A 23 Year Long Multi-Billion Dollar Long Contract Dispute Settled

And, surprise, surprise, it is a sweetheart deal for the defense contractors: (paid subscription required)

After more than two decades and numerous attempts at a settlement, the U.S. government finally agreed to accept $400 million from General Dynamics and Boeing in the dispute over the Navy's cancellation of the $4.8 billion A-12 Avenger II program.

The settlement is a fraction of what the government sought when the lawsuit began, demanding $1.3 billion in restitution ($2.2 billion in 2014 dollars) for money spent on the stealthy carrier-based aircraft program that had yet to deliver an aircraft. And it is even smaller when compared with an agreement for $2.9 billion that was nearly negotiated in 2003.

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The Navy will receive three EA-18G Growlers that will be delivered on top of the 21 Boeing aircraft that were funded by Congress for fiscal 2014 and are expected to be delivered in 2016, according to the Navy.

General Dynamics will provide $198 million in credits to the Navy toward the design, construction and delivery portions of the Zumwalt-class DDG-1000 destroyer.

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The dispute began in 1991, when then-Defense Secretary Dick Cheney canceled the $4.8 billion stealth attack aircraft, run by General Dynamics and McDonnell Douglas, which has since been acquired by Boeing. It was terminated in part due to the government's conclusion that contractors were not meeting cost and schedule targets. The Navy demanded that contractors repay $1.3 billion to the government.

The prime contractors sued the government, arguing the government should make penalty payments because the contract was canceled for “convenience,” not a failure to perform. The case festered in the court system, eventually reaching the Supreme Court.

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In 2011, 20 years after the start of the dispute, the Supreme Court considered the case. The Navy argued that the contractors had not completed the work they had promised. The contractors argued that the government held back classified information about stealth technology that hampered their effectiveness. Ultimately, the Supreme Court sent the case back to the U.S. Court of Federal Claims, where it remained until now.

They met none of their technical requirements, they missed their schedule, and they were hideously over budget, and the punishment for the (now effectively admitted with the settlement) misfeasance and malfeasance is that the contractors get to secure the status of existing programs.