oversight

Analysis of Changes in the Estimated Cost of the Skylab Program

Published by the Government Accountability Office on 1971-06-17.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

Analysis Of Changes In
Estimated Cost Of The
Skylab’ Program B-172192
                       de2(,
                      ,J
NatIonal Aeronautics and
  Space AdmInIstratIon




BY THE      COMPTROLLER    GENERAL
OF THE      UNITED  STATES
                     Contents
                                                    Page
DIGEST                                               1
CHAPTER
  1       INTRODUCTION                               6
  2       COST-ESTIMATING
                        SYSTEM                      12
  3      COST-ESTIMATING
                       PROCEDURES AND PRACTICESAT
         THE MARSHALLSPACEFLIGHT CENTER             18
  4      COST-ESTIMATING
                       PROCEDURES
                                AND PRACTICESAT
         THE MANNEDSPACECRAFT
                            CENTER                  26
  5      HEADQUARTERS
                   REVIEWOF COSTESTIMATES           32
  6      ESTIMATEDCOSTOF THE SKYLABPROGRAM          35
  7      EXPERIMENT
                  DEFINITION PROJECTCOSTS           41
  8      EXPERIMENT
                  DEVELOPMENT
                           PROJECTCOSTS             42
  9      SPACECRAFT
                  MODIFICATIONSPROJECTCOSTS         49
 10      SATURNWORKSHOP
                     PROJECTCOSTS                   53
 11      APOLLOTEIXSCOPEMOUNTPROJECTCOSTS           69
 12      SATURNIB VEHICLEPROJECTCOSTS               72
 13      SATURNV VEHICKEPROJECTCOSTS                75
 14      PAYLOADINTEGRATIONPROJECTCOSTS             78
 15      MISSION OPERATIONS
                          PROJECTCOSTS              79
 16      PROGRAM
               SUPPORT
                     PROJECTCOSTS                   82
 17      CONTRACT
                ADMINISTRATIONCOSTS                 83
 18      AGENCYCOMMENTS
                     AND OUREVALUATION              84
CHAPTER                                                             Page

  19         SCOPE OF REVIEW                                         87

APPENDIX

         I   Letter dated March 2, 1971, from the
               Associate Administrator  for Organization
               and Management                                       91

    II       Letter dated March 1, 1971, from the Director
               of the Marshall Space Flight  Center                 97

  III        Principal  officials  of the National Aeronau-
                tics and Space Administration   responsible
                for the activities  discussed in this re-
                port                                                113

                               ABBREVIATIONS

GAO          General    Accounting     Office

NASA         National    Aeronautics     and Space Administration
                                            COMPTROLLERGENERAL'S REPORTON
                                            ANALYSIS OF CHANGESIN ESTIMATED
                                            COST OF THE SKYLAB PROGRAM
                                            National Aeronautics and Space
                                            Admlnlstratlon B-172192

DIGEST
-m--m-

WliYTREREVIEWWASMDE

    The General Accounting Office (GAO) reviewed the system used by Na-
    tional Aeronautics and Space Administration    (NASA) Office of Manned
    Space Flight in estimating    the cost of the Skylab Program--its fourth
    manned space flight   program. GAO also analyzed changes in the esti-
    mated cost and obtained NASA's reasons for those changes.

    The goal of Skylab is to establish   a workshop and solar observatory
    in earth orbit for the purpose of expanding scientific    knowledge of the
    earth and the surrounding universe.    Skylab will also build the founda-
    tion for future manned exploration   beyond the moon, and lt 1s the fore-
    runner to a permanent space station.    (See p. 6.)

    Distribution  of this report 1s being restricted  because lt contains
    NASA's estimates of contract cost for major hardware Items.    NASA be-
    lieves that public disclosure  of these estimates should not be made to

         --avoid prejudicing   the Government in future   negotiations   with   con-
            tractors and

         --avoid the disclosure   of data which would permit    contractors  to base
            claims on NASA's estimates of projected costs.      (See p. 92.)


FINDING.3ANDCONCLUSIONS

    Cost-estimating    system
    The Office of Manned Space Flight estimates the cost of Skylab through
    its program operating plan system.   This system produces reports show-
    ing prior actual and future estimated cost and obligation   data for
    manned space flight  programs funded from NASA's research and develop-
    ment appropriation.   These reports were designed to furnish basic fl-
    nancial data needed for budget planning and financial   management and to
    meet the requirements of external review agencies.    {See p. 12.)

    NASA officials  have stated that, during the preparation    of a program
    operating plan, emphasis is placed upon estimating    the financial   require-
    ments for the next budget submission.   Estimates of the cost of the pro-
    gram may contain amounts which are not considered to be good estimates



                                       1
but which remain -rn the totals because they are for future years.    NASA
offlclals  have stated, however, that, at the time it is developed, the
program operating plan's estimate IS the best available    estimate of the
cost of the Skylab Program.    (See p. 12.)

The estimated cost of the Skylab Program does not represent the pro-
gram's total cost.     Costs funded by either of NASA's two other appro-
priations--research    and program management or construction     of faclli-
ties--do    not appear as part of the estimate.    The addltlonal   costs
charged to these approprlatlons      cannot be measured completely because
they are not always identified     as being related speclflcally    to a par-
ticular    manned space flight  program.

Also, the estimate did not include all research and development appro-
priation  costs.   For example, the Office of Manned Space Flight estab-
lished a policy that, through the completion of the Apollo Program, the
Skylab Program would fund its own support contracts9 and the Apollo Pro-
gram would fund the support contracts which benefited both programs
{common support).    NASA did not Identify the value of common support
which was applicable   to the Skylab Program. (See p. 12.)

In addltlon,  the estimate did not include the cost of hardware and equip-
ment procured by the Apollo Program and transferred  to the Skylab Pro-
gram. [See p. 16.)

The Office of Manned Space Flight's       guidelines  for the preparation    of
program operating plans did not direct the centers to provide for in-
flatlon.    GAO found that some elements of the Skylab estimate included
a provision    for lnflatlon   and others did not. Therefore the total in-
crease in the estimated cost of the Skylab Program attributable           to in-
flation   could not be determined.      (See p, 17.) GAO 1s making a
Government-wide review of the pollcles        and procedures for recognizing
inflation   in cost estimates.     The report ~111 be issued to the Congress
at a later date.

Many cost estimates were based partially    or entirely  on experience
and/or judgment for which sufflclent    documentation was not available to
show what was considered in arriving    at the estimate.   (See chs. 3
and 4.) NASA Indicated that 1-t would continue its attempts to Improve
in the area of documentation,

Changes zn cost estimates
The first   program operating plan which provided an estimate of Skylab's
cost was prepared in October 1968. GAO compared this estimate with one
made in October 1970--the most current estimate available    at the time of
the review.
                                                                                                    -        I




                                                    Estimated     costs                  Increase or
                                                 October           October              decrease (-)
            ProJects                              7968              1970              Amount      Percent

                                                                 (millions)

Experiment definltton                        $      23.8         $      47.2                            98
Experiment development                             110.8               218.8         $lK!               97
Spacecraft modifications                           604.4               624.7            20:3
Saturn workshop                                    274.0             - 680.2          406.2         14;
Apollo telescope mount                             195.8               113.2          -82.6         -42
Saturn IB vehicle                                  404.4               232.7         -171.7         -42
Saturn V vehicle                                                       157.1          153.5        4264
Payload integration                                16;*:               148.6          -14.4
Mission operations                                 281:l                54.7         -226.4         -,Y
Program support                                    164.7                74.3          -90.4         -55
Contract administration                             11.7                15.6             3.9         33
Design and development                              14.0                14.0
Lunar exploration                                                                      -6.8        -100
Space station definition                              76:;                             -7.7        -100
    Total                                                        $2,381.2          $W                    5
Note:   Figures        may not add due to rounding.

    As shown above, the Office of Manned Space Flight's    October 1970 estimate
    of cost of the Skylab Program L.SS $2,381.2 million.    Through fiscal  year
    1970, NASA has obligated $849.9 million   of this amount from its research
    and development appropriation.   Consequently an additional    $1,531.3 mil-
    lion is needed for the program between fiscal years 1971 and 1974, the
    current estimated year of completion.

    NASA attributed          the increases         primarily    to

        --change in the earth orbiting                   workshop configuration,

        --better        definition       of experiments,

        --additional         hardware,

        --contracting          out for     certain     work which was to have been performed
           in-house,

        --launch        schedule     slippages       totaling    15 months,    and
        --inclusion         of flight      support     costs    In the October 1970 estimate
        NASA attributed      the decreases primarily     to

          --canceled      production   of two Saturn   IB launch vehicles     (except for
             the first     stages),

          --cancellation   of lunar module modifications          and simplified command
             and service module requirements resulting          from the change in the
             workshop configuration,

          --a reduction ln the Office        of Manned Space Flight's       allowance     for
             contingencies, and

          --transfer   of funding for certain      support    contracts   from the Skylab
             Program to the Apollo Program.

        In addition,     NASA stated that the transfer of program elements among
        projects explalned many of the fluctuations       ln Individual   project cost
        estimates and that, from an overall point of view, these transfers           did
        not constitute     unwarranted cost growth.    NASA stated, however, that it
        would be difficult     to allocate  the cost increases and decreases among
        projects    involved in the transfers   and that such an allocation     could
        take as much as 3 months and might only result in a rough estimate.
        Accordingly,     GAOwas not able to price out the effect of the transfers.
        (See p. 85.)

.   RECOIkiWEiK'ATIOiQS
                   ORSUGGJZSTIONS

        None.


    AGENCY
         ACTIONSANDUNRESO&VED
                           ISSU&'S
        NASA agreed,in general, with the information in GAO's report.                   NASA's
        comments are included in appendixes I and II and are discussed                  in chap-
        ter 18.




                                            4
5
                               CHAPTER 1

                             INTRODUCTION

        Responding to congressional  interest   1.n the cost of
major research and development programs, we have reviewed
the system used by the National     Aeronautics    and Space Admin-
lstration's     Office of Manned Space Flight   for estimating   the
cost of the Skylab Program-- its fourth manned space flight
program.     We analyzed changes in the cost estimates      and ob-
tained NASA's reasons for these changes.

      Our review of the Office of Manned Space Flight's        cost-
estimating     system is discussed in chapters 2, 3, 4, and 5.
Chapters 6 through 17 present the changes in the cost es-
timates developed by NASA and NASA's reasons for these
changes.      Chapters 8 and 10 present also the results    of our
examination      into the cost of selected hardware contracts.
The illustrations       included in this report were provided to
us by NASA.

      The goal of the Skylab Program is to establish        a work-
shop and solar observatory       in earth orbit  for the purpose
of expanding the scientific       knowledge of the earth and the
surrounding    universe.     The Skylab Program will   also build
the foundation     for future major steps in manned exploration
beyond the moon, and it is the forerunner        to a permanent
space station    project.

MISSION PROFILE

        The Skylab Program is structured      around a solar obser-
vatory and a workshop containing       laboratories,     work areas,
control    stations, and crew llvlng     quarters.    Following     the
launch of the workshop, three teams of astronauts,            using
modified Apollo command and service modules, will visit               and
use the workshop during an 8-month period currently            planned
to begin rn November 1972.      Following     is a pictorial    profile
of the four Skylab Program missions which NASA identifies
as SL-1, SL-2, SL-3, and SL-4.




                                    6
                           m   \-"l"ll.ww"Y
                       (       ‘SERVICE
                                t MODULE




       A Saturn V launch vehicle,      with its first    two stages as
propellant    stages and its third      stage completely     outfitted
as a workshop, will      launch the hardware for the Skylab Pro-
gram into an orbit      approximately    235 nautical   miles above
the earth.      This launch will be followed 1 day later by the
launch of a Saturn IB carrying        three astronauts     to the work-
shop where they will remain for up to 28 days.             Each of the
two subsequent launches of Saturn IB's also will             carry three
astronauts    to the workshop where each group will          remain for
up to 56 days.

        The Office of Manned Space Flight      at NASA Headquarters
manages the Skylab Program.        In carrying   out this responsi-
bility,    the Office of Manned Space Flight has the following
three field      centers under its direction.
       Center                           Responsibility

George C. Marshall        Systems engineering,        payload integra-
  Space Flight     Cen-   tion,   launchvehicles,multiple          docking
  ter, Huntsville,        adapter,    airlock   module, Apollo tele-
  Alabama                 scope mount development,         orbital   work-
                          shop systems, and payload enclosures.

Manned Spacecraft         Command module and        service module modi-
  Center, Houston,        fications,     medical    research and opera-
  Texas                   tions,     crew systems     support and trarn-
                          ing, flight     mission    planning,   opera-
                          tions,     and recovery    operations.

John F. Kennedy           Launch operations      and mission    support.
  Space Center,
  Florida

HISTORICAL PROFILE

        The Skylab Program (formerly      the Apollo Applications
Program), as described       above, 1s intended to capitalize      on
the capabilities      and resources developed in the Apollo Pro-
gram. As early as 1962 studies were being conducted to de-
fine future manned missrons after         the Mercury, Gemini, and
Apollo Programs.       These studies were almed at determining
the future use of Apollo flight        hardware for extensive     sci-
entific    and technological     space exploration.    The Apollo
Applications     Program, called the Apollo Extension Systems
until    1966, was a result    of these studies.

        The objectives    of the Apollo Applications    Program, as
delineated     in 1966, included plans for both extended lunar
exploration      and earth orbit operations.      In 1969, however,
the extended lunar exploration        portion was dropped from the
Skylab Program and was assigned to the Apollo Program.           The
earth orbit operations       portion  remained with the Apollo Ap-
plications    Program and has evolved into what now is referred
to as the Skylab Program.

        Until July 1969 the mission plan centered around con-
verting     the S-IVB stage of a Saturn IB launch vehicle     into
a workshop after       Its initial use as part of the propulsion
system required      to reach earth orbit.    The spent S-IVB stage
                                    a
was to have been cleansed of fuel fumes and corrosive     resi-
due and used as a workshop for the conduct of scientific,
technological, and applications  experiments. NASA referred
to this as the wet workshop concept.

       A solar observatory--     the Apollo telescope mount--
carried    ln an unmanned modified       lunar module ascent stage
was to be launched by another Saturn IB, with automatic
rendezvous and docking with the workshop occurring           after
its arrival    In orblt.     A pictorial     profile of the Apollo
Appllcatlons    Program wet workshop concept is shown on
page 10.

        In July 1969 the mrssion plan was modified          to use the
launch capabillty       of the larger Saturn V launch vehicle         to
launch simultaneously        the orbital    workshop, airlock    module,
multiple    docking adapter,      and the Apollo telescope mount,
NASA refers     to this as the dry workshop concept because the
orbital    workshop will     be outfitted    on the ground and will
arrive    in orbrt equipped for immediate occupancy by the as-
tronauts.      The total   payload package being outfitted        and
checked out on the ground eliminated            the need for the as-
tronauts    to prepare the spent S-IVB stage for the conduct
of scientific,     technological,       and applications   experiments
while in orbit.       The dry workshop concept is being used in
the Skylab Program today.

       The decision      to switch from the wet to the dry concept
caused major program changes.            The principal     difference      in
the hardware configuration         was the clustering        of all payload
modules into a single payload for the Saturn V launch
vehicle--that       is, the workshop, airlock        module, multiple
docking adapter,        and Apollo telescope       mount became integrated
for the launch.         This rntegratlon     eliminated    the need for
the unmanned rendezvous and docking of the lunar module/
Apollo telescope mount with the workshop after                 its arrival
in orbit      and thereby eliminated      the need for the lunar
module ascent stage.

       The change from the wet to the dry concept also reduced
the interface     requirements    of the command and service module.
While docked under the wet concept,          the command and service
module was the provider        of the required    atmosphere for the
cluster --including      the pressurization     of the airlock  module,

                                       9
multiple    docking adapter,  and workshop.     In addition,  the
command    and service module's propulsion     system was to pro-
vide the    attitude  control for the cluster,     whereas under
the dry    concept it is only a backup system.

       During docked operations   under the dry concept,  the
command and service module will be powered down to the low-
est level possible    to maintain  operational readiness  for re-
turn and will   draw power from the workshop for housekeeping
functions.    NASA refers to this as a quiescent    command and
service module as compared to the command and service module
under the wet concept.




