The Boeing Company, General Dynamics Corporation, and the United States have formally asked the United States Court of Federal Claims to dismiss, as part of a settlement, their 23-year old dispute involving the Department of the Navy's 1991 default termination of a $4.8 billion contract awarded to Boeing's predecessor, McDonnell Douglas Corporation, and General Dynamics, to develop the A-12 carrier-based stealth aircraft. Under the settlement, the contractors will provide aircraft and services to the military valued at $400 million , and the government will not pay any money in connection with the contractors’ claims against the United States. The settlement was authorized as part of the National Defense Authorization Act for Fiscal Year 2014.
While performing the contract in the late 1980s, the contractors experienced significant schedule delays and cost overruns. After the secretary of defense declined to recommend that the president provide extraordinary relief to the contractors in early 1991, the Department of the Navy terminated the contract for default and sought the return of $1.33 billion which had been paid to the contractors under the terms of the contract. The contractors brought suit in the Court of Federal Claims to challenge the default termination, to retain the $1.33 billion paid and to assert a claim for an additional amount well over $1 billion, plus interest, for their purported unreimbursed performance costs.
After five trials and three appeals over two decades of litigation, including an appeal to the United States Supreme Court, the courts resolved most of the case. Litigation over one unresolved issue remained in the Court of Federal Claims.
“We are gratified that this decades-long litigation has been amicably resolved,” said Assistant Attorney General for the Civil Division Stuart F. Delery. “The resolution provides value to the government and brings this protracted and complex dispute to an end. The Department of Justice thanks the Department of the Navy for its commitment and support in this long-running effort.”
“We are closing a 23-year-long chapter in the annals of naval aviation and further strengthening, through the contractors’ in-kind payment, the Navy’s capabilities and capacities,” said Secretary of the Navy Ray Mabus. “The litigation was protracted and difficult, but it saved the Navy billions of dollars. We thank the Justice Department for its superb representation over these many years.”
The contractors will each provide the Navy with approximately $200 million in goods or services under the agreement announced today. General Dynamics will provide a credit against a contract to build the DDG-1002 guided missile destroyer, and Boeing will provide three EA-18G aircraft and a credit for converting the existing multi-year contract to a firm-fixed price contract. The settlement was authorized as part of the National Defense Authorization Act for Fiscal Year 2014, which the President signed into law on December 26, 2013.
The government’s litigation team was staffed by the Department of Justice, Civil Division, Commercial Litigation Branch, and the Department of the Navy’s Office of the General Counsel.
The case is captioned The Boeing Co. (successor to McDonnell Douglas Corp.) and General Dynamics Corp. v. United States , No. 91-1204C (Fed. Cl.).