Enhancing Value of Public Construction Projects by Improving Contract Review Process

Abstract

This study aims to suggest the method to enhance the value of public construction project during contract review process considering budget reduction for project profit and public interest enhancement simultaneously. The main results of this study are as follows: ① Current method are considered to be improved from the point that cost reduction through current method could influence performance of the object of contract without conforming to user requirements or facilities' function. ② In order to supplement current process, the method to evaluate the variation of performance and value was established based on facility type, participants on each phase, and their requirement. ③ Case study was conducted to verify suggested method, and showed the successful application in enhancing the value of construction projects on public sector. As enormous finances with the scale of 40 trillion won of the country and local government are invested into the public construction projects every year, various policies and techniques have been introduced to prevent the waste of budget by removing underlying inefficiency and waste factors in each phase of the construction project. Recently, public institutions including each central government and local government have shown the achievement of the large-scaled budget reduction for their own projects that the corresponding institute is in charge of through the contract review system. In spite of this budget reduction, it has been pointed out that the qualities of public projects such as functionality for users or consideration for project participants are overlooked during the contract review. This opinion is based on the fact that public projects should satisfy the additional needs by increasing the profit of stakeholders and public as well as the budget reduction. As the purposes of current contract review system are to enable the efficient and transparent execution of the budget, and to reinvest the savings, etc., the results of review are mostly reported focusing on the budget reduction of owner. This kind of reduction might cause non-conformance to user requirement, affect the performance of facilities with inadequate function, and change the site conditions or work difficulties of the contractors. Thus, a method needs to be established to secure project value as public construction with reduced cost by contract review. This study aimed to suggest the plan to enhance the value of projects in the process of contract review for public construction projects by considering both the budget reduction and the increase of the public profits from the perspective of the stakeholders of projects. By utilizing the method suggested in this paper, the objectivity and reasonableness of the current review works are expected to be improved, and the optimal direction of satisfying project stakeholders to be identified in carrying out public construction projects.