                                  11
                               CHAPTER '2

                      COST-ESTIMATING SYSTEM

       The Office of Manned Space Flight       estimates   the cost
of the Skylab Program through its program operating            plan
system.    This system produces reports       showing prior actual
and future    estimated   cost and obligation     data for manned
space flight     programs funded from NASA's research and devel-
opment appropriation.       These reports were designed to fur-
nish basic financial     data needed for budget planning and
financial    management and to meet the requirements         of exter-
nal review agencies.

       In each estimate NASA includes allowances for contin-
gencies in future years.     According to NASA officials   the
basic reason for including    such allowances is that there
are many unknown variables    in a research and development
program, and these contingency     allowances  serve to absorb
program changes that would otherwise      cause changes in the
estimated   cost of the program.

       NASA officials     have stated that, during the prepara-
tion of a program operating          plan, primary emphasis is placed
upon estimating       the financial     requirements  for the fiscal
years to be included in the next budget submission.               Each
budget submission includes the preceding year, the current
year p and the budget request for the next year.              Because of
this emphasis, differences          which may arise between NASA
Headquarters     and the field      centers concerning estimates     for
future years usually are not resolved until             these years are
included as part of a budget submission.

       In this regard the officials     have added that the esti-
mates of the cost of the program may contain amounts which
are not considered      to be good estimates  but which remain in
the totals    because they are for future years.     Even so,
these officials      have said that the program operating  plan's
estimate    of the cost of the Skylab Program is the best
available    estimate at the time it is developed.




                                  12
PREPARATION OF THE
PROGRAMOPERATING PLAN

       The program operating   plan is updated semiannually.
The steps generally   followed    during each updatrng cycle        are
as follows:

     1. On the basis of general guidelines       from NASA Head-
        quarters,   the three manned space flight       field    cen-
        ters,   as well as  NASA   Headquarters,   prepare    estr-
        mates which are incorporated       Into a prelimrnary
        program operating    plan.

     2. Headquarters  officials  review the preliminary     plan
         in view of anticipated  funds availabilrty     and their
         knowledge of the program and prepare revised guide-
         lines which provide estimate   ceilings    for each cen-
         ter and for NASA Headquarters.

     3. On the basrs    of the revised   guidelines, the prelim-
         inary plan is adjusted   by the three field    centers
         and NASA Headquarters   and is consolidated    into the
         final program operating   plan.

      As a part of our review, we examined into the prepara-
tion of the October 1970 program operating       plan--the    most
recent estimate  at the time of our review.       The preparation
of this estimate was initiated    by gurdelines     dated July 31,
1970, issued by the Associate Administrator       for the Office
of Manned Space Flight   to the Marshall    Space Flight     Center,
the Manned Spacecraft  Center, and the Kennedy Space Center.
On the basis of these guidelines,    preliminary     estimates    of
the costs of manned space flight    programs were prepared and
submitted to NASA Headquarters.

     The preliminary   estimate    for   the Skylab   Program was
$2.1 billion   as shown below.




                                  13
                                                           Millions

     Marshall Space Flight   Center                        $1,160.0
     Manned Spacecraft  Center                                 757.2
     Kennedy Space Center                                       86.5
     NASA Headquarters  and other centers                       97.3

          Total                                            $2,101.0

      During our review we examined into the procedures fol-
lowed by the Marshall    Space Flight   Center and the Manned
Spacecraft   Center in preparing   their preliminary    estimates.
We examined also into the review process at NASA Headquar-
ters,   The results   of these examinations    are presented in
chapters 3, 4, and 5.

COSTS NOT INCLUDED IN ESTIMATE

       The program operating     plan's estimate      of the cost of
the Skylab Program does not represent           the total   cost of the
program.      Costs which are related      to the program but which
are funded by either       of NASAss two other appropriations--
research and program management or construction             of facili-
ties--do     not appear as part of the estimate.          The additional
costs charged to these appropriations           cannot be measured
completely      because they are not always identified        as being
specifically      related  to a particular    manned spaced flight
program.

      We found that the     program operating    plan's estimate of
the cost of the Skylab      Program had not included certain      re-
search and development      appropriation   costs related   to that
program.    These costs    are discussed below.

Common support

       The coordination    of the Skylab Program with the Apollo
Program has resulted      in the Office of Manned Space Flight's
establishing     a policy that, through the completion    of the
Apollo Program, the Skylab Program will fund its own support
contracts,     and the Apollo Program will fund the support con-
tracts    which benefit   both programs (common support).    We
found that NASA did not identify       the value of common support
applicable     to the Skylab Program.

                                   14
       As a result   of thus policy, changes in the scheduled
completion    date for the Apollo Program have had a direct
effect    upon the estimated  cost of the Skylab Program.    The
following    chart depicts the intended source of funding for
common supr>ort at the dates of the program operating     plans
included In our review and demonstrates     that the content of
the estimate     is drfferent In each of the estimates.
                      Programs funding common support
    Fiscal      October 1968 December 1969 October            1970
     year         (note a>        (note b)      (note         c>

   1971 and
     prior          Apollo          Apollo           Apollo
   1972             Skylab          Apollo           Apollo
   1973             Skylab          Apollo           Skylab
   1974                             Apollo           Skylab

aApollo was scheduled   for completion   in fiscal   year   1971,
 and Skylab in fiscal   year 1973.
bApollo was scheduled   for completron   in fiscal   year   1975,
 and Skylab in fiscal   year 1973.

cApollo was scheduled   for completion   in fiscal   year     1972,
 and Skylab in fiscal   year 1974.

       As shown above, the October 1968 program operating
plan was prepared under the assumption that the Apollo Pro-
gram would fund common support through fiscal   year 1971 and
that the Skylab Program would assume funding responsibility
thereafter.

      Prior to the preparation    of the December 1969 program
operating   plan, the Apollo Program's scheduled completion
date was extended past the completion     date for the Skylab
Program.    This resulted   m the December 1969 program operat-
ing plan's    being prepared under the assumption that the
Apollo Program would fund common support.

       The scheduled completion  date for the Apollo Program
was changed from fiscal   year 1975 to 1972 prior    to the prep-
aration   of the October 1970 program operating   plan,    There-
fore this plan was prepared under the assumption that the

                               15
Apollo Program would fund common support through fiscal        year
1972 and that,     after fiscal  year 1972, common support would
be divided    into (1) flight   support which would be funded by
the Skylab Program during fiscal       years 1973 and 1974 and
(2) operating     base which would be funded as a separate
item--not   as a part of any approved manned space flight      re-
search and development program,

      Flight    support   costs consist   of hardware contractor
support for the Saturn IB vehicle,          the Saturn V vehicle,    and
the command and service module.          Contractor   support includes
checkout,    launch, postflight    data analysis,     and sustaining
engineering,       The inclusion  of flight    support for fiscal
years 1973 and 1974 in the October 1970 program operating
plan increased the Skylab Program's estimated           cost by about
$290 million,

       Operating base is the term used to describe contractor
costs associated   with center operational    and support activ-
 ities necessary to support approved and planned manned space
flight   programs,  The estimate for operating     base during
fiscal   years 1973 and 1974 in the October 1970 program oper-
ating plan was about $625.8 million,       The portion  of this
amount applicable   to the Skylab Program was not identified
in the program operating    plan,

Equipment

      Cur review showed that the following  equipment was
supplied to the Skylab Program by the Apollo Program and was
not included in the estimated   cost of the Skylab Program.
                 Description    (note     a)                        Units

Command and service module and systems/components                     4
Spacecraft   guidance and navigation         system                   4
Spacecraft   lunar module adapter                                     4
Launch escape system
Saturn IB                                                             ;b
Saturn IB electrical      support equipment and ground
  support equipment                                                   1
Saturn V (S-IVB stages will        be outfitted     as an or-
  bital workshop)                                                     2
Saturn V launch vehicle      digital    computers                     2
Saturn V electrical      support equipment and ground
  support equipment                                                   1
Ground support equipment for the orbital            workshop          1
Apollo telescope mount automatic          checkout equip-
  ment stations     at the Marshall     Space Flight     Cen-
  ter, the Manned Spacecraft         Center, and the
  Kennedy Space Center                                                3

aThe Skylab    Program is to fund modifications.
b Current Skylab Program plans          require   the use of only   four
 of these vehicles.

PROVISIONS FOR INFLATION

       The cost-estimating      system used by the Office of Manned
Space Flight    does not provide uniform treatment        for infla-
tion,    Because the Office of Manned Space Flight's            guide-
lines for the preparation         of program operating   plans had not
directed   the centers concerning provisions         for inflation,       we
found that some elements of the Skylab Program estimate                in-
cluded a provision       for inflation    and others did not,

       NASA officials      stated that the amount of increase in the
estimated     cost for any element of the Skylab Program which
was attributable       to inflation   was never shown in the pro-
gram operating      plan as a separate item and could not, in
most instances,       be identified,    We were therefore   unable to
identify    the amount of increase in the estimated        cost of the
Skylab Program that was attributable         to inflation.



                                    17
                                                         CHAPTER 3

                       COST-ESTIMATING PROCEDURESAND PRACTICES

                             AT THE MARSHALL SPACE FLIGHT CENTER

       Upon receipt      of the general guidelines              from NASA Head-
quarters,    the Marshall Space Flight             Center issued amplify-
ing instructions       to each of its organizations                for prepara-
tion of their cost estimates           for the preliminary             program
operating    plan.     The offices     responsible       for the Skylab
projects    assigned to the &rshall            Space Flight          Center esti-
mated that these projects          would cost about $1.2 billion                   at
completion.       Of this amount, $432.3 million                represented
incurred    cost through fiscal        year 1970, and $727.7 million
represented     the estimated      cost to complete the projects.
The following      schedule shows the estimated               cost of the
projects.                               Actual cost      Estimated         Estimated
                                                             at June 30,     cost to          cost at
                       Project                                  1970        complete        completion
                                                                           ballions)~
EXPERIMENTDEFI&I_TIa                                           $    89       $-              $     80
EXPERIMENT
         DEVELOPMENT.
        Apollo   telescope       mount     experiments
        Other                                                       2.7            2.8             55
-SATDRN
   __-__ WORKSHOP
              -
     Arrlock    module
     Xultlple    docking         adapter                            69          43      6         50.5
     Orbital    workshop                                         89 5          199      1        280.6
     Support                                                     15.2           32      0         47.2
APOlL TELESCOPE
              MOUNT,                                             73 2           31      9        105 1
        lunar module     modlficatlons                         --n            --3                 10 6
        Systems                                                  63 5           31      0         94 5
PAYLOAD INTEGRATION,                                             63 1           64      0        127 1
    Defrnltron                                                     99             -
    Implementation                                               53 2           64      0        1179.;
PROGRAM
-___-     SUPPORT                                                             23                  30 9
 SATURN
--~~     IB VFrHICLE*                                                                            148 5
      S-IB stage                                                                                  61 4
     S-IVB stage                                                    5.8           27 3            33 1
      Instrument     unrt                                                         11.9            11 9
     Ground support       equipment                                   .3           79              82
      Engines                                                      14 4            22             16 6
     Vehicle     support                                            36            13 7            17 3
&vJ--RN VVMIC.
      S-IC stage
      S-II stage
      S-IVB stage
      Instrument     unit
     Ground support       equipment
     &gnglnes
     Vehicle     support
Total
HOW COST ESTIMATES
WERE PREPARED

       In preparing     the project    cost estimates,    the estima-
tors allocated      the contract    values to assign to each project
its applicable      share of the contract       values.   These adjust-
ments were made because some of the Skylab Program con-
tracts    contained effort     for more than one project,        as well
as effort     for other NASA field      centers.     The estimators
then added to the allocated         contract    values an estimate    for
changes to the contracts         to complete the projects,

      These changes are categorized    as authorized     changes--
changes which the contractor     has been directed   to implement
but the costs of which have not been negotiated;        known and
probable changes--changes    which the contractor    will probably
be directed   to implement at a future date; and anticipated
changes--changes   for which the extent and magnitude have
not been defined.     The amounts included in these categories
were based on both in-house and contractor-furnished         esti-
mates.

      Before the project     cost estimates  were furnished     to
NASA Headquarters,     they had been subjected     to reviews by
the respective    Skylab Project   Managers, the Skylab Program
M&nager, the Center Program knagement        Director,    and the
&rshall    Space Flight    Center Director.    During the review
by the Skylab Program IGnager, an allowance for contingen-
cies was added to some of the project       estimates    to absorb
possible   future changes in the projects.       No other changes
had been made to the project      estimates  before they were
submitted to NASA Headquarters.

      The following    schedule shows the increases         made by the
Skylab Program Manager to the Project Managers'             estimates
for anticipated     changes.




                                    19
                                   Project        Increase      Revised
                                 managers'        by Skylab    estimated
                                estimate   to      Program      cost to
         Project                 complete          Manager     complete

                                                (millions)
Project   estimates    not
  increased                       $165.7            $    -      $165.7

Project   estimates      in-
  creased:
    Saturn workshop:
         Airlock     module        135.5                64.6     200.1
         Multiple     docking
            adapter                 24,4              19.2
         Orbital     workshop      144,o              55.1
         Support                    27.2               4.8
               Total               331.1             143.7

    Payload   integration           51,o                13.0      64.0

    Program support                 19,6               3.6        23.2
            Total                  401.7             160.3       562.0

Total                                              $160.3       $727.7

      As shown above, $160.3 million    was added by the Skylab
Program Manager to the estimates     for the Saturn workshop,
payload integration,  and program support projects.

        Our review of the cost estimating     procedures at the
&rshall     Space Flight  Center included a detailed      examina-
tion into the preparation      of the estimates    for the airlock
module project    and for three of the experiments       planned for
the Apollo telescope mount.       Of the $727.7 million      esti-
mated to complete the Skylab projects,        we selected For re-
view $210.2 million,     or about 29 percent,




                                      20
    APOLLO TELESCOPEMOUNT EXPERIMENTS

           Of the five major experiments    planned for the Apollo
    telescope mount, we revlewed three for which the estimated
    cost to complete totaled    $22.3 mrllion.     The compositron of
    this amount and the results    of our review are shown below.

                                                                     Effect   of errors
                                 Estimated     Amount not                made during
                                  cost to     supported     by           preparation
                                  complete    documentation      Overstated       Understated



    Allocated      contract
       value                       $3              $A                $2                $2
    Contract     changes:
          Authorized                   .3                                                .1
          Known and probable        16.0             2.5                  ::             .2
          Antxlpated                                                                    -
              Total                 16 3             2.5                                L3
    Total                          $22.3                                               $&
    Note:    Fqures   may not   add due to rounding.



    No supporting         documentatron

            As shown above, documentation       was not available    to
    support $2.5 mlllion,       or 15 percent,    of the $16.3 millron
    estimated    for contract    changes.    Although documentation      was
    available    for $13.8 million     of the $16.3 mllllon     estimated
    for contract     changes, we found that the in-house computa-
    tions furnished     for $9.4 milllon     of thrs $13.8 million      did
    not show the basis used to arrive          at the elements (men mul-
3   trplied    by time multlplled    by dollar    rates) included in the
    computations.      The estimator    told us that the $2.5 million
    and the elements for the $9.4 million           had been based on dis-
    cussions with the contractors         and that documentation     was not
    available    to show the content of the discussions.

    Errors     made during        the estimating           process

          As shown in the table above, errors                        made during the
    estimating  process caused overstatements                        of $1.1 million


                                                21
and understatements  of $0.4 million            in the estimated      cost
to complete the three experiments.

       Cur review of the computation        made in arriving      at the
allocated    contract    values of $6.1 million       disclosed   that
this amount contained overstatements           of $0.3 million,      which
was principally       caused by the failure     to delete from the
contract   values $0.3 million      for effort     applicable   to other
Skylab projects,       and an understatement      of $70,000, which
resulted   from use of the wrong contract          value for one of
the experiments.

      Errors were also made during the preparation           of the
$16.3 million   estimate   for contract    changes.     These errors
caused the estimate to contain overstatements           of $0.7 mil-
lion and understatements      of $0.3 million.      We found, for
example, that part of the $0.7 million         overstatement      had
been caused by using an estimate of $0.3 million           for autho-
rized contract   changes although these changes had already
been negotiated    at a value of $0.2 million.         The official
who prepared    the   estimate   told     us that   he did   not   know     that
the changes had been negotiated            at the time he prepared           the
$0.3 million estimate.

