Second round of bidding for Korean jet project fails over price

The second round of bidding for South Korea's multibillion dollar fighter jet project ended on Friday, with none offering a price below the 8.3 trillion ($7.3 million) budget, the state defense procurement agency said.

  The next bidding session begins next Tuesday, said the Defense Acquisition Program Administration (DAPA). South Korea is pushing to buy 60 jets to replace South Korean Air Force's aging fleet of F-4 and F-5 jets starting from 2017.

Competing are Boeing's F-15 Silent Eagle; Lockheed Martin's F-35 stealth jet; and the Eurofighter Tranche 3 Typhoon from the European Aerospace Defense and Space Company (EADS).

 The DAPA opened the bidding on June 18 and has since carried out about 30 bidding sessions, but none of their proposals were accepted as they were over the budget, according to officials.

   "The bidding ended, and an additional bidding will resume on July 2," DAPA spokesman Baek Yoon-hyeong said. 

   The drawn-out bidding session illustrated the fiercely contested competition by the world's biggest defense groups as they seek to overcome drastic cutbacks in military spending in the U.S. and Europe.

   The state procurement agency has officially said they are looking for affordable yet highly capable aircraft, but it was widely expected that the potential suppliers would propose prices that exceed Seoul's budget and adopt a wait-and-see approach during the sessions.

   If prices proposed by the three firms exceed the budget approved by the parliament last year, the acquisition plan needs to be re-examined by the finance ministry which handles state budget allocations.

   Unlike the two other companies that offer aircraft through direct commercial sales, Lockheed Martin, which sells the F-35 through the foreign military sales program by the U.S. government, did not submit either a fixed price or a maximum price during the bidding, said a DAPA official with knowledge of the bidding process.

   If the F-35A is selected, experts say the South Korean government will have to pay prices equivalent to those offered to the U.S. Air Force each year from 2017 to 2021, sparking speculation that the price for the stealth jet, which has been plagued with cost overruns, may rise.

   Once the process is completed, the DAPA will assess the three jets before making its final decision in a meeting slated for early next month, according to officials. (Yonhap News)