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Sources: F-35 Bid Exceeds S. Korean Fighter Budget

Aug. 18, 2013 - 11:07AM   |  
By JUNG SUNG-KI   |   Comments
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SEOUL — Since South Korea launched a multibillion-dollar fighter acquisition plan in 2011, Lockheed Martin’s F-35 has always been regarded the leading candidate due to the “fifth-generation” jet’s stealth functions.

Just a few steps before the finish line, however, the front-runner is on the razor’s edge because the South Korean customer isn’t satisfied with the price guaranteed by the US government.

The other F-X bidders are Boeing with the F-15 Silent Eagle and the Eurofighter Typhoon.

According to the Defense Acquisition Program Administration’s (DAPA) announcement of the latest price bids for the 60-aircraft F-X III competition, at least one bid came in under the budgeted figure of $7.4 billion.

“A bidder submitting a price over the budget won’t be selected as a winner. We can’t make a contract over the budget. That’s the bottom line,” DAPA spokesman Baek Yoon-hyung said.

The spokesman would not specify which bidders were in or out. But multiple sources privy to the bidding confirmed only the F-35 price was over the budget.

After the final evaluations of the jets’ performance, price and offset agreements, said the spokesman, DAPA’s decision-making committee will meet as early as next month to pick a winner. The new planes are scheduled for delivery between 2017 and 2021.

The F-35 would be sold through the US government’s foreign military sales (FMS) program. The F-15SE would be part FMS and part direct commercial sale.

“The F-35 is still in the race technically for the final evaluations, but the aircraft is eliminated in reality if the DAPA announcement has no lies,” said Shin In-kyun, an analyst at the Korea Defense Network, a private defense think tank.

“The F-X III was originally designed to buy stealthy fighter jets to counter possible threats from neighboring countries like Japan and China, as well as to deter North Korean aggression,” Shin said. “But the game has changed dramatically due to the price. It seems like a boxer in the ring was knocked out by his sparring partner.”

South Korean Air Force officials have expressed a preference for the F-35.

Lockheed officials hoped against hope.

“We’ll keep watching the situations until the DAPA’s selection committee ends,” a Lockheed official said. “This fighter selection program is critical for the Republic of Korea’s national interests for the next 30 or 40 years ahead, and the F-35 is the only future-oriented aircraft meeting the needs.”

He added the F-35 unit price is going down by an average of 4 percent each year, and eventually South Korea could get substantial money back in the final year of contract.

Eurofighter is in upbeat mood, as it is seeking to sell the first European fighter jet to the Korean market.

“Among the three aircraft, Typhoon is the only one tested and evaluated for real. The other two jets were not even flown by Korean pilots for evaluations,” a consultant for Eurofighter said. “It’s a fair game, and we’re confident that we have a greater opportunity to secure this deal.”

Boeing, the reigning champion of the previous two F-X deals for 60 F-15Ks, stresses the interoperability of the F-15SE and F-15Ks, although there is no customer for the stealthy version of the F-15 jet to date.

“We recognize the importance of the affordability, and we’re very confident that we put a very affordable and attractive offer to South Korea,” said Howard Berry, Boeing vice president for sales.

But critics worry that the Silent Eagle program could be costly since lots of modifications and upgrades are needed to transform the existing aircraft to a stealthy jet.

If the F-35 is priced out, “it will be a very sharp reminder that the world fighter market is still a competitive market, and the F-35 folks need to be thinking about getting more commercially aggressive,” said Richard Aboulafia, an analyst with the Teal Group in Fairfax, Va. “It’s still a cost-sensitive market, and a lot comes down to bang for buck.”

That cost-sensitivity is especially acute in South Korea, where officials have to balance two distinct threats, he said.

“There’s the immediate North Korean threat, which requires a lot of ordnance delivered fast, which F-15 is great for, and there’s a long-term threat that comes from being in a very dangerous A2AD [anti-access, area-denial] neighborhood where a modern platform like the F-35 would be very useful.”

While Eurofighter could make an aggressive offer to try and win the competition, Aboulafia has a hard time seeing them defeating a US design, given the strategic partnership between the RoK and the US.

Earlier, bidders offered competitive offset packages to sweeten the pot.

Lockheed proposed to support South Korea’s plan to develop and launch a military communication satellite and build a battlefield training simulation system for airmen.

Boeing also pledged that it would help build a simulation training system for the South Korean military. The company offered more than $1.2 billion in parts manufacturing and design and development, both direct to Silent Eagle, as well as export work for other defense and commercial programs.

Eurofighter promised to invest $2 billion in the KF-X effort, aimed at developing an F-16-class indigenous fighter jet. The European company also proposed that South Korea assemble 53 of 60 planes locally to help boost the nation’s aerospace industry.

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