Author Topic: NASA and Boeing working on optimizing SLS stage production at MAF  (Read 10177 times)

Offline JHošek

  • Member
  • Posts: 31
  • Czech Republic
  • Liked: 37
  • Likes Given: 11
Is this a guess, or a fact? Because based on Boeings behaviors on this contract it would be likely they would not be taking responsibility for manufacturing improvements, but I would state such musings as guesses, not facts, until we saw the contract.

"As reflected in table 3, NASA is also utilizing undefinitized contract actions and letter contracts, but is taking steps to mitigate some of the risk. In general, undefinitized contract actions authorize contractors to begin work before reaching a final agreement with the government on contract terms and conditions. Our previous work has demonstrated the risks associated with Department of Defense undefinitized contract actions, which include letter contracts. These actions can allow the government to fulfill requirements that are urgent or need to be met quickly when there is insufficient time to use normal contracting vehicles. However, our prior work has noted that these types of actions can pose risks to the government, such as when contractors lack incentives to control costs before all contract terms and conditions are defined.
For example, NASA awarded Boeing a letter contract—a type of contract with undefinitized terms—for production of two SLS core stages, materials for eight additional SLS core stages, and materials for eight EUS to support future Artemis missions. The program, however, does not plan to definitize this contract until March 2021—17 months after its initial award. NASA officials explained that they awarded the contract so Boeing could order long-lead items for future production in order to keep to schedule. However, NASA did not issue a request for proposal to Boeing to definitize the contract until April 2020 due in part to changing government requirements and the complexity of the proposed effort. Officials told us that while this contract is undefinitized, they are managing the contractor to interim milestones and scope.
While the use of cost type contracts and undefinitized contract actions do pose the possibility of increased costs risks, NASA has taken steps to control long-term costs by planning to transition from cost-type contracting to fixed-price contracting for production efforts as the programs gain knowledge. The SLS program plans to control long-term production costs of SLS core stages and EUS by structuring the SLS Stages Production and Evolution contract to allow a transition from cost-type to firm-fixed-price deliverables. Program officials told us they expect the first series of core stages and EUS under this contract to be produced under cost-type orders, but they expect to eventually transition to the use of firm-fixed-price orders as Boeing develops more expertise and certainty in the production of core stages and EUS. Negotiations for when this transition will occur are ongoing and will be finalized when the contract is definitized. As a result, the point at which the cost risk will shift from the government to the contractor through the use of firm-fixed-price type contracting remains unknown."
https://www.gao.gov/assets/gao-21-105.pdf

Offline Scintillant

  • Full Member
  • **
  • Posts: 242
  • Liked: 630
  • Likes Given: 197
Yes, NASA pays for this optimization.

Why? Honestly.

Edit: To make it more clear, shouldn't it be in Boeing's own interest to pay for the optimization?

Not under a cost-plus contract, which as JHosek points out, appears to be the current cost structure.

Offline VaBlue

  • Full Member
  • ***
  • Posts: 321
  • Spotsylvania, VA
  • Liked: 506
  • Likes Given: 186
The big question is who is paying for the optimization? If NASA had negotiated a Firm Fixed Price contract with Boeing for the core stage, then Boeing would be paying for the optimization and pocketing the profit from their efforts. Which is normal. But Boeing has been proposing a form of Cost Plus contract, which makes me think that NASA (i.e. the U.S. Taxpayer) is footing some (or all) of this optimization effort.

Which is why we need a Firm Fixed Price contract for building the core stage and EUS, to incentive Boeing and to reduce the burden on the taxpayer.

Boeing can recommend a CP contract type during the RFI stage, but the government alone decides which type of contract to use  (CP, FFP, etc) when the RFP is released.  So if it is a CP contract, that's all on NASA.  And if so, then chances are strong that any optimization work is an increase in scope unless it was written into the original contract language (fat chance).  Scope creep means NASA is footing that bill.

Considering how long this thing has been getting built and the, ahem, low rate of production, there is no feasible way Boeing could make a profit under anything but a cost plus contract.  Nobody could - and industry won't bid on anything they can't make money on (rightfully so!).  Sure, there are cases when you decide to take a loss to get your foot in the door, but those are one-off's.  And the SLS program isn't a fanciful one-off for some newcomer to get a foot inside.  This program is CP - it would have bankrupted Boeing otherwise...

Can Boeing move faster?  Surely they can!  But NASA controls the pace of work based on available funding, and Congress controls the funding.  It's a shared responsibility - Boeing has to retain enough people and facilities to make things work, and NASA has to schedule work according to funding amounts received from Congress.  By slow-rolling funding, Congress has ensured that NASA only schedules enough work to keep a minimum set of people/facilities in place - because they can't pay for enough resources to complete more tasks.

This is how Boeing keeps that CP contract for ~10 years without delivering a single, completed rocket.  Don't blame Boeing for everything, there's plenty to go around...

Edit: JHosek's post makes it clear that Boeing is operating under CP on the base contract.

