through low bid method. An official from a video AI company said, “The Orders from building construction or road-related projects, they usually expect SW to be free. When business gets bigger, there are more difficulties. The great examples are the bankruptcy of company B or company K, which had specialty in traffic SW.”
◇Negotiation-based contract method should be used
Experts are highlighting that bidding method of ITS and C-ITS where uses edge cutting SW has to be changed to negotiation-based contract method. The negotiation-based contract method can prevent price competition and reduce the supply of low-quality products through technical negotiation after selecting a preferred bidder. There is an opinion that separate orders must be placed not only for small businesses, but also for equipment manufacturing, purchasing, and installation projects for medium and large businesses.
There are also criticism that low bid is caused by lack of budgets. A professor from Ajou University, Choul-ki Lee, said, “A few years ago, related companies made estimating cost plans for the ITS project, but the government did not apply it, so there are difficult to receive a proper budget. ITS project itself is not beneficial to small and medium-sized specialized SW companies, so only numbers of companies have survived.”
By Staff Reporter Ho-cheon An (hcan@etnews.com)