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United States ex rel. Smith v. Boeing Co.

United States District Court, D. Kansas

October 8, 2014

UNITED STATES OF AMERICA ex rel. TAYLOR SMITH, JEANNINE PREWITT, and JAMES AILES, Plaintiffs-Relators,
v.
THE BOEING COMPANY and DUCOMMUN, INC., f/k/a AHF-Ducommun, Defendants.

MEMORANDUM AND ORDER

MONTI L. BELOT, District Judge.

Before the court are the following:

1. Boeing's Motion for Summary Judgment on Liability (Docs. 644, 645); Relators' Response (Doc. 703); Boeing's Reply (Doc. 733).
2. Boeing's Motion for Partial Summary Judgment on Damages (Docs. 646, 647); Ducommun's Joinder in the Motion (Doc. 659); Relators' Response (Doc. 702); Boeing's Reply (Docs. 731, 735).
3. Boeing's Motion for Summary Judgment on Retaliation Claim (Docs. 648, 649); Prewitt's Response (Doc. 701); Boeing's Reply (Doc. 732).
4. Relators' Motion for Partial Summary Judgment on Liability (Doc. 650); Boeing's Response (Doc. 691); Relators' Reply (Doc. 728).
5. Ducommun's Motion for Summary Judgment (Docs. 657, 658); Relators' Response (Doc. 704); Ducommun's Reply (Doc. 734).
6. Relators' Motion to Strike Eastin Testimony and Declaration (Doc. 682, 683); Defendants' Response (Docs. 711, 713); Relators' Reply (Doc. 715).
7. Relators' Motion to Strike 2004 and 2005 SUP Reports (Doc. 687, 700); Defendants' Response (Docs. 712, 714); Relators' Reply (Doc. 716, 720).
8. Relators' Notice of Supplemental Authority and Supplemental Expert Report (Doc. 737); Defendants' Response (Docs. 745, 747); Relators' Reply (Doc. 749).

1. Boeing's Motion for Summary Judgment on Liability (Doc. 644).

Relators filed this action under the qui tam provisions of the False Claims Act ("FCA"), 31 U.S.C. § 3729, et seq.[1] They claim that Boeing and one of its suppliers, Ducommun, manufactured and incorporated a number of nonconforming parts into aircraft sold to the U.S. Government. The complaint alleges that defendants knowingly and falsely certified to the Government, in connection with claims for payment, that the parts conformed to contract specifications and to applicable Federal Aviation Administration (FAA) regulations. In large part Relators claim the parts were nonconforming because they were produced with manually controlled machine tools rather than with computerized machine tools that used statistical control methods. Based on a total purchase price of over $1.6 billion for twenty-four specified aircraft, relators seek treble damages under the FCA of more than $4.8 billion. In addition, relator Prewitt claims Boeing unlawfully retaliated against her because she pursued an FCA claim. Defendants deny the allegations and contend that relators' claims fail as a matter of law.

Boeing's motion for summary judgment on FCA liability asserts three main points. First, it argues that Boeing met its contract requirements by delivering aircraft that were certified as airworthy by the FAA. Boeing denies that the contracts required it to additionally certify compliance with all FAA regulations. Although it denies that any violations occurred, it says if any did occur they should be addressed by the FAA through its regulatory enforcement powers. According to Boeing, "[m]ere regulatory violations do not give rise to a viable FCA action." (citing United States ex rel. Conner v. Salina Reg'l. Health Ctr., Inc. , 543 F.3d 1211 (10th Cir. 2008)). Second, Boeing argues Relators have no evidence that any of the claimed regulatory violations were material to the government's payment of claims. Boeing says this point is emphasized by the government's eventual rejection of Relator's allegations and its decision to continue certifying and purchasing Boeing aircraft despite knowledge of relators' allegations. Third, Boeing contends relators have at most shown a genuine dispute about how certain engineering drawings should be interpreted, but they have failed to show that Boeing acted with the scienter required for an FCA claim.

