Judge rules Navy broke contract improperly


WASHINGTON -- In a decision favoring two of the nation's largest military contractors, a federal judge ruled yesterday that the Defense Department improperly canceled a contract for a new Navy attack plane in 1991.

The decision by Judge Robert H. Hodges Jr. of the U.S. Court of Federal Claims in Washington paves the way for the two contractors, McDonnell Douglas Corp. and General Dynamics Corp., to be awarded a settlement of about $750 million.

In January 1991, Defense Secretary Dick Cheney canceled plans to build the $57 billion A-12 warplane. The Pentagon said at the time that the contractors had defaulted on the program by failing to "design, develop, fabricate, assemble and test the A-12 aircraft within the contract schedule."

The A-12, known as the Avenger, was a carrier-based warplane that was 18 months behind schedule and more than $2.7 billion over cost, by Pentagon projections.

The Defense Department had said it would demand repayment from the companies of $1.35 billion paid to them for work that had not been done. McDonnell Douglas and General Dynamics vowed to fight the claim in court.

In his single-page ruling issued late yesterday, Judge Hodges said: "Testimony and other evidence at trial showed that the A-12 contract was not terminated because of contractor default. The contract was terminated because the Office of the Secretary of Defense withdrew support and funding from the A-12."

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