122.3 Billion Won Counter-Drone Project Puts LIG D&A’s Defense Contractor Status Under Review

Key Facts

South Korea’s Defense Acquisition Program Administration asked the Ministry of Trade, Industry and Resources to review revoking LIG D&A’s designation as a defense contractor for a project to build a system to counter small unmanned aircraft, the agency said on October 25. The request follows an earlier penalty imposed on the company over suspected bribery in bids to develop weapons. The designation has not yet been revoked; the matter concerns the agency’s request for a review. The agency said it had asked the ministry to “review revoking LIG D&A’s designation as a defense contractor” in connection with the program. The measure matters because of the designation’s effect on how the project contract is awarded, not because it announces a revocation already in force.

The project aims to acquire jamming devices and control units capable of disabling small unmanned aircraft, and has a total cost of 122.3 billion won. The equipment is based on “soft kill” methods, including signal jamming, to disable aircraft without necessarily destroying them. That scope puts the project at the center of the review, because defense contractor status enables the company to secure a direct contract to produce the system in quantity. If the designation is revoked, the company would lose this project-specific direct contracting route. The pending review request does not mean the contract or designation has been revoked.

The designation review is separate from the earlier penalty related to bids. The agency imposed a two-year restriction on LIG D&A’s eligibility to participate in bids after suspecting that a company official had bribed a government employee during several weapons-development bidding processes. The processes included, according to the report, bids related to the small unmanned aircraft countermeasure program. But bidding restrictions do not in themselves bar direct contracts based on the designation of defense materials and defense contractors. The system allows designated contractors to enter into direct contracts for systems that are difficult to secure reliably through ordinary market competition. Revoking the designation, if decided, could therefore add a project restriction beyond the bidding penalty alone.

The agency is also reviewing whether to revoke the company’s certification for its defense cost management system over cost violations. If the certification is revoked, the agency intends to recover additional incentive payments previously made, set at 1%. The report estimated that the amount to be recovered could reach tens of billions of won. This review is separate from the request to revoke defense contractor status, although both concern the agency’s actions toward the company. The report did not specify when a decision on either review would be issued. The next step is a ministry decision on the designation request, alongside the agency’s decisions on the defense cost certification and recovery of the incentive.