An Aerial view of Korean next-generation frigate (Photo: HD Hyundai Heavy Industries)
The Ministry of Trade, Industry and Energy (MOTIE) designated both HD Hyundai Heavy Industries and Hanwha Ocean as defense companies to produce the Korean next-generation frigate (KDDX) finished goods. The final selection of the KDDX project operator is expected to occur as early as March next month.
MOTIE said it designated Hanwha Ocean and HD Hyundai Heavy Industries as defense companies capable of producing KDDX after consultations with related agencies, including the Defense Acquisition Program Administration.
KDDX is the first domestically produced frigate project to construct the hull and Aegis system entirely with domestic technology. There are plans to build a total of six vessels, with the project cost amounting to 7.8 trillion won.
MOTIE reported that the two companies were designated after passing procedures, including feasibility study for new company designation, formation of a joint on-site inspection team and preparation of production capacity evaluation criteria, and joint on-site inspections.
A Ministry of Trade, Industry and Energy official noted, “To ensure pro-cedural feasibility and fairness related to defense company designation, a joint on-site inspection team was operated for the first time, including the Defense Acquisition Program Administration, Navy, Defense Science Research Institute, Defense Technology Quality Agency, and the Defense Rapid Acquisition Tech-nology Research Institute.”
As the designation of defense companies by the Ministry of Trade, Industry and Energy is completed, the Defense Acquisition Program Administration will decide on the final operator for KDDX.
The Defense Acquisition Program Administration plans to submit the pro-ject promotion plan to the Defense Busi-ness Promotion Committee (DPC) by next month, and the DPC is expected to determine the final operator and project methods after deliberation.
The final operator for KDDX is expected to be selected as early as next month and no later than the first half of the year.
Hanwha Ocean and HD HHI have been competing for the detailed design of the KDDX project and the lead ship order. This is because the overall cost of the project is substantial, and the successful production of the lead ship will give Hanwha an advantage in the global Aegis ship order competition.
The conceptual design of KDX was awarded to Daewoo Shipbuilding & Marine Engineering (now Hanwha Ocean) in 2012, and the basic design was awarded to Hyundai Heavy Industries (now HD Heavy Industries) in 2020.
However, competition between Han-wha Ocean and HD HHI for the detailed design and construction of the lead ship intensified. HD HHI maintained that it should be awarded the contract for the lead ship as it was in charge of the basic design of the KDDX. Hanwha Ocean has argued that the contract should be awarded through a competitive bidding process rather than a contract, given HD HHI’s past history of incidents involving military secrets.
According to the practice, the lead ship (the first ship) and the rest of the mass-produced ships are designated separately, and in the case of the lead ship, the company that takes the basic design, which is in the stage of being built, is assigned to build it under a contract. The remaining mass-produced ships are built by competitive bidding.
The conflict reached a climax when the two companies filed charges against each other.
The companies later dropped the charges and returned to a reconciliatory mood, but the two companies still had a nervous war under the water.
At the height of the conflict, the MOTIE unusually designated multiple companies as defense contractors. As a result, con-fusion is expected to prevail until the final selection. The two companies have different interpretations of the ministry’s decision.
HD HHI said that under the multiple designation, it will be in charge of building the lead ship as a basic design company, while the volume of mass-produced ships will be shared between the two companies.
“We understand that the designation of the defense contractor is separate from the detailed design of the KDDX and the method of selecting the lead ship, and that the contractor is designated for the entire volume, including the follow-up ships,” said an official from HD HHI. ”As all legal doubts related to the KDDX have been resolved, (the selection of the contractor) should be carried out in accordance with the regulations and procedures of the Defense Projects Act.”
Hanwha Ocean, on the other hand, interpreted the unusual designation of multiple companies to mean that all selection procedures, including the lead, will likely go to competitive bidding.
“Hanwha Ocean’s designation as a KDDX defense contractor confirms our capability to participate in the KDDX project,” said a Hanwha Ocean official, ”and we look forward to a decision on how to proceed with the KDDX project in a reasonable manner.”★
About The Author
