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Supreme Court Takes Up A-12 Case

By Colin Clark Tuesday, September 28th, 2010 5:37 pm
Posted in Air, Naval, Policy

Hard as it may be to believe, a court case that traces its roots back to the time when Dick Cheney was Defense Secretary will be considered by the Supreme Court. The case involves the A-12 fighter program, for which the government says Boeing and General Dynamics owe it almost $3 billion (including interest).

The court combined cases filed by the two companies, according to the New York Times and Bloomberg. The A-12 began with a 1988 contract to build the Avenger aircraft. The Navy cancelled the contract three years later and said the companies owed it $1.35 billion.

The contractors refused to return the money and sued. The government, they said, had not shared classified technology and that led to program delays. The government used the state secrets privilege to explain why it could not present arguments in court refuting the companies claims. An appeals court ruled against the contractors.

The stakes are high for everyone in this case. Boeing has said the company could owe $1.7 billion. General Dynamics has said it may owe $805 million. And the government must defend its right to invoke the state secrets privilege, which has been an increasingly important legal principle to the government.

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	Byron Skinner September 28th, 2010 at 5:21 pm Good Evening Folks, To POG. A good and informative post. ALLONS, Byron Skinner
	Pennst98 September 28th, 2010 at 5:48 pm WTF? 22 years to figure out who owes whom? I don’t even know what to say to this one other than if guilty both companies should have to pay with interest. Ridiculous…
	NavAirDenizen September 28th, 2010 at 5:55 pm The USN’s position is you have to pay back the money and you can’t tell anyone why you think you don’t have to pay it back.
	POG September 28th, 2010 at 10:02 pm Dick Cheney is the gift that keeps on giving. The A-12 termination had nothing to do with contractor performance. Recall that this was 1991. The Berlin wall had fallen and there was little need for a carrier based stealth aircraft optimized for nuclear deep strike on the Soviet Union. Cheney needed to pay the bills for the first gulf war. It made perfect since to terminate a program that was only useful for nuclear deep strike. Cheney’s dilemma was that termination for convenience cost big bucks up front as GD/MCAIR were entitled to recover their costs at that point. And the contractor’s unreimbursed costs were huge. Each company had put in $600M apiece for the DEM/VAL design work leading up to contract award. There was another $2B in cost growth driven by NAVAIR directed changes plus the failure of NAVAIR to deliver qualified stealth material data and models from the B2 program. The basis of estimate for the A-12 development was that the US govt would provide the B2 data to GD/MCAIR vs. pay for development a second time. But the USAF was unwilling to play and prevented the transfer of that expensive development data. So GD/MCAIR had to invest extraordinary sums to recreate that technology. A similar amount was owed to the second and third tier suppliers who put in company funds up front for the DEM/VAL phase and suffered the cost growth resulting from NAVAIR directed constructive changes. Martin Marietta, Westinghouse, Litton etc. Cheney didn’t have the option of just stopping work and letting everybody walking away. The contractors would have kissed his feet in gratitude for stopping the bleeding. But his only tools were termination for convenience, which he couldn’t afford, or termination for cause which obligates the contractors to pay back all compensation to date. There was no middle option. Even though termination for convenience would have yielded large savings in the out years by forgoing production, Cheney spitefully decided to screw the contractors. NAVAIR advocated continuing the program and claimed that the program was well run. 18 months behind schedule is not bad in the context of all other US govt development programs. A-12 would have been an outlandish bargain compared to F-22 and B-2 which took decades and tens of billions to complete. Additionally, the Cheney spite drove the termination to be rushed in order to pre-empt a $500M progress payment due the contractors the next day. NAVAIR did not acquit itself very well either. Their cluelessness extended to the organization wide belief that there was no risk to the A-12 program as the development was fixed price. This resulted NAVAIR leadership actively encouraging their personnel to pile on the constructive changes. NAVAIR thought the changes were all free and had no idea that change destroys cost and schedule of development programs. The US Govt is clearly guilty of malfeasance in the termination for cause of A-12. The disappearance of the threat and the need for money are not grounds for cause. Eighteen months of schedule delay given massive NAVAIR directed change, plus the failure to deliver agreed to stealth technology is hardly grounds for cause. Eighteen months of schedule delay in the context of F-22 and B-2 is quite excellent performance. But the Govt cannot afford to lose this case. This would set a precedence which would allow many other contractors to recover damages suffered during the abuse of fixed price development contracts used by the DOD during the 1980’s. So DOD’s best defense 20 years after the fact is to claim state secrets privilege. DOD has repeatedly lost A-12 judgments over the years when the trial was based on the facts. This all illustrates the fact that incompetent, self serving, dishonest officials are not confined to the contractor sector. Sometimes the USG screws the contractors because that’s just the most expedite vs. the right thing to do. The A-12 termination was an early glimpse of the Cheney pattern of abuse of govt power and flat out dishonesty.
