Korean public housing developer LH cancels 11 contracts won by former officials

[Photo by Yonhap]

Korea Land & Housing Corp. (LH), South Korea’s state-owned land developer, has decided to terminate all design and supervision service contracts with partners that involve former LH officials after the scandal on missing steel bars broke out.

LH announced Sunday that it made such a decision at an emergency meeting on contractor cartels. LH will first cancel all new contracts signed after July 31, when the developer announced the results of the survey of all apartments built with a flat slab design.

There were a total 11 deals won by companies with former LH officials worth 64.8 billion won ($48.25 million), including 10 design contracts worth 56.1 billion won and one supervisory contract worth 8.7 billion won.

According to the National Assembly, 15 out of the 21 apartments with missing steel bars revealed through LH’s report are subcontractors where LH retirees are employed. There are also a number of design and supervision companies founded or headed by former LH executives.

“(Canceling existing contracts) may have legal issues, but it is an expression of our strong commitment to break the connection with former officials,” said LH President Lee Han-joon.

The decision comes after Minister of Land, Infrastructure, and Transport Won Hee-ryong ordered LH last week to “completely suspend the service contracting process with companies where its former employees are working.”

The 11 canceled contracts involve 2,800 apartments for sale and rent. Concerns rise that the delayed projects may disrupt the supply of public housing.

“We are planning to move up some projects that had been delayed (for other reasons) so that the supply will not be disrupted,” Lee said.

Meanwhile, no action will be taken on cases where contracts were signed before July 31, as it would be “unreasonable to cancel the contracts before that date,” according to Lee.

On July 31, the Ministry of Land, Infrastructure, and Transport and LH announced the results of a nationwide inspection of LH-ordered public apartments after the collapse of underground parking lots at the Geomdan apartment in Incheon.

The Land Ministry, in the meantime, announced Sunday it would prepare a plan to abolish the cartels surrounding former LH officials by October.

The basic directions include establishing a database (DB) of LH retirees and relevant subcontractors, strengthening the LH employment screening system, and limiting service contracts with subcontractors hiring former LH officials.

LH plans to discuss with relevant organizations, including the Ministry of Economy and Finance, how to limit the participation of contractors involving LH former officials.

It has also decided to immediately implement measures such as giving preferential treatment to companies without its former officials and making it mandatory to submit a list of its retirees when bidding for future contracts.