As the Defense Acquisition Program Administration decided to restrict LIG Defense & Aerospace (D&A), which was accused of bribery and cost fraud, from participating in bidding for two years, the company's new orders were put on notice.
LIG D&A's position is that it will take legal action, including applying for a suspension of execution, in defiance of the sanctions.
The Defense Acquisition Program Administration held a Defense Contract Deliberation Committee meeting on the 20th and announced that it had decided to restrict LIG's bid participation eligibility for 24 months, the highest level under the National Contract Act. This is a follow-up measure to the LIG bribery and cost fraud case announced by the prosecution last August.
Some in the defense industry discussed the possibility of imposing fines, but the DAPA decided to impose strong sanctions that would restrict bidding for two years.
LIG D&A is suspected of providing bribes exceeding 300 million won to DAPA employees. The DAPA explained that it took into account the largest amount of bribes since the agency was opened in 2006 and planned misconduct over a long period of time.
In response, LIG D&A said, "We regret imposing sanctions based solely on the facts of the indictment while legal procedures are in progress," and added, "We will apply for suspension of execution and take all measures to ensure that there are no disruptions to our business."
The prosecution believes that LIG D&A officials received orders for the 'Korean electronics and electric' core technology project worth 1.7 trillion won based on evaluation manipulation.
In the past, the DAPA has imposed restrictions on bid participation in all 27 cases of sanctions against illegal operators related to bribery.
Due to these sanctions, LIG D&A is expected to face significant restrictions in winning new defense business orders during the limited period.
There is also speculation that it may affect the KF-21 long-range air-to-air guided missile development project, which is scheduled to be signed at the end of this year. LIG D&A ranked first in proposal evaluation in the system integration field, which is the core of this project.
There are also concerns that there may be setbacks in military deployment in areas where LIG D&A has strengths, such as precision-guided weapons.
However, there is also a view that the impact of these sanctions on the overall K-defense industry will be limited. Existing contracts are not automatically terminated, and it does not directly apply to overseas export contracts. If the court accepts the application for suspension of execution, the effect of the bidding restriction will be suspended and participation in new projects may become possible.
Some in the defense industry say that the DAPA had no choice but to respond in principle to the serious allegations of bribery.
If sanctions are prolonged, the burden on LIG D&A's mid- to long-term performance is expected to increase due to a decrease in new orders. Although LIG D&A is expanding its exports, its domestic sales still account for four times its overseas sales.
The possibility of additional sanctions remains. The prosecution investigated six defense projects related to bribery charges, including a small unmanned aerial vehicle response system. This disposition is related to the small unmanned aerial vehicle response system project under the National Contract Act, and there is a possibility that additional sanctions will be imposed on the remaining projects.
LIG D&A is expected to take legal action, including a lawsuit to cancel sanctions and an application for suspension of execution. LIG D&A previously took legal action after being restricted from bidding for three months in connection with a test report forgery and falsification case in 2017.
On the 19th, a day before the decision on sanctions, LIG D&A announced that it would establish a compliance audit office and strengthen the system to constantly check compliance with laws and internal regulations.
