BAE Challenges Lockheed for F-16 Deals

Defense News

BAE Challenges Lockheed for F-16 Deals

01/23/2012

By Wendell Minnick

TAIPEI — BAE Systems is challenging Lockheed Martin for a $5.3 billion upgrade package for 145 F-16A/B Block 20 Taiwanese fighters.

Lockheed, as the F-16 original equipment manufacturer (OEM), was widely assumed to be the sole bidder for the U.S. government Foreign Military Sales contract, but now  BAE is asking the U.S. Defense Security Cooperation Agency (DSCA) and the Taiwan government for a chance to compete.

BAE is also challenging Lockheed in South Korea for a $1 billion avionics upgrade and weapon systems integration deal for 135 KF-16C/D Block 52 fighters, including installation of the active electronically scanned array (AESA) radar.

Both companies submitted prime integration proposals Dec. 2 to the South Korean Defense Acquisition Program Administration (DAPA). Defense industry sources indicated that BAE and Lockheed have been notified by DAPA that their proposals have cleared the first phase of reviews and further discussions will begin in February with a final decision expected by the second quarter of 2012.

While DAPA’s acceptance of BAE’s proposal clears the first hurdle, the problem will be persuading the Taiwan military and the DSCA to allow BAE to participate.

Lockheed is feeling the heat from BAE in Asia. In response to BAE’s challenge in Taiwan, Lockheed released a document titled “Lockheed Martin’s F-16 Upgrade Value Proposition for Taiwan.”

Lockheed argues that the scope of the upgrade includes changes to all elements of the F-16 weapons system, such as structural, hardware and software of the avionics system, and possibly propulsion. “Consequently, while other contractors may claim to have alternative solutions, Lockheed Martin, as the OEM, is the only entity that has the knowledge, capability, and experience to perform the tasks required by the ROCAF (Republic of China Air Force [Taiwan Air Force]).

BAE is challenging the mantra that “we built the aircraft and therefore we have ‘secret knowledge’ and we know all and see all,” a BAE official said.

Local Taiwan defense industry sources said Lockheed has been in Taiwan “forever” and it will be difficult to persuade some members of the Taiwan defense establishment who have long relationships with Lockheed to allow BAE to compete. “You are threatening rice bowls here,” one source said.

Taiwan secured the release of the F-16 upgrade package in September from the DSCA under the Foreign Military Sales program. The release included an arsenal of weapons that in the past has been considered verboten for sale to Taiwan by U.S. government officials who favored better relations with China. This includes the sale of Joint Direct Attack Munitions (JDAM), which Washington has refused to sell for the last 10 years. The DSCA released the GBU-31, GBU-38 and the GBU-54 laser-guided JDAM in the September notification to the U.S. Congress.

The DSCA release also consisted of AESA radars, embedded GPS inertial navigation systems and ALQ-213 electronic warfare management systems. Also released was a design study for replacing existing Pratt & Whitney F100-PW-220 engines with F100- PW-229 engines.

However, the Legislative Yuan’s budget for the program is about 20 percent less than the DSCA’s $5.3 billion price tag. This could force Taiwan to reduce the quantities of weapons, such as the JDAM, and forgo new engines. The U.S. Air Force sent a team to Taipei to discuss the budget issue during the second week of January.

BAE’s answer is to drive the price down in a bidding war with Lockheed by providing an identical, if not better, package, including a proven ethernet design for the fire control computer, a BAE source said. Lockheed is developing an ethernet option now being ap- praised by the U.S. Air Force operational test and evaluation office.

In its document about the F-16 upgrade for Taiwan, Lockheed argues that competitor solutions were derived from “niche solutions/configurations for U.S. Air National Guard and Air Force Reserve.” The result would “incur significant cost and schedule challenges for this potential solution and would be a ‘dead end’ configuration.”

Despite the long relationship between Taiwan’s military and Lockheed, Taiwan’s legislature issued an Oct. 12 directive requiring that a letter of acceptance for the F-16 upgrade package “shall not specify any specific supplier and that the Ministry of National Defense shall request a U.S. team to perform an open competition.”

This is not the first time Lockheed has been challenged in Taiwan. L-3 Communications competed with Lockheed for a $1.4 billion contract to refurbish 12 P-3 Orion maritime patrol aircraft in 2006. Lockheed won the contract despite L-3’s best efforts and local defense officials, some bitter, said the competition delayed the delivery of the P-3s by two years.