POSCO E&C Faces Criticism Over Lax Safety Management
No New Contracts Possible if License is Revoked
Restoring Image and Trust Is Key
Rising Likelihood of Lotte Construction Bidding Alone
The participation of POSCO E&C in the competition for the construction contract of Gaepo Woosung 4th phase, considered a major redevelopment project in Gangnam, has become uncertain. Initially, POSCO E&C and Lotte Construction were seen as the two main contenders, but a series of accidents has led to the prospect of severe sanctions, including possible license revocation. With the competition narrowing to two companies, speculation is growing that Lotte Construction may end up bidding alone if POSCO E&C withdraws.
According to the maintenance industry on August 7, four companies attended the project briefing for the Gaepo Woosung 4th phase held last month: POSCO E&C, Lotte Construction, Cheil Construction Punggyeongchae, and HDC Hyundai Development Company. All four submitted letters of intent to bid.
Two-way race after Samsung C&T's absence... New contracts impossible if license is revoked
Industry insiders had expected the bidding to become a two-way race. Samsung C&T, initially considered a strong contender, did not attend the briefing and instead focused its resources on Gaepo Woosung 7th phase, shifting the competition to Lotte and POSCO E&C. HDC Hyundai Development Company was also focusing on Songpa Hanyang 2nd phase, which was announced for bidding around the same time as Gaepo Woosung 4th phase, making it unlikely for the company to pursue both projects.
Meanwhile, Lotte Construction and POSCO E&C actively sought to win over union members, even setting up offices near the complex. Lotte Construction demonstrated strong intent to win the contract by being the first to submit a letter of intent at the briefing. POSCO E&C also expressed ambition to create a "Dogok-dong landmark complex" to rival Tower Palace, applying its own high-end brand "Otiere" in Gangnam for the first time.
However, with POSCO E&C now facing the threat of license revocation due to a series of serious industrial accidents, there are predictions that the competitive landscape will change. Since the beginning of this year, four people have died at POSCO E&C sites, and further fatalities occurred even after President Lee Jaemyung’s reprimand, highlighting the company’s safety management failures. President Lee criticized POSCO E&C, instructing, "Find and report all legally possible measures, including construction license revocation and prohibition from public bidding."
If POSCO E&C faces the unprecedented situation of license revocation, it will be unable to participate in the bidding. According to the Framework Act on the Construction Industry, even if business suspension or registration cancellation is finalized, the company can continue with existing contracts or projects that have already started after obtaining permits, but new contracts are completely blocked. Newly appointed CEO Song Chiyoung announced plans to halt all new orders in the infrastructure division.
"Difficult to guarantee bidding participation" - Declining trust is key
Even if POSCO E&C avoids license revocation, prevailing opinion is that its tarnished image will hinder its ability to win contracts. In June, POSCO E&C also lost out to HDC Hyundai Development Company in the bidding for the Yongsan Maintenance Depot Zone 1. Industry insiders believe that the road collapse incident at the Gwangmyeong Shinansan Line construction site contributed to this failure. With the president’s reprimand added to the situation, the stigma of being an "accident-prone company" is likely to follow POSCO E&C for some time.
Heemin Jung, President of POSCO E&C, is offering an apology to related parties before delivering a statement on the consecutive on-site fatalities at the headquarters in Songdo, Incheon on the 29th. Photo by Yonhap News
Among union members, there are also doubts about POSCO E&C’s ability to participate in the bidding. Due to strong criticism from political circles and the president, the company is focused on handling the aftermath of the accidents, making it difficult to take on new projects. Union member A said, "Among union members, there are concerns about whether POSCO E&C, preoccupied with resolving the serious industrial accidents, has the capacity to participate in the bidding."
Concerns about lax safety management have also been raised. Union member A stated, "Internally, there are mixed opinions: some say we should wait and see, while others worry about whether it is really safe to allow POSCO E&C to participate in the bidding given the ongoing safety management issues."
As concerns surrounding POSCO E&C spread, expectations are rising that Lotte Construction may bid alone. For Lotte Construction, Gaepo Woosung 4th phase is a prime project that could help solidify its high-end brand presence in the key Gangnam area. A Lotte Construction official said, "Nothing has been finalized regarding the bidding, so it’s difficult to make a judgment. There is still time left, so at this point, we cannot predict how the competition will unfold."
Among some union members, there have been suggestions that if Lotte Construction bids alone, the project should be put up for rebidding and then a private contract should be signed with Samsung C&T. An industry insider said, "Some residents were disappointed that Samsung C&T was expected not to participate in the bidding. There are also union members who say they will wait for a failed bid if Lotte Construction is the sole bidder."
Meanwhile, the Gaepo Woosung 4th phase union plans to close bidding on September 9 and select the contractor at a general meeting in November. This complex, currently a 9-story, 459-unit apartment building in Gaepo-dong, Gangnam-gu, is expected to be transformed into a 49-story, 1,080-unit complex after redevelopment.
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