The Defense Acquisition Program Administration. [Herald Business DB]
The Defense Acquisition Program Administration. [Herald Business DB]

The indictment of a Defense Acquisition Program Administration (DAPA) civil servant and a LIG D&A executive on bribery charges has cast a shadow over a 1.7 trillion won ($1.22 billion) state program to develop Korea's next-generation electronic warfare aircraft.

LIG D&A immediately rebuffed any connection between the bribery case and the electronic warfare program, but DAPA now finds itself caught between two uncomfortable options: imposing a two-year bid ban on LIG D&A as regulations allow, or risking a near-total freeze on weapons procurement if Hanwha Aerospace — already under a separate investigation — faces simultaneous sanctions.

According to defense industry sources, the Suwon District Prosecutors' Office's defense and industrial technology crimes unit on Thursday indicted a Grade-5 DAPA civil servant, identified only as A, on charges of aggravated bribery under the Act on the Aggravated Punishment of Specific Crimes, and LIG D&A executive B on charges of offering bribes.

Four others — including another company executive, D (48), and the head of a subcontractor — were indicted without detention. A is accused of manipulating evaluations across six defense projects worth a combined 91.5 billion won between late 2021 and late last year. Serving as an evaluation committee member, A allegedly awarded LIG D&A the highest score in 16 of 20 assessment categories while giving rival firms the lowest score across all 20.

In return, A allegedly received 320 million won in cash and subcontractor referral rights valued at 2.2 billion won, with the money funneled through fictitious service contracts, relatives' companies and accounts held under borrowed names. Including 140 million won in referral fees for subcontractor selections, the total amount received came to 460 million won.

The case has grown beyond a simple corruption scandal because three of the six manipulated projects were preliminary technology research contracts directly tied to the 1.7 trillion won "Electronic Warfare Aircraft (Block I) System Development" program — a contract LIG D&A won in December last year as part of a consortium with Korean Air.

Prosecutors determined that LIG D&A used the track record it improperly secured through those preliminary projects to gain a competitive edge over a rival consortium formed by Korea Aerospace Industries (KAI) and Hanwha Systems. The electronic warfare aircraft, designed to neutralize enemy air defense networks and communications systems in modern warfare, is slated for operational deployment by 2034.

Prosecutors also identified a structural flaw in the evaluation system that made the manipulation possible: because the scoring mechanism excluded only the highest and lowest marks before averaging, a single committee member could engineer a 20-point gap between competing bidders.

DAPA's own review of 14 projects linked to LIG D&A that were subject to search and seizure found that the company won three of the four projects in which the indicted civil servant served as an evaluator.

DAPA said it will determine the level of sanctions by applying either the Defense Acquisition Program Act or the State Contracts Act, depending on the legal status of the bribe-giver. If the executive is found to have violated an integrity pledge, a bid participation ban of six months to five years under the Defense Acquisition Program Act would be unavoidable and could not be replaced with a fine. DAPA is currently leaning toward a ban of approximately two years, taking into account the scale of the bribes confirmed so far.

The timing compounds the problem. Hanwha Aerospace, LIG D&A's main competitor, has been under investigation for violations of the Occupational Safety and Health Act and the Serious Accidents Punishment Act following a June explosion at its Daejeon plant that killed five workers. If formally indicted, Hanwha Aerospace could also face a bid ban of up to two years under the State Contracts Act.

Because the two companies dominate procurement competition across guided weapons and numerous other programs, DAPA officials have privately warned that simultaneous bid bans could leave the government unable to find alternative contractors — potentially halting weapons acquisition programs entirely or forcing a shift to overseas purchases.

"If both end up under bid restrictions, there could be situations where we cannot enter into a negotiated contract with anyone," a DAPA official said. "The scenarios become very complicated — whether both go to fines, only one does, whether we make overseas purchases for a period, or whether we delay certain programs."

DAPA Director General Lee Yong-cheol said he was "deeply sorry that an unsavory incident has occurred again, 11 years after a working-level bribery case in 2015," adding that "comprehensive consideration is unavoidable given the situation where government programs may be delayed or overseas procurement may become the only option."

DAPA changed its evaluator selection process this year, shifting from a volunteer-based pool to a random draw of five times the required number of candidates. Even so, the scandal is expected to intensify calls at the upcoming national audit for cross-verification of evaluators, stronger conflict-of-interest safeguards and a wholesale overhaul of the proposal evaluation system — with some lawmakers likely to raise the prospect of dismantling DAPA altogether.

People Power Party lawmaker Han Ki-ho and others are expected to press DAPA on related reforms at the national audit.

LIG D&A issued an official statement Friday pushing back against media reports that the indicted civil servant had influenced the evaluation of the electronic warfare program.

"Reports that certain projects involving the accused civil servant affected the electronic warfare program evaluation are not true," the company said. "The electronic warfare program was selected through a fair evaluation process by a wide margin."

The company added that "the relevant projects have no connection to the critical technology elements of the electronic warfare program" and that "the civil servant in question did not serve as an evaluator for the electronic warfare program."

LIG D&A urged restraint in reporting, saying the company should not have its "challenges and dedication disparaged by groundless claims that it was selected as the prime contractor on the basis of three unrelated projects," and asked that media "exercise caution in reporting unverified information while legal proceedings are ongoing."

A defense industry official said the case "is coming down to a politically uncomfortable choice for DAPA between strict sanctions and preventing delays in military capability development," adding that debate over the simultaneous-sanctions calculus involving LIG D&A and Hanwha Aerospace — and broader calls to reform Korea's defense procurement system — "will continue until the national audit and the contract review committee deliver their final verdicts."


rimsclub@heraldcorp.com