South Korea sued by BAE over cancellation of F-16 upgrade contract


BAE Systems has filed a lawsuit against the South Korean Government in response to its cancellation of a contract to upgrade the Republic of Korea Air Force's ageing fleet of F-16 Fighting Falcon aircraft.

Filed in the Maryland District Court, the lawsuit alleges that the South Korean Defense Acquisition Program Administration (DAPA) is pressurising the company to pay $43m in punitive costs.

In April, the company committed to hand over $43.25m to DAPA if it failed to take certain actions during the bid phase of the upgrade programme, which it now says were completed long ago, as reported by Flightglobal.

The lawsuit says: "DAPA is now impermissibly seeking to require [BAE] to pay $43,250,000 under the April 2014 Letter of Guarantee.

"DAPA is now impermissibly seeking to require [BAE] to pay $43,250,000 under the April 2014 Letter of Guarantee."

"DAPA bases its claim for payment not on an alleged violation of the terms of the guarantee, but on BAE Technology Solution & Service's (TSS) inability to force the US Government contractor for the portion of the work not otherwise performed directly by the US Government."

In December 2013, BAE Systems Technology Solutions & Service secured a foreign military sales contract to upgrade 134 ROKAF KF-16s in two phases at a cost of KRW1.75trn ($1.7bn).

However, the company was notified by the US Defense Security Cooperation Agency of the contract cancellation on 5 November.

The South Korean military had alleged that the US Government added about $470m and BAE about $280m in costs that were not part of the original contract.

However, BAE claims that South Korea scrapped the deal because the company was unable to negotiate directly with the US Government.

In June, the company had already started the first phase of upgrades on two KF-16C/D Block 52 fighters at its facility in Fort Worth, Texas, US.

Meanwhile, a BAE spokesman in an emailed statement to DefenseNews said: "In response to suggestions of legal action against BAE Systems from the Korean government, the company has asked a US federal court to rule that it does not owe any monies in connection with the F-16 upgrade programme.

"We are unable to comment further."

Defence Technology