Starting in November, construction companies must establish criteria for fluctuations in construction costs due to price changes from the bidding stage of maintenance projects such as reconstruction and redevelopment. As conflicts over construction costs between the unions and construction companies intensified after the maintenance project contracts, the government mandated that these criteria be established from the stage of selecting contractors.
According to the Ministry of Land, Infrastructure and Transport on the 13th, the government issued a partial amendment notice for the 'Standard for Processing Maintenance Project Contracts.' This amendment stipulates that construction companies must specify 'criteria for fluctuations in construction costs due to price changes' in their bidding proposals when participating in maintenance projects. This measure will be applied starting in November, three months after the announcement.
The Ministry of Land, Infrastructure and Transport implemented such regulations as disputes regarding construction cost increases between unions and contractors have been on the rise in maintenance projects. Due to increases in material costs and labor costs, the frequency of contractors requesting additional construction costs from unions in maintenance projects is increasing.
According to the Korea Real Estate Board (REB), the number of verified construction costs last year totaled 36, a 12-fold increase compared to 2019, which had only 3 cases. When conflicts arise over construction cost increases, contractors may halt work, delaying project completion and restricting the occupancy of pre-purchasers.
In the case of the Olympic Park Foreon in Dunchon-dong, Gangdong-gu, the contractor requested an additional 15 billion won in construction costs in October of last year, a month before occupancy, but the union refused, leading to a halt in infrastructure work. In the 'Cheolsan Xi The Heritage' in Cheolsan-dong, Gwangmyeong, GS Engineering and Construction sparked a conflict with the union in January of this year by demanding an increase of 103.2 billion won in construction costs. After mediation involving the Gyeonggi-do Dispute Resolution Committee and Gwangmyeong City, GS Engineering and Construction and the union agreed to increase the construction costs by 52 billion won in April.
Once this amendment is applied, maintenance unions will be able to compare the criteria for construction cost increases by different construction companies at the contractor selection stage. This will clarify the criteria for construction cost increases in the event of price hikes, potentially reducing conflicts over construction costs.
An official from the maintenance project stated, 'It is positive that we can fully recognize and evaluate the construction cost aspects before selecting the contractor, rather than after the selection and before signing the main contract.'
In addition, this amendment stipulates that, when construction companies participate in maintenance projects, they must include items such as ▲ financial status and construction capability of contractors ▲ project overview related to design outline and unit composition ▲ specifications and performance of the proposed finishing materials.
However, the construction industry views that such strengthened bidding criteria may act as a burden. There are concerns that the market will be restructured to focus on large companies that can minimize additional construction costs, making it even more difficult for small and midsize construction companies to participate in maintenance projects. A representative from the construction industry remarked, 'With the strengthened bidding and construction standards, the burden on construction companies increases, and there are concerns that fair competition could be hindered.'