2023 year-end business report Creation of R&D environment
Director of the DAPA “Enactment as soon as possible in consultation with related ministries”
President Yoon Seok-yeol and defense industry employees are taking commemorative photos in front of the multi-purpose unmanned vehicle Arion Smet and K9 self-propelled artillery in November of last year. President’s Photo Correspondents
As the government announced that it would create a challenging defense research and development (R&D) environment in order to become one of the world’s four largest defense exporters by 2027, the enactment of the Defense Contract Act is also expected to speed up.
Previously, the Ministry of National Defense strengthened pan-governmental support to effectively respond to the needs of purchasing countries, strengthened post-sales to promote additional purchases, and created a challenging defense R&D environment in order to leap forward to become one of the world’s four largest defense exporters in the ‘2023 Annual Report’ on the 11th. He said he would implement a systematic export strategy.
Regulations on the defense industry will also be eased. In order to promote advanced weapon system research, it was announced that it would improve the system for determining the successful bidder considering quality and performance, not the lowest price, and reduction of delay compensation when sincere performance is recognized.
The government and the National Assembly are also pushing for reform of the legal system to enable reduction of delay compensation or contract change. Last year, 29 members of the National Assembly of the ruling and opposition parties jointly proposed the Defense Acquisition Contract Act, and the Defense Acquisition Program Administration is also pushing for an institutional advancement plan centered on the Defense Acquisition Contract Act, which includes contents such as lowering the upper limit on compensation for delay and avoiding the lowest bid system.
The current state contract laws and regulations have been criticized for not fully reflecting the characteristics of defense projects, although there is no problem with simple procurement projects. It is said that excessive delay compensation and costs due to lawsuits hinder companies’ desire to innovate in R&D.
The Dosan An Chang-ho submarine was the world’s eighth submarine successfully built in Korea, but it was delayed by 110 days, which is equivalent to 1% of the total development period of 15 years, and paid 95.9 billion won in compensation for delay.
However, it is known that the Ministry of Strategy and Finance and others are arguing that the basic principles of state contracts, such as fairness and good faith, may be damaged due to excessive relaxation of contract standards and possession of corruption in the defense industry.
Eom Dong-hwan, head of the DAPA, said, “Since the current state contract law is a contract law that specializes in simple manufacturing and purchasing, construction, and civil engineering, there are some insufficient parts and limitations to apply to the national defense capability improvement project that conducts advanced technology and challenging R&D.” “Since the (Defense Contract Act) bill is currently being proposed in the National Assembly, we will faithfully consult with the relevant ministries and make efforts to enact it as soon as possible,” he said.