Research Reports

Recently, the domestic construction industry has faced requirements such as ‘securing construction safety, increasing the importance of construction quality, and introducing smart construction technologies'. The securing appropriate construction cost as the fundamental means to meet these demands has grown in importance. Looking at the efforts related to the appropriate construction cost, various improvement plans centered on the central government's procuring construction have been prepared. On the other hand, making efforts to estimate and to pay the appropriate construction cost for construction projects procured by local governments has been relatively neglected. The local construction industry is a key industry in the region that accounts for a high proportion of the local economy and has a high job creation effect along with the front and rear linked industries. Besides, the local construction companies, which can be seen as the main agent of revitalizing the local construction industry, also showed a high dependence on orders from local governments. Based on this background, it is judged that efforts to secure construction cost for local government-procured construction are urgently needed. As such, this study aims to present reasonable policy measures for estimating and executing appropriate construction cost for local government-procured construction. Specifically, based on the understanding of the necessity of securing appropriate construction cost for local government construction projects, various problems that hinder the estimation and payment of appropriate construction cost for the central and local government construction projects are analyzed. Moreover, the resolution method and the recent policy implementation status that the central and local governments are focusing on are comprehensively analyzed. Finally, the preferred policy direction leading central government and local governments to move forward is provided at the end of this research with the corresponding detailed policy measures. Specifically, the central government's policy implementation plan derived in this study is as follows: ● Securing appropriate construction cost for small and medium-sized construction projects by the amendment of Act On Contracts to Which a Local Government is a Party. ● Preparing of scientific budgeting plan to deal with reasonable construction cost adjustment and management. ● Preparing a plan to prevent unilateral reductions due to the utilization of the self-standard of labor and unit price, etc. ● The additional discovery of a standard yardstick used at the small-scale construction works and the search for a plan to increase that yardstick. ● Expanded construction cost review targeting small and medium-sized construction projects. ● Appropriate payment of (indirect) cost for the extension of the period of works. ● Strengthening audit system to monitor unfair practices of project owner‘s and establishing regulation rules. ● Introduction of Petition for Objection system to solve the problem of underestimation of construction cost. Next, the policy measures to be promoted by local governments derived in this study are as follows: ● Establishment of guidelines for setting reasonable construction cost (budget) using data on local procure construction. ● Development of standards for estimating construction cost tailored to the local construction environment. ● Improvement of the customary standard related to the reduction estimation of construction. ● Establishment of guidelines for planning standard and indirect construction cost applied to small construction works. ● Production and distribution of work manuals to operate rational contract screening system and to improve the expertise of that system. ● Mandatory examination to argue about propriety(contract review) of the construction cost for private subsidized projects. ● Arrangement of payment standards for the extension of the period of works for local government-procured construction. ● A casebook to prevent unfair practices of the construction owners. Finally, to secure the execution power of these policy measures of the central and local governments, and appropriate construction cost in the domestic construction industry in the future. it is necessary to prepare in the medium and long term reasonable alternatives. To facilitate this, building a comprehensive control tower that can comprehensively manage the cost of construction projects is essential. Above all, securing an appropriate construction cost is required at the stage of the project planning and design. For this purpose, it is necessary to educate staffs of affiliated ordering agencies and public officials of local government in charge of procuring a construction project. It is expected that expertise and capacity to estimate construction cost will be strengthened.