     The following      are other       examples of the errors       that
were made.

      --Eight    authorized    changes were not considered in the
         preparation     of the estimate because the estimator
         had not been aware of the changes at the time he had
         prepared the estimate.
      --An amount for contractor    effort    was included in both
         the computations   for the allocated    contract  value and
         the estimate   for known and probable changes to the
         contract.

      --A computation   error       resulted    in an $80,000 understate-
         ment of an estimate.

AIRLOCK MODULE

      The $474.8 million  estimated to complete the Saturn
workshop project  included an amount of $200.1 million   to

                                     22
complete the airlock     module.   As a part of our review, we
examined into the preparation      of $187.9 million   of this
$200.1 million   estimate.     The results  of our review are
shown below.

                                     Estimated      Amount     Amount not
                                      cost to      reviewed   supported by
                                     complete        by GAO   documentation

                                     -{millions)

Allocated    contract value           $ 60.3        $ 60.3         $     -
Contract    changes:
     Authorized                          42.9         39.8              22.1
     Known and probable*                 21.2         12.1              11.4
     Anticipated                         75.8         75.8              75.8

            Total                       139.8        127.6             109.2

Total                                 $200.1        $187.9         $109.2

Note:      Figures   may not add due to rounding.

No supporting        documentation

      As shown above, documentation   was not available      to
support $109.2 million,  or about 86 percent,      of the amount
we reviewed for contract  changes.     The remaining    $18.4 mil-
lion was supported by contractor    proposals or estimates.
During our review we were told that the bases for the
$109.2 million  estimate were as follows:
                                                                Amount
               Bases for    the estimate                      (millions)

        In-house discussions                                    $ 80.7
        Verbal estimates   obtained from
           the contractor                                          25.6
        In-house adjustments    to contrac-
           tor proposals and estimates                                 3.0

            Total                                               $109.2

Note:      Figures    may not add due to rounding.

                                          23
      $80.7 million

      The $80.7 million      estimated on the basis of in-house
discussions      included $4.9 million     for known and probable
changes and $75.8 million        for anticipated   changes--
$64.6 million       of which had been added by the Program Manager
during his review for a contingency-type          reserve to cover
possible    future changes.

     We were advised that these estimates had been arrived
at in various management meetings and that no documentation
was available to show the bases for the judgments made or
the rationale considered  in arriving at the estimates.

      $25.6 million

       Concerning the $25.6 million    which was based on verbal
estimates    received from the contractor,     the estimator  told
us that he had maintained     a file  of informal   notes for es-
timates obtained from the contractor       but that he had thrown
his notes away after the preliminary       program operating    plan
had been prepared because he had no further        use for the in-
formation.

       We reviewed     selected written   cost estimates       subse-
quently received from the contractor           after the preliminary
program operating       plan based on the verbal estimates          had
been submitted to NASA Headquarters.            In a number of in-
stances,    as shown by the following      schedule, we noted sig-
nificant    differences     between the written      estimates   and the
verbal estimates.        The   estimator could    not  explain   the dlf-
ferences.
  Estlfnates based on
  verbal Information         Estimates later received
  from the contractor            from the contractor        Differences
                                 (mill~ons)~
           $1.8                         $2.1                    s.3
              .2                           .o                   -.2
            1.0                            .4                   -. 7
              .2                                                -.l
            1.7                         2::                        .8
              .4                          .l
              .1                          .o
  Note :   Fqures   may not add due to rQuqdlng.
      $3 million

      For the $3 mrllron       which was a result     of In-house ad-
justments     to contractor    proposals and estimates,      we found
that the contractor       had furnrshed     cost rnformatlon    showing
that SIX contract       changes had been estimated to cost less
than $3.4 million.         These estimates were adJusted to $3 mil-
lion which included increasing          three from $1.4 million     to
 $1.6 million    and decreasing     three from $2 million     to
 $1.4 mllllon.

       We were told that these adjustments       had been made prl-
marily because (1) the estimates had been considered           to be
either   too high or too low for the proposed scope of work,
 (2) some of the proposed effort        had not been needed or al-
ready had been provided for under the contract,          and (3) cer-l
tain effort     known to be required     had not been considered    by
the contractor.      We   were   told, however, that there  was  no
documentation     available    to support the revised estimates.




                                   25
                               CHAPTER 4

            COST-ESTIMATING PROCEDURESAND PRACTICES

                  AT THE MANNED SPACECRAFTCENTER

       Upon receipt   of guidelines    fromNASA Headquarters       for
the preparation     of the preliminary     program operating     plan
estimate,    the Manned Spacecraft      Center issued amplifying
instructions    to its various organizational        elements,   in-
cluding the Skylab Program Office and various directorate
level organizations     which supported Skylab Program activi-
ties.     The Skylab Program Office then distributed          supple-
mental guidelines     to the directorates      supporting   Skylab
Program activities.

       After estimates     had been prepared,       they were subjected
to review at three organization          levels at the Manned Space-
craft   Center before being transmitted           to NASA Headquarters.
First,    the estimates    were reviewed at the directorate         level
with the estimators       generally   participating     in the review;
second, the estimates        were reviewed at the Skylab Program
Office level;     and third,    the estimates were reviewed by
the Director,     Manned Spacecraft     Center, or his designated
representative.

        We were told that any changes made to an estimate dur-
ing the review process had been incorporated            into all sup-
porting     documentation   before the estimate had been sent to
the next review level.         This procedure precluded us from
determining     the degree of, and reasons for, changes which
might have been made at any review level.            In a number of
instances,     our discussions    with individual    estimators     dis-
closed that changes had occurred,         but generally     there was
no official     documentation    of the initial   estimate     or the
changes.

       The Manned Spacecraft    Center's  preliminary     estimate
for the Skylab projects     assigned to that center was
$757.2 million.     As of June 30, 1970, $185.1 million         was
prior cost and $572.1 million      was estimated     cost to com-
plete.    These costs are listed    below by project,



                                  26
                          Actual cost          Estimated       Estimated
                               at               cost to         cost at
        Project          June 30, 1970         complete       completion

                                           (millions)
Design and develop-
  ment                      $ 11.7              $    -          $ 11.7
Experiment defini-
  tion                        14.3                                14.3
Experiment develop-
  ment                        25.6               104.8           130.4
Spacecraft  modifi-
  cations                     87.0               418.9           505.9
Saturn I workshop             19.5                                19,5
Apollo telescope
  mount                        7.6                                 7.6
Payload integration           10.3                  16.6          26.9
Mission operations              9.1                 31.8          40.9
       Total                $185.1              $572.1          $757.2
HOW COST ESTIMATES WERE PREPARED

       To determine how the above cost estimates            were pre-
pared, we reviewed the procedures and practices              used by the
estimators    in preparing     the estimates   for the spacecraft
modifications     project.     This project  was selected because
the estimated     cost to complete accounted for $418.9 million,
or about 73 percent,        of the $572.1 million     total    cost to
complete the projects        assigned to the Manned Spacecraft
Center.     We were told by a center official         that the prac-
tices and procedures used in preparing           estimates     for the
spacecraft    modifications      project were basically      the same as
those used for the other estimates.

       Cur review showed that approximately        50 percent of the
individual    estimates   for spacecraft   modifications    contained
some provisions     for inflation.     For example, in computing
some estimates,     composite labor rates were used and were
increased by 5 to 7 percent annually.

       In addition   to amounts provided      for inflation     or gen-
eral   price increases,   the spacecraft      modifications     project

                                     27
 estimate contained a reserve totaling             $52.2 million.        Cur
review,however,      disclosed    additional     amounts within       individ-
ual estimates     which were categorized         as reserves,      change
allowances,     and contingencies.       These amounts totaled
 $52.6 million    and were not supported by computations               based
on prior cost history,        negotiated     costs, or firm contractor
proposals.      The total    of the above two amounts was
 $104.8 million,    or about 25 percent of the $418.9 million
estimated    cost to complete the spacecraft            modifications
project.

       Cur review disclosed     that the various individual        esti-
mates had been prepared by adding the actual costs through
June 30, 1970, and the estimated         costs to complete.       We
found that the methods of preparing          the cost estimates var-
ied significantly    and ranged from computations          using the
latest   manpower projections      and cost data to estimates
based entirely    on the estimator*s      experience and judgment
without any supporting      computations.       The following    exam-
ples show how estimates      were prepared for selected elements
of the spacecraft    modifications     project.

North American      Rockwell    Corporation--
$291.3 million
         The estimated     cost of four command and service modules
 under contract      with North American Rockwell Corporation              was
 $291.3 million.        This estimate consisted         of prior actual
 costs as reported        on the contractor*s       financial    management
 report and estimated         future costs.       Costs of about $146 mil-
 lion funded by the Apollo Brogram were not included in the
 estimate.       The future cost estimates         were prepared by mul-
 tiplying    man-hour estimates         by applicable    labor rates and
adding estimated        costs for labor burden, major subcontracts,
minor subcontracts,         material     procurement,    other materials,
general and administration            items, major interdivision         work
authorizations,.             . . .
                      provisaonrng,       fee, closeout,      and other
items.
         We were told that the man-hour estimates were pro-
jected by the estimator           for each month on the basis of
prior production        history     and the approved production         sched-
ule.



                                    28
       The labor rates used were composite labor rates derived
from individual         labor rates in a North American Rockwell
publication,       and all but one were supported by several in-
dividual     rates.       The estimator     derived the composite rates
by weighting       the contractor's       individual    rates according   to
the level of effort          he anticipated      for fiscal   year 1971.
Supporting      computations,      however, showing the weighting        of
the individual        rate estimates      and the composite cost rates
subsequently       derived were not prepared,

        Percentages used in computing the labor burden, mate-
rial procurement,      and general and administrative     costs were
based on the estimatorss      past experience.      There was no sup-
porting    documentation   for these percentages.

      Major subcontract,    minor subcontract,       other materials,
major interdivision     work authorizations,      and provisioning
costs were developed from the contractor's           financial   man-
agement report and from the estimated         cost of anticipated
changes not included in the report,          Estimates    for the costs
of changes were based on the estimator's          experience    and
were not supported by any computations         or by any firm pro-
posals by the contractor.

     According to the estimator,           other costs generally   var-
ied proportionately       with direct    labor costs; therefore,
when the cost of direct         labor was projected,    the other costs
were projected      proportionately,       There was no supporting
documentation    or computations      for t'he other-costs   estimate,

     The estimated    fee was calculated by using a factor of
7.5 percent which was the same as the maximum fee negoti-
ated for the contract.

       Estimated closeout    costs were arbitrarily     allocated
between the Apollo and Skylab Programs, and there was no
supporting     documentation  for the allocation.      The estimate
for closeout costs was based on discussions         with individuals
involved    in the closeout of contracts     under the Mercury and
Gemini Programs.




                                     29
J   .




        Massachusetts      Institute   of Technology--
        $11.4 million

               Massachusetts     Institute of Technology costs were for
        computer services and related       support.   Support costs were
        estimated     by reducing the previous program operating        plan
        estimate to account for a decrease in projected           manpower
        requirements.       The previous estimate was computed from (1)
        manpower estimates      based on the estimator9s    experience and
         (2) cost rates determined from Massachusetts         Institute    of
        Technologyreports      increased at 7 percent compounded annu-
        ally.     Computer cost and travel    and materials    costs were
        allocated     between the Skylab and Apollo Programs in the
        same ratio as software manpower projections         for the two
        programs.

        Astronaut   life support assembly/
        life  support umbilical--$9.7  million

              The estimated     cost of $9,7 million     for astronaut    life
        support assembly/life       support umbilical    consisted    of (1)
        the contractor's    estimate at June 30, 1970, of $4.2 million,
        (2) estimated    changes of ~$2~1 million,      (3) potential    overrun
        of SO,4 million,     (4) additional      field support of $1.1 million,
        (5) cost of living      increase of $0.3 million,      and (6) contin-
        gency reserve for production        stretchout   of $1.6 million.

             The contractor's   estimate  of $4.2 million    was the to-
        tal contract  potential  reported  in the contractor's     summary
        of contract  cost for the month ending June 30, 1970.

               The estimated cost of changes of $2.1 million    was com-
        puted by multiplying     an estimated annual change cost rate
        by 2.5 years which included a 6-month production     slippage
        provision.     The annual change cost rate was based on ap-
        proved and proposed changes which had occurredover      a
        5i-month period ending June 30, 1970.

               Potential   overrun of $400,000 was based on the esti-
        mator's   belief   that the contractor   would overrun an equiv-
        alent of about     3-months production   costs on his analysis   of
        the contractor9s      financial management report.    There were
        no computations      supporting his analysis,


                                           30
       Additional    field   support of $1.1 million    was the same
estimate used in the previous         program operating   plan.
There was no documentation         to support this estimate.    The
additional     field   support covered an 18-month period beyond
that covered by the contract.
       The contingency     reserve of $1.6 million    for an antici-
pated production     stretchout    consisted  of about $1,3 million
which was developed for the previous program operating           plan
and an increase of $0.3 million         which was based on t'he es-
timator's   judgment.      He stated that he had no written    sup-
port for this figure.

       The cost of living     allowance of $300,000 was computed
by applying 6.5 percent a year to the estimated        changes,
potential   overrun,   additional    field support, and contin-
gency reserve costs.      The estimator    had no documented com-
putations   to support the estimate.

Space suits--$16    million

       Estimated contract   costs for space suits were allo-
cated between the Apollo and Skylab Programs.        Total costs
were for production,     management and engineering,   field   sup-
port, planned changes, and inflation      at 7.5 percent.     costs
were allocated   between the programs under the assumption
that (1) the Apollo Program would pay all field       support
costs in fiscal    years 1971 and 1972, (2) each program would
pay for production     and change costs for the space suits it
would receive,   and (3) ot'her costs for each fiscal     year
would be paid by the program which benefited       most from the
contract.

       According to the estimator,    costs used in preparing
t'he total   estimate were based on a contract    modification;
however, he could not reconcile     the costs with the modifica-
tion or reconstruct    the basis for his allocation      between
the two programs.
                                    CHAPTER 5

                                HEADQUARTERSREVIEW

                                 OF COST ESTIMATES

      As stated in chapter 2, preliminary  estimates of the
cost of manned space flight  programs for the October 1970
program operating  plan were prepared on the basis of guide-
lines dated July 31, 1970, from NASA Headquarters.

      The following    table shows, by project,  the breakdown of
the $2.1 billion    preliminary  estimate and the final   estimate
as printed    in the October 1970 program operating   plan:

                                          Pre-                        Increase
                                       liminary            Final
                Proiect                estimate         estimate     decrzise(-)

                                                        (millions)

Experiment definition                  $         47.3   $    47.2      $ -0.1
Experiment development                          235.7       218.8       -16.9
Spacecraft   modifications                      508.7       624.7       116.0
Saturn workshop                                 684.5       680.2        -4.3
Apollo telescope mount                          113.6       113.2        -0.4
Saturn IB vehicle                               190.2       232.7         42.5
Saturn V vehicle                                  9.3       157,l       147.8
Payload integration                             154.0       148.6        -5.4
Mission operations                               52.3        54.7          2.4
Program support                                  75.7        74.3        -1.4
Contract   administration                        15.6        15.6          -
Design and development                           14.0        14.0          -

        Total                          $2,100.9         $2,381.2       $280.3

Note:      Figures        may not add due to rounding.

       The preliminary   estimate of $2,100.9 million    initially
was reviewed by Skylab Program Office personnel at NASA Head-
quarters,   and the total    estimate was not changed.    Only minor
adjustments    were made to projects   within the estimate.
After this review the Associate Administrator       for I&nned
Space Flight    decided that the Skylab Program's estimate

                                           32
should be increased to include the cost of flight      support
during fiscal   years 1973 and 1974.   Prior to this decision
the cost of flight    support was to have been funded by the
Apollo Program.     When the scheduled completion  date of the
Apollo Program was changed from fiscal     year 1975 to fiscal
year 1972, however, funding for flight     support during fiscal
years 1973 and 1974 could no longer be through the Apollo
Program.

       Subsequent to this decision      the Skylab Program Office
at NASA Headquarters      developed an estimate   for flight   sup-
port of about $224 million.        According to agency officials
this estimate was based on manpower and dollar         levels for
identical   requirements    in the Apollo Program.     Revised guide-
lines reflecting     this new funding requrrement    for the Skylab
Program were issued and sent to the centers on September 18,
1970.

