Defense contractor vows to challenge ban as domestic contracts face risks, but overseas deals remain unaffected
LIG D&A faces a major setback to its domestic defense business after South Korea's arms procurement agency imposed a two-year bidding ban over alleged bribery, prompting the company to prepare a legal challenge.
The Defense Acquisition Program Administration said Tuesday that its contract review committee had approved the maximum two-year suspension from government defense procurement bids under the State Contracts Act. The agency cited what it described as its largest bribery case on record, repeated and premeditated cost fraud, and serious damage to national security and public trust.
The sanction follows an investigation by the Suwon District Prosecutors' Office, which found in August that a DAPA official had allegedly received 460 million won ($347,300) in bribes between 2021 and late 2025, including 320 million won in cash and 140 million won through subcontractors.
In exchange, the official allegedly gave LIG D&A favorable evaluations across six defense projects worth a combined 91.5 billion won.
In one project involving intelligent signal detection technology, the official awarded LIG D&A top scores in 16 of 20 evaluation categories while giving competing bidders the lowest possible scores across all categories.
"Bribes and cost fraud directly undermine the transparency and fairness essential to national security," said DAPA Vice Minister Kim Il-dong. "By applying our maximum sanctions, we are sending a clear message to the entire defense industry that corruption will not be tolerated."
The penalty currently covers only one of the six projects under investigation, leaving open the possibility of additional sanctions as DAPA reviews the remaining cases.
LIG D&A challenged the decision, arguing that the sanction was imposed before the courts had ruled on the allegations.
"We regret that the sanction was issued based solely on an indictment while the legal process is still underway," the company said, adding that it would seek a court injunction to suspend the penalty and prevent business disruptions.
An industry source said it was the first time DAPA had imposed such sanctions before a court verdict.
While existing contracts are expected to remain unaffected, the penalty threatens LIG D&A's domestic growth pipeline. Beyond the two-year bidding ban, the company faces three years of penalty points that could put it at a competitive disadvantage for up to five years.
Exports, however, are expected to remain largely insulated.
In a Wednesday report, DS Investment & Securities said the sanction would prevent LIG D&A from securing new domestic defense contracts, typically worth 2 trillion to 3 trillion won annually, but would not apply to overseas deals.
The brokerage said export growth for the company's flagship air defense systems, including the Cheongung-II medium-range surface-to-air missile system and the Long-Range Surface-to-Air Missile system, remained a key earnings driver.
"Additional export opportunities for Cheongung-II in the Middle East still remain valid within this year, while global demand for air defense continues to surge," the report said, citing Australia's interest in acquiring medium-range air defense systems.
hyejin2@heraldcorp.com
