HD Hyundai Heavy Industries took part in the second bid for detailed design and lead ship construction of the Korea Destroyer Next Generation (KDDX). It had skipped the first bid, taking issue with the fact that the basic design data were provided to rival Hanwha Ocean, but by entering the reannounced bid, it will continue competing with Hanwha Ocean for the KDDX order.
On the 27th, HD Hyundai Heavy Industries said, "As the contractor that carried out the basic design for the KDDX program, we completed registration for this bid to contribute to strengthening the Republic of Korea Navy's capabilities and advancing the national defense industry, based on our top-tier warship construction competence." The first competitive bid for KDDX, which closed on the 14th, failed because Hanwha Ocean was the sole bidder and did not meet the requirements, and the Defense Acquisition Program Administration issued a second bid notice with a deadline of the 28th.
KDDX is a program to develop major components, including the hull, combat system and a large integrated mast, with domestic technology. It is regarded as a high-difficulty project that will, for the first time among domestic warship programs, apply an integrated electric propulsion system. The goal is to invest 7.8 trillion won to build six 6,000-ton-class destroyers.
KDDX has completed the basic design and will proceed in the order of detailed design, lead ship construction and follow-on ship construction. The concept design for KDDX was handled in 2012 by Daewoo Shipbuilding & Marine Engineering (now Hanwha Ocean), and the basic design was subsequently awarded to HD Hyundai Heavy Industries in 2020. The plan had been to begin detailed design and lead ship construction in 2024 after completing the basic design in Dec. 2023, but the project was delayed by about two years due to disputes over the contractor selection method.
Earlier, during the first bid, HD Hyundai Heavy Industries did not register to participate, arguing that the Defense Acquisition Program Administration had provided basic design materials containing trade secrets to competitor Hanwha Ocean. Through the KDDX request for proposals (RFP) supplied by the agency, Hanwha Ocean obtained information related to HD Hyundai Heavy Industries' labor cost unit rates, construction methods and technology application plans, while HD Hyundai Heavy Industries said it needed time to formulate a strategy because it did not have the other side's information. HD Hyundai Heavy Industries also filed for an injunction, arguing the materials should not be provided to Hanwha Ocean, but after the court rejected it, the company appealed on the 15th.
Along with entering the bid that day, HD Hyundai Heavy Industries also filed for an injunction with the court against the Defense Acquisition Program Administration to prohibit the "extended application of security demerits." The company said, "Based on the agency's evaluation results for the basic design proposal of the ocean information ship, which recently participated in a bid, we confirmed that the security demerit was unlawfully extended without legal grounds, which led us to file for the injunction."
Previously, nine employees of HD Hyundai Heavy Industries were convicted with finality of violating the Protection of Military Secrets Act after they illegally obtained 12 Navy classified documents, including the KDDX concept design of Daewoo Shipbuilding & Marine Engineering, in 2013 and shared them on the company's intranet. Eight had their convictions finalized in 2022 and one in 2023. The Defense Acquisition Program Administration initially decided to impose a 1.8-point demerit by viewing the two rulings as one case, but after an internal review late last year, it treated them as separate matters and set a policy to apply an additional 1.2-point demerit through Dec. this year. Given that decimal-point differences can determine the outcome in defense procurements, the 1.2-point demerit is considered a key factor that could sway the award.
Within HD Hyundai Heavy Industries, there had been skepticism that participating in the KDDX program offered limited practical benefit because of the extended security demerits and the disadvantageous bidding landscape stemming from the provision of basic design data, but the decision appears to have been made based on the judgment that missing out on KDDX could make it difficult to secure leadership in follow-on ships and next-generation warship programs.
HD Hyundai Heavy Industries said, "As Korea's No. 1 warship builder, we will do our utmost with a responsible attitude to ensure the success of the KDDX program, based on our best-in-class technology."