Gyeonggi Province and Court Crack Down on Construction Company Illegally Operating Office Through 'Loopholes'

[Suwon Ilbo=Reporter Park No-hun] The Gyeonggi Province's business suspension against S Construction Company, which registered an illegally extended building as an office, has been ruled justified in an administrative lawsuit.
In particular, as this ruling also nullified the company's 'loophole' attempt to change its registered address, it is expected to serve as a stern warning to some construction companies that prioritize securing contracts by meeting legal standards only on paper.

According to Gyeonggi Province on the 6th, S Company was caught in a 'preemptive crackdown' by Gyeonggi Province in October of last year for violating construction business registration standards and received a business suspension order. The company was the top bidder for a province-commissioned project worth approximately 1.8 billion won.

According to the 'Framework Act on the Construction Industry,' construction companies must operate buildings that comply with building laws and other relevant regulations as offices where construction engineers can work at all times.

Accordingly, S Company argued that "the illegally extended office was used for only 12 days, and immediately after being caught, we transferred our registered address to another city or county to resolve the illegality," claiming that the province's administrative action was based on misinterpretation of facts and abuse of discretion. The company filed an administrative lawsuit in December of last year.

The province carefully reviewed construction business registration documents and job postings, and proved that S Company actually used the illegally extended office for as long as 15 months, contrary to its claims.

Based on this effort, the court ruled in favor of Gyeonggi Province, stating that the administrative action was justified. The ruling reasoned that while the company's corrective action was a mitigating factor, the grounds for the administrative action existed, and that a construction company that operates an office in an illegally constructed building fails in its 'duty to prevent defective construction'—a serious violation.

Gyeonggi Province plans to take stern measures against companies like S Company that operated illegally extended offices and lack proper registration standards, completely eradicating paper companies in the construction industry.

The province's position is that there are no exceptions to cases involving facilities related to automobiles, industrial facilities, commercial facilities, and single or multi-family dwellings that are used as construction company offices without purpose-change procedures, or cases where tenancy is obtained without approval from knowledge industry center administrators.

Furthermore, to prevent such illegal activities from recurring, the province has disseminated the ruling details to city and county governments and related associations.

Governor Lee Jae-myung stated, "Like this crackdown case, there are no exceptions to enforcement against paper companies that are hotbeds of defective construction, budget waste, work overload, and construction fraud," and added, "We will continue to make efforts to eliminate companies that gain unfair benefits through illegal activities and create a fair construction industry environment."

Since October of last year, the province has been conducting 'preemptive crackdowns' in which successful bidders in province-commissioned construction projects are carefully investigated for violations of the 'Framework Act on the Construction Industry,' such as failure to meet registration standards, unregistered subcontracting, and insufficient technical personnel, and the results are reflected in determining successful bidders.

In particular, the system has been highly evaluated for its ability to filter out illegal construction companies from the bidding stage itself. Central government agencies including the Public Procurement Service and the Ministry of Land, Infrastructure and Transport adopted this system starting in June, and most city and county governments in the province plan to introduce it in the second half of this year.