This year, only 2 out of approximately 30 establishments selected a construction company through competitive bidding for redevelopment and reconstruction projects. The majority of the other establishments entered into a contract with a single construction company (including consortiums) through private contracts. With rising labor costs and construction expenses, selection of construction companies for redevelopment and reconstruction establishments has faced difficulties throughout the year. As the construction market continues to exhibit a downturn, it is expected that the selection of construction companies for maintenance projects will remain challenging for a significant period ahead.

A banner hanging at the Yeouido Hanyang Apartment / Courtesy of News1

According to the maintenance industry on the 23rd, there have been 30 establishments that have selected construction companies this year as of this day. Including the Yongsan Sanho Apartment, which is scheduled to hold a general meeting for construction company selection on the 28th, a total of 31 establishments will have selected a construction company and will proceed with the projects this year.

Among these, only 2 establishments have selected construction companies through competitive bidding. On March 23, Hyundai Engineering & Construction was selected as the construction company for the Yeouido Hanyang Apartment reconstruction project, surpassing POSCO Engineering & Construction. The Hanyang Apartment reconstruction is a project being built on a site of 290,522 square meters in the Yeouido-dong area of Yeongdeungpo-gu, Seoul, consisting of a total of 956 housing units across 4 buildings, ranging from 5 basement floors to 56 above-ground floors.

The Dogok Gaepo Hanshin reconstruction establishment, which selected a construction company after a general meeting on August 31, is also an establishment that succeeded in competitive bidding. DL E&C won the construction rights competing against Duson Construction. This project will construct 816 dwellings across 7 buildings, ranging from 3 basement floors to 35 above-ground floors, and DL E&C proposed to name the complex 'Acre Dogok.'

However, the remaining 29 maintenance establishments have all entered or are expected to enter into private contracts. The Sinbanpo Hanshin 12th reconstruction association in the Gangnam area entered into a private contract with Lotte Engineering & Construction on June 1, and the Sinbanpo Hanshin 27th reconstruction association also entered into a private contract with SK Eco Plant on June 15. Additionally, the Sinbanpo Hanshin 16th (July 6, Daewoo Engineering & Construction), Jamsil Woosung 4th (July 6, DL E&C), Gaepo Jugong 5th (August 31, Daewoo Engineering & Construction), Songpa Samhwan Garak (September 28, GS Engineering and Construction), and Sinbanpo Hanshin 2nd (December 1, Hyundai Engineering & Construction) have also selected construction companies through private contracts.

Even outside the Gangnam area, large-scale reconstruction and redevelopment projects with over 2,000 dwellings are failing in competitive bidding. The Noryangjin District 1 redevelopment selected POSCO Engineering & Construction as the construction company through a private contract during the general meeting on April 27. This large establishment, which involves a total construction cost of 1.09 trillion won and covers a site of 132,187 square meters at 278-2 Noryangjin-dong in Dongjak-gu, will build apartments consisting of 2,992 dwellings and related welfare facilities, yet it failed in the competitive bidding.

The Machun 3 district redevelopment association, which will build a maximum of 25 stories of apartments with 2,321 units across 20 buildings near 283 Machun-dong, also selected GS Engineering and Construction through a private contract in November. The Gajeou 7 district redevelopment association, one of the nine districts in the Gajeou New Town in Seodaemun-gu, held a bidding process for construction company selection in July, but no bids were submitted. After failing once, the scheduled construction cost was raised to 8.435 million won per 3.3 square meters for the second round of bidding, where GS Engineering and Construction and Hanwha Construction Department jointly submitted a single bid and entered into a private contract.

The Yongsan Sanho Apartment reconstruction association is set to hold a general meeting on the 28th to select a construction company. Currently, only Lotte Engineering & Construction has submitted a single bid, making private contracting likely. This project will build 647 dwellings (including 73 rental units) and related welfare facilities in a site measuring 27,117.3 square meters, consisting of 7 buildings ranging from 3 basement floors to 35 above-ground floors in the area of 118-16 Wonhyo-ro 4-gil, Yongsan-gu. Although four bidding sessions have been held, only Lotte Engineering & Construction has participated.

Graphic by Jeong Seo-hee

Experts analyze that the deterioration of profitability in maintenance projects due to rising construction costs and other factors is the reason why some associations are exclusively demanding high-end brands, resulting in failures in competitive bidding.

Lee Eun-hyung, a research fellow at the Construction Policy Research Institute, noted, 'Often the construction costs presented by the associations are too low compared to the expectations of construction companies, and many associations demand high-end brands without considering site conditions, which can lead companies to give up on bidding altogether.'

Cho Young-gwang, a researcher at Daewoo Engineering & Construction, stated, 'This year, with many unsold homes in the housing market and issues with project financing (PF) affecting construction companies, the rising construction costs significantly increased the expense burden on these companies, making it challenging to competitively secure maintenance projects.' Cho added, 'When a company participates in a competitive bid and fails to win, the resultant losses in operating costs can be substantial, causing competitors to avoid bidding against each other.'