       Upon receipt     of these guidelines,     officials      at the NASA
centers felt that the allowed increase over their                Initial
submission was not sufficient         to fund flight       support require-
ments,    NASA Headquarters      allowed the centers to develop
their own flight       support estimates    for fiscal      years 1973 and
1974 and to include these amounts in the October 1970 pro-
gram operating      plan.

      As developed by the centers and NASA Headquarters,            the
Skylab Program's estimate         increased from $2,100.9 mrllion
to $2,381.2 million.       This $280.3 million      increase resulted
from a $289.9 million      increase for flight      support and a net
decrease of $9.6 mrllion        in other elements of the estimate.
According to agency officials          there were no significant
changes, other than flight          support, between the preliminary
estimate and the final       estimate printed     In the October 1970
program operating    plan.

       As discussed in chapter 2, estimating       the cost of the
Skylab Program involves      a great deal of uncertainty    because
the program is a research and development effort,          Therefore
provisions    for contingencies     in future years are incorpo-
rated into the estimated       cost of the Skylab Program to ab-
sorb program changes that would otherwise         cause changes in
the estimated    cost of the program.


                                   33
      Our review of the preparation     of the October 1970 pro-
gram operating    plan showed that allowances for contingencies
were added to the estimates     at various levels within       the cost
estimating   system.   Although several different      names were
used by NASA to describe these contingency        amounts--antici-
pated changes, management reserves,       or manager's reserve--we
were told that all of them represented       allowances for un-
known but expected increases     in program costs.

      During our review we Identified     the allowances for con-
tingencles   that were a part of the October 1970 estimate of
the cost of the Skylab Program.       The following  schedule
shows the amount of contingency     allowances Included in the
estimated   cost of the Skylab Program from July 1970 through
completion.
                                       Estimated         Allowances for
                                        cost to           contingencies
                                       complete          Amount Percent

                                            (millions)

Marshall  Space Flight Center          $   844.5         $163.9     19
Manned Spacecraft   Center                 641.6          103.6     16
Kennedy Space Center                       175.4            -       -
NASA Headquarters   and other
  centers                                   49.4           22.8     46
                                                                    -
        Total                          $1,711.0          $290.3     17
Note:      Fqures   may not add due to rounding.

       Of the contingency     amounts for the Marshall Space Flight
Center and the Manned Spacecraft        Center, $34 million     and
$30 million,   respectively,     were included at the direction
of NASA Headquarters.        The remaining contingency     amounts--
$129.9 million     for the Marshall    Space Flight Center and
$73.6 million    for the Manned Spacecraft      Center--were    in-
cluded by the respectrve       centers during preparation     of their
estimate of the cost to complete the Skylab Program.




                                  34
                             CHAPTER 6

             ESTIMATED CQST OF THE SKYLAB PROGRAM

         The first   program operatrng   plan which provided an es-
timate of the cost of the Skylab Program through completron
was prepared in October 1968. Due to changing program def-
inition,     earlier   program operating    plans included only es-
timates of costs to be incurred         during the next 2 years,
Therefore we selected this estimate as the base for compari-
son with the current        estimate.

      The schedule on the following     page     compares the Octo-
ber 1968 estimate with the October 1970 estimate---the          most
recent estimate at the time of our review.          As discussed in
chapter 2, these estimates    do not include costs associated
with (1) NASA's other two appropriations--research          and pro-
gram management or construction     of facilities,      (2) hardware
and equipment procured by the Apollo Program and transferred
to the Skylab Program, and (3) support contracts          which bene-
fit both the Apollo and Skylab Programs.
                                                              Chances           in Estrmated                Cost
                                                                    of        Skvlab    Program

                                                                                Estimated        costs                        Increase     or           Explanation
                                                                             October              October                     decrease(-)               of changes
                   ProieLts     and    svstems                                1968                  1970                 Amount           Percent            (pi&
                                                                                                (millions)

    EXPERIMENT           DEFINITION                                      S         23.8           $          47.2        $23.4                  98             41

     EXPERIMENT DEVELOP=                                                          110.8                     218.8                                              43
         Medical                                                                   10.1                       17.7            @Pi               ;'5
         Technology                                                                  2.4                       5.2                2:8          117
         Science                                                                   71.4                     120.1               48.7             68
         Applxatrons                                                               16.4                        07             -15.7           -96
         Engineering                                                               10.4                      75.1               64.7           622
     SPACECRAFT MODIFICATIONS                                                     604.4                     624.7                                3             SD
         Command and service         module                                       995.0                     321 8             -%                 9
         Guidance    and navigation                                                22.1                      32 3               10:2            46
         Extended    lunar    module                                                 2.6                       26                 w
         Subsystem     development                                                123.2                     102 7             -20.5           -17
          Spacecraft    support                                                   161.5                     165.2                 3.7               2
     SATURN WORKSHOP                                                              274.0                     680.2                              148             57
         Orbital  workshop                                                        115.4                     289.0             3%               150
         Airlock  module                                                           87.2                     247.9             160:7            184
         tiltiple  docking               adapter                                     9.4                      45.8             36.4            387
          Support                                                                   62.0                      97.5              35.5            57                    3


     APOLLO TELESCOPE MOUNT                                                       195.8                                                        -42             70
          Lunar module modifrcatrons                                              104 8               -%                      fg+              -83
          Apollo  telescope   mount                 systems                         69 2                     95:9                2617            39
          Support                                                                   21.8                     -                -21.8          -100
     SATURN IB VEHICLE                                                            404.4                                                       -42              74
         S-IB stage                                                                 68.2              -9                 -*
         S-IVB stage                                                                83.9                     so:9             -3s:o           -2
           Instrument          unit                                                 48 9                     12.8             -36.1           -74
           Ground   support           eeJipment                                     23 8                      7.7             -16.1           -68
           H-l engine                                                               204                      32 0               11.6             57
           Vehicle    support                                                     159.1                      64.4             -94.7           -60
     SATURN V VEHICLE                                                                3.6                                                    4,264             77
         S-IC stage                                                                  23               -3+                     5%            1,252
         S-II    stage                                                                                       24.4               2414           a
         S-IVB stage                                                                                         27.3               27.3           -
         Instrument        unit                                                                              41 9               41.9           -
         Ground      support          equzpment                                                               50                 5.0           -
         F-l    engine                                                               13                       5.7                44            338
         Vehrcle       support                                                                               21 8               21.8
     PAYLOAD INTEGRATION                                                          163.0                     148.6             -14.4             -9             78
          Definition                                                                36 1                     11 8             -24.3           -67
c         Implementatzon                                                          126.9                     136.8                 9.9             8
     MISSION      OPERATIONS                                                      281.1                      54.7                             -81             80
           Mission     control                                                      59 8                      0.8        -g$                  -99
           Flight    operatrons                                                     60.4                     19 3          -41:1              -68
           Flight    crew operations                                                39 6                     20 7          -18.9              48
           Launch    operations                                                   108 a                      12.8          -96.0              -88
           Launch    instrumentation                                                12 5                      11           -11.4              -91
     PROGRAM SUPPORT                                                              164.7                       74.3            -90.4           -55             82
     CONTRACT         ADMINISTRATION                                               11.7                       15.6            3.9               33            83
     DESIGN        AND DEVELOPMENT                                                 14.0                       14.0            I                               39

     LUNAR EXPLORATION                                                       68                       A                       -6.8           -100             39

     SPACE STATION            DEFINITION                                     77                       A                       -7.7           -100             39

           Total                                                         $2,265            8      $2.381             2   SgQ                        5

    Note       Figures        may not      add     due   to   rounding




                                                                                           36
37
      As shown above the Office of Manned Space Flight's
October 1970 estimate of cost of the Skylab Program was
$2,381.2 million.      Through fiscal    year 1970, NASA obligated
$849.9 mill ion of this amount from its research and devel-
opment appropriation.       Consequently    an additional
$1,531.3 million     1s needed for the program between fiscal
years 1971 and 1974, the current        estimated year of comple-
tion.

       The above schedule also shows that, between October
1968 and October 1970, there was a $115 million,           or
5-percent,   increase in the estimated cost of the Skylab
Program.    The $115 milllon  increase was the net result         of
increases   at the system level,   totaling      about $800 million,
and decreases at the system level,       totaling     about $685 mil-
lion.

     The workshop launch date on which each of the estl-
mates was based is shown in the following table.

Date of program       Official    launch           Reason for
operating  plan      date for    workshop         schedule slip

   Oct.   1968            Aug. 1971                 (note   a>

   Dec. 1969              July   1972        Program reorientation
                                             due to change from
                                             wet to dry workshop
                                             configuration

   Oct.   1970            Nov. 1972          Reduction   in NASA's
                                             budget

aIn May 1966 a launch schedule was approved for the launch
 of the first  mission in April 1968.  The April 1968 launch
 date was slipped to August 1971 because of NASA constraints
 on Skylab Program funding.

SUMMARYOF NASA REASONSFOR COST CHANGE

      As a part of our review, we obtained explanations   from
NASA for the changes between the October 1968, December
1969, and October 1970 estimates    of cost of the Skylab Pro-
gram.   From the information  provided by NASA, we have

                                 38
summarized    below the primary factors      which contributed      to
the overall    change during the 2-year      period.

      NASA attributed      the increases between October 1968 and
October,1970    primarily     to (1) change from the wet to the
dry workshop configuration,          (2) better  definition   of experi-
ments, (3) additional        hardware,   (4) contracting    out for cer-
tain work which was to have been performed in-house,
(5) launch schedule slippages totaling           15 months, and
(6) inclusion    of flight      support costs in the October 1970
estimate.

       Contracting    out for certain  work which was to have
been performed in-house increased the estimated cost be-
cause it required      the Skylab Program to fund, through the
research and development appropriation,       costs for contrac-
tor labor,     burden, and profit.    These costs would otherwise
have been funded through the research and program manage-
ment appropriation       if for civil service personnel salaries
and/or by the Apollo Program if for support contractor
costs.

      The decreases between October 1968 and October 1970
were primarily   attributed  to (1) canceled production        of two
Saturn IB launch vehicles    except for the first      stages,
(2) cancellation    of lunar module modifications      and simpli-
fied command and service module requirements       resulting     from
the change to the dry workshop configuration,         (3) a reduc-
tion in the Office of Manned Space Flight's       allowance for
contingencies,   and (4) transfer   of funding for certain        sup-
port contracts   from the Skylab Program to the Apollo Pro-
gram.

       The factors  causing Increases     and decreases within       the
estimate   during the 2-year period,      along with our review of
selected contracts,     are discussed in more detail         in chap-
ters 7 through 17. A discussion         of the design and develop-
ment, lunar exploration,      and space station     definition    proJ-
ects was not included in the following         chapters because
(1) design and development included the nonrecurring             costs
for design and development of new and/or modification             to
hardware and services,     all obligations     for which were made
prior to the October 1968 estimate,         (2) lunar exploration
funding was transferred     to the Apollo Program when the

                                   39
December 1969 estimate was prepared,    and (3) space station
definition   was established as a funding category indepen-
dent of the Skylab Program when the October 1970 estrmate
was prepared.

REVIEW OF SELECTEDHARDWARECONTRACTS

        Although the October 1968 estimate was the first           cost
estimate for the program as a whole, we found that earlier
estimates     existed for certain      hardware items.     We examined
into the cost history         of the development effort     for the
orbital     workshop,   airlock    module,  and two of  the   five sci-
ence experiments      for the Apollo telescope mount to identify
the amount of, and reasons for, changes in the estimated
cost prior to the October 1968 estimate.

        The starting  points for our review were August 1966,
when the contract     was awarded for the development of the
airlock    module, and early in calendar year 1967, when the
initial    estimates were made for the development of the or-
bital    workshop and the two Apollo telescope mount experi-
ments.     We limited  our review to those costs to be incurred
under hardware contracts.

       NASA contended that the choice of these starting           points
produced highly questionable        percentages  of cost growth be-
cause at that time the overall        program definition      and the
requrrements    on individual    projects   were still    very much
in the formative     stage.    NASA suggested that October 1968
be used as the base because it was the date of the first
completed program operating       plan showing cost through com-
pletion    and because the program had stabilized         reasonably
well into its present program configuration            and number of
launches.     In addition,    NASA advised us that,      as late as
July 1969, changes as significant         as the one from Saturn
IB-launched    wet workshop to Saturn V-launched dry workshop
were still    being made.

      We believe,  however, that the 1966 and 1967 bases are
appropriate   when viewed in the context that NASA sought and
received congressional    approval for the Skylab Program in
calendar year 1967.



                                  40
                               CHAPTER 7

               EXPERIMENT DEFINITION PROJECT COSTS

        Definition    studies of experiments    considered to be po-
tential     candidates    for manned space flight    missions are
funded under the experiment definition          project.     The fields
covered are science, applications,        technology,     engineering,
biomedical,       and human behavior.

     The following schedule compares the October 1968, De-
cember 1969, and October 1970 estimates of experiment defini-
tion cost.
                                                          Increase
October   Increase    December Decrease(-)   October        1968-70
  1968    1968-69       1969     1969-70       1970    Amount    Percent


 $23.8     $23.5       $47.3      -$O.l       $47.2    $23.4        98


NASA EXPLANATIONS FOR CHANGES
IN ESTIMATED COST

       We were advised by NASA that the net increase of
$23.4 million     between October 1968 and October 1970 was
primarily     due to (1) inclusion  of $33.5 million   applicable
to definition     of Skylab Program experiments    sponsored by the
Office of Space Science and Applications        and the Office    of
Advanced Research and Technology and (2) deletion         of a
$10 million     management reserve.




                                   41
                                                                  CHAPTER8

                            EXPERIMENTDEVELOPMENTPROJECT COSTS

      The locations of experiments to be performed                                                                 in the
Skylab Program are shown in the following  pictorial                                                                 profile.



                            A                        SKYLAB EXPERIMENTS

                                                                                       CREW/VEllI
                                                                                       DISTURGAN




                                                        X-RAY TELESCOPE

                                                                                                                                     MAN
                                                                                                                                     STIGULAR
                                                                                                                                     RCTION


                                                                                                            /                    PRESSURE



X-RAY   SPECTRDGRA




                                                                                                                               SUPPORT SYSTEM




                                                                                                                     \    LTIME A MOTION STUDY
              -q,,n”r”,nn   ,.“.   . ..-   ,...---
                                                         kART,l     RESOURCES EXFMTS (4) /



                                                                                                                       SPEClWh MASSMEASURE
                                                                                                                    FDUTCONTROLLED
                                                                  PARYICU CDLLEC-‘“”     -IH                        UAREUVERING UNIT
                                                                                                                  ASTRONAUT MANEUVERING EQUIP
                                                                                                             LGODY UASS
                                                                    IJV STELLAR ASTRDNDRY-f                    HEASUREMENT
                                                                              x-aAY    SOLAR PNOTOGRAPWY   VRCTORCARDIOGRAN




      The development,   integration,     and operation    of Skylab
Program experiments    and the translation       of experiment data
into a usable form are funded under experiment development.
The four categories    of experiments     currently   being funded
and their  objectives   are listed    below.

          1. Medical--to accumulate information   required                                                               to un-
             derstand man's capability  for long-duration                                                                space
             flight.

                                                                         42
         2. Technology-- to Improve and apply scientific                                           knowl-
            edge, methods, and research to industrial                                           arts,

         3. Science --to learn more about the universe,     space
            environment,   and phenomena in the solar system
            which affect   the environment   of man on earth and to
            learn more about the earth by gathering     data for use
            by experts studying oceanography,     water management,
            agriculture,   forestry,  geology, geography, and ecol-
            ogy     l




         4. Engineering--   to evaluate                          and demonstrate   engineering
            principles    or techniques                          in a space environment.

      The following    schedule compares the October 1968, De-
cember 1969, and October 1970 estimates        of cost for each
category of experiments,      including applications     experiments
which were reclassified     as science experiments     in the Octo-
ber 1970 estimate.

