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(Unedited Version)

Korea’s Experience Series No.2

The Clean Construction System of the Seoul Metropolitan Government

for Transparency and Corruption Prevention in the Public Construction Sector

2015

UNDP Seoul Policy Centre for Global Development Partnerships

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Korea’s Experience Series of the UNDP Seoul Policy Centre for Global Development Partnerships (USPC) consists of “knowledge packs” on Korean approaches and lessons learnt on key development issues. This series is produced as part of USPC’s Development Solutions Partnership, which is a new approach for USPC, acting as a knowledge broker and facilitator, to connect Korea with the wider UNDP network and enhance the Korea-UNDP partnership on strategic development issues globally. Publications in the series aim to provide a reference and inspiration for developing countries seeking to find development solutions in their own specific contexts.

Publisher

UNDP Seoul Policy Centre

4F, Division of International Studies,

134, Anam-Ro, Seongbuk-Gu,

Seoul, 136-701, Republic of Korea.

+82-(0)2-3290-5202~9.

www.undporg/uspc

For questions on this publication, please contact:

Ahjung Lee, UNDP Seoul Policy Centre

ahjung.lee@undp.org

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Table of Contents

Introduction…………………………………………………………………………………………………………..4

1. Open Data System………………………………………………………………………………………………5

I. One-Project Management Information System (One-PMIS)…………………………………..6

II. Construction Informer (“Allimi”) System for Public Access to Information……………12

2. Automated Subcontractor Payment System in Public Infrastructure Projects…….23

3. References…………………………………………………………………………………………………………27

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Introduction

The ‘Clean Construction System’ was introduced in the Korean capital of 12 million inhabitants in 2011. It consists of two e-governance tools: 1) Open Data System for transparent information management and public access; and 2) Subcontractor Payment System. CCS provides an integrated technological and institutional solution to the complex challenges of the public construction sector. In Korea, CCS has led to transparent management, improved efficiency and effectiveness, and citizens’ access to information in the public infrastructure sector, which used to be one of the most corruption-prone sectors in the country. SMG’s arrangements are regarded as the groundwork for transparent municipal administration by putting an end to the previous practices that kept work progress and resource information secret, and by disclosing all the basic information on projects such as the project overview, photos of major processes, and web camera site videos for public viewing. Successful development and implementation of this new system has demonstrated that the government can help bring greater transparency into the private sector in the public infrastructure development by encouraging communication among relevant parties. 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. A brief summary description of the system is as follows, while more detailed explanation of the sub-systems is provided in the rest of this paper.

(1) Open Data System (One-Project Management Information System & Construction Informer (“Allimi”) System)

SMG’s Clean Construction System has an open data section, consisting of two web-based tools: One- Project Management Information System (PMIS) and Construction Informer (“Allimi” in Korean). Together they help prevent corruption and poor construction work by managing and then releasing to the public the precise and relevant information of large public construction projects worth more than KRW 500 million (approx. $450,000). The One-PMIS allows stakeholders in a public construction project to register and share all project-related information, and to monitor project status in real time. As a result, construction info can be managed effectively and corruption during the project implementation stage is prevented. After the construction information has been uploaded on the One-PMIS, relevant information is shared on the Construction Informer website where citizens can access the information on public infrastructure projects and also give their feedback to the Seoul Metropolitan Government Infrastructure Headquarters.

(2) Automated Sub-contractor Payment System

This system allows SMG to make separate payments for prime contractors and subcontractors, and to check if a payment has actually been made to a subcontractor. The system applies to all public infrastructure projects whose construction period lasts longer than 30 days; subcontractors in such projects can register with the online system and use the system immediately. Subcontractors do not have to submit copies of their bankbooks to get access to the payment information as they used to have to do. Now they can monitor the remittance into their accounts in real time as banks now allow their funds transfer information to be available to the subcontractors immediately. In effect, the system has proven to help numerous subcontracted workers who suffer from greater unstable financial conditions than prime contractors. It has also improved efficiency in the overall work processes and saved significant budget for SMG by shortening bureaucratic procedures over documentation and verification by moving from paper-based to electronic documentation.

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1. Open Data System

One-Project Management Information System (One-PMIS) &

Construction Informer (“Allimi”)

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I. Construction Project Management Information System (One PMIS) (1) Development Process The establishment of the One-PMIS began in April 2011 and was completed in February 2012. Consultations and technical efforts were made to ensure that all the relevant parties in a project would register their information with ease and that the collected information could be used most effectively.