	William C. September 28th, 2010 at 10:26 pm GD and Boeing (McDonnell Douglas at the time) are right about one thing. There was a very real lack of information sharing between the A-12, ATF, and other stealth programs.
	Airplanejim September 29th, 2010 at 12:59 am The gov. lost the first case based on the facts and won the second case based on the State Secrets defense, in other words “We don’t have to tell you why we terminated you for cause and you just need to pay contractors.” Having worked in military and government contracting, this is just one example of many of the U.S. government using private contractors resources and intellectual property rights without paying for them. Our bureaucrats are anything but honest.
	Wasthere September 29th, 2010 at 8:24 am Your memory is really jumbled — some of what you say is exactly opposite to what happened.
	Dodbuzz1 September 29th, 2010 at 8:42 am Wasthere, We’d love to have your version of what happened and why — no names, no identifying marks. Send it to me using the Got a Hot Tip link on the front page. Thank you, Colin
	Jose J Clavell September 29th, 2010 at 11:23 am So the Navy wanted to develop an Attack aircraft (Nav speak for bomber) not a fighter to replace the A-6 Intruders. A seagoing version of the B-2 Spirit if you want to call that. The deal felt through because the AF refused to share stealth tech. So DOD canceled instead of looping some AF heads in such a fashion that we still dealing with the crap. Like the say, we have meet the enemy and is us!.
	NavAirDenizen September 29th, 2010 at 5:21 pm I now guard my third copy of Stevenson’s book jealously (having lost it’s two predecessors to folks who “just had to borrow it, but would bring it back”…but I digress). The footnoting and referencing of material are extraordinary. It was an absolute “must read” before this latest twist with the High Court. To POG’s point about Cheney, let me see if I have this right… These folks ordered a Special Meal, they asked for changes to the Menu, they lost their reason for the meal (the Wall came down), they walked into the Kitchen, took a taste of the Soup, claimed they didn’t like it and that there was a Fly in the taste they Swallowed (difficult to now disprove) and therefore they now don’t have to Pay the Bill. By the way, there was a Third Option. Finish the EMD contract and not execute the LRIP and Production Options. The PCO could have reasonably held to cost since this was a Definatized Contract. The USN would have gotten a couple of great Dorito shaped aircraft to investigate Carrier Suitability. Instead, the only ones who benefited were the *&%$# lawyers.
	Ed M. September 29th, 2010 at 8:51 pm You are correct. I was directly involed at the time and remember asking a question about why a JAG requirement was not followed that required sharing (inter/intra service) of technology. Only answer was “not sure, but USAF won’t let us in their programs to obtain this data”. Too bad, …good acft.
	Dave September 29th, 2010 at 9:03 pm Sounds like the Pentagon Wars with the Bradley program. I’ve seen more than one program performing better than contract requirements get canceled because of a new administration or because they needed the money for something else. Every time the government said we were over budget or behind schedule. But that was based on the original budget and schedule not all the revised budget and schedules due to technological changes that were in the revised contract we were working to.
	SLL September 29th, 2010 at 9:24 pm Za-Zing! POG seems to really know the details and Wasthere probably wasn’t.
	donald kunkel September 29th, 2010 at 9:43 pm when the gov’t make or break a contract it contends that there is or perhaps some secret of the deal have been open to a perhaps another contractor of builder of aircraft if the contract is open to out side contractor some of the orginial contract is or has been open ot perhaps a out side contractor is now not with in the scope of the contract thus the is reason for revocking the contract short brief and to the point gov’t contract no# 17–461-731.10 code policy procedure
	scientist September 29th, 2010 at 9:46 pm Yup. Feres was based on a lie by the USAF also. Supremes held that up EVEN THOUGH THEY LIED TO THE COURT WHICH SHOULD NEGATE THE RULING. But they won’t. Would be nice if this national security doctrine is tossed. Don’t believe the lies, there is a Foreign Intelligence Court in DC that could handle this. The do the wiretaps, all the CIA / NSA stuff. I remember at the time it sounded like a skrew job and I was AF.
