F-35 Back in the Fight for South Korea’s FX-III Competition
South Korea announced today that it will not purchase a fleet of 60 Boeing F-15SE aircraft as it had originally planned. Citing capability concerns with the F-15SE, South Korea plans to re-open its FX-III competition for a fifth-generation combat aircraft, potentially breathing life into Lockheed Martin’s efforts to sell the F-35 Joint Strike Fighter to the South Korean Air Force (ROKAF). This announcement is expected to delay a final award by at least a year.
The FX-III competition was among the world’s most closely-watched fighter acquisition programs. The ROKAF sought to replace its fleet of aging F-4 and F-5 aircraft with 60 modern, stealth-capable fighters at a price point that varied over the course of the competition from USD$7 billion to USD$13 billion. Bids were submitted by EADS with the Eurofighter Typhoon, Boeing with the F-15SE and by Lockheed Martin with the F-35A. Following a down-select to the F-15SE and F-35A, the South Korean Defense Acquisition Program Administration (DAPA) announced in late August 2013 that the F-35 was the last qualified bidder standing.
DAPA primarily cited cost concerns when announcing that Boeing was the sole qualified bidder, potentially reflecting some ongoing tension within the Ministry of National Defense (MND) between the procurement organization and the user community. DAPA was formed as an agency within the MND in 2006 and charged specifically with reducing cost overruns in defense acquisition programs. This led to a focus on budget considerations that some argue has relegated requirements and capabilities concerns to the back burner. DAPA held firm to the FX-III budget limit of USD$7.4 billion, which only the Boeing bid was able to meet. Indeed, in announcing the cancellation of the F-15SE purchase, the Ministry noted specifically that the F-15SE failed to meet the stealth requirements needed by the Air Force.
Though based on an older airframe, observers of the competition made arguments for the F-15SE based on interoperability with the existing fleet. The fighter maintains a high degree of commonality with the F-15K jets already operated by the Air Force (both previous phases of the FX program were awarded to Boeing’s F-15 family of aircraft), potentially reducing future training and O&M costs. Additionally, South Korea is in the midst of its own fifth-generation fighter development program, the KF-X. Technology transfer therefore likely looms large in the minds of defense procurement officials. Presumably, the barriers to technology transfer were lower with the F-15SE than with the highly advanced F-35 fighter.
However, South Korea’s emphasis on stealth capability leaves the F-35A in a strong position for the next iteration of the competition, though cost may remain an issue. Because unit cost for the F-35 depends heavily on the number of units acquired by the United States and its partner nations, a firm unit price was difficult to lock down in the bidding process, though the Defense Security Cooperation Agency estimated that the F-35 transfer could cost as much as USD$13 billion. If DAPA remains firm on the budget issue, a reduction in units acquired could offer one possible path forward.
An MND spokesman specifically pointed to North Korea’s recent nuclear test and “latest aerospace technology development” – likely a reference to ballistic missile technology – in explaining the decision to re-open the competition. This may be a signal that tensions on the peninsula have brought military requirements to the forefront of procurement planning in South Korea, which may spur further allocation of resources to military modernization.