In January 2011, SMG formed a task force with the purpose of establishing the One-PMIS inside Seoul Metropolitan Infrastructure Headquarters.

In April 2011, the city of Seoul signed a contract with SangAh Management Consulting Corporation, a professional project management information system developer, to develop the open data system for city administrators.

In order to reduce overlap, SMG merged three pre-existing construction information management systems1 into the new system, the One-PMIS.

In April 2012, SMG organized the Working-level Operation Council which included 60 people from the city’s affiliate organizations and 25 district offices to discuss how to run the One-PMIS efficiently. Focus was paid to system implementation, the operation guidelines, the operation evaluation plans and an expanded implementation of the system at the district level.

In May 2012, SMG’s Infrastructure Headquarters set up the Construction Information Department, in order to handle citizens’ project-related grievances in real time and to detect safety hazards and accident risks in advance. The department has also provided training to help relevant parties and communities learn about this new open data system.

(2) Legal Framework and Enforcement Mechanisms There is no specific law which requires the use of One-PMIS; 2 but there exist several national laws that provide the basis of One-PMIS and the Informer (“Allimi”) system:

Construction Technology Promotion Act3

1 Construction Project Management Information System (CPMIS): established in 2003-2004; Project Management Information System (PMIS): established in 2007-2008; and Total Project Management Information System (TPMIS): established in 2002-2003. 2 Among Korea’s e-governance tools, only the Knowledge Information System of Construction Industry (KISCON) mandatory by law. KISCON is an integrated construction information management system designed for information sharing and utilization in Korea to enhance transparency, competitiveness, efficiency in the construction sector. This was developed in response to the rapid growth in the construction sector (from 6,760 enterprises in 1990 to 50,116 enterprises in 2003), by the Ministry of Land, Infrastructure and Transport. KISCON is similar to Construction Allimi in a sense that it provides construction industry information to the public, including administration disposition notice, Penalty points information, Capacity of construction management information, and Excavation & Backfilling information. SMG and the Korea Construction Infonet signed the MOU on April 25th 2014 for the effective information management and elimination of duplication between One-PMIS and KISCON. After the MOU came into effect, contractors upload their construction performance data on the KISCON which is then automatically transferred to One-PMIS. For the subcontractor payments, contractors now utilize SMG’s Automated Sub-Contractor Payment System without having to upload the same data on the KISCON. 3 Article 1 (Purpose) The purpose of this Act is for the enhanced level of construction technology and proper execution of construction projects and also to ensure the quality and safety of construction work by promoting the research

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Framework Act on the Construction Industry4

Industrial Safety and Health Act

Public Records Management Act

Privacy Act

Official Information Disclosure Act

Regulations for the efficient administrative operation

In absence of specific law which obligates the use of the One-PMIS, SMG has adopted non-legal and institutional approaches in order to institute the “culture of acceptance” and the “norm” of using One-PMIS among the stakeholders.

Within SMG Infrastructure Headquarters (IH), the Construction Management Division in charge of the One-PMIS management did intensive work to educate and persuade all the divisions within the office concerning the rationale and importance of using the One-PMIS, as different divisions are in charge of contracting different types of public infrastructure projects and function as the gatekeepers of the One-PMIS. Once the divisions within the SMG IH took ownership of the One-PMIS, it spread to all of their stakeholders.

Today, the Division still holds ongoing advocacy and training, both within the Infrastructure Headquarters and to external stakeholders (i.e. constructors, consulting engineers, etc.). Continuous efforts are made to raise the awareness and unofficial commitment to the One-PMIS system and its underlying principles of information transparency and access.

As a result of such sustained efforts, the Division has been able to build a consensus among all divisions of the SMG Infrastructure Headquarters concerning the use of One-PMIS, and constructors and private stakeholders have also come to accept the use of the system as a norm.

and development of construction technology and putting it into efficient use and management, while aiming to contribute in the promotion of public welfare and the development of the national economy. Article 19 (Establishment of Construction Technology Information System) (1) The Mister of Land, Transportation and Marine Affairs shall establish and integrated system for the circulation of materials and information on construction technology and adopt necessary measures for its propagation. (6) The Minister of Land, Transportation and Maritime Affairs may work out a basic plan for the establishment of an integrated information support system for construction projects in order to promote the application of information processing to the process of construction works and to help make an efficient use of the results thereof.

