Author Topic: Why do contractors make so much money but aren't responsible when things go wrong?  (Read 7582 times)

Offline Star One

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Spinning out of the JWST thread just how are companies like NG seemingly able to walk away from a mess like this with their pockets still stuffed with public money but seemingly with minimum comeback. Especially here when the IRB have stated they cost US taxpayers one billion dollars through their actions?

Offline JH

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ol∑i∑gop∑o∑ly
/ˌšləˈɡšpəlē/
noun
a state of limited competition, in which a market is shared by a small number of producers or sellers.

Offline ulm_atms

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I am of the feeling that as long as the money is going where Congress wants it to go, they don't care where the blame is...which is why no one is responsible.  This goes for LOTS of government programs. (SLS, F-35, etc...).

If the government actually wanted companies on the line for mistakes...they would issue contracts that actually do that.

Offline SWGlassPit

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If the government actually wanted companies on the line for mistakes...they would issue contracts that actually do that.

There's a limit to which the government can do that before the contractor backs out of negotiations, leaving the government with no one.

Offline Coastal Ron

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I've worked for big government contractors, so I've seen the good and bad. Here is my personal perpective.

There are two "forces" at work here:

1. NASA wants someone to build something that has never been built, and is a technological marvel.

2. Northrop Grumman is a very mature company with lots of engineering experience, and a need to make a profit.

So right away when you look at the motivations involved you can see that there is a bias toward spending a lot of money on the government's part, and for a willingness to take on expensive work of any kind on the part of Northrop Grumman.

Now to be fair, you could have honest people involved on both sides and still have cost overruns on a program like the JWST. So let's not automatically assume that there is greed or ineptitude at work.

But this is why you need well trained NASA program managers, and executives running NASA that understand how to manage large, complex programs. For instance, the designers of the JWST will always be biased towards spending money on optimal solutions, because it's not their money. And Northrop Grumman knows from decades of government contracting experience that it's more profitable if they take on more expensive work since they get a percentage of that work as profit.

Which is why many people have said (including me) that there isn't enough fear of failure at NASA from a program standpoint - that many think cost overruns will not lead to program cancellations. And even if they did they would not have their careers dinged by the failures, so where is the downside?

So what is the solution? Good program oversight by management, and members of Congress that are willing to every once in a while cancel a program when it gets too far out of budget. Because without consequences, no one will ever take responsibility.

My $0.02
If we don't continuously lower the cost to access space, how are we ever going to afford to expand humanity out into space?

Online TomH

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I am of the feeling that as long as the money is going where Congress wants it to go, they don't care where the blame is...which is why no one is responsible.  This goes for LOTS of government programs. (SLS, F-35, etc...).

If the government actually wanted companies on the line for mistakes...they would issue contracts that actually do that.

The primary reason for F-35 problems stems from the Pentagon, not LM. LM and Boeing were given a list of requirements for all 3 variants of the JSF. Keep in mind, that each of those 3 airframes was already going to be used in multiple roles, e.g. attack, Growler (jammer). As soon as the down select was made of X-35 over X-32, all 3 services immediately heaped numerous additional requirements to their own version of the platform. Forcing so many options into multiple versions of one platform is what initiated so many problems.

Offline mike robel

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I'm a contractor (not NASA) and not a high level employee.  This is my opinion and observations.  Other contractors may have different observations and government civilians may have different ones.

It used to be that aerospace corporations were limited by statute in the amount of profit they can make.  The amount of something like 7% comes to mind.

The bulk of the financial dollars comes from awards that are built into Cost Plus contracts.  This can be sizeable.

One company, when I worked for them, refused to even consider Firm Fixed Price contracts because of the constant changes that come from the government customer.  On the small program I managed, I had to talk for 3 hours with the corporate VP for our sector to get a $100,000 contract.  Everyone around was stunned when I got his approval.  We delivered on time and below 100,000, too.

I've also seen programs that failed to pass VV&A with some unpleasant results and I've also seen Stop Work orders and see the little people lose their jobs as a result through no fault of their own.  Can't say I have seen a lot of management get fired, but I have seen some.

Another reason the government may keep paying a contractor money is the cancellation fees may off set any savings.

In my time, I have not seen dishonest or corrupt people on either side of the civil service - corporate fence.  I've seen some I consider incompetent on both sides and I have met (not from NASA, I don't work with them) some government people who don't pay any attention to what I tell them during testing; and they don't know about what I test, don't appear to care about it, and seem to want to be someplace else.


My knowledge comes from the Defense Simulation Industry and not aerospace, but I've worked for three of the fairly big names in the industry.

Insofar as lack of responsibility, I don't think any NASA employees lost their jobs over Challenger or Columbia.  I think some may have been promoted. 


