If Public Institution Project Costs Increase by More Than 30%, an External Agency Must Conduct a 'Feasibility Reassessment'

Ministry of Economy and Finance Establishes and Implements Total Project Cost Management Guidelines for Public Enterprises and Quasi-Governmental Institutions

[Sejong=Asia Economy Reporter Joo Sang-don] From now on, public institutions must conduct an external expert 'feasibility reassessment' if the project cost increases by 30% or more from the original total project cost.

The Ministry of Economy and Finance announced that it has established the "Guidelines for Total Project Cost Management of Public Enterprises and Quasi-Governmental Institutions," which will be implemented starting from the 1st.

An official from the Ministry of Economy and Finance explained, "These guidelines were established to minimize arbitrary increases in project costs during the execution phase of large-scale projects after the preliminary feasibility study stage, enabling public institutions to manage their financial status soundly. The guidelines are a standardized common guideline at a reasonable level, comprehensively considering the internal standards that each public institution has independently prepared and applied for managing large-scale project costs under their jurisdiction, after broad consultation with public institutions."

The management guidelines limit the scope of total project cost management to projects that have undergone public institution preliminary feasibility studies. The preliminary feasibility study targets for public institutions are new investments and capital contributions with a total project cost of 100 billion KRW or more and a national and public institution burden of 50 billion KRW or more. The scope of total project cost management for fiscal projects includes fiscal preliminary feasibility study projects as well as construction projects with costs of 20 billion KRW or more.

Additionally, a new internal feasibility verification procedure called 'feasibility re-examination,' which is not included in the fiscal project total project cost management guidelines, will also be introduced.

Along with this, when the project cost increases by 30% or more from the original total project cost, a verification process through a professional and objective feasibility reassessment requested from an external expert institution is mandated. For fiscal projects, a feasibility reassessment is required when the increase is between 15% and 20% of the total project cost.

These guidelines will apply to projects applying for public institution preliminary feasibility studies from September this year. Each institution will use these guidelines as the standard and proceed with follow-up work such as revising their own guidelines.