4 Article 1 (Purpose)

The purpose of this Act is to ensure the proper execution of construction works and the sound development of the construction industry by providing for fundamental matters on the survey, design, execution, supervision, maintenance management, technology management, etc. of construction works and for other matters necessary for the registration of construction businesses and contracts for construction works, etc. Article 24 (Comprehensive Information Management of Construction Industry) (1) The Minister may comprehensively manage the information on constructors such as capital, actual conditions of management and situations of construction progress of constructors, and the construction-related information such as the current demand and supply of materials and manpower necessary for construction works, and provide them to the related institutions or organizations, etc. requiring them. (3) The Minister may comprehensively manage the information on constructors such as capital, actual conditions of management and situations of construction progress of constructors, and the construction-related information such as the current demand and supply of materials and manpower necessary for construction works, and provide them to the related institutions or organizations, etc. requiring them.

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At the same time, SMG IH encourages relevant divisions to include special conditions in the public procurement notices and construction contracts pertaining the use of One-PMIS. With large-scale construction projects, in particular, SMG IH often inserts a special clause in the procurement notices and contracts on the responsibility of stakeholders to use One-PMIS. This helps the stakeholders accept the system use from the beginning.

Recommendation for pilot countries

Mobilize strong political commitment from the senior management of the government institution leading the CCS; this will ensure that the public officials in charge of public construction contracts become the willing agents of change, which will then spread to private entities.

Look for relevant laws on promoting e-governance with clauses that can be creatively used as the bedrock for the development and implementation of the One-PMIS.

One does not have to wait until specific laws are in place. Pursue the non-legal education and norm-building approach as the SMG Infrastructure Headquarters has done so far.

For a systematic enforcement, however, seek to enact a legal instrument for mandatory use of One-PMIS; SMG is currently working on the enactment of such regulation at the subnational level.

Use the procurement notice and official contract as a means to enforce the use of the system by the private entities.

Overall, SMG recommends that, along with continuous training and advocacy within the Government offices in charge of various types of public construction projects, pilot countries systematically insert such special clause in the procurement notices and official contracts, in the beginning stage of introducing the One-PMIS & Informer (“Allimi”) system. Private contractors do not contest the norm if the obligation—thought not legal per se—is referenced right from the beginning; it becomes a norm for the industry over time.

(3) The One-PMIS Users

Client is the entity that initiates the construction (i.e. Seoul Metropolitan Government)

Constructor or contractor is the entity that executes the actual construction as per the

contract signed with the client. “Contractors” consists of prime contractors and sub-

contractors. Prime contractors are the party that directly signed the contract with the client.

Sub-contractors are indirectly linked with the client by signing a contract with the prime

contractor.

Consulting engineers oversee/monitor the construction process on behalf of the client, to

make sure that the construction is being done according to the construction plan. Consulting

engineers are experts from private consulting firms.

Public inspection officials are similar to the consulting engineers in a sense that they also

monitor the construction process to check whether the construction is being undertaken

according to the plan. However, the difference is that the public inspection official is a civil

servant dispatched from the construction related bureau of SMG.

(4) Necessary Human and Financial Resources

One-PMIS and Informer (“Allimi”) system are under the management of the Construction Management Division, consist of about 8 officials (1 director, 1 administrator, 2 civil engineers, 2 communications). The Division also has 4 additional full-time staff, working in

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the same office, who are from the private company to which SMG outsources technical maintenance work (1 programme manager, 2 developer, and 1 designer). In addition, the division has 1 staff specifically tasked with system monitoring. (But it wishes to have more staff for system monitoring.)

Technical maintenance is outsourced to a private company on an annual contract basis.

Initial cost of developing the One-PMIS was 700 million KRW (Approx. 626,000 USD), and the annual maintenance cost is approx. 300 million KRW (Approx. 268,000 USD). For additional system development, SMG allocate approx. 50 million KRW (Approx. 44,682 USD).

Recommendation for pilot countries: SMG recommends building a team of 6 staffs at minimum in the responsible government institution for effective system management.

(5) Workings of the One-PMIS

The following provides a summary description of how the One-PMIS system is utilized at different

stages of public construction projects—i.e. who enters what information and when.

a. Prior to breaking ground

The following information must be uploaded to the Construction Overview sections of the One-

PMIS and then transported to the Construction Informer (“Allimi”) system for public access:

After the construction contract is signed, the client registers with the One-PMIS system upon

the PMIS administrator’s approval.

