Navy to Withhold Contractor Funding

DEFENSE

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The Navy has instructed Pentagon bookkeepers to begin withholding $2.3 billion from Boeing Co. and General Dynamics Corp. in connection with an 11-year legal battle over the canceled A-12 fighter-bomber.

The Defense Finance and Accounting Service was told in a letter to take “action as is appropriate.” It was not known when the collections would begin or how many contracts were affected. The collection effort would last at least 18 months, an earlier correspondence said.

The Pentagon demands that Boeing and General Dynamics repay $1.3 billion in progress payments plus $1 billion in interest from the A-12 aircraft program that was canceled in 1991. General Dynamics and McDonnell Douglas Corp., later bought by Boeing, sued. A federal court ruled against the companies in August 2001.