1. Case Overview

The plaintiff entered into a procurement (manufacturing) contract with DAPA for six radar component items valued at approximately KRW 1.75 billion and successfully delivered five of the six contracted items.
However, the plaintiff was unable to deliver one component intended for a console and radar set because it could not obtain the embedded software required to be installed in the product.

DAPA not only forfeited approximately KRW 32 million in contract security corresponding to a 55% non-performance rate, but also imposed a five-month debarment pursuant to Article 27(1)9(b) of the National Contract Act.
One Law Partners, LLC subsequently filed a lawsuit on behalf of the plaintiff seeking revocation of the debarment order.
 

2. Key Issues

The principal issues were:

• Whether responsibility for the failure to obtain the embedded software, which was essential for contractual performance, rested with DAPA as the contracting authority or with the plaintiff as the contractor; and

• Whether the plaintiff's non-performance constituted conduct falling within the category of a party 'likely to impair proper contract performance without justifiable cause' under Article 27(1)9(b) of the National Contract Act.

3. Legal Strategy

· Demonstrating That the Drawings Expressly Indicated the Software Was Already Installed

The defense established that the technical drawings provided with the tender documents expressly stated in the remarks section that the software was 'installed.'
Based on the ordinary meaning of the term 'installed,' the plaintiff reasonably understood that the software had already been incorporated and would therefore be available through the contracting authority.
 

· Establishing DAPA's Own Acknowledgment of Its Responsibility

The defense highlighted communications in which DAPA responded to the plaintiff's requests for technical materials by stating that it was coordinating with the system contractor and would provide information once obtained.
The defense also noted that DAPA did not immediately terminate the contract following the delivery deadline, but instead continued to request performance on the assumption that contract completion remained possible.
These circumstances demonstrated that DAPA itself understood that it bore responsibility for providing the relevant software.
 

· Proving the Practical Impossibility of Obtaining the Software

The embedded software constituted a military support system security asset originally developed and owned by a third-party company around 2002.
The defense established through software product specifications, checksum analyses, and DAPA's own defense specification guidelines that the plaintiff could neither purchase the software from a third party nor independently develop a substitute version.

· Demonstrating DAPA's Regulatory Obligation to Provide the Software
Relying on DAPA regulations, standard contract provisions for weapons-system development projects, and government procurement guidelines, the defense argued that software developed with public funds should belong to the State and that DAPA had a corresponding obligation to provide such materials to the contractor when necessary for performance.

· Clarifying the Legal Nature of the Tender Notice
The defense argued that a tender notice constitutes merely an invitation to make an offer, rather than contractual terms themselves, citing Supreme Court precedent.
Accordingly, statements contained in the tender notice regarding the availability of materials at a "commercially obtainable level" did not become contractual obligations binding upon the contractor.
The defense further established that the agreement was a work contract rather than a simple sales transaction, relying on provisions addressing price-adjustment mechanisms.

· Invoking the Principles of Protection of Legitimate Expectations and Proportionality
The defense argued that the plaintiff reasonably relied upon DAPA's representations and that such reliance deserved protection under the Framework Act on Administrative Affairs.
The attorneys further contended that DAPA abused its discretion by imposing the most severe sanction available even though less restrictive alternatives, including an administrative surcharge, were available under the National Contract Act.
 

4. Significance of the Decision

The court accepted the plaintiff's arguments and found that:

1. The drawings expressly referred to the software as 'installed,' making it reasonable for the plaintiff to believe that DAPA would provide access to it;

2. Even DAPA itself was unable to obtain the software due to the non-cooperation of the original software developer;

3. The software developer failed to respond to the court's requests for information, further demonstrating that the plaintiff could not realistically have obtained the software;

4. The tender documentation concerned only certain radar hardware, while the software was neither reflected in the contract price nor included in the delivery schedule;

5. The plaintiff successfully delivered all five remaining contract items and repeatedly requested the necessary materials in an effort to perform the contract.

Based on these findings, the court concluded that the plaintiff could not be regarded as a party 'likely to impair proper contract performance without justifiable cause.'
Accordingly, the court held that the legal grounds for the debarment order did not exist and revoked the administrative disposition in its entirety.

This decision is significant because it clarifies that, in defense procurement projects, responsibility for providing essential technical materials, particularly embedded software, generally rests with the contracting authority.
The ruling further confirms that broad disclaimer language included in tender notices cannot automatically transfer all contractual risks to defense contractors.

As such, the decision is expected to serve as an important precedent concerning the contracting authority's obligation to provide technical materials and the meaning of “justifiable cause” in debarment proceedings involving defense industry contractors.
 

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Attorney Jeong‑woo Kang | jwkang@onelawpartners.com
Attorney Jeong‑pyo Ko | jpgoh@onelawpartners.com
 

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Public Relations Team, One Law Partners, LLC | pr@onelawpartners.com