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- Announced ‘Construction Industry Vitality Enhancement Plans’, Improve Construction Conditions, Continuously Promote Creation of New Additional Values
【Main Contents of Construction Industry Vitality Enhancement Plans】
◎ (Reform regulations to resolve on-site difficulties) Reform a total of 26 regulations making it difficult for construction industry work such as reforming the construction ledger notification system and inclusion of articles supplied to the government during construction ability evaluation
◎ (Reform conditions in all construction processes) Enhance construction cost feasibility in the entire process of ‘pricing→ bidding→ construction’ and ensure appropriate profits and steadfast construction by reforming unfair practices
◎ (Continuously create new additional values) Pioneer new construction markets through early development and expanded application of smart construction technologies, foster construction start-ups, expand high-value overseas investment development projects, etc.
□ For sustainable growth of the construction industry and in order to create jobs, the government made a joint government agency announcement of the ‘construction industry vitality enhancement plan‘ at the ‘21st Economic Stimulus Meeting‘ on August 14 (Wed).
□ The government had established the ‘construction industry innovation plans’ that focused on the abolition of work area regulation in June of last year for the sustainable growth of the construction industry, and it has also been pursuing job reform measures such as direct wage payment systems, appropriate wage system, expanded electronic card system, etc. to create high quality jobs.
□ The plans aimed at improving the vitality of the construction industry in order to settle down the construction industry innovation project in advance and to procure driving force for creating high quality construction jobs, while also responding to the recent situation where the construction economy indicators are showing signs of slowing down*.
* Compared to same period of previous year (construction bids won) Jan – Jun ’19 △4.5% decrease, (construction investment) Q2 ’19 △3.5% decrease
□ The main contents of the vitality enhancement plans are as follows.
【 Reform regulations to resolve on-site difficulties 】
□ Through several review procedures* joined by experts, labor sectors, consumer organizations, etc. regarding regulations for which construction companies complained of practical difficulties in their management process, a total of 26 reform projects were selected, and regulations that could interfere with safety or that can cause inconvenience in the lives of citizens were excluded.
* 1st review meeting (Apr 26), 2nd review meeting (Jun 20), final regulatory innovation meeting (presided by senior vice-minister, Jun 27)
① For notification of construction ledgers to the client when changing construction contracting agreements, in the case of trivial total project cost changes* that occur frequently, notifications could be exempted and customary notifications such as overseas construction status reports(case 1), etc. were also considerably simplified.
* When changing total project costs for contracting costs of 100 million KRW or lower and subcontract costs of 40 million KRW or lower, notification exempted
→ Expected to result in a decrease of 60,000-70,000 notifications annually (about 9% of total notifications)
【Case 1】 Even in the case of short-term overseas construction of less than 15 days, bidding activities, contract agreement, construction status, construction completion, etc. were reported (more than 5 times a year) in the past, but it will now be replaced with a single construction completion report.
② In the event that a construction company adds a business category, cases of adding business categories to before establishing the special case of capital (Feb 11, ‘10) were retroactively eased(case 2) and when assessing capital, both buildings and land are now accepted as actual assets, thus easing the burden of capital.
【Case 2】 Notwithstanding the special case on capital (1/2 reduction) when a public works business (capital of 700 million KRW) registers additional construction businesses (capital 500 million KRW), when adding business categories prior to the establishment of the special case (Feb 11, ‘10), it was not subject to the special case → In the future, the special case can be applied (need to possess a total of 950 million KRW)
③Articles supplied to the government will also be reflected in performance during construction ability evaluations and reforms will be made so that construction technicians can easily check whether multiple projects were performed simultaneously in the performance management system (CEMS), while adding ‘equipment preservation technician‘ and ‘craftsman diver‘ in national technical certifications accepted for construction technicians.
【 Reform conditions in all construction processes 】
(1) Price Computation Stage ☞ Guarantee appropriate construction cost and appropriate construction time
□ Reform the computation system of the standard estimating cost and standard market price that serve as the standard for computing construction costs to reorganize into a cost system for fair payment.
* (Standard market price) Preferentially reform construction work with big differences in actual transactions and reflect the actual construction cost, etc.
** (Standard estimating cost) Provide outdated facility maintenance estimating cost according to social changes and ICT construction estimating costs
□ The ‘construction period computing standards (directive)’ will be legislated to become effective and in the event that construction period must be extended due to construction restrictions resulting from causes such as microdust and heat waves, the extension standards, procedures, etc. will be clarified in the future.
(2) Bidding Stage ☞ Advancement of contract systems, eradication of unfairness of public clients
□ In order to promote technological competition, expand general review bidding system (30 billion KRW→ 10 billion KRW or higher) and conduct alternative-suggestion type bidding pilot projects that allow free proposals of bidders, etc. to execute the ‘national contract system reform plans (Jan ’19)’ in earnest.
□ Plans are to conduct full investigations on the bidding conditions of public agencies to make improvements to irrational bidding conditions such as the client passing over its duties, unclear project instructions, etc.
(3) Construction Stage ☞ Lowered guarantee commissions, rationalization of indirect expenses
□ Considering that unpaid wages will decrease, etc. with the direct wage system becoming mandatory (Jun ‘19), subcontracting payments and construction machine loan guarantee commissions will be lowered* and in order to strengthen the competitiveness of strong small and medium construction companies, expansion of special exemptions for guarantee commission will also be pursued.
