F-35 Lightening II of Lockheed Martin

DAPA expects Lockheed deal to overshoot FX budget

By Lee Tae-hoon

The state-run arms procurement agency announced Wednesday that it will not purchase Lockheed Martin’s F-35 Lightening II Joint Striker Fighters, if the Pentagon cannot come up with an enticing price-tag.

“If the negotiation price exceeds our target price, it will be difficult for us to carry out the project,” said Col. Wi Jong-seong, head of the fighter procurement bureau at the Defense Acquisition Program Administration (DAPA) in a press conference at the Ministry of National Defense.

He added that his agency plans to have a written guarantee from the United States that Seoul will not bear the burden of cost overruns in the development and production of the fifth-generation fighter jets.

Seoul is currently planning to purchase 60 advanced multi-role fighters and a package of items to operate them, such as a pilot training system and ammunition, with a budget of 8.29 trillion won, or $118.3 million per aircraft.

Lockheed Martin, the only bidder seeking to sell jets through the Foreign Military Sales (FMS), is competing with its U.S. rival Boeing and the European Aeronautic Defense and Space Company for the FX-III project.

The remarks came amid growing fears that Seoul would eventually end up paying much more than it agrees to with the U.S. government if Lockheed Martin wins the bid due to cost overruns of the F-35 program

According to a top DAPA official, the FMS is often considered an unfair trade practice as it will leave little room for the buyer to punish the provider, which is the U.S. government, over possible delivery delays and cost increases.

He noted that the FMS program is a contract based on trust between the U.S. government and another nation and that no country has ever succeeded in imposing a strict penalty for the breach of an agreement.

\“As we begin negotiations with the U.S., we will make it clear that the government cannot pay more than what the budget target is no matter what unexpected cost-overruns occur for the U.S. led F-35 program,” another senior DAPA official said.

Industry insiders say that the F-35 should be excluded from the three-way race as the U.S. Government Accountability Office estimated early this year that the average cost of the F-35 fighter would be at $135 million per plane, plus an additional $26 million for the engine.

Nevertheless, Lockheed Martin maintains that the average cost of their single-seat, single-engine plane will be around $65 million to $70 million, based on 2010 dollars.

According to a 2011 report by the Canadian Parliamentary Budget Office, Canada's planned fleet of 65 F-35s will be at least 66 percent more expensive to purchase and operate over a 30-year lifespan than predicted.

It claims Lockheed Martin’s F-35s would cost Canadian taxpayers $29.3 billion over 30 years, compared to the $17.3 billion estimate published by the Canadian Department of National Defense.