                                                                                               Incrcosc     or
                                    Increase    or                Increase    or               decrease(-)
                        October     decrease(-)       December    decrease(-)      October        1968-70
                         1968~--~-~    1968-69          1969         1969-70        1970     Amount     Percent



 EXPERIMENT
   DEVELOPMENT          SU              $70            $181i          $37          $218 8    $108 0         97
     Medlcal                 10 1          68            16 9           08           17 7        76         75
     Technology               24           23             47            05            52         28       117
     Science                 71 4         25 9           97 3          22 a         120 1       48.7        68
     Apphcations             16 4        -6.7                          -90                    -15 7       -96
     Engineering             10 4        42.2                          22 5                     64 7      622
 Note.    Figures   may not     add due to rounding


NASA EXPLANATIONS FOR
CHANGESIN ESTIMATED COST

      NASA attributed      the increase of $70.3 million       In the
December 1969 estimate        to (1) a more refsned estimate      as
compared with the preliminary        estimates    in October 1968,
(2) an ll-month     launch schedule slippage from August 1971 to
July 1972, (3) incorporation        of additional    experiments,
(4) the change to the dry workshop configuration,            (5) the
award of contracts      for work which was to have been performed
in-house,  and (6) cost overruns.


                                                         43
       NASA attributed    the additional    increase of $37.7 mil-
lion in the October 1970 estimate to (1) additional              experi-
ment changes related      to the dry workshop configuration,
 (2) a 4-month launch schedule slippage from July to Novem-
ber 1972, (3) incorporation       of additional     experiments,
 (4) revised estimates      based on contract    negotiations     and
better definition      of some of the experiments,       and (5) cost
overruns.

      The $6.7 million   decrease shown under the applications
category between October 1968 and December 1969 was due to
the cancellation    of experiments which had an estimated    cost
of $9.3 million  and increases of $2.6 million   in the esti-
mated cost of the remaining experiments.

       Between December 1969 and October 1970, the remaining
applications      experiments   were reclassified   as science exper-
iments.      Of the $9.7 million    included in the December 1969
estimate,     $9 million   was deleted from the applications     cate-
gory in the October 1970 estimate;          the remaining $0.7 mil-
lion in costs had already been incurred.           When these experi-
ments were reclassified       as science experiments     in the Octo-
ber 1970 estimate,       however, they were estimated to cost
$12.7 million.

REVIEW OF SELECTED SCIENCE EXPERIMENTS

       We reviewed the Marshall       Space Flight Center's        con-
tracts  and the initial     cost estimates     for the X-ray spectro-
graphic telescope     (SO54) and the ultraviolet        scanning poly-
chromator spectroheliometer       (S055A) to identify        the amount
of9 and reasons for,     changes   in   cost  since  the   initial    esti-
mates were prepared.      The initial     estimates    were included in
an experiment    implementation    plan dated April 3, 1967.
These experiments     are two of the five science experiments
scheduled to be flown on the Apollo telescope mount.

       As of October 31, 1970, the contracts        for experiments
S055A and SO54 had experienced        a cost increase of $27.9 mil-
lion over the initial     estimated cost of $8.3 million       in
April 1967. NASA estimated        that a further    cost increase of
$11 million   will be experienced      through completion    of the
contracts.    At completion,    therefore,    the total  cost of the
contracts   is estimated   to be $47.2 million.

                                    44
       The explanations  provided by NASA for the changes be-
tween the October 1968 and October 1970 cost estimates     were
generally   consistent  with the reasons identified during our
review.

Cost increase through
October 31, 1970

     The reasons          and related  dollar amounts established                          for
the $27.9 million          cost increase include

      --$11.3    million      for    unrealistic            initial       estimates,

      --$6.7    million      for    contractor        cost       overruns,

      --$5.3 million         for    redesign       effort        and hardware          modifi-
         cations,

      --$2 7 million         for    development        of an alternate             experi-
         ment, and

      --$1.9    million      for    contract       schedule           slippage.

      The results of our review of this                        cost     increase       is dis-
cussed in the next two sections.

      Comparison     of initial        estilrtites
      with initial     contract        values

       The initial      estimates  for the two experiments        totaled
$8.3 million       and were contained    in an April 1967 experiment
implementation       plan which provided for a three-phase           pro-
curement       Phase 1 was to cover definition          of the experi-
ments; phase 2 was to cover fabrication             of flight    hardware;
and phase 3 was to cover field         support and data acquisition,
retrieval,    and analysis.       The contract    files    for the two ex-
periments    showed that the Initial       contract     value for these
three phases was $19.6 million,          or $11.3 million      higher than
the initial     estimates.

      The Chief of the          Experiments Branch told us that,    be-
cause there had been          very little    experience to rely upon,
the initial   estamate        for experiment    SO54 had been prepared
by doublin g the cost         of an orbiting    solar observatory

                                          45
experiment which had a basic concept similar           to the SO54 ex-
periment.     He stated that the estimate      for experiment     SO55A
also had been developed using experience          gained from the
orbiting   solar observatory   program.      He advised us that the
estimates   later proved to be unrealistic        because (1) exper-
iments of this type had never been built,           (2) experiment
definition    had not been completed at the time the estimates
were prepared,    and (3) the configuration       of the Apollo tele-
scope mount and the flight     configuration      of the hardware to
which it was to be attached were unknown.

       We found that the reasons cited          for the estimates       being
unrealistic    generally were supported         by documentation       con-
tained in the files.

      Cost increases over the
      initial  contract values

      As of October 31, 1970, the contract      values for the two
experiments   totaled    $36.2 million, or $16.6 million  higher
than the initral     values of $19.6 million

      The contract    files    showed that:

      -A $6 7 million           increase for contractor       cost overruns
        was   attributed        to   a number   of  reasons,  including
        technical       problems, failure        of subcontractors      to de-
        liver    flight      quality     components and subassemblies,
        late delivery         of parts,     replacement    of defective
        parts,     difficulties        in obtaining     power supplies,    and
        an unrealistic          estimate by one of the contractors
        for zhe phase 1 work,

      --There was a $5.3 million        increase for redesign ef-
         fort and hardware modificatrons,         $3.6 million   of
         which was attributed     to the need for additional          ex-
         perlment definition     effort    to correct  incompatibill-
         ties between the experiments        and Apollo telescope
         mount canister    designs.     The Chief of the Experi-
         ments Branch told us that these incompatibilities
         were the result     of oversights    during the concurrent
         desrgn of the experiments        and the canister.     The re-
         maining $1.7 million     cost increase was attributed          to
         a number of reasons including        (1) rncorporation       of a

                                     46
           mirror launch lock, (2) addition   of pressure gauges,
           alternate   power supply modules, and control  and dis-
           play components, and (3) minor hardware modifications
           and additions.

      --A $2.7 million      increase was attributed       to the devel-
         opment of an alternate       experiment which was later
         canceled.      When it became apparent that the contrac-
         tor could not deliver       experiment   S055A in time to
         meet the launch date for the first          Apollo telescope
         mount, the contractor       was directed    to initiate     pre-
         liminary    design and development of a less complicated
         instrument     to be flown in place of the more complex
         S055A experiment.       At the same time, however, the
         contractor     was to continue the development of experi-
         ment S055A at a rate to meet the launch date for the
         second Apollo telescope       mount.    All contract     effort
         on the alternate      experiment was terminated,        however,
         when a 31-month slip in the scheduled launch date for
         the first    Apollo telescope mount allowed the contrac-
         tor sufficient     time to develop the more complex S055A
         experiment.

      --A $1.9      million    increase resulted     from a decision to
         extend     the delivery      dates of the SO54 experiment   pro-
         totype     and flight     units by 9 and 16 months, respec-
         tively.       A Skylab official     told us that the delivery
         dates     had been extended because of a restriction
         placed     on funds during fiscal       year 1968.

Estimate     of additional    cost
increase     through contract     completion

      In addition    to the value of the contracts         at October31,
1970, NASA estimated      that $11 million       will be required     to
complete the contracts.        The estimated      increase of $11 mil-
lion consists     of (1) $5.5 million      for additional     field   sup-
port and real-time      data analysis,     (2) $2.7 million       for hard-
ware changes, (3) $2.4 million         for additional     postflight
data analysis,     and (4) $0.4 million       for changes in delivery
schedules.




                                     47
      Included in appendix II of this report are the Marshall
Space Flight   Center's    comer&s concerning programmatic   and
other influences    contributing   to the cost increases during
the development of these experiments.




                               48
                             CHAPTER 9

           SPACECRAFTMODIFICATIONS PROJECT COSTS

       The Skylab Program requires    a spacecraft     to transport
each crew of three men into earth orbit,        dock with a work-
shop, and return for a normal splashdown.          During orbital
operations   the spacecraft   will be powered down to the lowest
level possible    to maintain operational    readiness for return.




       Spacecraft   to be used in the Skylab Program are four
Apollo command and service modules which have been trans-
ferred to the Skylab Program and will be modified         to meet
Skylab Program objectives.       The Apollo Program is funding
completion of the spacecraft      structures  and the Skylab Pro-
gram is funding development,      production,  and integration    of
modified    subsystems and the checkout of these modified
spacecraft.
                                  49
      The following schedule compares the October 1968, De-
cember 1969, and October 1970 estimates      of cost for each
funding element of spacecraft  modifications.

                                                                                                                                   Tnrrrase       or
                                                             Increa.,e         or                    Increase      or              decrease(-)
                                             October         decrease(-)            Dcccmber         decrease(-)        October        1968-70
                                              p6lJ              1968-69                1969              1969-70         1970     Amount       Percent

                                                                                       (mlllions)p

 SPACECRAFT MODIFICATIONS                    $604              Is97        1         m?;L?              $117            $624      $20 3              3
     Command and service           module        295 cl           36                                     -10 1           321 8     26                9
      Guidance   and navigation                   22 1            -5 4                  16 7               15 6           32 3     10 2            46
     Extended    lunar      module
      subsystem    development                   12326 2         -3;   9                8926 3             13- 4         10: 4    -20.5-         -i7
      Spacecraft     z&port                      161.5           -94.1                  66.8               98.4          165.2        3.7              2

 Not:      Pigures    may not    add due    to    rounding
          .I


NASA'RXPLANATIONS FOR
CHANCES IN-ESTIMATED COST

      The explanations provided by NASA stated that the pri-
mary reason for the decrease in the December 1969 estimate
was that the Skylab Program no longer had responsibility
for funding common support.    The Apollo Program funded all
common support in the December 1969 estimate.     (See pp. 14
through 16.1

     " NASA"attributed the $117.4 million     increase in the
October 1970 estimate primarily      to the addition    of a manage-
ment reserve and to the Skylab Program's newly acquired
funding responsibility    for flight   support costs during
fiscal   years 1973 and 1974 which were formerly      to have been
funded by the Apollo Program.

     The following  sections present NASA's explanations     for
the changes shown in the above schedule of estimated     cost
for each funding element of spacecraft  modifications.

Command and service                              module

       The October 1968 estimate of $295 million    was based on
preliminary    estimates  of the command and service module
modlflcation    costs required  under the wet workshop concept.
A proposal had not been received from the contractor.
      The December 1969 estimate of $331.9 million,    an in-
crease of $36.9 million,  was based on preliminary    estimates
for simplified  quiescent  command and service modules under
the dry workshop concept.    The contract  for the modifica-
tions to the command and service modules was not yet final-
ized.   Also contributing  to the increase was the Il-month
launch schedule slippage from August 1971 to July 1972.

      The October 1970 estimate of $321.8 million        represented
a decrease of $10.1 mrlllon      from the December 1969 estimate,
Thus $10.1 million    decrease was the net result    of an In-
crease of $11.6 millron     due to the addition   of flight    sup-
port costs for fiscal    years 1973 and 1974 and a decrease of
$21.7 million   due to the June 1970 finalization      of the con-
tract for modifications     to the command and service modules.

Guidance and navigation

      The decrease in the estimate from $22.1 million    in Oc-
tober 1968 to $16.7 million   in December 1969 was attributed
to a reduced level of guidance and navigation   contractor
support.

      The increase of $15.6 million    rn the October 1970 estr-
mate was attributed    to the funding by the Skylab Program
during fiscal    years 1973 and 1974 of flight  support costs
which were previously    to have been funded by the Apollo Pro-
gram.

Subsystem development

       The October 1968 estimate included funding for common
support amountlng to $45.5 million.       This funding responsr-
blllty   was not included under the Skylab Program in the De-
cember 1969 estimate.      The December 1969 estimate,  however,
included additional     space suit funding amountlng to
$11.6 million    which resulted   In a net decrease of $33.9 mll-
lion.

      The increase of $13.4 mllllon  reflected in the October
1970 estimate was attributed   to the funding by the Skylab
Program of flight  support costs during fiscal  years 1973 and
1974.


                                 51
Spacecraft       support

         The decrease of $94.7 mullion            in the December 1969 es-
trmate     was attrrbuted to

         --deletion        of Skylab   fundIng   responsibility    for   common
            support;

         --reduced     estimates    for automatic checkout        equrpment,
             support   contractors,     and loglstles;

         --elrmlnation   of assembly and test of the lunar               module
            for the Apollo telescope mount; and

         --more support from the Apollo Program, due to less
            checkout overlap time on command and servrce modules.

      The increase of $98.4 million    in the October 1970 esti-
mate was due to the addition    of Skylab funding responsibil-
ity for flight    support costs during fiscal  years 1973 and
1974 and the inclusion    of a management reserve during fiscal
years 1972 and 1973.




                                         52
                                CHAPTEP 10

                    SATURNWORKSHOPPROJECT COSTS

      The Saturn workshop project   includes the estimated   costs
of the payload shroud, orbital    workshop, airlock  module,
and multiple   docking adapter.

       A payload shroud provides an environmental          shield and
an aerodynamic fairing     for the workshop and protects         the
multiple   docking adapter,     airlock    module, and Apollo tele-
scope mount during launch.         Certain consumables will be
carried   on the lower fixed portion        of the shroud whereas the
upper portion    will be jettisoned       on attaining  orbit.

       The orbital   workshop is a modified      S-IVP stage of the
Saturn V launch vehicle       that is outfitted    on the ground for
manned habitation.      Modifications     will be made prior    to
launch to remove systems required         for a propulsive   stage.
Integration    of the orbital     workshop provides for a

     --habitable  environment with storage for              crew provi-
        sions, consumables, and waste material;

     --capability    for     installation,      storage,   and operation
        of experiments;

     --propulsive       capability     for   maneuvering   the cluster;
        and

     --solar    array    electrical      power source.




                                       53
       The multiple   docking adapter provides docking accomoda-
tions in space for the command and service module and permits
the transfer     of personnel,   equipment, power, and electrical
signals between the command and service module, airlock
module, and orbital      workshop,    Contained in the multiple
docking adapter is the control        station  for operation        of the
Apollo telescope mount, earth resources and other experi-
ments, as well as the thruster        attitude   control      system which
will orient    the workshop to a solar-inertial          attitude.      Also
housed inside the multiple       docking adapter is the control
and display equipment to operate the solar telescope                system.
An optical   quality   window for viewing the earth is also
provided.




                                    55
     The following    schedule compares the October 1968, De-
cember 1969, and October 1970 estimates    of cost for the Sat-
urn workshop project.



                                    Increase    or                                          Increase
                          October   decrease(-)      December      Increase   October       1968-70
                           1968        1968-69         __
                                                       1969        1969-70     -1970    Amount     Percent

                                                      (mrlllons)

SATURN WORKSHOP           $274        $221            $495
                                                       -   2        $185      $680      $406
                                                                                         __ i       148
    Orbltal    workshop    115 4       112 3           227 7          61 3     289 0     173 6      150
    Arrlock    module       87 2       104 6           191 8          56 1     247 9     160 7      184
    Multrple    docking
       adapter               94            48           14 2          31 6      45 8      36 4      387
    Support                 62 0         -05            61 5          36 0      97 5      35 5       57
@SA EXPLANATIONS FOR CHANGES
z ESTIMATED COST

     The following  sections present the explanations provided
by NASA for the changes in the estimated cost for each fund-
ing element shown in the above schedule.

@bital    workshop

      The increase of $112.3 million  in the December 1969 es-
timate was a result  of the change from the wet to dry work-
shop configuration  and the ll-month  launch schedule slippage
from August 1971 to July 1972. Additional    hardware included
in the December 1969 estimate was the habitability    support
system, upgraded solar array system, and thruster    attitude
control  system.

     The increase      of $61.3 million     in the October 1970 esti-
mate was attributed       to the negotiation     of the contract for
the dry workshop      configuration   and changes that had been
made due to better       definition  of the dry workshop design.
Also contributing      to the increase was the 4-month launch
schedule slippage      from July to November 1972.

