Cost Plus Contracts in Aerospace

[nuaetius]

My question is if ULA has had a hand in the construction of almost every successfully built launcher and vehicle in the United States since the beginning of our space program. Why are we continuing to give them Cost Plus contracts? As far as I can see a Cost Plus contract is a perfectly appropriate choice when you are asking a company to produce a product that requires devolvement of new technology, such as when Boeing built the Shuttle or the Titan V. Both these projects required the company to experiment, create utterly new technology, and possibly find out that they are developing down a dead end and have to start over again. Cost plus allows you to experiment and innovate without fear of running out of money, but also makes you much less mindful of the bottom line (I should know, Cost Plus is feeding my family at the moment, and I never want this project to end). On the other hand the CEV is based on solidly tested technologies that Boeing and LM have used in production vehicles before. Ares is using components developed for the Shuttle, Apollo, Gemini, and Titin projects. <br /><br />I guess my question is if I requested Honda build a Ridgeline with one of their diesels used by their Europein delivery vans of course they would charge me an outragous price, but since all the technologies are proven they would never get Cost Plus. On the other hand if I requested a Ridgeline that could fly, that would require a Cost Plus contract.<br />

 

[docm]

ULA didn't exist until December 1, 2006. While it's a joint venture of Lockheed-Martin and Boeing its history starts then. <div class="Discussion_UserSignature"> </div>

 

[jimfromnsf]

"On the other hand the CEV is based on solidly tested technologies that Boeing and LM have used in production vehicles before. Ares is using components developed for the Shuttle, Apollo, Gemini, and Titin projects."<br /><br />Still needs to be cost plus, there still is inherent risk and the companies don't want to assume it

 

[CalliArcale]

I've gone back and forth in my mind about cost plus contracts. On the one hand, in the current business environment it is stupid for a supplier to accept a firm fixed price contract unless they are REALLY confident that they can do it for the money. I've seen companies get in serious trouble for underestimating the job on firm fixed price contracts. On the other hand, government contractors have gotten downright mercenary lately, leading one DoD official in the logistics arena (can't remember who at the moment) to lament that contractors aren't behaving as if we're at war -- impugning their patriotism for refusing to accept risk, but also going further to decry the fact that they're all focused on short-term financial return <i>to the detriment of long term gain</i>. And he had a very good point. In my opinion, innovation has suffered somewhat because a lot of government contractors are unwilling to make a personal investment in technology development unless they're really sure the government will reimburse them for that within a couple of years. It is a risk-averse market right now.<br /><br />So while firm fixed price is not a good idea for a contract like this, where there is considerable risk because they really are developing a new vehicle, I do worry that the private sector has become dangerously risk-averse. Of course, this does create opportunities for companies that are willing to take a few chances. Many companies that try will fail (that's why it's risky) but probably not all of them. The big guys ought to be watching their backs if they're not willing to take a few risks. <div class="Discussion_UserSignature"> <p> </p><p><font color="#666699"><em>"People assume that time is a strict progression of cause to effect, but actually from a non-linear, non-subjective viewpoint it's more like a big ball of wibbly wobbly . . . timey wimey . . . stuff."</em>  -- The Tenth Doctor, "Blink"</font></p> </div>