Haengdang 7 District Resolves 'Construction Cost Dispute'... Agrees to 28.2 Billion KRW Increase After City Verification

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The redevelopment project of Seoul Seongdong-gu’s Haengdang 7 District (Lachervo Prugio Summit), which had been in conflict with the construction company over increased construction costs, has reached a final agreement to increase the costs by 28.2 billion KRW through Seoul City’s cost verification.

Aerial view of the Haengdang 7 District Redevelopment Project (La Cherbo Prugio Summit) in Seongdong-gu, Seoul

According to the city on the 16th, near Wangsimni Station, the Haengdang 7 District’s construction company, Daewoo Engineering & Construction, demanded an increase of 52.6 billion KRW in construction costs (28 billion KRW for design changes, 24.6 billion KRW for price fluctuations), but the union did not accept it, leading to ongoing conflicts. In response, the city requested Seoul Housing & Communities Corporation (SH Corporation) to verify the construction costs of this project last February.

As a result of the verification, the union and the construction company agreed to increase the amount by 28.2 billion KRW, about 53% of the requested amount. SH Corporation judged that there was no reason to increase 10.8 billion KRW out of the 28 billion KRW requested for design changes. Regarding the 24.6 billion KRW for price fluctuations, it was excluded from verification according to the ‘price fluctuation exclusion clause’ in the construction contract, but considering the unusual rise in construction costs such as material prices, a reasonable compromise was proposed, leading to an agreement between both parties.

During this process, SH Corporation simplified the submission documents for swift verification and continuously shared review matters with the union and the construction company to enhance trust.

To resolve construction cost disputes between the union and the construction company, the city established the ‘Seoul City Comprehensive Management Plan for Construction Contracts in Maintenance Projects’ in March last year and assigned SH Corporation to perform construction cost verification tasks. SH Corporation established a dedicated department for construction cost verification in October last year. SH Corporation explained that it is desirable to avoid frequent design changes and to select materials that are of excellent quality at reasonable prices rather than expensive imported materials.

Construction cost verification is also underway for the ‘Sinbanpo 22nd Reconstruction Complex’ in Jamwon-dong, Seocho-gu, Seoul. The results are expected to be announced in August.

Additionally, the city is striving to minimize construction cost disputes through measures such as the ‘Seoul-type Standard Contract,’ ‘Expert Pre-consulting System,’ and ‘Dispatch of Maintenance Project Coordinators.’

Han Byung-yong, Director of Seoul City’s Housing Policy Office, said, “It is encouraging that a positive agreement was reached between the union and the construction company of Haengdang 7 District through construction cost verification,” and added, “Based on SH Corporation’s abundant experience and accumulated capabilities, we will fully implement the construction cost verification system to increase transparency in redevelopment and reconstruction projects and actively support resolving conflicts caused by construction costs.”