By Ann Roosevelt
Boeing [BA] and General Dynamics [GD] late yesterday separately announced they will appeal to the U.S. Supreme Court after a lower court refused to rehear the companies’ appeal of the Defense Department’s 1991 cancellation of the A-12 Avenger stealth bomber.
The U.S. Court of Appeals for the Federal Circuit yesterday rejected a move by the two companies to rehear the case.
“We are disappointed in today’s [Wednesday] decision,” J. Michael Luttig, Boeing executive vice president and general council, said in a statement. “The Court of Appeals’ decision is clearly wrong as a matter of law and it has broad implications for all forms of government contracting nationwide. As a consequence, I have directed that an immediate appeal be taken to the Supreme Court of the United States.”
In a statement, General Dynamics said it disagreed with the court’s decision and “continues to believe that the government’s default termination was not justified. The company also believes that the ruling provides significant grounds for appeal, and intends to petition the U.S. Supreme Court for review.”
Unstated is the fact that if the final court verdict goes against Boeing and General Dynamics, they will each incur charges amounting to about $1.4 billion apiece. The government wants to recover $1.4 billion in progress payments made to the contractors under the original contract, plus another $1.4 billion in interest.
In June, the Court of Appeals said the government had the right to cancel the contract, upholding the Navy decision 18 years ago to terminate for default a contract that required teammates General Dynamics and McDonnell Douglas–later acquired by Boeing–to develop the A-12 stealth bomber because the contractors failed to make adequate progress in developing the aircraft (Defense Daily June 3).
At issue in the litigation is the manner which the Defense Department terminated the aircraft program and whether the government owed Boeing and General Dynamics money for work in progress when the contract was terminated as well as certain other expenses.
In its June opinion, the court said the government offered the [Navy] contracting officer’s testimony, the contractors’ statements, and contemporary documents as direct evidence. The evidence, such as the contractors’ performance history (e.g., the failure to meet several milestones, including the significant first flight), coupled with the contractors’ dire financial difficulty, which negatively impacted their performance under the contract, shows that the contracting officer was reasonably justified in feeling insecure about the contractors’ rate of progress. Therefore, the government has satisfied its burden to justify the default termination.”
The A-12 was to have been the Navy’s next-generation, carrier based advanced tactical aircraft using low-observable, or stealth, technology. The jet was not produced.