Overheating in Winning Bids for Hannam 3 District Shows Signs of 'Rehashing' (Comprehensive)

Project Budget of 7 Trillion Won... Cooperative to Select Contractor by End of April
Allegations of Construction Companies Providing Entertainment Amid Legal-Illegal Tightrope
Ministry of Land and Seoul City, Previously Prosecuted, Remain Passive
Calls for Guidelines and Fairness Pledge Measures Raised

[Asia Economy Reporter Lim On-yu] The selection of the construction company for the redevelopment of Hannam 3 District in Yongsan-gu, Seoul, which has gone through many twists and turns, is now gaining momentum again. However, there are claims that some construction companies are engaging in prohibited individual contact with union members, which is banned by law, signaling signs that the bidding war may become overheated once more. In particular, the Ministry of Land, Infrastructure and Transport (MOLIT) and the Seoul Metropolitan Government, which had even reported the bidding participants to the prosecution, are reportedly not planning any administrative guidance or on-site inspections to prevent overheating, drawing criticism.

According to the urban maintenance industry on the 11th, the Hannam 3 District redevelopment union held an on-site briefing session for construction company bidding yesterday at Dokseodang-ro 5-gil, Yongsan-gu, Seoul. The briefing session is a stage where bidding guidelines are explained to construction companies wishing to participate, and letters of intent are collected. The union had proceeded with the construction company bidding last year with the participation of GS Construction, Hyundai Construction, and Daelim Industrial, but the process was halted after MOLIT and the Seoul Metropolitan Government raised issues about illegal activities by the three companies and requested an investigation by the prosecution. After the prosecution decided not to indict the three companies, the union has started preparing for a re-bidding of the construction company. As expected, the three companies that competed in last year’s bidding participated again in the briefing session.

Due to the previous prosecution report incident, the atmosphere on-site was calm. The union also emphasized fair competition to the construction companies. A union official said, "Since this is a re-bidding, we have revised some parts of the bidding guidelines considering the points raised by MOLIT and the Seoul Metropolitan Government," adding, "We will not accept innovative designs." The official refrained from specifying the changes, but it is highly likely that they relate to violations of the Urban Residential Environment Maintenance Act (interest-free support for project costs), bidding interference (guaranteeing sale prices), and violations of the Fair Labeling and Advertising Act (rent-to-sale) that were problematic last year. A representative from one of the construction companies attending the briefing also said, "The union requested us to keep in mind the points raised by MOLIT and the Seoul Metropolitan Government and to compete fairly," adding, "The guidelines have not changed significantly compared to the first round." He further stated, "If we violate the union’s guidelines, we may be excluded from the bidding, and it could affect future permits from the Seoul Metropolitan Government, so we will compete fairly."

However, the industry observes that signs of overheated competition are already emerging behind the scenes. Hannam 3 District is a large-scale redevelopment project on a 380,000㎡ site, where 5,816 new apartment units will be built, with the total project cost estimated to reach 7 trillion won. Especially since the outcome of this bidding could influence the bidding battles for Hannam 2, 4, and 5 Districts in the future, construction companies are walking a fine line between legal and illegal by attempting individual contact with union members, which is prohibited by law.

In fact, some union members of Hannam 3 District filed a complaint with the Seoul Western District Prosecutors’ Office in November last year, accusing GS Construction’s outsourced promotional staff (OS agents) of providing bundles of cash and entertainment. The same content was reported to the Yongsan District Office, the local government authority. According to the complaint and report, two outsourced promotional staff from GS Construction gave an envelope containing 3 million won in cash to the complainant’s son on November 9 last year, placing it inside the construction company’s promotional booklet. They also consistently provided expensive meals and fruit baskets to some union members. According to Article 38 of the Maintenance Project Contract Handling Standards, construction companies are prohibited from individual promotion and providing money or gifts to union members regarding the selection of construction companies. A representative from a construction company said, "We want to compete according to the law, but realistically, it is impossible to do it alone."

The bigger problem is that MOLIT and the Seoul Metropolitan Government, which should induce fair competition, are just standing by. A MOLIT official said, "There are no plans yet for on-site investigations or guideline presentations regarding Hannam 3 District." Because of this, the industry points out that MOLIT and the city government should establish institutional measures such as clearly presenting guidelines, requiring fair competition pledges, and operating reporting centers to prevent overheated competition. A representative from the maintenance industry said, "There are limits to self-regulation, and if competitors monitor each other, there is a risk of illegal activity," adding, "Public institutions should not just rely on prosecution reports as a remedy after the fact but need to take preemptive measures to prevent illegal competition."

This content was produced with the assistance of AI translation services.