	scientist September 29th, 2010 at 9:58 pm Cheney was a POS when he was SecDef. All the ‘peace dividend’ crap, all the turning DoD and GS jobs to contractors who lined their pockets like mad. That was the start. We’re seeing what it leads to in Iraq and Afghanistan. He should be sued by DOJ.
	scientist September 29th, 2010 at 10:08 pm Cheney was a POS when he was SecDef. All the ‘peace dividend’ crap, all the turning DoD and GS jobs to contractors who lined their pockets like mad. That was the start. We’re seeing what it leads to in Iraq and Afghanistan.
	scientist September 29th, 2010 at 10:08 pm $175 used at Amazon…
	Jay Citizen September 29th, 2010 at 10:32 pm You got that right; I know several developers who say Cheney out and out stole their intellectual property, even when it wasn’t an obvious case for national security. His company(s) made out like bandits renting it out to the Japanese, and Asian Pacific Rim Mafia.
	CurtKC September 29th, 2010 at 10:40 pm POG has it right. I have the book and also was involved. At the time I was with an EW company. What is really a killer is that this was a FFP contract. NAVAIR thought they had everyone over a barrel; MacAir/GD probably lighted candles when the program was cancelled since they could not have built the aircraft for the price agreed upon. The real problem came whenCheney terminated for cause. Ouch!
	RASCAL September 29th, 2010 at 10:40 pm I know/knew key members of the NAVAIR management team. IN short, they couldn’t have managed a train wreck.
	Gary September 30th, 2010 at 3:34 am Yeah, wait until I have to wait 22 years to get my first Social Security check if I can retire some day…and the only interest will be if I’m dead before the check is cashed.
	Gary September 30th, 2010 at 3:37 am 3 years of R&D, hiring and staffing, and actual work is a good reason to be compensated on a signed contract. Sounds like “I would gladly pay you Tuesday for a hamburger today”.
	Tony C September 30th, 2010 at 6:44 am Dick Cheney proved that you can’t trust a politician named “DICK”!! I didn’t like him as SecDef and I didn’t like him as VP, this man was the problem for any administration that had him. At least he got away with shooting a lawyer, poetic justice I presume!!
	Tenn Slim September 30th, 2010 at 11:01 am Was there, on the old ATF. A sad time, a bad time, laid off lots of folks from that debacle. Good part. The end took me to a far better Aerospace company, and a far beter retirement. D. Cheney did me a favor, inadvertantly. end Semper Fi We WILL Prevail
	Frank September 30th, 2010 at 11:06 am The only winners here are the lawyers and courts. The numbers should suffice. What was spent, to the point of termination and that’s it. Now we have supposed interest. Not so. Everything ended on the date of project termination. If the government paid out too much for start up and it wasn’t spent then give it back. Who cares about who didn’t share what…
	Sue September 30th, 2010 at 11:15 am 22 Years ago…Do the courts have nothing to do …while our Country is falling apart all around us, that they have to dig up a case that happened 22 years ago?
	Sonny September 30th, 2010 at 11:23 am Close to $1.8 billion this is the most costly toilet seat in histor!
	freefallingbomb October 1st, 2010 at 7:37 am Great post, Sue. I totally agree with you! The U.S. Navy claims that the two companies Boeing and General Dynamics owe it almost 3 billion $ (including interest). But the Truth is that the phony, criminal “Great War On Terror” alone costs the U.S.A. 1 BILLION $ D-A-I-L-Y , since 2003 !!! Which means that those 3 billion $ in alleged debts, that were allegedly made 20 years ago, would only buy the U.S. Armed Forces 72 H-O-U-R-S worth of chasing “Bin Laden” and other Fata Morganas, or even less than 1 % (!!!) of their planned fifth-generation fighter planes “to protect the U.S.A. against Chinese air raids” and other utter non-senses, as if this was important or even SANE in the present economical emergency!
	Diomedias October 1st, 2010 at 8:26 pm I remember this thing, from my days at NAVAIR. There were hundreds of people working on it, and they went on travel with no accountability (it was classified TS/Compartmentalized, Need-To-Know). After the Navy spend $6.2 billion, all they had was a plywood mockup. I smelled a red herring and dropped word to NIS that all was not right, and oh, I would like to point out that I was NOT CLEARED INTO THIS PROGRAM! A few months later, it blow open but only to the extent that several USN Flag rank and 0-6s were fired. But what a waste! Where did all that money go? There are many programs, military and non-military, that those funds were could have been applied beneficially. If the government achieves restitution, help injured vets, or do relief missions in stricken countries. $3 billion is only half of it, but that will go a long way in the right place. And does anybody know what happened to the “A-12″ mockup? That’s pretty costly wooden airplane! –Diomedias
	steeltoedboots October 1st, 2010 at 10:43 pm It is amazing how many blank, gray faces on black torsos inhabit this thread.
	DensityDuck October 1st, 2010 at 11:06 pm You weren’t cleared and you told NIS? My, you brave soul. But why are you posting under a screen name?
