South Korea is reportedly considering legal action against BAE Systems for its failure to implement a KF-16 upgrade at an already agreed upon price.
According to Korea Times, it will seek to force the company to pay any extra costs the upgrade will entail.
"We are reviewing the legal details," the Defense Acquisition Program Administration (DAPA) told The Korea Times, not ruling out a lawsuit. The damages could reach tens of millions of dollars.
"If we conclude its demand for additional funds for the contract is a breach of that contract, we could confiscate its bid bond," the official added.
DAPA selected BAE Systems over manufacturer of the F-16 Lockheed Martin in 2012 as prime integrator to take charge of software and hardware upgrades for 134 KF-16 aircraft.
However, since then, the US government has reportedly demanded another $471 million for unspecified added “risk management,” while BAE is reportedly requesting another $282 million to cover a 1-year program delay.
DAPA would have to turn to Lockheed at an additional cost should BAE fail to deliver. The delay in the program and extra costs should be shouldered by the party that reneges on the deal, according to DAPA.
At a National Assembly audit Monday, DAPA chief Lee Yong-geol said, "A legal review is currently being conducted regarding the possible cancelation of the deal."
According to Lee, the best deal is the current one, but the agency is reviewing various options, including the worst-case scenario.
He added that the acquisition agency has yet to contact Lockheed Martin, as it still hopes to work things out with BAE.
"The final decision will be made next month," he said.
BAE had previously said that it stands committed to its firm-fixed price contract for the scope of work defined by the U.S. and Korean governments.