Subcontract Payment Underpayment and Unfair Contract Terms... Fair Trade Commission Imposes 464 Million KRW Fine on Lead Construction
[Sejong=Asia Economy Reporter Jusangdon Joo] Lead Construction was caught by the Fair Trade Commission for signing a subcontracting contract at an amount lower than the lowest bid price despite conducting a competitive bidding process.
On the 27th, the Fair Trade Commission announced that it decided to impose a corrective order and a fine of 464 million KRW for unfair subcontract payment determination, unfair special contract setting, and failure to guarantee subcontract payment.
According to the Fair Trade Commission, Lead Construction Co., Ltd. did not sign a contract at the winning bid amount after conducting a lowest-price competitive bidding to outsource construction work from January 2016 to November 2017, but determined the subcontract payment by reducing 529 million KRW through additional negotiations without justifiable reasons.
Lead Construction also set unfair special contracts with subcontractors. According to the principal contractor’s instructions, even if rework, additional work, or repair work is performed, if the cost is within 3% of the total construction contract amount, the unfair special contract imposed the responsibility on the subcontractor regardless of fault. In addition, when outsourcing construction, the subcontract payment must be guaranteed to the subcontractor within 30 days from the contract signing date, but this was not done.
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A Fair Trade Commission official said, "This action sanctions unfair subcontracting practices such as determining subcontract payments at amounts lower than the lowest bid price through additional negotiations after competitive bidding and setting unfair special contracts," adding, "It is expected that unfair subcontracting transaction practices, such as principal contractors forcing subcontractors to accept unfair amounts or unilaterally shifting responsibility, will improve."
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