The arms procurement agency hinted Tuesday it could replace LIG Nex1 with Korea Aerospace Industries (KAI) as the preferred bidder for its ongoing spy satellite project.
Last month, the Defense Acquisition Program Administration (DAPA) picked a consortium - led by LIG Nex1, a Seoul-based aerospace and defense products manufacturer - as the preferred bidder for the reconnaissance satellite project.
But according to the administration, Monday, the company asked the agency to lower specifications for the project, shifting from its initial proposal.
"If we fail to narrow differences with the firm, we will proceed with the second preferred bidder (the KAI-led consortium)," DAPA spokesman Kang Hwan-seok told reporters.
Industry sources said LIG Nex1 may be deprived of its status as the preferred bidder.
"KAI has a broad range of experience in manufacturing satellites, having engaged in multiple projects encompassing the projectile development and satellite," an industry source said Tuesday, declining to be named.
The so-called 425 satellite development project is cited as one of the most crucial defense projects, as the satellites will stand at the center of detecting North Korea's movements for missile launches in real time.
With the project having remained deadlocked for four months, calls are growing for the defense ministry to stop wasting more time to settle the security-sensitive project.
The administration and the Agency for Defense Development (ADD), which leads the project, did not unveil the exact timeline to settle the negotiation, with Kang only noting the two organizations will make their utmost efforts to pick the final bidder and deploy the satellites on time.
This February, a lawmaker claimed the ADD gave favorable treatment to LIG Nex1 to win the project.
Rep. Kim Jong-dae from the minor opposition Justice Party said LIG Nex1 requested the state-run defense research facility change 29 out of 129 technological requirements. They include key standards ― such as imaging quality and movement speed, according to the lawmaker.
With Kim taking issue with the project, the defense acquisition administration's supervisory unit has reviewed the details of their negotiations. But as the administration has failed to proceed with the project as planned, concerns are growing about further delays to the project.
The defense ministry earlier said it would deploy the military satellites in 2021 and operate five spy satellites by 2023. The project is worth 1 trillion won ($933 million).