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0 Subcontract Price Payment Confirmation System (Subcontract System) for the Support for Shared Growth and Fair Trade of Principal Contractors and Subcontractors.

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Presentation on theme: "0 Subcontract Price Payment Confirmation System (Subcontract System) for the Support for Shared Growth and Fair Trade of Principal Contractors and Subcontractors."— Presentation transcript:

1 0 Subcontract Price Payment Confirmation System (Subcontract System) for the Support for Shared Growth and Fair Trade of Principal Contractors and Subcontractors Seoul Metropolitan Infrastructure Headquarters

2 1 Contents I.Background and Impulsion II.Introduction to the System System Expansion Scheme

3 2 ② Claim construction price ① Claim subcontract price Principal contractor Subcontractor ③ Pay the price ④ Pay subcontract price (within 15 days) ⑤ Notify within 5 days of subcontract price (submit documents) ⑥ Notify within 5 days of receipt of the price (submit the copy of bankbook) Public Agency Manual confirmation of subcontract price payment Ⅰ. 도입배경 및 추진현황 1. Background to System Introduction □ All government agencies must manage the subcontract price payment regarding their public projects: Needing an efficient system □ Emphasizing the need for shared growth and fair trade between large and small businesses : A social issue □ Need a measure designed to enhance the convenience and fairness of confirming subcontract price payment  The government worked out measures designed to induce fair payment of subcontract prices → Payment confirmation system, direct payment system, prime contractor method  On December 13, the government established the Commission for Shared Growth → announced shared growth evaluation indicators for 56 large corporations.  Need an automation system to smoothly operate the system : manual work → computerization  Need to secure the reliability of gathering all subcontract price payment details and confirming payment: in alliance with banks

4 3 2. Goals of System Development Ⅰ. 도입배경 및 추진현황 Securing both the convenience and public interest of paying the subcontract price  Connect with e-settlement services including the function of paying subcontract prices  Gather and confirm all subcontract price payment details (including prepayment) : In connection with banks’ system Preparing a measure designed to fundamentally resolve problems related to subcontract price payment  Seoul Metropolitan Government provides a subcontract price settlement means for non-construction completion months: cashable settlement (replacement of bills)  Establish the system to guarantee the subcontract price payment: Manage the subcontract price separately Establishing a support system for both principal contractors and subcontractors  Delete the mandatory submission of evidential documents for confirming subcontract prices  Offer a direct-payment system improvement solution: Retaining subcontractor control power (ex.: reserving the price payment if the payment of worker wages is overdue)

5 4 3. Impulsion Overview and Expansion Plan Ⅰ. 도입배경 및 추진현황 Apr‘11: Began system development Oct‘11: Completed the system development Feb’12 Educated users (principal contractors, supervisors) Mar‘12: Completed the pilot and test operation of the system  2012: Expand the system across Seoul (including existing contracts)  Begin to build the system at government agencies including Korea Hydro & Nuclear Power Co.  Begin to introduce the system to private sector such as SK Telecom  Seoul Metropolitan Government plans to add the function of labor cost confirmation to the system  Applying to new projects worth over KRW 500M (including bid notification)

6 5 1. Subcontract Price Payment Confirmation System The Subcontract System is designed to automate the work of handling subcontract price payment, gathering and confirming payment details, and confirming the subcontract price between principal contractors and subcontractors. ⑤ Claim construction price ③ Claim subcontract price ⑥ Pay price(to designated account) ⑧ Pay/settle subcontract price (cashable settlement and repayment) ① Original contract ② Subcontractor ④ Pay subcontract price (Cashable settlement) ⑧ Pay the contract price ④ Instruct cashable settlement ⑨ Subcontract price payment details Client Seoul Metropolitan Government Principal Contractors Total Constructors Subcontractors Specialist Constructors Financial Institution Bank Subcontract System Ⅱ. 시스템 소개 ⑦ Instruct money transfer

7 6 2. Major Functions Ⅱ. 시스템 소개 1 Transfer money for subcontract price payment(Internet banking) 2 Financial support for subcontract price settlement (provision of settlement means) 3 Streamline work procedure (deletion of submission of evidential documents, text message notice, etc.) 4 Improve on problems associated with the direct subcontract price payment system (enhancement of arbitration power)

8 7 2. Major Functions _ Price Transfer Ⅱ. 시스템 소개  Transfer the subcontractor price of Seoul Metropolitan Government’s paid contract price : Internet banking  Subcontractor’s share is separately managed via the principal contractor’s designated account : The principal contractor has the right to order payment. Seoul Metropolitan Government Principal contractor Subcontractors ProjectsContract price (unit: KRW 1,000) Agreement date (commencement of construction work) Major progress Ooo Service Center Construction Project2,639,560Dec 27, ‘11 (Jan 26, ’12) Handled KRW 66,000,000 in cashable settlement (Mar 19, ‘12) Ooo Center Renovation Project1,076,317Dec 28, ’11 (Dec 30, ;11) Paid KRW 64,250,000 for completed portion (Feb 29 ’12) * After education and pilot operation, the system operation proved to be normal.

