“Our global customers and stakeholders” = “the US Congress”
Yeah Boeing, that’s really going to solve your problems. How about you move HQ back to where your engineers are? Then maybe every project won’t be an engineering clusterfuck.
I think we can continue to expect some big Boeing bailouts disguised as purchases from the US government. Though times do seem to be somewhat a’changin’, with NASA at least calling cost-plus contracts “a plague”:
Yes, having your corporate headquarters and your engineering and manufacturing facilities on opposite coasts is always a great idea! Always a great help with maintaining well-informed management!
Well, the lesson learned was we need to be even closer to the people who can lean on the regulators to let us do things our way. And we owe our existence to government defense and space contracts so we need to be close to those who set aside the funds to award those contracts.
It’s amazing how pathological their management is at this point. It doesn’t take a genius to recognize that Boeing has some very serious problems that started when Boeing became a less engineering-centric company. The HQ moves away from their engineering centers is as much a symptom as a cause. And yet they choose to intentionally make things worse in this regard.
At this point, it should be assumed that their executives have no interest in the continued success of Boeing’s product lines as long as they can walk away with enough money. But I wonder why their board of directors cannot see the problems with their strategy.
Boeing used to have a reputation for engineering excellence, especially compared to their main competitor at the time, McDonnell-Douglas. Now, they seem to be (pardon the expression) in free-fall.
Boeing is a broken company. It will take a lot to fix it.
This article is a couple of years old, but still worth reading.
There’s a new Netflix documentary on the same subject. Haven’t seen it myself, but I understand it’s quite scathing. And the fact that Boeing hasn’t sued for defamation is telling.
But that’s not how it works. Someone gets an idea, someone else decides it’s a great idea, then it’s dumped into engineering, where they’re told to do it. Doesn’t matter if it’s a stupid idea. Doesn’t matter if it won’t solve whatever issue there is. Doesn’t matter because engineers are supposed to make it happen. Not determine why it should happen or if it even makes sense - they should just shut up and do it. Right?
There aren’t enough eyerolls…
Yeah, my husband and I both worked as engineers for gov’t contractors. As long as the money keeps flowing, the engineers are supposed to keep charging to the project.
I don’t disagree, but how does this “being close” thing work? Does the company expect it’s executives to become part of DC’s social stratum where they can influence decision-makers? I am curious how this actually is expected to work for the company.
You had me in agreement up to that last point. “Cost plus” contract structures—which aren’t a single type of contract structure but cover a wide array of structures such as cost plus fixed-fee (CPFF), cost-plus-incentive fee, and cost-plus-award fee (CPAF)—are not fundamentally a problem, and in fact the press to move to firm fixed price (FFP) contracts for all manner of government contracting whether it is basic support services, mainline production, or research and development, has created enormous problems and increased costs as bidders have learned to lowball contracts but leave out critical items that they know will be required to make their product usable, and then come back with contract ‘adjustments’ or follow-on contracts for “out-of-scope’ work that dwarfs the cost of the original contract. (I literally watched a contractor insist that a guidance system was “out-of-scope” for the space launch vehicle they were contracted to build, and because the maroons who wrote the RFP and evaluated the bidders didn’t get adequate technical support to tell them that they left out that critical feature when cutting and pasting from previous RFPs, they ended up paying through the nose for a system the contractor had literally sitting on the shelf. And no, it wasn’t Boeing.)
The problem with these kinds of abuses and deficiencies in government contracting is that government agencies are not doing a good job managing these contracts in putting in good requirements and statements of work—oh, excuse me, Performance Work Statements because what this process really needed was a new set of acronyms for the same exact thing—into contracts, not doing good technical evaluations of RFPs and accepting contractor’s word for their capabilities even when they have demonstrated anything but, and most importantly failing to manage the awarded contract and hold the contractor’s feet to the fire and often reward them for incompetence and malfeasance by giving them contract extensions and additions because for fear that the failure of that contractor will reflect badly on the government.
I am currently watching contractor after contractor working to FFPs for ‘commercial’ launchers that are not much more than vaporware in terms of actually meeting the required capabilities flounder and fail, with the government reps throwing their hands up and saying, “How could this happen? You guys said that you could deliver payload X to orbit Y by time T!”, and somehow not recalling the last time a contractor made and failed to do practically the same thing. It is like Charlie Fucking Brown and Lucy Van Pelt with these turdbrains. (And no, your favorite contractor is not immune to this; every commercial contract I’ve seen in the last ten years has been “plused-up” because the contractor was running out of funds.)
