Policies

[Transparency] Anti Corruption Clean Construction System

Date 2014-05-22 Category Others Updater scaadmin
Affiliation
Global Urban Partnership Division
Date
2014-05-22
Last Update
2019-05-09

Summary

Seoul Metropolitan Government developed the anti-corruption "Clean Construction System (CCS)" with the aim of securing transparency and promoting culture of fair contract in the construction industry. This system enabled local civil servants and all relevant parties of the construction project to share information smoothly and manage construction efficiently and systematically. They could resolve issues such as chronic delay of payment or nonpayment of construction cost to subcontractors. In addition, citizens can find information about payment status as well as the extent of construction progress that is carried out around their home. Therefore, the CCS is continuing to evolve into a system with “openness, innovation and transparency”.



The Anti-Corruption CCS consists of two subsystems.

  • One-PMIS & Allimi(meaning informer in English) : It prevents poor construction work by managing the precise information of manpower, equipment and materials in construction project and by disclosing these information to the citizens.
  • Subcontractor Payment System : It ensures that payments to subcontractors are made on time and the payment information is accessible in real time to all.

      

Geographic information Business process information Present condition of business Q&A of the construction





In recent years, the SMG has made efforts to carry out “Electronic HR Management Scheme” that connects Seoul’s One-PMIS with “Electronic HR Management System”, which is from the Construction Workers Mutual Aid Association under the Ministry of Employment and Labor. This is expected to prevent the omission of construction workers’ retirement allowance from the employment history. Moreover, by identifying the accurate number of workers, steps can be taken immediately when an accident occurs on the construction site.



CCS was 2nd winner of the 2013 United Nations Public Service Awards

ISSUE

Rampant Corruption in the Area of Construction
 Korea has taken a number of measures to improve the transparency level of its construction industry since the mid-1990s. However, presently the domestic construction industry scores only 54.21 points out of 100 in terms of transparency, which makes it evident that the situation is still serious. According to data released by the Supreme Public Prosecutor’s Office(SPO) and the Citizens’ Coalition for Economic Justice(CCEJ), a revered local civic group, the construction industry was related to 412 corruption cases ort of a total of 765 cases, or 53.9%, covered by Korean media between March 1993 and July 2006. In terms of the percentage of corruption cases indicated by the SPO, corruption in the construction industry accounted for 40.4% in 2005 and 25.2% in 2006
 
Unpaid Wages for Construction Workers
Back Pay owed in construction is significantly higher than that of other industries in Korea. According to a survey conducted by Ministry of Labor, 18,000 construction workers reported that they didn’t received wages worth 86 billion won in 2011, almost the amount over the second worst industry in Korea. However, the reality including the reported cases is likely even worse. It is reported that 68.8% of construction workers have been owed back pay in one form or another. The situation stems from the pyramid structure of the local construction industry. Many construction workers get paid only when payment  goes smoothly through a linear payment channel : subcontractors submit payment requests to prime contractors, who then request payment from clients, who make payments to prime contractors, who in turn finally pay subcontractors.
 
Vagueness in Subcontract Amounts and Non-payment
 Contracts require prime contractors to pay their subcontractors within 15 days of the receipt of payments from clients. This system allows prime contractors to use the funds for other purposes during those 15 days, which causes several problems.
 
Problems with the Direct Payment Scheme
 Theoretically, it is easy to require clients to directly pay subcontractors after deducting the portion of the payment due to prime contractors. If this system is implemented, however, prime contractors will lose their power over subcontractors. As a result, work quality by subcontractors might deteriorate and dispute may increase.
 
Unsystematic Project Management
 For a long time, papers were prepared manually. Contractors’ various reports including daily, weekly, monthly and so on, were no exception. All of these had to be submitted to Clients’ offices in person.  The regular reports included many details such as types of works, the progress rate, the amount of materials and the equipment used. However, as these details were difficult to verify, inaccurate information in the reports was commonly accepted in many cases.
 
Closed Construction Information
 Citizens living nearby construction projects are entitled to know when a project is going to be completed. A signboard is often installed at the entrance of a construction site at the beginning of a project, but updates are not posted. Typically, any information on delays cannot be found anywhere, and some projects are totally halted with no information given

GOALS AND OBJECTIVES

CCS was developed to ensure that the construction projects are transparent.


This can be done by the following: systematic and efficient process management of construction and information sharing between all relevant parties via “One-PMIS”, separately paying the construction cost via “e-Baro”, identify the accurate number of construction workers to prevent the omission of construction workers’ retirement allowance from employment history via “Electronic HR Management Scheme” and; ensure citizens’ right to information and to improve integrity in the construction sector by the real-time disclosure of construction information called “Construction Allimi”.

IMPLEMENTATION

Construction Allimi and One-PMIS

  • Formation of a Task Force Team : In January 2011, the city formed a task force team with the purpose of establishing  One-PMIS inside Seoul Metropolitan Infrastructure Headquarters.
     

