Submission of Sole Bid Participation Commitment in First Round
Association Plans Second On-site Briefing on 20th
Total Project Cost Likely to Find a Compromise
Hyundai Development Company "Legal Action Underway"
Due to conflicts over construction costs, the Banghwa 6 District Housing Reconstruction Maintenance Project Association, which terminated the construction contract with HDC Hyundai Development Company, has begun the process of reselecting a contractor. After the first site briefing, Samsung C&T Corporation submitted a sole bid and the bid was unsuccessful. If there is a sole bid again this time, there is a high possibility that a private contract will be made with Samsung C&T. If a private contract is made early next year, construction is expected to resume.
According to the Banghwa 6 District Housing Reconstruction Maintenance Project Association on the 14th, the association recently announced a re-bid for contractor selection and will hold a second briefing session on the 20th. Companies that submit a letter of commitment to participate in the bid within seven days after the site briefing will be qualified to participate. The bid deadline is January 6 of next year. The Banghwa 6 District Association set the condition of 'no consortium (joint contract)' for contractors and required submission of a pledge to comply with promotional guidelines, a commitment letter for project cost procurement, and full cash payment of the bid deposit of 15 billion KRW as conditions for bid participation.
Previously, five companies including Samsung C&T, Hanwha Construction Division, Woomi Construction, Daebang Construction, and HS Hwaseong participated in the site briefing held on the 4th. On the 11th, Samsung C&T submitted a letter of commitment to participate in the bid alone. If Samsung C&T participates alone in this second bid as well, it is highly likely to lead to a private contract. According to current law, if competitive bidding fails twice or more, a private contract can be made with the contractor who participated in the bid.
Notably, the Banghwa 6 District did not include the total project cost in the contractor selection bid announcement. Industry insiders expect Samsung C&T and the association to find a compromise at a level similar to the amount requested by the previous contractor. A Samsung C&T official explained, "There is no construction cost proposed by the association; the process will be to prepare an estimate, submit it, and then finalize through negotiation."
If a contractor is selected this time, Banghwa 6 District will have chosen a new contractor within four months. The association held an extraordinary general meeting on September 28 and passed a motion to terminate the contract with HDC Hyundai Development Company due to conflicts over construction costs. HDC Hyundai Development Company opposed the contract termination and has taken legal action, recently filing an injunction against the association. A representative of HDC Hyundai said, "We are proceeding with legal measures regarding the termination of the construction contract."
The Banghwa 6 District Association and HDC Hyundai signed a construction contract in June 2020 at 4.71 million KRW per 3.3㎡. Afterwards, Hyundai demanded increases in construction costs to 6.29 million KRW in 2020, 7.27 million KRW last year, and 7.58 million KRW this year, which led to conflicts. Construction stopped six months after commencement, even though demolition had been completed. A construction industry official explained, "The association terminated the contract because the repeated increases in construction costs caused a burden on the association."
Banghwa 6 District is a project to build 11 buildings with a total of 557 households, ranging from three basement floors to 16 above-ground floors, located around Banghwa-daero 25-gil 13. The district received management disposition approval in 2021 and began demolition in August 2022. Although the initial plan was to launch sales next year, the sales schedule is likely to change due to the contractor change and other factors.
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