      We examined into the cost of the contracts  for the de-
velopment of the orbital  workshop.   The results of our re-
view are discussed on pages 60 through 64 of this report.

Airlock   module

       The increase of $104.6 million     in the December 1969 es-
timate was a result     of the change to the dry workshop con-
figuration    and the ll-month   schedule slippage from August
1971 to July 1972. Under the dry workshop configuration,         the
afrlock    module became the control    center for the workshop.
Additional    hardware included in the December 1969 estimate
was a fixed airlock      shroud and an Apollo telescope mount de-
ployment assembly.

      The increase of $56.1 mrllion      in the October 1970 esti-
mate was primarily     due to further   definrtization  of the dry
workshop configuration     and completion of contract    negotiations.
Also contributing    to the increase was the 4-month launch


                                    57
schedule slippage      from July to November 1972 and the addrtion
of a jettisonable      payload shroud.

     We examrned rnto the cost of the contract   for the devel-
opment of the airlock module.   The results  of our review
are discussed on pages 65 through 68 of this report.

Multiple   docking   adapter

       The October 1968 estimate of $9.4 million            was based on
the complete multiple        docking adapter being built        in-house
at the Marshall Space Flight Center.             In the conversion to
the dry workshop configuration,           the need for the lunar module
was eliminated     and some of the lunar module systems were                '
transferred     to the multiple     dockrng adapter.       A  contract   was
awarded for the integration         of the multiple      docking adapter
internal    systems.     This lntegratron     effort   and the ll-month
launch schedule slippage from August 1971 to July 1972 were
primarily    responsible     for the $4.8 million      increase rn the
December 1969 estimate.

      The October 1970 estimate of $45.8 million,        an increase
of $31.6 million,    was based on a definitized     contract   for
the final  assembly and integration     of the multsple docking
adapter.   Also contributing     to the increase were the addi-
tion of effort    for the integration   of the earth resources
experiments package into the multiple       docking adapter and
the 4-month launch schedule slippage from July to November
1972.

Support

        The decrease of $0.5 mrllron     in the December 1969 esti-
mate was the net result      of (1) increased requirements        for
the attitude     pointing control   system, the ll-month    launch
schedule slippage from August 1971 to July 1972, and the in-
clusion of an estimate     for a jettisonable    payload shroud and
(2) decreased requrrements       due to a revised major contractor
estimate and cancellation      of the workshop attitude     control
and solar array systems.       The workshop attitude    control       and
solar array systems were replaced by the thruster          attitude
control    and upgraded solar array systems which were included
in the December 1969 estimate for the orbital         workshop.


                                    58
        The increase of $36 million      in the October 1970 esti-
mate was attributed     to (1) an $18.8 million      increase result-
ing from the 4-month launch schedule slippage from July to
November 1972 and increases       in the allowance for program
changes and (2) a $17.2 million        increase resulting     from re-
vised major contractor      estimates    and the reassignment     of con-
tractor    manpower formerly    charged to the Saturn IB launch
vehicle project.

REVIEW OF SELECTEDSATURN
WORKSHOPPROJECT CONTRACTS

      We reviewed the contracts   for the orbital  workshop and
the airlock   module admlnlstered  by the Marshall  Space Flight
Center to identify   the amount of, and reasons for, changes
in cost as of October 1970.

     The explanations     provided by NASA for the changes be-
tween the October 1968 and October 1970 estimates         of cost
are generally  consistent     with the reasons identified    during
our review.




                                    59
 Extent      of cost increase in the
 orbital      workshop contracts

        As of September 29, 1970, the contracts            for the orbital
 workshop had experienced          a cost increase of $165.4 million
 over the initral        estrmate of $2.3 million      in January 1967.
 In addition,     NASA estimated      that a further     cost increase of
 $119.4 mrllron      will be experrenced through contract          comple-
 tion.     The total    cost of the contracts      through completion
 therefore    is estimated       to be $287.1 million.

      The reasons and related  dollar amounts establrshed                       for
 the $165.4 mrllion cost increase include

           --$32.4 million  for placing work under contract previ-
              ously planned to be accomplished in-house and an In-
              crease in the complexity  of the work;

           --$64 million     for the    addition   of a second orbital    work-
              shop 3 incorporation      of a habltabrllty     support system,
              schedule slippages,       and additional    requrrements  for
              testing   and ground     support equipment;

           --$64 mllllon   primarily  for the change from the wet to
              the dry workshop configuration;   and

       --$5 million  for orbital   workshop effort                  included   1.n
          the S-TVB stage production    contract.

      The results        of our review        of these    cost   increases     are
drscussed below.

       Cost increase between the initial                 estimate
       and approved procurement plan

        On the basis of an early concept of the orbital         work-
shop, the Marshall Space Flight Center prepared a statement
of work dated January 31, 1966, which, in essence, provided
for the incorporation       of a passivation   system rnto the basic
S-IVB stage and for special studies to ensure the acceptabil-
ity of the stage for manned occupancy.          The passivation     func-
tion includes dumping and venting of unused propellant            and
other residuals,     deactivation    of hazardous systems, and prep-
aration     for a pressurized     atmosphere.

                                         60
       On February 10, 1966, the contractor        furnished   a rough
estimate of $848,000 for the effort         but pointed out that the
estimate did not cover all the work which would be required.
In March 1966 the contractor        was authorized    to proceed wrth
certain   modrfications      to the S-TVl3 stage under the S-IVB
stage production      contract.

       As the Apollo Applications      Program continued to be re-
fined during the first      part of 1966, increased emphasis was
placed on establishing      a basrs for long-duratron        manned mis-
sions.    As a result,   NASA Headquarters       decided in December
1966 that the orbital     workshop would be made habitable         and
that experiment modules would be docked to the workshop whrle
in orbit    to form a cluster.      In addrtion,     the orbrtal  work-
shop was to be capable of reactrvation           and reuse for subse-
quent missions occurring       up to a year later,

      On the basrs of these new mission requirements,        the
Marshall Space Flrght Center prepared a procurement plan dated
February 20, 1967, for the study, design, test,       and manufac-
turing effort  required  to attain a shirt-sleeve     envrronment
in the S-IV5 stage for its use as an orbital      workshop,,     The
procurement plan provided for the modifrcatron      of four S-IVB
stages on a time-phased basis at an estimated      cost of
$2.4 mrllron.

      Skylab Program officials     informed us, however, that the
estimate   contained in the procurement plan did not include
total   development effort.     They provided us instead with an
estimate prepared in developing the January 1967 preliminary
program operating    plan whrch included $11 millron       for in-
house effort    and $17.3 million    for contractor effort    required
for development of three wet and two dry workshops.

      We were also told that the records showrng a breakdown
of the estimated contract     cost could not be located but that
about 40 percent of the $17.3 mullion,      or $6.9 mullion would
have been applicable    to the three wet workshops.    On thrs
basis, we estimated   that the contract   cost for one wet work-
shop would have been about $2.3 mrllron.

     On October 18, 1967, a revised procurement plan was IS-
sued by the Marshall Space Flight  Center which provided for
the adaption of two S-TVB stages for use as orbital   workshops

                                   61
at an estimated cost of $34.7 million    for the first  one and
$34.9 million   for the second.   On January 8, 1968, after
making several changes to the procurement plan, including
the deletion   of the second workshop, NASA Headquarters    ap-
proved the procurement of one orbital    workshop at an esti-
mated cost of $34.7 million.

      Skylab Program officials    told us that one of the rea-
sons for the increase was their decision to have work ac-
complished by the contractor     which was previously   planned to
be accomplished in-house.      The other reason was that the
complexity   of the work required    to develop the orbital   work-
shop had increased considerably      during the period between
the two estimates.

      Cost increase between the approved
      procurement plan and contract  definitization

       On the basis of the procurement plan approved by NASA
Headquarters     on January 8, 1968, the S-IV8 stage production
contract    was modified by a letter        amendment issued in Febru-
ary 1968 which contained a complete statement of work for
the modification      and adaptlon of one S-IV8 stage for use as
anorbitalworkshop.        The letter     amendment established    a con-
tract delivery     date of July 31, 1969, and a contract         comple-
tion date of June 15, 1970.          Before   the issuance  of the  letter
amendment, modifications      to the S-IVB stage production        con-
tract had been issued on a time-phased basis for only cer-
tain segments of the work.

         In November 1968 a revised procurement plan to defini-
tize the letter      amendment was issued which proposed to com-
bine the contractor's       effort     on the airlock    module and the
orbital     workshop under the same contract          except for certain
S-TVB stage modifications          which were to remain under the
basic S-IVB stage production           contract.    These modifications
consisted     of changes to the S-IVB stage which permitted             the
installation      of various hardware items.         The procurement
plan also provided for a second orbital             workshop and a hab-
itability     support system which were major additions           to the
scope of work previously        planned.       NASA Headquarters    approved
the revised procurement plan in February 1969.



                                    62
      Negotlatlons    were   completed    rn May 1969 to definltize
the letter    amendment for the orbital        workshop portion       of the
contract    at $98.7 million,      or $64 million    higher than the
$34.7 million      estimate   approved by NASA Headquarters         in the
January 1968 procurement plan.           A supplemental     agreement, ef-
fective    August 8, 1969, was Issued incorporating           the deflni-
tized value for the orbital         workshop effort     into the airlock
module contract.        The supplemental    agreement also changed the
contract    delivery    date of the first    orbital    workshop from
July 31, 1969, to March 1, 1971, and the contract               completion
date for the orbital        workshop from June 15, 1970, to July 31,
1972. A delivery        date of August 31, 1971, was established
for the second orbital        workshop.                           i

        In addition   to the second orbital     workshop, the habit-
ability    support system, and the schedule slippage drscussed'
above, Skylab Program officials         told us that an additional
requirement      for ground support equipment and testing      was an-
other major area of cost impact causing the $64 mllllon            in-
crease.     Although the records did not contain a breakdown of
the cost increase applicable        to each of these four areas,
Skylab Program officials       estimated    that the cost impact was
about $16 million       for each area.

      Cost increase between contract   deflniti-
      zation and September 1970 contract     value

      In July 1969 the Skylab Program mission plan was modi-
fied to use the launch capability      of the larger Saturn V
launch vehicle  which permitted   the complete outfitting         of the
workshop on the ground.    As a result      of this decision,     a num-
ber of redesign and structural    modifications       to the orbital
workshop were required.    The scope of work under the contract
was also substantially  increased by adding new tasks such as
the solar array system, thruster     attitude     control   system, and
changes in water storage and food management facilities.

        Negotiations   were completed in May 1970 to definitize
the wet to dry workshop configuration          changes at $62.1 mll-
lion.     The contract    delivery  dates for the flight    and backup
unit were changed fromMarch         and August 1971 to July 1971
and January 1972, respectively,         and the contract  completion
date was changed from July 1972 to February 1973. These de-
finltized      changes were incorporated    into the contract   on

                                     63
    August 27, 1970.     Since definitization      of these changes, sev-
    eral minor modifications    totaling      $1.9 million have been ne-
    gotiated  which increased the contract        value to $162.7 million
    as of September 29, 1970.

         Cost increase in the S-I'VE3
         stage production contract

          As discussed above, certain    modifications      to the S-IVB
    stage were accomplished under the S-IV3 stage production
    contract.     We noted that the negotiations     for the wet to dry
    configuration    changes included a part of the costs incurred
    under the S-IVB stage production     contract    which were appli-
    cable to the orbital     workshop.  As of September 1970, how-
    ever, the S-TVB stage production     contract    still    contained
    costs of $5 million     applicable to the orbital      workshop,

         Estimate   of additlonal    cost
         increase   through contract     completion

           In addition   to the September 1970 contract    values total-
    ing $167.7 million,     NASA estimated that a $119.4 million      cost
    increase will be experienced through contract        completion.
    This amount includes $112.7 million      for redesign effort,
    hardware changes, and increased testing      requirements     and
    $6.7 million     for schedule slippage.
                                  -w-v




A

          Included in appendix II of this report are the Marshall
    Space Flight   Center's    comments concerning programmatic  and
    other influences    contributing   to the cost increases during
    the development of the orbital      workshop.




                                         64
Extent of cost increase in
the airlock module contracts

      AS of October 19, 1970, the airlock         module contract  had
experienced    a cost increase of $117.4 million        since the ini-
tial  contract   was awarded in August 1966 for $10.5 million
NASA estimated    that a further      cost increase of $121.4 mll-
lion wall be experienced;        the total   cost of the contract
through completion     therefore    is estimated   to be $249.3 mil-
lion.

      The reasons and related       dollar  amounts for the
$117.4 million   cost increase      between August 1966 and Octo-
ber 1970 include

     --$25.9 million    for   a major      redefinition      of the airlock
        module;

     --$52.3 million    for the addition     of a second (backup)
        airlock  module, schedule slippages,      addition   of sup-
        porting  engineering   and integration    effort,  redesrgn
        effort  and hardware modifications,      and preparation    of
        an updated test program; and

     --$39.2 million    for the change from the wet to the dry
        workshop configuration.

      The results   of our review        of these    cost   increases   are
discussed below.
      Cost increase between initial          contract
      and proposed definitization          of contract
      conversion

        In August 1966 the Manned Spacecraft       Center awarded a
fixed-price    contract    in the amount of $10.5 million      for the
design and development of the airlock         module and related
hardware.     The contemplated      design of this early unit was
essentially    a pressurized     tunnel with one end providing     a
sealed connection       to a hatch in the orbital    workshop and the
other end providing       a docking adapter for the command and
service module.       The performance requirements      for this early
unit were limited       to a single mission of 14 to 28 days' du-
ration.

                                    65
        In December 1966, NASA Headquarters             issued a new set
of mission requirements        which established          a more complex
program.     As a result,     a major redefinition          of the airlock
module hardware, supporting         effort,     testing     requirements,
and interface     requirements     with other modules was required.
Changes to be made to the airlock             module included the in-
corporation     of a power and distribution           system, environ-
mental conditioning,       a communications        system, storage for
certain    experiments,    provisions      for ground control,        and a
means for astronaut       extravehicular       and intravehicular        activ-
ity.

        Because of the significant    changes to be made to the
airlock    module, the Manned Spacecraft     Center directed     the
contractor     to stop work on the early version and issued a
new scope of work for the more complex unit.         The fixed-
price contract     was then converted to a cost-type      letter    con-
tract to be definitized      at a later date.

      In early 1968, negotiations      were completed to defini-
tize the letter    contract  for the redesigned airlock        module
at $36.4 million,    or $25.9 million     higher than the value of
the fixed-price    contract.    The NASA Administrator      decided
not to approve the definitization       action and directed      that
the performance period of the letter         contract   be extended to
December 1968. A NASA Headquarters          official  told us that
documentation   was not available     which showed the Administra-
tor's   reasons for not approving the definltization         action
and that he could only speculate on what the reasons were.
      Cost increase between proposed definitlzation
      of contract  conversion and definitized    contract

        In September 1968 the NASA Administrator            approved the
realignment       of management responsibilities        for developing
certain    flight     hardware, including     the airlock    module for
which responsibility         was transferred     to the Marshal1 Space
Flight    Center.      Because of the many changes to the unit
that resulted       from the revised mission requirements          issued
in December 1966, a new procurement plan was prepared and
submitted      to NASA Headquarters       for approval.

      In addition   to incorporating          the revised mission re-
quirements,    the plan  provided for         a backup airlock  module

                                      66
and for systems engineering      and integration effort.             After
preparation     of the procurement plan, the contractor            was re-
quested to submit a proposal for the dcfinitization                of the
letter   contract.    To allow time for thus action,     the         letter
contract    period of performance was extended several             times
with the last extension being to August 31, 1969.

        Negotiations     were concluded in May 1969 to definrtize
the letter      contract   at $88.7 mrllion    whrch was approved by
NASA Headquarters        on August 8, 1969. The definitized      con-
tract was $52.3 million         hrgher than the amount negotiated
by the Manned Spacecraft          Center in early 1968, and It estab-
lished a contract        completion    date of August 31, 1972. The
airlock    module flight     unit and backup unit were scheduled
for delavery on March 1 and August 1, 1971, respectively.

