Daewoo Engineering has refuted claims by Korea Hydro & Nuclear Power (KHNP) regarding the breakdown of negotiations over the construction contract for the Dukovany nuclear power plant in the Czech Republic. The company argued that KHNP unilaterally shifted the burden of costs associated with design changes onto the contractor while failing to adequately account for increased construction quantities.
On October 29, Daewoo Engineering issued a press release stating, "KHNP had requested that the risk contingency be excluded from the contractor's estimate, indicating that they would reflect it in their own bid." The company added, "KHNP's assertion that the contractor accounted for all risks related to increased quantities in the bid amount is not true."
On the same day, KHNP announced the termination of negotiations with the Daewoo Engineering and Doosan Enerbility consortium regarding the construction contract for the Dukovany nuclear power plant. KHNP stated that after approximately 15 months of discussions, an agreement could not be reached, prompting the decision to end negotiations to prevent delays in the overall project schedule.
The main points of contention between the two parties revolve around construction costs and the financial responsibilities stemming from design changes. Reports indicate that KHNP sought to reduce the overall construction cost by approximately 1 trillion won (about $850 million). In a statement, KHNP explained, "We requested adjustments to the excessive indirect costs due to the decrease in management ratios resulting from increased baseline quantities."
In response, Daewoo Engineering emphasized, "The Czech nuclear project involves the new APR1000 model, for which there are no existing reference plants." They argued that it is unacceptable to unilaterally impose the risks associated with quantities calculated without a basic design on the contractor. Daewoo further claimed that KHNP proposed increased quantities as contract amounts without reflecting the corresponding cost increases, demanding that the contractor lower its unit prices to meet the total contract amount.
Regarding changes in construction unit prices during the bidding process, Daewoo stated, "It is natural for tens of thousands of unit prices to vary in the market over a three-year bidding period," citing fluctuations in oil and grain prices due to the war in Ukraine.
Daewoo also raised concerns about the scope of contractual responsibilities, asserting that KHNP unilaterally imposed primary contract requirements that exceeded the contractor's scope and responsibilities. They pointed out that if design errors identified by KHNP were not discovered, they would be deemed the contractor's responsibility, while KHNP did not specify its liability for the faults of other subcontractors. Additionally, they noted that conditions made it difficult to receive compensation for delays caused by rework due to design errors or the failure to provide the construction site by the client.
Daewoo questioned the negotiation timeline, stating that KHNP demanded the negotiations be concluded by October 29 after presenting revised contract terms on the 7th of the month. Daewoo argued, "The revised terms should have been presented at least 2 to 3 months in advance," emphasizing that setting a negotiation deadline without sufficient review time violates the principle of good faith in contract negotiations.
* This article has been translated by AI.
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