Delayed Naval Force Deployment Due to Liquidated Damages

[Monthly Defense Times Editor-in-Chief An Seung-beom] Recently, Hyundai Heavy Industries was selected as the preferred negotiation partner for the lead ship construction in the Navy's next-generation destroyer KDDX construction project bidding. The Navy's next-generation destroyer KDDX project involves building and acquiring six ships from the mid-2020s onward.

The next-generation destroyer KDDX is a Korean Aegis destroyer equipped with ballistic missile defense capabilities and is expected to become a mainstay of the Navy alongside the KD-Ⅲ Aegis destroyers from the 2030s onward. The KD-Ⅲ Aegis destroyer, known as the Sejong the Great-class, plans to secure three additional ships from 2025 following the first batch of three ships. Hyundai Heavy Industries was the design and construction company for the lead ship, and the same company was selected for the second batch, with the project currently underway. Based on these achievements, Hyundai Heavy Industries appears to have been selected as the lead ship construction company for the next-generation destroyer KDDX as well.

However, the Navy's shipbuilding projects have faced various surrounding circumstances and trial-and-error, causing significant delays in delivery schedules, and this remains an ongoing issue.

Since 2000, Hyundai Heavy Industries, which ambitiously entered the Jangbogo-II submarine construction project, was fined 14.5 billion KRW in liquidated damages while building the first ship Son Won-il, but was ultimately exempted through litigation. Currently, due to delivery delays of the fifth ship Yun Bong-gil and the seventh ship Hong Beom-do, Hyundai Heavy Industries is facing liquidated damages in the 60 billion KRW range, with ongoing legal proceedings.

In the case of the fifth ship Yun Bong-gil, liquidated damages were imposed because government-supplied equipment delivered by the German company TKMS was not accepted on time, and delivery was delayed due to insufficient sea trials and evaluations. The actual cause was bad weather, but this was not acknowledged. Additionally, the Jangbogo-I submarine upgrade project also imposed 900 million KRW in liquidated damages on the first ship Jangbogo, with litigation ongoing.

Project management issues also occurred in the surface support ship project. Hyundai Heavy Industries was fined liquidated damages for consecutive delivery delays in the construction of the second and third ships of the next-generation landing ship. The next-generation mine-laying ship Nampo, constructed earlier than the landing ships, also incurred liquidated damages. The next-generation logistics support ship Soyang, currently operated by the Navy after construction of one ship, was also fined for delivery delays.

Daewoo DSME was fined liquidated damages for the Jangbogo-II sixth ship Yu Gwan-sun and eighth ship Lee Beom-seok, as well as for the Jangbogo-I performance improvement project involving the Choi Mu-seon and Na Dae-yong ships, including the major overhaul of Na Dae-yong.

In the surface combatant construction project, the lead ship of the second batch of the next-generation frigate, the Daegu-class, encountered many problems that hindered its operational deployment and raised concerns about the smooth introduction of subsequent ships.

The Daegu-class first ship required improvements related to the hangar for the new AW-159 Wildcat maritime operation helicopter and helicopter starting devices. Delivery was delayed and additional costs incurred to resolve seawater intrusion issues in the towed array sonar system (TASS) for anti-submarine warfare.

More than ten other improvement items were requested, and another ten improvements were applied starting from the second ship, resulting in a rare case in recent shipbuilding projects.

The remaining second batch ships of the next-generation frigate, currently being alternately constructed by Hyundai Heavy Industries and Daewoo DSME, will be under close shipyard management with 11 key focus areas until 2023.

The first and second ships of the second batch of the next-generation frigate were built by Daewoo DSME; the first ship has been delivered to the Navy and is in operation, and the second ship is scheduled for delivery at the end of October. The third and fourth ships were launched by Hyundai Heavy Industries and are scheduled for delivery to the Navy by mid-2021. The fifth and sixth ships are being built by Daewoo DSME and are scheduled for delivery by the end of 2022.

The seventh and eighth ships have contracts with Hyundai Heavy Industries and are scheduled for delivery to the Navy in 2023. Hyundai Heavy Industries and Daewoo DSME, who have been competitors, are preparing for a merger but will continue construction at their respective shipyards. Daewoo DSME will manage construction at the Geoje shipyard, and Hyundai Heavy Industries at the Ulsan shipyard.

In addition to the next-generation destroyer KDDX, the Navy plans to build six ships after 2020, including the third and tentative fourth batches of next-generation frigates, fire support ships, next-generation Aegis destroyers, and aircraft carriers.

However, due to the repeated delivery delays in these various ship projects, the Navy has been unable to operationalize new ships as planned, causing setbacks in force enhancement. Thorough management by the Defense Acquisition Program Administration is required for these upcoming projects.

This content was produced with the assistance of AI translation services.