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S. Korea cancels contract with BAE to upgrade fighter jets, 190 jobs lost

November 7, 2014

Fighter jets fly overhead at an event at the Gyeryongdae military headquarters in Gyeryong, South Chungcheong Province, on Sept. 30, 2014, ahead of the 66th anniversary of the foundation of the country’s military, which falls on Oct. 1. (Yonhap)

By Brian Han

South Korea has decidedly cancelled its $1.3 billion contract with BAE Systems to upgrade its fleet of F-16 fighter jets.

When BAE won the contract in 2012 through a public bid, it was unique in the sense that it was the first time that a company other than the original manufacturer of the jets was hired.

Although BAE is based in Britain, the agreement was to perform the upgrades at its U.S. division located in Fort Worth, Texas.

The process had already begun over the summer, but the prices began to increase because the nature of the deal was categorized as a “foreign military sale,” meaning that costs are subject to change via the U.S. military while the two countries involved in the deal have no legal grounds to negotiate the price fluctuations.

As a result, approximately 190 jobs created in Fort Worth by the original contract will be terminated as the responsibilities are currently being transferred to Lockheed Martin — the original manufacturers of the F-16 — according to a report by Texas’ Star-Telegram.

Working directly with a U.S. military defense company on U.S. soil should allow for a more predictable and secure contract for the South Korean government.