Enterprise Risk Management: The Case of the 737 MAX Program

By Defense.info Media Team

The question of risk management is a key aspect of any way ahead for defense or commercial aerospace programs.

For example, Jim Durso examined this challenge in looking at the enhanced reliance of the U.S. government on private space companies.

In his article, “The Pentagon Should Proceed with Caution in Investing in the SpaceX Starship,” Durso cautioned:

The Air Force motto is “Aim High,” but a better suggestion is “Buyer beware.”

In its 2022 funding request, the U.S. Air Force  revealed it is looking to invest nearly $50 million into the research and development of rocket payload delivery systems for the rapid transport of cargo and troops across the globe. While the branch has indicated that the investment isn’t geared towards any particular company, most observers believe that the outlined criteria — rapid reusability and 100,000-ton cargo capacity — suggest it is considering SpaceX’s Starship prototype.

If the Air Force announces it is investing in Starship, the news will come less than a year after the Space Force entered into a direct development agreement with SpaceX with a similar goal in mind: the prospect of global one-hour payload delivery. If the Department of Defense (DoD) decides to pursue this unproven technology, it needs to proceed with caution.

For Starship, Musk said he has a goal of $2 million per launch and delivery, which would provide same-day reusability with greater carrying capacity at a fraction of current costs. The Air Force has been dealing with a thin budget for years, which has increased the need for smart investments with high probability returns. However, while SpaceX’s standing in the commercial space industry has presented many positives, the company is also known for unpredictable development schedules, which could undercut the same cause the Air Force is seemingly trying to help.

For example, in 2018, after years of delays and setbacks with its cargo delivery rockets, the space company conceded that it had to revise its contract with NASA and raise prices by 50-percent. According to an audit from the NASA Office of Inspector General, it did so because it received a “better understanding of the costs involved after several years of experience with cargo resupply missions.” The Air Force should keep this in mind when considering the viability of SpaceX’s current Starship plans.

Musk often overstates his company’s capabilities, and even he concedes that the latest figures he provided for Starship sound “insane.” Nothing about Starship’s development demonstrates this time will be any different.

But is the challenge of risk management really with regard to advanced aerospace products? What is entailed? How can the private sector and government oversight work better in managing risk?

A recent case study published by the Macrothink Institute considers these issues with regard to the 737 Max program.

The abstract to the article highlights of the case study as follows:

The loss of two Boeing 737 MAX aircraft, their 346 passengers and crew in 2018 and 2019 stunned the aerospace community and the flying public.

There is a natural inclination after an aviation mishap to ask, “What if…?”

What if latent design flaws in the system had been found earlier?

What if the aircrew had taken different steps in handling the non-normal events?

What if the B-737 MAX certification by the Federal Aviation Administration (FAA) had been handled more rigorously?

This paper will re-examine the antecedent events leading up to the mishaps through a counterfactual lens to envision how the two tragedies could have been avoided. T

hroughout the paper observations based on our combined 120+ years of aerospace, engineering and risk management experience will be offered to readers.

For the opportunity to read this fascinating case study, please go to the following web address: