Korea Rail Network Authority "Reviewing Construction Cost Adjustment for Increased Building Material Prices"

[Asia Economy (Daejeon) Reporter Jeong Il-woong] The Korea Rail Network Authority is considering a plan to reflect the increase in construction material prices in the construction costs.

On the 15th, the Rail Network Authority announced that, considering the increasing burden on contractors due to the recent surge in raw material prices, it will review reflecting the rise in material prices in the construction costs before issuing design and bidding (turnkey method) construction orders.

This initiative aims to minimize the impact of rising construction raw material prices on upcoming railway projects and reduce the burden on companies.

The Rail Network Authority plans to sequentially issue orders for 4 projects and 13 sections by the end of the year, including the Nam-bu Inland Railway turnkey construction (2 sections) ordered last month, the Gwanggyo?Homaesil double-track electrified railway, and the Metropolitan Area Express Railway (GTX-B).

However, the Rail Network Authority believes that if the rise in raw material prices becomes a pretext for construction companies to withdraw from bidding, causing the bids to fail, there is a risk of project delays.

Until now, in turnkey projects, the construction company has borne all responsibility from design to construction, and according to the 'Government Bidding and Contract Execution Standards,' price fluctuations occurring during the period from the announcement of the basic plan to the bidding could not be reflected in the contract amount.

Even in the current situation where exceptional circumstances such as the Russia-Ukraine war have caused rapid price increases, the structure requires the construction company to fully bear the cost increases.

Accordingly, the Rail Network Authority plans to explore various measures to alleviate difficulties on site, including negotiating with the government to reflect price fluctuations in advance before ordering through total project cost self-adjustment consultations.

Kim Han-young, Director of the Rail Network Authority, said, “Passing on costs caused by external factors such as price fluctuations to construction companies goes against fair economic policies,” and added, “We will strive to resolve the difficulties on site caused by the sharp rise in raw material prices and ensure that the scheduled railway projects proceed without setbacks.”

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