Private Sector Participation Public Housing Projects to Reflect 'Price Levels'... Busan Urban Corporation to Actively Respond to 'Increases'

"Concerns Over Breach of Duty if Construction Cost Increases and Price Fluctuations Are Reflected

Guideline Revision Considers Private Requests for Increased Costs Due to Inflation"

Busan Metropolitan Corporation (BMC, President Kim Yonghak) announced on the 22nd that it is preparing follow-up measures regarding the first adjustment results of the Ministry of Land, Infrastructure and Transport's Public-Private Joint Construction Investment Project Adjustment Committee concerning the increase in project costs for public housing projects with private participation.

The public housing project with private participation is a project jointly implemented by private developers and public institutions.

The public institution is responsible for providing land and managing the construction project, while the private developer is responsible for design, construction management, civil complaints, defects, and other matters related to the project.

For public housing projects with private participation implemented before the revision of the Ministry of Land, Infrastructure and Transport's guidelines in March 2023, it was agreed that price fluctuations would not be reflected despite the increase in the construction cost index.

However, due to unprecedented rises in construction costs caused by various external factors such as the Russia-Ukraine war over the past two to three years, private developers have continuously requested increases in construction costs, arguing the difficulties of the project, despite the policy stated in the agreement that price fluctuations cannot be reflected. Public institutions, on the other hand, found it difficult to narrow differences and resolve conflicts, as increases beyond what was specified in the agreement could raise concerns of breach of trust.

To resolve these issues, the Ministry of Land, Infrastructure and Transport launched the Public-Private Joint Construction Investment Project (PF) Adjustment Committee in October 2023 to mediate. After two committee resolutions, construction cost guideline standards were presented, and in April of this year, an explanatory session was held jointly with the Board of Audit and Inspection for public institutions and private developers to explain supplementary measures for the construction cost guidelines and plans related to preliminary consulting.

Busan Metropolitan Corporation also actively responded to the issue of project cost increases by requesting an official document from the Ministry of Land, Infrastructure and Transport. On the 20th, the Ministry sent an official document to LH and local public corporations instructing them to apply for 'preliminary consulting by the Board of Audit and Inspection.' Accordingly, once the discussions between LH and the Board of Audit and Inspection on price fluctuations in private participation projects are completed between June and July, BMC is preparing to apply for 'preliminary consulting by the Board of Audit and Inspection' through the Busan City Audit Committee.

Kim Yonghak, President of Busan Metropolitan Corporation, said, "I am pleased that the issue of breach of trust can be partially resolved and a plan to alleviate the difficulties of construction companies has been established through the corporation's active expression of opinions and the proactive administration of the Ministry of Land, Infrastructure and Transport and the Board of Audit and Inspection regarding price fluctuation adjustments," adding, "As the largest construction public enterprise in the Busan area, BMC will do its best to revitalize the local economy."

Busan Urban Corporation

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