  • Intervention of Private Enterprise to Set Up a Professional System : The city of Seoul signed a contract with SangAh Management Consulting Corporation, a professional project management information system developer, in April 2011 to develop a system for city administrators.
     

  • Contributions by Each Party to Develop an Integrated System : Prime contractors must input all the detailed project information into One-PMIS. Consulting engineers check the information and submit it to the client through the computerized system. Public officials review the information and approve or disapprove it. The approved information is stored in the database, which is accessible to the public in real time. Due to these interconnectedness of roles in various, the city had to develop a close cooperation system.
     


    Subcontract Payment System

  • Formation of a Task Force Team : A task force team was formed with public officials in charge of construction contracts and computerization in order to develop a computerized payment system that would monitor the payment flows from start to finish.
     

  • Private Sector’s Involvement and Feedback from Subcontractors : In April 2011, the city of Seoul contracted with Paycoms, a systems integrator, for the development and installation of a computerized system to monitor the prime contractors’ payment to their subcontractors. Through the contract, the city of Seoul could mobilize the expertise of the company’s programmers, financial experts and risk managers. For about a year, the company’s experts and the city’s construction officials did their best, holding numerous meetings with subcontractors to get their opinions about what a new system should include.
     

  • Agreement with Banks for Real-time Payment Information : The city of Seoul made an agreement with two respected banks for the provision of payment information so that payments to subcontractors can be checked online.

  • Gradual Implementation : The city of Seoul adopted a gradual approach to the implementation of the system on site to give all the parties concerned enough time to adapt to the new system. The subcontract payment management system was implemented in two stages. The focus of the first phase was to ensure that prime contractors make payments to their subcontractors on time. The second phase pursued the guarantee of on-time payment to construction workers and equipment renters. (First Step : Real-Time Subcontractor Payment Confirmation System, Second Step : Added additional function in the system to guarantee payment for construction workers’ wage, materials, and equipments)
     

  • Adoption of Innovative Technologies and Work Process : Owing to innovative technologies, the city of Seoul even has two patents for the subcontract payment management system. The first one, which deals with the technology to check the cash flow for subcontractors linked to banking system, was registered in June 2010. In October 2011, another patent, which deals with payments to employees, material suppliers and equipment rental shops, was registered. It was possible to make system by adopting these innovative technologies.

COST

One-PMIS & Allimi

  • Initial Investment : 700,000,000 KRW
  • Annual Budget
  2011 2012 2013 2014 2015 2016 2017
Project Duration 2011.3~2012.2 2012.3~2013.2 2013.3~2014.2 2014.3~2015.2 2015.3~12 2016.1~12 2017.1~12
Content System Development Maintenance Maintenance and Upgrade Maintenance and Upgrade Maintenance and Upgrade Maintenance and Upgrade Maintenance and Upgrade
Cost (million KRW) 700   245 386 236 209 257
  Development Cost 470            
Maintenance Cost 230   195 324 194 209 257
Upgrading Cost     50 62 42    



Subcontractor Payment System

  • Initial Investment

    • 62,423,000 KRW (Step 1 : 42,323,   Step 2 : 20,100,000 )

  • Annual Budget

(Unit : KRW) Total 2011 2012 2013 2014
Development Cost 289,000,000 43,000,000 21,000,000 37,000,000 188,000,000
Maintenance Cost
(Customer Care Center Operation)
231,000,000 - - 45,000,000 186,000,000

 

    •  

RESULTS AND EVALUATION

Status

  • The Subcontractor Payment Management System was introduced and applied not only in public institutions but also in private companies, totally in 2,351 workplaces as of 2013

  • Total 1840 projects are registered in One-PMIS as of December 2012
     

Measurable Result

  • Decrease in the percentage of workers who have experienced more than 3 months of overdue wages from 44%(in 2012) to 28%(in 2013)

  • Full payment of total 3 years’ overdue wages of 13billion KRW

  • Decrease of 63% in the number of reporting of subcontract corruption from 326 cases (in 2012) to 100 cases(in 2013).
     

Domestic and Foreign Evaluation

  • 2nd winner of the UN Public Service Awards (May, 2013) 

  • Chosen as one of the 40 excellent programs at Guangzhou International Award for Urban Innovation co-hosted by UCLG(United Cities and Local Governments), Metropolis(the World Association of Major Metropolises) and Guangzhou Municipal Government, China.

  • Won the first prize in 2013 Anti-Corruption Competitive Exhibition

  • Citizen’s evaluation of Mayor Park’s 100 projects : Citizens evaluated Subcontract Payment System as a Second-most-important project.

TIMELINE

One-PMIS & Allimi

  • April 2011~February 2012 : Established the One-PMIS and Allimi

  • March 2012~February 2013 : Free maintenance and defect repair of the system

  • April 2012 : Organized the Working-level Operation Council with 60 people from the city’s affiliate organizations and 25 district offices to discuss how to run One-PMIS efficiently.