Contractors provide basic construction information, including the exact site address and the

construction scale. They also upload their budget which includes both the comprehensive

construction cost—including construction expense, compensation expenses, design expenses,

and supervision cost—and the construction-specific cost—comprised of the subcontractor

cost, government-supply cost, relocation cost, and waste management cost.

Finally contract information is uploaded to the One-PMIS including the current contract cost,

total contract cost, total received cost and total received cost rate.

b. After construction has commenced

The following information must be uploaded to the Process-Based Estimation and Category

sections of the One-PMIs and then transported to the Construction Informer (“Allimi”) system

website for public access:

Both the contractor and consulting engineer are obligated to provide relevant construction

data on an ongoing basis.

For the progress reports, the contractor must upload these reports on a daily, weekly

or monthly basis as per the contract, while the consulting engineer uploads the

supervision reports on a daily basis.

The contractor and construction engineers are also required to upload construction-

site data to the “Data Management” section. Relevant E-documents must be

uploaded to the “E-document section” for approval.

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c. Assessment (ongoing)

Construction performance assessment:5 This consists of the following: 1) assessment of the

consulting engineers; 2) assessment of the contractor by the client and consulting engineers;

and 3) assessment of the architecture design by the client, contractor, and consulting

engineers. When completed, all of these assessments are to be uploaded to the “Performance

assessment” section of the One-PMIS.

(Note)

1) The client evaluates the performance of the consulting engineer (private expert company)

who monitors the contractor (i.e. construction company).

2) The consulting engineer conducts the preliminary assessment of the contractor. Then the

client’s evaluation follows.

3) The contractor and consulting engineer first conduct a preliminary assessment of how

well the construction followed the initial plan. Then, the client’s evaluation is done.

The One-PMIS utilization assessment: The One-PMIS administrator must conduct an

assessment of how relevant parties (including clients, contractors, consulting engineers, and

public inspection officials) have operated and utilized the One-PMIS on a semi-annual basis,

based on a systematic criteria. SMG’s Infrastructure Headquarters ranks and awards those

divisions whose team members as well as their responsible project stakeholders used the

One-PMIS well. Commendation from the senior management and cash awards are given to

the best-performing teams in order provide encouragement and further motivation.

d. After the construction is completed

The contractor must upload the necessary data for the construction completion inspection on the

“construction completion inspection” section of the One-PMIS.

<Table 1. The One-PMIS Menu and Data Entry Agents>

Category Name of the Menu Agent to enter the data

Frequency

Construction Outline

Construction work status

Constructor/contractor Upon contracting the construction work

Contract Status Constructor/contractor Upon contracting the construction work

Subcontracts Constructor/contractor Upon contracting the construction work/ When the progress payment is made

Organization chart Public official inspector Upon contracting the construction work/ modifying the original contract

Basic Data Entry

Process based progress estimation

Constructor/contractor Upon contracting the construction work/ modifying the original contract

Categorization System

Constructor/contractor Upon contracting the construction work/ modifying the original contract

5 Performance evaluation is divided into 3 evaluation categories (i.e. design, construction, supervision) for each project. Operation Evaluation assess the performance of relevant SMG officials as well as of the project stakeholders; the result is open to all construction stakeholders.

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Detailed subcontract report management

Constructor/contractor Upon contracting the construction work/ modifying the original contract

Reporting Progress report (Weekly)

Constructor/contractor Every Monday

Daily report Constructor/contractor Daily

Monthly report Constructor/contractor 1st day of each month

Consulting engineer’s activity report

Consulting engineer Daily

Construction delay report

Constructor/contractor When the construction work is delayed compared to the progress schedule

Resources Management of info on construction site

Constructor/contractor & Consulting Engineer

Upon collecting the relevant info on the construction site

E-documents

Business connections management

Constructor/contractor & Consulting Engineer

Upon adding new business connections

E-document management

Constructor/contractor & Consulting Engineer

Upon receiving/ sending e-documents

(6) Monitoring, Updates, and System Utilization

Responsible divisions of the SMG IH actively monitor the One-PMIS data entry in their construction projects. When the data entry is not made, automated reminder text messages are sent to persons in charge of uploading daily progress reports on the specific projects. In addition, weekly progress reports are emailed to the heads of the client (i.e. SMG divisions). Since its installation in May 2012, SMG has annually updated/upgraded the system, enhancing the accessibility and user-friendliness of the system.6 In addition, SMG has increasingly expanded the use of One-PMIS. For instance, in October 2014, SMG installed the mechanism whereby divisions share via One-PMIS safety inspection results of the constructions sites. It also added features whereby the data on the One-PMIS can be used for the bidding pre-qualification assessment of constructors and private companies in procurement.

