Korea Extends Price Negotiations for Surveillance Aircraft with Boeing

Korea Overseas Information Service, Korea has extended the deadline for price negotiations with U.S. aviation giant Boeing over the purchase of surveillance aircraft until the end of November, Seoul's defense procurement agency said Wednesday, Sept. 27. 
 
“We had planned to wrap up price negotiations by the end of September. But the negotiations did not go smoothly and we thought we needed more time, so the deadline is extended until the end of November,” said Lee Yong-chul, deputy commissioner of the Defense Acquisition Program Agency (DAPA). 
 
In August, Korea chose Boeing as the sole bidder for its big-ticket project to procure surveillance aircraft, dropping Israel's IAI ELTA out of the competition. 
 
However, the DAPA will not be able to announce whether Boeing is the winner of the project until the two sides complete price negotiations for the contract. Successful price negotiations would enable Boeing to win the 2 trillion won ($2 billion) E-X project, which aims to introduce four surveillance planes to Korea by 2012. Both sides refused to reveal the range of prices addressed in the last two rounds of negotiations. 
 
When asked about what course of action the DAPA will take if the price negotiations fall through, Lee left open the possibility of reconsidering the much-coveted project. “Every option will be on the table,” Lee told reporters. 
 
Meanwhile, ELTA called upon the DAPA to take back its decision to disqualify the Israeli firm from the competition, saying it stemmed from the DAPA's belated request for the removal of provisos in its export license. 
 
“The decision is not in line with the standard business practice. It is like announcing that Korea will import all weapons from the U.S.,” James Lee, executive vice president of Communications Korea, a PR agency for ELTA, said in a luncheon meeting with reporters. 
 
Korea gave IAI ELTA until the end of July to remove any restrictions on its U.S. export license, putting off its decision on whether to disqualify the Israeli company from the country's project, code named E-X. 
 
But the Israeli firm failed to meet the deadline and instead submitted two letters of statement to the Korean authorities. the DAPA has warned IAI ELTA that if it fails to secure the restriction-free license it will result in the company's elimination from the lucrative E-X program. 
 
In June, Korea gave a green light to two surveillance plane models vying for the project, but it asked the Israeli company to ensure it could obtain an export license on par with that of Boeing when it sets forth the terms for the contract, as well as accept a penalty clause if it fails to comply. Boeing has no conditions attached to the license. 
 
Since its elimination from the competition, IAI ELTA has questioned the fairness of the bidding for the project, claiming the country has created a favorable environment for its U.S. rival. 
 
The surveillance plane project is aimed at strengthening the aerial surveillance capability of Korea. 
 
Korea plans to deploy the first two surveillance planes in 2009 and the other two in 2011. The country now depends on U.S. radar aircraft based in Okinawa, Japan, as it has no aerial warning systems of its own.