The US Defense Security Cooperation Agency (DSCA) has approved South Korean 134 KF-16 fighter jet upgrade program for an estimated $2.5 billion (2.87 trillion won) Wednesday.
South Korea however is not happy about the contract as the estimated cost is far higher than 1.75 trillion won (US $1.5 billion) it is willing to pay.
"The State Department has made a determination approving a possible foreign military sale (FMS) to the Republic of Korea of the KF-16 upgrade program and associated equipment, parts and logistical support for an estimated cost of $2.5 billion," US DSCA said in a statement Wednesday.
South Korea had signed a $1.5 billion deal with BAE systems and Lockheed Martin for upgrades and system integration of KF-16 fighter fleet in 2012.
However the deal was cancelled due to a risk reserve to offset changes to the upgrade issue cropped up. The US and the British defense company had asked for a combined 800 billion won (US $696 thousand).
The upgrade contract includes modular mission computers, active electronically scanned array radar, friend or foe identification system and positioning and navigation system for the fighter jets.
It also wants to purchase precision weapons such as laser joint direct attack munitions and bomb tail kits.
In response to the DSCA's estimate, Seoul’s Defense Acquisition Program Administration (DAPA) has said that it is not a confirmed cost.
"The total will be finalized through negotiations between the Korean and U.S. governments, which is a procedure of the government-to-government FMS," DAPA spokesman Col. Kim Si-cheol was quoted as saying by Korea Times news daily Thursday.
"Although I cannot unveil a specific amount now, the two sides are in talks to reduce the upgrade cost," Kim said.
DAPA has last week filed a counter suit against US defense contractor Raytheon and the UK's BAE Systems demanding to pay $60 million for their failure to implement a KF-16 upgrade deal.
The lawsuit was filed with Seoul Central District Court last month to ask BAE pay $43.25 million and Raytheon $17.99 million.