As for Boeing, while it can be argued that part of the problem is that there isn’t adequate competition, that is also the government’s fault in not only allowing large aerospace concerns merge or acquire one another but in actually encouraging (and in a couple of cases, mandating) it because they feared that there wasn’t enough work in the post-Cold War economy to sustain the industry as a whole. As a result the aerospace world is more consolidated than chain restaurants and news media, and the only place for new entrants to come in is act the very low end because even if a company can get enough venture capital funding to produce a large class launch vehicle they’ll never match the lobbying influence of Boeing, Lockheed, Northrop, or (yes, they lobby, and lobby hard) SpaceX.
Boeing is a perfect example of a company that is perceived as being “too big to fail” even though it is constantly failing despite being given preferential treatment (see the KC-46 debacle as an example of an RFP being rewritten in midstream to favor them), but part in parcel of that is that the contracting agencies are not holding the contractor to the letter of the contract, and from that standpoint it really doesn’t matter what the contract structure is. Quite frankly, it is much easier to put pressure on a company working a CPAF and sincerely threaten to withhold the award fee (which is the main profit line) versus FFP where the contractor has notionally completed all milestones even if their product will fall apart before it gets five meters from the ground.
Because at this point, the Board itself sees its function as making sure they do walk away with enough money. So you fire a CEO that led the company into a tragic embarassment and loss of sales… but don’t fix the structural causes. Because after all, the intent WAS to make a couple of more sales. Doing the Right Thing means that some times you need to deliberately walk away from money on the table right now, which in modern corporate capitalism is the equivalent of Blaspheming the Holy Spirit.
Honestly, the benefit to Boeing in terms of being able to schmooze politicians and defense contracting officials is very minimal. Mitch or Chuck aren’t going to care that they saw the CEO of Boeing at the Kennedy Center Honors, but they’ll know to the dollar how much Boeing’s PAC has contributed to Republican and Democratic candidates. And contracting officials are bound by rigorous ethics rules.
I assume this is the same mercenary “local and state incentives” money grab as back when they moved to Chicago.
It might not be on their radar, but the location of a company’s headquarters is relevant to federal diversity jurisdiction for civil suits. If I wanted to sue Boeing in state court rather than federal court, (something many plaintiffs prefer for various reasons) I have to do so in their home state. I’m guessing (don’t really know) the state courts in Virginia are better for defendants than state courts in Chicago.
This pretty much sums it up. Companies that start out making widgets will often, over the course of time, become companies whose primary industry is fleecing the taxpayers. Canada has Bombardier, for example.
I would recommend… not watching it. It’s disappointingly shallow, especially if you’ve read a few long form articles on Boeing’s restructuring and how it contributed to the 737 MAX disasters - you’ll learn nothing and be bored by it. It’s a subject that really merited a miniseries to dig in to it.
Hmm… I notice it’s the same general location that just the other year incentivized Amazon to move in so I wouldn’t put it past them that Arlington has a campaign up to become the new Big Corporate HQ location to move into.
There’s a maxim for pilots, “fly the airplane.” That may sound obvious, but when you’re on final approach, and the lights that indicate your landing gear is down and locked don’t come on, what do you do? You could go into a holding pattern, diagnose the problem, and try to fix it, etc. And you could wind up flying in circles until you run out of fuel. When something goes wrong, don’t get so distracted that you forget to “fly the airplane”.
I hear too much from Boeing about managing strategic alliances, and leveraging global supply chains. Someone needs to slap them across the face and say “build the airplane!”
You make many valid points, but while you can probably guess my personal attitude toward cost-plus contracts, what I find more important here is that the NASA administrator is railing against them.
I suspect you’ll agree that Bill Nelson is among the most cynical of politicians, and this shift does not represent any personal revelation of his, if indeed he has any real ideas at all. Nevertheless, he’s making public statements to the effect that fixed-price contracts are superior to cost-plus (and you may well argue that the situation is far more complicated–I’ll just say bring it up with him).
And, well, it’s easy to see that Boeing is having trouble adjusting to this new structure. No one forced them to bid Starliner for Commercial Crew; they set their own milestones. And yet here we are, with them making rookie mistakes and being years behind. And it’s not just the funding at play here, but the nature of the performance criteria: objective milestones (like, safely docking with the ISS) rather than fuzzy, subjective performance awards that get juiced.
This feels like a bad contract to me. The greatest advantages of fixed-price contracts come from giving the provider flexibility in how the objectives are met. When I hire a taxi, I don’t stipulate that the car must have spark plugs. I have high level criteria like the ability to safely transport me for X miles. The details should be up to the provider. Yes, a guidance system is likely a requirement in practice-but hell, the Japanese put a satellite in orbit with a rocket that had no guidance system. Not exactly recommended, but…
Gwynne Shotwell does an excellent job here. Regardless, I try to judge the hot dogs based on how they taste, and not think too hard about how they were made. And in this case, SpaceX is doing very well and Boeing not so well.
