[Exclusive] Seongdong District Office Requests Seoul City Inspection Over Alleged Collusion in 'Seongsu District 1' [Real Estate AtoZ]

Seongdong District Office Requests Joint Investigation with Seoul
District Mayor Holds Meeting with Association Members
Seoul Reviewing the Need for Inspection
Association Gathers Opinions by Inviting Four Construction Companies

Amid ongoing controversy surrounding the selection process for the contractor of Seongsu Strategic Maintenance Zone District 1, it has been confirmed that the Seongdong District Office has requested an inspection from the Seoul Metropolitan Government. The district office intends to conduct a joint investigation with the city to determine whether the association has engaged in illegal activities, such as collusion with a specific construction company. Despite these developments, the association is proceeding with preparations for a re-bid, holding a briefing on the bidding guidelines and inviting four construction companies.

According to an Asia Economy report on September 26, the Seongdong District Office requested an inspection of the association’s operations from the Seoul Metropolitan Government on September 25. A Seoul city official stated, “On September 24, we received a request for an investigation from the Seongdong District Office,” adding, “We are currently reviewing the necessity of initiating an inspection.”

In the case of District 1, conflicts over the selection of the contractor have intensified, prompting the district office to request an investigation. Some association members have raised suspicions that GS Engineering & Construction had private meetings with the association president over meals and provided peaches to delegates, allegedly urging them to reject a proposal to relax bidding guidelines for contractor selection. Additional allegations have surfaced, including claims that the association made phone calls to delegates asking them to vote down the proposal, and that the association president attempted to pass a proposal at the delegates’ meeting by changing finishing materials to lower-cost options.

If the joint inspection reveals clear violations of the law, the district office may refer the case to the police for investigation. If only corrective action is deemed necessary, an order for rectification will be issued. If the matter is considered minor, administrative guidance will be provided. In the case of District 1, if, as pointed out by some association members, violations of Article 10 of the “Seoul Metropolitan Government’s Maintenance Project Contractor Selection Standards” occurred during the bidding process, administrative guidance is likely. Article 10 stipulates that the eligibility to participate in bidding may be restricted for participants who offer money, entertainment, or other material benefits. If the district office issues administrative guidance, the association must decide whether to restrict bidding qualifications through a resolution of the delegates’ meeting.

Before requesting a joint investigation, the district office held a meeting with association members on September 10, presided over by the district mayor. Subsequently, the office sent an official letter to the association requesting clarification regarding the allegations. Regarding the suspicion of providing peaches, the association responded to the district office by stating, “A specific employee purchased some fruit for personal use, unrelated to company policy, and provided some to a member’s spouse.” As for the allegation of a meal between the association president and GS Engineering & Construction, the association explained, “It was a meeting to seek mutual understanding and persuade for the resumption of the bidding process.”

Nevertheless, while providing these explanations, the association is expediting preparations for the re-selection of the contractor. The association has decided to cancel the previous contractor selection bid and proceed with a new competitive bidding process. Accordingly, on September 24, the association invited four construction companies-Hyundai Engineering & Construction, GS Engineering & Construction, HDC Hyundai Development Company, and Samsung C&T-to gather opinions on the bidding guidelines. On that day, three of the companies, excluding Samsung C&T, met with the association at different times and reportedly held discussions for about an hour each. The participating construction companies requested that the association broaden the range of finishing material options and relax the bidding criteria.

An expert pointed out that regardless of whether a company participates in the bidding, offering entertainment or gifts could constitute a legal violation if it has a substantial impact on the contractor selection process. Kim Yerim, managing attorney at Law Firm Simmok, explained, “The current Urban Maintenance Act does not distinguish between before or after the bidding when prohibiting the offering of gifts or entertainment. The key consideration is whether providing gifts had a meaningful impact on the contractor selection.”