And if Boeing wants to ever recover a chance on major NASA contracts, they can't let NASA down on this. Unless the want to just leave the space business.
Do they really have a choice...? I haven't been following this very closely, but it seems like SpaceX is eating their lunch regardless, and Boeing the overall organization is in crisis, isn't it? Will they even still be around in a year or two, much less continue to make space things for NASA?
Really, Boeing needs to have a come to jesus moment on several different things - they need to say "hey so clearly SLS is a mistake, we need to develop something like Starship, give us $5 billion we'll make it happen."
Although it also seems like they need to have a better engineering culture and organizationally they would prefer to retaliate against engineers trying to improve their culture. If they don't fix that, probably can't fix anything. But also if they had a good engineering culture they probably would've scrapped SLS 5 years ago.
The neat part from government perspective is that it doesn't matter how much Boeing has already lost on the contract, whether it makes sense for them to go on depends strictly on whether they believe they can fly the remaining contracted-for flights for less than the payouts. And this is probably still true. Yes, they will lose money overall on the contract, but they will lose less money if they complete it.
NASA has been trying to cancel SLS for a decade. It’s nicknamed the Senate Launch System for a reason.
The reality is that large parts of NASA are extremely supportive of SLS. We know from reporting that this is true. It was NASA Johnson engineers who pushed the design. No NASA Administrator has ever dared to even question the SLS or publicly speak in criticism at best the have lightly pushed for solutions around SLS.