KDDX Project Decision Today... High Likelihood of Rejection

The selection of the contractor for the Korean next-generation destroyer (KDDX) project, in which Hanwha Ocean and HD Hyundai Heavy Industries are competing, is expected to be postponed until next year. The Defense Acquisition Program Administration (DAPA) plans to select the KDDX contractor at the Defense Project Planning and Management Subcommittee meeting scheduled for the 14th, but the likelihood of the proposal being rejected is high due to opposition from civilian members of the subcommittee. If rejected, the project will be pushed to next year, resulting in a delay of more than two years compared to the original plan to move from basic design to detailed design in 2023.

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According to a government official, DAPA will present options for a private contract, competitive bidding, and a co-development plan to the subcommittee on this day in order to select the KDDX contractor. DAPA is insisting on a private contract. DAPA argues that a private contract with the basic design company (HD Hyundai Heavy Industries) is necessary, considering technological continuity and the timing of force integration. DAPA has held prior briefing sessions for the civilian members of the subcommittee, explaining the need to pursue a private contract. The competitive bidding option was effectively excluded because Hanwha Ocean would have an advantage due to HD Hyundai Heavy Industries’ security demerit issue, while the co-development plan was dismissed due to concerns about collusion and lack of agreement between the two companies.

On the other hand, the civilian members of the subcommittee are opposed to a private contract. They are advocating for either competitive bidding or co-development. Since the subcommittee operates on a consensus basis, it is difficult to pass a resolution if even one civilian member objects. In February, the Ministry of Trade, Industry and Energy designated both Hanwha Ocean and HD Hyundai Heavy Industries as multiple defense contractors, opening up various participation methods such as competitive bidding and co-development. If the private contract proposal is rejected on this day, it will be the fifth such rejection this year.

The KDDX is a Korean Aegis destroyer project involving a total of six ships with a budget of 7.8 trillion won. The conceptual design (the basic direction and conceptual stage of the vessel) was carried out by Hanwha Ocean in 2012, while the basic design (the stage of concretizing the actual structure and systems) was handled by HD Hyundai Heavy Industries in 2020. Although the basic design was completed in December 2023, the next stage-selecting the contractor for detailed design and construction of the lead ship-has been stalled.

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