* After analyzing the direct wage system effects in the second half of ‘19, lower commission in the first half of ’20 (around 10% of guarantee commission)
ㅇ In addition, general-specialized construction company win-win cooperation systems* will also be reinforced for balanced development of the construction industry and to enhance construction efficiency.
* Reflect results of contract-subcontract mutual cooperation evaluations in public bids to strengthen appropriateness review of subcontract payment
□ Plans are to positively review the payment conditions, scope and computation standards for indirect expenses that occur when large-scale construction projects are stopped or delayed.
(4) Innovation Base Support ☞ Procure appropriate SOC investments, foster outstanding personnel
□ Plans are to smoothly carry out projects that are to be executed in the short-term and actively applying turnkey method* for large-scale projects such as railways.
* Review on Pyeongtaek-Osong 2 double-tracking (3.1 trillion KRW, begin construction in ’21), Chuncheon-Sokcho (2.1 trillion KRW, begin construction in ’21), Nambu continental railway (4.7 trillion KRW, begin construction in ‘22), etc.
ㅇ Promptly pursue capital area railway projects such as GTX-A (3 trillion KRW, begin construction in Dec ‘18), Sinansan Line (3.3 trillion KRW, begin construction in second half of ’19), GTX-C (4.3 trillion KRW, begin basic planning in Jun ‘19), Suseo-Gwangju Line (0.9 trillion KRW, passed preliminary feasibility study in Jul ‘19), Susaek-Gwangmyeong (2.4 trillion KRW, begin preliminary feasibility study in Jul ’19), etc.
ㅇFor roads, nine projects (7.2 trillion KRW) such as the Sejong-Anseong Expressway will begin construction within this year and five projects such as the Ansan-Incheon Expressway (4.3 trillion KRW) will begin designs next year.
ㅇIn addition, government construction investment projects will also be continuously pursued as the Urban Regeneration New Deal (‘19, 1.2 trillion KRW), outdated SOC management (32 trillion KRW for 4 years), and new urban and public housing, etc.
ㅇ Meanwhile, among the ‘National Balanced Development Project (24 trillion KRW), most SOC projects (19.8 trillion KRW) will begin basic plans and designs within the year to increase project speed, invigorate the local economy, while reviewing plans to expand local business participation according to the project objectives such as sustainable growth of the region.
□ Outstanding construction personnel will be fostered by the best craftsmen through apprenticeships according to industry demands, and a cooperative support system between educational institutes and construction companies will be constructed so that trainees will be able to find their desired jobs in full-time positions.
【 Continuously create new additional values 】
(1) Development of international-level smart construction technologies
□ Begin smart construction technology R&D* worth 200 billion KRW to procure core technologies in advance and apply new smart construction technologies through various pilot projects** throughout the entire process.
* R&D (‘20～’25, passed preliminary feasibility study in Jun ‘19): 3D digital design, construction of wireless and remote modulization construction, construction equipment automation, drone measurement, integrated data management, etc. / also pursue follow-up R&D worth 160 billion KRW
** Apply smart technologies (4 cases) in all processes, apply specific element technologies (22 cases), and smart turnkey (1-2 cases)
□ Continuously expand ‘smart construction support center’ to establish an ecosystem for construction start-ups (opened in Sep ‘18, currently 21 tenant companies → goal of having 50 by ‘21) and planning to perform customized support for each start-up year.
* (Year 1 and 2) Joint commercialization research, prototype production / Year 3 and 4) On-site demonstration, venture investment matching, etc.
(2) Expand high-value added overseas investment development projects
□ Planning to go beyond simple subcontracting projects and help expand entry into investment development-type projects such as smart cities by strengthening financial support such as establishing funds*, while pursuing customized strategies per core project country.
* Investment agreement on 600 billion KRW mother fund of PIS (Global Plant Construction Smart City) fund (Jun 27)
□ Expand dispatch of GICC*, Korea-ASEAN senior official infrastructure meetings, and senior official bid support teams to strengthen omnidirectional support for winning overseas bids.
* Global Infrastructure Cooperation Conference (Sep 3 – Sep 5), Seoul, over 200 people from foreign clients and financial institutes
【 Future pursuance plans and expected effects 】
□ MOLIT is planning to actively cooperate with relevant agencies to speedily pursue the ‘construction industry vitality enhancement plans’.
ㅇ In particular, revision work for all regulation reform projects will start immediately and be completed within the year so that the effects can be felt in advance, and projects that require pilot projects will be promptly expanded by preferentially applying in public projects under MOLIT.
□ In addition, projects that can further energize the construction industry will continuously be sought after and construction economy trend inspection meetings will be held regularly joined by experts and businesses to respond to changes in the construction economy in a timely fashion.
ㅇ MOLIT Construction Policy Division Director Lee Sung-hae said, “If construction costs are reflected at appropriate levels through these measures, it is expected that with the full-fledged execution of reform plans for jobs such as the direct wage payment system and appropriate wage system, it will be possible to let the system to receive fair pay for both the original contractor and on-site laborers take root.”
ㅇ Meanwhile, Lee also added, “Using the opportunity of the announcement of such plans, we will also quickly execute the ‘construction industry innovation measures’ that we have been pursuing to reorganize the work are regulations, etc.”
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