- The Washington Times - Friday, June 7, 2002

Deputy Defense Secretary Paul Wolfowitz is set to play host to a meeting of Pentagon and Navy officials to approve a settlement in one of the largest and longest-running lawsuits in Pentagon history.
The decade-old case involves the Navy and two giant defense contractors that originally sued the Pentagon over then-Defense Secretary Richard B. Cheney's decision to cancel the in-development A-12 attack jet.
The Navy, General Dynamics Corp. and the Boeing Co. have agreed in principle to a settlement that would require the contractors to pay the federal government more than $2 billion. It would come in the form of paying contract costs out of pocket, providing free logistics support for deployed weapons systems and giving the Navy and Army four Gulfstream jets for VIP travel.
In the lawsuit, the contractors had sought $2.6 billion in business costs, while the government said it was due $1.35 billion in unspent "progress payments."
The companies' legal position weakened last year, when a Court of Federal Claims judge ruled that Mr. Cheney, who is now vice president, acted correctly in canceling the A-12 because the program fell badly behind schedule. The judge said no cash award was due the firms, who then took the case to the U.S. Court of Appeals.
The purpose of the Pentagon meeting, which could come within days, is to persuade Mr. Wolfowitz to approve the deal and notify the Justice Department of the Pentagon's position. Defense sources said they expected him to agree.
"This is a win-win for the Pentagon and the companies at a critical time in our war against terrorism," said a senor congressional staffer who has been briefed on the deal.
Defense sources said it appeared the Pentagon had dragged out negotiations to try to win more concessions. Just two weeks ago, the companies sweetened the offer by $200 million.
Pentagon officials who favor the deal say it will help the Navy afford two major weapons systems: Boeing's F-18 Super Hornet, the plane selected to replace the A-12, and General Dynamics' new Virginia-class attack submarine.
The Navy plans to buy 232 F-18s for $9.4 billion. With the settlement, the Navy would save more than $700 million off that estimate, defense sources said. The estimated saving on the submarine program is $575 million on five vessels.
With no settlement, the officials argue, the case would likely drag out in the appeals courts for years. This would mean President Bush's military-transformation program would miss out on more than $2 billion in benefits.


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