Phase 2 Combatant Radio Project: DAPA Confirms 'Contract-Violating Parts, Erased Markings' and Conducts Security Investigation with NIS... 'Chinese Replacement Parts' Claimed by Contractor

SEOUL

The Defense Acquisition Program Administration (DAPA) stated that components differing from the contract were used in the second project for military combatant radios, and that markings had been erased on some equipment to make the parts unrecognizable. DAPA is investigating security risks in coordination with the National Intelligence Service (NIS). On October 23, the contractor, Insopack Co., Ltd., filed a civil complaint on DAPA's website demanding that sanctions be halted and DAPA's statement be retracted, asserting that the three-year warranty period had concluded without any defects.

In a statement released on September 29 in response to reports that emerged on September 28, DAPA stated that the project had been contracted with Company A in August 2022 and that all deliveries had been completed. The statement referred to the contractor as Company A. In its October 23 petition, Insopack claimed that it is the contractor for that same project and that the statement defames the company.

DAPA: "Verification on September 9 Confirmed Markings Had Been Erased"

According to DAPA's statement, DAPA confirmed the fact that contract-breaching items differing from the contract had been used. When checking some equipment on September 9, markings had been deleted to make it difficult to identify the parts' model names and manufacturers. DAPA stated that the company also acknowledged the use of contract-breaching items in its explanatory and clarification documents submitted on September 17 and 21.

The company claimed it had notified DAPA in advance that it would use substitute parts due to parts procurement difficulties and that DAPA had agreed. DAPA refuted this, stating it is contrary to fact. DAPA stated that to use parts differing from the contract, a written request for modification must be made to the contracting officer and agreed to in writing, but there was neither an official modification request nor written agreement from the company. DAPA also stated that when the Defense Agency for Technology and Quality requested verification of major component manufacturers and countries of origin in December last year, the company replied that it had used the same parts as in the proposal.

On September 22, DAPA requested that the company properly fulfill the contract with the items specified in the contract and reply with a follow-up action plan. DAPA said it subsequently contacted the company to urge action, but as of September 29, there had been no response from the contractor. Emphasizing that violating contract terms and using contract-breaching items is a grave matter that could undermine trust in defense capability improvement projects directly tied to national security, DAPA stated that, after establishing the facts, it will take follow-up measures, including legal action, in accordance with relevant laws and contract procedures.

Contracted in August 2022; Rectification Demanded on September 22, 2026

Arranging the dates listed in the statement reveals the timeline. DAPA signed the contract for the 2nd project with the company in August 2022, and in December 2025, the Defense Agency for Technology and Quality requested verification of key parts' manufacturers and origins. On September 9, 2026, the removal of markings was confirmed on some equipment, followed by two issue discussions on September 14 and 17. The company submitted an explanation document on September 17 and a briefing document on September 21. DAPA demanded rectification and a response regarding follow-up action plans on September 22, and released its position statement on September 29. Insopack posted its civil petition on DAPA's website on October 23. Attached to the petition is the file "Insopack Co., Ltd. Petition Application.pdf".

DAPA: "Continuously Consulting on Action Measures with Army, Air Force, and Marine Corps"

In its statement, DAPA stated that claims alleging the military was excluded from issue discussions are contrary to fact. The Army attended the September 14 issue discussion via video conference, while the Army, Air Force, and Marine Corps attended the September 17 discussion. DAPA said it is continuing consultations on measures with the armed services that use the equipment. The department in charge of the statement is the Tactical Control Communication Project Team under DAPA's Space, Command, and Communications Program Bureau.

Security Issues Under Joint Investigation with NIS

DAPA described the company's claim that "there are no security problems and no backdoors in the Chinese-made substitute components" as a one-sided assertion. DAPA stated that it is conducting a relevant investigation in cooperation with the National Intelligence Service to determine whether the components pose security risks. The phrase DAPA identified as the "company's one-sided claim" was introduced in the statement as content "mentioned in news articles."

National Assembly Defense Committee Cut 3rd Project Budget by Over 18.1 Billion Won in November 2024

The project also appears in the minutes of the National Assembly's National Defense Committee. At the 6th meeting of the National Defense Committee during the 418th National Assembly (regular session) on November 15, 2024, Representative Kang Dae-sik, chairman of the Budget and Accounts Review Subcommittee, reported the results of the review of the fiscal year 2025 budget proposal under DAPA's jurisdiction. Chairman Kang reported that while 18.2 billion won had been allocated for asset acquisition costs to sign and deliver contracts for the 3rd combatant radio project, security-related review items arose during the project's progress, making a contract signing in 2025 uncertain, leading to a cut of 18.139 billion won excluding costs for proposal evaluations and related tasks. The committee approved the 2025 budget proposal as amended by the subcommittee report, leaving the remainder as originally drafted by the government.

