South Korea has been quick to talk about defence contracts, but slow to act. But as the USA scales down its presence in the country, is that about to change?
South Korea plans finally to move forward this year with a handful of military aircraft acquisition programmes for which manufacturers have been competing for years without any results.
Western manufacturers are sceptical that contracts will be awarded as early as promised and they believe South Korea’s acquisition ambitions are in many cases unrealistic. But they also believe Seoul now has no choice but to proceed with major purchases, given the USA’s plans to reduce its military presence in the Korean peninsula and the heightened security concerns in the region.
The South Korean air force needs airborne early-warning and control (AEW&C) aircraft to reduce the country’s reliance on US-gathered reconnaissance data. Seoul identified a requirement for four AEW&C aircraft several years ago under the E-X programme, but it has been marred by delays, with three tenders failing to result in a contract.
This month South Korea will release its fourth request for proposals (RFP) for AEW&C aircraft. After the third RFP, issued early last year, Boeing offered a 737-700 with Northrop Grumman Mesa radar, while Israel Aircraft Industries (IAI) proposed a Gulfstream G550 with Elta Phalcon radar. L-3 Communications has also been enlisted as a partner in the IAI proposal to ensure the solution has at least 50% US content.
After the Phalcon radar failed a performance test, South Korea decided early this year to delay the E-X programme and issue a fresh tender. Boeing tried to convince Seoul it deserved a sole-source contract because only the 737 met the original requirement outlined by the air force. But the ministry of national defence decided a sole-source contract would contradict its policy of having multiple qualified competitors for all procurements.
New bids
Boeing and IAI plan to submit new bids based on the 737 and G550, as long as the requirement in the new RFP is not significantly revised compared with the last round. An earlier RFP generated a bid from Thales for an Airbus A320-based solution, but sources say the French manufacturer is no longer interested in the programme because it feels the 737 solution, already in development for Australia and Turkey, is difficult to beat. Boeing offered the 767 in the first E-X tender in the mid-1990s before switching to the 737 in the second round. The 767 is now considered too large for the requirement and Seoul may even entertain proposals based on regional aircraft in the new round in an attempt to attract more competitors.
Boeing, however, has warned that if the requirement is redrawn to allow aircraft with more limited range, such as the Ericsson Erieye radar fitted on an Embraer ERJ-145 or Saab 2000, it will not bid. However, sources believe the air force has decided against significantly changing the critical range requirement and the $1.8 billion acquisition will go forward by the end of this year, with Boeing the strong favourite.
Says one industry source: “AEW has been a high-priority requirement for the last 12 years. In 1992 it was one of the things on their list. I would think it’s their number one priority now.”
New helicopters also top Seoul’s wishlist as South Korea’s fleet of ageing Bell UH-1 Hueys, AH-1 Cobras and MD Helicopter MD500s are overdue for replacement. South Korea had pursued a single acquisition programme known as the Korean Multi-role Helicopter (KMH) to replace all three types. But after a high-level review determined late last year that the KMH project was too ambitious, the programme was reduced to include only a utility variant, and was relaunched in April under a new name, the Korean Helicopter Programme (KHP). Bids from foreign manufacturers interested in partnering Korea Aerospace Industries (KAI) to develop a new 6,800kg (15,000lb) helicopter are due in at the end of this month. KAI says it will review the proposals and submit comments to the defence ministry.
The KHP programme office has told manufacturers it plans to pick a winner by early October, award a contract by the end of this year and launch development early next year. But the manufacturers doubt a winner will be selected before the Seoul air show, to be held in October, and believe the programme may need yet another major review before it can go forward.
The defence ministry must also secure approval from the national assembly before it can go proceed with the estimated $1.3 billion development portion of the KHP project. Producing 235 utility helicopters in-country is expected to cost about another $4 billion. However, a source at one Western helicopter manufacturer says the programme does not seem right, describing it as “hokie”. He adds: “I don’t know if its chances of survival are any better [than last year].”
South Korea is proposing to develop over 50% of the helicopter indigenously and keep the number of imported parts to a minimum . But Western manufacturers are reluctant to give South Korea some of the technology required to develop complex rotorcraft systems and believe the programme’s strategy is too ambitious, given its goal of deploying helicopters from 2011.
“All the manufacturers are concerned with their direction and lack of understanding they have for developing a new helicopter,” says a source at another major helicopter manufacturer. “The programme has too many unknowns to make any of us comfortable.”
KAI will be the prime contractor and has been tasked with overseeing local development of a total of 38 items, including high-tech components such as the gearbox and driveshaft. The Korea Aerospace Research Institute (KARI) will lead the development of another 18 items, including the complex rotor blade and rotor hub. The Agency of Defence Development (ADD) is responsible for another 15 items, including integration of mission equipment.
Only 31 items will be acquired directly from overseas, while 71 items are to be developed indigenously. Engines will be supplied from abroad, but assembled in-country by Samsung Techwin.
The ADD, KAI and KARI are overseeing separate competitions to select vendors to supply the 31 imported items, and to select manufacturers to help with development of the 71 indigenous components. The lead foreign manufacturer will be expected to help KAI with overall integration. AgustaWestland, Bell and Eurocopter – which were shortlisted for the KMH programme last year – are expected to submit new bids this month.
