Lockheed Focused on South Korean Jet Re-Tender

Lockheed Martin said it will continue with its bid to land a major South Korean jet fighter contract when the deal is re-tendered.

The deal, in which Seoul required a contractor to deliver 60 jets over five years beginning in 2017, was a race between the Boeing's F-15 Silent Eagle, Lockheed Martin's F-35 Lightning II Joint Strike Fighter and EADS' Eurofighter Typhoon.

Lockheed, ahead of EADS, was thought to have been nudged out of the deal by Boeing's Silent Eagle. But South Korea's military defense procurement agency, the Defense Acquisition Program Administration, announced Tuesday it wasn't completely satisfied with Boeing's offer.

Boeing came close to grabbing the contract with the cheapest offer, but DAPA said it will review its budget for the jet fighter deal and re-tender later this year.

Lockheed's Stealth aircraft were offered through a government-to-government sales process, meaning there was less room to negotiate on price. Boeing and EADS aircraft were offered through direct sales to South Korea.

A statement by Lockheed after DAPA's decision said the aircraft maker "will continue to support the U.S. government in its offer of the F-35A to Korea." DAPA's decision caps an intense bidding campaign for all three manufacturers.

There were 55 bidding sessions in June and July, but DAPA suspended bidding in mid-July over concerns that manufacturers' bids were higher than the budgeted $7.2 billion. DAPA restarted bidding in mid-August, reiterating that its budget limit is the most important requirement for a successful bid. Last month, a report by Yonhap News Agency said the contract was noted for its extreme bidding war following drastic cutbacks in military spending in the United States and Europe.

DAPA's decision leaves South Korea with an aging fleet of McDonnell Douglas F-4 Phantom and Northrop F-5 aircraft for at least another year. South Korean Defense Ministry spokesman Kim Min-seok, announcing the cancellation of the tender, said DAPA committee members rejected Boeing's F-15 SE and are set to restart the project because of a "consensus that South Korea ... needs to deter the growing threat posed by North Korea."

Boeing's Silent Eagle failed to overcome its inadequate stealth capabilities to win the $7.2 billion deal amid growing regional security concerns, Yonhap reported this week after DAPA's announcement. South Korea now will have to wait longer for suitable air defense protection but political and military climate in Southeast Asia has changed since the tender first went out, the Yonhap article said.

The need to acquire the most advanced jet took on new urgency as North Korea conducted its third nuclear test in February and continues to develop its missile program. Japan and China are at loggerheads over disputed maritime territories in the region.

Japan signed a deal last year to buy 42 F-35s, with the first four planes to be delivered in 2017.
The Yonhap article pointed out that China boosting its strength by developing its own stealth jet -- the J-20 now in development -- and launched its first aircraft carrier last year.

Russia also is preparing its first advanced T-50 fighter jets, built by Russia's biggest defense contractor, Sukhoi, this year. Boeing's successful bid was based on its claim that the F-15 had survivability, not stealth, in its favor -- a dual-engine power plant and and impressive arsenal.

Yonhap said experts believe the cancellation of the tender favors the F-35 because of growing calls for stealth technology to counter these threats.
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