Boeing Can't Make Money With Fixed-Price Contracts

DannyB writes:

Boeing says it can't make money with fixed-price contracts

"Rest assured we haven't signed any fixed-price development contracts, nor intend to."

Boeing released its third-quarter results on Wednesday [ . . . . ] amid these improving results, Boeing's financials continued to be dragged down by its Defense, Space & Security division. This division, which includes missile production for the military and space activities such as satellites and the Starliner spacecraft, lost $1.7 billion during the first three quarters of this year.

[ . . . . ] Boeing's chief executive, David Calhoun, and chief financial officer, Brian West, expressed disappointment in these results from the defense and space division. [ . . . . ] the pair pinned the blame for performance by its defense and space division, referred to internally as BDS, on fixed-price contracts. As the BDS division seeks a return to profitability, West said Boeing will not be using fixed-price contracts anymore.

[ . . . . ] Boeing has also been struggling with fixed-price contracts in programs to build aircraft for the military, such as the KC-46 Pegasus aerial refueling aircraft, and NASA, with the Starliner crewed spacecraft.

[ . . . . ] Boeing has been developing Starliner for more than a decade and is running six years behind its original goal of flying crew to the International Space Station for NASA in 2017. The company also has fallen more than three years behind SpaceX

[ . . . . ] As it has sought to compete with SpaceX on a purely fixed-price contract for crew transport, Boeing has reported more than $1 billion in losses to date and still has yet to fly its first astronaut mission.

Clearly cost-plus contracts accomplish exactly what they were intended to and must be continued.

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