Cheney decision on aircraft could cost Navy billions

A decision that Dick Cheney made as Defense Secretary nearly a decade ago may well cost the Navy $4 billion-almost enough money to buy the service a year's worth of warplanes.

This very real possibility comes at a time when Republican Party chieftains and Cheney himself are hailing the defense savvy and decisiveness of the man selected last week by GOP presidential nominee George W. Bush as his running mate. At Wednesday night's session of the Republican National Convention, Cheney made his first big speech since his emergence as the GOP vice presidential candidate.

Cheney's controversial decision was made on Jan. 7, 1991-when he canceled the Navy's A-12 fighter bomber, a flying wing which was to be the service's main combat aircraft in the 21st century. Cheney said at the time that the A-12's costs had soared out of control.

"The decision terminating the contract for default was not proper," a federal judge later ruled of Cheney's action after A-12 contractors sued the government and demanded payment for past work and penalty payments for the sudden cancellation.

The long-festering case, said to be the most expensive litigation ever over a federal contract, has bounced from the U. S. Court of Federal Claims to the U. S. Court of Appeals, which sent it back to the claims court to determine with more precision how the contractors performed.

That set the stage for a virtual retrial which was to commence in October-just before Bush and Cheney face the voters on Nov. 7. But secrecy issues and other complications have put that starting date in doubt.

A spokesman at the Republican National Convention for the Bush-Cheney ticket did not respond to calls seeking comment. Cheney himself has declined in the past to discuss his A-12 decision while the matter is in litigation.

The key question in the case is whether the contractors did the work they were paid to do or failed to produce. Cheney concluded the contractors had defaulted and should not be given any more money, while Navy procurement chiefs were willing to stick with the stealthy A-12.

So far the contractors are winning in the courts. McDonnell Douglas and General Dynamics, the original A-12 contractors, brought the lawsuit, but McDonnell Douglas has since merged with Boeing. At stake is about $4 billion: the $2 billion the contractors are demanding from the government, and the $2 billion the Navy obligated on the assumption it would get that much from the contractors for the latter's failure to hold up their end of the bargain.

These estimates include accrued interest on the original $1.5 billion the contractors sought from the government and the $1.3 billion the Navy assumed it would get from the contractors. Under federal contracting laws, the money the government might lose would come out of the Navy's budget. Congress just passed a fiscal 2001 Defense appropriations bill that provides $4.87 billion for the Navy to buy a year's worth of combat aircraft.

Not only did Claims Court Judge Robert Hodges Jr. declare in his opinion of April 8, 1996, that Cheney had acted improperly, but Hodges portrayed him as a government official "who was not well versed in government contracts" and who changed his story, first taking credit for canceling the A-12 and then denying he was the one who swung the ax.

In comments that drew little attention at the time, the judge noted that Cheney had told the House Armed Services Committee in 1991 that "I did terminate" the A-12-but later said in court he had limited himself to denying contractors "relief" from the contract terms by advancing them emergency funds, leaving it to the Navy to actually cancel the program.

"It does not matter whether the Secretary was correct about the scope or effect of his decision," Hodges wrote. "Secretary Cheney did not review the contract, and he did not consider contractor defaults or any reasons that might have excused those defaults. He did not weigh the merits of different types of terminations or the option of going forward."

At the time Cheney canceled the A-12, many civilian Pentagon contracting officers cheered, figuring they finally had a Defense Secretary willing to take a stand against the military. Navy aviators, on the other hand, felt Cheney had taken away their future and saddled them with an outdated technology in the form of the F/A-18 E and F carrier fighter-bomber now in production.