Seoul City said on the 19th that it has prepared guidelines to reduce disputes over indirect costs, cited as a frequent cause of conflict in long-term continuing construction projects. The effective date is Jan. 1 next year.
Indirect costs refer to indirect labor costs, expenses, and the like, excluding material costs and direct labor costs. Under the Local Contracts Act, if the construction period is extended due to the ordering agency's fault, indirect costs may be paid within the scope not exceeding actual expenses.
However, at long-term continuing construction sites, disputes often arose or led to schedule delays due to differences over fault determination, whether indirect costs occurred, the timing of claims, and the appropriateness of calculation.
In response, the city focused the guidelines on standardizing the overall methods for calculating and procedures for paying indirect costs when the construction period is extended.
To secure objectivity and expertise in calculating indirect costs, the city expanded the project cost threshold for review by the "Indirect Cost Payment Review Committee" from the previous 30 billion won to 10 billion won, increasing the effectiveness of the system. It also codified the timing for filing indirect cost claims as 90 days before the scheduled completion date, and for long-term continuing projects, allowed claims 90 days before the scheduled completion date for each phase.
The city expects that with the implementation of this system, disputes such as lawsuits and arbitration related to indirect costs will decrease and the transparency of the indirect cost claim process will be strengthened. Kim Seung-won, Seoul City construction technology policy director, said, "We will continue to promote rationalization of regulations at construction sites and improvements to practical guidelines to enhance the quality and trust of public works."