Path: utzoo!attcan!uunet!husc6!mailrus!cornell!uw-beaver!fluke!ssc-vax!eder
From: eder@ssc-vax.UUCP (Dani Eder)
Newsgroups: sci.space.shuttle
Subject: Re: Gov't contracting problems
Summary: cost plus contracting
Message-ID: <2369@ssc-vax.UUCP>
Date: 15 Nov 88 18:57:06 GMT
References: <1543@banzai-inst.sw.mcc.com> <3330012@hpindda.HP.COM>
Organization: Boeing Aerospace Corp., Seattle WA
Lines: 48

In article <3330012@hpindda.HP.COM>, mears@hpindda.HP.COM (David B. Mears) writes:
> > Since this is sci.space.shuttle, the question is then: why isn't Boeing
> > building our shuttles?
> 
> What's really disturbing is not so much that we end up with a product that
> was built by the lowest bidder (with the quality to match) but that the
> contracter always ends up with cost overruns and the thing ends up costing
> more than the higher bidders anyway.  I don't how to do it, but the govt.
> needs to change the way it does contracts so that bidders are forced to
> meet the bids they make along with the quality required.

If you mean Space Shuttle Orbiters, it's because Boeing didn't bid on them.
We bid on the External Tank part of the job, I imagine mostly because at
the time we were building Saturn V first stages in the Michoud, LA facility
where ETs are now built.  If we won the ET contract, then the same people
could have transitioned from Saturn to ET work.   As it happens, we lost
that competition.  Why we did , I don't know, since that happened before
I started working for Boeing.

As to the second quote above, what you should encourage your elected
officials to require is 'firm fixed price' contracting with performance
specifications, but no other types of specifications.

Right now, the contract Boeing has with NASA to build part of the
Space Station is a 'cost plus award fee' type contract.  That means
we bill the government for actual costs incurred in performing the
contract, and our fee (read profit) is determined by a customer
commitee who decide how well we are doing our job.  Imagine
if a car buyer could determine GMs profit based on how happy the
car buyer was.  That would be an equivalent situation.

This type of contract has no inc}ientive to keep costs in line,
in fact, if it costs more to keep the customer happy, and thus
earn a higher award fee, then the incentive is to spend more, since
the gov't will reimburse us for costs.

As far as specifications, generally the gov't overspecifies, which
prevents us from exercising engineering judgement.  We have a
requirments document that is supposed to tell us 'what' the Station
systems are to do.  `But it also includes design solutions, which
prevents us from adopting a better one if we think of it.
ASo the gov't should give us performance specifications, and let
us work out the best way to meet the specs

-- 
Dani Eder / Boeing / Space Station Program / uw-beaver!ssc-vax!eder
(205)464-4150(w) (205)461-7801(h) 1075 Dockside Drive #905 Huntsville, 
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