Path: utzoo!attcan!uunet!husc6!cfa!cfa250!willner From: willner@cfa250.harvard.edu (Steve Willner P-316 x57123) Newsgroups: sci.space.shuttle Subject: Re: Gov't contracting problems Message-ID: <1164@cfa183.cfa250.harvard.edu> Date: 17 Nov 88 20:40:47 GMT References: <2369@ssc-vax.UUCP> Organization: Harvard/Smithsonian Center for Astrophysics Lines: 69 From article <2369@ssc-vax.UUCP>, by eder@ssc-vax.UUCP (Dani Eder): > 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. Absolutely right, but not as simple as it sounds. See below. > 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. > This type of contract has no incentive to keep costs in line... In theory, the award fee is supposed to be based on cost as well as performance, though it's true that in practice it doesn't always work out that way. > 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. > So the gov't should give us performance specifications, and let > us work out the best way to meet the specs Having been on the other side of the table, I can say that writing performance specifications is harder than it sounds. The problem is that the specification writers don't generally know the tradeoff between cost and a particular performance specification. (Often nobody knows, if you are trying to do something truly new.) And of course, even with perfect knowledge, reasonable people will disagree whether a certain increment in performance is worth the corresponding increment in cost. What we (i.e. the groups in which I have participated) generally do is try to write 'requirements' and 'goals', the former being the minimum performance that makes the project worth building and the latter being the point beyond which no further improvement is worthwhile. Unfortunately, it seems impossible in the current management structure actually to pay on the basis of how closely the goals are met. (Contracts for ground-based telescope mirrors HAVE been written this way with some success; the problem is not primarily technical, though the technical problems increase greatly when complex systems are considered rather than single components.) The alternative of an ongoing, collaborative effort between the users and the contractor also appears to be unacceptable both to the government and to the contractors. (Among other things, the potential for financial abuse is obvious, and contractors are worried about disclosing proprietary information.) Another part of the problem is that NASA seems to be a lot more capable of auditing financial records than performance records and writes contracts accordingly. (Even for basic research grants, for instance, you need special approval to spend already-allocated money on something different than in the original budget.) So what's the bottom line? Certainly the current process gives too little incentive to control cost. Even if incentives were there, the information available is often inadequate or too late. No doubt improvements are possible by using fixed-cost contracts when possible (and when you can get contractors to bid on them!) and by auditing performance in preference to cost, but I wouldn't expect any simple change to give great cost reductions. -- Steve Willner Phone 617-495-7123 Bitnet: willner@cfa 60 Garden St. FTS: 830-7123 UUCP: willner@cfa Cambridge, MA 02138 USA Internet: willner@cfa.harvard.edu