WASHINGTON — A long-expected package of F-16 upgrades for South Korea has been cleared by the US State Department, making likely a win by Lockheed Martin in a contract taken away from competitor BAE.

The agreement, announced Wednesday on the website of the Defense Security Cooperation Agency (DSCA), is worth an estimated $2.5 billion to upgrade 134 KF-16C/D Block 52 aircraft with new avionics, weapons and active electronically scanned array (AESA) radars.

As with all DSCA announcements, the deal must still be negotiated among all parties before becoming official.

The contract to upgrade the KF-16 fleet is a major coup for Lockheed, which lost a competition for the upgrades to BAE in 2012. That was the first time that a country selected a non-Lockheed contractor for a major F-16 upgrade package.

In late 2014, however, South Korean officials began to balk at the BAE deal, with acquisition officials there publicly complaining about extra costs being tacked onto the contract, claiming the US government added about $470 million and BAE Systems about $280 million in costs that were not part of the original agreement.

Ironically, the BAE price tag was estimated at $1.7 billion; in cost; Lockheed's deal, at an estimated $2.5 billion, is significantly larger.

The DSCA notification says that South Korea is seeking offsets for the agreement and noted that those are still being sorted out.

When Lockheed began trying to win the BAE contract, a source told Defense News that the company was proposing to include engineering experience for South Korea's next-generation indigenous fighter to sweeten the pot.

That lines up with offsets offered by Lockheed when South Korea picked its F-35A joint strike fighter, when the company offered experience along with the high-end fighters. South Korea plans to produce at least 120 domestically designed twin-engine fighters by 2025 to replace its fleets of aging F-4s and F-5s.

Twitter: @AaronMehta

Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.

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