Issue Focus

Recently, the Ministry of Land, Infrastructure, and Transport (MLIT) in South Korea has announced amendments to the Construction Technology Promotion Act to improve the effectiveness of the penalty point system. The amendment to the penalty point system included change from the cumulative average method considering the number of defect measurement sites to the cumulative sum method. Also, in cases of a joint venture subcontract, the MLIT in South Korea intends to change from the method of imposing the penalty point on all members who jointly perform the works or services based on the investment ratio to the method of imposing all penalty points on the representative companies. Various problems with the penalty point system under Construction Technology Promotion Act’ have been raised constantly as follows: (i) disadvantage system that does not meet the purpose of the law, (ii) indeterminate measurement standards, and (iii) administrative capacity limitations for inspecting construction site. However, this amendment to the penalty point system could create a crisis in the overall construction industry because it only increases the impacts of disadvantages (e.g., point deduction in prequalification, restriction on qualification to participate in tendering procedures, restriction of recruit occupant, etc.) by changing only the calculation and imposition criteria of the penalty point, without improving the existing problems. In particular, there are also legal issues such as violation of the ‘principle of equitable treatment’, ‘principle of proportionality’, and ‘principle of self-responsibility’. Thus, this study analyzed the problems of the penalty point system under the ‘Construction Technology Promotion Act’ and proposed its improvement methods with effectiveness and fairness as follows. First, considering the negative effects of the excessive penalty point on the management of a construction company, the method of imposing the penalty point and disadvantages linked to penalty points need to be reviewed and revised. In particular, it is necessary to consider the ways of reflecting the number of defect measurement sites for calculating the penalty point in consideration of the administrative capacity limitations for inspecting the construction site. It is also necessary to consider ways to classify penalty points imposed through on-site inspection according to work type and business boundary in the Korean construction industry. Second, clear and objective imposition criteria for the penalty point need to be established to prevent subjective factors in process of penalty imposition process. Third, it is necessary to introduce the penalty point reduction system as an incentive policy to encourage voluntary efforts for preventing poor construction work by the constructor. The objection system also needs to be improved to prevent the unreasonable imposition of a penalty point. Forth, as most general administrative sanctions have an exclusion period, it is necessary to introduce an exclusion period in the penalty system. As a standard for the exclusion period, it is possible to consider using the term of warranty liability for each facility specified in the law. Fifth, it is necessary to establish an organic cooperation system between the on-site inspectors (e.g., MLIT, the head of a contracting authority or the head of an authorizing or permitting agency, etc.) and to improve the expertise of the on-site inspectors.