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Jan. 27, 2014: After a 23-year seesaw legal battle in which both sides were at some point “up” by more than a billion dollars, the Navy and its A-12 contractors have put the A-12 controversy to rest with a settlement. 

Under the deal announced by the Justice Department, Boeing will give the Navy three EA-18G Growler electronic warfare jets and convert some of its Super Hornet multiyear contracts to fixed-price. General Dynamics will give $200 million worth of credits on the DDG-1002 guided missile destroyer project. The Navy pays nothing in return, other than giving up further claims on the project. Air Force officials were not able to say by press time whether it will receive any funds due to the fact the service was partnered with the Navy on development of the A-12.

“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,” Navy Secretary Ray Mabus said. “The litigation was protracted and difficult, but it saved the Navy billions of dollars.”

Over its 23 years, the case involved five trials and went as high as the Supreme Court; three appeals sent the case back to lower courts or vacated earlier decisions. The deal was struck in July of last year, but was kept quiet pending Fiscal 2014 authorization from Congress that the Navy could “keep and retain” settlement funds. Boeing said it would count the payments as a pre-tax writeoff.

The A-12 was a highly secret stealth airplane program started in the mid-1980s under the Reagan Administration. It was to be a tandem-seat, two-engined strike aircraft of about 26,000 pounds. Pentagon leaders demanded the aircraft be developed under a fixed-price contract. The then-separate companies of Northrop and Grumman, which teamed for the A-12, ultimately opted not to bid because they believed such a contract was unworkable. The project was awarded to the team of McDonnell Douglas and General Dynamics, which offered a triangular flying-wing design, which acquired the unofficial nickname “Dorito.”

As technical challenges mounted—operational stealth aircraft technology was still in its infancy—costs ballooned and the scheduled first flight slipped by more than two years. Both the Navy and the contractors began keeping two sets of books on the program; one showing how it was really doing, and a fake set which each used in discussions with the other. The contractors feared that admitting huge overruns and schedule slips would put them in costly default; the Navy’s program leaders feared that acknowledging the mounting problems would vacate the fixed-price deal and make them liable for the overages.

The Navy reported to then-Defense Secretary Dick Cheney that the A-12 was on time and on budget, a fiction which he repeated to Congress in his Major Aircraft Review. When the real facts about the A-12 began to leak out through the press in 1990, Cheney ordered an Inspector General investigation. After reading the IG report, Cheney ordered the A-12 cancelled in January, 1991, on the eve of Operation Desert Storm.

The legal dispute started soon after.

The contractors argued Cheney had no standing to cancel the A-12; their contract was with the Navy, and when the Navy followed Cheney’s order, the cancellation became an action for the convenience of the government. That meant they were entitled to termination costs, in their view. The Navy, argued, of course, that fault was with the contractors for failing to perform; though eight aircraft were to be delivered under the $4.8 billion development contract, when the A-12 was terminated, the only physical result was a half-built engineering mockup, and the Navy wanted the $1.33 billion in progress payments back.

Complicating the issue was whether the government was under any obligation to share stealth technology it had paid for on the B-2 bomber, which may have saved time and effort on the A-12. Only late in the effort, a month before the termination, was B-2 data made available. 

When General Dynamics (formerly Convair) sold its aircraft business to Lockheed Martin in 1993, it retained its standing in the lawsuit, believing it to be a moneymaker. When Boeing acquired McDonnell Douglas in 1997, it inherited the A-12 lawsuit as well.

Both sides were ordered to put money in escrow against losing a court decision. Boeing had put aside about $350 million in 1990, which has been collecting interest. A Boeing spokesman was unable to say what the account is worth now, because earnings reports come out soon and the company is not permitted to discuss bottom-line figures until they are formally released. In previous statements on the case, Boeing has acknowledged that its liability could conceivably have been as high as $1.75 billion, or its benefit as much as $1.2 billion, “including interest from June 26, 1991.” 

The demise of the A-12 played a significant role in shaping today’s tactical combat fleet in the Navy, Air Force, and Marine Corps. When the A-12 failed, the Navy at first sought to replace it with the A-X (later the A/F-X) program. When funds and time did not permit replacing the A-6 in a timely manner, the Navy was compelled to enlarge and enhance the F/A-18C/D into the F/A-18E/F Super Hornet.

The A/F-X requirement was folded in with the Air Force’s Multirole Fighter F-16 replacement and the Marine Corps’ Advanced Short Takeoff and Vertical landing AV-8B replacement. The disparate programs were homogenized into the Joint Strike Fighter program, now in production as the F-35A, F-35B, and F-35C. The Air Force never did replace the F-111 with another interdiction/strike aircraft, but did somewhat boost its inventory of F-15E Strike Eagles to take on some of the mission.

The only physical result of the A-12—the half-built mockup—is now at the B-36 Peacemaker Museum in Meacham, Texas. It migrated between Carswell AFB, Tex., and Lockheed Martin’s Ft. Worth plant for several years and now belongs to the Veterans Memorial Air Park. Restorers are trying to raise $6,000  to reassemble, paint and display it.