A. Uncontroverted facts.

This qui tam action was brought by Jeannine Prewitt, Taylor Smith and James Ailes, three former employees of Boeing in Wichita. It relates to fuselage parts produced by Ducommun, a Boeing supplier in California.

Ducommun supplied parts mainly for Boeing's 737 Next Generation (or New Generation) aircraft ("737NG"). Ducommun delivered the parts to Wichita, where Boeing workers assembled them with other parts to form aircraft fuselages. The fuselages were shipped to Boeing's facility in Renton, Washington, where complete 737s were assembled. The completed 737 aircraft at issue were sold by the Boeing Commercial Airplanes business (BCA) to the Boeing Defense and Space Systems company (BDS). BDS then modified the aircraft for use by the U.S. Air Force and U.S. Navy. Finally, BDS personnel submitted claims for payment to the Air Force and Navy for the aircraft.

FAA Regulatory Overview. An overview of the FAA's regulatory scheme is necessary for an understanding of the claims. The following summary is taken largely from United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines) , 467 U.S. 797, 804-06 (1984).

In the Federal Aviation Act of 1958, Congress directed the Secretary of Transportation to promote flight safety by establishing minimum standards for aircraft design, materials, workmanship, construction, and performance. Congress established a multi-step certification process to monitor the aviation industry's compliance with these requirements. Authority over the process rests with the FAA.

The FAA has promulgated comprehensive regulations setting out the minimum safety standards that aircraft designers and manufacturers must meet before marketing their aircraft. At each step of the certification process, an FAA employee or an FAA-designated representative evaluates materials submitted by the aircraft manufacturer to determine whether it has satisfied these regulatory requirements. Upon a showing that the requirements have been met, the FAA issues an appropriate certificate permitting the manufacturer to continue with production and marketing. Varig Airlines , 467 U.S. at 804-06. There are three main steps in the certification process: a type certificate, a production certificate, and an airworthiness certificate. 49 U.S.C. § 44704. Type certificate. A manufacturer wishing to introduce a new type of aircraft must first obtain FAA approval of the plane's basic design in the form of a type certificate. After receiving an application for a type certificate, the FAA typically requires the applicant to make such tests as the FAA deems necessary in the interests of safety. By regulation the FAA makes the applicant itself responsible for conducting all inspections and tests necessary to determine that the aircraft comports with FAA airworthiness requirements. The applicant must submit to the FAA the designs, drawings, test reports, and computations necessary to show that the aircraft satisfies FAA regulations. It must certify that it has complied with the applicable requirements. 14 CFR § 21.20. The "type design" that must be submitted includes the drawings and specifications necessary to define the configuration and design features of the product, as well as information on the materials and processes necessary to define the structural strength of the product. 14 CFR § 21.31.

The manufacturer must produce a prototype of the aircraft and conduct ground tests and flight tests on it. FAA employees or their representatives review the resulting data and make such inspections or tests as they deem necessary to ascertain compliance with the regulations.[2] If the FAA finds that the proposed aircraft design meets the minimum safety standards, it signifies its approval by issuing a type certificate. Varig Airlines , 467 U.S. at 805-06.

Production certificate. Production may not begin until a manufacturer obtains a production certificate from the FAA authorizing the manufacture of duplicates of the prototype. To obtain a production certificate, the manufacturer must prove to the FAA that it has established and can maintain a quality control system to assure that each aircraft (including parts purchased from suppliers) will meet the design provisions of the type certificate. When it is satisfied that duplicate aircraft will conform to the approved type design, the FAA issues a production certificate, and the manufacturer may begin mass production of the approved aircraft. Regulations require a production certificate holder to notify the FAA of any changes in its quality control system that may affect the inspection, conformity, or airworthiness of its product.

Airworthiness certificate. Finally, before any aircraft may be placed into service, its owner must obtain an airworthiness certificate (or its military equivalent, a "conformity certificate") from the FAA. Such a certificate signifies that the particular aircraft in question conforms to the type certificate and is in condition for safe operation. It is unlawful for any person to operate an aircraft in air commerce without a valid airworthiness (or conformity) certificate.

