KRW 116 trillion invested in 2008 (14% of GDP), 1.82 million jobs created (8% of total employment) Overseas construction has been the key source of foreign capital (orders worth of USD 47.6 billion received in 2008) Low productivity (57% of manufacturing industry, sluggish performance since the 1990s) Public works have displayed poor performance such as delayed construction period and increased construction costs Low level of technology and prevailed corruption and irregularities 4 * Measures to advance the construction industry have been developed based on the recommendations from the Construction Industry Advancement Plan submitted by the private sector. (Jan. 2009)

6 - Uniform regulatory regimes as seen in the contractor - subcontractor system and separated order issuance, which are mandated according to the relevant laws - Bidders turn to brokers only for lobby activities - Venders are being negligent of technical development * Comprehensive companies: 5, Specialized companies: 25 business types Limitation in business among different business types - Performance has been unsatisfying because the order issuance and contracting methods are determined based on the construction cost

* Wasting huge amount of social cost for lobby activities to over 3,000 judges pool 7

* CM at Risk, turn - key 8

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Owner forms flexible production system satisfying the characteristics of construction * Utilizing a professional company as a prime contractor using CM, and utilizing a main contractor type joint venture 11 Technology development will be facilitated including connecting designs with construction, while design businesses will become larger and specialized * Several private contracts, and turn - key projects are not included in separated order (’09, 4% further 60%) Construction efficiency will be increased including saving costs for fair management and shortening construction period

Facilitating and verifying turn-key methods Expanding the application of technical proposal bidding for constructions requiring advanced technologies and creativity - Applying to not only high-level construction, but also constructions requiring a reduced construction period - Introducing the submission of proposal outline for detailed design Introducing a bidder proposed tendering system where a bidder estimates and proposes construction methods and volumes 12 * Technological development including new technology and construction methods will be facilitated

Stricter construction guarantee evaluation Rigorous PQ criteria * 【 Current 】 Construction Guarantee 【 Future 】 General Insurance Companies 13 - Refuse to warrant dumping bids by insolvent builders - Open the market so that owners can choose guarantee companies * Include specific categories such as construction performance and technology - Reinforce the evaluation standard of PQ - Grant full autonomy to capable owners

Evaluate bid price based on objective data Appraise elements besides price if necessary, and allow the proposal of alternatives Capable owners can organize their own evaluation committee Avoid corruption by disclosing the list of members before the evaluation as well as the results 14 - Incapable owners should depend on the central permanent evaluation committee (with around 50 members) - Members from the private sector should also submit asset reports and are subject to punishment

Budget has been wasted due to expensive CM Appraise performance by project stage and utilize it in developing plans and budgeting 15 * 63% (681.6 B won) of projects are not obligated to undergo supervision * Construction cost, increase of project time, safety, change in design, and reconstruction

Move the focus away from price to technological capability 16 Cost-plus-fee contract will replace percentage-of-construction-cost contract in design cost payment Stricter builder management with new punishment clauses on insolvent companies Specification system should focus on performance instead of materials and standards Enhance the guideline for shop drawing so that blueprints can be actually applied in construction sites

17 Impose fines 50 - fold of the bribe Review methods to liquidate the company in case of repeated offense during a certain period Regulate unfair practices in subcontracting such as not reflecting additional project cost Expand guarantee to include subcontracting, equipment, and material cost Promote a consultative body for the parallel cooperation between prime contractors and subcontractors

19 Restructuring of the industry to be implemented by 2011 (Complete legal amendment by Sep. 2012) Complete urgent tasks by the end of September 2009 * Reform institutions on government projects: Enforcement Decree of the Act on Contracts to which the State is a Party, Enforcement Decrees of the Act on Electrical Communication Business Act, Information and Communication Work Business Act * Ease regulations on entering the construction industry: Enforcement Decree of the Framework Act on the Construction Industry * Permanent evaluation committee on turn-key projects: Enforcement Decree of Construction Technology Management Act (Dec. 2009) * Eradicate barriers between construction businesses, and open the construction guarantee market

Set up a taskforce among relevant ministries for continuous monitoring and follow-up measures Implement and evaluate pilot projects to improve public delivery and tender / award system 20 * Pursue initiatives through Korea National Housing Corporation, Korea Land Corporation, Korea Water Resources Corporation, and Korea Rail Network Authority Run programs to build capabilities of owners