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Policy Briefs contain useful information on territorial planning policies and national strategies of Korea and other countries.

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TITLE Policy recommendations for redressing unfair practices in construction
Volume vol.562 DATE 2016-04-18 HIT 8122

파일첨부 Brief562.pdf

Policy recommendations for redressing unfair practices in construction: Strengthen enforcement of preventive measures against malpractices and create environment for fair practices


Unfair practices have been rampant in construction works, as ps in the higher levels of production abuse their dominating position. However, a comprehensive approach towards fixing those practices has yet to be prepared. According to an analysis, acts related to construction costs recorded high levels of unfairness, attributable largely to a combination of insufficient funds for construction and a vertical production system where a client has an upper hand.

■ Levels of unfairness were high regarding no adjustment in payment of construction costs after changes in designs and delayed payment of low-priced subcontracted works, rent and wages.

■ The lack of money allocated for construction and a client-oriented vertical production system are the primary causes of such unfair practices, and they need to be urgently addressed. The evaluation of effectiveness of policies to prevent unfair practices surrounding construction works indicates that it is crucial to beef up the enforcement of those policies.

■ Preventive measures such as regulations on construction costs seem to be effective, but actually they do not work well.

■ That is because of shoddy measures in the stage of enforcement, such as dispute mediation, penalties and incentives.

■ It is necessary to take a policy approach towards strengthening the practical execution of policies and enhancing the mindset of ps involved in construction works and the culture.

Policy recommendations

❶ It is suggested to secure adequate funds for construction and bolster payment guarantees and execution guarantees in a bid to fundamentally prevent malpractices.

❷ It is necessary to develop an integrated system for unfair practices in construction works, which is responsible for checking construction payments, investigating unfair practices, mediating disputes and follow-up measures, in an attempt to strengthen the enforcement of measures to prevent unfair practices.

❸ It is recommended to step up public relations of preventive measures and launch the fair practice vow program to help spread fair practices and come up with guidelines on fair practices for construction works.

❹ To create an environment for fair practices, it is required to lay out a legal framework that can embrace all of the ps in construction.

Sungil Kim, head of housing&land research at KRIHS, Minchul Kim, associate research fellow at KRIHS, Jeonghui Cho, researcher at KRIHS

Volume 562