By Kim Eun-jung
SEOUL, Aug. 5 (Yonhap) -- South Korea's arms procurement agency will begin the final round of bidding for a 8.3 trillion won (US$7.2 billion) deal to buy 60 fighter jets next week, following a six-week hiatus due to overpriced proposals, a senior official said Monday.
The Defense Acquisition Program Administration (DAPA) in early July suspended the bidding for the nation's largest arms import deal because the bids made by three aerospace giants were higher than the budget approved by the Parliament.
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) will participate in the process from Aug. 12-16. The bidding will be on hold for Aug. 15 Liberation Day, a national holiday in South Korea.
"If all firms offer prices beyond the budget, DAPA will reconsider the fighter jet project from scratch," a senior DAPA official said. "There will be no additional bidding."
DAPA has sought to purchase affordable yet highly capable aircraft to replace South Korea's aging fleet of F-4s and F-5s starting from 2017. There is an urgent need to replace them as one of the F-4 D retired last week after four decades of service and the Air Force plans to replace all of its 70 F-4s by 2019.
"I think the competitors are aware that this is the last chance, and a re-examination of the project will change the business plan and delay the purchase of the jets," the official said.
Offering a price within Seoul's budget is critical to win the project, but analysts remain doubtful over further price cuts by the rival companies that had offered their lowest prices during the 55 separate bidding sessions.
Unlike two of the companies that sell aircraft through direct commercial sales, a U.S. government representative placed the bid on behalf of Lockheed Martin under the foreign military sales (FMS) program, which didn't specify a fixed price, according to multiple sources. Boeing and the EADS offered a definite price for their jets.
The government-to-government FMS condition requires a foreign government to pay the amount specified by the U.S. government for F-35s at the time of payment, which experts cite as one of the factors that affected the unbudging attitude of the bidders.
Changes to the number of jets to be bought or increasing the state budget needs DAPA to open a new project and get approval from the finance ministry, a process that could take several months. Analysts expect little from the government in allocating more spending on the arms import deal when it is seeking to rejuvenate its economy and expand welfare programs.