HD Hyundai Heavy Industries (329180.KS), a competitor in the bidding for South Korea's next-generation Korean Destroyer (KDDX) program, told a court that the Defense Acquisition Program Administration's (DAPA) decision to extend the application period of a security-related penalty was unjustified, saying it could not understand why the regulator had altered its interpretation of the rules.
The Seoul Central District Court's 50th Civil Division (presided over by Senior Chief Judge Lee Sang-hoon) held a hearing Wednesday on the injunction filed by HD Hyundai Heavy Industries against DAPA seeking to suspend the measure.
HD Hyundai Heavy Industries argued in court that DAPA's extension of the penalty was unjust. "Looking at previous bidding cases, the outcomes were determined by score differences of less than one point," the company's attorney said. "The 1.2-point deduction applied through this measure could provide a windfall to the rival bidder, and the resulting disadvantage could ultimately fall on the public."
The KDDX program is South Korea's first domestically built destroyer project, which calls for the construction of six 6,000-ton Korean Aegis destroyers by the 2030s, with a total project size of approximately 7.8 trillion won. HD Hyundai Heavy Industries and Hanwha Ocean (042660.KS) are currently competing through a designated competitive bidding process for the detailed design and lead-ship construction contract.
Earlier, nine HD Hyundai Heavy Industries executives and employees were indicted and convicted of unauthorized photography and sharing of military secrets, including the KDDX conceptual design documents being handled by Daewoo Shipbuilding & Marine Engineering (now Hanwha Ocean) in 2015.
The dispute centers on the timing of the convictions: eight of the nine indicted employees had their sentences finalized in November 2022, while the remaining one was finalized in December 2023. DAPA had initially planned to apply the security penalty for three years from November 2022 until November of last year. It later treated the two final rulings as separate matters and decided to apply penalties for each. Accordingly, a 1.8-point deduction was applied through November of last year, followed by an additional 1.2-point deduction extending through December of this year. HD Hyundai Heavy Industries filed the injunction in protest after DAPA formally notified the company of the extension last month.
"The main issue appears to be whether DAPA's interpretation of the regulations exceeded the scope of its discretionary authority and the principle of protection of legitimate expectations," the court said. "We will issue a decision by the 9th of this month."