6 In 2014, Construction Allimi undertook a major system improvement for the user-based system, which

included:

1. Improvements on the One-PMIS login page and the main page 2. Addition of the “integrated search” function 3. Simplified One-PMIS e-document menu 4. Improved registration process for new projects 5. Expanded information shared through the Construction Allimi 6. Improved accessibility of the mobile Construction Allimi 7. Establishmnet of the Allimi service at the municipal level.

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II. Construction Informer (“Allimi”) System— Web-based Public Information Portal for Public Infrastructure Projects

(1) Introduction

Construction Informer (“Allimi”) system is a channel where the construction information relevant to

the public is shared. After the construction information has been uploaded on the One-PMIS, relevant

information is shared on the Construction Informer (“Allimi”) system site where citizens can access

the information on public infrastructure projects and also give their feedback to the Seoul

Metropolitan Government Infrastructure Headquarters.

(2) What Informer (“Allimi”) system provides

Information uploaded on the One-PMIS is automatically transferred to Construction Informer (“Allimi”)

system. As a principle, SMG seeks to share all relevant information with this system. SMG filters,

however, some information with justification. For instance, sensitive information that might

undermine privacy, security and the reputation of the company is not shared. Roughly 80% of the

information on One-PMIS is shared via Construction Informer (“Allimi”) system.

Types of information shared through the Allimi Website Details

1. Construction overview Project name, construction time period, completion status, and information on clients, consulting engineers, and prime contractors

2. Contract details (payment schedule) Contract value and payment schedule between prime contractor and sub-contractors

3. Disbursement status (transaction history) Actual transaction history from the prime contractor to sub-contractors

4. Construction site photo updates (weekly) Photos taken for the weekly construction report

5. Web camera video updates (real-time) Only available for construction projects which exceed 10 billion KRW (approx. $9.9 million) in the total contract value. People can observe web camera images in real-time

6. Information on key stakeholders (construction participants)

Name and position of those in charge of the construction (from the clients, consulting engineers, and prime contractors)

Sub- Contractors

Consulting Engineers

Public Inspection

Officials

Prime Contractors

One-PMIS Construction Allimi

Government

Citizens

Register info onto

Access information through

Sends info to

Provide feedback to

Verify and manage info through

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7. Other related information Resources (documents and reports on construction plan, architectural changes, maintenance status)

8. List of sanctions List of penalties and sanctions for the violation of the rules and follow up actions

The above chart summarizes all the information citizens can acquire using the Construction Informer

website. The public inspection officials in charge of the projects check whether the contractors and

consulting engineers have uploaded relevant information to the One-PMIS so they can be accessed by

using the Construction Informer website.

Below are the more detailed descriptions and images of each section of the Informer website.

(i) Construction Overview

*The Bird’s eye view of the construction site and the video clip of the briefing session are not

mandatory. Short-term and underground construction projects (such as pipeline construction) do not

require these components uploaded on the Informer site.

* The Client, however, may share the briefing session video clips if they have the files.

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(ii) Contract Details (payment schedule)

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(iii) Disbursement status (transaction history)

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(iv) Construction Site Photo Updates (weekly)

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(v) Web camera video updates (real-time)

* Web camera videos are available on the Informer only for constructions projects that exceed the

total contract value of 10 billion KRW (approx. $9.9 million)

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(vi) Information on Key Stakeholders (construction participants)

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(vii) Other related information

* The “construction period change” section provides justifying documents for projects whose

construction period is shortened or extended relative to the original timeline.

* The “design changes” section7 accounts for changes in the budget and the construction process of

the public infrastructure projects. “Changes in the budget” refers to the occasional changes to the

7 “Design change” is a very comprehensive term and can be regarded as equivalent to “contract changes”. Construction plan, budget, concept changes are all included in the “design change” section.

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initial estimation of construction costs during the planning period. “Changes in the construction

process” refers to the alteration of the process due to occasional interruptions in the planned process.

