LIG D&A expects first-instance ruling in early next year, expresses regret over pre-verdict sanctions; KF-21 long-range air-to-air missile contract may go to Hanwha Aerospace
A corruption scandal involving defense contractor LIG D&A is now casting a shadow over weapons development for South Korea's homegrown KF-21 fighter jet.
The Defense Acquisition Program Administration (DAPA) has decided to bar LIG D&A from participating in defense procurement bids for the next two years — the harshest sanction available under the National Contracts Act.
The measure stems from charges prosecutors announced in August involving 460 million won ($346,000) in alleged bribery and cost fraud. DAPA said it imposed the 24-month ban in light of what it described as the largest bribery amount in the agency's history and a pattern of deliberate, long-running misconduct.
A court has yet to issue a final ruling on the case. A LIG D&A official told reporters the company expects a first-instance verdict in early next year and asked that the facts be confirmed at that time. With DAPA's sanction now in place, LIG D&A expressed regret that the restriction was imposed solely on the basis of an indictment and said it would seek a court injunction to suspend enforcement and pursue other legal remedies.
The more immediate concern is what happens to upcoming defense contracts.
The ban could affect the KF-21 long-range air-to-air missile development project, a contract slated for signing by the end of this year. The program aims to reduce South Korea's reliance on the European-made Meteor missile and advance domestic development of aircraft armaments. With a total budget of 1.9 trillion won covering both system development and subsequent mass production, it ranks among the most coveted contracts in the defense industry.
LIG D&A and Hanwha Aerospace had already been competing for the systems integration role — the core component of the project — and LIG D&A ranked first in the proposal evaluation. But the bidding ban has introduced a major complication for the company just as it was approaching final contract signing at year's end.
The sanction does not automatically void existing contracts, and if a court grants the injunction, LIG D&A could still be eligible to participate in new projects. Ultimately, the court's decision and subsequent procedures will be the decisive factors.
The fate of LIG D&A remains to be seen.
ryul@heraldcorp.com
