Today contract change notices – or CCN – are an integral part of space programs. At first glance it makes perfect sense: use them to adapt to changing needs. However, that is a slippery slope. When it is so easy to change contract why bother to make sure you have a good definition in the first place? If you wonder how the requirement creep got a foothold in your project, how the schedule slipped and the budget was overun. Look no further. In short you are better of if you don’t (CCN).
Try to remember: your first kick-off meeting (of an Agency program)
There is always a first time. Mine was many years ago. As a #newspace entrepreur I wasn’t used to the special language of the space agency but one word caught my attention: CCN. I was not quite sure what it meant but it seemed important; so I listened.
Person A: there are so many uncertainties in the project.
Person B: don’t worry if it gets out of hand we can always do a CCN!
A magical cure all in the #oldspace world
In my experience, to change a project after it has started is a bad idea. The later the worse it gets. Nevertheless why are many so eager to do it anyway?
From my outsider perspective: it seems useful to the participants. The Agency itself may be pushing for some cutting edge technology with many things unknown and the industry with a firm fixed price and 8% fixed profit objectively (Space Done Wrong – Episode 01) does not have the ability to include to many unknowns in their margins. So when you come across a roadblock, lets agree with the supplier on what to do, adapt the contract and budget – no harm done.
CCN: Its a slippery slope leading to:
That would all be well and good, if it would be the exception of the rule. If one in ten projects would require a CCN. Unfortunately they have become somewhat ubiquitous. As a result several negative things also have become normal.
Cost and Schedule Overuns
As part of a CCN that is requested by the Agency there is an expected adaptation of the budget. In addition – since its not the fault of the supplier – there is a pardon on the schedule overun. And while we are at it, haven’t you identified something to make the project better? Why not add that to the mix, too? While we are waiting for one team to fix a problem the others will not be idle. Many new ideas will arise and so the requirements will increase. For the Agency that surely means a better program and for the industry it means more money and more time to get the project done. Would you say no?
Maybe because over time all your projects will look like the car Homer Simpson designed: while every detail may be right the whole picture isn’t.
No accountability and slow innovation
A side effect that has been outlined in first Episode of this series is that even a project with a Firm Fixed Price slowly but surely drifts towards becoming a Cost Plus one. Then nobody has an incentive to actually getting the project done on budget and on schedule.
If a CCN offers an easy fix an issue, there is less incentive to prepare a project diligently.
You are not #NewSpace if you CCN.
Instead of focusing on the negative things that can happen when you do CCN, lets look what additional advantages there are when you don’t and why that actually makes you more #newspace in the process.
Customers (Space Agencies or otherwise)
While it may be tempting to add more features to your program while it is running, I encurrage you to resist the temptation. A program that takes 4 years instead of two will bind ressources and delay results.
A passable outcome on schedule and budget is better than perfect one – years later
For that you will have settle for less and to take more risks. To make that acceptable do more baby steps than giant leaps. Short missions with palatable and well defined innovation will bring you closer to your goal – fast.
Industry
One reason why the agencies requiring maximum profit margins is because you kept coming back requesting budget increases. Yes the customer may have come to you and asked for improvements but you should have tried harder to identify them beforehand and include in an allowance in your proposal – or convince the customer – before the project – that deviations in that direction are ill advised.
Winning a project where you know you will have to do a budget increase via CCN might not be worthwhile in the first place.
Know your risk and own it. If the risk margin is unacceptable to your customer, take smaller steps. Maybe your product is not flexible enough (as in flexible with no or low NRE) – so do innovate. If there are failures, learn from them, move forward. Accept no mission that has no room for faillure.
Disclaimer
The author’s views are his own do not represent the views of his company Berlin Space Technologies.
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