Hello, I am Attorney Park Jong-han from Cheongchul Law Firm.

The National Contract Law recognizes changes in the contract amount due to price fluctuations, design changes, and other changes to the contract terms, and it is common for construction contracts to include similar reasons as grounds for adjusting the contract amount.

The National Contract Law sets forth requirements for adjusting the contract amount due to design changes among the grounds for adjustment mentioned above, so it is necessary to look into the requirements that must be met for the adjustment of the contract amount to be recognized.

[Question]

Requirements for adjusting the contract amount due to design changes

[Answer]

Article 19 of the “Act on Contracts to which the State is a Party” (hereinafter referred to as the “National Contract Law”) states that “the head of each central administrative agency or the contract management official shall adjust the contract amount if it is deemed necessary to adjust the contract amount due to price fluctuations, design changes, and other changes to the contract terms (including cases of force majeure such as natural disasters and war) after entering into contracts for construction, manufacturing, service, or any other contracts that incur a financial burden on the national treasury, in accordance with the provisions set forth by Presidential Decree.”

Article 65(1) of the Enforcement Decree of the National Contract Law states that “in the case of construction contracts, when there is an increase or decrease in construction volume due to design changes, the contract amount shall be adjusted in accordance with Article 19 of the Act.” and Article 74-2(1) of the Enforcement Rules of the National Contract Law states that “a design change under the provisions of Article 65 must be completed before the construction of the part that requires the design change. However, if it is urgently necessary to carry out the construction due to concerns about quality degradation caused by delays in performance, the head of each central administrative agency or the contract management official may collaborate with the contractor to clearly specify the timing of the design change and may allow priority construction before the completion of the design change.”

In other words, the requirements for adjusting the contract amount due to design changes are not satisfied merely by having a design change; there must be an increase or decrease in construction volume due to the design change, and in principle, the design change must be completed before the construction of the part that requires the design change.

The Supreme Court scrutinizes the grounds for adjusting the contract amount due to design changes by conducting detailed reviews for each submission to recognize whether or not an adjustment is warranted (See Supreme Court decision 2009. 9. 10. 2009Da34665).

As such, we have briefly reviewed the requirements for adjusting the contract amount due to design changes. In cases involving disputes related to national contracts and public procurement, the relevant laws are not only very complex but are also frequently amended, necessitating knowledge and experience in this area, as well as a good understanding of not only court rulings but also administrative interpretations and case examples. Therefore, it is recommended to seek the assistance of Attorney Park Jong-han, who possesses expertise in national contracting laws and has experience in resolving various national contract and procurement disputes.

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