The Defense Acquisition Program Administration (DAPA) announced on the 15th that it is reviewing the possibility of administrative action against Hanwha Ocean regarding the business method decision for the $8 trillion Korea next-generation destroyer (KDDX) project. Currently, Hanwha Ocean and HD Hyundai Heavy Industries are competing for detailed design and the construction order for the lead ship (Ship No. 1).
Spokesperson Jo Yong-jin said at a regular briefing at the Ministry of National Defense on the 15th regarding reports of reviewing sanctions on Hanwha Ocean that "DAPA is internally reviewing the possibility of administrative action concerning the KDDX conceptual design report." Spokesperson Jo noted, "No decision has been made yet regarding administrative action."
DAPA is reported to be considering administrative action based on the investigation results from the Military Counterintelligence Command, which found that Hanwha Ocean (formerly Daewoo Shipbuilding & Marine Engineering) improperly quoted parts of the conceptual design report conducted by Daewoo Shipbuilding & Marine Engineering in its basic design proposal submitted during the KDDX bidding process in 2020. Previously, at the end of last month, the Counterintelligence Command informed DAPA that Daewoo Shipbuilding & Marine Engineering had plagiarized 27 items, including charts included in the conceptual design report, in a basic design proposal submitted to DAPA in 2013, and that it had not submitted the original conceptual design report to DAPA but had retained it. The Counterintelligence Command concluded there would be no charges due to the expiration of the statute of limitations under the Military Secrets Protection Act (10 years) and instructed DAPA to make its own decision regarding sanctions.
The KDDX project progresses in the order of "conceptual design → basic design → detailed design and lead ship construction → follow-up ship construction." The conceptual design was undertaken by Daewoo Shipbuilding & Marine Engineering in 2012, and the basic design was completed by HD Hyundai Heavy Industries in December 2023.
As the competition between the two companies intensifies and they engage in legal disputes, DAPA has been unable to determine the business method for detailed design and lead ship construction for over a year. HD Hyundai Heavy Industries argues that it should proceed with a negotiated contract, following the practice of having the company that conducted the basic design also handle the detailed design and lead ship, while Hanwha Ocean claims that competitive bidding is necessary due to HD Hyundai Heavy Industries' past conviction for military secrets theft.
DAPA is known to want to proceed with a negotiated contract. There are also speculations in the defense industry that DAPA may be reviewing sanctions against Hanwha Ocean to facilitate a negotiated contract with HD Hyundai Heavy Industries. If designated as an unreliable contractor, Hanwha Ocean would be barred from participating in DAPA tenders for a certain period.
When asked whether it is appropriate to consider administrative action against a specific company ahead of the decision on detailed design and lead ship construction contractors, Spokesperson Jo said, "The methods for advancing the KDDX project are in no way related to sanctions against a specific company." Spokesperson Jo added, "We are reviewing the optimal project methods for advancing the KDDX project, considering the technical difficulty of the KDDX, the conditions of the shipbuilding industry, and the timing for implementing capabilities."
DAPA is reportedly planning to reopen the Business Division Committee (sub-committee) within this month to discuss the business method for KDDX detailed design and lead ship construction and present the agenda to the Defense Acquisition Promotion Committee for a final decision.