NRO-MOL_2015

Chapter XIV - NEW FINANCIAL AND SCHEDULE PROBLEMS 1967-1968
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NEW FINANCIAL AND SCHEDULE PROBLEMS 1967-1968
As noted, from the earliest days of the program Air Force
officials had felt a sense of urgency about getting the
MOL into orbit at an early date. They were motivated in
part by their experiences with “the B-70 and Dyna-Soar
programs, which had been dragged out interminably—
mainly due to lack of administration support—until
finally cancelled. In both cases, the Air Force rationale
had been disputed and neither was supported by the
White House. MOL on the other hand, had been publicly
endorsed by President Johnson and was assigned an
important mission—very high resolution photographic
reconnaissance. Still, Air Force officials felt it essential to
get a laboratory vehicle into orbit as soon possible. They
were consequently pleased when MOL entered Phase II
engineering development in September 1966 and they
had additional cause for satisfaction two months later
when the Gemini B heat shield underwent a successful
test flight launch from Cape Kennedy. The first unmanned
MOL launch was set for April 1969 and the first manned
flight for December 1969. *
Although engineering development work got under
way officially in the late summer and fall of 1966, the
MOL System Office at the time was still involved in hard
contract bargaining with the Associate Contractors.
The problem was a familiar one: the contractor’s cost
estimate and those of the Air Force were millions of
dollars apart. McDonnell, for example, estimated its
Gemini costs at $205.5 million for a fixed price, incentive
contract whereas the Air Force offered $147.9 million.
Douglas requested $815.8 million to develop and build
the laboratory vehicles (fixed price incentive/cost plus
incentive fee), the Air Force proposed $611.3 million.
General Electric sought $198 million (cost plus incentive
fee), the Air Force offered $147.3 million. 1
With the government and contractors unable to reach an
agreement, Air Force officials—with the approval of the
MOL Policy Committee—in late November 1966 adopted
a new “negotiating strategy.” They directed the MOL
Systems Office to reopen competition for those systems
not already under contract and to halt the issuance of any
further DORIAN clearances to contractor personnel. This
tough stance broke the deadlock; by early December,
the contractors had substantially reduced their cost
estimates to bring them closer to the Air Force offers.
On 4 January 1967—when Dr. Flax summarized the
* This schedule constituted a year’s slip from the launch dates announced by
the President in August 1965. See Chapter XI.
results of these negotiations to Dr. Foster—he was thus
able to report that total MOL development costs would
run approximately $1.92 billion, a sum which included
$295.0 million in “deferrals. † ’’ 2
The FY 1968 Budget Crisis
The December 1966 agreements with the contractors—
completed to the handshake stage—were based on an
understanding that OSD would release all deferred fiscal
year 1967 funds and that at least $80 million would be
provided the program in fiscal year 1968. The latter
premise soon proved faulty. OSD—finding it needed
huge sums to support U.S. operations in Southeast
Asia—notified the Air Force on 7 January that it planned
to request only $430 million from Congress in new
obligating authority (NOA) for fiscal year 1968. This sum
was $157 million below the amount the MOL Systems
Office estimated was its minimum requirement and $381
million below the contractors’ estimates.
McNamara’s decision meant that the Air Force would
have to renegotiate the prime contracts to reduce fiscal
year 1968 fund requirements to $430 million NOA. On 15
February, in an effort to define a revised MOL baseline
to fit the lower funding level, contractor and Air Force
officials,including Dr. Flax, convened a meeting on the
West Coast. It became evident during their discussions
of ways to reduce the impact of the cut in funds that there
would be additional slippage in the launch schedule.
At the end of the conference, Dr. Flax directed the
contractors and the MOL Systems Office to prepare new
program schedules, using as their “Bogeys” the planning
figures of $500 million and $600 million NOA’s for fiscal
years 1969. ‡3
It was against this background that General Evans—
soon to be succeeded as Vice Director, MOL, by Maj.
Gen. James T. Stewart § —summed up “the current mess’’
and the “Pearl Harbor”-type crisis facing the program. In
a memorandum to several aides, he reviewed various
options they might examine in the future. One would
accept a nine or 12-month program slip; another would
† Items deferred included the data readout system, various spares, some
test activities, and manpower requirements to support “out-of-plant” or field test
operations for all of the contractors concerned.
‡ It was Dr. Flax’s intention to reprogram other Air Force funds to meet the
fiscal year 1968 deficit.
§ Stewart took over on 27 March 1968. General Evans retired to join an
industrial concern.