-Caveat Lector-
http://www.newsday.com/ap/washington/ap525.htm
Cheney Facing Suit Over Contract
by KAREN GULLO
Associated Press Writer
WASHINGTON (AP) -- When Vice President Dick Cheney axed a costly project to
build a stealth jet a decade ago, he was praised for taking decisive action
to cut costs. But the way he handled the cancellation is now at the heart of
a lawsuit that could cost taxpayers $2 billion.
A Republican-appointed federal judge has already said that Cheney, while
defense secretary under former President Bush, forced the contract
cancellation without understanding the proper procedures. The judge also
cited inconsistencies in Cheney's testimony.
''His decision was remarkable, few were willing to make such gusty moves,''
said John Isaacs, president of the Council For a Livable World, a frequent
critic of defense programs. ''But, not to his credit, he didn't follow the
rules when he canceled the program.''
The case, set for trial in May, pits the government against two of the
biggest defense contractors, General Dynamics Corp. and Boeing Co., which
acquired McDonnell Douglas Corp., the other original contractor.
General Dynamics' top executive hopes the new Bush administration might
pursue a settlement. The company's lawyers will not say whether they will
call Cheney as a witness.
''I believe Cheney will be interested in getting this behind him,'' the
company's chief executive officer, Nicholas Chabraja, told investors when
asked to speculate about the case. ''His testimony in this case wasn't one of
his finest moments.''
Cheney will not comment on the pending litigation, spokeswoman Juleanna
Glover Weiss said. Cheney previously has testified he believed it was the
Navy's job to properly terminate the contract.
But government lawyers say they will prove that Cheney acted correctly in
1991 when he refused to bail out the contractors and ended the program to
develop A-12 radar-evading jets.
The government did not get a single plane after pouring $3 billion into the
program.
''We're going to show that he was absolutely right,'' said David Cohen,
director of the Justice Department's commercial litigation branch. ''The
contractors couldn't tell him how much the plane would cost, what it would
look like or when it would be able to fly.''
The government has tried to show the contractors defaulted on their work.
But Judge Robert Hodges of the U.S. Court of Federal Claims already has ruled
that Cheney forced the termination to avoid spending more money, not because
the contractors performed unsatisfactorily.
The judge also said Cheney and his subordinates did not follow the proper
contract cancellation procedures; he ordered the government to pay about $1
billion to each contractor to reimburse the contractors for development costs.
An appellate court overturned that 1996 decision and sent the case back to
Hodges, an appointee of the elder Bush, for a new trial to determine whether
the government was justified in terminating the contract by claiming the
contractors had not performed the work.
Hodges, in his ruling, cited inconsistencies in what Cheney said about his
role in the cancellation. ''Secretary Cheney's own perception of his role in
the termination of the A-12 is somewhat unclear,'' Hodges said.
Cheney told the court his only role was to decline the contractors' request
for more money to continue the project. The job of properly terminating the
contract, he said, fell to the Navy, which wanted to keep the program.
Cheney won praise for his decision, but experts said the issue that could
cost taxpayers is whether the cancellation followed the appropriate rules and
procedures. ''He was sloppy in his actions,'' said Isaacs.
Questions also surround Cheney's description of the program to Congress
before he abruptly canceled the jets.
In March 1990, Cheney told Congress that the A-12 was ''reasonably well
handled'' and there were ''no impediments for completing ... (the) program
within the scope of the current contract.''
But a book due out this spring says declassified documents and interviews
with Defense Department officials show Cheney had been warned the program was
$1 billion over budget before he briefed Congress.
''He was told four times that there were problems and he went out and said
there were no impediments to going forward,'' said James Stevenson, author of
''The $5 Billion Misunderstanding.''
John Betti, who was head of Defense Department acquisitions in 1990, said he
told Cheney in person and in writing about the cost overruns before Cheney
gave his congressional testimony.
Cheney said he found out about the cost overruns months later.
On Jan. 5, 1991, two days before $553 million was due on the contract and two
weeks before the start of the Gulf War, Cheney decided to end the program.
In his earlier testimony, Cheney sought to shift blame for any technicalities
to the Navy.
But Hodges said that by cutting off funds, Cheney ''dictated'' the
termination, forcing the Navy to terminate for default and cut corners that
would have protected the government from legal challenges.
''The A-12 contract was not terminated because of contractor default,''
Hodges ruled. ''The contract was terminated because the office of the
Secretary of Defense withdrew support and funding from the A-12.''
(PROFILE
(CO:General Dynamics Corp.; TS:GD; IG:ARO;)
(CO:Boeing Co; TS:BA; IG:ARO;)
)
AP-NY-02-08-01 0422EST<
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