Concerns are mounting over potential disruptions to the site preparation work for Busan's Gadeokdo New Airport, as the fallout from the Iran war has triggered a surge in construction costs. Construction companies participating in the consortium are requesting increased construction fees through the introduction of a special provision.
According to the construction industry on the 29th, 13 construction firms from the Busan and South Gyeongsang regions within the Daewoo Engineering & Construction consortium, which is handling the Gadeokdo New Airport project, recently submitted a joint petition to the Ministry of Land, Infrastructure and Transport (MOLIT), the Busan city government and others, demanding that construction costs be brought in line with reality. If their demands are not met, they are reportedly even considering withdrawing from the consortium.
The industry believes that if current construction costs are maintained, some participating companies are highly likely to face management crises as they cannot bear losses during construction. In fact, local construction firms are said to have internally raised the need for a construction cost increase of at least 500 billion to 600 billion won.
Daewoo Engineering & Construction, the lead company, is also closely monitoring the situation. "Since the Middle East war, the cost structure has fundamentally changed, and losses are now unavoidable," a Daewoo Engineering & Construction official added.
The current State Contract Act allows adjustments to contract amounts for price fluctuations occurring after a contract is signed, but cost increases arising between the bidding stage and the signing of the main contract are not subject to reflection. For projects that apply the technology-based bidding method, such as the Gadeokdo New Airport, this gap has a greater impact as the design process following the bid becomes prolonged.
To resolve this structural problem, the industry is requesting the introduction of a special provision. Specifically, one measure under discussion would allow construction costs to be recalculated based on the point at which the main contract is signed, rather than the bidding date, when construction costs surge due to external shocks such as the Middle East war.
The Gadeokdo New Airport is a super-large national project with a total project cost of 10.7176 trillion won, and it is a project with significant future impact on the regional economy and logistics infrastructure. However, if the momentum for the project weakens due to construction cost issues, the possibility cannot be ruled out that not only will the schedule be delayed but the project structure itself may be reviewed. On these grounds, attention is focused on future policy responses.
