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After two decades, U.S. Navy near deal to settle 'Flying Dorito' suit

By David Alexander

WASHINGTON (Reuters) - On the list of Pentagon weapons programs gone awry, the Navy's A-12 Avenger attack jet stands out.

The radar-evading, carrier-based McDonnell Douglas plane was 18 months behind schedule and about $1.4 billion over cost when then-Defense Secretary Dick Cheney canceled the $57 billion program back in 1991.

The case over the triangular-shaped A-12 Avenger, which was dubbed the "Flying Dorito," has been in legal limbo ever since, going all the way to the Supreme Court in 2011 before being referred back to a lower court.

Now, after 22 years, a settlement is on the horizon.

Senator Susan Collins told the Senate Appropriations Committee the government reached a deal this week to end its battle with Boeing Co - which now owns McDonnell Douglas - and General Dynamics Corp.

The plane was designed as a replacement for the Vietnam-era A-6 Intruder attack jet. The Navy and Marine Corps initially planned to purchase more than 800 of the Avengers, with the Air Force considering another 400.

The settlement is conditional, based on the passage of necessary legal language by Congress, and would give the Navy $400 million worth of military hardware "for free," Collins said. The deal is being evaluated by the Congressional Budget Office, she said.

"On Tuesday, the Navy reached an agreement with Boeing and General Dynamics to settle a decades-old lawsuit concerning the cancellation of the A-12 aircraft," the Maine senator told the panel on Thursday. "This is just an extraordinary story."

General Dynamics Vice President Rob Doolittle confirmed a deal had been reached contingent on the legislation referred to by Collins. He said the settlement was an "in-kind" offer of goods and services but declined to estimate the value.

Boeing was not immediately available for comment.

PLANE WAS TOO HEAVY

The Navy awarded McDonnell Douglas and General Dynamics a fixed-price contract worth $4.7 billion in 1988 to research and develop eight of the planes according to a specific delivery schedule between June 1990 and January 1991. The contract gave the Navy the option of purchasing additional planes.

But court records show the companies ran into difficulties meeting the contract schedule from the outset. The plane was built with new composite materials that were expected to reduce its weight but failed to do so, and it ended up being 30 percent heavier than design specifications.

The companies notified the Navy in June 1990 that they could not deliver the first aircraft on time and that the cost of completing the agreement would be well over the ceiling price, court records show.

Efforts to restructure the contract failed and the Navy declared the companies in default in early 1991, with no planes delivered. The Navy demanded the contractors return $1.35 billion in payments.

The two companies countered by suing the government, and the case has been in court ever since. Judgments have see-sawed back and forth between rulings in favor of the companies and the government.

In 2011 the Supreme Court set aside an appeals court ruling that the Navy had been justified in canceling the contract. The court found one main issue could not be litigated because it involved classified information that could not be disclosed in court.

But the case was sent back to a lower court for decisions on other issues, and it has remained there since then.

Collins said the settlement reached this week was good for the Navy at a time of tight budgets and "incredible fiscal challenges."

"The taxpayers benefit because there's no guarantee that the government will ultimately prevail in the ongoing litigation," she said. "And finally there would be a settlement that would end decades, literally decades, of litigation."

(Editing by Dan Grebler)

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