The 'Gadeokdo New Airport Access Railway Construction Project,' with a total construction cost of 1.2 trillion won, has been put out for tender, initiating the contractor selection process. There has also been a tender for the access road construction estimated at 550 billion won. However, concerns about unsuccessful bidding are growing in the construction industry due to the low construction costs.
According to the maintenance industry on the 8th, the Korea Rail Network Authority issued tenders for the two sections (Sections 1 and 2) of the Gadeokdo New Airport access railway on the 30th of last month. The Ministry of Land, Infrastructure and Transport and the Korea Rail Network Authority are reported to select a construction contractor in the third quarter of next year and to encourage prompt commencement.
Both sections will be carried out in a turnkey manner (integrated design and construction). Section 1 will be about 8.5 kilometers long with tunnels and a vehicle depot, with a construction cost of 679.6 billion won. Section 2 will include a tunnel and one station, with a construction cost of 532.3 billion won.
According to the maintenance industry, DL E&C and Lotte Engineering & Construction are showing interest in Section 1. For Section 2, Ssangyong Engineering & Construction is mentioned as a candidate. However, Section 2 is evaluated as having less interest from construction companies due to the low construction cost relative to Section 1.
The Ministry of Land, Infrastructure and Transport's Busan Regional Land Management Office has also initiated the contractor selection process by issuing a tender for the access road construction at the end of last month. The project involves constructing a 9.35-kilometer, four-lane road connecting the Gadeokdo New Airport and Busan Songjeong-dong in a turnkey manner, with a construction cost of 558.3 billion won. Within the maintenance industry, there are concerns that the recently increased construction costs have not been reflected in the low construction expenditure, given the high difficulty involved in simultaneously building tunnels and bridges.
As a result, there are concerns about unsuccessful bids for both the railway Section 2 and the road construction project. A representative from a large construction company noted, "There is a general perception among construction companies that the cost of construction is somewhat higher than what has been estimated," adding, "Particularly, the project scale is likely suitable for mid-sized construction companies to actively participate, but many construction companies are likely to be reluctant due to their financial difficulties stemming from the recent downturn in the construction market. Therefore, there is a possibility of failure to secure bidders, similar to the land development project."
Earlier, the land development project for the Gadeokdo New Airport, which accounts for 78% of the total project cost amounting to 10.53 trillion won, maintained a competitive bidding approach while relaxing the bid participation conditions but ended up going to private contracts after failing to attract bidders. Two rounds of bidding were conducted in May and June, but during the first round, not a single construction company applied, resulting in an unsuccessful bid. For the second to fourth rounds, only one consortium consisting of Hyundai Engineering & Construction and Daewoo Engineering & Construction submitted the pre-qualification documents (PQ), leading to a lack of competitive bidding due to a single bid. Subsequently, Hyundai Engineering & Construction decided to participate in the private contract, allowing the project to proceed.
The land development project did not proceed with competitive bidding due to a tight schedule and the complexity of the construction, but it was noted that even during that time, construction companies were reluctant because it was not a project likely to yield significant profits in a poor construction market.
Another construction company representative mentioned, "Rail and road construction projects have less symbolic value compared to land development projects and airport construction, thus have limited portfolio utilization," adding, "The project scale is also somewhat ambiguous for large construction companies to express interest, meaning there is a possibility of proceeding through private contracts rather than competitive bidding."