Agreement on Construction Costs Reached Through Coordinator Mediation After Six Months
Mediation Plan Worth 197.6 Billion KRW Approved
The redevelopment project for Noryangjin 6 District, considered a prime location in the southwestern part of Seoul, has reached an agreement after six months of conflict over increased construction costs.
The Seoul Metropolitan Government announced on June 2 that it had dispatched a redevelopment project coordinator, and that the association for the Noryangjin 6 District Urban Renewal Promotion Area and the construction companies GS E&C and SK Ecoplant had agreed on an adjustment to the increased construction costs, thereby resolving the issue of construction delays.
The redevelopment project for Noryangjin 6 District faced the risk of construction delays as the construction companies demanded an additional 92.2 billion KRW due to design changes and increased total floor area, as well as 127.2 billion KRW due to inflation and financing costs, totaling an increase of 219.4 billion KRW.
In response, since October of last year, the city dispatched a redevelopment project coordinator and held mediation and arbitration meetings, ultimately succeeding in reaching an agreement. This is the first case in which the issue of construction delays caused by disputes over construction costs has been resolved. During the adjustment process, in-depth discussions also took place regarding an additional request of 21.9 billion KRW for changes in finishing materials and specialized features.
The city reviewed both the initial request for an increase of 219.4 billion KRW and the additional request, and proposed a mediation plan amounting to 197.6 billion KRW. Subsequently, on April 29, a final agreement was reached through cooperation and concessions between the association and the construction companies, and on April 31, the revised construction contract was approved.
Since 2012, the redevelopment project coordinator system has involved dispatching expert groups composed of professionals or lawyers in architecture, urban planning, urban administration, and urban renewal to sites where redevelopment projects are delayed or facing conflicts.
This year, the city achieved agreements on construction cost disputes in three districts, including Noryangjin 6 District, Daejo 1 District, and Sinbanpo 4 District. Currently, redevelopment project coordinators have been dispatched to five districts, including Noryangjin 8 District and 487-17 Wolgye-dong, to mediate and arbitrate construction cost disputes. Most recently, a coordinator was also dispatched to Haengdang 7 District, which had sent occupancy restriction notices to association members, to prevent any issues from arising.
Choi Jinseok, Director of Housing at the Seoul Metropolitan Government, stated, "Ultimately, it is the citizens who suffer from construction delays, so the city actively intervened to resolve the conflict and reach an agreement," adding, "We will continue to work to prevent and swiftly resolve disputes over construction costs in redevelopment projects that cause delays and significantly increase the burden on association members."
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