Sanctions on Improper Business Entities Governed by Article 27 of the State Contract Act

Article 27, Paragraph 1 of the Act on Contracts to Which the State Is a Party (State Contract Act) provides that the head of each central administrative agency must restrict eligibility to participate in bidding for an improper business entity for up to two years as prescribed by Presidential Decree, and must immediately notify other heads of central administrative agencies. The heads of other central administrative agencies who receive the notice must also restrict that entity's eligibility to participate in bidding. The law published on the National Law Information Center is the version enforced on June 11, 2026 (Act No. 21418, partially amended on March 10, 2026).

Targets for sanctions are set out in each subparagraph of Paragraph 1. Subparagraph 1 specifies "a person who has performed a contract in a substandard, crude, or improper manner, or engaged in fraudulent acts." Subparagraph 9 lists persons prescribed by Presidential Decree, such as "a person who is feared to impede the fair execution of competition, such as forging or altering bid- or contract-related documents or obstructing bids or contracts" (item a) and "a person who is feared to undermine the proper performance of a contract by failing to perform or obstructing acts related to the execution or performance of a contract without justifiable grounds" (item b). Paragraph 3 prohibits entering into private contracts with restricted entities, except in unavoidable circumstances such as the absence of other suitable manufacturers. Paragraph 4 specifies that restrictions on bid participation eligibility cannot be imposed after five years have elapsed from the time the act concluded, and Paragraph 5 requires details of restrictions to be made public.

DAPA's statement described follow-up measures as "stern follow-up measures including legal actions in accordance with relevant laws and contract procedures." The statement did not separately specify the clauses to be applied.

United States Revised China-Related Procurement and Export Regulations in 2025–2026

The U.S. Congress, the U.S. Department of War, and the U.S. Department of Commerce revised restrictions on Chinese companies and Chinese products between 2025 and 2026. Relevant regulations are as follows:

Section 850 of the National Defense Authorization Act for Fiscal Year 2026 (Public Law 119-60), signed into law on December 18, 2025, prohibited the Secretary of War from acquiring computers and printers for which a "Chinese entity" is the manufacturer or bidder. The acquisition percentage subject to this prohibition is phased in: 10% in FY2026, 25% in FY2027, 50% in FY2028, and 100% in FY2029. This provision applies to contracts entered into, renewed, or extended after the enactment of the law.

Section 805 of the National Defense Authorization Act for Fiscal Year 2024 (Public Law 118-31), enacted on December 22, 2023, prohibited the Secretary of War from entering into, renewing, or extending contracts with Chinese military companies on the Department of War's Section 1260H list. The effective date is June 30, 2026. The prohibition on contracts that include goods or services produced by listed companies applies starting June 30, 2027. Subsection (a)(3)(C) of the same section states that this prohibition does not apply to components. Section 845 of the National Defense Authorization Act for Fiscal Year 2026 added prohibitions on grants, loans, and loan guarantees to this Section 805.

The U.S. Department of War released an updated Section 1260H list on June 8, 2026. The list included 188 entities. The Federal Register published this list on June 10 (91 FR 35189).

The Federal Acquisition Regulation (FAR) amendment published in the Federal Register on February 17, 2026 (FAR Case 2023-008, 91 FR 7223) implements Section 5949 of the National Defense Authorization Act for Fiscal Year 2023. Starting December 23, 2027, it prohibits federal agencies from procuring electronic products containing certain semiconductor products or services.

The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce published a rule in the Federal Register on September 30, 2025 (90 FR 47201) automatically applying the same restrictions to entities owned 50% or more by entities on the Entity List. In the Federal Register on November 12, 2025 (90 FR 50857), BIS announced a one-year suspension of this rule from November 10, 2025, to November 9, 2026.

Presumably, the tightening of U.S. regulations on Chinese-made components and companies may serve as the background for DAPA scrutinizing the country of origin and security risks of substitute parts.

The entities governed by these documents are the U.S. Secretary of War, federal executive agencies, and the U.S. Department of Commerce. The measures pursued by DAPA are directed against a contractor. In its statement, DAPA declared that it demanded the company fulfill the contract with the items specified therein and that it would take follow-up measures, including legal action. The company claimed in its petition that DAPA is pursuing sanctions against it as an improper business entity.

