LIG D&A sanctions threaten $92 million counterdrone project

Korea’s 122.3 billion won ($92.3 million) counterdrone project faces uncertainty because LIG D&A, the system’s developer, has been hit with a two-year bidding ban and is now the target of a government move to revoke its status as a designated defense contractor.

The news sent shares of LIG D&A down 9.78 percent from the previous close to 429,000 won as of 3:30 p.m. Monday on the Korea Exchange.

LIG D&A said it will argue its case against the government’s move to revoke its status. “We express deep regret that such sanctions are being discussed based solely on the indictment, even though legal proceedings to establish the facts are still underway,” the company said in a statement Monday. “We will faithfully explain our position through the established procedures.”

Both measures stem from the indictment of a company executive on charges of bribing a Defense Acquisition Program Administration (DAPA) official to secure favorable evaluations in weapons development bids.

DAPA has asked the Ministry of Trade, Industry and Resources to review whether to take away LIG D&A's designated contractor status. The ministry will decide after a hearing and notify DAPA of the outcome.

A designated contractor can be awarded a government weapons contract directly, without competing in an open tender, when the government judges that the weapon would be difficult to obtain reliably through competition.

LIG D&A holds that status for a project to build systems that neutralize small enemy drones using jammers and control devices that disrupt the drones' radio signals. The company completed 24.4 billion won development phase earlier this year and has been pursuing the follow-on mass production contract.

The bidding ban was imposed by DAPA on Tuesday. It bars LIG D&A from competing in open tenders for new defense contracts for 24 months starting Thursday, the maximum allowed under the relevant law. The company on Oct. 22 asked a court to suspend the ban and filed a lawsuit seeking its cancellation.

The bidding ban alone does not necessarily block the mass production contract, because the company, as the designated contractor, can sign it directly without a tender. Revoking the designation would close that route.

The company also called the bidding ban and the move to revoke its designation measures “that risk causing irreparable damage.”

The company may face another penalty. DAPA is considering withdrawing a certification that recognizes LIG D&A's accounting of weapons production costs as reliable, citing irregularities in how the company calculated those costs. If the certification is withdrawn, DAPA plans to seek the return of incentive profit already paid to the company.

The case dates back to July, when a DAPA official was arrested and indicted on charges of receiving 460 million won in bribes from executives and employees of LIG D&A and other contractors.

BY KIM MIN-YOUNG [[email protected]]