When the Korea Land and Housing Corporation (LH) sells apartments in public housing areas such as new cities, some mid-sized construction companies have increased the chances of winning by using a’bee bidding’ method. Practically the same company, but mobilizing Paper Company (paper company) or partner companies as if several companies participated, so it took an advantageous position in the bidding. In a bid that selects a winner by simple lottery, the more companies participate in the bid, the higher the chance of winning.
Mobilization of Paper Company and Partners
Increase the number of heads and increase the chances of winning
5 companies take 30% over 10 years
Rep. Song Eon-seok, the People’s Power, published a data entitled’Participation in the bid for LH apartment sites in 2008-2018 and the status of winners. According to this data, five companies, including Lakeside Construction, Jungheung Construction, Umi Construction, Bando Construction, and Jeil Construction, took 142 lots (30%) from the bids of 473 lots during the period. In some cases, Hoban Construction mobilized 29 related companies to bid for one lot, Song said.
In order to participate in the bid for public housing, 10% of the land price must be raised as a reserve. Some construction companies lent money in the form of short-term loans to related companies participating in the bee bid. At Cheil E&C, short-term loans from 2.3 billion won in 2013 increased more than 100 times to 256.9 billion won in 2019. An official in the construction industry who requested anonymity said, “There are many cases of mobilizing bee bidding even for business partners with construction achievements.”
Jungheung Construction, which uses an apartment brand called Jungheung S-Class along with Jungheung Construction, rose to the 15th place in the construction capability evaluation ranking of the Korea Construction Association last year. The company’s 2014 ranking was 82nd. In 2019, Jungheung Engineering & Construction recorded KRW 1.47 trillion in sales and KRW 2682 billion in operating profit. Compared to 2014, sales surged 280% and operating profit surged 952%.
Bando E&C rose from 57th in 2014 to 14th last year. Cheil Construction, which uses the brand Jeil Punggyeongchae, jumped from 94th in 2014 to 31st last year. Cheil E&C recorded 97.1 billion won in sales and 1342 billion won in operating profit in 2019. Compared to 2014, operating profit increased by 505%.
Some companies are reducing their size in order to take advantage of favorable conditions in public housing bids. Jungheung Construction Group, which Jungheung Construction Group belongs, reduced the number of affiliates from 62 in 2017 to 34 in 2019. The total assets of Jungheung Construction Group as of the end of 2019 were 8.42 trillion won. If the total asset exceeds 10 trillion won, it is difficult to bid for public housing by mobilizing affiliates because it is highly regulated by the Fair Trade Act.
Reporters Ham Jong-sun and Kim Won [email protected]
