The Defense Acquisition Program Administration ordered that the basic design for Korea’s next-generation destroyer (KDDX) be handed to Hanwha Ocean (042660), and HD Hyundai (267250) pushed back — even filing for an injunction. HD Hyundai says turning over sensitive information, including pricing, to a rival could leave it disadvantaged when the detailed-design contract is awarded.
The KDDX program, already delayed more than two years by the dispute between HD Hyundai and Hanwha Ocean, has again been roiled by unfair-competition allegations and appears to be drifting.
HD Hyundai warns of leaks to a rival… Hanwha cites an experience gap
On March 25, defense-industry sources said HD Hyundai Heavy Industries filed an injunction at the Seoul Central District Court on March 24 against DAPA over the sharing of KDDX basic-design materials. “We reluctantly filed the injunction because we fear serious unfair competition,” an HD Hyundai spokesperson said.
The KDDX program aims to construct six 6,000-ton-class KDDX Aegis destroyers by 2030 at an estimated cost of about 7.8 trillion KRW (approximately $5.85 billion). The project proceeds through concept design, basic design, detailed design and lead-ship construction, and then follow-on ship construction.
HD Hyundai won and completed the basic design and officials are now selecting the contractor for detailed design and lead-ship construction. The dispute centers on whether Hanwha Ocean — which did not participate in the basic design — should be given access to those materials before DAPA issues the detailed-design RFP.
HD Hyundai argues that the basic design contains sensitive know-how — including pricing, advanced ship technologies and commercial strategies — and that granting Hanwha Ocean access would hurt HD Hyundai’s chances in future bids. For example, knowledge of HD Hyundai’s pricing could allow a rival to undercut its offers. Hanwha Ocean counters that it cannot have a fair shot if only one company has accumulated the relevant experience.
According to sources, HD Hyundai told DAPA it would share only the non-confidential portions of the basic design — excluding 12 items it considers trade secrets out of 195 total items. DAPA has insisted on sharing all items, prompting HD Hyundai’s injunction.
DAPA originally planned, following precedent, to award the detailed-design contract directly to HD Hyundai Heavy Industries, which handled the basic design. But Hanwha Ocean raised concerns about a past military-secrets leak involving HD Hyundai and pushed for competitive bidding, delaying the program by more than two years.
The firm that handles the detailed design and builds the lead ship gains recognized KDDX construction experience. That experience can be decisive in securing future overseas contracts, which is why the two leading special-shipbuilders are locked in fierce competition. After repeated disputes, DAPA decided late last year to select the contractor through competitive bidding.
DAPA is also weighing an extension of HD Hyundai’s security penalty, a move that could complicate the selection further. In connection with the military-secrets leak, DAPA is considering extending the penalty period — originally set to end last November — through December of this year. If finalized, the penalty would be reduced from 1.8 points to 1.2 points. Because shipbuilding awards are often decided by slim decimal-point margins, many expect the penalty’s final value could determine which company wins the detailed-design contract.
