17 March 2016
by Chris Johnson
South Korea 'very much disappointed' with Australia over Defence contracts
South Korean army soldiers stand on their K-55 self-propelled howitzers during exercises near the North Korean border.
The Australian government has outraged South Korea by awarding a $1 billion plus Defence supply ships contract to a Spanish company, despite the Asian nation believing it would be the preferred partner.
A specially convened Senate estimates hearing on the Defence white paper will be conducted Thursday afternoon. The Blue House (Korea's White House) will be closely watching the proceedings.
Last week the Defence Capability and Acquisition Group notified the Korean embassy that Spanish Navantia had been selected as the preferred contractor for the SEA 1654 program for replenishment ships.
Korea's Daewoo Shipbuilding and Marine Engineering (DSME) had hoped to secure the contract and believed it was the frontrunner because former prime minister Tony Abbott pushed for their involvement.
This appeared as a result of Australian governments reneging on a previous high level handshake "deal" over the supply of Korean mobile land artillery (self-propelled howitzers).
"A handshake in Korea means a contract is entered into," said one well-placed Korean source.
"Korea had been selected as the preferred solution for the land artillery acquisition by the Australian Defence Force, but the Australian government abruptly cancelled that program citing budgetary problems.
"Tony Abbott subsequently heavily pushed the supply ships contract as some sort of consolation, but a decision has now apparently been made against DSME."
A spokesman for the Korean Embassy in Canberra expressed disappointment over both contracts.
"We were disappointed when Australian government cancelled the purchasement of self-propelled howitzer from Korea," he said.
"And again we are very much disappointed given the high quality and good prices of the Korean ships and Korea's track record of co-operating with foreign countries including UK, Norway and New Zealand."
Another Korean source said the country feels harshly done by.
"It is now a matter of maintaining face," the contact said.
"The feeling in Seoul is that if the Australian government can't properly review the Defence materiel decision, then the National Assembly in Korea will review how it deals with Australia into the future."
A spokesman for Defence Minister Marise Payne said the minister was not involved in the assessment process nor was she the decision maker.
"The SEA 1654 Phase 3 - Maritime Operational Support Capability Project seeks to replace both HMAS Success and HMAS Sirius with a single class of two Auxiliary Oiler Replenishment Ships to sustain deployed maritime forces," he said.
"In June 2014, the government announced First Pass approval for Defence to conduct a limited competitive tender process between Navantia of Spain and Daewoo Shipbuilding and Marine Engineering of South Korea for the offshore construction of two identical replacement replenishment vessels based on existing designs.
"Defence has selected Navantia S.A. as the SEA 1654 Phase 3 preferred tenderer to proceed to Offer Definition and Improvement Activity (ODIA) and negotiations.
"The tender process has been conducted by Defence in accordance with standard procurement processes and appropriate probity oversight. The tender process is ongoing and following the conduct of ODIA and negotiations, Defence will return to government for consideration of Second Pass approval, likely in mid-2016."