Why the 'Geonjilbeop' Amendment Penalty System Requires a Comprehensive Review

Geonsanyeon, "Current Penalty System Emphasizes 'Punishment Effectiveness' While Leaving Effectiveness and Objectivity Issues Unaddressed"
Pre-sale Restrictions Worsen Financial Capacity of Mid-sized and Small Housing Construction Firms... Negative Impact on Local Economy

Archive photo / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Yuri Kim] Recent legislative notice by the Ministry of Land, Infrastructure and Transport on the 'Construction Technology Promotion Act' penalty point system has been analyzed to potentially cause various fairness-related issues across the construction industry. It has been pointed out that the system, currently focused on 'post-penalty for poor construction,' should be improved to focus on 'prevention of poor construction' in line with its ultimate operational purpose.

The penalty point system under the Construction Technology Promotion Act is fundamentally designed to ensure the effectiveness of on-site inspections to prevent poor construction, raise awareness to prevent recurrence of poor construction, and impose penalty points and related disadvantages for minor issues that raise concerns about poor construction. However, the recent revision of the penalty point system has shifted towards strengthening post-penalties for defects, leading to strong opposition from the construction industry.

On the 24th, the Korea Construction Industry Research Institute presented improvement measures for the operation of the penalty point system and the disadvantage linkage system in a research report titled 'Problems and Measures to Enhance Effectiveness and Fairness of the Penalty Point System under the Construction Technology Promotion Act.' Since its initial introduction, the penalty point system under the Construction Technology Promotion Act has continuously faced controversies regarding ineffective defect measurement standards, disadvantage systems, and on-site inspections for penalty imposition that do not align with the system’s operational objectives.

Issues identified in defect measurement standards include ▲broad responsibility scope regulations ▲unclear penalty imposition criteria ▲lack of fairness and balance in penalty imposition ▲absence of penalty balance considering the severity of defects ▲lack of consistency with other laws and overlapping punishments. In the disadvantage system, unreasonable and excessive disadvantages that deviate from the purpose of preventing poor construction were pointed out as problems. A representative example is the restriction on pre-sale.

The revised penalty point system also failed to address these previously raised issues. Deputy Researcher Kwangbok Jeong of the Korea Construction Industry Research Institute stated, "The current penalty point system emphasizes only the effectiveness of the penalty system without considering problems related to unclear and non-objective imposition criteria, fairness, and balance." In particular, the change in penalty calculation method from an average based on the number of inspection sites to a simple sum, and the change in penalty imposition for joint contract projects from proportional allocation based on investment shares to collective imposition on the representative company have led to increased disadvantages such as restrictions on bid participation and pre-sale limitations, making this revision a punishment-centered reform.

The report cited the negative impacts of implementing the revised penalty point system on the construction industry, including 'worsening management and order conditions for small and medium construction companies participating in projects subject to qualification review,' 'withdrawal of mid-sized and small housing construction companies with insufficient financial capacity from the housing market due to pre-sale restrictions,' and 'difficulty in forming joint ventures due to collective penalty imposition on the representative company in joint contract projects.' As a result, the Korea Construction Industry Research Institute pointed out that this would ultimately restrict the growth of small construction businesses and participation of local construction companies, negatively affecting regional economic revitalization.

Deputy Researcher Jeong emphasized, "Comprehensive improvement of the penalty point system under the Construction Technology Promotion Act is necessary to fulfill its basic operational purpose of 'preventing poor construction.'" To this end, he suggested ▲re-examining the penalty calculation method and subjects of imposition ▲improving penalty imposition criteria ▲institutionalizing penalty reduction and appeal systems ▲introducing a statute of limitations for the penalty system ▲and enhancing the substance of on-site inspections.

Deputy Researcher Jeong added, "Excessive punitive measures focused on punishment that deviate from the purpose of preventing poor construction can negatively impact the construction industry, which plays a vital role in the national economy," and "Given the strong opposition from the industry surrounding this revision, it is necessary to prepare measures to enhance the effectiveness and fairness of the penalty point system by balancing the level of disadvantages linked to penalty points."

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