(viii) List of sanctions

The site also provides detailed information on how contractors (with their company names disclosed)

violated regulations, contractual obligations or safety procedures (e.g. failure to wear the safety

helmet on the construction site), as well as information on the consequential penalties imposed and

follow-up actions taken by the Seoul Government authorities in response. It also indicates which

division of the Seoul Government was responsible for that particular contractor.

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(ix) Citizen’s feedback and Public Complaint Handling

Informer (“Allimi”) system is not a one-way channel where the public passively receives the

information given to them. If citizens want to find out more about the construction project or if they

want to file a complaint, they can post their questions or complaints to the Seoul Metropolitan

Infrastructure Headquarters.8 The system has a menu on its first main page, “Want answers from the

director of Infrastructure headquarters,” whereby citizens can directly channel their views and

questions to the director of the SMG Infrastructure Headquarters about the construction related

issues. (See the image below.)

Each morning, relevant SMG officials receive a list of questions, comments, and complaints from

citizens on their responsible work portfolios, and their replies and actions are recorded in the system.

In addition, citizens can ask questions or file complaints via SMG’s main website, their municipal office

website, or the 120 SMG (Dasan) Call Center, operating 24/7, which is all channeled to the “Eungdapso”

(SMG’s dedicated web portal for public complaint handling) for one-stop processing and response.

8 In addition, citizens can use “Eungdapso”, SMG’s total web portal for public complaint handling, to channel their

comments, questions and complaints on the public construction projects.

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(3) Site Visits

Furthermore, as a way to minimize distrust from local residents and enhance accessibility of the

construction information, Seoul Metropolitan Infrastructure Headquarters also organizes visits to

public construction sites for local residents once a month, on a demand-basis (regardless of the project

value). Residents interested in a site-visit can make a request and arrange the schedule for the visit

with the designated public inspection official in the SMG via phone call or e-mail. Upon approval by

the public inspection official in charge of the particular project, the site-visit can take place.

(4) Mobile Accessibility

Instead of having a separate smart-phone application, Construction-Informer (“Allimi”) system is currently available in a sub-section of the SMG mobile application (Mobile Seoul). Since Mobile Seoul is a mobile application for the entire SMG public administration, however, SMG is now considering the development of an independent smartphone application to provide fast and efficient service delivery.

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2. Automated Subcontractor Payment System in Public Infrastructure Projects

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Introduction SMG developed a subcontractor payment system to address the long-standing problem of unpaid wages and delayed payments for construction workers in public infrastructure projects. According to a survey conducted by the Ministry of Labor, 18,000 construction workers reported that they didn’t received wages worth 86 billion won in 2011 (approx. $78,200,000), almost double the amount over the second worst industry in Korea. It was reported that 68.8% of construction workers have been owed back pay in one form or another. The situation stemmed from the pyramid structure of the local construction industry. Many construction workers got paid only when payment went smoothly through a linear payment channel: subcontractors submitted payment requests to prime contractors, who then requested payment from clients, after which payments were made to prime contractors, who in turn finally paid the subcontractors. The establishment of the system was initiated by the Seoul Metropolitan Infrastructure Headquarters, an associate organisation of the Seoul Metropolitan Government (SMG), which is responsible for the management of all construction projects ordered by the SMG. The public servants in the office agreed that a new system was needed to guarantee that prime contractors paid their subcontractors; the payment failures were creating problems for the subcontractors as well as their workers, equipment renters and construction material suppliers. Process of Setting up the System In order to develop the new computerized system that would monitor the whole payment flows, SMG set up a task force, composed of personnel from computer science, finance and construction engineering. SMG also held various meetings between relevant bodies in the public and private sectors, such as the Subcontract Improvement Council and Citizen Satisfaction Council, NGOs and Construction Labor Unions. Opinions and proposals from the consultation meetings were used to develop the system and address challenges and gaps in the system development and implementation. For the testing period, In April 2011, the SMG signed a service contract with Paycoms, a private system integrator company, for the development and installation of a computerised system to monitor the prime contractors’ payment to their subcontractors. Through the contract, the SMG could mobilise the expertise of the company’s programmers, financial experts, and risk managers. SMG also made an agreement with two reputable banks for the provision of payment information, so that payments to subcontractors could be checked online. For the implementation of the new system, SMG used its financial management system ‘E-Hojo’ and allowed the contract data to be accessed by relevant stakeholders, which enabled the construction fees to be paid to prime contractors and subcontractors separately. Additionally, SMG automated some of its work processes including subcontract payment and the printing of evidential documents. With the new system, the City of Seoul now makes separate payments for prime contractors and subcontractors, and operates online system to check if a payment has actually been made to a subcontractor. The new system applies to all public infrastructure projects of more than 500 million KRW (approx. $460,000); subcontractors in such projects can register with the online system and use the system immediately. In terms of the costs, the initial Investment in Subcontractor Payment System cost a total of KRW 62,423,000 (Step 1: KRW 42, 323,000; Step 2: KRW 20,100,000), (approx. $57,000). Results

