![An air defense missile being fired from a KF-21 [Photo courtesy of LIG D&A]](https://www.businesskorea.co.kr/news/photo/202610/279574_287306_3650.jpg)
An air defense missile being fired from a KF-21 [Photo courtesy of LIG D&A]
Concerns are emerging that variables will arise in the domestic defense procurement market as LIG Defense & Aerospace (LIG D&A) received a disposition restricting its qualification for participation in bidding for 2 years from the Defense Acquisition Program Administration.
The industry anticipates that the immediate business vacuum will not be significant as there is a high possibility that LIG D&A’s application for suspension of execution will be accepted. However, observations are also emerging that the medium-to-long-term business structure could change depending on future procedures, such as criminal trials and the Defense Acquisition Program Administration’s review of existing contracts.
According to the industry on Oct. 23, LIG D&A disclosed that it received an official document regarding the administrative sanction disposition from the Defense Acquisition Program Administration on Oct. 22. The restriction period is from Oct. 29 this year to Oct. 28, 2028.
Previously, the Defense Acquisition Program Administration held the Defense Acquisition Contract Review Committee and decided to restrict the qualification for participation in bidding for 2 years for LIG D&A, which was indicted on charges of handing over hundreds of millions of won in bribes to a Defense Acquisition Program Administration employee during the bidding process for a weapon system development project. This official document is the formal notification according to that resolution.
LIG D&A will disobey the disposition and take legal action. An LIG D&A official stated, “We consider it regrettable that an administrative sanction disposition was issued based on the contents of the indictment while legal procedures are underway,” and added, “Our company plans to proceed with legal actions, such as an application for suspension of execution of the sanction disposition and a revocation litigation, to ensure there are no disruptions to our business, and we will faithfully vindicate our position.”
The first turning point is expected to be the court’s judgment on the suspension of execution. If the court cites the application, the effect of the disposition will be halted until the judgment on the merits of the revocation litigation is issued. During this period, LIG D&A can participate in the fulfillment of existing contracts and new bids without restrictions.
In the industry, it is viewed that applications for suspension of execution regarding restrictions on qualification for participation in bidding are typically cited in most cases. An industry official said, “If the court cites the application for suspension of execution, the effect of the restriction on qualification for participation in bidding can be suspended until the judgment of the lawsuit on the merits.”
In response, an LIG D&A official said, “Upon a decision to suspend the effect of the administrative disposition, there will be no impact on our company’s qualification for participation in bidding until the judgment of the ‘revocation litigation of the administrative disposition’.”
Afterwards, the legality of the disposition will be determined in the merits. If a judgment emerges that the disposition is justified, the remaining restriction period will be applied again, and conversely, if LIG D&A’s argument is accepted, the disposition will be canceled.
The direction of the merits is highly likely to interlock with the results of the criminal trial. The Defense Acquisition Program Administration employee who received the bribes was arrested and indicted on charges of bribery under the Act on the Aggravated Punishment of Specific Crimes, and LIG D&A executives were also handed over to trial. LIG D&A is expressing regret over the fact that the disposition was issued before a judicial judgment emerged.
Observations also arise that if the sanction is confirmed, there could be an impact on businesses such as order receipts. LIG D&A’s sales related to the government and public institutions last year amounted to 2.7773 trillion won (about $2.097 billion), reaching 64.5% of the total. Accordingly, the analysis is that if the bidding restriction continues for a long period, it could affect medium-to-long-term order receipts.
Judgments surrounding existing projects also remain. Previously, the Defense Acquisition Program Administration argued that as a result of an internal inspection, LIG D&A won orders for 3 out of 4 projects in which the employee who received bribes participated as a proposal evaluation committee member. The Defense Acquisition Program Administration has previously revealed its position that existing contracts can also be rescinded or terminated if a causal relationship between the criminal act and the order receipts is confirmed.
The KF-21 long-range air-to-air guided missile project, which is facing a contract at the end of the year, is also an interest of the industry. This project, with a scale of approximately 1.9 trillion won, is scheduled for a final contract in December. Accordingly, whether the contract is signed during the restriction period depends on the decision on the suspension of execution.
The Defense Acquisition Program Administration’s concerns are also not small. The domestic guided weapon market is effectively a two-power structure of LIG D&A and Hanwha Aerospace. Hanwha Aerospace is also undergoing an investigation in relation to an explosion accident at its Daejeon worksite in June, so concerns are raised within the industry that it will be difficult to find an alternative business operator if both companies receive restrictions.
