Twenty-three mid-sized construction firms have increased subcontractor payments by approximately 18.4 billion won to reflect changes in supply costs due to rising raw material prices and fuel costs. Some companies have also improved practices regarding the withholding of payments until project completion and established new mechanisms for resolving subcontracting disputes.
On November 12, the Fair Trade Commission held a meeting at the Specialized Construction Hall in Dongjak-gu, Seoul, with representatives from 29 mid-sized general construction firms and the Korea Specialty Contractors Association to share compliance results related to the cooperation agreement.
This meeting was organized to review the implementation of the 'Construction Industry Cooperation and Fair Trade Agreement' signed on July 24. It followed a previous meeting held in September with 19 large construction firms, focusing on the performance of the 29 mid-sized firms ranked 21st to 50th in construction capability.
Since the agreement was signed, the 23 construction firms have raised subcontractor payments for 152 supply contractors by about 18.4 billion won to account for fluctuations in supply costs. Among them, HJ Industrial increased payments to three contractors by a total of 3.3 billion won through contract adjustments and negotiations.
The practice of withholding part of the payment until project completion has also been improved. This withholding, known as retention, has previously caused difficulties for subcontractors in paying labor costs and purchasing raw materials.
Currently, 11 construction firms have either eliminated retention or are conducting related training and contract reviews. Two of these firms have blocked the establishment of retention through their computer systems. They are also strengthening payment management by regularly checking the status of subcontractor payments.
A procedure has been established to reasonably share liability for damages arising from defect lawsuits between the main contractor and subcontractors. Since the agreement was signed, five construction firms have notified 190 subcontractors of defect lawsuits filed against them. Future compensation amounts will be negotiated with the respective subcontractors based on the lawsuit outcomes.
Contract terms have also been revised to prevent the unilateral transfer of industrial safety and waste disposal costs to subcontractors. Fourteen construction firms have included provisions in their contracts stating that they will bear these costs in full, implementing measures to prevent cost shifting. Some firms have conducted self-inspections for unfair clauses across all their sites.
The framework for voluntarily resolving subcontracting disputes has also been expanded. Sixteen construction firms operate internal dispute resolution mechanisms to discuss subcontractor payment disputes and price adjustments, with five of them establishing these mechanisms after signing the agreement.
Additionally, best practices were introduced, including ESG management consulting for subcontractors by Woomee Construction, safety education related to construction laws by Hanshin Construction, a selection system for excellent subcontractors by Doosan Construction, and the introduction of an AI chatbot for unfair clauses by Xi & A.
A Fair Trade Commission official stated, "We will continue to communicate with the construction industry to support the voluntary implementation of the agreement and spread best practices to establish a fair trading order in the construction sector."
* This article has been translated by AI.
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