Stealth Jet DESTROYS $5 Billion

Jet fighter flying through clear blue sky.

A stealth jet that never flew cost taxpayers five billion dollars and spawned a legal battle that outlasted the Cold War it was designed to fight.

Story Snapshot

The Navy’s A-12 Avenger II program collapsed in 1991 after burning through $4.8 billion without producing a single flyable prototype
Defense Secretary Dick Cheney terminated the contract for default, triggering a 23-year legal war over $1.35 billion in repayment demands
Contractors argued the government withheld classified stealth technology they needed to succeed, but state secrets privilege blocked their defense
The Supreme Court ruled in 2011 that secrecy cannot automatically guarantee government victory, leading to a 2014 settlement for just $400 million
The case established lasting precedent on how classified information affects contractor liability in defense programs

When Ambition Met Reality on the Flight Deck

The Navy launched its Advanced Tactical Aircraft program in 1983 with a clear mission: replace the aging A-6 Intruder, a Vietnam-era attack jet bleeding losses to enemy air defenses. The solution would incorporate cutting-edge stealth technology proven in Air Force programs like the F-117, packaged in a carrier-capable flying wing. The wedge-shaped design earned the nickname “Flying Dorito” for its triangular profile. Plans called for 620 Navy and 238 Marine Corps aircraft, with internal weapons bays carrying bombs and missiles deep into defended airspace where the Intruder could not survive.

McDonnell Douglas and General Dynamics won the contract in January 1988 with an aggressive $4.8 billion fixed-price bid covering eight prototypes and full-scale development. The first flight was scheduled for December 1990. Fixed-price contracts shift risk to contractors, a sensible approach when requirements are stable and technology mature. Stealth technology in 1988 was neither. The Air Force guarded its low-observable secrets jealously, and carrier operations imposed brutal constraints on weight and dimensions that land-based stealth aircraft never faced.

The Wheels Come Off Before Takeoff

Trouble surfaced almost immediately. The airframe ballooned past weight targets as engineers struggled to balance stealth requirements with carrier durability and weapons payload. Manufacturing challenges compounded design headaches. By summer 1989, the June 1990 first flight target was already slipping. A critical design review in October 1990 pushed first flight to early 1992, a delay measured in years, not months. Each schedule revision burned money the fixed-price contract could not absorb. A November 1990 government report documented what insiders already knew: serious development problems threatened the entire program.

Defense Secretary Cheney demanded justification for continuing in December 1990. Five billion dollars had vanished into a program with no flight-ready aircraft, no clear path to solving fundamental technical problems, and contractors bleeding red ink on a contract they had drastically underbid. On January 7, 1991, Cheney pulled the plug, canceling the program for breach of contract. The Navy followed with a default termination, the contractual equivalent of firing someone for cause rather than laying them off. Default termination carried a sting: the government demanded repayment of roughly $1.35 billion in progress payments made for work it deemed incomplete or unsatisfactory.

The Courtroom Battle Outlasts the Cold War

McDonnell Douglas and General Dynamics refused to pay, launching litigation in the Federal Claims Court that would stretch across two decades. Their defense hinged on “superior knowledge”: the government possessed classified stealth technology data essential to meeting contract requirements but withheld it from contractors. If the Navy set them up to fail by keeping secrets, how could termination for default be justified? The government invoked state secrets privilege, blocking contractors from accessing or presenting classified information that might support their defense. Courts faced an impossible dilemma—how to adjudicate a contract dispute when one party cannot present evidence without compromising national security.

The case climbed through appeals for years, with the government arguing state secrets justified dismissing contractor claims entirely. Contractors countered that letting secrecy automatically guarantee government victory in contract disputes would eviscerate contractor rights and enable the Pentagon to cancel any classified program without accountability. In 2011, the U.S. Supreme Court sided with the contractors on principle: state secrets blocking a valid defense do not entitle the government to automatic judgment. The ruling forced genuine negotiation. By 2014, Boeing (which absorbed McDonnell Douglas) and General Dynamics settled, providing approximately $400 million in aircraft and services to the Navy—a fraction of the original repayment demand but a vindication of their legal position.

Legacy Written in Legal Precedent, Not Flight Records

The A-12 never defended anything except contractor rights in federal court. No prototype flew. No production aircraft joined the fleet. The Navy patched the capability gap with upgraded F/A-18E/F Super Hornets, capable jets but hardly the stealthy deep-strike platform envisioned. Taxpayers absorbed five billion in sunk costs for technology that fed into later programs like the F-35 and B-21 but delivered zero operational aircraft. The settlement recovered a small fraction, validating critics who questioned fixed-price contracts for immature technology. Cheney’s decision to cancel remains defensible—throwing good money after bad makes no sense—but the default termination accusation proved harder to sustain once courts examined it under adversarial scrutiny.

The broader defense industry absorbed lessons. Fixed-price contracts for cutting-edge stealth programs fell out of favor; the risk proved too asymmetric when government-controlled classified data dictated success or failure. The state secrets precedent constrained how aggressively the Pentagon could wield secrecy in contract disputes, introducing accountability where none existed before. Aviation historians debate what might have been—a carrier-based stealth striker operational in the 1990s could have reshaped naval air power—but romanticism does not change the outcome. The A-12’s real contribution was legal, not aeronautical, establishing that national security secrecy cannot become a blank check to ignore contract law. For a program that never left the ground, that precedent flies higher than any prototype ever would have.