“Largest bribe since its establishment” ... DAPA slaps LIG D&A with its harshest penalty: a two-year bidding ban

[Financial News] LIG Defense & Aerospace (hereafter LIG D&A, formerly LIG Nex1), a major defense contractor suspected of providing bribes worth hundreds of millions of won to a Defense Acquisition Program Administration (DAPA) employee during a weapons-development bidding process, has been hit with the harshest sanction: a two-year ban on participating in bids. A major new contract worth trillions of won is now at risk, with significant repercussions expected across the defense industry.

On the afternoon of the 20th, DAPA convened the Defense Acquisition Program Contract Deliberation Committee at the Government Complex in Gwacheon and deliberated and approved the above sanction against LIG D&A as an improper business entity.
The measure follows the bribery case involving a DAPA fifth-grade civil servant, identified as A, announced by prosecutors last August. A was indicted and detained on charges of taking money and benefits worth around 460 million won through sham service contracts and other means in return for biased evaluations, including awarding LIG D&A the highest scores in proposal evaluations for six defense projects worth a total of 91.5 billion won from 2021 to 2025.

The committee also reviewed improper cost-calculation practices in connection with the case. DAPA Deputy Commissioner Kim Il-dong, who chaired the committee, said, “The largest bribe since DAPA was established, along with deliberate cost fraud carried out over an extended period, undermines trust in the defense acquisition sector as a whole.” He added, “To raise awareness throughout the defense industry, we have strictly applied the zero-tolerance principle and decided on a two-year bidding ban, the harshest penalty under the State Contracts Act.”

The sanction takes effect five business days after LIG D&A is notified, after which the company cannot participate in new bids by DAPA or public institutions. The project immediately at risk is the KRW 1.9 trillion Korean Fighter (KAI KF-21 Boramae) Long-Range Air-to-Air Missile Program, whose final contract is due in December. LIG D&A and Hyundai Rotem are ranked first for the project, but if the sanction takes effect, whether the final contract will be awarded becomes uncertain, raising the possibility of delays or a reshuffling of the field.
In principle, however, contracts already signed are not subject to termination. In the case of the Korean electronic warfare aircraft system development program, signed last year for KRW 1.5593 trillion, prosecutors view some projects that A unfairly evaluated as foundational core technologies. If a causal link between the alleged crime and the main program is established, that could become grounds for terminating the contract.

LIG D&A immediately pushed back against DAPA’s hard-line measure. In a statement, the company said it “regrets that a sanction was imposed solely on the basis of the prosecution’s indictment while legal proceedings are ongoing,” and announced it would take all legal measures, including seeking an injunction to suspend enforcement, to prevent disruption to the project.


[email protected] Park Ji-hyun Reporter