HD Hyundai remains eligible for gov't contracts despite controversy

A bird's-eye view of the Korean Next-Generation Destroyer [HD HYUNDAI]

HD Hyundai Heavy Industries maintained its eligibility for bidding on government contracts, including a 7.8 trillion-won ($5.8 billion) project to build new stealth guided-missile destroyers for the Korean Navy, despite the controversy surrounding the leakage of military secrets.

Seoul's Defense Acquisition Program Administration (DAPA) said Tuesday that it had decided to take “administrative guidance” measures instead of imposing bidding restrictions on HD Hyundai Heavy Industries.

Korea's major shipbuilders vying for $5.8 billion defense deal

“The breach of the Military Secret Protection Act does not encompass actions like discrepancies between design plans and actual construction, or financial losses, as outlined in the Act on Contracts to Which the State Is a Party,” DAPA said.

Nine employees of HD Hyundai Heavy Industries were convicted last year for unlawfully obtaining and disseminating military documents, including crucial conceptual designs for the Korean Next-Generation Destroyer (KDDX) by Hanwha Ocean, then Daewoo Shipbuilding & Marine Engineering, in 2013.

The administration said that sanctions cannot be imposed due to the expiration of the exclusion period that was imposed on the company for its alleged misconduct. Such periods typically last five years as prescribed by law, and the leaks in question occurred from 2012 to 2015.

HD Hyundai Heavy Industries already faces a 1.8-point deduction in DAPA's tender evaluation due to the leak. The state arms procurement agency's rigorous assessments generally result in scores of less than 1 point.

With the latest decision, HD Hyundai Heavy Industries remains eligible to bid on future KDDX-class destroyer projects.

“We respect DAPA's decision,” HD Hyundai stated following DAPA's announcement late Tuesday. “We will do our utmost to contribute to the country's defense industry.”

Rival shipbuilding firm Hanwha Ocean, on the other hand, expressed strong opposition to the decision.

“The theft of confidential information by HD Hyundai Heavy Industries is deemed a serious breach that shakes the core of the defense sector,” Hanwha Ocean said in a statement. “Consequently, we once again urge a redeliberation, audit and thorough police investigation.”

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]