Kicking Costs Down The Road

Editor's 31 Aug note: The following internal NASA email is part of the process whereby NASA Headquarters gets its numbers straight before it goes to OMB in early September to ask for an additional $5.5 billion over the next few years (FY 2006-2010) to cover previously unquantified costs. Part of the process is trying to understand where (and how) these costs originated in the first place.

From: Shank, Christopher M. (HQ-AA000)
To: Griffin, Michael D. (HQ-AA000)
CC: [Senior NASA HQ Management]
Sent: Wed Aug 31 07:29:55 2005
Subject: RE: FY07 Shuttle/ISS budget

Mike,
As I discussed with you last week about the need to get a more complete, accurate history about why Shuttle budget runout is not sufficient from what you heard previously from Shawcross and Reads, Doug Comstock put together the following writeup and coordinated it with Hamaker, Gerst, et al:

The FY05 budget request for the Vision included assumptions for budget reductions in the outyears as Shuttle was to be retired. These reductions were used to increase funding for exploration systems development. The reductions were not based on rigorous bottoms-up analysis, and this was acknowledged at the time by both NASA and OMB. The assumptions behind the reductions were based, in part, on analysis done by the RAND study looking at Shuttle privatization (Sarsfield/Heimerdinger, et al), including savings associated with rampdown/closeout of various production lines. These assumptions were integrated into estimates generated by Matt Schaffer, who was part of Joe Hamaker's Cost Analysis Division at the time. Matt also generated the Exploration Systems numbers used in the initial 'sand chart.'These were NASA numbers, not OMB numbers, and they were cleared through the Strategic Planning Council (which included all AAs) as part of the budget formulation process. It was expected, at the time, that the numbers would be refined with more rigorous analysis as part of the FY 2006 budget formulation process.

Hopes of developing rigorous estimates for the FY06 budget were not realized, given ongoing challenges with RTF. However, SOMD did generate estimates that indicated the budget was insufficient to fund the planned 28 flight manifest. OMB was provided those numbers, but the budget submission to OMB was the same as the FY05 runout, with stated plans to address the outyear issues in the FY07 process. OMB provided draft passback language that the issue should be addressed in the FY06 budget by reducing the Shuttle manifest to 15 flights to be consistent with the funds available in the budget (the basis for OMB's assessment that 15 flights would be in-guide is unclear). NASA pushed back successfully and in the end, the President's FY06 budget request assumed the same runout numbers that were in the FY 2005 request and OMB agreed to defer resolution of outyear Shuttle funding issues until the FY 2007 process.

In short, the can was kicked down the road the last two years (acknowledged by all parties at the time) and we are having to deal with it now. The numbers in the runout were generated by NASA, not OMB.

Related story

White House Memo Calls For Slashing Remaining Space Shuttle Flights, SpaceRef

"This document was originally supposed to have been part of the Administration's formal "passback" on the NASA FY 2006 budget. However, the approach spelled out in this document was rejected out of hand by (then) NASA Administrator Sean O'Keefe."


Reader Comments.


"As a recently retired Program Control Officer with the Space Shuttle Program at JSC, I continue to be frustrated by the attitude at NASA Headquarters regarding how the program budget is communicated within the agency and to the OMB. Your Sept. 1 posting of "Kicking Costs Down The Road" added to that frustration. This is one reason why I retired relatively early in a career that could have aided the next generation program with lessons learned experience from other development programs. I realize the external perception of Shuttle Program management is not good. But know that the program control community at JSC, those people who develop cost estimates and conduct independent review of the various projects (SRB, ET, Orbiter, SSME, etc.) are extremely dedicated, do an exceptional job, and are very, very good at forecasting and projecting performance based on available budgets. Program managers at JSC and NASA HQs were constantly warned by this group that budgets projected and communicated to the OMB were extremely insufficient to meet stated objectives (flying 28 flights prior to 2011).And, that short-term budgets were insufficient (and still are) to conduct tactical planning for improvements needed to fix problems needed to return to flight. Additionally, program managers ignored theneed to consider all three legs of the management stool -technical, schedule, cost - when planning return to flight development activity.I realize that politics drives agency budget positions depending on whether you're buying or selling. But know that the folks at JSC, those who do the estimating for the program and who recommend budget positions to program management, arethe best at what they do. Unfortunately, their expertise often goes waisted because some in the program and many at NASA HQ have different agendas.

