Nineteen major construction companies will raise the prices paid to subcontractors by a total of 107.7 billion won due to challenges posed by the Middle East conflict and rising raw material costs. This increase represents approximately 80% of the amount promised for this year, and regulatory authorities will monitor the implementation of the cooperation agreement through a public-private consultative body.
The Fair Trade Commission held a meeting on September 16 at the Specialized Construction Hall in Dongjak-gu, Seoul, attended by representatives from the comprehensive and specialized construction sectors. This meeting was a follow-up to the 'Construction Industry Cooperation and Fair Trade Agreement' signed with the 19 major construction firms on May 28. The consultative body was established to share implementation results, best practices, and trends in the enforcement of subcontracting laws.
The participating construction companies include Samsung C&T, Hyundai Engineering & Construction, Daewoo Engineering & Construction, DL E&C, and GS Engineering & Construction, among others. At the time of the agreement, they committed to raising the prices paid to subcontractors by a total of 134.3 billion won within the year due to increased burdens from the Middle East conflict.
At the time of the agreement, an initial increase of 34 billion won was already implemented. Following that, an additional increase of 73.7 billion won was made, bringing the total increase to approximately 107.7 billion won, achieving an implementation rate of about 80% compared to the annual plan.
Contracts linked to subcontractor payments have also been expanded. Among the 19 construction firms, 15 have signed additional linked contracts with 52 subcontractors. Some companies have also conducted training on linked payment systems for their partners.
A dispute resolution mechanism for subcontracting is operated by 14 construction firms. Since the agreement was signed, a total of 14 disputes have been resolved using this mechanism.
Examples of improved cost burdens and payment conditions on-site were also shared. Kyeryong Construction Industry added a clause to its project specifications stating that 'the primary contractor will bear all waste disposal costs' and implemented this change. POSCO E&C supported the labor costs of safety personnel for subcontractors. Jeil Construction reduced the payment period from the previous 60 days to 30 days.
The agreement signed in May includes key provisions for timely cash payments for subcontractor fees, the elimination of unfair retention practices, rapid adjustments to payments due to changes in supply costs, and the expansion of linked payment systems.
It also stipulates that subcontractors should not be required to contract at amounts lower than those submitted during bidding and eliminates clauses that unfairly transfer costs related to industrial safety and waste disposal. In cases where construction is disrupted due to war or supply chain instability, it allows for mutual discussions on extending deadlines and waiving penalties.
The public-private consultative body will meet at least once a year to share the status of agreement implementation and trends in subcontracting law enforcement, as well as to discuss industry recommendations. The Fair Trade Commission plans to hold a meeting with 30 construction firms that signed a separate cooperation agreement on July 24 in November.
The Fair Trade Commission stated, 'We will strive to ensure that the cooperation agreement is properly implemented through the public-private consultative body and will continue to communicate to bring about tangible changes on-site.'
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.