9 8 2. Major Functions _ Financial Support Ⅱ. 시스템 소개  Seoul Metropolitan Government supports the fund for subcontract price settlement before paying the price: Provision of settlement means (cashable settlement)  Issuing cashable settlement certificates (with good conditions) : Enable principal contractors even with low credit rating to use the means (settlement means replacing bills) Principal contractor Subcontractors CategoryBefore the system developmentAfter the system development Target users Principal contractors with superior credit ratings (BBB+ or higher) All firms that signed agreements with Seoul Metropolitan Government Repayment of price Principal contractors repaid the price with their own fund. (risk of chain bankruptcy exists) Repaying the price with the construction price paid by Seoul Metropolitan Government (preventing the risk of chain bankruptcy)  00 constructor that signed an agreement with Seoul Metropolitan Government (credit rating /BB-, principal contractor) : Price payment based on cashable settlement: 5.56% (Mar 19, 2012)

10 9 2. Major Functions _ Streamlining of Work Procedure Ⅱ. 시스템 소개  Automating the price payment confirmation work via banks : Deleting the submission of copies of bankbooks, securing the reliability of documents  Can manage whether the subcontract price is timely paid: HQ can monitor whether the price was timely paid by field.

11 10 2. Major Functions _ Improvement of Direct Payment System Ⅱ. 시스템 소개  Recognizing the system use results as direct payment results  Retaining subcontractor price payment control power : Can promptly take corrective action on problems created (overdue wages, etc.) Category TotalPrincipal contractorsSubcontractors No. of cases AmountNo. casesAmount No. of cases Amount 20101111,536,55819230,375921,306,183 201175 768,9666221,38069 547,586 Total1862,305,524 25 (13%) 451,755 161 (87%) 1,853,769 (Feb 2010 – Dec 2011, Unit: KRW 1,000)  Principal contractors protract price claim cycles => Subcontractors experience a lack of liquidity => The possibility of creating overdue wages (Under agreements with banks, Seoul Metropolitan Government provides cashable settlement means to bolster the settlement capabilities of principal contractors)

12 11 Ⅱ. 시스템 소개 3. Expected Effects  Prevent overdue wages and enhance construction work quality  Secure the transparency of price payment to guarantee subcontractor price payment  Support principal contractors and subcontractors, thus helping establish a fair trade culture  Bolster subcontract price settlement (securing of settlement means)  Improve the direct payment system (hold subcontract price payment rights to enhance control power)  Delete the submission of evidential documents (official letters, copies of bankbooks) and automatically send a text message on payment details  Respond to the government’s policy (Can provide financial support for secondary / tertiary partner firms : Reflect results in the shared growth evaluation)  Guarantee the receipt of subcontract price to enhance financial health  Delete the submission of evidential document (copies of bankbooks, tax payment certificate for direct payment, etc.)  Enhance the stability of recovering labor cost / equipment rents / material price (After expanding the development of system)  Can confirm the information on subcontractor price receipt in real time (Send a text message on payment details in real time) Seoul Metropolitan Government Principal Contractors Subcontractors Workers Equipment & Material Suppliers Workers Equipment & Material Suppliers

13 12  Pushing to further develop the system into a truly shared growth system for the public sector, as well as for large, medium and small businesses (May 2012 -) ☞ Add the labor cost payment confirmation function to prevent overdue wages for workers ☞ Add the price payment confirmation and payment support function for equipment and material suppliers System Expansion Scheme System Expansion Scheme ☞ Add the mutual-aid linked advance-payment guarantee management function for lowering advance payment guarantee fees for subcontractors ☞ Add the advance payment use details management function for principal contractors Equipment / Material Suppliers Workers Confirm subcontract / equipment, material price Support subcontract price settlement Support subcontract price & support equipment, material price settlement Support labor, equipment and material price Subcontract System Support financial service Bank Guarantee Institutions Client Seoul Metropolitan Government Principal Contractors Total Constructors Subcontractors Specialist Constructors

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