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S. Korea rejects Boeing bid for $7.7 bn fighter deal

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File picture shows an F-15 Eagle fighter jet during an airshow display at the Asian Aerospace 2006 exhibition in Singapore on February 21, 2006.AFP/File

South Korea decided Tuesday against awarding a $7.7 billion jet fighter deal to Boeing Co. for 60 F-15 Silent Eagles, saying it would re-tender its largest ever defence contract.

The deal was aimed at replacing the air force's ageing fleet of F-4s and F-5s and had initially attracted bids from Boeing, US rival Lockheed Martin and the European aerospace consortium EADS.

Boeing, with its offer of 60 F-15 Silent Eagles, had ended up the sole eligible candidate after proposals from the other two came in over South Korea's stated budget, and the firm was expected to be named the winner on Tuesday.

But the state Defense Acquisition Programme Administration apparently decided the F-15 did not meet the air force's current requirements, especially in the light of the nuclear threat from North Korea.

"A majority of the (DAPA) committee members agreed to reject (the F-15) and restart the project," said Defense Ministry spokesman Kim Min-Seok.

Kim said the DAPA had taken into consideration "the current security situation, North Korea's nuclear programme and... the rapid development of aviation technology."

South Korea's position that the bid price should not exceed the 8.3 trillion won approved by parliament was a major source of concern throughout the tender process.

In late August, 15 South Korean former air force chiefs signed a petition suggesting a review of the "irrational" procedure that weeded out the higher-priced Lockheed Martin F-35 and the EADS Eurofighter Typhoon

A major criticism of the F-15 SE was that it lacked the radar-evading stealth capabilities of other modern jet fighters like the F-35.

The government said it intended to restart the entire project from scratch after a thorough review that would include a re-assessment of the budget.

"We believe that the whole review process will take about a year," said Kim Min-Seok.

"We will expedite the process to make sure that the void in our national defence will be limited to a minimum," he added.

A team of officials from the defense ministry, air force and acquisition agency will consider various alternatives, including changing the number of jets, extending the funding and combining different types of aircraft.

South Korea's military procurement needs, especially where the air force is concerned, have overwhelmingly been met by US suppliers in the past -- a reflection of their close military alliance.

But EADS' hopes had been raised in January, when the Anglo-Italian company AgustaWestland beat out US defence giant Sikorsky for a $567 million contract to supply six helicopters to the South Korean navy.

In an effort to sweeten its costlier bid, EADS had offered a $2.0 billion investment in a separate South Korean project to develop its own advanced fighter jets if the consortium is chosen.

And Lockheed Martin had offered to support South Korea's effort to develop and launch military communications satellites.