Seoul Resolves Disputes at 37 Sites in Two Years... "Dedicated Team to Manage Construction Cost Conflicts" [Real Estate AtoZ]

Active Intervention in Union-Contractor Disputes, Normalizing Projects
"Construction Cost Verification Information" Service Launched on the 1st of This Month

The Seoul Metropolitan Government announced on December 23 that it has mediated conflicts between unions and contractors at a total of 37 project sites over the past two years, normalizing project operations.

With construction cost disputes arising one after another at redevelopment and reconstruction sites due to surging construction costs and rising interest rates, the city has actively intervened administratively since last year. It established a monitoring system for sites where contractors have been selected and set up a structure in which requests for construction cost increases are immediately shared with the city for prompt response.

For projects where construction cost issues were significant, the Seoul Housing and Communities Corporation (SH) and external expert agencies objectively reviewed reasons for cost increases, such as design changes and price fluctuations. In cases of internal union conflict or complex negotiation structures, expert coordinators were dispatched to support negotiations and facilitate the process through to general assembly resolutions and contract amendments.

The city has also managed and mediated to prevent project suspensions, provided guidance on normalizing union operations, and expanded the possibility of conflict resolution through institutional measures such as the Urban Dispute Mediation Committee. This year, major projects with high risks of delays, such as Daejo District 1 in Eunpyeong-gu, Sinbanpo District 4 in Seocho-gu, and Noryangjin District 6 in Dongjak-gu, reached agreements on construction costs through city mediation, preventing disruptions to completion and move-in schedules.

In particular, the Daejo District 1 redevelopment project, which had experienced repeated work stoppages due to union disputes and construction cost increase conflicts, saw the requested increase of 377.1 billion won reduced to 256.6 billion won through a consultative body involving the city, district, union, and contractor, leading to the signing of a construction contract in April.

For the Sinbanpo District 4 reconstruction project, where construction cost increase disputes had escalated to litigation and there were significant concerns about move-in delays, a coordinator was immediately deployed. The mediation plan reduced the requested increase from 308.2 billion won to 78.8 billion won. The agreement was approved at the general assembly in June, the lawsuit was withdrawn, and the project returned to normal. The Noryangjin District 6 redevelopment project also faced concerns over delayed groundbreaking, but agreement was reached on a mediation plan reducing the requested increase from 219.4 billion won to 197.6 billion won, and a construction contract was signed in June, allowing normal commencement of work.

Additionally, the city completed construction cost verifications for five redevelopment zones through SH, using the figures as a basis for facilitating agreements between unions and contractors. SH has been operating a "mobile construction cost verification information office" since December 1 to promote the construction cost verification system.

For the Seocho Shindonga reconstruction project, 273.5 billion won-about 81% of the 335.9 billion won subject to verification-was validated as an appropriate construction cost, resolving the conflict in May. Verification was also completed for Cheongnyangni District 7, Jangan Hyundai, and Jegi District 1 in October and November, and smooth agreements are expected based on these results.

The city is also pursuing institutional improvements to prevent construction cost disputes from becoming prolonged or recurring. By revising the standard construction contract and preparing a standard union charter, it clarified procedures for cost increases, verification timing, and dispute mediation, restructuring the system to enable step-by-step mediation in the event of conflict and shifting the response system from post-mediation to "prevention." In January this year, a dedicated team was established to monitor construction cost disputes, conduct verifications, link mediation and arbitration, and manage the entire redevelopment process to proactively address conflicts.

Choi Jinseok, Director of Housing at the Seoul Metropolitan Government, stated, "This is an example of the public sector actively intervening in what was considered a private matter-disputes between unions and contractors-and demonstrating that 'redevelopment project conflicts' can be managed by the government. We will continue to systematically manage construction cost disputes through the dedicated team to ensure smooth housing supply and residential stability for citizens."