LH to Overhaul Public Housing Construction Cost Estimation... 400 Billion Won in Project Savings by 2030

Expansion of Standard Market Unit Price Application Items

Cost Savings of 45.1 Billion Won Expected in Second Half

Projected Annual Savings of 100 Billion Won

Korea Land & Housing Corporation (LH) announced on September 28 that it will revamp its construction cost estimation method to reduce the financial burden of public housing construction, aiming to save an average of 100 billion won per year in project costs by 2030.

The Asia Business Daily DB

LH will implement improvements in its construction cost estimation method starting this year, which include expanding the application method and scope of standard market unit prices.

The standard market unit price is a unit price calculated based on the market transaction prices of actual completed construction projects. LH has decided to compare the estimated contract unit price, which is derived by applying the previous year’s average bidding rate to the standard unit cost, with the standard market unit price, and use the lower of the two as the design unit price. In the past, designers would compare the unit price calculated by the standard estimation method with the standard market unit price and apply the lower one as the design price, but this process often made it difficult for cost-competitive companies to win bids.

In addition, LH plans to broaden the scope for applying the standard market unit price. Previously, the standard market unit price was applied only to certain items in the standard unit price list for construction (developed based on standard estimation), where direct comparison was possible, but from now on, it will be extended to include special local unit prices for each site as well. This means that construction works that were previously bundled under one unit price and difficult to compare with the standard market unit price can now be broken down into detailed items and compared at the market rate for each component.

LH expects that the revised cost estimation method could save a cumulative 400 billion won in project costs by 2030. For the 34 blocks and 19,677 units commissioned in the second half of this year, the improvements were first applied and resulted in a cost saving of about 45.1 billion won. The amount saved by expanding the application of standard market unit prices reached 27.8 billion won, while the improvements to the application method created additional savings of 17.3 billion won. Based on the scheduled construction volume from 2027 to 2030, additional cumulative savings of approximately 397.7 billion won are forecast.

An LH official stated, "We plan to continuously expand the number of items to which the standard market unit price is applied and further improve our estimation methods to secure appropriate budgets and use the savings to expand the supply of public housing."

This content was produced with the assistance of AI translation services.