Because the FAA does not have near the number of engineers needed to complete this elaborate compliance review on its own, the law allows the FAA to delegate certain inspection and certification responsibilities to properly qualified private persons. These "designated engineering representatives" (DERs) and other representatives[3] assist in the FAA certification process. They are typically employees of the aircraft manufacturers themselves who possess detailed knowledge of an aircraft's design based on their day-to-day involvement in its development.

The FAA may reexamine a certificate at any time and may modify, suspend or revoke it. See 49 U.S.C. § 44709. The FAA may investigate a suspected violation of safety regulations and may issue an order to compel compliance if it finds a violation. It also has the power to impose fines and can bring a civil or criminal action against persons who violate the regulations.

The Purchase Contracts

When the Air Force and Navy contracted with Boeing for the planes at issue, it had the option of using military procurement procedures. It opted instead to buy commercial airplanes and to modify them.

Each of the contracts at issue contained the following language or something similar to it requiring Boeing to obtain the appropriate FAA certificates:

1. FAA Certificates

a. Boeing will obtain from the Federal Aviation Administration (FAA):
(a) a Type Certificate... issued pursuant to Part 21 of the Federal Aviation Regulations for the type of aircraft covered by this Agreement, and
(b) a Standard Airworthiness Certificate for each Basic Aircraft issued pursuant to part 25 of the Federal Aviation Regulations or in the alternative a Conformity Certificate - Military Aircraft, FAA Form 8130-2, which will be provided to Buyer with delivery of the Aircraft.
b. Boeing will not be obligated to obtain any other certificates or approvals for the Basic Aircraft. * * *

The contracts required that Boeing provide the Government an FAA Standard Airworthiness Certificate Form 8100-2 or a Conformity Certificate Form 8130-2. Both of these forms included a certification that the aircraft was manufactured in conformity with data forming the basis for the type certificate and required disclosure of any deviations from the type certificate.

Each of the contracts also contained language similar to that set forth below pertaining to quality control and FAA oversight:

The production facilities of the aircraft Contractor... shall be FAA approved and in compliance with 14 CFR 21 (FAR Part 21). Quality Assurance requirements shall be in accordance with FAA Advisory Circular 00-41B, "Quality Control System Certification Program", FAA STD 13[D], "Quality Control Program Requirements", and FAA STD 16[A], "Quality Control System Requirements". Compliance is evidenced by the Production Certificate.

See Doc. 643, Exh. F-1.[4]

Boeing also warranted that each airplane would be free not only from defects in material and workmanship, but also "free from defects in... process of manufacture" and "free from defects in design, including selection of... process of manufacture, in view of the state of the art at the time of design."

Boeing did, in fact, hold a type certificate and production certificate with respect to each model at issue, and it obtained from the FAA airworthiness or conformity certificates for each aircraft. Each certificate is signed by a Boeing employee who was an authorized FAA designee.

The contracts also incorporated Federal Acquisition Regulation (FAR) 52.212-4 (48 CFR). Among other things, this regulation allows the Government to terminate a contract for cause in the event of a default by the contractor or if the contractor fails to comply with any terms and conditions of the contract. Upon such a cancellation, the Government shall not be liable for any amount for supplies or services not accepted.[5]

Development of 737 Next Generation

Boeing first obtained a type certificate for the 737 in 1967. In subsequent years, it obtained type certificate approval for several 737 derivatives. Boeing refers to these later derivatives, including the 737-600, 700, 800 and 900 series, as the Next Generation, or 737NG, as opposed to the original 737 Classic. All of the 737 derivatives are listed under a single FAA type certificate number.

The 737 Classic was manufactured using traditional design and manufacturing methods, including two-dimensional drawings, labor-intensive hand-directed machine tools, and manual measurement and inspection of tools and parts to ensure quality control. Assembly of parts into the fuselage required the use of massive, complicated and expensive assembly equipment.

