Ministry of Land, Infrastructure and Transport Cracks Down on Illegal Subcontracting at Construction Sites: "Zero Tolerance Strict Measures"

(Data provided by the Ministry of Land, Infrastructure and Transport)

The Ministry of Land, Infrastructure and Transport announced on the 26th that it detected illegal subcontracting at 46 sites out of 136 construction sites nationwide following a rigorous on-site inspection.

From the 15th of last month to the 20th of this month, the Ministry conducted a special inspection of 136 public construction sites. This inspection targeted 136 sites suspected of illegal subcontracting among 2,401 specialized construction sites contracted by general construction companies due to mutual market entry.

As a result, illegal subcontracting was found at 46 construction sites, accounting for about 34% of the total inspected sites, where the principle of direct construction was not observed.

Until now, the division of work areas, which allows only general construction companies to handle comprehensive construction projects involving multiple trades and only specialized construction companies to handle single-trade projects, has been criticized for hindering mutual competition based on actual capability and entrenching multi-tier subcontracting structures.

In response, the Ministry amended the Framework Act on the Construction Industry in December 2018 to establish a legal basis for mutual market entry between general and specialized businesses. Public construction projects have allowed mutual market entry since this year, and private projects will allow it from next year.

When mutual market entry is permitted, the principle is to directly perform at least 80% of the contracted amount, but subcontracting within 20% of the contract amount is allowed only in exceptional cases meeting certain conditions, thereby reducing multi-tier subcontracting structures and improving construction efficiency.

The inspection revealed that in many construction sites where mutual market entry is allowed, the principle of direct construction was violated, and illegal subcontracting occurred.

Among the 46 companies caught for illegal subcontracting, 43 failed to directly perform at least 80% of the contracted amount as required, and among them, 15 did not obtain prior written approval from the client.

The remaining 3 companies subcontracted within the 20% limit but did not receive prior written approval from the client.

The Ministry plans to take strict measures with a zero-tolerance policy against the detected companies. For construction companies violating the law, administrative sanctions will be requested from the construction business registration authorities, and if the acts are subject to criminal punishment, they will be reported for prosecution.

Construction companies may face business suspension for up to one year or fines up to 30% of the subcontracted amount violated, and criminal penalties including imprisonment for up to three years or fines up to 30 million KRW may also be imposed.

Woo Jeong-hoon, Director of the Construction Industry Division at the Ministry, said, "When ordering construction projects allowing mutual market entry, clients should specify in the bidding announcement that subcontracting is generally restricted and that the project must be directly constructed, and thoroughly verify any violations of direct construction during the construction process. We ask for strengthened management of direct construction and subcontracting, including more meticulous review of legal compliance during the subcontracting approval process."

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