(Seoul = Yonhap News) Reporter Kim Hyo-jeong = The Defense Acquisition Program Administration imposed sanctions on LIG Defense & Aerospace (hereinafter referred to as LIG D&A), which is suspected of paying hundreds of millions of won in bribes to DAPA employees during the weapons development bidding process, restricting its bid participation for two years.
As LIG D&A, a major defense company that has produced many of the military's core weapon systems, including precision-guided weapons, is subject to severe sanctions, repercussions are expected in the defense industry as well.
The DAPA announced on the 20th that it held the Defense Contract Deliberation Committee (hereinafter referred to as the Committee) at the Gwacheon Government Complex and deliberated and decided on sanctions against LIG D&A.
The DAPA explained that the committee decided on the level of sanctions in consideration of the following factors: ▲ the largest amount of bribe since the DAPA was opened; ▲ long-term planned misconduct such as cost fraud; ▲ the negative impact of such misconduct on national security and trust in the defense industry as a whole.
The 'Act on Contracts to which the State is a Party' (National Contract Act) stipulates that when a bid participant or contract counterparty in a contract with the state or public institution commits an illegal act in the process of bidding, contract conclusion, or contract performance, he or she is an 'unfair business operator' and is prohibited from participating in the bidding for a certain period of time.
In particular, Article 27 of the National Contract Act stipulates that unfair business operators may be restricted from participating in bidding for up to two years. The sanctions imposed on LIG D&A this time correspond to the highest level of sanctions.
An official belonging to the Defense Acquisition Program Administration was arrested and indicted last July on charges of receiving bribes worth 460 million won from executives and employees of defense companies such as LIG D&A during the weapons development bidding process (bribery under the Aggravated Punishment Act for Specific Crimes).
The DAPA previously announced that if bribery worth 460 million won is confirmed, LIG D&A may be subject to a two-year ban on participation in bidding under the Defense Acquisition Program Act or the National Contract Act.
In this review, the DAPA reviewed bribery practices as well as fraudulent cost estimation practices that occurred during the contract process between LIG D&A and the DAPA.
Bribery and cost fraud may each be subject to separate sanctions.
The restrictions on bid participation were two years for the bribery case and six months for the cost fraud case, but it was reported that the final level was set at two years in accordance with the regulations to select the highest level of sanctions.
DAPA explained the deliberation process by saying, "After listening to the explanation and statements of the company in question with the participation of a number of civilian members, we comprehensively looked at the illegality of the misconduct and the impact the sanctions would have on future defense projects, and held in-depth discussions on the method and level of sanctions, including restrictions on bid participation qualifications and imposition of fines."
The mention of 'the impact on future defense projects' is interpreted to mean that the impact on the military's planned weapon system deployment and core technology research was also taken into consideration.
In a meeting with reporters last August, DAPA Commissioner Lee Yong-cheol mentioned that Hanwha Aerospace, whose business area overlaps with LIG D&A, is also under investigation for a fire accident at its Daejeon plant, and said, "If sanctions restricting participation in bidding are applied to both companies, the government's projects will have no choice but to be postponed or make overseas purchases," adding, "We cannot help but take comprehensive consideration."
Despite these circumstances, it appears that the DAPA ultimately decided to impose high-intensity sanctions due to the scale of the bribe and the seriousness of the case.
Kim Il-dong, deputy director of the Defense Acquisition Program Administration (chairman of the committee), said, "Through this highest level of sanctions, we will raise awareness throughout the defense industry and continue to thoroughly apply the zero-tolerance principle to corruption in defense projects."
LIG D&A said, "We regret imposing sanctions based solely on the facts of the indictment while legal procedures are in progress," and announced that it would file an application for suspension of execution in protest of the decision.
