South Korea Rejects Boeing Bid For $7.7b Fighter Deal

South Korea decided Tuesday against awarding a $7.7 billion jet fighter deal to Boeing Co. — the sole remaining candidate — and said it would re-tender its largest ever defense contract.

The deal to provide 60 advanced combat fighters was aimed at replacing the air force’s aging fleet of F-4s and F-5s and had initially attracted bids from Boeing, US rival Lockheed Martin and the European aerospace consortium EADS.

Boeing, with its offer of F-15 Silent Eagles, had ended up the sole eligible candidate after proposals from the other two came in over South Korea’s stated budget, and the firm was expected to be named the winner on Tuesday.

But the state Defense Acquisition Programme Administration apparently decided the F-15 did not meet the air force’s current requirements, especially in the light of the nuclear threat from North Korea.

“A majority of the (DAPA) committee members agreed to reject (the F-15) and restart the project,” said Defense Ministry spokesman Kim Min-Seok.

Kim said the DAPA had taken into consideration “the current security situation, North Korea’s nuclear program and ... the rapid development of aviation technology.”

South Korea’s position that the bid price should not exceed the 8.3 trillion won ($7.7 billion) approved by parliament was a major source of concern throughout the tender process.

In late August, 15 South Korean former air force chiefs signed a petition suggesting a review of the “irrational” procedure that weeded out the higher-priced Lockheed Martin F-35 and the EADS Eurofighter Typhoon

A major criticism of the F-15 SE was that it lacked the radar-evading stealth capabilities of other modern jet fighters like the F-35.

“There is a consensus that South Korea needs the fifth-generation fighter jet to deter the growing threat posed by North Korea,” said Kim Min-Seok.

The government said it intended to restart the entire project from scratch after a thorough review that would include a re-assessment of the budget.

“We believe that the whole review process will take about a year,” said Kim. “We will expedite the process to make sure that the void in our national defense will be limited to a minimum,” he added.

A team of officials from the defense ministry, air force and acquisition agency will consider various alternatives, including changing the number of jets, extending the funding and combining different types of aircraft.

South Korea’s military procurement needs, especially where the air force is concerned, have overwhelmingly been met by US suppliers in the past — a reflection of their close military alliance.

But EADS’ hopes had been raised in January, when the Anglo-Italian company AgustaWestland beat out US defense giant Sikorsky for a $567 million contract to supply six helicopters to the South Korean navy.

In an effort to sweeten its costlier bid, EADS had offered a $2.0 billion investment in a separate South Korean project to develop its own advanced fighter jets if the consortium is chosen.

And Lockheed Martin had offered to support South Korea’s effort to develop and launch military communications satellites.

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