Local Government Contracts to Reflect Price Fluctuations and Raw Material Cost Increases

Ministry of the Interior and Safety Announces Legislative Notice for Amendment to the 'Local Contract Act Enforcement Decree'

The system will be improved so that contract amounts can be reasonably adjusted in the event of price fluctuations or raw material price increases in contracts ordered by local governments.

On the 16th, the Ministry of the Interior and Safety announced that it will give a 40-day legislative notice from the 17th until the 26th of next month for the amendment of the "Enforcement Decree of the Local Contract Act" containing these details.

The main points of this amendment are as follows. First, when a contract between a local government and a company is canceled or terminated and a new contract is made with another company, the conditions for 'price fluctuation adjustment' will be improved so that the new contracting party can receive a fair price. Through this amendment, if 90 days have passed since the 'original contract date' and the item adjustment rate has increased or decreased by 3% or more, the contract amount can be adjusted by reflecting the price fluctuation.

The conditions for adjusting the contract amount in case of a sharp rise in construction material prices will also be relaxed. Previously, the proportion of specific standard materials had to exceed 1% of the construction cost (net construction cost), but it will be improved so that the contract amount can be adjusted if it exceeds 0.5%.

In addition, the number of small and medium-sized enterprise technology development products eligible for private contracts will be expanded from the existing 9 types to 13 types by adding 4 more.

The amendment can be checked in the official gazette or the National Participation Legislation Center, and opinions on the amendment can be submitted via mail, fax, or the National Participation Legislation Center.

Choi Byung-kwan, Director of the Local Finance and Economy Office, said, "Due to recent sharp rises in raw material prices and high interest rates, difficulties in the field such as the construction industry and manufacturers are increasing," and added, "We hope this system improvement will help enhance the fairness of contract prices and ease the burden on companies."

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