KT, which is involved in a lawsuit with Ssangyong Engineering & Construction over additional construction costs due to rising prices, has also entered negotiations with Hyundai E&C regarding the calculation of additional construction costs. Lotte Engineering & Construction is also demanding that KT recognize additional construction costs reflecting price increases, raising the prospect that KT's litigation with the construction industry may expand in the future.
According to the construction industry on the 16th, Hyundai E&C, which is in charge of the remodeling project for the KT Gwanghwamun West (WEST) building, began discussions on the calculation of construction costs with KT this month.
Hyundai E&C completed the remodeling of the KT Gwanghwamun West building on April 30 and received approval for use. The original completion date was set for March of this year, but it was delayed by about a month due to design changes.
Hyundai E&C signed a contract for the KT Gwanghwamun West building remodeling project for 180 billion won and started construction in 2022.
A Hyundai E&C official said, "We are discussing various aspects, such as how many days to consider the completion date of the building as a criterion for calculating construction costs and how to interpret the contract terms," and added, "We have just started negotiations regarding design changes, so the specific construction cost amount has not yet been determined."
Lotte Engineering & Construction is reported to be consistently requesting KT Estate, the ordering company, to recognize the additional construction costs of about 100 billion won that were added after completing the redevelopment project in the Jayang 1 area of Gwangjin-gu, which was completed last January.
According to the Financial Supervisory Service's electronic disclosure system, the construction cost for the redevelopment project in the Jayang 1 area by Lotte Engineering & Construction is 796.55664 billion won. Lotte Engineering & Construction claims that considering several design changes and price increases, they spent an additional 100 billion won, which is 12% of the total contracted construction amount.
A Lotte Engineering & Construction official said, "I can't specify the exact amount, but we are consistently asking KT to recognize the construction costs incurred outside the contract price," and added, "Although we have completed the work, the internal finishing work has not yet been completed, so we have not officially entered negotiations, but we plan to continue discussions in the future."
KT is not accepting the construction industry's request to reflect price increases in the existing construction costs. Based on the 'exclusion clause for price fluctuations' in the contracting agreement, they are not paying construction cost increases due to price hikes. The exclusion clause for price fluctuations refers to a provision that excludes the possibility of price adjustment due to price fluctuations.
KT filed a lawsuit for 'debt non-existence' against Ssangyong Engineering & Construction, which is demanding the payment of an additional construction cost of 17.1 billion won for the additional construction costs for the Pangyo new office building in May last year. This is based on the argument that there is no obligation to pay additional construction costs according to the exclusion clause for price fluctuations. Ssangyong Engineering & Construction also filed a counterclaim for the construction payment, and both companies are waiting for a court ruling.
KT's subsidiary, KT Estate, also filed a lawsuit for debt non-existence last June against Hanshin Engineering & Construction, which took on the construction of the Busan Choryang officetel development project, demanding an additional construction cost of 14 billion won.
The construction industry believes that they may receive additional construction costs due to design changes, but until a legal judgment is issued, it will be difficult to receive additional construction costs that reflect price increases.
An official from the construction industry analyzed, "From the ordering company's perspective, they included the exclusion clause for price fluctuations in the contract, stating that they would not adjust construction costs regardless of price changes, and if they were to pay additional amounts for price increases in the future, it could lead to breaches of trust," and said, "KT and the construction companies are left with no choice but to keep an eye on the court's ruling."