“Fast, Cheap, or Right. Pick two.”
– an old engineering aphorism

A report from NASA’s Office of the Inspector General released several key findings about Boeing and the Michoud assembly facilities today. In that report, they cited massive cost overruns for the Exploration Upper Stage, quality issues at Michoud and an underqualified workforce at that facility.

Findings About the Exploration Upper Stage

The Exploration Upper Stage is a cornerstone of the Space Launch System (SLS) Block 1B rocket now slated to debut on Artemis IV. Developed and built by Boeing, it is planned to increase the SLS rocket’s cargo capability some 40%. Currently, Block 1 SLS, such as the one used for Artemis I and slated for Artemis II, can carry 27 metric tons to the moon. The Block 1B iterations of SLS, using the EUS will increase that capability to 38 metric tons.

The SLS Block 1B has been under development since 2014 and has faced changing technical requirements and competing funding priorities. These factors, along with congressional directives to accelerate the rocket’s development, have led to increased costs and schedule delays. Originally intended for the Artemis II mission, Block 1B’s first flight was moved to Artemis IV, extending the development timeline and increasing costs. Boeing’s EUS contract has grown from $962 million to over $2 billion through 2025, contributing to the overall SLS Block 1B cost increase.

NASA’s Management of Space Launch System Block 1B Development

The OIG added that Boeing’s Earned Value Management System (EVMS) has been rejected by the US Department of Defense for four years. EVMS is used to gauge adherence to budgets and timelines, and is not completely unlike a project management tool.

NASA delayed establishing the Block 1B Agency Baseline Commitment until December 2023, after 10 years of development and much later in the project life cycle than NASA’s standard practice. Without a formal cost and schedule baseline at critical milestones, the Agency was limited in its ability to assess adherence to budgets and timelines, and Congress and other stakeholders lacked visibility into the Block 1B’s increasing costs and schedule delays. Additionally, Boeing Defense, Space & Security’s EVMS, used by NASA for its Stages contract to measure cost and schedule progress, has been disapproved by the U.S. Department of Defense since 2020. DCMA has issued several Level II and III CARs for this EVMS, including a Level III CAR related to visibility into cost, schedule, and resource needs for several Boeing contracts, including Stages.

NASA’s Management of Space Launch System Block 1B Development

Essentially, it seems that the OIG is saying that NASA’s insight into progress and budgets is limited, and that the tool used to measure those critical items was deemed not fit for purpose by the DoD.

Boeing Quality Issues Cited

The OIG did not mince words in their scorn at Boeing’s quality control practices at Michoud:

While NASA requires its aerospace contractors to have quality assurance programs that comply with SAE International’s AS9100D standards on quality management systems, we found Boeing’s quality management system at Michoud does not adhere to these standards or NASA requirements. NASA engages DCMA to conduct surveillance of Boeing’s core and upper stage manufacturing efforts at Michoud, and when deficiencies in quality are found, DCMA issues Corrective Action Requests (CAR) to the contractor. CARs are labeled Level I through IV, with Level I the least serious deficiency. From September 2021 to September 2023, DCMA issued Boeing 71 Level I and II CARs, as well as a draft Level III CAR. According to DCMA officials, this is a high number of CARs for a space flight system at this stage in development and reflects a recurring and degraded state of product quality control. Boeing’s process to address deficiencies to date has been ineffective, and the company has generally been nonresponsive in taking corrective actions when the same quality control issues reoccur.

NASA’s Management of Space Launch System Block 1B Development

SAE International’s AS9100D is an industry-standard framework for guiding quality systems for manufacturers in the aerospace field. It came about when aerospace companies found that in practice, ISO 9001 was inadequate for DoD, NASA, FAA customer requirements. AS9100 added 55 aerospace industry-specific amplifications and requirements to ISO 9001:1994, and is often viewed as the quality standard for companies like Boeing.

Quality standards are dry to read to be sure, but they are part and parcel of any manufacturing process. Government procurement quality standards are easily found online, and make for good — if not exciting — reading.

• Level I CARs [Corrective Action Requests] are issued to the supplier management level responsible for taking corrective actions for a nonconformity that can be corrected on the spot, and where no further corrective action response is necessary.
  
• Level II CARs are the minimum level for a nonconformity associated with critical characteristics. They are issued to the supplier management level responsible for initiating corrective actions when the contractual nonconformity cannot be corrected on the spot. Level II CARs may be issued to subcontractors, and may be coupled with contractual remedies such as charge for additional cost of inspection or test when prior rejection makes reinspection or retest necessary. The purpose of a Level II CAR is to help a supplier improve their QMS. [Quality Management System]
  
• Level III CARs are issued to the supplier’s top management for serious contractual nonconformities, failure to respond to a Level II CAR that has been issued, and repeat Level II CARs which indicates inadequate root cause determinations. Level III CARs are issued by the DCMA NSEO ACO and may be coupled with contractual remedies to include reduction of progress payments, cost disallowances, business management systems disapprovals, and charge for additional cost of inspection or test when prior rejection makes reinspection or retest necessary. A Level III CAR is the DCMA NSEO Commander’s management tool to correct issues that need to be addressed.
  
