Illegal Subcontracting, Punishments Are Lenient... Most Construction Participation Bans Last Only 1-2 Months Despite Maximum 2-Year Limit

Construction Subcontracting Participation Restrictions: 148 Cases Over 3 Years
Only 6 Sites Received 4-Month Participation Bans
Over 95% Faced Restrictions Lasting Just 1-2 Months

[Asia Economy Reporter Oh Ju-yeon] Although illegal subcontracting issues among construction companies have become controversial following the collapse of a redevelopment building in Hakdong 4 District, Dong-gu, Gwangju, which resulted in nine deaths last year, the penalties have been found to be lenient. Over the past three years, a total of 148 cases have been subject to restrictions on participation in public construction subcontracting due to illegal re-subcontracting and non-payment of retirement reserve funds. While the law allows for a maximum restriction period of up to two years, most cases have only received participation bans lasting one to two months.

According to data on 'Restrictions on Participation in Construction Subcontracting' submitted by the Ministry of Land, Infrastructure and Transport to Kim Byung-wook, a member of the Democratic Party of Korea, from 2020 to July 2022, a total of 148 construction companies were subject to participation restrictions in public construction subcontracting under Article 29-3 of the Construction Industry Basic Act.

The total number of restrictions by year was △62 cases in 2020, △63 cases in 2021, and △23 cases from January to July 2022. Specifically, 'subcontracting restriction violations' showed an increasing trend with 13 cases in 2020, 30 cases in 2021, and 23 cases in 2022 (January to July), while fines for non-payment of retirement reserve funds were 49 cases in 2020, 33 cases in 2021, and zero cases in 2022 (January to July).

Moreover, among the 148 companies restricted from participating in construction over the past three years, only six companies received a four-month restriction, while the remaining 142 companies were restricted for just one to two months. The current Construction Industry Basic Act stipulates a maximum subcontracting participation restriction period of two years, and the enforcement decree sets the restriction period from a minimum of one month to a maximum of 12 months depending on the reason.

Looking in detail at the restrictions due to subcontracting violations over the past three years, there were △10 cases of subcontracting within the same industry, △34 cases of re-subcontracting to unregistered companies, △7 cases of blanket subcontracting, and △15 cases of re-subcontracting to companies within the relevant industry. Illegal re-subcontracting in construction projects is still not decreasing.

Rep. Kim said, "There have been major casualties due to construction collapse accidents, and the biggest problem is illegal subcontracting," adding, "While the construction industry should be promoted according to circumstances, since the law allows a maximum participation restriction period of two years, it is necessary to strengthen monitoring for safety regarding illegal acts in construction projects."