Design, development and manufacture of the 737NG models incorporated newer technologies, including Computer Aided Three-Dimensional Interactive Application (CATIA) design software and Computer Aided Design (CAD) drawings to define detail parts and assemblies. The CATIA-created designs use solid modeling, a three-dimensional computer process that allows for interface of parts and computer-based structural analysis. Solid modeling requires that suppliers like Ducommun have the technical capability to work with and implement the new electronic designs. The relevant engineering drawings in this case were delivered to Ducommun in CATIA format, although they could also be printed out as conventional two-dimensional drawings.

ATA. One of the manufacturing processes used by Boeing in making its newer planes, including the 737NG, was "Advanced Technology Assembly" (ATA). ATA requires the drilling of precision-located and coordinated fastener holes in detail parts. The holes are placed and "toleranced" from other part features such as surfaces, edges and other holes. The accurate placement of these ATA holes establishes the location and orientation of a part relative to its "mate-with" part. This allows for a simplified assembly process that does not require large and expensive assembly equipment and may reduce the need for frequent measurement and inspection. It also reduces the need for shims and potentially damaging force (i.e. "make it fit") in the assembly process.

Machine tools were traditionally hand-directed and controlled. The use of automated numerically-controlled ("NC") machines has now become widespread, with many NC machines controlled by computer ("CNC"). Due to the close tolerances required for ATA parts and the ability of CNC machines to perform precision drilling, ATA holes are typically drilled on CNC machines. These machines automatically collect statistical data during the manufacturing process. The data can be used in applying "statistical process controls" (SPC), a quality control tool that employs statistics to track, predict and minimize variations in the manufacturing process.

Boeing's guide for assessment of its suppliers' ATA capability (Doc. 669-13) provides in part:

In order for ATA to be successfully implemented, several tools and processes are required. Among the most critical are a digitally engineered model as the controlling "drawing" used in conjunction with CNC machine tools. This marriage allows us to ensure accurate, first generation engineering to drive reliable, accurate production methods. The final element is the acceptance of the product and the assurance of product integrity. While not required for ATA production, coordinate measuring machines (CMMs) have proven to be invaluable in performing highly accurate, complex, repeatable verification of engineering requirements.
The ultimate goal of this program is to obtain a position whereby precise, consistent products are obtained at reasonable cost with a minimum of actual piece part inspection. No part or product has ever been improved by the inspection process. As such, it is our desire to move reliable processes to the mode of process acceptance and sampling. In order to obtain this goal it is necessary that each process be characterized as to capability and repeatability. Once established, and improved as necessary to meet product requirements, the process must be stabilized to the point of "reliable", and then a method to periodically validate continued reliability must be must be implemented. Through this, the process can be proven to be statistically stable and the products, by inference, acceptable. This process acceptance can then be done without using 100% inspection.

The same guide also states, however, that a supplier has alternatives for establishing an ATA process:

Certainly the preferred process would be one in which the supplier uses CATIA for their CAD system, a CNC mill for establishing part geometry and hole placement, and a programmable CMM for verification of engineering requirements, prior to obtaining a sampling approval plan. None of these is a requirement, however. In place of CATIA, Boeing supports nearly all CAD systems via IGES. Precision drill jigs may, and in some instances should, replace the CNC mill. Many parts can be validated very effectively using digital height gages, digital calipers, etc., with proper certification. This means you are not required to have a CMM.
* * *
Precision drill jigs may be used for the ATA program to install and inspect the ATA holes. These drill jigs must meet the requirements of [certain specified standards[6]. This is not the Boeing preferred method due to the potential for higher non-recurring cost associated with part configuration changes. It is however a viable alternative and in some instances provides the best value approach. Use of drill jigs requires the production of five parts, which must be validated independently by a secondary measurement, and a periodic maintenance plan to insure continued compliance to the engineering requirements.

The guide provides that a supplier must demonstrate its ATA production capability. As indicated above, if it elects to use drill jigs for the ATA program, it must produce five parts with the drill jig and have them independently verified on a certified CMM prior to Boeing acceptance. If it elects to use CNC machine tools, it must drill a prescribed test plate. The supplier's production plan must identify the method by which it will install ATA holes, and it must supply either measurement results from the CNC test plate or from the five items produced with a drill jig.

