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 and General Dynamics to build a stealth aircraft, the court said.
Chicago-based Boeing, which acquired McDonnell Douglas in 1997, said it will 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 because of serious technical difficulties, the Pentagon refused to approve additional funding, leading the Navy to cancel the program.
In a 29-page opinion, the court explained the contractor's performance history showed that "the government was justifiably insecure about the contract's timely completion."
Both contractors are now required to repay the government more than $1.35 billion, plus interest of $1.45 billion.
Boeing had questioned whether the government owed money to both companies for work in progress when the contract was terminated.
In a statement, Boeing called for an immediate appeal of the court's ruling. Falls Church, Va.-based General Dynamics issued a statement saying it disagrees with the ruling and continues to believe that the government's default termination was not justified. The company intends to seek a re-hearing in the Federal Circuit.