Revised Defense Industry Development Act to Be Promulgated This Month, Easing Participation Burdens for SMEs

The Defense Acquisition Program Administration (DAPA) announced today (July 1) that the amendment to the Act on the Development of and Support for the Defense Industry, designed to ease the burden on small and medium-sized enterprises (SMEs) and venture firms participating in the defense sector, will be promulgated this month.

The amendment, which passed the plenary session of the National Assembly on June 18 and was approved at a Cabinet meeting on June 30, establishes a legal basis to partially compensate SMEs and venture firms for costs incurred during test evaluations for procurement projects or participation in defense industry promotion projects.

DAPA explained that until now, SMEs and venture firms had to bear these costs themselves, and the inability to recover investment costs—especially when not selected as the final contractor—had been a factor discouraging them from entering the defense industry.

Accordingly, the amendment provides a basis for partial cost compensation in cases where a company receives a "suitable for combat use" rating in domestic procurement project test evaluations but is not selected as the contractor, or meets the passing criteria in defense industry promotion project evaluations but is not ultimately selected.

The revised Defense Industry Development Act will take effect in the first quarter of next year. DAPA plans to determine specific details, such as the scope, criteria, and procedures for cost compensation, through a public notice in the second half of this year.

DAPA Commissioner Lee Yong-cheol stated, "This legal amendment is a practical support measure to lower entry barriers and alleviate cost burdens faced by SMEs and venture firms in the defense industry."

Meanwhile, DAPA has revised relevant guidelines to resolve the issue where domestic procurement companies participating in defense bids lose the remaining validity period when renewing item registrations in the Defense Integrated Procurement System before the expiration date.

Previously, when renewing item registrations, the remaining validity period would disappear and a new validity period would be applied, leading to criticism that companies that completed the renewal process early were actually being penalized.

The revised Guidelines for Management of Procurement Source Registration Information, which takes effect today, changes this system so that the new validity period for item registration renewals begins the day after the existing expiration date.

(Photo: Courtesy of DAPA, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.