HVC. Boeing also implemented a quality control process called HVC (Hardware Variability Control). Although "no single definition of HVC exists, " (Doc. 669-11 at p.3), the concept focuses on defect prevention rather than defect detection. It involves several steps: product definition and analysis; development and documentation of "Key Characteristics"[7] on engineering drawings; development, documentation and implementation of a supporting manufacturing plan and a tool indexing plan; and use of SPC methods to measure performance and process capability, as well as an effective method of improving processes based on findings. Defendants point to Boeing documents citing the importance of HVC - including one describing it as "the foundation to ATA" - and argue that ATA necessarily required the use of HVC methods including collection and use of SPC data.

Quality Assurance; SPC. The quality control procedures adopted by Boeing pursuant to FAA standards are in Boeing's Advanced Quality System (AQS) D1-9000 Revision A, dated 1996, and the Boeing Quality Assurance Detailed Instruction Manual (Quality Manual) containing revisions beginning in 1997. Boeing's D1-9000 AQS system is divided into two sections: the basic quality system and the advanced quality system. Section 1 describes the basic quality system that must be in place to be a Boeing supplier. It does not necessarily require HVC or SPC. Among other things, it provides that the supplier "shall perform 100% inspection, acceptance sampling[, ] or statistical process control for in-process inspection or final inspection for each characteristic of a product." Section 2, the advanced quality system, "describes a process for improving quality by systematically reducing the variation of key characteristics." (Doc. 668-4). For a supplier to obtain Boeing approval under Section 2, it must have the ability to determine and measure the variation of key characteristics and show statistical control and capability[8] of the key characteristics. When a key characteristic is not in control and/or not capable, corrective action must be taken by the supplier to identify and establish control of key sources of variation, and 100% inspection may be required until the characteristic is back in control and the process is capable. Under either section, the supplier is required to take corrective action when noncompliances are identified by a Boeing audit.

According to Boeing's ATA design guide (Doc. 669-5), use of reliable processes for ATA key features is critical to the success of ATA assemblies, because tolerances for ATA key features are significantly smaller than for traditional designs. Using force to make ATA parts fit can damage or deform the assembly, so accuracy of the detail parts and adherence to specified tolerances is essential.

The ATA design guide (Doc. 669-5) also states that successful implementation of ATA requires control of random variations in manufacturing processes. Manufacturers often use tolerance analysis to establish and verify such control. If an assembly consists of numerous manufactured parts, the acceptable variation or "tolerance level" for each part must be considered in determining whether the overall assembly will be acceptable. Variations in individual parts can accumulate or "stack up" and cause critical features of the final assembled product to be unacceptable.

Two common methods of tolerance analysis are arithmetic (or "worst case") and statistical (or "RSS"[9]) analysis. Arithmetic analysis adds up the maximum possible variation for each part to show the "worst case" scenario for an entire assembly. Because it anticipates the worst possible outcome, a design using arithmetic analysis requires the smallest or "tightest" manufacturing tolerance for individual parts to ensure that the total assembly does not exceed acceptable limits. Statistical tolerance, by contrast, relies on the concept of a normal distribution or bell curve to predict that random variations will usually fall toward the middle of a range rather than at the extremes. Using statistical tolerance, a manufacturer can prescribe "looser" individual part tolerances and still have confidence that the final assembly will be within acceptable limits.[10] To use this method, the manufacturer must monitor the process to identify the normal range of variation and must ensure that the process stays within that range.

