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Hanwha Ocean (042660) will build South Korea's next-generation destroyer (KDDX), set to become a core future naval asset.
Hanwha Ocean disclosed on the 1st that it had been selected as the preferred bidder for the KDDX detailed design and lead-ship construction project.
KDDX is a major state-led project to build six 6,000-ton "mini Aegis" destroyers using domestic technology. The project is valued at about 7.8 trillion won in total, comprising 1.8 trillion won in development costs and 6 trillion won in construction costs. Hanwha Ocean and HD Hyundai Heavy Industries (329180) competed for the contract. Following the completion of the basic design in December 2023, lead-ship construction was scheduled to begin in 2024, but the fierce competition between the two companies led the Defense Acquisition Program Administration (DAPA) to delay its decision, pushing the project back by about two years.
On the 11th of last month, DAPA notified both companies that Hanwha Ocean had taken the lead in the KDDX proposal evaluation. The gap between the two companies was reportedly about 0.58 points.
The decisive factor in the outcome was HD Hyundai Heavy Industries' security-related point deduction. Nine HD Hyundai Heavy Industries employees were accused of photographing and leaking KDDX preliminary research materials prepared by Daewoo Shipbuilding & Marine Engineering, Hanwha Ocean's predecessor. Eight of them were convicted in November 2022, and the remaining one in December 2023. As a result, HD Hyundai Heavy Industries received a 1.2-point deduction for the security breach.
DAPA had considered HD Hyundai Heavy Industries' security-deduction period to run until November 2025. However, after an internal legal review, it changed its assessment, ruling that the deduction would apply until December of this year, based on December 2023, when the last of the individuals was convicted. HD Hyundai Heavy Industries filed an injunction, arguing this was an unjustified extension with no legal basis, but the court dismissed it.
HD Hyundai Heavy Industries outscored Hanwha Ocean by 0.64 points in the technical capability evaluation, but the security deduction made Hanwha Ocean the top-ranked bidder.
A Hanwha Ocean official said, "We feel a heavy sense of responsibility over being selected as the preferred bidder for the KDDX detailed design and lead-ship construction project," adding, "We will engage sincerely in negotiations with the government and do our utmost to normalize the project."
