'All costs borne by the contractor'...Gyeonggi Province uncovers 297 subcontracting abuse cases

[Suwon Ilbo=Park No-hoon] When Company G, a large construction firm that won a 33 billion won A wastewater treatment facility construction project ordered by Pyeongtaek City, entered into a subcontracting agreement, it set a special clause requiring the subcontractor to bear all costs incurred from civil complaints.

Company N, another large construction firm, issued a subcontracting agreement for a 11.6 billion won B facility construction project ordered by Gwangju City, setting a special clause prohibiting the subcontractor from demanding payment for material price increases or rush construction costs (work completed quickly through concentrated equipment and personnel deployment).

Such abuse of power by setting unfair special clauses that unjustly restrict the subcontractor's contractual interests during subcontracting agreements constitutes unfair practices prohibited under the Construction Industry Basic Act.

The Gyeonggi Province Audit Office announced on the 22nd that it conducted targeted audits on 196 publicly-funded construction projects ordered by the province, cities, counties, and public institutions since July 2018, uncovering a total of 297 cases of unfair subcontracting practices related to contracts.

According to the audit results, despite efforts to improve unfair practices in the construction sector, abuse of power in the form of modified improper special clauses such as site explanation documents continues to be confirmed.

Representative cases include ▲setting improper special clauses that shift costs related to civil complaint processing and industrial accidents that should be borne by the main contractor to the subcontractor (26 cases) ▲setting delay compensation rates higher than statutory standards (137 cases) ▲setting defect warranty periods and defect compensation guarantee rates at or above statutory standards (134 cases).

The province believes this stems from public ordering agency officials failing to carefully review subcontracting agreement contents submitted by large construction firms. It will hold responsible those project supervisors and others who neglected their duties in reviewing subcontracting agreements, and plans to issue improvement orders for unfair subcontracting practices confirmed through the audit results.

Kim Jin-hyo, Gyeonggi Province's Audit Commissioner, said, "We hope this targeted audit has provided some help to small subcontracting firms struggling with COVID-19," and added, "Going forward, we will conduct regular audits on unfair subcontracting practices and make efforts to protect the socially vulnerable."