Major South Korean construction companies have raised the prices they pay subcontractors by a combined 107.7 billion won ($77.6 million) so far to ease cost pressures stemming from factors including the Middle East conflict. The amount represents 80% of the 134.3 billion won in increases the companies pledged to deliver this year.
The Fair Trade Commission (FTC) said on the 16th that it held the first meeting of a public-private council on the construction industry's cooperation pact at the Specialty Construction Center in Seoul to review implementation, with 19 general contractors ranked at the top by construction capability and the Korea Specialty Contractors Association in attendance.
The 19 builders committed to raising subcontract prices by a total of 134.3 billion won this year. Of that, 107.7 billion won has been delivered so far, meeting 80% of the target. The companies raised prices by 34 billion won when the pact was signed and have since added another 73.704 billion won.
The subcontract price-linkage system is also spreading. Of the 19 companies, 15 have signed additional price-linkage contracts with 52 subcontractors since the pact took effect. Some builders also provided training on the price-linkage system to their partner firms.
Internal bodies for resolving disputes are in operation as well. Fourteen of the 19 companies run subcontracting dispute resolution units, which have settled a total of 14 disputes since the pact was signed. Kye-Ryong Construction Industrial (013580) specified in its site guidelines that the prime contractor bears the full cost of waste disposal, while POSCO E&C covered the labor costs of subcontractors' dedicated safety officers. Jeil Construction shortened its payment period to 30 days from 60 days.
The FTC and the construction industry had earlier agreed to pay subcontract fees in cash within 60 days absent special circumstances, and to negotiate in good faith over adjustments to subcontract payments when supply costs shift because of war, international disputes or sharp increases in raw material prices. They also agreed to eliminate unfair contract clauses that shift costs such as industrial safety expenses or waste disposal fees onto subcontractors.
The FTC said it would work through the public-private council to ensure the cooperation pact is properly implemented and that it would bring about changes that can be felt on the ground.
