HD Hyundai Heavy Industries Cornered in KDDX Bidding War [Yang Nakkyu's Defence Club]

Defense Acquisition Program Administration Extends Security Penalty Period by One Year Until Next Year
HD Hyundai Heavy Industries: "No Opportunity Given to Submit Opinion"

The Defense Acquisition Program Administration has extended the security penalty period for HD Hyundai Heavy Industries by one year due to a security incident, leading to assessments that the company has been effectively excluded from the 'Next-Generation Korean Aegis Destroyer (KDDX)' project. The KDDX project is a massive initiative to build six 6,000-ton 'mini Aegis destroyers' by 2030, with a total budget of 8 trillion won. Given that the outcome of the bidding can be determined by even a fractional point difference, the extension of the security penalty period is considered particularly detrimental to HD Hyundai Heavy Industries.

According to the defense industry on October 1, there are predictions that HD Hyundai Heavy Industries will be at a disadvantage in the KDDX project even if the contract is awarded through a private contract. HD Hyundai Heavy Industries, which was responsible for the basic design of the project, is in fierce competition with Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering), which handled the conceptual design. At the first party-government consultation held on September 30, it was revealed that the KDDX project would most likely proceed as a private contract. Assemblyman Boo Seungchan, the Democratic Party secretary of the National Assembly Defense Committee, explained, "A win-win cooperation plan may be perceived as collusion, and if we proceed with a competitive bid, there is a possibility that the deployment timeline could be delayed," adding, "Even if we go with a private contract, the application of security penalty points creates advantages and disadvantages among the companies." Initially, it was widely believed that HD Hyundai Heavy Industries would have an advantage if the contract was awarded privately, but the security penalty has made even this scenario difficult.

Previously, the Ulsan District Prosecutors' Office indicted nine out of twelve HD Hyundai Heavy Industries employees involved in the 2020 security incident. Of these, eight had their verdicts finalized in November 2022, and for the remaining one, the prosecution appealed, resulting in a final verdict in December 2023. However, the Defense Acquisition Program Administration changed its previous stance and treated the 2022 and 2023 verdicts as separate cases, extending the penalty period by three years from the date of the last verdict in December 2023, meaning the penalty will now last until December 2026.

HD Hyundai Heavy Industries immediately protested this decision. The company stated, "The security incident involving the employees in question was the same case indicted under a single case number," and pointed out, "During the process of extending the penalty period, the Defense Acquisition Program Administration did not provide us with an opportunity to submit our opinion or take appropriate action."

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