In what is being reported as a first-of-its kind settlement with U.S. federal regulators, Boeing has agreed to pay $12 million in penalties as part of a settlement mandating Boeing 737Max Linetighter oversight of suppliers and tighter quality controls inside its own production facilities.

This settlement resolves 13 pending or potential civil enforcement cases with the Federal Aviation Administration (FAA).  According to reports, the settlement subjects Boeing to as much as $24 million in additional penalties if manufacturing, auditing and regulatory reporting improvements are not implemented in the coming five years.

In its announcement, the FAA stressed the importance of internal corporate controls to insure that the design-to-manufacturing to maintenance processes are “operating according to the highest standards.” FAA Administrator Michael Huerta stated:

Compliance requires all certificate holders to develop and implement internal controls that ensure they’re operating according to the highest standards. “Boeing has agreed to implement improvements in its design, planning, production and maintenance planning processes, and has already implemented several of these improvements.”

Process areas cited for attention include, among others:

  • Improved management and accountability systems including a requirement that Boeing managers review regulatory compliance performance.
  • Improvement in internal audit processes across designated processes with audit teams reporting directly to Boeing’s Vice President of Quality.
  • Enhanced supplier management to determine whether incomplete work is being accepted.
  • Review and simplify at least 15 process specifications used to design, build, deliver and support Boeing products.
  • Report to the FAA at least on an annual basis on the effectiveness of Boeing’s regulatory compliance activities including a final comprehensive report after the fifth year of the agreement.

According to the FAA statement, prior issues involved installation of fuel tank flammability reduction equipment on Boeing 747 and 757 aircraft and insufficient corrective action after discovering that a supplier was providing incorrectly shaped fasteners. Details related to other specific enforcement matters were not released by the FAA.

Supply Chain Matters readers might recall that in March of 2014, after the FAA initiated a thorough formal joint review of Boeing’s 787 Dreamliner aircraft program, a subsequent report indicated that Boeing had placed too much reliance on suppliers for the overall quality of 787 components and systems.  It further stated that Boeing’s sometimes ambiguity in stating what was required of partners led suppliers to believe that they had met requirements.

Certain suppliers within Boeing’s supply chain will likely feel the effects of this new announced compliance agreement with the FAA. It comes as Boeing continues to ramp-up its production cadence for delivery of booked customer orders involving newly designed aircraft that stretch out over the enhanced conformance period.

This development is yet another reinforcement of the importance of effectively integrating product lifecycle management, manufacturing and quality management systems together in a continuous information and decision-making flow.