Hyundai Heavy Industries is facing significant challenges in its bid for South Korea’s next-generation KDDX destroyer program, following a recent decision by the government to extend the company’s penalty related to a security incident from 2020. The Defense Acquisition Program Administration (DAPA) has extended Hyundai Heavy’s penalty period until December 2026, which is one year longer than previously scheduled, as reported by the Maeil Business Newspaper.
This extended penalty period impacts Hyundai Heavy’s ability to secure defense contracts, as it allows participation in bids but results in a lower evaluation score relative to competitors without penalties. The penalties stem from a 2020 incident where employees leaked sensitive defense data, leading to the conviction of eight individuals under the Military Secret Protection Act. The final ruling regarding this case was issued in December 2023, at which point DAPA began counting the penalty period, effectively extending the sanctions until late 2026.
In response to this extension, Hyundai Heavy has indicated it may consider legal action to contest the decision, according to The Chosun Daily.
The KDDX destroyer program is a pivotal initiative aimed at designing and constructing six new destroyers to modernize the Republic of Korea Navy. These vessels will replace aging warships and are expected to be equipped with advanced radar systems, air and missile defense capabilities, and long-range strike technologies. Additionally, the new destroyers are planned to include integrated electric propulsion systems, making them both more efficient and quieter while in operation.
With an estimated budget of 8 trillion Korean won (approximately $5.5 billion), the KDDX program stands as one of South Korea’s most ambitious naval projects. Currently, Hyundai Heavy Industries and Hanwha Ocean are the primary competitors for the contract. Hyundai Heavy maintains that it should be the lead contractor due to its prior work on the basic design of the destroyers, while Hanwha calls for an open and competitive bidding process.
