The progress of projects, including the Gadeokdo New Airport and public works, is encountering difficulties as construction companies are being passive in winning contracts for large civil engineering projects, including private construction. This is due to the construction market slump, leading companies to selectively pursue contracts based on revenue. Additionally, there are analyses suggesting that the risk of safety accidents associated with civil engineering projects has intensified the tendency to avoid them recently.
According to the Korea Construction Industry Institute and others on the 9th, the construction contract amount for civil engineering projects among public works in the first quarter of this year reached 5.1 trillion won. This represents a 44.6% decrease compared to the same period last year (9.2 trillion won). Although the overall public works order volume has decreased, the decline in civil engineering projects has been even greater. The public works contract amount in the first quarter of last year was 12.9 trillion won, which has decreased to 9.1 trillion won in the first quarter of this year, a reduction of 29.5%.
A representative example is the Busan Gadeokdo New Airport project, where the Hyundai E&C consortium, which was the recent contractor, halted the negotiated contract process after a conflict over construction costs. The Hyundai E&C consortium requested adjustments to the construction period and increases in construction costs, but the Ministry of Land, Infrastructure and Transport did not accept these demands.
More than a year has passed since the groundbreaking ceremony for the Metropolitan Area Express Railroad (GTX)-B project, but actual construction has not yet begun. This is because major construction companies among the Daewoo E&C consortium that won the project contract, including DL E&C, Lotte Engineering & Construction, Namkwang Engineering & Construction, and Hoban Industrial, have withdrawn due to a lack of project funds.
In the Wire-Sinsa Line project, construction companies selected as preferred negotiators waived their contracts and raised the construction costs for bidding announcements, but all bids were rejected.
Along with the reduction in public works volume, private construction has also decreased. As of March this year, the civil engineering contract amount was limited to 600 billion won, a decrease of 70% compared to last year (2 trillion won). In contrast, the order volume for private construction increased from 8.5 trillion won to 10.7 trillion won, a rise of 25.9% during the same period.
Overseas, the scale of civil engineering contracts has also shown a decline. According to the Overseas Construction Association, the annual amount of civil engineering contracts was 1.72 billion dollars last year, a decrease of 9.4% compared to the previous year (1.9 billion dollars).
Responses indicate that the lower revenue potential of civil engineering projects compared to housing projects has had an impact. A representative from a major construction company noted, "While the number of project orders has decreased, civil engineering projects generally have large scales, so it appears that the recent economic slump and market conditions have led to greater difficulties in financing, resulting in fewer contracts. Although there's not a complete avoidance of contracts, recently we have been evaluating business sites internally in detail and selectively pursuing contracts."
Another construction company representative stated, "Civil engineering projects are more affected by variables like the natural environment than housing projects, and accidents on-site are frequent. When accidents occur, the damage to the image is significant. However, it is not a direct reason for avoiding contracts, so if the number of orders increases, construction companies that have prepared for safety issues will pursue contracts."