Boeing reports a $410M charge in case NASA decides Starliner needs another test
1–10 of 58 posts
Re: Boeing reports a $410M charge in case NASA decides Starliner needs another test
#2From today’s Orbital Index (https://orbitalindex.com/archive/2020-01-30-Issue-49/):
The Best Way to Make a Profit as an Aerospace Company is to Fail (https://qz.com/1784335/the-space-military-industrial-complex...), a compelling piece about how massive corporations like Northrop Grumman have little incentive to hit their contract budgets and are arguably incentivized not to. “Northrop Grumman […] won the James Webb Space Telescope contract in 1996 with a promise that the project would cost $500 million and be flight-ready in 2007. The telescope is now likely to launch in 2021 and is expected to cost nearly $10 billion. [...] [W]ith every delay and snafu, Northrop Grumman rakes in more money as missed deadlines extend the timeline and require more funding from the government. One delay in 2018 brought Northrop Grumman close to a billion dollars alone—twice the price the firm originally quoted to the government for the entire project.” According to this document (pdf) released on Jan. 28 by the Government Accountability Office, the JWST has only a 12% chance of launching in March 2021. The massive overruns by Boeing on SLS are a similar example.
Re: Boeing reports a $410M charge in case NASA decides Starliner needs another test
#3'Charge' here is a confusing term. The way I take it they have set aside this money in case they need to do another test. The title makes it seem as if they have charged (or are preparing to charge) Nasa for this amount. That wouldn't be too surprising given Boeing's history, but does not appear to be the case here (yet).
Directly from the financial report from Boeing:
> Fourth-quarter operating margin decreased to 0.5 percent due to a $410 million pre-tax Commercial Crew charge primarily to provision for an additional uncrewed mission for the Commercial Crew program, performance and mix. NASA is evaluating the data received during the December 2019 mission to determine if another uncrewed mission is required.
https://boeing.mediaroom.com/2020-01-29-Boeing-Reports-Fourt...
Re: Boeing reports a $410M charge in case NASA decides Starliner needs another test
#4From today’s Orbital Index ( https://orbitalindex.com/archive/2020-01-30-Issue-49/ ): The Best Way to Make a Profit as an Aerospace Company is to Fail ( https://qz.com/1784335/the-space-military-industrial-complex... ), a compelling piece about how massive corporations like Northrop Grumman have little incentive to hit their contract budgets and are arguably incentivized not to. “Northrop Grumman […] won the James We…
I never understood why there aren't performance requirements in government contracts. Same thing with infrastructure construction here in DC... new offices go up in a year, but changes to the intersection in front of said office take 5 years and cost multiple of the office itself. [hyperbole, but only just]
Re: Boeing reports a $410M charge in case NASA decides Starliner needs another test
#5'Charge' here is a confusing term. The way I take it they have set aside this money in case they need to do another test. The title makes it seem as if they have charged (or are preparing to charge) Nasa for this amount. That wouldn't be too surprising given Boeing's history, but does not appear to be the case here (yet). Directly from the financial report from Boeing: > Fourth-quarter operating margin decreased to 0…
This is standard jargon for investors. The charge is to the company and a hit directly to their earnings.
Similar wording can also be used with respect to debt that will never be collected.
Re: Boeing reports a $410M charge in case NASA decides Starliner needs another test
#6From today’s Orbital Index ( https://orbitalindex.com/archive/2020-01-30-Issue-49/ ): The Best Way to Make a Profit as an Aerospace Company is to Fail ( https://qz.com/1784335/the-space-military-industrial-complex... ), a compelling piece about how massive corporations like Northrop Grumman have little incentive to hit their contract budgets and are arguably incentivized not to. “Northrop Grumman […] won the James We…
I never understood why there aren't performance requirements in government contracts. Same thing with infrastructure construction here in DC... new offices go up in a year, but changes to the intersection in front of said office take 5 years and cost multiple of the office itself. [hyperbole, but only just]
The argument is that something the size and complexity of the JWST has never been attempted, which leaves a lot of Rumsfeld's famous "unknown unknowns" it's unfair to saddle the contractor with. There really needs to be a middle-ground on cost-plus contracts; something that allows for unanticipated issues to be dealt with, but punishes shoddy work or insanely silly lowball bids.
https://www.seattletimes.com/business/boeing-aerospace/shodd...
> In a vibration test of the telescope earlier this year in California by prime contractor Northrop Grumman, dozens of loose fasteners — some 70 pieces in all — came off. A few pieces are still missing and could well be inside the observatory. The locknuts were not tightened properly before the test, according to a report by the board.
This sort of thing (IIRC, this individual issue cost $150M) should come directly out of the contractor's profits.
Re: Boeing reports a $410M charge in case NASA decides Starliner needs another test
#7Why do we even have this program?
Re: Boeing reports a $410M charge in case NASA decides Starliner needs another test
#8Why do we even have this program?
Commercial Crew, or Boeing's contribution to it specifically?
The argument for Commercial Crew seems clear. The argument for two companies doing it is redundancy, in case one company goes bankrupt or hikes prices or has a huge mishap requiring months/years of investigation and remediation.
Re: Boeing reports a $410M charge in case NASA decides Starliner needs another test
#9From today’s Orbital Index ( https://orbitalindex.com/archive/2020-01-30-Issue-49/ ): The Best Way to Make a Profit as an Aerospace Company is to Fail ( https://qz.com/1784335/the-space-military-industrial-complex... ), a compelling piece about how massive corporations like Northrop Grumman have little incentive to hit their contract budgets and are arguably incentivized not to. “Northrop Grumman […] won the James We…
I never understood why there aren't performance requirements in government contracts. Same thing with infrastructure construction here in DC... new offices go up in a year, but changes to the intersection in front of said office take 5 years and cost multiple of the office itself. [hyperbole, but only just]
There used to be a lot more defense contractors during the cold war. Also, more accountability. So there was competitive pressure to be seen as an organization that could reliably deliver projects. Over the years, many of the major companies merged, then shifted strategies to geographically dispersing their jobs to bolster congressional support.
Take the Joint Strike Fighter / F-35 for example: 4 bids. Lockheed won the contract but subcontracts major parts to another JSF bidder (Northrop) and Boeing/MD ending up merging. The whole thing is so incestuous.
Re: Boeing reports a $410M charge in case NASA decides Starliner needs another test
#10From today’s Orbital Index ( https://orbitalindex.com/archive/2020-01-30-Issue-49/ ): The Best Way to Make a Profit as an Aerospace Company is to Fail ( https://qz.com/1784335/the-space-military-industrial-complex... ), a compelling piece about how massive corporations like Northrop Grumman have little incentive to hit their contract budgets and are arguably incentivized not to. “Northrop Grumman […] won the James We…
I never understood why there aren't performance requirements in government contracts. Same thing with infrastructure construction here in DC... new offices go up in a year, but changes to the intersection in front of said office take 5 years and cost multiple of the office itself. [hyperbole, but only just]
The answer is the sunken cost fallacy. A government institution will view the sunken cost as too big, and solve that problem by throwing more money at it. The same thing that happens in Wall Street when they get into big problems.