GS Engineering & Construction Dominates Seongsu and Songpa Bids... Growing Controversy Amid Fierce Competition [Real Estate AtoZ]

Seongsu Zone 1 Bid Guideline Change Fails
GS Engineering & Construction Likely to Secure Private Contract
Some Association Members Protest; Prolonged Internal Conflict May Cause Delays
GS Engineering & Construction Also Sole Bidder for Songpa Hanyang 2nd Complex
HDC Hyundai Development Company Raises Issue Over Individual Contact, Does Not Participate
Association to Decide on Re-announcement After Delegate and Board Review

GS Engineering & Construction has gained a favorable position in the bidding wars for the redevelopment projects of Seongsu Strategic Redevelopment Zone 1 and Songpa Hanyang 2nd Complex in Seoul. However, there has been ongoing controversy, with some alleging that GS Engineering & Construction has altered the bidding conditions to its advantage or provided meals to association members. As a result, some associations are even pushing for a general meeting to dismiss their presidents, raising concerns about GS Engineering & Construction's excessive determination to secure these contracts.

Seongsu Zone 1, Bid Guidelines Remain Unchanged... Favoring GS

On September 4, a vote was held at the Seongsu Zone 1 delegates' meeting regarding changes to the bidding guidelines for selecting a construction company. Specific agenda items included giving priority allocation to association members in premium floors, removing the ban on presenting general sales prices, association member sales prices, and contributions, and easing the excessive obligation for guaranteed completion. This vote took place after Hyundai Engineering & Construction and HDC Hyundai Development Company, who had initially shown interest in the project, boycotted the site briefing, claiming the bidding guidelines were excessive. Without attending the site briefing, a company cannot participate in the bidding process. While the vote was seen as an attempt to increase the chances of Hyundai Engineering & Construction or HDC Hyundai Development Company participating, more than half of the 115 delegates-71 in total-voted against the changes.

As a result of this rejection, the likelihood that GS Engineering & Construction will be awarded the project through a private contract has increased. Seongsu Zone 1 is a project that GS Engineering & Construction has been pursuing for a long time. However, the upcoming schedule will not be smooth. Even if GS Engineering & Construction becomes the preferred negotiation partner, strong opposition from association members could make a private contract difficult.

Prior to the vote, 58 association members held a rally near the association office, condemning the executive board and chanting "absolute opposition to a private contract," calling for a fair bidding process. Some association members are also pushing for a motion to dismiss the association president. If more than 10% of all association members agree, a general meeting to dismiss the association executives can be convened.

In the case of Bangbae Shinsamho Apartment in Seocho-gu, the bid failed because only HDC Hyundai Development Company participated, resulting in no competitive bidding. However, due to strong opposition from association members, a private contract was not concluded. Seongsu Zone 1 is regarded as the largest redevelopment project along the Han River, with a total construction cost of 2.154 trillion won. Once redevelopment is completed, the area will feature 3,014 apartment units as well as cultural and convenience facilities.

GS Engineering & Construction Sole Bidder for Songpa Hanyang 2nd Complex, Halted Amid Controversy Over Individual Contact

Panorama of Songpa Hanyang 2nd Complex

GS Engineering & Construction has also become the sole bidder for Songpa Hanyang 2nd Complex. On September 1, three days before the bidding deadline, GS Engineering & Construction submitted a bid deposit of 60 billion won to the association and entered the bid. HDC Hyundai Development Company, which had shown strong interest in the project, did not participate. A representative from HDC Hyundai Development Company stated, "If the association does not take action regarding the competitor's violations, it would be tantamount to condoning an unfair situation. We will participate in the competition and contribute to maximizing the interests of association members if a fair and clean competitive environment is established."

HDC Hyundai Development Company has raised concerns about GS Engineering & Construction's alleged individual contact with association members. On September 3, the company sent an official letter to the association, stating, "GS Engineering & Construction has violated regulations by conducting illegal tours of the Xi Gallery, providing premium beef meals to certain association members, making individual contacts in violation of the rules, and operating illegal large LED promotional trucks within the complex," and requested a review of GS Engineering & Construction's eligibility to participate in the bid.

However, GS Engineering & Construction responded by sending an official letter on September 4, claiming that HDC Hyundai Development Company was also not competing fairly. GS Engineering & Construction asserted that HDC Hyundai Development Company had shown association members the Yongsan Maintenance Depot promotional center and provided gifts. The company also pointed out that HDC Hyundai Development Company had violated the ban on individual contact by setting up a lounge for association members within the complex and raised issues with large advertisements at bus stops.

The association plans to decide whether to re-announce the construction company selection bid after reviewing the materials with Songpa District Office, followed by board and delegate meetings. Kwon Jagun, president of the Songpa Hanyang 2nd Complex association, stated, "We judged that both sides' demands were legitimate, and confirmed that there was no entertainment provided in GS Engineering & Construction's case of individual contact. We plan to proceed with the process after a resolution by the delegates' meeting. It is undecided whether there will be a re-announcement, or if the current bid announcement will be nullified and a new announcement will be made from scratch. Even if the schedule is delayed, we hope to resolve the suspicions as we prefer a competitive bidding process." On this day, Songpa District Office sent an official letter to the association, requesting that "the bidding process comply with the Seoul Metropolitan Government's public support maintenance project contractor selection criteria." According to these criteria, if a person is found to have provided financial benefits such as money or entertainment, resulting in the invalidation of a bid or selection, their eligibility to participate in the bid can be restricted following a resolution by the delegates' meeting.

Songpa Hanyang 2nd Complex, completed in 1984, currently consists of 744 units and will be rebuilt into a development with four basement levels and 29 above-ground floors, totaling 1,346 units. The construction cost proposed by the association is 7.9 million won per 3.3 square meters, with a total construction cost of 685.6 billion won.