DAPA stated that the current actions are legitimate follow-up measures resulting from the confirmation of violations of contract terms.

Contractor: "Three-Year Warranty Concluded Defect-Free"

In its petition, Insopack stated that DAPA placed the order in June 2021, deliveries were completed in July 2023, and the three-year warranty period concluded without defects in July 2026. It noted that the equipment is currently in operational use across field units. The number of delivered units is redacted as "00,000 units" in the publicly released version of the petition.

The company argued that DAPA judged the component modification to be a breach of contract without giving adequate consideration to past developments, such as pre-contract discussions regarding component supply issues and post-contract approval of the project management plan. The company also explained that DAPA is demanding restoration to original condition and pursuing sanctions against it as an improper business entity on grounds of submitting fraudulent documents. Insopack wrote in its petition that it used components with equivalent or superior performance, and that legitimate contract performance and normal business activities should not be deemed misconduct without thorough factual verification.

The petition made three requests: first, to re-examine whether there was a breach of contract and submission of false documents by comprehensively taking into account pre-contract discussions, the approval process of the project management plan, and the contract terms of the procurement project, and to suspend sanctions on the improper business entity until then; second, to examine whether demanding restoration to original condition for equipment operating with equivalent or superior components is contractually and technically reasonable; and third, to either delete the statement or revise it to reflect the facts. The company added that DAPA's administrative determination could severely impact not only the survival of an individual enterprise but also trust in and development of the domestic defense industry.

DAPA stated that interpretations claiming an attempt to exclude the 2nd project contractor from the 3rd project to favor a specific firm, along with allegations of improper external interference such as "pushing for a third party," are not true. DAPA said it would take action "fairly and strictly in accordance with law and principles, without being swayed by any external factors."

Sources (KST)

• Defense Acquisition Program Administration (DAPA) statement, "We will sternly respond to defense contractor's breach of contract" (September 29, 2026): https://www.dapa.go.kr/jfile/board/readDownloadFile.do?fileNum=2&fileType=WT_CMS_DOC&fileTypeSeq=59219
• Civil petition posted on Defense Acquisition Program Administration (DAPA) website, "Request to halt DAPA's unjust pursuit of sanctions and delete statement regarding the 2nd procurement project for combatant radios" (Insopack Co., Ltd., October 23, 2026): https://www.dapa.go.kr/dapa/doc/selectDoc.do?bbsSeq=326&docSeq=59350&menuSeq=3069
• Minutes of the 6th National Defense Committee meeting of the 418th National Assembly (November 15, 2024): https://record.assembly.go.kr/assembly/viewer/minutes/download/pdf.do?id=52395
• Act on Contracts to Which the State Is a Party, Article 27 (Enforced June 11, 2026, Act No. 21418), National Law Information Center: https://www.law.go.kr/LSW/lsLawLinkInfo.do?chrClsCd=010202&lsId=000695&lsJoLnkSeq=900041736&print=print
• National Defense Authorization Act for Fiscal Year 2026, Public Law 119-60 (December 18, 2025), Sections 845 and 850: https://www.congress.gov/119/plaws/publ60/PLAW-119publ60.htm
• National Defense Authorization Act for Fiscal Year 2024, Public Law 118-31 (December 22, 2023), Section 805: https://www.govinfo.gov/content/pkg/PLAW-118publ31/html/PLAW-118publ31.htm
• U.S. Department of War Section 1260H List Release (June 8, 2026): https://www.war.gov/News/Releases/Release/Article/4511232/dow-releases-list-of-chinese-military-companies-in-accordance-with-section-1260/
• Federal Register 91 FR 35189 (June 10, 2026): https://www.federalregister.gov/documents/2026/06/10/2026-11571/notice-of-availability-of-designation-of-chinese-military-companies
• Federal Register 91 FR 7223, FAR Proposed Rule (February 17, 2026): https://www.federalregister.gov/documents/2026/02/17/2026-03065/federal-acquisition-regulation-prohibition-on-certain-semiconductor-products-and-services
• Federal Register 90 FR 47201 (September 30, 2025): https://www.federalregister.gov/documents/2025/09/30/2025-19001/expansion-of-end-user-controls-to-cover-affiliates-of-certain-listed-entities
• Federal Register 90 FR 50857 (November 12, 2025): https://www.federalregister.gov/documents/2025/11/12/2025-19846/one-year-suspension-of-expansion-of-end-user-controls-for-affiliates-of-certain-listed-entities