        We obtained an internal          NASA working paper dated Febru-
ary 11, 1969, which summarized the various contract                   changes
and related     contractor      proposals that had been submitted
after the $36.4 million          was negotiated       with the contractor
by the Manned Spacecraft           Center in early 1968.         On the ba-
sis of discussions        with Skylab Program officials           and the
proposed dollar       amounts shown on the working paper, we esti-
mated that $41.9 million           of the $5'2.3 million      increase in-
cluded about $17.4 million            for the addition      of the backup
airlock    module, $13.2 million           for schedule slippages,
$9.2 million     for redesign effort            and hardware modifications,
and $2.1 million       for the preparation          of an updated test pro-
gram. The contract         files     showed that the remaining
$10.4 million      increase was for the addition            of supporting
engineering     and integration         effort.

       Cost increase between definitized   contract
       and contract  value at October 1970

      In July 1969 the Skylab Program mission plan was modi-
fied to use the launch capability       of the larger Saturn V
launch vehicle which permitted      the complete outfitting      of
the workshop on the ground.      As a result,    major modifica-
tions to the airlock    module were required;     and a payload
shroud and deployment assembly for the Apollo telescope
mount were added to the airlock       module contract.     The con-
tract completion    date was extended from August 31, 1972, to
February 28,   1973,  and the delivery    dates for the airlock

                                     67
module flight  and backup units were changed from March 1 and
August 1, 1971, respectively,   to July 1, 1971, for both
units.   These changes were incorporated  into the contract
on July 23, 1970, at a value of $39.7 million.

       On the basis of our review of the contractor               proposals
and contract      files,     we estimated that the $39.7 million          in-
crease consisted         of $21.1 million    for hardware modifica-
tions,   $15.8 million        for hardware additions,       and $2.8 mil-
lion for schedule slippage.             Since July 23, 1970, several
minor contract        modifications     have been made which reduced
the value of the contract           by $0.5 million      for a total   net
increase of $39.2 million           between definitization       of the
letter   contract      on August 8, 1969, and its value of
$127.9 million        as of October 19, 1970.

      Estimate    of additional    cost
      increase    through contract     completion

       In addition    to the October 1970 contract      value of
$127.9 million,      NASA estimated    that an additional    $121.4 mil-
lion cost increase will be experienced through contract             com-
pletion.    The estimated      increase of $121.4 million     consists
of $108.1 million       for redesign effort,    hardware modifica-
tions,   and testing      and $13.3 million  for schedule slippage.



      Included in appendix II of this report are the Mar-
shall Space Flight Center's     comments concerning programmatic
and other influences  contributing   to the cost increases
during the development of the airlock     module.




                                      68
                          CHAPTER11

            APOLLO TELESCOPEMOUNT PROJECT COSTS

       The Apollo telescope mount 1s to be designed and de-
veloped to permit man to observe, monitor,      and record solar
phenomena outside the distorting     atmosphere of the earth
and to demonstrate and evaluate man's ability      to perform
scientific   experiments with high resolution    astronomrcal
telescopes   while in space.   Funding for the cost of experr-
ments that are to be flown on the Apollo telescope mount 1s
provided under the experiment development proJect.         (See
ch. 4.1




                               69
      The following schedule compares the October 1968, De-
comber 1969, and October 1970 estimates  of cost for the
Apollo telescope mount project.

                                                                                                 Increase or
                                              Increase or              Increase 05               decrease(-)
                                    October   decrease(-)     December decrease(-) October         1968-70
                                     1968       1968-69         1969     1969-70    1970     --Amount Percent


  APOLLO TEXESCOPEMOW               $195 8     -$02 1          $113      -so 5      $113 2 482 6        42
     Lunar module modifications      104         -853            19 5      -2-Z      17     -33         -83
     Apollo telescope mount
       systems                        69 2        21.4          90 6       53        95 9      26.7       39
     SuPP*                            21.8      -18 2            3.6      -3 6               -21.8     -100


NASA EXPLANATIONS FOR CHANGES
IN ESTIMATED COST

       The major cause for the decrease in the estimated cost
of the Apollo telescope mount was attributed   to the cancel-
lation   of the modifications to the lunar module that would
have been requrred under the wet workshop configuration.

     NASA's explanations for the changes in estimated cost
for each funding element of the Apollo telescope mount proj-
ect are presented in the following sections.

Lunar module modifications

       The decrease of $85.3 million      in the December 1969 es-
timate resulted     from the cancellation    of the lunar module
modifications    that were no longer required      after the change
to the dry workshop configuration.

       The contract    termination     and closeout costs for the
lunar module modifications         were less than anticipated     and
resulted    in an additional      decrease of $2.2 million    which
was reflected     in the October 1970 estimate.

Apollo      telescope             mount systems

       The change to the dry workshop configuration    and the
ll-month   launch schedule slippage from August 1971 to July
1972 resulted    in the increase of $21.4 million   in the De-
cember 1969 estimate.



                                                         70
      A further   launch schedule slippage to November 1972 and
the addition    of a backup mission capability resulted   in the
increase of $5.3 million    rn the October 1970 estimate.

Support

       The decrease of $18.2 million in the December 1969 es-
timate was caused by the elrminatlon   of contractor checkout
effort   for the Apollo telescope mount at the Kennedy Space
Center.

       Retained in the December 1969 support cost estimate
was a contingency        fund amountrng to $3.6 millron    for possible
experiment    installation     costs.  This fund was    subsequently
eliminated    and a decrease of $3.6 million     in the October
1970 estimate resulted.




                                   71
                                                CHAPTER12

                             SATURN IB VEHICLE PROJECT COSTS

      The two-stage    Saturn IB launch vehicle will be used to
launch three astronauts       in a modified  command and service
module for the initial      visit   and two subsequent visits   to
the workshop.     A picture    of the Saturn IB on a modified
Saturn V mobile launch structure        is shown on the following
page*
       Seven unused Apollo Saturn IB launch vehicles     procured
by the Apollo Program have been transferred      to the Skylab
Program.     In addition to the seven vehicles   procured by the
Apollo Program, the Skylab Program was funding the produc-
tion of two additional     Saturn IB vehicles.   In calendar
year 1969, production    was suspended except for the two first
stages which were already near completion.       Of the seven
vehicles   transferred,  three are to be used for the initial
and two subsequent workshop visits,      one is a backup, and
three will remain unassembled in storage.

       The following schedule compares the October 1968, De-
cember 1969, and October 1970 estimates     of cost for each
funding element of the Saturn IB vehicle     project.     The pro-
duction costs of the seven vehicles   transferred      to the Sky-
lab Program are not reflected   in the estimates      shown below.

                                                                                                    Increase     or
                                       Increase    or             Increase    or                    decrease(-)
                             October   decrease(-)    December    decrease(-)      October             1968-70
                              1968       -1968-69       -1969        1969-70          1970
                                                                                     ---          Amount     Percent



SAXURN IB VEHICLE            $404 4     -$205
                                           -     1    $199
                                                       -      3     GiLi            $232
                                                                                     --      7   -$171 7       -42
    S-IB stage                68,2         -24 4         43.8         21.1              64.9          -3 3       -5
    S-IVB stage                83.9        -45.2         38.7         12 2              50.9        -33 0      -39
    Instrument     unit        48.9        -26.2         22.7        -9.9               12.8        -36.1      -74
    Ground support
       equipment               23,8        -11.0        12 8         -5.1               7.7        -16.1       -68
    H-l engine                 20.4           2.7       23.1           8.9             32.0          11.6        57
    Vehicle    support        159.1      -101.0         58.1           63              64 4        -94.7       -60

Note     Figures   may not     add due to rounding.




                                                        72
NASAEXPLANATIONSFORCHANGES
IN ESTIMATEDCOST
      I'he primary reasons for the $205.1 million decrease in
the estimate as of December 1969 were the cancellation of
productionofthe    second stage and instrument unit for two
Saturn IB vehicles and the elimination of the Skylab Program
funding responsiblity   for commonsupport.     (See pp. 14
through 16.) Also contributing    to the decrease were the
elimination of a Saturn IB dual launch capability,     a lower
negotiated level of Saturn IB vehicle support, and a cost-
reduction study which resulted in cost savings and planning
changes.
      The increase of $33.4 million in the October 1970 esti-
mate was primarily a result of including closeout costs for
the completed S-IB stage contract and the Skylab Program's
newly acquired funding responsibility   for flight support
costs during fiscal years 1973 and 1974 as a result of the
Apollo Program phasing out. Funding for the assembly of
two instrument units was added, and the 4-month launch
schedule slippage from July to November 1972 contributed
to the increase.   These increases were partially  offset,
however, by the elimination of the Skylab Program's need
for launch complex 34 and the accompanying realignment of
contractor manpower at launch complex 39.




                             74
                                      CHAPTER13

                      SATURN V VEHICIX PROJECT COSTS

       The availability      of a Saturn V launch vehicle     procured
by the Apollo Program enabled the Skylab Program to change
to the dry workshop configuration.           Only the first   two
stages (S-IC and S-II) of the Saturn V will be used to si-
multaneously     launch the orbital     workshop, airlock    module,
multiple    docking adapter,     and Apollo telescope mount.
During the launch, the orbital          workshop, airlock    module,
multiple    docking adapter,     and Apollo telescope mount will
occupy the area that is normally occupied by the S-IVB
stage, lunar module, and command and service module during
Apollo missions,        Skylab has funding responsibility       for
modifications      to the Saturn V vehicle     configuration   which
are unique to the Skylab Program.

          A picture of the Saturn V vehicle launch configuration
for     the Skylab Program is shown on the following  page.

      The following schedule compares the October 1968, De-
cember 1969, and October 1970 estimates  of cost for the
Saturn V vehicle project.

                                                                                     Increase
                        October   Increase   December Increase         October       lY68-70
                         1968      1968-69     1969    3969-70          1970     Amount
                                                                                 ---      Percent
                                                                                          -
                                                (millions)
 SATURNV VEHICLE         $3.6                                $148      $1571     $153       4,264
    S-IC stage            25                                   28.8      31 1      28 a     1,252
    S-II stage                                                 24.4      24 4      24 4        s
    S-IVB stage                                                27.3      27 3      27.3        m
    Instrument unit                                            41.9      41.9      41.9        m
    Ground support
       equipment           -                            ”
                                                                5.0       5.0       5.0       w


    F-l engine            1.3                                             5.7       4.4      338
    Vehicle support        s         515          :::          1::';     21 a      21.8
 Note    Figures may not add due to rounding.




                                             75
NASA EXPLANATIONS FOR CHANGES
IN ESTIMATED COST

      The October 1968 estimate of $3.6 million       was for long-
lead procurements    for Saturn V launch vehicles.      Early Sky-
lab Program planning included several missions which re-
quired Saturn V vehicles.       At that time all Apollo Saturn
V's were still   assigned to Apollo lunar missions which made
it necessary for the Skylab Program to purchase additional
Saturn V vehicles.      The procurement was canceled, however,
when all requirements     for follow-on    Saturn V's were re-
moved from the Skylab Program.        Long-lead items  already
purchased were placed in storage for use as spares.

       The $5.5 million   increase for vehicle      support in the
December 1969 estimate was attributed         to effort   for launch
umbilical   tower modifications      required by and unique to the
Skylab Program.      These modifications     were required   as a re-
sult of the change to the dry workshop configuration.

      The additional  increase of $148 million     in the October
1970 estimate consisted    of (1) $142.3 million     for flight
support costs in fiscal    years 1973 and 1974 due to the
planned completion   of the Apollo Program in fiscal       year
1972 and (2) $5.7 million     for Saturn V modifications      re-
quired for the dry workshop configuration.




                                  77
                                                CHAPTER14

                           PAYLOAD INTEGRATION PRBJECT COSTS

          Payload integration    is the activity  necessary to com-
     plement and integrate    the work that is being performed un-
     der other Skylab projects.,    This activity  includes

             --mission    analysis   for experiment operations,
             --system analysis,
             --system integration       and requirements   analysis,
             --experiment    analysis,    and
             --program management requirements         and controls,

            The following schedule compares the October 1968, De-
    cember 1969, and October 1970 estimates    of cost for these
    activities.

                                                                                             Increase     or
                                     Increase    or                                          decrease(-)
                           October   decrease(-)      December    Decrease(-)   October         1968-70
                            1968        1968- 69        1969        -1969-70     v1970    Amount
                                                                                          --          Percent



    PAYLOAD INTEGRATION.   $163 0      -$ll      5    .$m           -$2 9
.       Definition          36.1         -x3             11,8           -F
        Implementation      126.9           12.8        139.7         -2.9


    NASA EXPLANATIONS FOR CHANGES
    IN ESTIMATED COST

           The October 1968 estimate of $163 million                                  was based on
    preliminary    estimates made prior to negotiation                                 of the con-
    tract   for the payload integration   effort.

           The December 1969 estimate of $151.5 million,         a de-
    crease of $11.5 million,   was primarily       attributed  to (a> a
    decrease of $13.1 million    which resulted       from the negotiated
    contract   being less than the October 1968 preliminary         esti-
    mate and (b) a partially    offsetting     increase of $1.6 million
    which was caused by the ll-month       launch schedule slippage
    from August 1971 to July 1972.

          The decrease of $2.9 million                           from December 1969 to Oc-
    tober 1970 was prnmarily  attributed                            to a reduction in the
    allowance for program changes,
                               CHAPTER 15

                MISSION OPERATIONS PROJECT COSTS

       Mission operations       provides for the overall        operational
capability     of the Skylab Program.        Mission   operations      fund-
ing includes all mission control;           preflight,   flight    and re-
covery operations;       crew training;     crew systems; crew opera-
tions;    launch support operations;        launch instrumentation
support;     and liaison    activity    for the NASA offices      partici-
pating in each Skylab Program mission.




      The following schedule compares the October 1968, De-
cember 1969, and October 1970 estimates  of cost for mission
operations.




                                      79
                                                                                                             F




                                                                                            Decrease(-)          1
                             October   Decrease(-)    December    Decrease(-)   October       1968-70
                              1968       1968-69           1969     1969-70        1970
                                                                                  ---     Amount   Percent



MISSION OPERATIONS           $281 1     -$214 2           $66       -$12
                                                                      __ 2       $54   -$226 4       -81
     &sslon     control        59 8        -59.0            08                     0.8   -59 0       -99
     Flight    operations      60.4       -37.5            22.9        -3.6       19 3   -41.1       -68
     Flight    crew oper-
        ations                 39 6       -16.7            22.9       -2.2        20 7    -18.9      -48
     Launch operations        108.8       -89.8            19.0       -6.2        12 8    -96 0      -88
     Launch instru-
       mentation               12.5       -11.1             1.4       -0.3         1.1    -11.4      -91
Note'   Figures    may not   add due to rounding


 NASA EXPLANATIONS FOR CHANGES
 IN ESTIMATED COST

           The following   sections                  present       NASA's explanations as
 they      relate   to each element                  of cost       shown in the above sched-
 ule.

 Mission          control

      The decrease of $59 million     in the December 1969 esti-
mate was attributed  to the elimination     of the Skylab Pro-
gram's funding responsibility     for common support.    (See
pp. 14 through 16.)

 Flight       operations

        The decreases of $37.5 million and $3.6 million      in the
December 1969 and October 1970 estimates,    respectively,       were
attributed    to a reduced level of support contractor     effort.

Flight        crew operations

      The decrease of $16.7 million    in the December 1969 es-
timate was primarily     attributed to the deletion  of the lunar
module/Apollo   telescope mount simulator    when the workshop
configuration   was changed from wet to dry.

       The $2.2 million   decrease in the October 1970 estimate
resulted   from reduced camera requirements      and the transfer
of funding responsibility      for modifications   and maintenance
of simulators   from the Skylab Program to the operating        base.


                                                     80
Launch operations

       The decrease of $89.8 million    in the December 1969 es-
timate was attributed   to (1) elimination     of the Skylab Pro-
gram's funding responsibility     for common support,   (2) con-
version of contractor   tasks to in-house at the Kennedy Space
Center, and (3) cost reductions      at the Air Force Eastern
Test Range where Saturn IB launches were scheduled to take
place.

      The decrease of $6.2 million  in the October 1970 esti-
mate was primarily  a result  of the consolidation  of manned
launch operations  at launch complex 39 which eliminated   the
Skylab Program's need for launch complex 34.

Launch instrumentation

      The decrease of $11.1 million     in the December 1969 es-
timate was primarily  attributed    to the elimination   of the
Skylab Program's funding responsibility       for common support.

      The decrease of $0.3 million    in the October 1970 esti-
mate was primarily  attributed   to better manpower utiliza-
tion through the consolidation     of manned launch operations
at launch complex 39.




