Fighter upgrade talks hit turbulence

By Kang Seung-woo

The nation’s project to upgrade its 134 KF-16 aircraft faces difficulties due to cost escalation.

The U.S. Defense Security Cooperation Agency (DSCA) announced Wednesday that the U.S. government has approved the upgrade program at an estimated cost of $2.5 billion (2.87 trillion won).

However, the cost estimate is far higher than the 1.75 trillion won Korea is willing to pay.

“The State Department has made a determination approving a possible foreign military sale (FMS) to the Republic of Korea of the KF-16 upgrade program and associated equipment, parts and logistical support for an estimated cost of $2.5 billion,” it said in a statement.

In 2012, Seoul signed a 1.75 trillion won deal with the U.S. unit of BAE Systems over Lockheed Martin to perform upgrades and systems integration for the KF-16 fleet. However, the contract was cancelled last year after the U.S. government and the British defense company asked for a combined 800 billion won, citing a “risk reserve” to offset changes to the upgrades.

The Defense Acquisition Program Administration (DAPA) has since picked Lockheed Martin as the key contractor. The U.S. defense giant is the manufacturer of the KF-16. According to the DSCA, Northrop Grumman is also a joint principal contractor.

The Air Force is looking to upgrade its fighter jets to include modular mission computers, active electronically scanned array radar, friend or foe identification system and positioning and navigation system.

It also wants to purchase precision weapons such as laser joint direct attack munitions and bomb tail kits.

It added: “It is vital to the U.S. national interest to assist our Korean ally in developing and maintaining a strong and ready self-defense capability. The KF-16 upgrade program ensures interoperability and continued relations between the ROK and the U.S. government for the foreseeable future.”

In response to the DSCA’s estimate, the nation’s arms procurement agency said that it is not a confirmed cost.

“The total will be finalized through negotiations between the Korean and U.S. governments, which is a procedure of the government-to-government FMS,” DAPA spokesman Col. Kim Si-cheol told a briefing.

“Although I cannot unveil a specific amount now, the two sides are in talks to reduce the upgrade cost.”

The new cost estimate may put the DAPA in the hot seat because it is asking questions about why Seoul cancelled the original deal with BAE Systems if a new contract would cost more.

“Should the deal be finalized at the estimated price in future talks, it is likely to spark strong criticism of the government for squandering taxpayers’ money,” an official of the defense industry said.

Another official of the industry said that the final price depends on how well DAPA will negotiate with its U.S. counterpart.

The DSCA also said that Korea is seeking offsets from the upgrade deal.

“The purchaser requested offsets. At this time, agreements are undetermined and will be defined in negotiations between the purchaser and contractor,” it said.