Court says Boeing, General Dynamics owe U.S. $2.8 billion

Boeing Co. and General Dynamics Corp. must pay the government $2.8 billion to settle a nearly two-decade dispute over the cancellation of a Navy contract for a stealth aircraft, the U.S. Court of Appeals for the Federal Circuit ruled Tuesday.

The Navy was justified in 1991 when it opted to terminate the $4-billion contract with McDonnell Douglas Corp. and General Dynamics to build a stealth aircraft, the court said.

Chicago-based Boeing, which acquired McDonnell Douglas in 1997, said it would appeal the ruling.

The aircraft project was ended for being substantially over budget and behind schedule, according to the Justice Department. Both contractors were under a fixed-price contract to develop the A-12, a carrier-based attack aircraft.

But the project faced serious technical difficulties and the Pentagon refused to approve additional funding, leading the Navy to cancel the program.

In a 29-page opinion, the court explained that the contractor’s performance history showed that “the government was justifiably insecure about the contract’s timely completion.”