But of course Commercial Crew is just one topic that happens to be of personal interest. Boeing is also whining about their Air Force One contract:
This might actually be one of the few decent deals that the Trump administration made. Poor Boeing, losing $1.1B on a fixed-price contract. I wonder if they got strong-armed into that, as some kind of quid-pro-quo for some other bloated contract? I can only wonder.
Yes, it was a bad contract that allowed a contractor to provide a launch vehicle that had no guidance system. But that is exactly the point; a badly written or poorly managed contract is a bad contract regardless of the structure. Somewhere along the line someone got the bug that “firm fixed price” (FFP) contracts are a fix-all to all problems with bad contract management which is such an utterly misguided notion that I wonder if it wasn’t actually perpetuated by the very contractors who now make such a meal of “plus ups”; those being the contract addenda or follow-on contracts on which the “low bidder” contractors make their exceptional profits by declaring important items out of scope of the original contract.
I don’t know what your direct experience is with government contracting, if any, but I’ve been dealing with this for over twenty years now, and by far the worst trend I’ve seen is the drive to make everything an FFP contract has been utterly destructive to good contract management. Don’t get me wrong; the government program managers love it because it means they don’t have to do much work to oversee the contractors at a detail level, and when the contractor technically meets their milestones even though nothing they have produced is actually workable, they throw their hands up and say, “But it’s firm fixed price and I can’t do anything about it,” (which is technically not true—they could absolutely refuse to give the contractor a pass on not meeting entry criteria and not satisfying exit criteria to a milestone review—but do not because of all of the noise it would create with “contracting”, i.e. the Procuring Contracting Officer who holds all real authority over contract fulfillment in such cases).
When most performance contracts were the supposedly dreaded “cost plus” (incentive fee or award fee, CPIF and CPAF respectively), the program manager could actually judge the performance regardless of whether the contractor technically met a milestone, and deny them their fees upon which profit was based. I worked under a CPAF contract for years and getting that crucial 97%+ rating to get the complete award fee was highly motivating versus doing just enough to meet technical milestones. FFP contracts have their place when it comes to build-to-print or well defined services but are often both limited and easy to exploit when it comes to work that requires development or requirements that may change due to unforeseen issues.
The idea that contracts should only be managed by the kind of high level requirements that you identify is also problematic; it is that sort of thing that allows contractors to get away with declaring that vaguely worded high level requirements do not encompass the complete scope for a particular capability. I am right now dealing with a (not to be named) new entrant contractor which was contracted on a commercial fixed price contract to provide launch services under the assumption that they would be able to provide their advertised capabilities which were at that time only a paper design. The contractor has since suffered predictable weight growth and to compensate has increase their propulsion system requirements to a point that is nearly physically impossible to meet. The government’s response? They’ve sunk so much into this contractor so far that it would only make sense to give them more money and time while relaxing mission requirements, which isn’t even a wrong attitude if there were good reason to believe that the contractor could meet their revised capability estimates even though there is absolutely no reason to believe that they will. I’m sympathetic to a contractor not wanting DCMA all up in their business double checking quality at every step during a developmental phase, but if you are having a custom car built for your application it behooves you to walk into the shop once in a while and see how the work is progressing rather than just taking someone’s word that it’ll be purring like a fat cat any day now.
Your favorite company, BTW, is the king of plus-ups; without going into details, SpaceX has managed to get tens of millions of extra dollars on missions for doing what is actually very little additional work, and the apparently popular notion among the space enthusiast crowd that the manifest costs they state on their website is everything a government or commercial customer pays is absolutely false, as they will charge for a wide array of ‘additional’ services that are actually basic requirements for most payloads such as cleanroom integration processing, health & status monitoring, or additional CLA cycles. They’re still a bargain compared to ULA, but again, it was the government itself that deliberately eliminated competition by forcing the major contractors into that joint venture and then not taking the analysis done by SETA support to force the contractor to reduce their excess costs. ULA is very much a creature created by the very inefficiencies of government contracting as it currently stands.
This notion that the government is the problem and should just get out of the way of commercial contractors who will work it all out on their own is…well, not entirely wrong because every tine the Aerospace Corporation crew rolls in you can see the work just grinding to a halt while the contractor has to educate them on fundamentals. But as a ‘caretaker’ of taxpayer money (and debt, because to be frank the entire aerospace industry is funded on public debt and venture capital) the government representatives should be doing due diligence to see that they are not being sold a bill of goods. The pooch has been thoroughly screwed in this regard so many times that you would think that someone would realize that the best way of managing contractor success is to let them do things as they would like but ensure that there is adequate visibility such that independent technical experts can review and provide assurance that things are or are not progressing as expected and risks are being adequately identified, presented, and resolved as best possible. This blind trust that a contractor will do everything that it should without cutting corners is a philosophical notion at odds with the reality that companies exist to maximize profit which means minimizing expenses, especially if “expenses” mean admitting errors or having to delay a mission at their own cost.
