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IMMEDIATE RELEASE

Release No: 614-02
December 03, 2002

DOD BEGINS OFFSET PAYMENTS OF A-12 PROGRAM

In August 2002, the Navy issued a demand letter seeking repayment from General Dynamics and Boeing of approximately $2.3 billion owed the government as a result of the termination for default of the A-12 aircraft development and production contract. The letter also advised that if the companies failed to pay the amount owed, the government would initiate collection of the debt.

Because the Department of Defense and the Department of Justice continued to engage in what we had hoped would be productive settlement negotiations with the companies, DoD did not begin any collection efforts between August and November.

Since it now appears that an equitable settlement will not be reached in the near term, the Under Secretary of Defense (Comptroller) Dov S. Zakheim today instructed the Defense Finance and Accounting Office (DFAS) to begin offsetting against payments due on existing contracts with the companies.