SH Corporation Expands 'Direct Construction System'... Also Led Legal Revisions

Seoul Housing and Communities Corporation (SH Corporation) will expand the direct construction system to Magok Complex 16 and Wirye A-14 Complex. They also led a legal amendment to reflect the 'direct construction ratio' as an evaluation item for local contract law projects over 3 billion KRW starting from January 2025.

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On the 13th, SH Corporation announced plans to order projects under the direct construction system this year, including Magok District Complex 16, a land lease-type sale housing, and Wirye District A-14 Block, a profit-sharing sale housing.

The direct construction system means that the construction company does not subcontract but uses its own workforce, materials (including purchases), and equipment (including rentals) to carry out the construction. This encourages the primary contractor's responsible construction, ensuring building quality and safety.

Under the current Framework Act on the Construction Industry, direct construction is mandatory at a rate of 10-50% for construction projects under 7 billion KRW, but there is no compulsory regulation for projects over 7 billion KRW.

SH Corporation has independently promoted the expansion of the direct construction system to eliminate the practice of multi-level subcontracting and strengthen the responsibility of the primary contractor. They required the primary contractor to directly construct projects over 7 billion KRW ordered by SH Corporation and significantly increased the direct construction ratio to 50% for projects under 10 billion KRW and 30% for projects over 10 billion KRW.

Since announcing the expansion of direct construction for projects over 7 billion KRW in December 2022, SH Corporation has applied the direct construction system to projects such as Godeok Gangil Complex 3 and Magok 10-2 Complex. Seoul Mayor Oh Se-hoon also pointed out in 2022 that safety issues at construction sites arise from habitual multi-level subcontracting and stated that the proportion of direct construction should be increased.

Additionally, SH Corporation requested the Ministry of the Interior and Safety to revise the 'criteria for selecting successful bidders in local government bids,' which was reflected in the eligibility review and comprehensive evaluation criteria for direct construction plans. SH Corporation emphasized the importance of the direct construction system by attending several meetings on local contract system improvements.

According to the Ministry of the Interior and Safety, from January 2025, projects subject to the local contract law over 3 billion KRW will have the direct construction ratio reflected as an evaluation item (full score for 30% or more). For example, if direct construction exceeds 30%, the primary contractor must directly perform processes such as reinforced concrete work.

Kim Heon-dong, President of SH Corporation, stated, "The direct construction system, which induces responsible construction by the primary contractor, is the starting point for innovation in construction culture," and added, "We will expand the direct construction system to prevent poor construction and ensure the quality and safety of buildings."

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