Repeated Failures but 'Joint Contracting Not Allowed' in Notice
Association Opposes Due to Difficulty in Assigning Responsibility
"Joint contracting not allowed."
This phrase can be found in the recent bidding announcements of redevelopment and reconstruction associations in Seoul that are selecting construction companies. Despite the housing market slump and rising raw material costs causing construction companies to withdraw from maintenance projects, each association has not been able to remove this phrase from their announcements. Associations have blocked joint contracting due to difficulties in determining liability in case of defect disputes. However, there are calls for a change in perception, as joint construction by multiple companies can reduce the burden on builders and allow associations to find contractors more quickly, thereby accelerating project progress.
According to industry sources on the 4th, most bidding announcements for maintenance projects currently selecting construction companies in Seoul specify the phrase "joint contracting (consortium) not allowed." The Sin-gil 2 District Redevelopment Association in Yeongdeungpo-gu, Seoul, which held a recent site briefing, also included the phrase "joint contracting not allowed" in its announcement when it opened bidding on the 21st of last month. Despite being a large complex with a total of 2,786 households, it opposed joint construction. Although the board initially allowed the formation of joint contracting for selecting the builder, the association members strongly opposed it, leading to the abandonment of the joint construction policy.
The same applies to associations that have failed multiple times to select a construction company. The Gaepo Jugong 5 Complex Association in Gaepo-dong, Gangnam-gu, Seoul, saw two failed attempts to select a builder in March and this month. However, the third announcement still specified "joint contracting not allowed." Similar situations exist for the Dogok Gaepo Hanshin Reconstruction, which failed once, and the Jamsil Woosung 4th Reconstruction Association, which failed four times.
The Hannam 5 District Association in Dongbinggo-dong, Yongsan-gu, considered the largest redevelopment project in northern Seoul, did not include the joint contracting phrase in its bidding announcement. An association official said, "To allow joint contracting, there is a phrase that must be included according to Seoul City's contractor selection criteria. We removed that phrase and posted the announcement, clearly indicating that joint contracting is not allowed."
Associations oppose joint contracting because it is difficult to determine "liability." A representative from an association currently selecting a construction company said, "We have already seen cases where construction companies shift responsibility to each other when apartment defects occur," adding, "The current trend is that unless it is a large complex with over 5,000 households, there is no need to insist on joint construction." The difficulty in using specialized designs or premium brands of construction companies is also cited as a reason for not preferring consortia.
However, if joint contracting is allowed, associations can find contractors more easily. From the construction companies' perspective, it reduces excessive marketing costs incurred due to bidding competition and increases the chances of winning projects. Even if losses occur due to unsold units, the risk burden is lower. A construction company official said, "In the current situation where cost rates are rising and construction costs are increasing, it would help to disperse risks."
As the exclusion of consortia has become a norm in Seoul's maintenance projects, mid-sized construction companies are losing opportunities to win large complex contracts. A construction company official said, "For mid-sized construction companies, it will be difficult to participate unless it is a small-scale maintenance project in Seoul," adding, "Although selective bidding is the trend due to conflicts over construction costs, it is unfortunate that the option of joint contracting is completely excluded."
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