  • May 2012 : Had Seoul Metropolitan Infrastructure Headquarters set up the Construction Information Department that would be in charge of the operation of Construction Allimi & One-PMIS.

  • March 2013~December 2013 : Implementation of user education (total 1,634 person)

  • June 2013 : Implementation of Mobile Allimi Service



Subcontractor Payment Management System

  • April 2011~October 2011 : The system development was done.

  • December 2011 : The mayor of Seoul and the presidents of Woori Bank and the Industrial Bank of Korea Signed an cooperative agreement to ensure payments on time to subcontractors by sharing banking information which allowed the goals of phases one and two to be met.

  • May 2012~October 2012 : The system which guarantees the payment to construction workers, small-scale equipment renters and materials suppliers was done.

  • November 2012 : Test operated at city level and signed an MOU with 25 districts to expand the system

  • January 2013 : Promoted expansion of the system to entire organization of Seoul Metropolitan Government

  • June 2013~September 2013 : Held meeting with large construction companies which had not yet joined the system(total 7 times)

  • October 2013 : revised relevant ordinance
     

 

LEGISLATION

Continuous communication between all the parties concerned.

The city raised problems that were anticipated in the system development and operation at various meetings between concerned bodies in the public and private sectors, such as the Subcontract Improvement Council and Citizen Satisfaction Council, in order to check the standpoints of contractors, NGOs and construction labor unions. All the opinions and proposals from every meeting were used to develop the system and solve the problems. Through such processes, the city of Seoul was able to come up with a system which satisfied not just the city itself, but all potential users.
 

New Perspectives on Public Services for the Disadvantaged.

A few programs under the banner of anti-corruption clean construction began because of the new perspective of the Seoul municipal government that wanted to solve construction related grievances from the perspective of the disadvantaged, and fostered shared growth. Ways were sought to guarantee payment to subcontractors and construction workers in the context of building a society where the underprivileged are protected and each and every citizen matters. For too long, the weak parties to construction contracts have not been taken care of by the public sector. An innovative and transparent management system has been developed and implemented as a fundamental solution. The result is the creation of an exemplary system that is effective in preventing construction corruption which has resulted in recognition at home and abroad. In the meantime, in the process of the implement of the system designed largely to protect subcontractors, the city of Seoul took active measures that consider other disadvantaged groups of citizens as well, such as the disabled and the elderly who needed extra measures on the part of the city of Seoul for their easy access to the system’s information on the computer. Thus, for the blind, every image on the website has been supplemented with text information. For the deaf and the elderly, all voice information has been supported with subtitles. For those with upper-limb disabilities having difficulties using a mouse, special agreement has been made so that they can use their computers with just keyboard strokes. Such efforts to embrace the underprivileged were recognized by organizations such as the Korea Blind Union, and the system website was chosen by the association as the best website for accessibility. The initiative of the city of Seoul, therefore, also opened doors to an improved environment for the lives of those who are disadvantaged in their use of the computer.
 

Paradigm Shift in Construction Culture with Public Initiatives.

Public works are funded with taxpayers’ money. Citizens, therefore, are entitled to know whether the works are being done properly or when they will be completed, as they are the real clients of the works. Construction Allimi and One-PMIS are participating in the efforts of the municipal government to return project ownership to citizens. The agreements are regarded as a groundwork for transparent municipal administration by putting an end to the previous practices that kept work progress and resources information secret, and instead disclosing all the basic information on projects such as the project overview, photos of major processes, and web camera site videos for public viewing. This new system has proved that a government by encouraging communication between interested parties can bring transparency into the private sector, in this case the construction business. In the construction field, the new system has not only improved the payment process but also the overall management of projects, specifically in the areas of financial inputs and resources and materials.

TRANSFERABILITY

  • Seoul’s subcontract payment management system, Construction Allimi and One-PMIS, are internet-based computerized systems. Therefore, they can be used wherever there is an Internet infrastructure. Almost all the countries in the world are implementing anti-corruption policies and information disclosure regulations. They are also strongly pushing for an improved Internet infrastructure. More people depend on the Internet and will continue to do so. Therefore, it is expected that the demand for these systems will continue to rise both at home and abroad.
     

  • The new construction management system uses innovative technologies and the Internet to streamline the existing construction work processes. Therefore there is no fiscal burden besides the expenses incurred for the establishment and operation of the system.

  • Other cities and provinces in Korea can apply the system easily. In fact, many institutions have come to use Seoul’s system as a benchmark. So far, 19 domestic agencies and 30 foreign countries’ institutions have sent their officials and personnel to Seoul. All of them have responded very positively to the Seoul system.

CONTACT

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POLICYSHARE@SEOUL.GO.KR

Department / Contact

  • Global Urban Partnership Division  /  82-2-2133-5264  /  policyshare@seoul.go.kr

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