	first fighter October 3rd, 2010 at 9:22 pm I worked on the full-scale A-12 at MickeyDee’s in St. Louis in 1990 and believe me it was one hell of a lot more than a “wooden mock-up” A/P… That the DOD dropped the ball big time on us still winds my clock.
	first fighter October 3rd, 2010 at 9:30 pm “Cost overruns, Navy spend $6.2 billion, all they had was a plywood mockup..” You SOB, I think about all the friggin off the clock free time that me and my fellow McDonnell Douglas workers did in 1990 to build the A-12 real article and all you cck-scking SOBs can talk about is your own waste… dammit I don’t care look me up… I’ll be waiting… with the GD truth “The truth! You can’t handle the truth!”
	William C. October 3rd, 2010 at 11:55 pm In your opinion were you making significant progress to a prototype? I remember reading how supposedly there were some major difficulties with building the main spars of the aircraft or something like that. Nobody would stand a chance against our naval aviation if we had A-12s and NATFs flying, ah the dreams of the late 1980s.
	TJRedneck October 4th, 2010 at 7:40 am Maybe the A-12 wouldn’t have been canceled if that contract was awarded to Halliburton. Hey Government!, you want $3 billion?, first of all get rid of Welfare, then get rid of the President’s and Congress’s lavish perks/retirement/benefits, then quit sinking billions into the black holes called Iraq and Afganistan. All of that is JUST a start too, instead you go after private companies who create real jobs and help protect this country. But don’t worry, we will start cutting your paychecks this November!
	TJRedneck October 4th, 2010 at 7:42 am I know that some knucklehead will post: “But Halliburton doesn’t build aircraft”, yes I know, it’s called sarcasm.
	DensityDuck October 5th, 2010 at 4:33 pm Why do you post here if you don’t have anything useful to add? If we want nasty sarcasm we can just watch The Daily Show.
	JSFMIKE October 14th, 2010 at 11:49 am One look at the intakes says the design was not stealthy. The inboard edges at the top and bottom are 90 degree turns. Definitely non-stealthy. The bomb bay doors made a 90 degree turn when opened. Same problem. The exhausts are an IR disaster. The canopy was not stealthy becuse there wee no coatings or other things. The radar waves would have gotten in there and bounced all around, before returning to the radar receiver. So many problems, so little time to fix. I think the NAV liked McD but not GD. Plus 1991 was a minnie recession around the world so the gov’t was trying to save money where ever it could.
	An A12 PSO October 29th, 2010 at 9:46 am Some of you know bits and pieces and none of you know what really was going on. Over weight, over budget and behind schedule. The first contractor defense was “Yes we bid on the A12, but the Government knew we couldn’t build it”. Those fired were fired because they assured Cheney everything was on target, Cheney briefed Congress and then they had to let Cheney know that it was Over weight, over budget and behind schedule and he then had to return to Congress and inform them that he had not told them the truth. That’s when he cancelled the program.
	Jay Citizen October 30th, 2010 at 1:08 am Oh Well! On a supposedly black program like that, it would have been obsolete so fast a guy’s head would spin! My brother used to see it flying out in the desert. He said is was weird because it looked like a bar of soap squirting along in the high atmosphere! Maybe that wasn’t the A-12, but it sure was fast! It left puffs of exhaust along the contrail where the exoatmospheric propulsion burst. Maybe someone can correct me here, but he knew it wasn’t a UFO. Many photos have turned up in the media from that time; and he said those were identical. I figure the new exoatmospheric space plane program has already bypassed it — big time! Hell — that is dead too!
	POG November 4th, 2010 at 9:13 pm A few more bits and pieces for your consideration… You are mixing up NAVAIR and GD/MCAIR roles. NAVAIR and Admiral Gentz hid weight, cost and schedule issues from OSD. NAVAIR was embedded with GD and MCAIR teams and knew program status at each reporting level. It was actually GD/MCAIR biz development types that spilled the beans to OSD on schedule when they were shopping around a recce variant. OSD had never seen the baseline production schedule. They had only seen the bogus NAVAIR version. All aviation programs from the past fifty years have been over weight, over cost and behind schedule. A-12 was just less so than most. How bad of shape was/is B-2, F-22 and JSF with respect to weight, cost and schedule? The thing that made A-12 different is that Cheney terminated due to default even though NAVAIR was the main cause of problems due to massive requirement additions. Plus NAVAIR hid the true development status from OSD in order for A-12 to not become a target of opportunity during the Major Aircraft Review. V-22 was terminated due to convenience coming out of that review. Cheney learned that termination due to convenience is quite expensive and chose to stick it to the contractors for the A-12 scenario.

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