Offline Coastal Ron

  • Senior Member
  • *****
  • Posts: 8859
  • I live... along the coast
  • Liked: 10198
  • Likes Given: 11927
The big question is who is paying for the optimization? If NASA had negotiated a Firm Fixed Price contract with Boeing for the core stage, then Boeing would be paying for the optimization and pocketing the profit from their efforts. Which is normal. But Boeing has been proposing a form of Cost Plus contract, which makes me think that NASA (i.e. the U.S. Taxpayer) is footing some (or all) of this optimization effort.

Which is why we need a Firm Fixed Price contract for building the core stage and EUS, to incentive Boeing and to reduce the burden on the taxpayer.

Boeing can recommend a CP contract type during the RFI stage, but the government alone decides which type of contract to use  (CP, FFP, etc) when the RFP is released.

In a normal world, sure. But the SLS contract is not a normal contract since Congress pretty much mandated that Boeing would get the contract, which left the U.S. Government with less negotiating power.

For instance, Boeing can, in many ways, point to where the SLS design is not yet finalized, and that they can't bid an FFP. What is NASA going to do, take the contract away? Not with the time schedules forced upon NASA for SLS use.

Quote
Considering how long this thing has been getting built and the, ahem, low rate of production, there is no feasible way Boeing could make a profit under anything but a cost plus contract.

Funny how engineering companies take on one-off engineer projects all the time using Firm Fixed Price contracts.  ;)

As someone with a manufacturing operations background, including with new production introduction and product costing, I don't see what can't be defined by a FFP contract. They already have a completed unit going to the launch pad, what is left to define?

Quote
This is how Boeing keeps that CP contract for ~10 years without delivering a single, completed rocket.  Don't blame Boeing for everything, there's plenty to go around...

I've worked for government contractors, so I know some of the games that are played. And Boeing is not an innocent here, not when they are getting HUGE awards for doing things that don't make the SLS get done faster.

And Boeing knows how to play the game, and they have the upper hand in the negotiations with the U.S. Government because they were, for all practical purposes, appointed by Congress to be the prime contractor.
If we don't continuously lower the cost to access space, how are we ever going to afford to expand humanity out into space?

Offline VaBlue

  • Full Member
  • ***
  • Posts: 321
  • Spotsylvania, VA
  • Liked: 506
  • Likes Given: 186
In a normal world, sure. But the SLS contract is not a normal contract since Congress pretty much mandated that Boeing would get the contract, which left the U.S. Government with less negotiating power.

Doesn't matter that Congress essentially mandated that Boeing gets the work - the gov't still decides what type of contract it is.  And yes, everything can be done with FFP as well as with CP, but the gov't chose CP.  I'm sure Boeing sent a lobbyist to help, but NASA made that decision.

Quote
I've worked for government contractors, so I know some of the games that are played. And Boeing is not an innocent here, not when they are getting HUGE awards for doing things that don't make the SLS get done faster.

I didn't say Boeing was an innocent, I said they aren't solely to blame.  As far as "HUGE awards", we can disagree.  I don't know what their award fee is, but it's usually around 10% of the value of the contract for the PoP under review (not the entire contract).  The award fee periods are setup in the contract, and the dollar values are set.  The profit margins are ~2-5% (they vary a little between HW and services), so the award fees help make another ~5-7% profit - which is pretty small.  When we hear the number for an award fee, it feels really big.  But it's not that large considering the overall size of the program - SLS is TOO EFF'IN LARGE because it's been going on for TOO EFF'IN LONG!

I've worked for gov't contractors for a long time (not Boeing), and I'm not here to defend them.  My experience includes many competitive proposals and SW dev activities.  But the profit margin isn't all that with Gov't work (and we don't throw anywhere near the lobbying money that most think we do!).

Overall, I think we agree on all of this.  The production contract that Boeing received was crap, and they're performing slowly.  But they aren't solely to blame for that, NASA and Congress have to also be held accountable.  Boeing is playing the hand they've been dealt, and they're playing it well.  The gov't is doing it's part by allowing the game.  These types of issues will get resolved (well, improved) when the gov't's accounting and contracting practices modernize away from 1952 contract law to something more modern - but that's a whole different discussion!

Offline Coastal Ron

  • Senior Member
  • *****
  • Posts: 8859
  • I live... along the coast
  • Liked: 10198
  • Likes Given: 11927
In a normal world, sure. But the SLS contract is not a normal contract since Congress pretty much mandated that Boeing would get the contract, which left the U.S. Government with less negotiating power.

Doesn't matter that Congress essentially mandated that Boeing gets the work - the gov't still decides what type of contract it is.  And yes, everything can be done with FFP as well as with CP, but the gov't chose CP.  I'm sure Boeing sent a lobbyist to help, but NASA made that decision.

I think this is one of those "glass half full vs half empty" discussions, so I'll just stick with my "half empty" view...  ;)

Quote
...SLS is TOO EFF'IN LARGE because it's been going on for TOO EFF'IN LONG!

Yea verily!

Quote
Overall, I think we agree on all of this.  The production contract that Boeing received was crap, and they're performing slowly.  But they aren't solely to blame for that, NASA and Congress have to also be held accountable.  Boeing is playing the hand they've been dealt, and they're playing it well.  The gov't is doing it's part by allowing the game.  These types of issues will get resolved (well, improved) when the gov't's accounting and contracting practices modernize away from 1952 contract law to something more modern - but that's a whole different discussion!