• Level IV CARs are issued to the supplier’s top management when a Level III CAR has been ineffective and when the contractual nonconformity is of a serious nature. Level IV CARs are issued by the DCMA NSEO ACO and may be coupled with contractual remedies to include suspension of progress payments, suspension of product acceptance activities, removal of QAR from facility, and charge for additional cost of inspection or test when prior rejection makes reinspection or retest necessary.

The OIG found that Boeing Michoud had a higher-than-acceptable level of quality issues, with 71 lower-level violations leading to the drafting of a single higher-level finding. In short, that finding is all but a red alert that quality problems are present and persisting, and OIG continued by saying that Boeing’s responses and corrective actions were inadequate.

Workforce Issues

OIG cited workforce issues at Michoud as a major concern:

According to NASA officials, the welding issues arose due to Boeing’s inexperienced technicians and inadequate work order planning and supervision. The lack of a trained and qualified workforce increases the risk that Boeing will continue to manufacture parts and components that do not adhere to NASA requirements and industry standards.

NASA’s Management of Space Launch System Block 1B Development

Later in the report, OIG explained why this is a problem for Boeing:

According to Safety and Mission Assurance officials at NASA and DCMA officials at Michoud, Boeing’s quality control issues are largely caused by its workforce having insufficient aerospace production experience. Michoud officials stated that it has been difficult to attract and retain a contractor workforce with aerospace manufacturing experience in part due to Michoud’s geographical location in New Orleans, Louisiana, and lower employee compensation relative to other aerospace competitors.

NASA’s Management of Space Launch System Block 1B Development

Boeing is paying a lower than market rate for employees in a region of the US that is less desirable for those workers. Put another way, highly experienced, high-talent individuals can make more money while they live in areas that they prefer to Michoud.

Effectively, Boeing has made the business decision to have a pay rate structure that has aligned with with a lesser experienced, lower skilled workforce at Michoud.

We project the SLS Program’s Block 1B development costs will reach approximately $5.7 billion before the system is scheduled to launch in 2028. This is $700 million more than the Block 1B cost and schedule baseline, or Agency Baseline Commitment (ABC), that NASA formally established in December 2023 at nearly $5 billion. The EUS accounts for more than half of the cost of Block 1B development. We estimate EUS development costs will reach nearly $2.8 billion through 2028, roughly three times the initially agreed-upon cost of $962 million in 2017.

NASA’s Management of Space Launch System Block 1B Development

Specific Recommendations From OIG

The OIG made four specific recommendations:

1. Coordinate with Boeing, the SLS Stages prime contractor, to develop a quality management system training program that is compliant with AS9100D and reviewed by the appropriate NASA officials.

2. Institute financial penalties for Boeing’s noncompliance with quality control standards.

3. Perform a detailed cost overrun analysis on Boeing’s Stages contract for EUS development.

4. Coordinate with DCMA [Defense Contract Management Agency] to ensure contractual compliance with EVMS clauses.

NASA Response

In Appendix B of the OIG Report, NASA said the following: first, that it concurs with recommendations 1, 3, and 4, but that it does not agree (“nonconcurs”) with the second recommendation, to institute financial penalties for Boeing’s non-compliance with quality control standards.

Its rationale for declining the second recommendation is that the agency

“interprets this recommendation to be directing NASA to institute penalties outside the bounds of the contract. There are already authorities in the contract, such as award fee provisions, which enable financial ramifications for noncompliance with quality control standards.”

The agency commented that

“NASA is dedicated to ensuring that its workforce and associated contractors are qualified and properly trained to ensure the safety of its missions. This includes employing project managers and technical experts who work closely with contractors to provide guidance and ensure compliance with contractual obligations. NASA holds all its programs to the highest technical and programmatic standard levied on the spaceflight community, and ESDMD bears the responsibility of equipping Artemis astronauts with safe, reliable hardware to enable the most ambitious of engineering and scientific goals.

NASA also cited supply chain and labor shortages as drivers of cost and scheduling impacts.

“The aerospace industry is facing significant supply chain disruptions, similar to, and in some cases in a more acute scale, to the broader economic supply chain issues. These disruptions have been exacerbated by various factors, including labor shortages, transportation delays, and raw material shortages. These disruptions have had a profound impact on the aerospace industry, leading to production delays, increased costs, and challenges in meeting customer demand. ESDMD’s buying power is decreasing each year and escalating. These unforeseen challenges, including technical issues, are all contributing factors to cost and schedule impacts. NASA is working to adapt through proactive management strategies and understanding the interconnected factors shaping the aerospace market’s dynamics.”

Taken all together, this does not paint a pretty picture for a company that has been dogged by quality problems across the breadth of its business. Nor does it paint a pretty picture for the future of SLS — a program whose total costs have spiraled upwards seemingly non-stop since its inception.

Clearly, Boeing is not managing its manufacturing very well, and it is failing to address serious issues as they arise. In short, it sounds a lot like the same issues Boeing is facing with its commercial aircraft business.

Whether this draws the eye and ire of Congress remains to be seen. Perhaps these eye popping numbers of the exploding cost of the EUS project in the OIG report makes that inevitable, and perhaps in a Congressional examination lower cost alternatives may gain traction. Time will tell.