By Jun Ji-hye
BAE Systems has filed a lawsuit in a U.S. court to block the Korean arms procurement agency’s demand that the British company pay $43 million to it to cover costs from a now-suspended contract for KF-16 upgrades.
The company filed the suit with the U.S. District Court in Greenbelt, Wednesday (local time), claiming that the Defense Acquisition Program Administration (DAPA) is seeking payment for BAE’s “inability to force the U.S. government to withdraw its proposed price increase.”
The company said in a statement, “In response to suggestions of legal action against BAE Systems from the Korean government, the company has asked a U.S. federal court to rule that it does not owe any money in connection with the F-16 upgrade program.”
At the center of contention is a 1.75 trillion won ($1.6 billion) deal BAE signed two years ago to upgrade the ROK Air Force’s KF-16s. At the time, the U.S. government agreed to provide a foreign military sale (FMS) guarantee for the multinational company, which has a significant U.S. presence.
However, the project has been suspended after DAPA was asked to pay an additional 800 billion won ― 500 billion won to the U.S. government and 300 billion won to BAE.
DAPA said the demand was a breach of contract, which could lead to a cancelation of the contract. The procurement agency warned that it may confiscate the U.K. based-company’s $60 million bid bond if it fails to deliver on the project upon the already agreed on price.
BAE has expressed its position that the U.S. government changed the scope of the work and increased the price, and it is not liable for this. Under the FMS format, the U.S. acts as a middleman.
In response to the latest action by BAE, a DAPA official said, “South Korea will also follow the appropriate procedures, meaning that it will continue to seek to confiscate the company’s bid bond and take other legal action including a lawsuit for damages resulting from a delay in the program.”
Regarding the company’s argument that it was the U.S. that increased the price, the official said, “That is a matter that the company and the U.S. need to resolve.”