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Is Boeing Overcharging People to Go to Space?

A report from the NASA Inspector General has called the costs associated with Boeing’s Starliner program into question. The audit, which was only recently released, finds that not only is the Boeing-manned rocket program substantially more expensive than competitor SpaceX, but the aerospace giant also sought and received “unnecessary” additional compensation.

Boeing has lashed out at NASA’s Inspector General following a report that the company is overcharging the space agency for scheduled manned missions to the International Space Station (ISS). The audit published this week also questions Boeing’s demand for additional payments, which the NASA Office of the Inspector General deemed “unnecessary.”

“We strongly disagree with the report’s conclusions about CST-100 Starliner pricing and readiness, and we owe it to the space community and the American public to share the facts the Inspector General [IG] missed,” Boeing VP and Director of Boeing Space and Launch Jim Chilton said in a terse November 18th statement rejecting the (OIG) findings. “Each member of the Boeing team has a personal stake in the safety, quality and integrity of what we offer our customers, and since Day One, the Starliner team has approached this program with a commitment to design, develop and launch a vehicle that we and NASA can be proud of.”

The OIG report was highly critical of Boeing’s performance and cost-efficiency, especially when compared to competing contractor SpaceX. While the report did not accuse Boeing of any wrongdoing, the “NASA’s Management of Crew Transportation to the International Space Station” audit was extraordinarily suspicious of the aerospace giant’s price schedules and timetables.

“We found that NASA agreed to pay an additional $287.2 million above Boeing’s fixed prices to mitigate a perceived 18-month gap in ISS flights anticipated in 2019 and to ensure the contractor continued as a second commercial crew provider, without offering similar opportunities to SpaceX,” the report stated under the leading subheading “NASA OVERPAID BOEING TO PREPARE FOR MULTIPLE CREWED MISSIONS” in the November 14th document. “NASA essentially paid Boeing higher prices in an attempt to address schedule slippage caused by Boeing’s 13-month delay in completing the ISS Design Certification Review milestone and after the Agency and Boeing could not agree to use the contract’s lower fixed price. In our judgment the additional compensation was unnecessary given the risk of a gap between Boeing’s second and third crewed missions was minimal when the Agency’s analysis occurred in 2016. Furthermore, any presumed gap in commercial crew flights would be addressed by NASA’s purchase of additional Soyuz seats from Boeing.”

Although the OIG conceded that additional funding was negotiated as a way to keep the program on schedule, the auditors indicated that the additional money was primarily a means to keep Boeing from dropping out of the program, rather than being directly tied to additional expenses. The report found that it was unfair and improper not to provide this same incentive to SpaceX.

In Boeing’s rebuttal, the company addressed each of the OIG accusations line-by-line, including the renegotiated payments. Boeing not only rejects the conclusions of the report but also largely disputes the facts on which those conclusions were based.

“Contrary to the conclusion in the IG report, Boeing contends that the benefits in shorter lead time and flexibility in adjusting launch dates are well worth the higher price in the table,” the company said in its rather thorough response. “Boeing rejects the average seat price assessment in the IG report. Boeing will fly the equivalent of a fifth passenger in cargo for NASA, so the per-seat pricing should be considered based on five seats rather than four. For proprietary, competitive reasons Boeing does not disclose specific pricing information, but we are confident our average seat pricing to NASA is below the figure cited.”

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flyoftentoo November 26, 2019

In my opinion, Boeing should have been eliminated from the program long time ago. Selecting two suppliers to kick off the program and watching the progress of both suppliers then eliminate the weak one, Boeing, based on cost/performance. NASA should have stick to the original terms of the contract and insisted Boeing to deliver. Boeing with its higher operating overhead and inefficient management will force themselves out of the contract. Boeing should pay the delay penalty and save tax payers' money. There is nothing wrong with just one supplier to begin with. NASA itself has done a poor job in managing the project. To save itself from further embarrassment. NASA should take the action now and stick to the terms that Boeing and Spacex must follows to deliver.