"If the final contractor for building cutting-edge warships is decided with technical capability assessments ignored due to security demerit points, there will be no future for the K-defense shipbuilding sector."
"As the president has pointed out, employees were convicted of illegally photographing and leaking project-related materials, so the company must take responsibility for it."
After drifting for more than two and a half years, the Korean Next-Generation Destroyer (KDDX) program — now proceeding via designated competitive bidding — is again sparking controversy over the selection of a contractor for detailed design and lead-ship construction. The Defense Acquisition Program Administration (DAPA) plans to deliver the lead ship to the Navy by 2032, but with legal disputes erupting, criticism is mounting that DAPA leadership is running the program without clear principles.
DAPA initially set a schedule starting with a bid notice in late March, proposal submission and evaluation in May, selection of a preferred bidder and establishment of a detailed design and lead-ship construction execution plan in June, and a final contract in July. However, HD Hyundai Heavy Industries did not participate by the bid registration deadline of 2 p.m. on May 14. The company cited the need for internal review due to numerous technical considerations, making non-participation in the first bid unavoidable.
Caught off guard by HD Hyundai Heavy Industries' absence, DAPA immediately re-issued the bid notice for the "KDDX Detailed Design and Lead-Ship Construction Project" on May 18. HD Hyundai Heavy Industries, which had skipped the first round, registered for the second bid on May 27. Had only a single company bid, Hanwha Ocean could have been selected as the preferred bidder through proposal evaluation, enabling a private contract.
But fresh legal controversy emerged in this process. HD Hyundai Heavy Industries filed an injunction with the court seeking to bar the extended application of security demerit points, mounting a legal challenge to DAPA's policy. It marks the company's second legal action, following its March 26 injunction filed against DAPA seeking to prevent the disclosure of the Request for Proposal (RFP) to Hanwha Ocean.
KDDX is a 7.0439 trillion won program to build six 6,000-ton mini-Aegis destroyers. Warship construction proceeds in the order of concept design, basic design, detailed design and lead-ship construction, and follow-on ship construction. Conventionally, the basic design contractor has also taken on detailed design and lead-ship construction. Hanwha Ocean and HD Hyundai Heavy Industries handled the concept design and basic design, respectively.
Apart from the legal action, the second-round bidding delay could push back DAPA's original timeline of selecting a preferred bidder and establishing a detailed design and lead-ship construction execution plan in June, with a final contract in July. Furthermore, if HD Hyundai Heavy Industries is eliminated, a main lawsuit becomes inevitable, raising the prospect that the final contractor decision could slip past this year.
HD Hyundai Heavy Industries cited a shortened project period, frozen budget, and issues over sharing basic design materials as reasons for skipping the first bid. The KDDX project period has indeed been cut from 76 months at the basic design stage to 71 months. With prolonged delays driving up raw material prices and labor costs, cost burdens on contractors have grown, yet the lead-ship (Ship No. 1) budget remains frozen.
Even so, the second-round bid notice kept the project period and budget terms unchanged from the first. The project period stands at 71 months from the contract date, the budget at 882.099 billion won, and the contracting method remains designated competitive bidding and contract by negotiation. This means HD Hyundai Heavy Industries entered the bid accepting the same terms it had rejected the first time.
With the bidding contest for the long-stalled KDDX program now underway, either HD Hyundai Heavy Industries or Hanwha Ocean is set to be chosen as early as July. Because the format is designated competitive bidding, HD Hyundai Heavy Industries — saddled with a 1.2-point security demerit — appears at a surface-level disadvantage. But many caution against premature conclusions.
So what will determine the outcome of the KDDX contest? Two key factors stand out. First, as the Navy has emphasized that the KDDX project embodies cutting-edge warship-building technology, Hanwha Ocean's biggest weakness is that it has never designed an Aegis destroyer. While Hanwha Ocean handled the concept design, it has never carried out basic or detailed design.
The Navy operates three 7,800-ton Sejong the Great-class destroyers and three 8,200-ton King Jeongjo-class destroyers. The second King Jeongjo-class ship, Dasan Jeong Yak-yong (DDG-996), will be delivered to the Navy this year, and the third, Daeho Kim Jong-seo (DDG-997), is scheduled for delivery next year. Hanwha Ocean has experience building the second Sejong the Great-class destroyer, Yulgok Yi I (DDG-992).
The second factor is the security demerit issue, which could even lead to a court ruling overturning DAPA's final decision. DAPA stirred controversy in September 2025 by raising the possibility of extending the period of security demerit application against HD Hyundai Heavy Industries, and recently applied the demerit in evaluating the company's basic design proposal for a maritime intelligence vessel bid.
As a result, if HD Hyundai Heavy Industries bids, it will face Hanwha Ocean carrying a 1.2-point security demerit. DAPA has not officially notified HD Hyundai Heavy Industries of whether the demerit will apply, fueling allegations of unprincipled and unfair program management. The 1.2-point demerit on HD Hyundai Heavy Industries has been extended by one year, from December 2025 to December 6, 2026.
A 1.2-point margin is a major variable in warship contracts. In the 2023 contest for the fifth and sixth Ulsan-class Batch-III ships, Hanwha Ocean won the preferred bidder slot with a final score of 91.8855, edging HD Hyundai Heavy Industries' 91.7433 by just 0.1422 points. HD Hyundai Heavy Industries led on technical capability but was docked 1.8 points for past unfair practices.
That is why the responsibility of the evaluation panel in this KDDX decision is heavier than ever. Whether HD Hyundai Heavy Industries weeps or Hanwha Ocean smiles will inevitably hinge on the security demerit.
A DAPA official said, "For this KDDX project, highly expert and accountable evaluators will participate to assess technical capability and project management capacity with clear differentiation," adding, "Given the long delay, we will swiftly select the final contractor without legal disputes so the lead ship can be delivered to the Navy in 2032."
