LIG D&A Challenges Two-Year Bid Ban
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 t
Concerns are emerging in the domestic defense procurement market regarding the impact of a two-year bid ban on LIG Defense & Aerospace (LIG D&A). The company received a disposition from the Defense Acquisition Program Administration prohibiting its qualification for bidding for two years, effective from October 29, 2023, to October 28, 2028.
While the immediate business vacuum may not be significant, the medium-to-long-term business structure could change based on future procedures such as criminal trials and administrative reviews of existing contracts.
LIG D&A disclosed the administrative sanction disposition on October 23, noting it received the document on October 22. The restriction period is from October 29, 2023, to October 28, 2028. The company plans to challenge the disposition through legal actions, including an application for suspension of execution and a revocation litigation to ensure business continuity.
The first turning point will be the court's judgment on the suspension of execution. If cited, the effect of the restriction on qualification for participation in bidding can be suspended until the judgment on the merits of the revocation litigation.
LIG D&A argues that the disposition was issued before a judicial judgment emerged and expresses regret over this fact. The Defense Acquisition Program Administration employee who received bribes was arrested and indicted, while LIG D&A executives faced trial. If the disposition is deemed justified, the remaining restriction period will be applied again, or canceled if LIG D&A's argument is accepted. The resolution of the merits is likely to be influenced by the results of the criminal trial.
LIG D&A's government and public institution sales last year amounted to 2.7773 trillion won, representing 64.5% of the total. A long restriction period could impact medium-to-long-term order receipts. The KF-21 long-range air-to-air guided missile project, with a scale of approximately 1.9 trillion won, is scheduled for a final contract in December.
The contract's signing during the restriction period depends on the suspension of execution decision. The domestic guided weapon market primarily consists of LIG D&A and Hanwha Aerospace, raising concerns about alternative business operators if both companies face restrictions.
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