Offline ulm_atms

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If the government actually wanted companies on the line for mistakes...they would issue contracts that actually do that.
There's a limit to which the government can do that before the contractor backs out of negotiations, leaving the government with no one.

Oh I agree.  And Costal Ron is correct to.  I have no problem when cost overruns are because of things out of people's control, it has never been done before type things, or when the customer keeps changing the specs during development.  Those things happen in every sector.

It's when pure carelessness (not following documented procedures, not checking required checklists before doing things, etc...) happen.  That kind of stuff needs to land squarely in the contractors pocket book....but it never seems to most of the time.  The last time I remember a contractor going "Oops, my bad...we'll forgo our profit." was LM on that sat that was dropped due to not following procedures.  But even then taxpayers had to pay quite a bit more money to fix it.  I firmly believe LM should of shouldered all costs to fix it.

But to the above quote.  The contracts don't need to be tightened up where no one would want to bid....but they could tighten them more they are now...my 2 cents.

Offline Coastal Ron

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It used to be that aerospace corporations were limited by statute in the amount of profit they can make.  The amount of something like 7% comes to mind.

I thought I remembered something like that too from when I was working for government contractors, but a friend of mine that was a recent subcontracts manager for a large government contractor said regarding contractor profit targets that "absent adequate price competition, services less than 9%, manufacturing less than 15%".

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The bulk of the financial dollars comes from awards that are built into Cost Plus contracts.  This can be sizeable.

I would agree that they can be lucrative. And this type of work is the least predictable in scope, meaning it can go up substantially without much notice.

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Another reason the government may keep paying a contractor money is the cancellation fees may off set any savings.

While that is a factor, I would not think it's predominate.

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Insofar as lack of responsibility, I don't think any NASA employees lost their jobs over Challenger or Columbia.  I think some may have been promoted.

Which is why I mentioned in my other post about the need for consequences, otherwise there is little downside to making big mistakes. Which needs to be understood as being different from taking on risk - risk is good when it's recognized, but inept management is usually something that magically appears when it's too late to make a correction...  :o
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 Rocket Science

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It's the "Iron triangle" in US politics that continues on regardless of the party in power...
https://en.wikipedia.org/wiki/Iron_triangle_(US_politics)
« Last Edit: 07/05/2018 02:16 pm by Rocket Science »
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Offline woods170

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So what is the solution? Good program oversight by management, and members of Congress that are willing to every once in a while cancel a program when it gets too far out of budget. Because without consequences, no one will ever take responsibility.

Emphasis mine.

And that's why, IMO, the JWST should have been cancelled by US Congress back in early 2011, as a result of the damning Casani report.
Doing so would have sent everyone involved (NASA, science institutes, contractors) a clear message: "Next time, get your act together, or else face the consequences".

But unfortunately US Congress lacked the nerve to kill JWST; the gravy train had to keep rolling.

Offline FinalFrontier

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It's called an Oligarchy. Congratulations you live in one.

How this system works and how this sort of theft is accomplished is complicated. But a very short summary would be:

1. Very small number of companies are the only producers and sellers of needed industrial capacity.
2. They have very powerful lobbyists and friends and can literally by swaths of the government and do.
3. As a result they are not regulated and are given free passes on a variety of things.
4. Everybody makes money. Politicians get their careers and personal nests made, company gets tons of tax dollars, product may or may not actually get built at the end of the day. Chances are if it does it is often deeply flawed (F35 program).

Meanwhile you lose, the sciences and technology sectors lose since such a system must actively oppose innovation in order to continue to exist, and all our money is wasted.

JWST is a small example. CXP and SLS are the bigger cousins.

NASA as a whole is a small example however, F35 program and things like it are much bigger brother in terms of waste.

If a contractor was ever truly held accountable it would disrupt the natural order, and nobody involved wants that because it would cause everyone in the racket to lose money. Therefore they aren't.

Meanwhile SpaceX and a few others are trying to knock these guys off the top, but ultimately to what end remains to be seen.

Quote
But this is why you need well trained NASA program managers, and executives running NASA that understand how to manage large, complex programs. For instance, the designers of the JWST will always be biased towards spending money on optimal solutions, because it's not their money. And Northrop Grumman knows from decades of government contracting experience that it's more profitable if they take on more expensive work since they get a percentage of that work as profit.

Quote
But this is why you need well trained NASA program managers, and executives running NASA that understand how to manage large, complex programs

Almost all of these were lost in the aftermath of Columbia, and later VSE CXP and the saga that followed. You could even argue you were losing these prior to 2003 and we have not had them for a long time now.