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The system has proven to help speed up the payment to numerous subcontracted workers who

suffer from greater unstable financial conditions than prime contractors. As such, it has helped

solve construction related grievances by guaranteeing payment to subcontractors and

construction workers.

The system also improved efficiency in the work processes by shortening bureaucratic

procedures over documentation and verification by moving from paper-based to electronic

documentation. Subcontractors do not have to submit copies of their bankbooks to get access

to the payment information as they used to have to do. Now they can monitor the remittance

into their accounts in real time as banks now allow their funds transfer information to be

available to the subcontractors immediately.

By removing redundant manual work processes, and allowing for less errors and quicker

processing in the overall public construction payment system, SMG actually saw that the total

budget for public construction projects was saved by nearly 10%, along with work efficiency

improved by 30% after the first year of its introduction.

Seoul has succeeded in projecting an image of ‘embracing the underprivileged’ and in opening

doors to an improved environment for the lives of its people.

Factors of Success

Gradual implementation: the SMG adopted a gradual approach to the implementation of the

system on-site to give all stakeholders enough time to adapt to the new system.

Development of an easy, computerised system: the SMG developed an easy-to-use

computerised system to be able work in a variety of environments.

Connections to other computerised systems: the SMG pursued the connection of the new

computerised system to existing public systems such as ‘E-Hojo’, the SMG’s financial

management system, ‘G2B', the national contract information system, and ‘GIS’, a

geographical data system. The purpose was to integrate various information systems. As a

result, the new system not only worked as the construction contract and management portal,

but also played a role as an alert system.

Adoption of Innovative Technologies: It was possible to make this system by adopting

innovative technologies in construction work processes. Owing to these 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.

Lessons Learnt

The new system has proved that the government can help protect the rights of underprivileged

workers in public infrastructure process and bring transparency into the private sector by utilizing

its position of strength in public procurement.

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It is useful to utilize innovative technologies and the internet to streamline existing construction

work processes for costs-saving and efficiency purposes as well. In SMG’s experience with the new

subcontractor payment system, there is little fiscal burden except for the expenses incurred for

the establishment and operation of the system; the benefits are far greater than the set-up costs.

While different cities and countries have different levels of relevant technologies and banking

systems, it would be useful to explore possible arrangements with banks and prime contractors

with SMG’s system as an inspiration.

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References The following reference documents were used for the preparation of this briefing paper, along with oral explanations of the Seoul Metropolitan Government (SMG) officials in the Construction Management Division of the Seoul Metropolitan Infrastructure Headquarters (SMIH) I. Internal SMG Documents (in Korean language)

Overview of CCS System and Its Function

Information Released through Seoul’s Construction Allimi

CCS Manuel for Seoul Construction Clients

CCS Manuel for Seoul Construction Consulting Engineers

II. List of the People Interviewed at SMIH

Ms. Jung hee Kim, Construction Management Division

Mr. Hae Min Jung, Construction Management Division

Mr. Young Jun Jang, Construction Management Division

Ms. Myoung-Ja Choi, Construction Management Division

Mr. Tae Hyeok Park, Construction Management Division

Ms. Myung hee Ji, Construction Management Division

Mr. Tae-Hag Roh, Damage Prevention Division III. Public Sources

Video introduction of Seoul’s Clean Construction System, available at https://www.youtube.com/watch?t=311&v=5nw3O0tfUO.

Seoul Government Policy Information Archive, available at: https://seoulsolution.kr/content/anti-corruption-clean-construction-system?language=en.

Official Construction Informer (“Allimi”) Website of the Seoul Government, available at http://cis.seoul.go.kr/TotalAlimi/Main.action.

SMIH News on the Construction Informer (“Allimi”), available at: https://infra.seoul.go.kr/archives/2590.

Seoul Government’s Submission for the UN Public Service Awards, available at: http://unpan3.un.org/unpsa/Public_NominationProfile.aspx?id=1943.