“Would Boeing make a bet like that again, on a low-cost space launch vehicle,” asked our team leader. Suddenly, thirty or so people burst into a tower of babel, everyone talking at once as if a spark set off a conflagration. Mostly the cacophony of replies leaned toward “no,” or jumped right into statements – how different our world is today versus then, how we now have shareholders, or how the technology is not the same. Unlike in the movies, this moment in the meeting did not slow dance a conversation. There was no pause by someone at the table, followed by another insightful contribution from the next character. I saw again that everyone talking at once is not atypical for engineers and scientists, that is when faced with a question about risk.
Boeing “bet the company,” in aerospace lore, when it built its first jet airplane in the fifties. Now, in 2016 we were visiting Boeing to see what thoughts their engineers had on low-cost access to space. The hosts and the visitors knew each other well from many years and projects. Someone said we had gathered all the usual suspects. Fast-forward to this week, and we see the Boeing Starliner crew spacecraft arrive at the International Space Station, minus crew for this demonstration flight. This milestone is part of a tectonic shift in how NASA relates to its private-sector partners. Boeing signed up to build Starliner for a firm-fixed-price rather than the usual cost-plus, by the hour contracting, with its uncertainty about the total cost.
This is not the first time a firm-fixed-price contract has been in the news, as these are increasingly common for NASA, and are even appearing in the US Department of Defense. As NASA spaceflight sees the advantage of partnerships focused on results, such contracts are now more the norm than the exception.
Tankers for sale, 50% off!
Financial risk for a partner is usually not emphasized in these new arrangements with NASA, perhaps because most have been so successful. Nonetheless, Boeing’s Starliner is a poster child to remind us about financial risks, as with other projects Boeing has signed up for on the dotted line. To date, the Boeing Air Force One deal is a loss of a billion dollars for Boeing. The KC-46 tanker aircraft for the Air Force, also a fixed-price development program, stands at $5.4 billion in losses. That’s more in financial losses for Boeing than the Air Force will pay in total. Tankers for sale, 50% off! Boeing’s Starliner program also “booked charges” in recent years, accounting-speak for costing that much more than you got paid. These losses were $410 million in 2020, then another $185 million in 2021.
With a little (ok, a lot) of forensic accounting, it’s not difficult to draw out some curiosities beyond the big numbers. The NASA Commercial Crew program awarded a $4.2 billion firm fixed price contract to Boeing in 2015. Later (with much criticism), NASA gave Boeing an additional $287 million. So, it can be said we have two numbers for a Starliner program: there is the Starliner cost to NASA, $4,487 million, and there is the cost to Boeing, $5,082 million.
This is not just apples and oranges, it’s different numbers of each.
But those totals get ahead of things, as what are the total dollars for? Here, NASA mixed apples and oranges, development and operations, to give its partners more latitude in the initial commercial crew awards. To further complicate matters, quantity varies too. This is not just apples and oranges, it’s different numbers of each. (The critical contract line is “The minimum quantity of missions to be ordered is two and the maximum potential quantity of missions which may be ordered is six.”) Operational flights come after development is complete, as marked by a first successful crew demo flight. When all is said and done, seemingly, SpaceX will have delivered 6 operational missions before beginning its subsequent contract at the Crew-7 mission (for a grand total of about $2,600M). Boeing will have delivered only two operational missions (the minimum) if it goes into its next contract at the Crew-3 mission (for a grand total of $4,487M). Alternately, an interpretation might conclude there are more “charges” to follow if Boeing is to deliver the promised launches ahead, with a crew.
It’s tempting to say an answer to our question from 2016 is now in much better shape, from experience rather than from a survey of the room. Would a company, around a long while or just born, bet its future on knowing NASA investment is just a start, while new opportunities created by lower costs (safely) are the end? Commercial partnerships have been an enormous success for NASA since their beginning. In practice, the private sector continues to sign on when asked to take the bet. This is so even in the face of risk, with technical difficulties becoming financial losses.
After Starliner will follow a Dreamchaser for cargo, perhaps one day with crew. Private spaceflight has also taken off with personal Dragon flights, Inspiration 4 just the start. Maybe just as the relationship between NASA and the private sector changes, it’s time to change our question. When NASA takes a risk and asks if others will join, can any company afford not to say yes?