By Jun Ji-hye
The government is ready to ditch BAE Systems for Lockheed Martin on the Air Force project to upgrade its KF-16 fleet, according to military and procurement sources, Thursday.
They said that as manufacturer of the F-16 jets, Lockheed has told the Defense Acquisition Program Administration (DAPA) it would do the upgrade within the proposed budget.
"Lockheed Martin recently lowered its offer from when it lost the bid to the U.K.-based defense contractor two years ago," a source said.
"If Lockheed can actually implement the upgrade on the given budget, there is no need to reject it."
BAE had offered a 1.75 trillion won deal and was chosen over the U.S. defense contractor in July 2012.
The U.S. government agreed to provide its foreign military sale (FMS) guarantee for the multinational company, which has a significant U.S. presence.
In May, it began working on the first two jets at its facility in Fort Worth, Texas, and was scheduled to finish work by 2019.
DAPA was asked in August by the U.S. to pay 800 billion won more — 500 billion won to the U.S. government and 300 billion won to BAE.
DAPA said the move was a breach of contract.
The military procurement agency said Thursday that it told BAE, through the U.S. government, to suspend the program tentatively.
"The government decided that it had better not progress with the project, given the current situation," said DAPA spokesman Col. Kim Si-cheol. "We told the U.S. side that we are reviewing various options including cancelation of the contract if BAE refuses to accept Seoul's position that the project should proceed on the agreed budget."
The Pentagon's Defense Security Cooperation Agency (DSCA) also announced through its website that the U.S. government notified BAE that "it would terminate for convenience a contract with BAE for initial development and long lead production in support of the ROK KF-16 fighter aircraft upgrade."
Kim said the announcement meant that the DSCA had suspended BAE's work and was calculating how much the company had spent so far on the project, but this did not mean the contract was canceled.
"The deal has yet to be canceled. It is still alive and negotiations to resolve the problem are ongoing," he said.
Asked who would pay the company's expenses if the deal was eventually canceled, Kim said the two governments were discussing the matter.
Reuters news agency quoted unidentified sources as saying that preliminary talks between South Korea and Lockheed would begin on Thursday.
The government is ready to ditch BAE Systems for Lockheed Martin on the Air Force project to upgrade its KF-16 fleet, according to military and procurement sources, Thursday.
They said that as manufacturer of the F-16 jets, Lockheed has told the Defense Acquisition Program Administration (DAPA) it would do the upgrade within the proposed budget.
"Lockheed Martin recently lowered its offer from when it lost the bid to the U.K.-based defense contractor two years ago," a source said.
"If Lockheed can actually implement the upgrade on the given budget, there is no need to reject it."
BAE had offered a 1.75 trillion won deal and was chosen over the U.S. defense contractor in July 2012.
The U.S. government agreed to provide its foreign military sale (FMS) guarantee for the multinational company, which has a significant U.S. presence.
In May, it began working on the first two jets at its facility in Fort Worth, Texas, and was scheduled to finish work by 2019.
DAPA was asked in August by the U.S. to pay 800 billion won more — 500 billion won to the U.S. government and 300 billion won to BAE.
DAPA said the move was a breach of contract.
The military procurement agency said Thursday that it told BAE, through the U.S. government, to suspend the program tentatively.
"The government decided that it had better not progress with the project, given the current situation," said DAPA spokesman Col. Kim Si-cheol. "We told the U.S. side that we are reviewing various options including cancelation of the contract if BAE refuses to accept Seoul's position that the project should proceed on the agreed budget."
The Pentagon's Defense Security Cooperation Agency (DSCA) also announced through its website that the U.S. government notified BAE that "it would terminate for convenience a contract with BAE for initial development and long lead production in support of the ROK KF-16 fighter aircraft upgrade."
Kim said the announcement meant that the DSCA had suspended BAE's work and was calculating how much the company had spent so far on the project, but this did not mean the contract was canceled.
"The deal has yet to be canceled. It is still alive and negotiations to resolve the problem are ongoing," he said.
Asked who would pay the company's expenses if the deal was eventually canceled, Kim said the two governments were discussing the matter.
Reuters news agency quoted unidentified sources as saying that preliminary talks between South Korea and Lockheed would begin on Thursday.