Flag note S3. Boeing's ATA Design Guide provided that ATA key feature tolerances "are determined by a statistical tolerance... or a worst case analysis of the assembly. This document [the Design Guide] contains a brief discussion of statistical analysis." An ensuing section on statistical tolerancing states:

When statistical tolerancing is used on an engineering drawing, the corresponding arithmetic tolerances may also be shown. The statistical tolerances will be identified with an "S" series Flag Note. If Manufacturing elects to build to statistical tolerances rather than arithmetic tolerances, the part features must be fabricated using statistical process controls; and Quality Assurance shall accept/reject parts based on statistical acceptance methods. Part acceptance requirements for statistically toleranced parts is based on evaluation of process data or lot measurement data. Each coordinate axis is analyzed independently.... If the results of the analysis require statistical tolerancing to predict good assemblies/installations, the following notes shall be used on the drawings that specify these tolerances:

FLS2 FEATURES IDENTIFIED AS STATISTICALLY TOLERANCED SHALL BE PRODUCED WITH STATISTICAL PROCESS CONTROLS, OR THE MORE RESTRICTIVE ARITHMETIC TOLERANCES ON THE DRAWING. THE STATISTICAL TOLERANCE APPLIES ONLY WHEN PROCESS MEASUREMENTS MEET THE FOLLOWING REQUIREMENTS: 1) THE PROCESS CONTROL CHARTS SHOW THAT THE ASSOCIATED MANUFACTURING PROCESS IS IN CONTROL. 2) THE MEAN DEVIATES FROM NOMINAL NO MORE THAN 10 PERCENT OF THE SPECIFIED TOLERANCE. 3) THE MINIMUM Cpk IS 1.0, WITH 90 PERCENT CONFIDENCE. * * *

FLS3 FEATURES IDENTIFIED AS STATISTICALLY TOLERANCED SHALL BE PRODUCED WITH STATISTICAL PROCESS CONTROLS. THE DRAWING TOLERANCE APPLIES ONLY WHEN PROCESS MEASUREMENTS MEET THE FOLLOWING REQUIREMENTS: 1) THE PROCESS CONTROL CHARTS SHOW THAT THE ASSOCIATED MANUFACTURING PROCESS IS IN CONTROL. 2) THE MEAN DEVIATES FROM NOMINAL NO MORE THAN 10 PERCENT OF THE SPECIFIED TOLERANCE. 3) THE MINIMUM Cpk IS 1.0, WITH 90 PERCENT CONFIDENCE. WHEN THESE REQUIREMENTS ARE NOT SATISFIED, INDIVIDUAL PRODUCT MEASUREMENT MUST FALL WITHIN THIRTY PERCENT OF THE SPECIFIED TOLERANCE, CENTERED ON NOMINAL. * * *

FLS4 FEATURES IDENTIFIED AS STATISTICALLY TOLERANCED SHALL BE PRODUCED WITH STATISTICAL PROCESS CONTROLS. PROCESS MEASUREMENTS MUST MEET THE FOLLOWING REQUIREMENTS: 1) THE PROCESS CONTROL CHARTS SHOW THAT THE ASSOCIATED MANUFACTURING PROCESS IS IN CONTROL. 2) THE MINIMUM Cpk IS 1.0, WITH 90 PERCENT CONFIDENCE. * * *

Application notes in the guide indicate the usage of Flag S2 is for "any ATA drawing with both arithmetic (worst case) and statistical tolerances for a feature." Flag S3 is for "any ATA drawing with only statistical tolerances for a feature."

Boeing's engineering drawings or data sets for many of the 737NG ATA parts manufactured by Ducommun included flag note S3. Relators and their experts contend flag note S3 mandated the use of NC machines and the collection of statistical process control data in making these ATA parts.[11]

