President Lee Jae Myung listens to HD Hyundai Chairman Chung Ki-sun, third from left, during a meeting with business leaders at the presidential office in Seoul, Nov. 16. Yonhap
President Lee Jae Myung has pressured the Defense Acquisition Program Administration (DAPA) to select a shipbuilder for the Korean Next-Generation Destroyer (KDDX) project through an open competitive bidding process rather than awarding a sole-source contract to HD Hyundai Heavy Industries (HHI), which drafted the basic design.
With Defense Minister Ahn Gyu-back also opposing the agency’s push for a sole-source deal, expectations are growing that Hanwha Ocean could be allowed to join the 7.8 trillion won ($5.3 billion) program to build six 6,000-ton destroyers by 2030.
During a meeting on Friday with residents in South Chungcheong Province, Lee warned DAPA Minister Lee Yong-chul against signing a sole-source contract with a company penalized for its employees leaking military secrets, calling such a move “ridiculous.”
Although Lee did not name the company, his remarks were widely interpreted as referring to former HD HHI employees who stole conceptual destroyer designs from Daewoo Shipbuilding & Marine Engineering (DSME) — now Hanwha Ocean — between 2012 and 2015. After their convictions were finalized in December 2023, HD HHI received a 1.8-point deduction in government bids through the end of 2026.
HD HHI has since tried to secure a sole-source contract for the detailed design and construction of the first KDDX-class destroyer, citing precedent that the company in charge of the basic design typically receives the follow-on contracts.
Hanwha Ocean, however, has pushed for an open bidding process that would allow multiple shipbuilders to participate, calling a sole-source deal inconsistent with the penalties imposed on HD HHI.
A rendering of the Republic of Korea Navy’s next-generation destroyer / Courtesy of HD Hyundai Heavy Industries
Ahn also supported Hanwha Ocean’s position during his time as a lawmaker, saying the lead contractor should be chosen through competition. Lawmakers from the ruling Democratic Party of Korea likewise criticized DAPA’s plan earlier this year as corrupt after the agency reviewed its contracting approach in March.
In response, DAPA is now reportedly considering asking both shipbuilders to jointly design the KDDX-class destroyers to bolster cooperation in overseas markets. The two companies agreed earlier this year to collaborate on naval exports despite their rivalry at home.
According to sources close to the matter, DAPA plans to finalize its decision on the contracting method on Dec. 18.
“Everyone wants this wrapped up as soon as possible,” the defense minister said when asked about the KDDX project on Wednesday.
HD HHI finished the basic design in late 2023, and DAPA initially aimed to complete the detailed design and start construction of the first ship last year. However, two years have passed with little tangible progress, in part due to the ongoing rivalry between HD Hyundai and Hanwha.