Controversy Erupts from the Start of Hannam 2 District Contract Battle... Difficulties Arise from Preparing Bid Proposal Comparison Table

Daewoo E&C and Association Clash Over Bid Proposal Comparison Table
Request to Yongsan District Office to Review Invalidity of Lotte E&C's Innovative Design Bid
Association Sends Warning Letter Over False Information Dissemination and Damage to Association's Credibility

[Asia Economy reporters Chawan-yong and Hwang Seoyul] The redevelopment bidding competition for Hannam 2 District in Yongsan-gu, Seoul, between Daewoo E&C and Lotte E&C has been tumultuous from the start. The association and Daewoo E&C are in conflict over the bidding guidelines and the decision on the bid proposal comparison table, while Daewoo E&C and Lotte E&C are engaged in disputes over alleged violations of pre-promotion rules.

As related complaints were filed even with the Yongsan District Office, the local government requested the association to take cautionary measures due to the intensifying bidding competition. In response, the association sent cautionary letters to both construction companies regarding the dissemination of false information and damage to the association's credibility.

Daewoo E&C Refuses to Sign Bid Proposal Comparison Table

According to the Hannam 2 District redevelopment association and the bidding contractors (Daewoo E&C, Lotte E&C) on the 2nd, Daewoo E&C has recently refused to sign the bid proposal comparison table prepared by the Hannam 2 District association. This is due to concerns that Lotte E&C’s innovative design proposal, which increases the total floor area, may violate the bidding guidelines.

Daewoo E&C submitted an official letter to the Yongsan District Office requesting a review of whether Lotte E&C’s innovative design proposal violates regulations, and has stated that it will withhold signing the bid proposal comparison table until the results are announced.

A Daewoo E&C representative said, “Lotte E&C’s innovative design proposal, which increases the total floor area, is highly likely to violate the bidding rules. We have requested the association and Yongsan District Office to review the invalidity of Lotte E&C’s bid, and we will wait for the results before signing the comparison table.”

In response, the Yongsan District Office stated that the innovative design proposal is an additional idea rather than the original design, and if it is a matter agreed upon by the association and the bidding contractors, there is no problem. However, if the innovative design proposal is promoted as if it were the original design, administrative guidance or other measures will be taken.

A Yongsan District Office official said, “We requested the association to re-examine whether there are any issues with the content. Also, due to concerns about the intensifying competition between bidding contractors, we sent an official letter requesting the association to properly control the situation.”

The association rebutted that all contents in the innovative design proposal were confirmed and agreed upon by the association and the bidding contractors, so there is no issue. Accordingly, the association sent a cautionary letter to Daewoo E&C regarding the dissemination of false information and damage to the association’s credibility, and a cautionary letter to Lotte E&C regarding the cautionary matters requested by the Yongsan District Office due to the intensifying competition between bidding contractors.

In fact, according to a search on Seoul City’s comprehensive maintenance project portal ‘Jeongbi Project Jeongbi Mongttang,’ the association sent an official letter on the 29th of last month titled ‘Daewoo E&C Official Letter Reply and Cautionary Measures for Daewoo E&C Due to Violation of Contractor Promotion and Bid Participation Regulations.’

The letter states, “The comparison table of bid proposals, agreed upon by each contractor’s presence and our association’s executives, was confirmed through recorded minutes to acknowledge your company’s bid establishment and agreement on the comparison table. However, your company has spread false information to association members claiming there was no agreement, damaging the credibility of the association’s work. Furthermore, your company’s official letter was distributed to association members before formal receipt by the association, which appears to be an exploitation of the association for your company’s promotion.”

One Violation by Daewoo E&C, Promotion Violations by Lotte E&C Each Receive Cautionary Measures

Through the official letter, the association also pointed out issues with Daewoo E&C’s alternative design proposal. It was designed in violation of the floor area ratio and height restriction compliance standards according to the Hannam 2 District redevelopment promotion plan announced during the bidding site briefing.

In particular, the association stated in the letter that participating in the bid as if the design proposal met the association’s standards, and distributing the design proposal to association members as if it were factual before verification by the association and Yongsan District Office, are serious violations of the bidding process, and thus a one-time cautionary measure is being notified.

In light of the above, it appears that Lotte E&C’s innovative design proposal, which increases the total floor area, is included in the comparison table, while Daewoo E&C’s proposed design, which violates floor area ratio and height restrictions, is excluded. In fact, Daewoo E&C submitted a design proposal with a height of 118m, exceeding the 90m height restriction (for Seoul’s Namsan landscape) according to the redevelopment promotion plan.

Regarding this, Daewoo E&C stated, “The 118m design proposal is an alternative design that can be pursued if the height restriction is lifted in the future. Lotte E&C’s innovative design proposal is also not the original design, and increasing the total floor area to expand underground space and improve project feasibility is a trick and a violation. Including only one side’s innovative design proposal in the comparison table is unfair.”

The association is also reported to have sent an official letter titled ‘Cautionary Measures for Lotte E&C Due to Violation of Contractor Selection Promotion’ on the same day.

The letter states, “It has been confirmed that Lotte E&C distributed promotional materials not approved by our association, so we issue this cautionary measure and ask for your special attention.”

Meanwhile, although the Hannam 2 District redevelopment project is witnessing overheated promotion between bidding contractors, separately, both companies are competing by proposing various conditions and designs to capture the votes of association members along with high-end brands to win the construction rights.

First, Daewoo E&C, which proposed the complex name ‘Hannam Summit,’ has partnered with architectural design group JERDE, which designed the Dubai International Financial Centre and the Bellagio Hotel in Las Vegas; landscape design firm STOSS, led by Harvard University landscape architecture professor Chris Reed; and interior design group SWNA, which designed the medals for the PyeongChang Winter Olympics. Additionally, they proposed ▲150% LTV for association members’ relocation costs ▲minimum relocation cost of 1 billion KRW per household ▲one-year grace period for relocation cost repayment ▲full responsibility for association project costs.

Lotte E&C proposed the complex name ‘Le L Palatino’ under the high-end brand ‘Le L,’ showcasing exterior designs in collaboration with hotel design specialist group HBA and renowned Korean media artist Lee Inam, landscape design firm SWA, which participated in Disney World landscaping, architect Choi Siyoung who designed the Signiel Seoul Residence interiors, and plans to develop landscaping and commercial spaces with Front and DnSP. Additionally, they proposed ▲hotel-style community facilities spanning approximately 4,000 pyeong ▲relocation costs through financial agreements with four major banks ▲full responsibility for project costs totaling 4 trillion KRW ▲priority payment of association member refunds (60% upon contract).