SH Corporation Introduces Direct Construction System for Projects Over 7 Billion Won

From 'Jungnang Fashion Sewing Smart Anchor Construction' Applied
SH Corporation Establishes Internal Policy... "Eradicate Chronic Subcontracting Practices"

SH Corporation building.

[Asia Economy Reporter Kim Hyemin] Seoul Housing and Communities Corporation (SH Corporation) is expanding the direct construction regulation to construction projects exceeding 7 billion KRW. This is to eradicate poor construction practices caused by subcontracting customs.

SH Corporation announced on the 20th that it will expand the application of the direct construction system starting with the 'Jungnang Fashion Sewing Smart Anchor Construction Project,' scheduled to be ordered this month. Direct construction means that the primary contractor who wins the project does not entrust the work to subcontractors but uses its own personnel, materials (including purchases), and equipment (including rentals) to carry out the construction.

Under the current Construction Industry Basic Act, the direct construction regulation is mandatory only for construction projects under 7 billion KRW. However, SH Corporation has established an internal policy to apply the direct construction regulation to projects exceeding 7 billion KRW as well. This is to eradicate the subcontracting customs that shift construction responsibility and risk, which are major causes of poor construction at construction sites, onto subcontractors. Applying this regulation to projects over 7 billion KRW is the first in Korea.

According to the internal policy, SH Corporation will designate major construction types that affect safety and quality, such as civil engineering and framework work, as 'direct construction target work types' when ordering projects, and specify the 'mandatory direct construction ratio' in the bidding announcement. Subsequently, the project issuer will inspect quarterly whether the direct construction target work types and mandatory ratios are properly implemented on site. If subcontracting is necessary due to difficulties in direct construction during the project despite being a direct construction target work type, a 'subcontract contract appropriateness review' will be conducted.

The Jungnang Fashion Sewing Smart Anchor, to which the direct construction system is applied this time, has a total floor area of 8,109㎡, with four basement floors and seven above-ground floors, and will build a knowledge industry center and a public parking lot. The construction cost is approximately 22.2 billion KRW. SH Corporation held a working-level council and finalized the direct construction target work types and ratios as reinforced concrete work (26.8%) and earthwork (4.98%).

SH Corporation plans to promote legislative amendments to increase the direct construction ratio in the future. It judged that some items in the 'Ministry of the Interior and Safety Accounting Regulations,' applied when evaluating construction performance, are obstacles to activating direct construction, and has proposed amendments, currently negotiating system improvements.

According to the regulations, the evaluation criteria applied to the credit evaluation of eligible review target projects (estimated price under 30 billion KRW) and comprehensive evaluation target projects (estimated price over 30 billion KRW) specify subcontracting performance and cooperative partner development as evaluation fields, which SH Corporation explains currently induce a certain level of subcontracting.

Kim Heondong, President of SH Corporation, said, "Through the direct construction system for construction projects, we will do our best to prevent poor construction, wage arrears, and illegal employment caused by multi-level subcontracting structures and supply high-quality, premium century housing."

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