South Korea’s Defense Acquisition Program Administration (DAPA) has extended the penalty period imposed on HD Hyundai Heavy Industries Co. for a security breach, dealing a blow to the company’s bid for the Korean Next-Generation Destroyer (KDDX) project against Hanwha Ocean Co.

At a regular briefing on Tuesday, DAPA announced that the penalty period for the incident would be extended from November 2025 to December 2026, one year longer than previously set.

The penalty system deducts points from defense companies in bidding processes if they are found responsible for security lapses.

The original case dates back to September 2020, when the Ulsan District Prosecutors’ Office indicted nine of 12 HD Hyundai Heavy employees involved in a security breach.

Eight were convicted with final rulings in November 2022, and the last was finalized in December 2023.

DAPA initially applied the three-year penalty from November 2022, but has now decided to count from the final December 2023 ruling, extending the measure until December 2026.

HD Hyundai Heavy strongly protested, arguing that the breach was a single case under one indictment number and that the extension was unfairly imposed without granting the company an opportunity to respond.

The company criticized the move as undermining the fairness of the K-defense sector and warned it would take all possible legal actions.

The KDDX project, which involves building six destroyers by 2030, is contested between HD Hyundai Heavy and Hanwha Ocean.

Hyundai claims it should lead detailed design and production under a private contract since it handled the basic design, while Hanwha calls for a competitive bidding process.

Democratic Party lawmakers on the National Defense Committee, in the meantime, held a policy meeting on Tuesday to discuss ways to resume the delayed KDDX project.

Lawmaker Boo Seung-chan noted that a cooperative arrangement between companies could be seen as collusion, while competitive bidding might delay deployment, stressing that security penalties could tilt the playing field between the bidders.

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