I would appreciate being kept an anonymous source but would be happy to answer questions about this subject."


"Keith, feel free to post or not. I work in the Space Operations Mission Directorate at NASA HQ, but I would prefer to remain anonymous.

I read the memo posted on NASAWATCH about how we're kicking costs down the road. What I've written below is related to those issues. For the record, I have no direct role with respect to station and shuttle budgets, planning or any real authority within the agency with respect to those programs. The entire text is my own opinion on the matter of costs associated with programs, and may therefore be an uninformed; opinion please make that clear if you post this text.

==============

There is a large, essentially fixed-cost component to flying the shuttle. The cost for doing 1 flight per year wouldn't be that much less than doing 5 flights per year. I know that sounds counter-intuitive, but I think that's because most of us compare flying the shuttle to flying commercial aircraft. There is a large, up-front fixed cost in building a Boeing 747, followed by ongoing operating costs (fuel, inspections, routine maintenance) that are proportional to your flight rate. If you fly the 747 regularly, you are going to incur significant operating costs. If you decide not to fly for a while, your immediate operating costs drop dramatically.

This dynamic doesn't apply to the shuttle because, in the 747 example, we've left out the costs for maintaining the airports that are required for the 747 to take off and land. As the owner of the 747, your operating costs certainly drop when you don't fly, but the overall costs of maintaining the airports doesn't change much regardless of your flight rate. If you want to maintain flight capability, you must maintain the infrastructure, and you must keep your air crews and mechanics working so they retain their skills, even when you aren't actually flying. The military does this in peacetime by spending tremendous amounts on training and readiness. Another difference is that there are many more 747s than shuttles, and they fly constantly, so the per-flight cost of a 747, including airport fees to maintain that airport infrastructure, is low due to economies of scale.

We are in the position of having to maintain the ability to fly three vehicles with a turnaround time on each that is measured in weeks or months, not including whatever time is needed to develop and implement fixes to the external tank. The cost of maintaining the infrastructure and skills to fly dwarfs the direct, immediate costs associated with any particular flight. There has been and continues to be talk of reducing the number of flights and retiring the shuttle fleet earlier than 2010, with the idea that we're going to save a ton of money by closing out some or most of the shuttle contracts. This doesn't make much sense to me. I'm not inherently for or against closing down or canceling contracts, and I'll remain impartial about how many flights we ought to make, but the facts are these: If we are going to fly, whether it's the shuttle or a follow-on vehicle, we will have to maintain the ability to fly, which means maintaining the infrastructure and skill sets that are required to fly a vehicle carrying human beings. Setting aside issues with NASA's ability to associate costs with work on contracts, issues with financial accounting, many of the safety constraints, and the simple fact that the shuttle and station programs and equipment are very complex, this would still cost a lot of money. If we close down contracts, disassemble facilities, and otherwise dismantle infrastructure and skills, who will fly the next vehicle? Learning the same lessons over again because we've gutted these programs will be, I believe, more costly in the long run. The budgets for the station and shuttle programs are relatively small in comparison to many of the budgets of other agencies and programs; the criticism and angst over NASA's two largest programs seems to me to be disproportionate to the amount of money involved. As for payback, most of the benefits of these programs are indirect and hard to quantify, but they are there.

I will not dispute that there are mistakes made, things overlooked, wasted money, time and effort within NASA as a whole and within the shuttle and station programs; find me a program that doesn't have some component of these. Many of these problems are endemic to bureaucracy as a form of organization. NASA is, fundamentally, a solid organization, and ultimately, we must decide as a nation, as a government, or as an agency, whether or not we are going to put human beings into space. If the answer is yes, then we need to fund those efforts at a level that works and get on with it."

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This page contains a single entry by Keith Cowing published on September 7, 2005 6:39 PM.

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