LH Improves Construction Cost Estimation Method, Targets KRW 400 Billion in Savings by 2030

[Financial News] Korea Land and Housing (LH) said it will overhaul its construction cost estimation method for public housing projects, saving KRW 45.1 billion this year alone and an annual average of KRW 100 billion through 2030.
LH announced on the 28th that it would significantly improve its construction cost estimation method to ease the financial burden of public housing projects in line with the government's policy to expand housing supply. The move aims to mitigate rising project costs caused by increases in material and labor expenses as the target volume of public housing construction continues to grow.
The key change involves the way the standard market unit price is applied. The standard market unit price is calculated based on market transaction prices for completed construction work, and regulations require the design unit price to be used as the bid unit price without modification. Previously, LH compared the unit price calculated using the standard construction cost estimate with the standard market unit price and adopted the lower figure as the design unit price. However, when the standard market unit price was selected, bidders had to submit it unchanged as their bid unit price, making it difficult for price-competitive companies to win contracts.
LH will address this issue by comparing the estimated contract unit price—which reflects the previous year's average winning bid rate in the unit price calculated using the standard construction cost estimate—with the standard market unit price. The lower figure will be adopted as the design unit price. This will expand opportunities for price-competitive companies while lowering actual contract prices and reducing project costs.
LH will also expand the types of work and the scope to which the standard market unit price applies. Previously, it was used only for certain items among standard unit work prices that could be compared with the standard market unit price. Going forward, the comparison will also cover special unit work prices for individual project districts. As a result, construction work that was previously difficult to assess using market prices because it was grouped under a single unit work price can now be compared by detailed item.
After first applying the improvements to projects ordered in the second half of this year—34 blocks totaling 19,677 housing units—LH confirmed savings of KRW 45.1 billion. The expansion of items subject to the standard market unit price saved KRW 27.8 billion, while improvements to the application method saved KRW 17.3 billion. Based on the planned construction volume from 2027 through 2030, LH expects cumulative savings of KRW 397.7 billion.
An LH official said, "We will continue expanding the items subject to the standard market unit price and refine the estimation method to secure appropriate budgets, while actively using the savings to expand the supply of public housing."

[email protected] Jung Kyung-soo Reporter