HD Hyundai Heavy distances itself from ex-DAPA head's charges

Korean Next-Generation Destroyer / Courtesy of HD Hyundai Heavy

HD Hyundai Heavy emphasized its lack of connection to alleged abuse of power by the former head of the Defense Acquisition Program Administration (DAPA). The company denied rumors suggesting it benefited from the allegation five years ago, according to the country’s major shipbuilder, Sunday.

The company said it submitted a letter to the National Police Agency, Friday, addressing the logical flaws behind rumors that former DAPA minister Wang Jung-hong had colluded with them against other defense system developers in the country. The police launched an investigation into Wang in June of last year.

HD Hyundai said it has been losing public trust due to the rumor and urged the police to complete the investigation fast.

According to the rumor, in 2019, Wang removed from the bidding procedure for the Korean Next-Generation Destroyer (KDDX) construction project a clause that would have deducted 0.5 to 1.5 points from any company that had experienced a data security breach. As a result, HD Hyundai Heavy, one of the bidders, did not lose any points despite a data breach related to the KDDX project. The company won the bid's basic design phase in August 2020 by a narrow margin of 0.056 points over Hanwha Ocean (formerly DSME Construction).

The KDDX project consists of four phases: concept design, basic design, detailed design, and construction. Hanwha Ocean was responsible for the concept design phase.

After losing the KDDX bid, Hanwha Ocean began alleging that Wang had favored HD Hyundai Heavy by removing the clause.

HD Hyundai denied the allegation, claiming that Wang removed the clause based on advice from the Anti-Corruption & Civil Rights Commission (ACRC) and the Office for Government Policy Coordination within the Prime Minister’s Secretariat.

“Hanwha Ocean’s argument has already been proven false by a court and the Board of Audit and Inspection of Korea,” a HD Hyundai Heavy official said. “Among seven private companies that had urged ACRC to remove the clause, four of them were Hanwha subsidiaries.”

HD Hyundai also denied rumors that the removal of the controversial clause facilitated the selection of specific firms as its partners for the KDDX project.

“The selection of partner companies for the project became possible in late 2022 when most of the project’s basic design works were done,” the official said. “It’s illogical that a clause from the KDDX bidding procedure was removed to have certain companies be selected as our partner companies three years later.”

Following Hanwha Ocean’s accusation against HD Hyundai, the KDDX project has been stalled and has not progressed beyond the second phase.