Lockheed Martin Won S Korean F-35 Deal Despite 'Failing' Offset Conditions

A South Korean opposition lawmaker has claimed that the US aerospace giant Lockheed Martin secured 7.3 trillion won ($6.43 billion) F-X project despite it failed to satisfy the conditions “requiring the value of the firm’s offset program to meet at least 50 percent of the total cost of the deal”.

In 2014, the government decided to buy 40 Lockheed F-35 stealth fighters as the Republic of Korea Air Force’s next-generation fighters, rather than Boeing’s F15-SEs.

Rep. Kim Jong-dae of the Justice Party was quoted as saying by The Korean Herald on Wednesday that Lockheed Martin “benefited from favoritism from the South Korean military”.

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 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.

However, 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.

But the delay in delivering the satellite costed DAPA about 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 state-run Board of Audit and Inspection has been investigating the controversial F-X project.