LG CNS Consortium Announces ‘Quit’ of Large Public Informatization Project

In a large-scale public informationization project, a consortium of project implementers, including the main contractor, notified that it was withdrawing from the project. The cause of the conflict is the change of task and the payment of additional costs.

According to the industry on the 22nd, it was confirmed that LG CNS Consortium (LG CNS, Korea Information Technology, and VTW), the developer of the next-generation social security information system of the Ministry of Health and Welfare, requested the Ministry to terminate the business contract.

As the final opening of the 3-4th project is about to take place following the 1-2th project last year, it is expected that the schedule will be disrupted if the contract termination is confirmed.

The next-generation social security information system construction project was won by the LG CNS consortium in 2020 and planned to open the 1st through 4th phases by December 2022.

Starting with the partial opening of Welfare Road (public service) and Welfare Membership in September 2021 (1st phase), the opening of Happy Eum (for local government officials) and Hope Eum (for social welfare facility workers) was scheduled in September last year (2nd phase). Then, in November last year, it was planned to open the entire HopeEum (3rd) and the statistical information system (4th) in December.

However, computer errors occurred after the opening of the second service in September last year, disrupting the use of the system for several months. The consortium resolved the problems encountered during the second phase earlier this year and focused on the third phase안전놀이터, opening about 80 percent of the third phase’s systems.

However, the consortium has decided to withdraw from the remaining 20% of the third phase and the fourth phase, primarily due to profitability.

The consortium’s position is that the process of correcting the problems that occurred during the second opening, as well as the opening of the first through the third, required additional manpower and time, but they were not reimbursed by the Welfare Ministry.

The consortium is also responsible for the problems that occurred after the second opening. However, even if the consortium bears the costs, the overall cumulative deficit is tens of billions of won. If the remaining three systems and the fourth are opened, the deficit will be even larger.

An official from the consortium said, “Although the tasks were significantly increased from the time of the project order in 2020, we endured the deficit as the opening proceeded one after another without promising additional compensation.” “The opening of the remaining systems such as the third and fourth is also expected to increase significantly, so we have no choice but to terminate the final contract because it is fatal to the survival of not only large companies but also SMEs to bear more deficits.”

The consortium has verbally conveyed its views to the ministry. If the ministry chooses to terminate the contract, it will have to select a company to carry out the remaining projects (part of the third and fourth phases). The opening of the system is likely to be delayed.

If the Welfare Ministry does not accept the termination of the contract, the controversy is expected to continue for some time, as lawsuits and other court battles may occur.

A Welfare Ministry official said, “Once we receive the request in a formal letter, we will prepare a follow-up plan in consultation with related organizations.”

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