15 thoughts on “Snowball Fights In Hell”

  1. The only people who like cost plus contracts more than the contractor VPs and up are NASA engineers. It allows them to do things like demand 600 sensors on a heat shield test so they can write papers and go to conferences. Of course only 5 or 6 of those actually tell them if the heat shield will do it’s job but the contractor gleefully goes along because the contractor engineers also enjoy writing papers and learning new things and the VPs enjoy the extra money. NASA engineers would have a fit if they couldn’t demand all sorts of needless research activities because then they’d just be program mangers trying to get the job done as soon and as cheaply as possible.

      1. I have to agree. Cost+ in my experience is mostly used to comply with a nit picky, ultra-meddling customer. It is NOT about maximizing profits (though that may be a side benefit). Fixed cost contracts only work if the scope is carefully limited and firmly controlled.

  2. I once hired a manager who was very adept at government contract type work, and put him in charge of commercial aerospace projects. He spent a long time and enormous effort to master the mindset required for commercial work. At the end his learning period, he summarized it with this sentence: “All companies that contract with the government are in the sole business of selling cost.”

    He nailed it, in a relatively short period of time.

      1. It is simple economics when you know whatever you invest, you’ll get all of it back plus 10%. Where is the risk?

  3. As I see it, the only place where cost plus is a normal thing is in the legal/regulatory/taxation system where firms bill by the hour (and find plenty of hours to bill). So let’s launch our rockets like we run our court rooms and financial dealings. What could possibly go wrong?

    1. Think of all the time and expense we could save in our judicial system with just a minor tweak to our principle of jurisprudence that would align our legal system with much of the rest of the world: Guilty beyond a reasonable doubt.

  4. I can tell you guys from personal experience that ‘Fixed Price’ contracts have their major down-falls as well.

    Worked on one project and there were several weekly meetings that involved upper management (Contractor, Civil Servants) and lawyers as they argued over the smallest detail. Literally hours and hours each week of completely wasted time.

    After being part of both processes (for longer than I care to mention here), neither are ideal (to put it lightly).

    1. I’m in the commercial world now, outside aerospace. Every major project builds a contracting strategy based on risk and the best way to manage it for both us and the vendor. Problems do arise and can be expensive. Still, we just delivered a $12 billion mega project in 6 years. Parts of that project were fixed cost, fixed cost with incentive fees, and some cost plus.

      SLS had a similar budget initially and has yet to be delivered. It’s cost have ballooned and the end product may meet performance specifications, but not at initial projected costs. Outside government, we certainly approve designs that we expect to meet certain performance specifications, but final investment decisions depend on whether the endeavor will make money and how quickly due to cash flow concerns. When the fights by NASA civil servants to retain performance specs drove up costs and eroded NASA’s budget; they simply asked and got Congress to print more cash to keep it flowing. Never were the contractor’s investment at risk.

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