2 Defense Firms Sue U.S. Over A-12 Jet Pact : Aerospace: McDonnell Douglas and General Dynamics seek more than $1 billion in a dispute with the Navy over the canceled Stealth fighter program.

The nation’s two biggest military contractors sued the government Friday over the Navy’s cancellation of the A-12 Stealth attack jet program, the largest contract terminated by the Pentagon.

The 78-page lawsuit was filed in U.S. Claims Court in Washington by the two St. Louis-based companies, McDonnell Douglas Corp. and General Dynamics Corp., setting the stage for a major legal battle.

It is rare for defense contractors to sue the military over contract disputes, and the lawsuit, seeking far more than $1 billion, was believed to be one of the largest claims filed against the military, industry analysts said.

The Navy in January canceled development of the $57-billion A-12 program, resulting in the layoff of 9,000 workers.

It canceled development of the radar-evading A-12 long before a prototype was ever scheduled to fly because of cost overruns, delays and questions surrounding the ability of the wedge-shaped jet to meet range and payload requirements.

The aircraft carrier-based Stealth jet had been expected to be the centerpiece of naval aviation for the early 21st Century and was to have replaced the aging Grumman A-6 Intruder.

Saying the two companies defaulted on the joint $4.78-billion development contract, the Navy demanded the return of $1.35 billion in payments it had made.

The lawsuit argued that the two firms were entitled to keep that money.

The companies also said they should be allowed to recover price adjustments, profits, cancellation expenses and receive other unspecified damages for breach of contract.

One basis of the suit is that the Navy’s fixed-price contract was an inappropriate method for the companies to work under in developing a plane with new technology.

The suit alleges that the government eliminated many early risk-reduction efforts, including studies and tests that were required by law to justify award of a fixed-price development contract.

The suit also alleges that the government set specifications that it knew were unattainable, that it failed to provide critical data from other classified programs, that it interfered with the contractors’ ability to execute the contract and failed to apply available funds.

There were a total of 19 claims. Parts of the suit were kept secret out of concern by the government that secret information may be revealed.

According to a joint statement by McDonnell Douglas and General Dynamics, “The companies are confident this matter can be resolved in a fair and equitable manner that will recognize the significant contributions made by this program to technologies necessary for naval aviation.”

Analysts said it was one of the largest, if not the biggest, claim against the government by a defense contractor, eclipsing the claims by General Dynamics for Navy submarine contracts in the late 1970s.

“They aren’t going to get all of that,” Prudential Securities Analyst Paul Nisbet said of the companies’ claim. “I would guess they’ll end up settling for something on the lines of 50 cents on the dollar.”

The Justice Department, which will defend the military in the case, had no immediate comment.