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BAE Targets Lockheed in Asia's F-16 Upgrade Wars

Feb. 15, 2014 - 03:45AM   |  
By WENDELL MINNICK   |   Comments
Singapore's Black Knights aerobatic team performs for the Singapore Airshow last week. BAE Systems and Lockheed Martin are vying to upgrade Taiwan's and Singapore's F-16s. (AFP via Getty Images)
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SINGAPORE — BAE Systems is preparing to leapfrog over Lockheed Martin and gobble up international F-16 upgrade contracts should the US Air Force drop funding for its fighter jet radar upgrade program.

The Combat Avionics Programmed Extension Suite (CAPES) program — with Lockheed as systems integrator — would upgrade 300 US F-16 fighter aircraft and 146 Taiwan F-16s with active electronically scanned array (AESA) radar, avionics and displays, communications, electronic warfare improvements, and a new modular mission computer. Lockheed selected Northrop Grumman’s scalable agile beam radar for the AESA requirement.

But budget constraints could force the US Air Force to transfer remaining funds from CAPES to the F-16 service-life extension program, raising the specter of increased prices for Taiwan if it has to go it alone on its F-16 upgrade program. The president’s budget proposal is expected to be submitted to Congress on March 4.

BAE already scored a victory in November by beating Lockheed for the contract to upgrade 134 South Korean KF-16C/D Block 52s with a fully integrated avionics suite. The upgrade includes the Raytheon advanced combat radar, ALR-69A all-digital radar warning receiver, modular mission computer and weapon systems integration.

The Korea upgrade is in two phases. Phase 1 is estimated to cost about $200 million for contractor technical, engineering and logistics support services for the initial design. Phase 2 will include the Raytheon radar and updated avionics. The total bill for South Korea could be as high as $2.4 billion if all of the options are exercised.

BAE’s John Bean, vice president for Global Fighter Programs, said BAE won the South Korean upgrade competition by offering a 25 percent price reduction. Bean also said the company is prepared to offer Taiwan a similar deal should CAPES crash and burn.

William McHenry, Lockheed Martin’s head of F-16 business development, said that even if CAPES is defunded for the US jets, the Taiwan program would continue at the same cost, without an increase.

Cost for the Taiwan program is estimated at $1.85 billion, but Taiwan military sources indicate $300 million in nonrecurring engineering costs for AESA and modular mission computer development and integration are added to the price. Taiwan will be unable to recoup this money if other countries choose the BAE option.

Phase 1 of the CAPES program, the developmental phase, remains funded, but the production stage remains unclear, said another Lockheed source.

“This is a [foreign military sales] program, government-to-government, and the US Congress was notified of the sale,” he said.

McHenry confirmed that if Taiwan was unhappy with the situation it could opt out.

“We don’t control the [letter of acceptance], but the price is not expected to increase because of what happens to CAPES,” McHenry said.

If problems occur from the CAPES defunding, the customer can still go with Lockheed’s Common Configuration Improvement Program, which replaces the modular mission computer.

“Oman is doing this,” McHenry said.

Taiwan and others could also select the service-life extension program, which would give the F-16 an additional 2,000 hours of service life, or roughly 10 years, Bean said.

Mark Lorell, senior political scientist with the Rand Corp., said CAPES might be defunded for 2015 but would not be canceled. The program would instead be stretched out.

Bean said the US needs the F-16 upgrades for interoperability with the F-22 and F-35, but that does not require a CAPES-Lockheed solution.

BAE cut its teeth on F-16 upgrades in 2005 when it added a new fire control computer and other systems to US Air National Guard F-16s, opening the door to a potentially multibillion-dollar market opportunity. Bean reckons there is a market for up to 850 F-16 upgrades beyond those on contract in South Korea and Taiwan.

At the Singapore Airshow last week, both BAE and Lockheed made it clear they would fight for the Singapore upgrade. In January, the US Defense Security Cooperation Agency announced the release of a $2.43 billion upgrade for Singapore’s 60 F-16C/D Block 52-plus aircraft.

The announcement made no mention of what many at the Singapore Airshow believe could be a bottleneck for either BAE or Lockheed: Singapore’s F-16s were almost carbon copies of Israel’s F-16 aircraft.

A defense industry source said the Singaporean F-16s were outfitted with Israeli-made sensors and weapons, including the modular mission computer, electronic warfare suite, missile warning system and weapons.

Defense industry sources said this could cause unexpected delays and increased costs to the Singapore program. The problem some suggested was how could the system integrator — BAE or Lockheed — guarantee the operational capability of its upgrade with alien components and systems. ■


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