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Navy loses A-12 jet case
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February 20, 1998: 8:06 p.m. ET
Court orders military to pay $1.7 billion to Boeing, General Dynamics
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NEW YORK (CNNfn) - A U.S. Court Friday ordered the U.S. Navy to pay more than $1.7 billion to General Dynamics Corp. and Boeing Co. for improperly terminating a government contract.
In a statement, the companies said the Court of Federal Claims ordered the government to pay $1.2 billion in damages stemming from the Pentagon's improper default termination in 1991 of the contract to build the A-12 attack aircraft for the U.S. Navy. In addition, the ruling entitles the contractors to interest costs, now calculated at $538 million.
"We were confident from the beginning that when all the facts in this extraordinarily complicated case were known, we would prevail," General Dynamics Chairman and Chief Executive Nicholas Chabraja said in a statement. "However, there are no real winners in this case, which has been one of the most regrettable events in the history of the U.S. defense industry. Today's ruling will only partially offset our loss on this program, which we recorded in 1990."
The Navy had awarded the A-12 contract to the General Dynamics-McDonnell Douglas team in January 1988. In October 1990, the design of the A-12 was formally accepted by the Navy at the conclusion of the Critical Design Review.
However, in January of 1991, the program was terminated for default.
On June 7, 1991, General Dynamics and McDonnell Douglas filed a 19-count complaint in the U.S. Court of Federal Claims, claiming the termination for default was illegal.
Larry McCracken, a spokesman for Boeing said the company was pleased with the decision.
"We're pleased with the final decision of the court," he said. "We expect the government to appeal the judgment, but we expect the court's decision to be sustained."
Boeing's McDonnell Douglas unit had taken a $350 million writeoff in 1990 related to the case. 
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