[njarboe]

Yes. It is great that NASA is trying to get away from this model with the Commercial Crew Program. Boeing would eat this cost, just like SpaceX does when it has problems. Cost plus contracts, while maybe necessary in some situations, evolves huge cost bloat in defense, large public works, and health insurance sectors of the economy.

[garmaine]

Unfortunately Boeing has petitioned for, and received amendments to its “fixed-price” contract to cover these extra costs in the past. Boeing making this number public, which they would have every reason to keep secret for competitive reasons if it was their own cost, is the first step in normalizing the customer to the added cost. Watch as they threaten to pull out as they have done before...

[perl4ever]

Is that really a priori the wrong way to run things?

You have a project, you estimate the cost, you have a contract, then the customer just HAS to add more stuff, so you negotiate about what to add at what cost in time and money.

So, fixed price with adjustments, why wouldn't that be normal (in a vacuum)?

[garmaine]

The promise of fixed-price contracts is that the contractor is incentivized to get really creative and cut costs in order to maximize profits, like SpaceX has done. SpaceX is charging NASA about $220M per launch of the Falcon 9 -- the same rocket they price on their website for $62M -- and they get to keep the rocket and capsule for reuse too. Now at a marginal cost that's a minimum of 72% profit, and probably much higher. Now if SpaceX botched their demo flight and had to do another, would NASA be willing to pay the cost? No, and they shouldn't: the risk of cutting into their margins is what incentives them to keep on schedule, on budget, and minimize risk.

Yet Boeing has shown consistently that they are only able to operate in the old business model where "profits" disappear into "overhead" and contracts earn only a small margin of profit. Then as something unforeseen happens, as has happened multiple times, they threaten to pull out and force a renegotiation.

This defeats the entire spirit of the fixed-price contract, and costs the taxpayer. IMHO NASA contract officers should call the bluff, and give the contract to Sierra Nevada if Boeing does back out.

[ceejayoz]

> SpaceX is charging NASA about $220M per launch of the Falcon 9 -- the same rocket they price on their website for $62M...

To be fair, that doesn't include the cost of a Dragon capsule, nor the extra steps NASA flights involve. It's the "stick your ready-to-go satellite on top of our booster" price.