Overall, yes, though I have different views as to how mischievous Boeing has been on the contract, specifically because of the position they are in regarding being effectively designated by Congress to be the prime contractor.

And I really don't have a lot of blame for NASA in all of this, because Congress defined what the SLS was to be without input from NASA, and Boeing had the luxury of a lack of pressure to get things done in a timely fashion, since it was only until 2017 that a real use for the SLS was defined (i.e. Artemis). And it didn't help that Congress kept shoveling money into the program regardless of progress.

So regarding "optimization", while direct costs are being looked at for "optimization" on future builds, in the overall scheme of things NASA is spending money to pay for all of that, so hard to tell whether any savings can be realized within the first tranche of 10ea SLS launches.
If we don't continuously lower the cost to access space, how are we ever going to afford to expand humanity out into space?

Offline ncb1397

  • Senior Member
  • *****
  • Posts: 3497
  • Liked: 2310
  • Likes Given: 29
In a normal world, sure. But the SLS contract is not a normal contract since Congress pretty much mandated that Boeing would get the contract, which left the U.S. Government with less negotiating power.

Doesn't matter that Congress essentially mandated that Boeing gets the work - the gov't still decides what type of contract it is.  And yes, everything can be done with FFP as well as with CP, but the gov't chose CP.  I'm sure Boeing sent a lobbyist to help, but NASA made that decision.

I think this is one of those "glass half full vs half empty" discussions, so I'll just stick with my "half empty" view...  ;)

Quote
...SLS is TOO EFF'IN LARGE because it's been going on for TOO EFF'IN LONG!

Yea verily!

Quote
Overall, I think we agree on all of this.  The production contract that Boeing received was crap, and they're performing slowly.  But they aren't solely to blame for that, NASA and Congress have to also be held accountable.  Boeing is playing the hand they've been dealt, and they're playing it well.  The gov't is doing it's part by allowing the game.  These types of issues will get resolved (well, improved) when the gov't's accounting and contracting practices modernize away from 1952 contract law to something more modern - but that's a whole different discussion!

Overall, yes, though I have different views as to how mischievous Boeing has been on the contract, specifically because of the position they are in regarding being effectively designated by Congress to be the prime contractor.

They weren't. The core stage could have been done by anyone at program start. Boeing had a contract for an upper stage under Cosntellation and Congress said they should modify contracts if practicable. NASA could have given ULA ICPS, Boeing EUS (an extension of their Ares contract) and SpaceX/Blue Origin/Boeing/Lockheed the core stage. They chose Boeing. They also chose Boeing for the Ares upper stage, Commercial Crew, ISS,  EUS. etc....so not at all surprising and not at all out of character.
« Last Edit: 05/27/2021 12:51 am by ncb1397 »

Offline Coastal Ron

  • Senior Member
  • *****
  • Posts: 8859
  • I live... along the coast
  • Liked: 10198
  • Likes Given: 11927
Overall, yes, though I have different views as to how mischievous Boeing has been on the contract, specifically because of the position they are in regarding being effectively designated by Congress to be the prime contractor.

They weren't. The core stage could have been done by anyone at program start.

No, not "anyone".

In 2010, when the SLS was created by Congress, there were only two companies in the U.S. that had proved they could build large rockets - Boeing and Lockheed Martin. And in December 2011 Boeing was awarded an undefinitized SLS contract worth $1.05B, without bidding a design, and without a competition.

Quote
Boeing had a contract for an upper stage under Cosntellation and Congress said they should modify contracts if practicable.

It's called novation, which in this case the Constellation Ares contract Boeing was bidding on was replaced by the SLS. And Boeing won the SLS contract without an open competition.

Quote
NASA could have given ULA ICPS, Boeing EUS (an extension of their Ares contract) and SpaceX/Blue Origin/Boeing/Lockheed the core stage.

How could any other company have been awarded the SLS Core Stage contract when there wasn't a competition for it?

Remember that back in 2010 SpaceX had just launched their first Falcon 9, so they were not known as a company that had a long history in building rockets. Remember too that up until recently that NASA considered Boeing as a company that could not fail (well, up until the Boe-OFT failure).

Quote
They chose Boeing. They also chose Boeing for the Ares upper stage, Commercial Crew, ISS,  EUS. etc....so not at all surprising and not at all out of character.

NASA had little choice. None really, when you consider the political support Boeing has in Congress. Which is why I don't blame NASA for the ills of the SLS, since they were never fully in control of the program.

And as for the SLS, after all this time if Boeing doesn't understand how to build the core stage on a Fixed Price Contract, then they shouldn't be building it. It's big propellant tank, not an aircraft carrier...  ::)
If we don't continuously lower the cost to access space, how are we ever going to afford to expand humanity out into space?

Tags:
 

Advertisement NovaTech
Advertisement Northrop Grumman
Advertisement
Advertisement Margaritaville Beach Resort South Padre Island
Advertisement Brady Kenniston
Advertisement NextSpaceflight
Advertisement Nathan Barker Photography
0