A-12 Going To The Supreme Court As Boeing And General Dynamics Face Last Option

(MoneyWatch)  In June a Federal Court ruled that Boeing (BA) and General Dynamics (GD) owed the United States Government almost three billion dollars over the canceled A-12 program. The A-12 was to be a stealthy bomber flying off of carrier decks as a compatriot of the F-117 used by the Air Force. The two companies and the Defense Department have gone back and forth each winning different court cases and appeals. Now the last appeal upheld the ruling saying the companies owed money to the Government so they are looking at their last resort of appealing to the Supreme Court.

The A-12 program was canceled by then Secretary of Defense Dick Cheney due to cost overruns and schedule growth. The Government claims the money is owed them due to non-performance and over payment. At the time McDonnell Douglas which was later acquired by Boeing and General Dynamics claim that the contract was terminated illegally so money was owed them for work carried out and not billed plus termination costs.

The argument is that only the Contracting Officer (KO) and not the Secretary of Defense can end a contract either for cause or needs of the Government. Originally Federal Courts ruled in the favor of the contractors but that was overturned by further courts. The case has been on-going since the early Nineties.

The cancellation of the program was a major scandal at the time as the Program Manager and some of his subordinates were fired for basically working to cover up the actual state of the program at the time to Navy and Defense Department officials. This led to stronger reporting and review requirements for defense acquisition programs in general. The A-12 contract never did deliver any aircraft to the Navy before it was canceled.

The case if agreed to be heard and decided by the Supreme Court may lay out some new rules on how a contract must be terminated. There is no guarantee though that that Court will take on the case.