Only the Daewoo Engineering & Construction consortium is expected to bid in the re-tender for the Gadeokdo New Airport site preparation work, which closes on the 6th. The likelihood has grown that the government will end up signing a negotiated contract with Daewoo Engineering & Construction for this mega state project worth over 10 trillion won. Observers say the government now faces greater pressure to prioritize speed over the risk of controversy about favoritism and quality issues.

According to the Ministry of Land, Infrastructure and Transport on the 4th, submissions for the pre-qualification documents for bidders in the site preparation work, announced by the Gadeokdo New Airport Construction Corporation on the 19th of last month, close on the 6th. In the first tender held on the 16th of last month, the Daewoo Engineering & Construction consortium bid alone, pushing the process to a second round.

So far, it appears that, as in the first round, only the Daewoo Engineering & Construction consortium will submit documents on its own.

Major builders such as Lotte Engineering & Construction and the Hanwha Construction Division, which had been considering joining the consortium, decided at the end of last month to drop out. They are said to have concluded after internal discussions that the drawbacks outweigh the benefits.

As a result, among the top 10 builders by construction capability evaluation, Daewoo Engineering & Construction is the only one to have expressed willingness to participate in the Gadeokdo New Airport project.

The number of companies participating in the consortium formed by Daewoo Engineering & Construction has also decreased by three compared with the first tender. Lotte Engineering & Construction and the Hanwha Construction Division, which had been exploring stakes of 10 percent or more through last month, ultimately bowed out, and Ssangyong Engineering & Construction, Kumho Construction, and Kolon Global also left the consortium. Instead, Doosan Engineering & Construction (approximately 4 percent stake) newly joined, and HJ Shipbuilding & Construction and Jungheung Construction each increased their stakes to about 9 percent.

Typically, for a large state project with construction costs exceeding 10 trillion won, multiple major builders take part, but this time there is only one large builder and even the number of consortium participants has shrunk. In this situation, under the National Contract Act, the government can sign a negotiated contract with the Daewoo Engineering & Construction consortium. Signing a contract worth over 10 trillion won with a sole bidder makes it difficult to avoid allegations of favoritism and concerns about poor quality. It is burdensome for the government, but if it is to break ground this year and aim for completion in 2035, it must move quickly to select a contractor.

A Ministry of Land, Infrastructure and Transport official said, “If there is a sole bidder, the legal requirements are met, but no decision has been made on whether to proceed with a negotiated contract.”

The Gadeokdo New Airport construction project drifted after Hyundai Engineering & Construction in May of last year announced it would not participate, citing ‘insufficient schedule’, and POSCO E&C also decided to bow out. The government extended the construction period from the initial 84 months to 106 months and raised the contract amount by 200 billion won to 10.7 trillion won in an effort to encourage participation, but in the end, among large firms, only Daewoo Engineering & Construction stepped forward.

It is interpreted that the exodus of major builders reflects a judgment that the risks outweigh the returns. There are significant concerns about ground settlement, profitability is uncertain, and fears of safety accidents add to the reluctance. A source at a major builder said, “Because it is a state project, numerous government requirements are expected, and we concluded that the burden would be heavy while profitability would be low.”

In the construction industry, there is significant concern about Daewoo Engineering & Construction effectively carrying the highly challenging Gadeokdo New Airport project on its own. A construction company official said, “Even from the standpoint of participating in the project, it is more reassuring when multiple major firms share the burden, so it is indeed a worry.”

Conscious of such concerns, Daewoo Engineering & Construction said in a press release the same day, “If selected as the final construction consortium, there will be no issues at all in executing the work,” adding, “The ultra high difficulty of construction on soft ground that some worry about can be fully overcome with the company technology and experience.”