Overreaching in Attempt: Samsung C&T Embroiled in Controversy over Winning Construction Project at Low Prices | BusinessKorea

Tuesday, January 23, 2018

Some say that Samsung C&T won the project of constructing the underground expressway in Singapore at the excessive low prices in order to kill the rumors of the replacement of President Choi Chi-hun.
Some say that Samsung C&T won the project of constructing the underground expressway in Singapore at the excessive low prices in order to kill the rumors of the replacement of President Choi Chi-hun.
Seoul, Korea
11 December 2017 - 12:00pm
Jung Min-hee

Criticism mounts as Samsung C&T won a large construction project abroad at excessive low prices again. It is appreciable that South Korea’s largest construction firm Samsung C&T saw its competitiveness be recognized in the global market but it is deplorable that it created severe competition with a low price strategy.

As Samsung C&T received an order with 10 percent lower price than the construction company which made a bid with the second lowest price, there are doubts whether the company made a bid below cost. Some say that it obtained the order at the excessive low prices in order to kill the rumors of the replacement of President Choi Chi-hun before the regular appointment of Samsung C&T executives and make efforts to serve consecutive terms.

According to construction industry sources, Samsung C&T won the project for the construction of the first double-deck underground expressway in Singapore at 809.35 million Singapore dollars (US$598.57 million or 654.65 billion won) on November 24. Launched by the Land Transport Authority (LTA) of Singapore, the project is to build a 1.25 km-long underpass and four entrance and exit ramps with a total distance of 3.34 km and ventilation buildings under existing roads with up to eight lanes.

In addition to Samsung C&T, six South Korean and foreign construction companies, such as SK Engineering & Construction, Hyundai Engineering & Construction, Ssangyong Engineering & Construction, Lum Chang and Sinohydro, passed the preliminary qualification to place a bid for the project and competed each other.

Samsung C&T received only one order worth US$907.31 million (992.42 billion won) until November this year so the latest order is like “a welcome rain during the draught” to the company. However, there is a controversy surrounding Samsung C&T’s latest order. 

In fact, domestic builders had a cutthroat competition in a bid to obtain pouring orders from the Middle East in the past when oil prices were high and construction companies that won the orders at low prices suffered huge losses. Samsung C&T also suffered a huge loss after winning the so-called Roy Hill project to develop an iron ore mine in Australia at low prices in 2013. The company became a public enemy of domestic constructors as it received the 6.5 trillion won (US$5.95 billion) project at 10 percent lower prices than its domestic competitors. In particular, Samsung C&T made a loss of some 800 billion won (US$731.86 million) due to increased construction expenses and liquidated damages caused by delays stuck in various issues and was embroiled in a legal battle with the orderer and subcontractors.

An official from Samsung C&T said that it is a basic company policy that it cannot obtain orders at prices below cost and it is the amount which is enough to make a profit through its local infrastructure and technology.

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