Hanwha Ocean Raises Concerns over KDDX Destroyer Project AwardHanwha Ocean Raises Concerns over KDDX Destroyer Project Award Investors and politicians in Geoje Island are expressing apprehension regarding the potential exclusion of Hanwha Ocean from the KDDX destroyer project, a 7.8 trillion won undertaking. Media reports suggest that the Defense Acquisition Program Administration (DAPA) may award the contract for the detailed design and construction of the first KDDX ship to HD Hyundai Heavy Industries (HHI) without competitive bidding. Hanwha Ocean, which designed the basic design for the destroyers, contends that a single-supplier contract would be unfair and advantage a company that had previously stolen their conceptual design. Geoje City Council and Mayor Park Jong-woo have passed resolutions and made statements urging the government to involve multiple companies in the project. They cite the theft of military secrets by HD HHI employees as a reason for disqualifying the company. Meanwhile, politicians in Ulsan, where HD HHI’s shipyard is located, claim that the government would incur financial losses if it chose another company for the project. DAPA has denied the media reports, stating that they will follow regulations and assess the project’s impact on the naval ship industry before making a decision.
An illustration of the Republic of Korea Navy’s next-generation destroyer / Courtesy of HD Hyundai Heavy Industries
By Park Jae-hyuk
Investors and politicians at Hanwha Ocean of Geoje Island, where the shipbuilder is based, are growing concerned about the company’s possible exclusion from a 7.8 trillion won ($5.6 billion) KDDX project to build the Republic of Korea Navy’s next-generation destroyers, industry officials said on Wednesday.
Several media reported on Tuesday that the Defense Acquisition Program Administration (DAPA) will hold a meeting this month to award a contract to HD Hyundai Heavy Industries (HHI) to draw up a detailed design for the KDDX-class destroyers and build the first ship without any competitive bidding process.
Subsidiary HD Hyundai was awarded the contract for the basic design of the destroyers in 2020, enabling the Republic of Korea Navy to put the warships into service under a one-man contract as scheduled from 2030.
DAPA dismissed the reports as unfounded.
“We will make decisions in accordance with the laws and regulations after assessing the importance, necessity and impact of the project on the naval ship industry,” the government said in a text message sent to reporters Tuesday evening.
Hanwha Ocean’s conceptual design of the KDDX-class destroyer is seen during the Korea Institute of Military Science and Technology symposium at the Jeju International Convention Center in this June photo. Courtesy of Hanwha Ocean
However, Hanwha Ocean shareholders expressed concerns about the upcoming decisions of the state arms procurement agency.
Rep. Seo Il-jun of the ruling People Power Party, who represents the Geoje constituency, issued a statement calling for fair selection of project participants.
The shipbuilder also requested a competitive bidding process to select multiple companies as participants in the project.
“A single-supplier contract will unfairly give preferential treatment to a particular company, negating the penalties imposed on that company for illegally acquiring our conceptual design for the KDDX project,” a Hanwha Ocean official said.
Hanwha Ocean was responsible for the conceptual design of the destroyers when it was still called Daewoo Shipbuilding & Marine Engineering (DSME), before the acquisition of Hanwha.
Although former HD HHI employees were found guilty of stealing DSME’s conceptual design, DAPA allowed HD HHI to bid on the KDDX and other warship construction projects for the South Korean Navy.
Last Friday, Geoje City Council members unanimously passed a resolution calling on the central government not to sign an exclusive contract with HD HHI for the KDDX project.
“We warn that the government will face a strong backlash from Geoje residents if it signs a single-supplier contract with HD HHI,” the council said in a statement.
Geoje Mayor Park Jong-woo also said last month that it was nonsense to select HD HHI as the sole company to carry out the KDDX project, given the shipbuilder’s theft of military secrets from Hanwha Ocean.
In contrast, politicians in Ulsan, where HD HHI’s shipyard is located, claimed that the government will suffer serious financial losses if it asks another company to carry out the KDDX project.
“HD HHI is the country’s largest exporter of defense systems and plays an important role in the regional economy,” Ulsan Mayor Kim Doo-gyeom said in May.
