[Exclusive] "Curbing Excessive Project Orders" Right to Object to Construction Costs and Deadlines... Project Owners Cannot Ignore

'Right to Raise Objections for Contractors' Introduced
Mandatory Response and Notification by Project Owners
President Lee Jae Myung: "Considering Punitive Damages"
Government Adopts Stronger Stance

Going forward, those commissioning construction projects will be required to receive and review any additional cost claims or requests for extensions of the construction period from contractors, and must notify the contractor of the results. This is a strong measure introduced amid growing calls for project owners to be held accountable for safety accidents that occur when project budgets are tightened through lowest-bid contracts and construction schedules are rushed.

According to the construction industry and political circles on August 25, legislative work is underway to supplement the "Special Act on Construction Safety," centered around the office of Moon Jin Seok, Senior Deputy Floor Leader of the Democratic Party and a member of the National Assembly's Land, Infrastructure and Transport Committee. The special act, sponsored by Assemblyman Moon at the end of June, was submitted to the full committee meeting of the Land, Infrastructure and Transport Committee on the 21st and referred to the subcommittee. This law assigns safety management responsibilities to each party involved in construction-project owners, designers, supervisors, contractors, and subcontractors-according to their authority, and clarifies the respective responsibilities of each party.

'Right to Raise Objections for Contractors' Introduced...Mandatory Response and Notification

At the Shinansan Line underground tunnel construction site in Gwangmyeong, Gyeonggi Province, where a collapse accident occurred, rescue workers conducted recovery operations for one missing person on April 16. In the afternoon of the same day, a worker in his 50s, identified as A, belonging to POSCO E&C, who had been missing due to the accident, was found. The rescue workers recovered A, who was deceased, and transported him to Chung-Ang University Gwangmyeong Hospital. This was approximately 125 hours after the accident occurred.

However, legislative supplements have begun to address the current construction ecosystem, where public project owners such as the state, public institutions, and local governments, as well as private project owners such as developers, individuals, and associations, do not take responsibility for construction safety.

On-site, not only unpredictable variables such as heatwaves and heavy rain, but also repeated work stoppages for safety inspections can lead to tight schedules, ultimately forcing workers to take excessive risks. Risks identified during on-site safety inspections are difficult to incorporate at the contract stage. As repeated loss of life has resulted from pushing ahead with construction strictly according to contract terms, the Special Act on Construction Safety is designed to enforce a readjustment process specifically for safety issues, distinguishing it from a simple contract amendment.

An official from a construction company explained, "The construction period set by the client is often unrealistically short, as it is simply based on past performance or experience. Because the schedule is insufficient, all-night forced work to meet deadlines is repeated, leading to frequent accidents."

To address these issues, Assemblyman Moon has decided to include a provision granting contractors the right to raise objections to the project owner. The previous draft only required contractors to review the appropriateness of the construction period and costs before starting work. However, even if the outcome was unreasonable, contractors had no right to object to the project owner.

Subcontractors could request changes from the main contractor, and the main contractor was required to respond, which placed the burden of changing project requirements on the main contractor. With the amendment, contractors can now follow objection procedures, such as making claims for additional costs. If a contractor raises issues related to safety, construction period, or costs, the project owner must inform the contractor of the outcome.

Previously, contractors could request extensions of the construction period due to force majeure events such as typhoons or floods, or for reasons attributable to the project owner, in order to prevent industrial accidents. There was also a regulation (under the Industrial Safety and Health Act) requiring project owners to grant such extensions unless there were special reasons not to. However, contractors could not claim additional costs. A staff member from Assemblyman Moon's office stated, "To enhance effectiveness, contractors must be able to request a reconsideration from the project owner." The office plans to push for supplementary legislation including this provision within a month.

President Lee Jae Myung: "Considering Punitive Damages"...Government Also Takes Tough Stance

President Lee Jae Myung is reviewing a report related to the Special Act on Construction Safety, which Lee Sang Kyung, First Vice Minister of Land, Infrastructure and Transport, handed over just before giving a verbal report on industrial accident measures at the Cabinet meeting held at the Presidential Office in Yongsan, Seoul, on the 29th of last month. Screenshot from the Presidential Office Cabinet meeting video

The government is also strongly committed to legislation. At the Cabinet meeting on the 29th of last month, Lee Sang Kyung, First Vice Minister of the Ministry of Land, Infrastructure and Transport, stated that the prepared materials were insufficient when it was his turn to report on industrial accident response measures, and spontaneously brought up the Special Act on Construction Safety, which had been proposed by Assemblyman Moon.

Vice Minister Lee explained, "I am providing a verbal explanation of the special act, which was not included in the prepared materials. Assemblyman Moon has proposed it, and we are coordinating with the National Assembly and working on the legislation." He added, "Although opposition from the industry is expected, it can be highly effective. However, since the financial burden on project owners will increase, public project owners must coordinate their budgets with the Ministry of Economy and Finance in accordance with the National Finance Act."

The meeting took place on the same day President Lee Jae Myung called for strong construction safety measures, stating, "If fatal accidents occur habitually and repeatedly, we should consider introducing punitive damages." After hearing Vice Minister Lee's report, President Lee responded, "Isn't this about creating a new law on construction safety to strengthen sanctions and accountability? This is an important matter."

After review (and a public hearing if necessary) by the subcommittee, the bill will proceed to the full committee meeting of the National Assembly's standing committee, then to the Legislation and Judiciary Committee, and finally to a plenary vote. If passed, it will be promulgated by the President and go into effect. With a series of fatal accidents recently occurring at large construction sites, the likelihood of the bill passing has increased.

Ahn Hong Seop, President of the Korean Society of Construction Safety, said, "The core of the Special Act on Construction Safety is to correct the unfairness of responsibility by explicitly stating the comprehensive responsibility of the project owner. Establishing a fair system of accountability is essential to fixing distortions in the contract system and creating a virtuous cycle in the construction industry."

President Ahn further commented, "The biggest problem in our construction industry is that project owners enjoy unchecked authority but bear no responsibility. As long as low-price bidding continues, construction budgets and schedules will always be insufficient, and only project owners have the power to correct this."