Seoul City Large Construction Site Completion Deadline Extension and Excessive Increase in Construction Costs Due to Price Fluctuations

Seoul City Councilor Kim Hyeong-jae Points Out in Seoul Urban Infrastructure Administrative Audit: 9-Year Delay in Shinlim-Bongcheon Tunnel Completion, 87.9 Billion KRW Cost Increase; 6-Year Delay in Seonam Water Reclamation Center Completion, 42.4 Billion KRW; Total 496.2 Billion KRW Increase Including 247.7 Billion KRW for Changdong-Sanggye East-West Pedestrian Bridge, Emphasizing the Need to Recognize That Inflation-Related Cost Increases Due to Construction Delays Are Significantly Larger Than Routine Design Change Cost Increases

[Asia Economy Reporter Park Jong-il] In large-scale construction sites commissioned by the Seoul Metropolitan Government, the originally planned construction periods were not adhered to, causing delays in progress. As a result, compensation-type construction cost increases due to price fluctuations (applied at 3% or more) amounted to a staggering 496.2 billion KRW after inspecting only five construction sites.

Seoul Metropolitan Council member Kim Hyung-jae (People Power Party, Gangnam 2, Urban Safety and Construction Committee) pointed out issues related to the extension of construction completion deadlines and construction cost increases due to price fluctuations during the administrative audit of the Urban Infrastructure Headquarters under the Urban Safety and Construction Committee at the 315th regular session on the 10th.

The ‘Sillim~Bongcheon Tunnel Road Construction Project’ located in Sillim-dong, Gwanak-gu, Seoul (from Siheung IC to in front of Nakseongdae Park) saw an increase of 48.618 billion KRW due to price fluctuations on top of the initial contract amount of 182.9 billion KRW for Section 1, and an increase of 39.352 billion KRW on top of the initial contract amount of 154.9 billion KRW for Section 2.

The completion deadline was extended three times, totaling nine years, which increased the construction cost due to price fluctuations, becoming a cause of budget waste. It is expected that the increase due to price fluctuations will continue to grow in the future.

In addition, the ‘Seonam Water Reclamation Center Advanced Treatment and Facility Modernization Project’ initially contracted in 2009 with a completion deadline from November 9, 2009, to August 9, 2015, was extended by six years to October 15, 2021. The total project cost increased from the original 285.3 billion KRW to 349.7 billion KRW, an increase of 64.4 billion KRW. Of this, the construction cost increase due to price fluctuations alone amounted to 42.4 billion KRW, accounting for 66% of the total cost increase.

Other projects include the World Cup Bridge (204.6 billion KRW → 301.2 billion KRW), Sewoon Sangga Public Space Creation Project (19.3 billion KRW → 40.9 billion KRW), and Changdong-Sanggye East-West Pedestrian and Vehicle Bridge (1.3425 trillion KRW → 1.5902 trillion KRW), totaling an increase of 496.2 billion KRW across these five major projects.

Council member Kim said, “Until now, we believed that construction cost increases due to frequent design changes were caused by project plan changes, unexpected discoveries of obstacles, or complaints. However, the issue of cost increases due to price fluctuations from construction period extensions has largely been overlooked.”

He pointed out, “We all need to newly recognize that the increase in construction costs due to price fluctuations from extended construction periods is relatively much larger than the cost increases from routine design changes.”

Kim further emphasized, “The Seoul Metropolitan Urban Infrastructure Headquarters should recognize this and, through thorough pre-inspections from the design stage, adhere as closely as possible to the planned construction period to reduce budget waste caused by price fluctuations.”