Too many delays, failed programs, and continuous re-directs the talent ultimately goes elsewhere (like to EELV companies).
« Last Edit: 07/03/2018 06:46 am by FinalFrontier »
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Offline Semmel

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You underestimate the need for a telescope like JWST in astronomy. Almost any astronomer wants that telescope. It is the most promising way to answer the remaining open questions in astronomy. If JWST gets canceled, the push of scientists will be to a new telescope just like JWST. There are many more telescopes needed for answering current open questions, but JWST or equivalent would give data for the largest chunk of it.
« Last Edit: 07/03/2018 08:53 am by Semmel »

Offline woods170

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You underestimate the need for a telescope like JWST in astronomy. Almost any astronomer wants that telescope. It is the most promising way to answer the remaining open questions in astronomy. If JWST gets canceled, the push of scientists will be to a new telescope just like JWST. There are many more telescopes needed for answering current open questions, but JWST or equivalent would give data for the largest chunk of it.

You do realize that your argument is exactly what was used to justify the cost of Hubble?

And guess what: Hubble observations led to more new questions than that it answered existing and old ones.

IMO JWST will do the same: When JWST is said-and-done there will be more new questions about the universe than that it will have answered old ones.

But that aside I stick to the opinion that cancelling JWST in 2011 would have been the right thing to do. Because it would have led IMO to a more practical and affordable way of doing an in-space telescope of that size. JWST as it exists today is IMO overly complex and relies too much on new/unproven technology resulting in massive cost-overruns above-and-beyond the cost-overruns caused by the initial under-funding and poor management.
« Last Edit: 07/03/2018 11:27 am by woods170 »

Offline Star One

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You underestimate the need for a telescope like JWST in astronomy. Almost any astronomer wants that telescope. It is the most promising way to answer the remaining open questions in astronomy. If JWST gets canceled, the push of scientists will be to a new telescope just like JWST. There are many more telescopes needed for answering current open questions, but JWST or equivalent would give data for the largest chunk of it.

You do realize that your argument is exactly what was used to justify the cost of Hubble?

And guess what: Hubble observations led to more new questions than that it answered existing and old ones.

IMO JWST will do the same: When JWST is said-and-done there will be more new questions about the universe than that it will have answered old ones.

But that aside I stick to the opinion that cancelling JWST in 2011 would have been the right thing to do. Because it would have led IMO to a more practical and affordable way of doing an in-space telescope of that size. JWST as it exists today is IMO overly complex and relies too much on new/unproven technology resulting in massive cost-overruns above-and-beyond the cost-overruns caused by the initial under-funding and poor management.

JWST was done the way it was because it had to be. It wasnít wilfully designed that way for the sake of it.

With your overly-conservative approach we would never make any progress in delivering capabilities.

It seems as if when private industry breaks new ground for progress itís applauded but when NASA tries a similar approach it gets condemned. We often hear people complaining NASA is too conservative. So it seems to be case of them being dammed if they do and dammed if they donít.
« Last Edit: 07/03/2018 11:43 am by Star One »

Offline woods170

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You underestimate the need for a telescope like JWST in astronomy. Almost any astronomer wants that telescope. It is the most promising way to answer the remaining open questions in astronomy. If JWST gets canceled, the push of scientists will be to a new telescope just like JWST. There are many more telescopes needed for answering current open questions, but JWST or equivalent would give data for the largest chunk of it.

You do realize that your argument is exactly what was used to justify the cost of Hubble?

And guess what: Hubble observations led to more new questions than that it answered existing and old ones.

IMO JWST will do the same: When JWST is said-and-done there will be more new questions about the universe than that it will have answered old ones.

But that aside I stick to the opinion that cancelling JWST in 2011 would have been the right thing to do. Because it would have led IMO to a more practical and affordable way of doing an in-space telescope of that size. JWST as it exists today is IMO overly complex and relies too much on new/unproven technology resulting in massive cost-overruns above-and-beyond the cost-overruns caused by the initial under-funding and poor management.

JWST was done the way it was because it had to be. It wasnít wilfully designed that way for the sake of it.

With your overly-conservative approach we would never make any progress in delivering capabilities.

It seems as if when private industry breaks new ground for progress itís applauded but when NASA tries a similar approach it gets condemned. We often hear people complaining NASA is too conservative. So it seems to be case of them being dammed if they do and dammed if they donít.

Industry and NASA can break new ground perfectly fine while still adhering to the KISS principle. Unfortunately, neither NASA, nor industry did so in the case of JWST.
JWST is overly complex, with too many mission-critical deployment steps. If just a single one of those steps goes awry it is mission-over for JWST.

