Redevelopment and Reconstruction Brighten... Seoul City "Faster Selection of Construction Companies"

After Project Implementation Approval to After Union Establishment
Seoul City and Council Plan to Amend Related Ordinances in the First Half
"Early Redevelopment Projects to Gain Momentum... But Side Effects Must Be Reduced"

[Asia Economy Reporter Onyu Lim] Seoul City is moving the timing of selecting construction companies for redevelopment and reconstruction projects forward to after the approval of the establishment of the association to expedite housing supply. This is the first time in 13 years since the decision was made to select construction companies after the project implementation approval due to issues with opaque construction cost increases. It is expected that maintenance projects will accelerate as even early-stage associations will be able to smoothly secure funding. However, concerns have been raised that past problems such as excessive collusion between construction companies and associations may resurface.

Redevelopment Area in Ahyeon-dong, Mapo-gu, Seoul

Seoul City to Move Construction Company Selection Timing Forward to After Association Establishment for the First Time in 13 Years

According to Seoul City on the 3rd, starting from July, all maintenance project areas will be allowed to select construction companies after the approval of association establishment. To this end, the city plans to revise the Urban and Residential Environment Maintenance Ordinance within the first half of the year with the cooperation of the Seoul Metropolitan Council's standing committee.

Maintenance projects proceed in the order of designation of maintenance zones ▶ safety inspection (reconstruction) ▶ approval of association establishment ▶ project implementation approval ▶ management disposition plan approval ▶ relocation and demolition ▶ completion. According to the Urban and Residential Environment Maintenance Act, the selection of construction companies is generally possible after the establishment of the association. However, in 2010, Seoul uniquely decided to select construction companies after project implementation approval by introducing the Public Management Support System nationwide. This was to prevent situations where roughly estimated construction costs without specific items were excessively increased by construction companies, causing project failures or delays. Contrary to expectations, early-stage projects without construction companies faced difficulties in securing funds, and after selecting construction companies, frequent design changes caused further project delays. Therefore, Seoul City has decided to revert the timing of construction company selection.

A Seoul City Housing Maintenance Division official explained, "By moving the timing of construction company selection forward, detailed construction plans and reviews on architecture and traffic can proceed simultaneously, speeding up project progress," adding, "It also allows for securing funding plans and applying branded designs at the early stages of maintenance projects."

Seoul City Hall

Concerns Over Ambiguous Construction Cost Estimation and Excessive Construction Company Interference Remain... Seoul City Plans to Establish Safeguards

However, concerns have been raised that problems experienced in the past may recur with the earlier selection of construction companies. First, it becomes difficult to estimate construction costs and verify feasibility. Previously, the design documents confirmed through project implementation approval served as the basis for construction cost estimation. Other side effects include corruption caused by overheated bidding wars and issues where construction companies dominate projects.

In response, Seoul City will operate a ‘Special Team for System Improvement.’ The team plans to establish a method allowing construction companies to participate in projects at the level of ‘detailed bidding,’ specifying budgets for each construction item based on confirmed design documents. A Seoul City Housing Maintenance Division official said, "Moving up the timing of construction company selection does not mean abandoning the achievements of the previously promoted public support system," adding, "We plan to prepare safeguards to minimize side effects within the first half of the year."

Kim Deokrye, head of the Housing Research Office at the Korea Research Institute for Housing and Urban Affairs, said, "Given Seoul’s characteristics with no new housing sites, it is necessary to speed up maintenance projects for smooth housing supply," adding, "With earlier construction company selection, participants’ expertise and financial capacity will increase, accelerating the process from association establishment approval to project implementation approval." However, she advised, "Authorities should manage to minimize issues such as collusion between associations and construction companies and project opacity that were problems in the past."