Government turns public construction costs into reality as construction economy shrinks due to soaring construction costs

As the construction industry shrinks due to a surge in construction costs, the government has decided to raise the winning bid rate compared to the order amount, which is currently in the early-mid 80% range, in order to help construction companies recover net construction costs in public works.

In this regard, the government held a meeting of ministers related to strengthening industrial competitiveness at the Seoul Government Complex and announced a plan to boost the vitality of the construction industry.

First of all, the government plans to raise the successful bid rate for public construction costs by 1.3 to 3.3 percentage points to guarantee net construction costs.

The successful bid rate is the final successful bid contract amount compared to the order amount, and it is currently formed in the early-mid 80% range in accordance with the low-cost bidding practice in which companies write low prices to win the bid.

In addition, it will be subdivided or newly established to suit construction conditions such as location and site characteristics.

The general management fee rate, which is applied when calculating construction costs, will also be raised by 1 to 2 percentage points.

In fact, it has also decided to improve the construction cost price reflection standard, which requires the application of the lower value among the current gross domestic product deflator and construction cost index.

In addition, in the case of the so-called turnkey project, where design and construction are carried out collectively, the price of the design period will be adjusted to be reflected in the construction cost even when signing a private contract.