Supply prices raised by 107.7 billion won, reaching 80% of year-end target

15 firms expand indexed contracts with 52 subcontractors

14 companies operating dispute bodies, resolving 14 cases

The Korea Fair Trade Commission has launched a public-private consultative body with the construction industry to regularly monitor compliance with a mutual-growth agreement, as supply prices have risen by about 73.7 billion won ($54.5 million) since the pact was signed in May and additional indexed subcontracting agreements have been concluded.

The Fair Trade Commission said it held the inaugural "Construction Industry Mutual-Growth Agreement Public-Private Council Meeting" on Wednesday at the Specialized Construction Hall in Dongjak-gu, Seoul, with representatives from both general and specialty construction sectors in attendance.

A housing reconstruction site in Seoul. [Yoon Chang-bin]
A housing reconstruction site in Seoul. [Yoon Chang-bin]

The meeting was a follow-up to the "Construction Industry Mutual-Growth and Fair Trade Agreement" signed with 19 major construction companies on May 28.

At the time, the Fair Trade Commission and the construction industry concluded the agreement to prevent the recurrence of unfair practices that had persisted in general and subcontracting transactions and to protect the rights of subcontractors. The agreement covers cash payment of subcontracting fees within 60 days, abolition of retainage practices, adjustment of subcontracting fees in line with cost changes, expansion of indexed contracts, elimination of unfair special clauses, and operation of dispute resolution bodies.

As a follow-up measure, the Fair Trade Commission and the general and specialty construction industries agreed to form the public-private council in the second half of this year, sharing updates on agreement compliance, subcontracting law enforcement trends and best practices in mutual cooperation — and discussing proposals — at least once a year.

At Wednesday's inaugural meeting, key compliance results were shared. The 19 general construction companies had pledged to raise supply prices by a total of 134.3 billion won for subcontractors struggling amid the war in the Middle East and other difficulties. Of that amount, 34 billion won had been raised before the agreement was signed, with an additional 73.7 billion won added afterward, bringing the cumulative increase to 107.7 billion won — about 80 percent of the year-end target.

The number of indexed subcontracting agreements also grew. Fifteen of the 19 general construction companies concluded additional indexed contracts with 52 subcontractors. Some construction companies also provided education on indexed payment systems to their partner firms.

Fourteen of the 19 companies were found to be operating subcontracting dispute resolution bodies. A total of 14 disputes have been resolved through those bodies since the agreement was signed.

Best practices in mutual cooperation were also shared. Gyeryong Construction Industrial added a clause to its site briefing documents stating that the general contractor would bear the full cost of waste disposal, and conducted bidding for subcontractors on that basis. Posco E&C covered the labor costs of safety officers employed by subcontractors, while Jeil Construction shortened its payment cycle from 60 days to 30 days. Recent subcontracting law enforcement trends in the construction sector were also discussed as part of efforts to prevent legal violations.

The Fair Trade Commission said it would "work to ensure the mutual-growth agreement is properly implemented through the public-private council" and pledged to "continue communicating to bring about changes that can be felt on the ground."

Meanwhile, a public-private council meeting with 30 mid-sized construction companies that signed a separate mutual-growth agreement on July 24 is scheduled for November.


y2k@heraldcorp.com