Gajaeul 7 District, Hanwha and GS Pursue Private Contract
Geoyeosaemaeul Also Accepts Consortium as Contractor
Excluding Prime Sites
Single Construction Companies Face Difficulty in Competitive Bidding
"Allowing Consortiums More Beneficial Than Project Delays"
Construction Companies Also Reduce Risks
The number of redevelopment projects in Seoul selecting two or more construction companies as joint contractors is increasing. As construction companies have become more selective in bidding based on project profitability, the threshold for selecting contractors has been lowered. The prevailing view is that preventing project delays due to the inability to find contractors and reducing unnecessary expenses such as re-announcements is beneficial.
◆ Increase in Joint Contracts = According to the industry on the 13th, the redevelopment association of Gajaeul 7 District in Seodaemun-gu, Seoul, is currently pursuing a plan to contract Hanwha Construction and GS Construction as a consortium through a private contract.
The association has been searching for a contractor since May but received no participation intentions from construction companies. In the second bidding announced in June, the construction cost was raised from 7.7 million KRW to 8.435 million KRW per 3.3㎡, but no contractor was found. The third announcement also failed as only one company expressed bidding interest.
An association official said, "After the site briefing at the end of last month, Hanwha Construction and GS Construction submitted a letter of intent to bid as a consortium," adding, "After going through the advisory committee and the board of directors, if it passes the delegates' meeting on the 20th, we plan to proceed with a private contract." Gajaeul 7 District, the last redevelopment site among the nine Gajaeul New Town districts, is expected to have 1,407 households in buildings ranging from four basement floors to 26 above-ground floors.
On the 10th, the residents' general meeting of Geoyeo Saemaeul in Songpa-gu selected Samsung C&T and GS Construction as a consortium contractor. This district, which will build a total of 1,678 households through a public redevelopment method, held two bidding rounds in March and May this year to select a contractor, but both failed. The association initially considered selecting a contractor through a third announcement, but Samsung C&T and GS Construction proposed a consortium. They then agreed on conditions including maintaining the construction cost and were finally selected as contractors.
Lee Jung-woo, chairman of the Geoyeo Saemaeul Residents' Representative Council, said, "When Samsung C&T and GS Construction proposed a consortium, we investigated whether other construction companies would participate if we re-announced the bid, but there were almost none," adding, "We judged that going with a consortium private contract would be more beneficial to residents than raising construction costs and delaying the process with another announcement."
Additionally, Banghwa 3 District in Gangseo-gu, which will build a total of 1,476 households, also abandoned the previous guideline of 'no contractor consortium' and allowed joint contracts.
◆ Preventing Construction Cost Increases through Joint Contracts = Associations have preferred single construction companies due to difficulties in assigning responsibility. They also avoided consortiums because it is difficult to use specialized designs or premium brands from construction companies, and there could be differences in construction quality by building.
However, as the number of places struggling to select contractors, except for prime projects, noticeably increased, they began allowing consortiums. To induce single bids from construction companies, construction costs per pyeong (3.3㎡) must be raised, which could increase additional contributions. Amid this, construction companies proposed building as a consortium while maintaining construction costs, which was accepted. From the association's perspective, they can quickly find contractors while maintaining construction costs, and construction companies can reduce unnecessary marketing expenses and risk burdens caused by competition.
An association official said, "Even if a re-bid is conducted, it is not easy to induce competition unless the location or project profitability is excellent," adding, "There is a growing atmosphere to find contractors as soon as possible even if it is through a consortium method rather than wasting time and money. The number of projects proposing the consortium card may increase in the future."
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