Japan’s Ministry of Land, Infrastructure, Transport and Tourism (MLIT) Drafts Guidelines for Standard Labor Costs in Construction Contracts
November 19, 2025 – Administration & Organizations
Japan’s MLIT has compiled a draft “Operational Policy” to serve as a guideline for price negotiations in construction contracts based on the standard labor costs. Focusing on how contractors and clients can effectively “utilize” these standard labor costs in diverse contract situations, the draft organizes 71 specific measures from the perspective of involved parties. The aim is to embed a culture of paying and receiving labor costs properly and establish consistent commercial practices.
The guidelines present unified rules for estimating and contracting, taking into account that assumptions and estimation methods vary for each project. They also address perspectives of non-construction clients and prime contractors managing multiple subcontractors. A “Writing Guide” and example forms for detailed cost breakdowns are provided for specialized construction companies. Public feedback will be sought, with the final version expected in early December.
Standard labor costs are intended as a “baseline,” and actual calculations should consider project conditions and contractor capabilities. Setting labor unit prices below public construction rates is deemed “inappropriate.” Estimates may be adjusted for additional work or productivity efforts, but post-contract actual cost adjustments are generally unnecessary.
From the contractor’s perspective, the draft explains how to select appropriate unit labor prices, address skill-level disparities in the Construction Career Up System (CCUS), and disclose the labor cost breakdown in estimates. The guidelines also clarify legal considerations such as submitting estimates without prior subcontractor input or offering discounts during slow periods.
To embed sound practices, prime contractors are expected to ensure subcontractors also provide detailed labor cost breakdowns. In design-build contracts, detailed labor cost breakdowns are not required for preliminary estimates but should be disclosed once detailed design is finalized.
