[OUTLOOK]Unacceptable delays

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[OUTLOOK]Unacceptable delays

The South Korean Defense Ministry announced on Saturday that it would postpone announcing the winning bidder for its E-X project, or airborne early warning and control systems, until May 2006. The E-X project, estimated to cost 2 trillion won ($1.97 billion), has been pursued since the early 1990s, and is a crucial component of operating and modernizing the military prowess of the South Korean Air Force. The two aircraft in contention are U.S. company Boeing’s E-737 and Israel’s Elta System’s G-550. The Defense Ministry and the Air Force originally sought to select the aircraft by the end of 2004, but the date was pushed back to 2005, after the Elta aircraft’s radar strength fell short of the operational capacity required by the South Korean Air Force.
In the past year, the Air Force has evaluated the capabilities of both aircrafts, while the Defense Procurement Agency negotiated terms of trade. The ministry was to finalize its selection by late this year, but has postponed that once again.
Having watched the Defense Ministry’s procurement process for the E-X project, I find it hard to suppress mounting doubt as to whether the ministry has the capacity or the necessary systems to carry out the procurement of various arms and weapons that require huge budgets. I also have very little trust that the ministry will pursue its “Defense Reform 2020” in an economic and effective manner.
The reason the government gave for delaying a final selection was that both Boeing and Elta did not submit the technical documents of telecommunications equipment that would be installed in their aircraft. Also, in the case of Elta, it has not yet received export permits from the U.S. government for certain facilities to be fitted in its aircraft. But if these ostensible reasons are the true causes of the delay, I have to ask just what the Defense Ministry and the Air Force have been doing for the past year. The delay not only means a glitch in our plan to strengthen the Air Force’s military prowess, but also that the cost of the E-X project will rise, at the minimum, in line with inflation. Also, any additional costs, including the cost for manpower and other expenses that Boeing and Elta spent for bidding, will be reflected in the final bidding price.
From the beginning, the E-X project was fraught with incongruities in its required operational capacity, procurement method and how the entire project was pursued. First of all, the Air Force should have presented a rough estimate of the size of the aircraft to be fitted with radar and various other electronics equipment. In reality, the E-737 and the G-550 differ in size, so have different prices and flexibility. The Air Force should have first standardized the aircraft size, so that comparable aircraft would appear in the bidding. Thus, at this point, the simple method of selecting an aircraft that meets the required conditions at the cheapest price should not apply.
Secondly, the E-X project includes a compromise deal. South Korea, in return for purchasing the aircraft, would receive related technology. Such terms accounted for 51 percent of the total project price. The related technology is mainly cutting-edge electronics and software-related items. I am concerned, however, that in trying to secure that 51 percent figure, we might have inflated the cost of the E-X project without real gains in tandem. My judgement is that we should be more flexible with the target figure so as to barter only for the core technologies we need, so that the total cost is kept significantly lower.
Lastly, there is a problem with the reasons that the South Korean government gave for the delay ― that the two companies did not submit technological data on their telecommunications equipment and Elta had not obtained export permits from the U.S. government. This is a telling example that points to the ministry’s inability to carry out this procurement project. It should have been more strident in determining the winning bidder during the bid period, through such qualifications as whether the bidders met the required operational capacity or had the necessary documents, which in Elta’s case would include export clearance from the U.S. government. When a final selection to a bid is put off for this or that reason, we are going to see unhappy losers who will most likely contest the outcome.
Beginning in the New Year, a new government body, the Defense Project Agency, which will be founded in January, will handle the E-X project. I sincerely hope that the Defense Project Agency will live up to its goal of upgrading the nation’s procurement process with a transparent and logical system, and that the South Korean Air Force will have the airborne early warning and control systems that it needs by next May.

* The writer, a former director of the Korean Institute for Defense Analysis, is the president of the Security Management Institute. Translation by the JoongAng Daily staff.

by Hwang Dong-jun
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