An industry official said, “The Defense Acquisition Program Administration will also have great concerns between the level of sanctions and the deployment of military power, worrying that the project schedule itself will be shaken.”Business Korea · সাধারণ
LIG D&A Challenges Two-Year Bid Ban
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An air defense missile being fired from a KF-21 [Photo courtesy of LIG D&A]
Concerns are emerging that variables will arise in the domestic defense procurement market as LIG Defense & Aerospace (LIG D&A) received a disposition restricting its qualification for participation in bidding for 2 years from the Defense Acquisition Program Administration.
The industry anticipates that the immediate business vacuum will not be significant as there is a high possibility that LIG D&A’s application for suspension of execution will be accepted. However, observations are also emerging that the medium-to-long-term business structure could change depending on future procedures, such as criminal trials and the Defense Acquisition Program Administration’s review of existing contracts.
According to the industry on Oct. 23, LIG D&A disclosed that it received an official document regarding the administrative sanction disposition from the Defense Acquisition Program Administration on Oct. 22. The restriction period is from Oct. 29 this year to Oct. 28, 2028.
Previously, the Defense Acquisition Program Administration held the Defense Acquisition Contract Review Committee and decided to restrict the qualification for participation in bidding for 2 years for LIG D&A, which was indicted on charges of handing over hundreds of millions of won in bribes to a Defense Acquisition Program Administration employee during the bidding process for a weapon system development project. This official document is the formal notification according to that resolution.
LIG D&A will disobey the disposition and take legal action. An LIG D&A official stated, “We consider it regrettable that an administrative sanction disposition was issued based on the contents of the indictment while legal procedures are underway,” and added, “Our company plans to proceed with legal actions, such as an application for suspension of execution of the sanction disposition and a revocation litigation, to ensure there are no disruptions to our business, and we will faithfully vindicate our position.”
The first turning point is expected to be the court’s judgment on the suspension of execution. If the court cites the application, the effect of the disposition will be halted until the judgment on the merits of the revocation litigation is issued. During this period, LIG D&A can participate in the fulfillment of existing contracts and new bids without restrictions.
In the industry, it is viewed that applications for suspension of execution regarding restrictions on qualification for participation in bidding are typically cited in most cases. An industry official said, “If the court cites the application for suspension of execution, the effect of the restriction on qualification for participation in bidding can be suspended until the judgment of the lawsuit on the merits.”
In response, an LIG D&A official said, “Upon a decision to suspend the effect of the administrative disposition, there will be no impact on our company’s qualification for participation in bidding until the judgment of the ‘revocation litigation of the administrative disposition’.”
Afterwards, the legality of the disposition will be determined in the merits. If a judgment emerges that the disposition is justified, the remaining restriction period will be applied again, and conversely, if LIG D&A’s argument is accepted, the disposition will be canceled.
The direction of the merits is highly likely to interlock with the results of the criminal trial. The Defense Acquisition Program Administration employee who received the bribes was arrested and indicted on charges of bribery under the Act on the Aggravated Punishment of Specific Crimes, and LIG D&A executives were also handed over to trial. LIG D&A is expressing regret over the fact that the disposition was issued before a judicial judgment emerged.
Observations also arise that if the sanction is confirmed, there could be an impact on businesses such as order receipts. LIG D&A’s sales related to the government and public institutions last year amounted to 2.7773 trillion won (about $2.097 billion), reaching 64.5% of the total. Accordingly, the analysis is that if the bidding restriction continues for a long period, it could affect medium-to-long-term order receipts.
Judgments surrounding existing projects also remain. Previously, the Defense Acquisition Program Administration argued that as a result of an internal inspection, LIG D&A won orders for 3 out of 4 projects in which the employee who received bribes participated as a proposal evaluation committee member. The Defense Acquisition Program Administration has previously revealed its position that existing contracts can also be rescinded or terminated if a causal relationship between the criminal act and the order receipts is confirmed.
The KF-21 long-range air-to-air guided missile project, which is facing a contract at the end of the year, is also an interest of the industry. This project, with a scale of approximately 1.9 trillion won, is scheduled for a final contract in December. Accordingly, whether the contract is signed during the restriction period depends on the decision on the suspension of execution.
The Defense Acquisition Program Administration’s concerns are also not small. The domestic guided weapon market is effectively a two-power structure of LIG D&A and Hanwha Aerospace. Hanwha Aerospace is also undergoing an investigation in relation to an explosion accident at its Daejeon worksite in June, so concerns are raised within the industry that it will be difficult to find an alternative business operator if both companies receive restrictions.
An industry official said, “The Defense Acquisition Program Administration will also have great concerns between the level of sanctions and the deployment of military power, worrying that the project schedule itself will be shaken.”