Boeing cites the testimony of the two authors of the Design Guide's discussion of Flag Note S3. Michael Kuss states that he and colleague Bob Atkinson wrote these provisions recognizing that Boeing does not dictate particular methods of drilling ATA holes and that suppliers might use NC machines or they might use drill jigs. If a supplier used NC machines and collected enough SPC data to show that the process was in control, a wider tolerance for ATA holes was allowed because it could be determined statistically that the holes would rarely mismatch. If the supplier used drill jigs, however, the process "was not conducive to data collection for SPC purposes data" and so "we provided a tighter tolerance - forty percent tighter, to be exact, if SPC data were not used for product acceptance." Kuss said the line next to Flag S3 [i.e., .0300 ×.60 =.0180] means that the hole center must fall within a circle with a.03" diameter centered on the nominal location, but if the supplier does not have sufficient SPC data, then the tolerance is only 60% of that, or.018. Kuss states that Flag Note S3 "was not meant to require SPC in every instance" and that they inserted the phrase "when these requirements are not met" to explain that different methods of manufacture would result in different tolerances depending on whether or not SPC data was generated. According to Kuss, "the use of drill jigs by Ducommun, or any other supplier, was acceptable, so long as the hole location tolerances stated in the drawings were satisfied." (Doc. 645-11). Co-author Atkinson similarly states that they knew "suppliers would have options for the method of drilling" and that they provided different tolerances depending on whether the supplier conducted a statistical analysis. If SPC data was collected, a 40% wider tolerance was permitted, but "when holes were drilled using other methods, such as drill jigs, that did not lend themselves to collection of statistical data, " a tighter tolerance was required to ensure that holes would line up properly. (Doc. 645-12). Boeing cites further evidence in support of the same conclusion, including expert testimony from former Boeing design engineer Theodore Gladhill, who says he interprets Flag Note S3 in the manner described above and that he is "aware of no engineer at Boeing who interpreted flag note S3 differently." (Doc. 645-10). He adds that after Ducommun stopped supplying these parts for Boeing, the new supplier used some of the same drill jigs to fabricate 737NG ATA parts for Boeing.

Relators' experts, meanwhile, opine that Flag Note S3 required the use of NC machines and SPC data, emphasizing the note's first sentence providing that "FEATURES IDENTIFIED AS STATISTICALLY TOLERANCED SHALL BE PRODUCED WITH STATISTICAL PROCESS CONTROLS." Relators contend this made application of SPC (and therefore use of NC machines) mandatory. (Doc. 702-4 at 7[12]). Relators concede that the flag note sometimes allows acceptance of parts where statistical control has been lost, but argue the parts must still be produced using SPC and, in any event, they say the circumstances allowing drill jigs to be used for acceptance were not satisfied, a point they say is shown by the tooling audit report. Relators' expert Dr. Dreikorn argues that the language of the design drawings speaks for itself and cannot be "reinterpreted" retroactively by Boeing's witnesses. He further opines that the failure to use SPC to control key characteristics other than ATA holes was also a violation of Boeing's production certificate.[13]

Ducommun production

Ducommun supplied Boeing with over 200 different types of parts for the 737NG aircraft, including chords, fail-safe chords, and frames. All but 16 formed at least part of principal structural elements. Ducommun was the single source supplier (i.e., the only manufacturer) for nearly all the structural fuselage parts it contracted to produce for Boeing between 1996 and 2004. It was a primary source manufacturer of bear straps, which reinforce the skin and frame around door openings. Boeing incorporated the component parts it received from Ducommun into the fuselage structures of the 737NG aircraft at issue that it sold to the government.

The contracts between Boeing and Ducommun required Ducommun to implement and maintain a quality system that met or exceeded the requirements of Boeing's AQS D1-9000. The latter system required suppliers to establish procedures to ensure that non-conforming products were not used or installed and to notify Boeing of such non-conformities. It required the supplier to provide a detailed "first article inspection" (FAI) on a new part that was representative of a first production run to verify that the prescribed production methods produced an acceptable item in accordance with engineering specifications. Boeing's Quality Assurance Manual (Doc. 652-6) provided that non-conforming material was to be marked and dispositioned by a Material Review Board (MRB) consisting of representatives of quality assurance and engineering departments. By regulation, the MRB had the responsibility of determining whether parts withheld as non-conforming were in fact serviceable, needed to be reworked, or should be rejected.

Ducommun was also required under its contracts with Boeing to obtain and maintain ATA qualification. Ducommun was supposed to measure all Key Characteristics and validate that they met engineering tolerances. Boeing's contracts with Ducommun provided that Ducommun "may utilize SPC control charts... in an effort to provide process improvements." ...


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