Although multiple construction companies submitted letters of intent to participate in the '3rd Pangyo Techno Valley Construction Project,' which has an estimated project cost of about 2 trillion won, concerns have arisen that some construction companies are taking a conservative approach due to insufficient construction funds, leading to difficulties in advancing the project.
According to the Gyeonggi Housing and Urban Corporation (GH) on the 21st, a total of 18 construction companies, including large firms such as Hyundai E&C, POSCO E&C, Daewoo E&C, and DL E&C, submitted letters of intent in the results of the '3rd Pangyo Techno Valley Construction Project Private Operator Bidding Announcement.'
The project is intended to create a knowledge industry center, office facilities, community facilities, a university, and dormitories on a site of 60,937 square meters in the Seongnam Geumto public housing district. The estimated project cost totals 1.985 trillion won, of which the construction cost for private operators (including other costs) is 1.2656 trillion won.
GH will close the business application confirmation letter submission on the 11th of next month. After that, they plan to receive project applications in April and select the preferred negotiation targets after relevant evaluations.
Construction companies ranked 1st to 10th in the construction capability evaluation can participate with up to two companies and form a consortium with no more than five companies. Consortium members must include companies with headquarters located in Gyeonggi Province by at least 20%. All participating companies, excluding small and medium-sized enterprises, must have a minimum equity of 10%.
Despite being a large-scale public project with construction costs exceeding 1.2 trillion won, construction firms assess that at least 1.5 trillion won is insufficient. As such, there are speculations that during the business application confirmation letter bidding phase on the 11th of next month, construction firms may take a conservative approach. Although they may not submit a business application confirmation letter after submitting a letter of intention to bid, if they submit a business application confirmation letter and then abandon the project, they may face disadvantages in participating in future projects issued by the same ordering agency.
A representative from a large construction company noted, "A rough estimate suggests that construction costs will exceed 1.2 trillion won," and added, "Recently, many public projects have been abandoned or proceeded with negotiated contracts due to low construction costs, and it seems that the 3rd Pangyo Techno Valley project is just starting. There is a need to normalize construction costs for public projects."
Another construction company representative said, "If the project cost is low, it is difficult for construction companies to discuss and form a consortium. Furthermore, the requirement to include local construction firms can divide equity among large firms and create additional risks, which could be burdensome." They also commented, "It is a very large-scale project, and since there are not many recent public project orders, companies might express interest during the letter of intent phase, but will likely approach the application confirmation phase conservatively."
Because the project is not related to housing developments such as apartments, the project details are crucial. However, the currently disclosed designs are so large and varied that construction companies find it challenging to evaluate them. There is also a response indicating that the risk of unsold units is greater for knowledge industry centers than for dwellings.
A representative from a large construction company stated, "Pangyo is already home to several companies, so the location is guaranteed, but the knowledge industry center market itself carries a high risk of unsold units. It's a challenging situation to proceed actively amid rising construction costs," adding that "although the project is large, it is a mixed-use development project, so there is variability, leading to a conservative examination."
GH stated that they would conduct relevant reviews based on the results of the business application confirmation letter bidding on the 11th of next month. A GH representative noted, "We are aware of industry concerns regarding construction costs. First, we will wait to see the results of the application confirmation letter bidding next month."