“Sustainable Shared Growth in Defense,” Government and Major Firms Join Forces to Back Small Businesses’ Parts Development / Provided by the Defense Acquisition Program Administration
- DAPA launches a new cooperative parts-localization program to promote shared growth between prime contractors and small defense suppliers
- Officials also cut technology royalty rates and revised rules to accelerate parts localization
The Defense Acquisition Program Administration (Administrator Lee Yong-cheol) issued an amendment to the Regulations on the Management of Weapon System Parts Localization Development, effective March 11, 2026. The change aims to accelerate parts localization and strengthen collaboration between prime contractors and small parts suppliers, which form the backbone of the domestic defense industry.
At the center of the amendment is a new cooperative parts-localization development category. As Korea’s defense industry expands its global role, the program will have the government and prime contractors jointly support small firms so they can reliably develop critical weapon system components.
The cooperative parts-localization support program departs from the previous model, which relied entirely on government funding and left small and medium enterprises to bear the risks alone. Under the new approach, the government and system integrators will pool resources to finance SMEs’ parts localization development.
Under the program, prime contractors will match government contributions on a 1:1 basis through dedicated cooperative funds to jointly cover SMEs’ parts R&D. This matching model lets officials stretch limited government resources and support a larger number of localization projects.
Backed by both funding and technical guidance from system integrators, SMEs will find a stronger environment for successful parts development. Prime contractors, in turn, will secure a more reliable domestic supply. Officials expect the program to become a model for balanced, nationwide shared growth across the defense sector.
In addition to creating the cooperative support program, the amendment includes other changes intended to reduce administrative burdens at defense project sites and improve consistency with related laws and regulations.
To encourage private investment in parts localization, the administration sharply reduced the technology-royalty collection rate—roughly halving it—to align with the National R&D Innovation Act. The amendment also simplifies procedures by aligning R&D project evaluations with year-end completion dates, easing paperwork for companies.
Choi Eun-shin, acting director of DAPA’s Defense Industry Promotion Bureau, said, “The cooperative parts-localization program will help large firms improve supply stability and give small firms a platform to grow into competitive niche leaders. We will continue refining policies and providing support so our SMEs can succeed in the defense market on the strength of their technology alone.” End
