As construction costs soar amid the global economic woes, disputes between the country’s construction giants over costs are escalating into legal battles.
Ssangyong Engineering & Construction (E&C) is organizing a protest at KT’s headquarters in Gwanghwamun, Seoul, with a team of about 50 members from its construction division. The protest aims to demand an additional 17.1 billion won ($12.6 million) for the construction costs of KT’s new headquarters in Pangyo.
Ssangyong E&C had previously held a similar protest in front of KT’s Pangyo headquarters at the end of Oct. 2023.
However, after KT filed a lawsuit with the Seoul Central District Court on May. 10, seeking confirmation that there are no additional construction costs payable to Ssangyong, the construction company began preparing for a second protest. It is unusual to see employees of one large corporation protesting in front of another’s headquarters.
In 2020, Ssangyong E&C won the contract from KT to build a new headquarters in Pangyo and completed the construction in Apr. 2023.
Since 2022, Ssangyong has been demanding an additional $12.6 million, citing a significant increase in construction costs due to the Russia-Ukraine war and a surge in cement prices.
However, KT has refused to increase the construction costs, pointing out a special agreement in the initial contract stating that the contract amount would not be adjusted for price fluctuations during the construction period.
A Ssangyong E&C representative said, “KT had been saying they were considering an increase, but suddenly filed a lawsuit, which feels like a betrayal.” On the other hand, KT’s stance is that they are seeking a legal judgment as the most definitive and prompt resolution to the situation.
Disputes over rapidly rising construction costs over the past two to three years are expanding into legal battles between large corporations in S. Korea.
In the past, disputes over increased construction costs typically occurred between reconstruction or redevelopment associations and construction companies in the housing market, sometimes leading to construction halts.
Recently, such disputes have also been occurring in office building constructions and public construction projects, leading to bitter conflicts between construction companies demanding more money and clients insisting on sticking to the original contracts.
Hyundai Engineering & Construction (E&C) is in a tug-of-war with Lotte Shopping over an additional $10.3 million for the construction of a new mixed-use complex in Gwangsan-gu, Gwangju.
In September 2019, Hyundai signed a contract with Lotte Shopping to build a 39-story apartment building with 315 units, a cinema, and retail facilities, with a total construction cost of $101.7 million
However, Hyundai requested an additional $10.3 million, citing an unexpected rise in construction costs, and has sent four official letters to Lotte Shopping since last year.
Lotte Shopping has not responded, leading Hyundai to apply for mediation with the Ministry of Land, Infrastructure, and Transport in Jan. 2024.
DL Construction is also in conflict with the LF Group over an additional $29.4 million for the reconstruction of a logistics center in Anyang, Gyeonggi-do
The original contract amount was $87.7 million in Sept. 2020, and DL Construction completed the project Nov. 2023. DL Construction is requesting additional payment, citing a six-month delay in the construction period due to contaminated soil discovered during the construction process, but no agreement has been reached.
In the construction industry, there is a growing sentiment that it is better not to take on projects if increased costs make them unprofitable.
According to the Construction Association of Korea, domestic construction orders in the first quarter of this year amounted to $25.2 billion, a 28% decrease from $35 billion in the same period last year.
