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KF-16 fighter jet |
By Jun Ji-hye
The U.S. government is demanding an extra 800 billion won for a project to upgrade the ROK Air Force's KF-16 fleet without the consent of BAE Systems, the main contractor, sources said Wednesday.
The 1.75 trillion won deal was awarded to BAE under the U.S. foreign military sale (FMS) guarantee. But it is now uncertain after the demand, which breaks down to 500 billion won for the U.S. government and 300 billion won for BAE, was made in a letter to the Defense Acquisition Program Administration (DAPA).
The source did not say what motivated the U.S. government to raise the costs, when BAE saw no reason to do so.
He said the U.S. government asked BAE to change the scope of the work, which would account for the additional costs.
BAE objected, but the U.S. government repeated the demand, citing risk management, the source noted.
DAPA said the move was a breach of contract.
"A primary partner of this negotiation is the U.S. government as the deal was carried out through the FMS format," a DAPA official said.
Under such a format, the U.S. acts as a middleman.
"Documents say that both the U.S. government and BAE want to raise the price anyway," the official said.
The agency previously argued that it was reviewing legal details, including a possible lawsuit against BAE, to hold the company responsible for reneging on the deal and delaying the program.
Possible cancelation of the deal would provide an opportunity for Lockheed Martin, the manufacturer of the F-16.
"Under such a deal, the company might not have been able to speak out about its position," he said.
The DAPA official said it would be necessary to check the situation if BAE and the U.S. government had opposing positions, but BAE also needed to state its position.
The multinational company was chosen in July 2012 over Lockheed Martin as primary contractor to upgrade the Air Force's KF-16s, because of BAE's more reasonable price.
But uncertainty has been growing over the deal.
"We cannot accept such a demand. The total amount for the project cannot be changed," the DAPA official said.
BAE said it remained committed to its fixed price for the scope of the work that the U.S. government and the Air Force defined last year.
"We are very concerned to learn of an apparent breakdown in the discussions between the Republic of Korea and the U.S. Air Force on the KF-16 Upgrade Program," BAE said in a statement on Oct. 28. "We strongly encourage the two governments to return to the negotiating table."
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