[Exclusive] Kwon Ik-wi: "Penalty Points for HD Hyundai Heavy Industries Are Justified" [Yang Nak-gyu's Defence Club]

Complaint That Security Incident Deductions Are Excessive in Bidding Dismissed
Also Affects This Month's DAPA Bid Eligibility Review

The Anti-Corruption and Civil Rights Commission dismissed HD Hyundai Heavy Industries' complaint that the penalty points for security incidents were excessive. On the 22nd, a government official said, "The Commission dismissed the complaint submitted by HD Hyundai Heavy Industries the day before." Accordingly, the penalty points for security incidents against HD Hyundai Heavy Industries will continue to be applied.

[Image source=Yonhap News]

Employees of HD Hyundai Heavy Industries were convicted last year on charges of leaking military secrets, including the concept design of the Korean next-generation destroyer (KDDX). Subsequently, in July, HD Hyundai Heavy Industries was deducted 1.8 points in the proposal evaluation due to the penalty points regulation for security incidents. They also lost the status of preferred negotiation partner to Hanwha Ocean in the contract for the construction of the FFX Ulsan-class Batch III 5th and 6th ships.

In September last year, HD Hyundai Heavy Industries filed a complaint with the Anti-Corruption and Civil Rights Commission, claiming that the penalty points imposed by the Defense Acquisition Program Administration (DAPA) for security incidents were excessive. After review, the Commission concluded, "The penalty evaluation for unfair conduct history stipulates the principle of applying penalty points for three years in case of violation of the Military Secrets Protection Act," and added, "Since the defense industry is directly related to national security, the importance of security is very high, and strict sanctions are necessary."

The Commission's decision is expected to influence the qualification review for participation in bids by DAPA scheduled for the 27th of this month. Previously, Jeom Dong-hwan, former head of DAPA, had promised sanctions against HD Hyundai Heavy Industries for leaking military secrets. At last year's National Assembly audit, he stated, "We have obtained the court ruling on HD Hyundai Heavy Industries. We plan to review the imposition of debarment sanctions through contract deliberation." However, in December last year, DAPA's contract deliberation committee deferred the decision on debarment sanctions against HD Hyundai Heavy Industries. The delay in the decision led to criticism that it might be a step to lower the level of disciplinary action.

In response, HD Hyundai Heavy Industries said, "The complaint was an unavoidable measure taken out of desperation," and added, "We plan to continue raising concerns about the weakening competitiveness in the shipbuilding sector caused by the unreasonable penalty point system for security incidents."