[2023 National Audit] Eom Cheong-jang: "HD Hyundai Heavy Industries Faces Security Deductions in KDDX Project"

National Defense Committee of the National Assembly Defense Acquisition Program Administration Audit Response
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HD Hyundai Heavy Industries Faces Difficulties Over Korean Destroyer Project

The Defense Acquisition Program Administration (DAPA) has announced a security penalty review for HD Hyundai Heavy Industries regarding the 'Next-Generation Korean Destroyer (KDDX)' project.

[Image source=Yonhap News]

On the 16th, Eom Dong-hwan, head of DAPA, stated at the National Assembly National Defense Committee's audit, "We have obtained the court ruling on the provisional injunction application filed by HD Hyundai Heavy Industries to confirm their status as the preferred negotiation partner, and we plan to review the debarment sanctions through the contract review committee."

In response to a question from Ahn Kyu-baek, a member of the National Assembly National Defense Committee from the Democratic Party of Korea, who said, "Employees of HD Hyundai Heavy Industries who were convicted in the first trial prohibited access to the court ruling, and as a result, DAPA was unable to take follow-up measures until recently," Eom replied accordingly. He added, "It was difficult to obtain the court ruling, so a specific re-examination could not be conducted."

Recently, after HD Hyundai Heavy Industries was excluded from being selected as the preferred negotiation partner for the construction of the Ulsan-class Batch-Ⅲ 5th and 6th ships, they filed a provisional injunction against DAPA in August, raising objections to the evaluation criteria. However, the Civil Division 50 of the Seoul Central District Court dismissed the injunction. In this bid, HD Hyundai Heavy Industries scored 91.7433 points, narrowly trailing Hanwha Ocean, which was selected as the preferred negotiation partner with 91.8855 points.

The issue lies ahead. Industry insiders predict that if HD Hyundai Heavy Industries continues to receive security penalties, it will be practically difficult for them to win the KDDX contract. A company official stated that due to a guilty verdict last November against an employee who photographed and shared military secrets related to the next-generation Korean destroyer (KDDX) project within the company, a 1.8-point security penalty is applied in the evaluation of the weapons system proposal for the current next-generation frigate construction bid. The penalty period is three years starting from last November.

HD Hyundai Heavy Industries claims that they significantly outperformed competitors in technical scores and that the security penalty was the reason for their failure. The company argues that the issue arose where the security penalty, rather than technical superiority, effectively determined the contract award. They also contend that the strengthened security incident penalty criteria have been retroactively applied only to HD Hyundai Heavy Industries.

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