Seoul City Develops Standard for Appropriate Construction Costs for 12 Items

Seoul City announced on the 2nd that it will develop appropriate construction cost estimation standards for 12 items that either had no pricing standards, were applied at low rates, or were not charged at all.

The items to be developed include seven requested by the Korea Mechanical Equipment Construction Association: air conditioner piping boxes, deck plate sleeves, duct sleeves, heat exchanger installation, metal heater installation, HVAC cleaning, and air curtain installation; and five requested by the Korea Electrical Contractors Association: penetrating connectors, shading screens, streetlight arms replacement, small handholes, and light-emitting diode (LED) lighting poles.

Construction cost estimation standards refer to the calculation of costs incurred when installing construction materials. These standards are announced annually by the government, but if rapidly changing construction environments such as materials and methods are not reflected in time, local governments can create their own estimation standards.

Earlier in February, the city held a meeting with the five major domestic construction associations to address difficulties faced by the construction industry. Last month, the city also met with the Korea Mechanical Equipment Construction Association and the Korea Electrical Contractors Association, who requested additional meetings, to listen to industry challenges.

The city convened an advisory meeting involving experts, related organizations, and ordering agencies, reaching consensus on the need to establish appropriate construction cost estimation standards for the 12 items that had not received fair compensation due to customary practices. Accordingly, a 'Public-Private Joint Construction Cost Estimation Standards Task Force (TF)' was formed to begin development this month.

The appropriate construction cost estimation standards for the 12 items will be transparently developed through on-site inspections led by experts recommended by the construction associations and the city to ensure objectivity. The inspection results will undergo additional detailed verification by specialized construction cost estimation institutions such as the Korea Mechanical Equipment Research Institute and the Korea Electrical Association, and will be used as a rational and valid basis for construction cost estimation standards.

The city expects this development to contribute to improving construction quality and safety, as well as alleviating difficulties in the industry. Furthermore, the developed standards will be registered as official government standards to promote widespread use among public institutions and the private sector.

Additionally, the city will improve the 'construction equipment rental cost compensation (work coefficient)' that the industry has been requesting.

When construction equipment is used in electrical work and work time is delayed due to obstacles, part of the cost is compensated through a work coefficient. However, the industry has expressed concerns that the increasing rental costs are not adequately covered by the current work coefficient, resulting in losses.

Considering the challenging conditions of urban construction, the work coefficient will be adjusted from good (0.9) to normal (0.7). Applying this will result in approximately a 30% increase in construction costs for installing one streetlight compared to before.

Moreover, to prevent errors in applying the construction equipment work coefficient, a work coefficient application guide will be developed and distributed to the streetlight design department within the first half of this year.

Lee Hye-kyung, Director of the Seoul City Finance Bureau, stated, "The development of appropriate construction cost estimation standards will improve the long-standing practice of not receiving fair compensation and is expected to provide practical help to the construction industry."