The US Government is reportedly planning to sign an agreement with South Korea by the end of 2014 for the second phase of the Republic of Korea Air Force’s (ROKAF) KF-16C/D Block 52 aircraft upgrade programme.

Two unnamed sources were quoted by Reuters as saying that the two sides are trying to finalise the pricing and schedule of the contract, as some changes requested by Seoul have increased the cost.

One of the sources said South Korea had already budgeted money for the project this year with an aim to conclude the current negotiations before the year end.

"The question now for BAE, the US Government and the South Korean Government is, can we fulfil the requirements the South Koreans are asking for at the price they’re asking for," the source said.

The second source said: "The basic scope of the contract isn’t changing. I wouldn’t expect to see a significant increase in the price."

US Air Force spokeswoman Ann Stefanek declined to address any specific communications with South Korea, while BAE Systems said the company was assisting as needed in the talks between the air force and Seoul.

In December 2013, BAE received a foreign military sales contract from the US to upgrade ROKAF’s ageing fleet of 134 KF-16 fighters in two phases at a cost of $1.3bn.

"The question now is can BAE and the US fulfil the requirements the South Koreans are asking for, at the price they’re asking for."

BAE already started work on the $140m first phase, which included the development of design for the upgrades, including new radars, mission avionics, higher resolution screens and new weapons.

The second phase would fund systems integration and flight test activities, followed by production and installation of upgrade kits in the aircraft at the company’s sites in Florida, New York, California, Virginia and Texas, the US.

BAE spokesman Neil Franz said: "Phase One of the programme began earlier this year and is proceeding on schedule, and we look forward to soon beginning Phase Two."

Powered by F100-PW-229 engines, the KF-16 is a Korean variant of the Lockheed Martin F-16 fighter and was built by Korean Aerospace Industries under license from its manufacturer in the 1990s.

Image: A Republic of Korea Air Force’s KF-16C/D Block 52 aircraft in flight. Photo: courtesy of BAE Systems.

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