But sources warn the bids may not meet all the requirements outlined in the RFP and the defence ministry will probably have to reduce its expectations for indigenous development in favour of more direct purchasing if the programme is to move ahead this year.
One source says there is no business case for a fully compliant bid because the terms and conditions of the programme are “unacceptable”.
‘Unacceptable risk’
He adds that the programme also poses “unacceptable risk”, given the lack of revenue guarantees offered and the likelihood that South Korea’s ambitions to export the helicopter will prove to be unrealistic. “It’s got to make sense,” he says. “No-one wants to sell engineering services. What do you get out of that?”
But all the manufacturers say KHP nevertheless represents an improvement over KMH and, while some additional revisions may be required, the acquisition is at least now moving in the right direction.
“South Korea always has very high ambitions, but at the last second they always settle for the most realistic position,” says a source at one Western manufacturer. “They have learned their lesson and something will go forward this year.”
With an indigenous attack helicopter no longer being pursued, South Korea is expected to eventually acquire Cobra replacements separately. Bell and Boeing have long expressed interest in theAH-X programme, which was put on hold for years as Seoul pondered meeting the requirement as part of KMH.
The defence ministry plans to begin the AH-X procurement in 2008 and has begun pursuit of an upgrade programme to convert some of the air force’s Sikorsky UH-60P Black Hawks into combat search-and-rescue HH-60P Pave Hawks. The programme was launched last month with a tender for four aircraft, but sources expect South Korea to eventually upgrade two helicopter squadrons. The acquisition is being driven by the USA’s decision to withdraw its South Korea-based Pave Hawks.
Upgrade bids
The upgrade includes the installation of an automatic hover-hold system (AHHS), multi-mode radar, personnel locator system and forward-looking infrared. BAE Systems and IAI are expected to submit bids to supply the upgrade kits. Sources say Sikorsky may not bid because Seoul is specifying an AHHS from an outside vendor that it does not support. KAI will probably install the kits.
The air force has already enhanced its search-and-rescue fleet with the acquisition of seven Kamov Ka-32 helicopters equipped with Western avionics supplied by IAI. Three aircraft were delivered last year, two more in the first quarter of this year and the last two will be delivered in the second half of this year. Sources say Kamov and IAI are hopeful of a follow-on contract from the air force for five to 10 more helicopters and are trying to convince the navy to also acquire the aircraft.
From 2007 the air force will also replace its three UH-60 VIP helicopters with Sikorsky S-92s. The S-92 was selected over the AgustaWestland EH101 in May and a $110 million contract was signed last month for three aircraft, ending years of delay to the VH-X VIP helicopter programme. In 2000 the EH101 was evaluated against the Kazan-built Mil Mi-17, but budget constraints delayed the contest.
Seoul also signed a contract in April with KAI and L-3 Communications to refurbish and upgrade eight ex-US Navy Lockheed P-3B maritime patrol aircraft. While relatively small, the S-92 and P-3 contracts are the first in a string of new aircraft procurements, ending three years of little activity since the 2002 purchase of 40 Boeing F-15K fighters.
South Korea plans to acquire its next batch of fighters from 2009, likely to be another 40 F-15Ks, although some factions within the defence ministry are pushing for a new fighter contest. Seoul is also reviewing a proposal from KAI to purchase the indigenous F-50 as a light fighter to replace some Northrop F-5s. South Korea already has acquired 94 T-50 advanced jet trainers, the first of which will be delivered at the Seoul air show in October.
Seoul also plans to launch next year the procurement of an indigenous medium-altitude unmanned air vehicle. In addition, there are plans to finally move forward in 2006 with the long-delayed SAM-X surface-to-air missile programme. South Korea has been looking at acquiring new Lockheed PAC-3 missiles, but sources warn there are only enough funds in the preliminary 2006 budget to acquire secondhand Raytheon PAC-2s from Germany.
The deployment last year of new PAC-3s by US forces in South Korea could persuade Seoul to further delay its missile purchase. But the USA’s plans to reduce its presence is forcing South Korea to consider accelerating other requirements, including combat search-and-rescue helicopters, AEW&C aircraft, attack helicopters and tankers.
Seoul has for several years been considering a fleet of at least four tankers. Boeing provided price and availability data last year on the 767 tanker, but a contract is not expected until at least 2010.
There is an overall push within the government to increase defence spending to cover all the high priority acquisitions. The ministry of planning and budgeting is proposing to increase the research and development portion of the defence budget over the next few years from $750 million to at least $1.5 billion annually.
Self-reliancy goal
The administration believes the increase is required to meet its goal of self-reliant defence and offset the forthcoming reduction in US forces and equipment based in South Korea. There is also a push to diversify by acquiring more European products. European manufacturers are confident of at least one of the forthcoming major contracts, with KHP the most likely.
But foreign manufacturers remain frustrated by the slow pace of acquisitions in South Korea and unrealistically high demands. Europeans complain they are not given a fair shot at winning contracts, while US manufacturers have quietly complained about acquisition procedures. Budget constraints and politics, meanwhile, threaten to block defence ministry attempts to increase defence spending.
“They were talking about E-X, AH-X and SAM-X in 1992 ,” says a source at one manufacturer. “For all this stuff they just kick cans down the road. They don’t get off the dime and the air force’s modernisation suffers. They are still flying the same F-4s, F-5s, Cobras and MD500s.”
BRENDAN SOBIE/SEOUL
Source: Flight International
