In 2014, under the 7.3 trillion won ($6.43 billion) F-X project, Seoul decided to buy 40 Lockheed Martin F-35 stealth fighters as the Republic of Korea Air Force’s next-generation fighters, rather than Boeing’s F15-SEs.
Rep. Kim said Lockheed Martin won the deal although it had failed to satisfy conditions requiring the value of the firm’s offset program to meet at least 50 percent of the total cost of the deal.
The offset program in arms trade refers to an agreement between exporting and importing entities, which calls for the exporter to undertake activities in order to satisfy secondary objectives of the importer, such as a technology transfer.
Citing documents he received from the Defense Acquisition Program Administration (DAPA), Kim said Lockheed Martin failed to meet the conditions of the offset program until February 2013 when the F-X project was ongoing.
After a month, the U.S. company belatedly added the delivery of a communications satellite to its offset program, and this raised the program rate to 63.4 percent from 27.8 percent.
The opposition lawmaker said the satellite was not among the items required by the South Korean military.
But the company won the deal the following year, and Seoul decided to introduce the communications satellite through the offset agreement without conducting a feasibility study.
Contrary to expectations, in September 2015, the U.S. firm put the satellite project on hold, citing mounting manufacturing costs, and demanded Seoul share the excess.
Helped by the U.S. government’s meditation, Lockheed Martin recently agreed to resume work to build the satellite as originally agreed.
DAPA estimated the damages caused by the delay in delivering the satellite at 30 billion won ($26 million).
“The F-X was a project of Lockheed Martin, by Lockheed Martin, for Lockheed Martin,” Rep. Kim said. “Those who were responsible for the damages to the state coffers should take responsibility.”
The decision to buy Lockheed Martin F-35s was led by then-Defense Minister Kim Kwan-jin who later became ousted President Park Geun-hye’s National Security Office chief.
The decision has also caused enormous controversy, as it was belatedly known that the nation failed to receive four core F-35-related technologies from Lockheed Martin due to the government’s bungled management of the offset program. The technologies were core to carrying out the KF-X project to develop Korean-made fighters.
President Moon Jae-in, then serving as opposition leader, said Kim and Cheong Wa Dae made a “political decision” that brought enormous damage to the nation.
The state-run Board of Audit and Inspection has been investigating the controversial F-X project.
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