I can see your viewpoint here, but externally it looks like a system which is very easily gamed. What I see is an endless series of reports like this one:
Boeing received evaluation scores of “excellent” or “very good” since 2014, with the exception of the most recent period included in the report of October 2017 through September 2018, when it received a lower score of “good.”
I can’t see any universe in which Boeing’s performance on the SLS program merits anything approaching “good”, let alone “excellent”. And yet that’s what they were awarded.
If this is a function of lobbying power, then a more subjective system probably works better at a small scale, where managers can use their best judgment without undue outside influence. That becomes impossible when you’re talking hundreds of millions of dollars.
I do appreciate that subjective evaluations are often better than objective ones. I experience this kind of thing in my job, where we end up optimizing only those things that can be measured. Things like sustainable design practices can’t be measured and can get short shrift. It’s not always an easy problem to solve, though. You also want to be sure you’re making progress.
I’m sure you have better visibility here, but what I’ve read in their payload processing guide is consistent with that. Not to mention the clear variability in mission pricing, which I’ve seen range from ~$50M to >$100M for a single F9 mission.
But–isn’t that what we want? It’s the Frontier Airlines model–charge for everything. People complain, but all of these things do have a cost.
Not all payloads need a cleanroom, even if it’s set as a requirement. If customers aren’t being charged for cleanroom service, then why wouldn’t they request it? Or–perhaps a payload could be modified to not need a cleanroom for minimal cost. A customer isn’t going to spend $1 on modifying their payload if they get the cleanroom for free, but if it costs a few mil extra then they might start to be motivated.
SpaceX has a strong interest in cost-optimizing their Starlink system. One aspect was to make the payload dispensing system as cheap and light as possible. Normally, a basic (and seemingly obvious) requirement is that a dispenser doesn’t allow payloads to collide. But if you relax that slightly, the whole system becomes easier. So Starlink satellites are designed so that they can gently bump off each other. I don’t know all that went into this–it may have just required extra qualification, with no actual change. Nevertheless, they’ve saved costs because of that.
No doubt. As best I can tell, this is still the attitude that NASA has taken for their various programs, such as Commercial Crew. The projects are divided into a series of milestones, with the next set of payments based on the milestone being achieved. The milestones should be developed in conjunction with the provider so that they are divided up in a way that makes sense for both parties. I would hope that any large program is designed that way, regardless of the contract type.
All of that is not to say that FFP contracts are the end-all, be-all. If NASA’s (or another’s) goal in some instance isn’t just to procure a service but rather develop a new provider–then FFP may not be the best way. I have no problem with funneling some money to new providers even if the expected return is negative. Part of NASA’s mission is to promote American aerospace industries. They can provide funding that even venture capitalists might find too risky (or have too little upside).
Ho hum, Boeing is saying their valve problems are Aerojet’s fault, and vice versa. No surprises there. What did come as a surprise was this little blurb at the end:
The feud with Aerojet is not Boeing’s first Starliner subcontractor quarrel. In 2017, Starliner had an accident during a ground test that forced the president of a different subcontractor to have his leg medically amputated. The subcontractor sued, and Boeing subsequently settled the case.
Eric Berger (Ars Technica space reporter) tracked it down to this case:
as TIM plugged in the capsule release cable, an electrostatic discharge caused one of the pyro activated cutters to misfire, severing the primary restraint lines holding the balloon to the ground. This static discharge sent the capsule hurling upwards instantly and the force pushed the ladder TIM was standing on backwards and away from the capsule. With no other choice, TIM tried to jump away to safety, but there was nowhere to go. His right foot landed hard on the lowboy trailer on which the capsule was mounted, also provided by Boeing, shattering his ankle, before being hit by the ladder and tumbling backwards head over heels the rest of the way to the ground. TIM fell approximately 20 feet, knocking off his hard hat when hit by the ladder, and ultimately landing hard on his neck, back, and hips.
TIM would go on to suffer substantial physical and financial damages, needlessly endure extreme pain and suffering from his resulting catastrophic injuries and multiple surgeries, and, along with KRISTEN, enduring extreme emotional distress from TIM being forced into a below-the-knee amputation of his right leg that left him permanently disfigured or risk death.
Yikes. SpaceX got a lot of crap for their pad explosion of the Crew Dragon capsule, but no one lost their leg because of it. There appears to have been a lot of negligence going on here.