Defense Companies Involved in Military Secrets Leaks Line Up for Bidding

Project Reannounced After Dasan Gikong’s Penalty Expires, Allowing Competitive Bidding
Private Contract Possible with Company Involved in KDDX Project Secret Leak

Defense companies that leaked military secrets are lined up to participate in bids in the first half of this year. These companies are preparing for competitive bidding or considering private contracts, citing the expiration of the 'penalty deduction statute of limitations.' The industry criticizes the Defense Acquisition Program Administration (DAPA) for favoritism toward specific companies.

According to DAPA on the 14th, the Special Operations Submachine Gun Type 1 project, which had been suspended for the past three years, will be relaunched. This project aims to replace the K-1A, which has been in use for over 40 years, with a submachine gun with improved performance. A total of 65.483 billion KRW will be invested by 2027 to introduce 16,000 new submachine guns.

This project had selected Dasan Gikong as the preferred negotiation partner in June 2020. However, after Dasan Gikong was caught leaking military secrets, DAPA canceled the contract the following year. A former executive of Dasan Gikong leaked military secrets such as the military's Required Operational Capability (ROC) to Dasan Gikong and received bribes. DAPA imposed a 'penalty deduction' on Dasan Gikong during the proposal evaluation. After the statute of limitations, which lasted until last year, expired, DAPA plans to reannounce the bid in the first half of this year.

A DAPA official said, "The project is restarting this year as the budget has been reflected," adding, "If Dasan Gikong participates in the bid, a competitive bidding with SNT Motiv is expected." The companies evaluate that DAPA waited until the penalty statute of limitations expired to allow competitive bidding.

On the other hand, there is also a project where private contracts are being considered despite the company leaking secrets. This is the Korean Next-Generation Destroyer (KDDX) project. The KDDX project has been a source of conflict between HD Hyundai Heavy Industries and Hanwha Ocean since 2013. Nine employees of HD Hyundai Heavy Industries secretly photographed military secret materials, including the KDDX conceptual design won by Daewoo Shipbuilding & Marine Engineering (now Hanwha Ocean), and shared them through the company's internal server. They were prosecuted for violating the Military Secrets Protection Act and received a final guilty verdict in November of the same year. According to security regulations, the security penalty (-1.8 points) imposed during DAPA project bidding will remain in effect until November 2025.

HD Hyundai Heavy Industries, responsible for the basic design, insists that it should handle the private contract for the lead ship as per convention. Seok Jong-geon, the head of DAPA, has also made statements supporting private contracts. In an interview with a media outlet, Director Seok said, "In a way, the existing method (where the basic design company handles detailed design and lead ship construction) can be efficient in terms of design continuity."

DAPA plans to hold a project subcommittee meeting on the 17th of this month to decide on the method, whether private contract or competitive bidding. Some voices suggest that the private contract decision has already been made and that the process is merely a formality. DAPA also attempted to decide on the private contract method at a project subcommittee meeting in July last year but delayed the decision due to emerging ethical issues.