Offline ulm_atms

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You underestimate the need for a telescope like JWST in astronomy. Almost any astronomer wants that telescope. It is the most promising way to answer the remaining open questions in astronomy. If JWST gets canceled, the push of scientists will be to a new telescope just like JWST. There are many more telescopes needed for answering current open questions, but JWST or equivalent would give data for the largest chunk of it.

You do realize that your argument is exactly what was used to justify the cost of Hubble?

And guess what: Hubble observations led to more new questions than that it answered existing and old ones.

IMO JWST will do the same: When JWST is said-and-done there will be more new questions about the universe than that it will have answered old ones.

But that aside I stick to the opinion that cancelling JWST in 2011 would have been the right thing to do. Because it would have led IMO to a more practical and affordable way of doing an in-space telescope of that size. JWST as it exists today is IMO overly complex and relies too much on new/unproven technology resulting in massive cost-overruns above-and-beyond the cost-overruns caused by the initial under-funding and poor management.

JWST was done the way it was because it had to be. It wasnít wilfully designed that way for the sake of it.

With your overly-conservative approach we would never make any progress in delivering capabilities.

It seems as if when private industry breaks new ground for progress itís applauded but when NASA tries a similar approach it gets condemned. We often hear people complaining NASA is too conservative. So it seems to be case of them being dammed if they do and dammed if they donít.

Industry and NASA can break new ground perfectly fine while still adhering to the KISS principle. Unfortunately, neither NASA, nor industry did so in the case of JWST.
JWST is overly complex, with too many mission-critical deployment steps. If just a single one of those steps goes awry it is mission-over for JWST.

That is the scary part for me in all of this.  Since it has to be deployed at L1, there is no way to fix it (unlike Hubble) if there are any issues with any the moving parts during deploy.  Shoot, Hubble was a colossal screw up at first but at least it was built to be fixed to a point and we could actually get there to fix it.

So this telescope, with all it's complexity, and no way to fix any issues after deploy, makes hearing of all of these issues from NG scary to read/hear.  KISS should be adhered to especially if there is no way to fix it post launch.

Offline butters

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The traditional US aerospace contractors remind me of the popular generalization about family businesses: the children of the founding patriarch often do okay, but the third generation is rarely up to the task of sustaining and evolving the empire.

These are big brand names with proud histories behind them, but the Jack Northrops and Kelly Johnsons are long gone, and so are their proteges. These are third- and fourth-generation companies in an industry where changing with the times is essential. It's not like they're selling a traditional product, like cheese produced according to a centuries-old family recipe.

At this stage in their corporate lifecycles, they have no vision, no values, and no culture of excellence. They behave like entitled rent-seekers and see their greatest financial opportunities in mergers and acquisitions.

Also having the government as a customer really sucks...

Offline Coastal Ron

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That is the scary part for me in all of this.  Since it has to be deployed at L1, there is no way to fix it (unlike Hubble) if there are any issues with any the moving parts during deploy.  Shoot, Hubble was a colossal screw up at first but at least it was built to be fixed to a point and we could actually get there to fix it.

So this telescope, with all it's complexity, and no way to fix any issues after deploy, makes hearing of all of these issues from NG scary to read/hear.  KISS should be adhered to especially if there is no way to fix it post launch.

Of course it's not the contractors fault that the JWST was not designed to be serviceable, it's NASA's. And to be fair, when NASA was designing the JWST way back in 1996 the idea of servicing a science platform at L1 - with humans - was a bit of a stretch.

But now we are on the edge of a world where reusable rockets and commercial crew vehicles are part of our reality, and I would advocate that somewhere in NASA they should be considering what the next generation of standards should be for Earth-local remote systems.

For instance, and this gets to the national "leadership" issue, NASA could decide that all future Earth-local major science platforms be equipped for not only capture (like Hubble), but movement from their location of science to a location of service. Then all that would be needed are space tugs and commercial habitats to set up a service location. No doubt this would cost a good chunk of money to set up, but the long term benefits should pay for itself. Plus this would help create new industries, which is always a good side effect of government spending.  :)

Just trying to think of ways to eliminate situations like this...
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 Jim

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But now we are on the edge of a world where reusable rockets and commercial crew vehicles are part of our reality, and I would advocate that somewhere in NASA they should be considering what the next generation of standards should be for Earth-local remote systems.

For instance, and this gets to the national "leadership" issue, NASA could decide that all future Earth-local major science platforms be equipped for not only capture (like Hubble), but movement from their location of science to a location of service. Then all that would be needed are space tugs and commercial habitats to set up a service location. No doubt this would cost a good chunk of money to set up, but the long term benefits should pay for itself. Plus this would help create new industries, which is always a good side effect of government spending.  :)

Just trying to think of ways to eliminate situations like this...

regardless, JWST type telescope is not a viable platform for servicing. 

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