Lockheed will upgrade KF-16 jets

KF-16 fighter jet

$1.9 bill contract to be signed soon

By Jun Ji-hye

The nation’s arms procurement agency said Wednesday that it has concluded a deal with U.S. defense giant Lockheed Martin on a project to upgrade the warfare capabilities of the ROK Air Force’s 134 KF-16 fighter jets.

Defense Acquisition Program Administration (DAPA) spokesman Col. Kim Si-cheol said the two sides are negotiating over a price of about $1.9 billion (2.2 trillion won), and are planning to sign the deal by the end of the year.

The announcement came about a year after an initial deal with the U.K.-based BAE Systems was canceled after the DAPA was asked by the U.S. to pay 800 billion won more -- 500 billion won to the U.S. government and 300 billion won to BAE. At the time, the U.S. and the company cited that the risk cost in implementing the project had increased.

“DAPA will push for the project by changing companies in order to upgrade the aircraft from BAE Systems to Lockheed Martin, and also push Lockheed to provide the active electronically scanned array (AESA) radar for the fleet from Raytheon to Northrop Grumman,” Kim said.

In July 2012, BAE offered a 1.75 trillion won deal and was chosen over Lockheed for the project. At the time, the U.S. government agreed to provide its foreign military sale (FMS) guarantee for the multinational company, which has a significant U.S. presence.

The South Korean government also earmarked a 1.75 trillion won budget to implement the upgrade project.

Under the deal, BAE was supposed to upgrade the avionics systems, communications display and cockpit interface, while Raytheon was to provide AESA radar for the fleet. But the deal was canceled in November last year following the request for the additional cost three months earlier.

Regarding the price that is being negotiated with Lockheed, which has increased from the initial deal and the government budget, Kim said, “When the deal with BAE was canceled, the company and the U.S. government were demanding the payment of some $2.5 billon including additional costs. We reduced this to $1.9 billion through negotiations with Lockheed.”

However, criticism still remains, with some saying DAPA made the wrong decision from the beginning when it chose BAE, not Lockheed, which possessed patented technology for the F-16, after only considering the low price the U.K.-based company offered at the time. They said such a bad decision consequently caused the change of companies and raised the price.

The National Assembly already approved a motion on Nov. 30 calling on the Board of Audit and Inspection to inspect the project that caused the additional cost and is being delayed.

“We will fully cooperate with the inspection so that all doubts surrounding the project can be resolved,” Kim said.

The DAPA and BAE are currently in a legal battle in which the former is demanding payment of $60 million for the company’s failure to implement the KF-16 upgrade deal.