                                81
                               CHAPTER       16


                   PROGRAMSUPPORTPROJECT COSTS

        The program support project      provides     aczivltles     to as-
slst the Skylab Program Office         In the establishment        of pro-
gram requirements       and the review of program implementation
activities.      Program support includes        funding for systems
engineering,     technlcal     and management services,        and related
support services,       including   some electrlcal     support equip-
ment.

      The following schedule compares the October 1968, De-
cember 1969, and October 1970 estimates  of cost for program
support.


                                                              Decrease(-)
October Decrease(-)    December Decrease(-)       October      1968-70
 1968     1968-69        1969     1969-70           1970     Amount Percent


$164.7     -$5.1        $159.6      -$85.3         $74.3    -$90.4    -55


NASA EXPLANATIONS FOR CHANGES
IN ESTIMATED COST

      The decrease of $5.1 million    in the December 1969 esti-
mate was the net result   of (1) a decrease of $33.5 million
due to the transfer  of funding responslbillty      to the Apollo
Program for common support costs applicable      to laboratory
support contractors  at the Marshall    Space Flight   Center and
(2) an increase of $28.4 million    in the management reserve
when the workshop configuration    was changed from wet to dry.

        The decrease of $85.3 mllllon    In the October 1970 estl-
mate was the net result      of (1) an Increase of $3 5 million
due to the 4-month launch schedule sllppage from July to
November 1972 and (2) an $88 8 mllllon        decrease resulting
from a reduction      In the management reserve and reduced con-
tractor     effort for the test program, the reliabllity-
quality-safety     program, and configuration    management.


                                     82
          .


                                     CHAPTER17
                 I




                         CONTRACTADMINISTRATION COSTS

       Contract administration     funding consists   of the Skylab
Program's allocated     portion   of costs associated   with audits
of NASA contractors     which are performed primarily      by Depart-
ment of Defense audit agencies.         The following  schedule
compares the October 1968, December 1969, and October 1970                         ,
estimates    of cost for contract     administration.

                                                                   Increase
October       Increase    December     Decrease(-)   October       1968-70
  1968         1968-69      1969         1969-70       1970    Amount    Percent
                               (millions)
 $11.7          $4.1       $15.8            --GO.2    $15.6     $3.9        33

NASA EXPLANATION FOR CHANGESIN
ESTIMATED COST

      NASA attributed the net increase of $3.9 million    be-
tween the October 1968 and October 1970 estimates     to ex-
tended Department of Defense audit activities   resulting
from launch schedule slippages.




                                            83
                               CHAPTER18

                AGENCYCOMMENTSAND OUR EVALUATION

        In a letter   dated March 2, 1971, the Associate Adminis-
trator    for Organization   and Management commented upon the
rationale     behind NASA's request that we restrict           the dis-
tribution     of our report and transmitted        the Office of Manned
Space Flight's      comments on the report.       This letter       is in-
cluded as appendix I.       Comments   were   also    obtained    from   the
Director     of the Marshall Space Flight      Center and these are
included as appendix II.       Following    is   a summary of NASA's
comments and our evaluation       thereof.

        NASA commented that the general facts showing only a
small cost growth since mid-1968 were sound and that the
general narrative      of the program in chapter 1 reasonably
portrayed    the situation.    NASA felt,   however, that the re-
port became very confusing       in later chapters on individual
projects    because we had shifted     the reference    base for costs
from the October 1968 program operating          plan to various
earlier    bases,

        NASA stated that the October 1968 program operating
plan had been well chosen as the base for the general sec-
tion of the report because this represented              the first    com-
pleted program operating           plan containing   the estimated     cost
of the program through completion            and because the program
had stabilized      reasonably well into its present program con-
figuration    and number of launches,           NASA stated also that
the use of reference          bases as early as 1966 in the report
for several individual          projects--a   time when the overall
program definition         and the requirements     on individual     proj-
ects were still       very much in the formative        stage--had   made
it extremely     difficult      to follow a train of logic through
the report.      NASA felt      that it also produced highly ques-
tionable    percentages       of cost growth and strongly       suggested
that the project        sections of the report be rewritten         around
the same base as the more general parts of the report.

       Initially,      we had planned to use as our base the
earliest      possible estimate of the cost of the program as a
whole.      Since the October 1968 estimate,    however, was the
first    estimate     of the cost of the program through completion,

                                    a4
we decided to trace the cost of selected hardware items from
the initial  estimate to the most recent estimate   to obtarn
a more complete understanding  of the changes In the program.
We believe that the bases used, 1966 and 1967, rn this part
of our review are appropriate  when viewed in the context
that NASA sought and received congressional   approval for the
program in calendar year 1967.

TRANSFER OF EFFORT

       NASA commented that the transfer       of program elements
between projects     had explained many of the fluctuations        in
individual   project   cost estimates.     As an example, NASA com-
mented that major functions       of the lunar module had been
transferred   to the airlock    module which increased     its cost;
however, because of this transfer,       it was possible to cancel
the lunar module project      and decrease its cost.      NASA be-
lieves that identification       of such transfers    is essential
since they do not, from the overall        point of view, consti-
tute unwarranted     cost growth.

       We met with officials     of the Marshall Space Flight         Cen-
ter on March 19, 1971, to discuss the effect           of transfers
between projects.      During this meeting,     the officials      stated
that the transfers     pertained   only to the period between
July 1969 and October 1970--the        time when transfers      between
projects    were being made as a result      of the decision to
change from the wet to the dry workshop configuration.                They
stated also that it would be a difficult          task to allocate
the applicable     cost increases and decreases among the proj-
ects involved in the transfers.          They estimated that such
an allocation     could take as much as 3 months and even then
might result    in only a rough estimate.       Therefore     we were
not able to price out the effect         of the transfers.

ACCOUNTING EE'FECTS

      NASA commented that the effect    of changes in accounting
had perhaps been overemphasized by our comments regarding
common support costs.    In this regard,    the information   pro-
vided in our report concerning    the common support was pro-
vided by NASA as part of its explanation       for cost decreases
in the program.   We reported   and explained common support
as it was presented to us.

                                   85
METHODSOF ESTIMATING

      The agency also stated that within     our report there
were numerous references    to the fact that estimates were
often based on judgment and experience and that documents in
the file  did not preserve the rationale    and calculations   on
which the estimates   were based.   NASA felt that the report-
ing of the use of judgment and experience      should not be con-
strued as critical   in a program of this nature.

       In this regard, emphasis in our report was placed on
NASA's lack of documentation.      We were not suggesting   that
judgment and experience should not be used but that suffi-
 cient documentation   was not available  to show what was con-
sidered in arriving    at the estimate.   NASA indicated  that
 it would continue its attempts to improve in the area of
 documentation.

PROVISION FOR INFLATION

       NASA commented that a GAO summary of facts concerning
our review at the Marshall Space Flight           Center had errone-
ously indicated     that conflicting      statements had been made
by center officials      concerning the provision       for inflation.
NASA stated that provision        for inflation     had been made in
the cost estimates      but that inflation      had not been sepa-
rately   identified    as a percentage factor.

        We do not feel that conflicting        statements were pre-
sented.     During our review,    one official      told us that an es-
timate being discussed did not include a specific             provision
for inflation     but that the estimate      included contractor-
proposed costs which did.       Other officials        told us that es-
timates would provide for inflation          but that they could not
identify    the amounts provided.

       In   contrast  to our summary of facts,        our final    report
does not     deal with the provision      for inflation      solely at the
Marshall     Space Flight    Center.    Rather, we state that program
operating      plan guidelines     do not direct   the centers concern-
ing the     provision   for inflation    and that, as a result,        some
estimates      do not include a provision       for inflation.



                                     86
                                CHAPTER 19

                           SCOPEOF REVIEW

       We examined the policies,      procedures,    and practices
followed by the Marshall        Space Flight   Center, Huntsville,
Alabama; the Manned Spacecraft        Center, Houston, Texas; and
NASA Headquarters,      Washington,   D.C., in estimating      the cost
of the Skylab Program.        We discussed with agency officials
the procedures    followed    in preparing   the most recent esti-
mate of the cost of the program--the         October 1970 estimate,

        At NASA Headquarters     we also examined into the cost
history    of the program between October 1968 and October
1970. We selected as our base the estimate of program cost
in the October 1968 program operating         plan because it pro-
vided the first      estimate   of the cost of the Skylab Program
through completion.        Due to changing program definitron,
earlier    program operating     plans included only estimates   of
costs to be incurred       during the next 2 years of the program.
We identified     the changes that occurred between the October
1968, December 1969, and October 1970 program operating
plan estimates      and obtained NASA's reasons for thesechanges.

       We examined the cost history     of selected Marshall    Space
Flight  Center hardware contracts.       We reviewed the records
and documents related    to these contracts     and held discus-
srons with cognizant    NASA officials.     The contracts   selected
and the related   hardware being developed are shown below.

             Item                            Contractor

   Orbital   workshop            McDonnell Douglas Astronautics
                                   Company
   Airlock   module              McDonnell Douglas Astronautics
                                   Company
   X-ray spectrographic          American Science and Engineer-
      telescope                    ing, Inc.
   Ultraviolet      scanning     Harvard College Observatory
      polychromator     spec-
      troheliometer
APPENDIXES




 89
                                                                       APPENDIXI




                                                                     MAR 2 1971




Mr. Klein Spencer
Assistant Director,  Clvll Divlslon
U.S. General Accountmg Offlce

Dear Mr. Spencer:

In response to your letter,  dated February 24, 1971, there are enclosed
the comments of the Office of Manned Space Flight relating  to GAO's draft
report on the review of estimated cost of the Skylab Program.

The following   lnformatlon    1s furnLshed pursuant to your request for a
reiteration   of the ratlonale    behind NASA*s limitations on the use and
release of certain types of lnfonnatlon      made available to the GAO audstors
assxgned to the review of the Skylab Program, Such rationale        was stated
in the several GAO/NASAmeetings that were held on the need for documents
and data. These meeting resulted m mutually accepted "groundrules"          for
the performance of this survey and, also, for the other recently announced
"cost-growth"   reviews of certain OSSA and OART Programs.

Speclflcally,   GAO auditors agreed not to use or disclose to others, wlth-
out prior approval of NASA, any of the following    data If it should come to
the auditors'   attention  while other lnformatlon 1s being made avallable
for GAO review:
       (a)   Budget estimates      until    such time as they are made public     by
             the President.
       (b)   Obsolete     budget requests    of the Admlnlstrator.
       (c)   Agency estimates      of the run-out    costs of lndlvidual    contracts.
There was no        restrictxon      on NASA's latest estimate of total program run-
out costs for         the Skylab Program, including a breakdown of the elements
(line items)        comprising such total,      Provided:    budget estsmates or pro-
gram prOJeCtlOnS,          by fiscal    years, were not used or dLsclosed.     Also,
there was no        restriction      on the use or disclosure   of agency estimates of
total run-out        costs of all Skylab contracts in the aggregate.



                                            91
          APPENDIX      I


         The rationale    supportrng the above limitatrons   (a) and (b) 1s set forth zn
         NMI-7440.1 and BOB Circular A-10 which are designed to Implement the in-
         structlons    of the Executrve Office of the President,    The rationale behznd
         lrmltation    (c) above 1s to prevent public disclosure of m-house determi-
         nations on exlstlng     contracts in order to:

               1.    Avold preJudicing       the Government rn future   negotiations   with
                      the contractors,       and
               2.    Avoid the drsclosure of data whrch would permit contractors
                     to predicate their clarms on NASA's estimates of proJected
                     costs.
         In brief,  these llmltatlons         are deslgned to protect   the -Lnterests of the
         United States.

         To our knowledge, the above groundrules have created no significant           pro-
         blems in the conduct of the review of the Skylab Program. In fact, the
         GAO audrtors themselves recognized that care would have to be exercrsed r.n
         the presentation    of some schedules and flnanclal     data, as well as narra-
         tive, m the GAO report to preclude a meanrngful interpretation          by con-
         tractors'  representatives   even though ldentlflcation      of NASA proJections
         of run-out costs on individual      contracts might not be readily apparent to
         some readers of the report.     For example, report frnancral      data or nar-
         rative on a program line item (or sub-item) might be extrapolated          to
         mformatlon    on lndlvldual  contracts by knowledgeable contractors       even
         though contract or contractor     identiflcatlon   1s not shown.

         The draft report provrded with your letter of February 24, 1971, does
         include several NASA estimates (speclfrc or mterpretable)          of run-out
         costs on rndrvrdual contracts.        As a matter of preference, NASA continues
         to urge you to delete from your report the agency's estrmates of run-out
         costs of rndlvldual    contracts.     If, however, such lnfonnatron    1s m GAO's
         view essential   to the report then as a minrmum we request that you make
         the survey report "restrrcted",       in complrance with the llmrtatlons    agreed
         upon, and accompany It with a sultable explanation regarding the sensltlve
         nature of the specified     information.




    k/ pdRlchard   C. McCurdy
          Associate Admrnlst fd tor    for
I        Organrzatlon       and Management
         Enclosure:
           As stated


                                                    92
                                                                                 APPENDIX    I


                             NATIONAL   AERONAUTICS       AND SPACE ADMINISTRATION
                                             WASHINLTON     D c   20546




REPLY OF
Al-TN  To   MLB
                                                                          Mm   2 1971


            MEMORANDUM
            TO:          D/Associate   Admlnlstrator
                         for Organlzatlon    and Management
            FROM:        M/Deputy Associate  Administrator
                         for Manned Space Flight
            SUBJECT:     Comments on the GAO February                 24 Draft      F&port
                         on the Skylab Program

            Attached are OMSF comments In response to the GAO draft
            report  on Skylab, received February 24.
            Per our conversatron  this morning,  these                     are untended
            to be attached to your letter   to GAO.




            Charles   W. Mathews
            Attachment




                                            93
APPENDIXI

            NASA COLMMENTS
                         ON GENERALACCOUNTING OFFICE
                  DRAFT REPORT ON THE SKYLAB PROGRAM

General
The general facts showing only a small cost growth since mid
1968 are sound, and the general narratrve          of the program In
Chapter 1 reasonably portrays      the sltuatlon.       However, the
report   becomes very confusing    ln later chapters      on lndlvldual
proJects    because It shifts   the reference     base from P3P 68-2
to various earlier    bases.    Thus makes lt very dlfflcult        to
follow   through the thread of development and also leads to
erroneous conclusions     at the proJect    level.

Base
The POP 68-2 was well choosen as the base for the general
section    of the report because this represented       the first                       \
completed POP going to runout and because the program had
stabllzed    reasonably   wzll Into Its present program conflg-
uratlon    and number of launches.     Even after   that tune, as
late as July 1969, changes as slgnlflcant         as the one from
Saturn IB-launched      wet to Saturn V-launched dry workshop
were still    being made.
Earlier    reference      bases are used In the report              for several
lndlvldual      proJects     extending     back into periods as early as
1966, a time when the overall              program deflnltlon          and the
requirements       on lndlvldual      projects       were still     very much ln
the formative       stage.      Structuring       these lndlvldual        proJect
analyses      to a different        base In time and In degree of
deflnltlon      makes It extremely         dlfflcult      to follow     a train    of
logic through the report.              It also produces highly ques-
tlonable    percentages       of cost growth.          For instance,       the
Airlock    Module 1s reported          to have experienced          a very large
percentage      cost growth.        This was calculated          from a very
early base related         to early tasks and a concept of a
simple Airlock       ti?lch later      grew into a sophlstlcated             nerve
center of the Cluster,           taking over numerous functions
orlglnally      assigned elsewhere,            This 1s typical        of numerous
instances     where growth in one proJect              represented      transfers
of effort     from another proJect without              increase to overall
program.
It 1s strongly    suggested that the project sections of the
report be rewritten    around the same POP 68-2 base as the
more general parts of the report.

                                        94
                                                                  APPENDIXI

Transfer     of Effort

330th the general section           of the report and the detailed
proJect    analyszz could be greatly           improved by stressing
and presenting      more clearly        the transfer     of program elements
from proJect      to proJect.         Such transfers     explain many fluc-
tuatlons     In lndlvldual       proJects    which, without      accompanying
explanation,      would appear quite unusual.              For Instance,     using
the example c&ted before,            maJor functions       of the LM were
transfered     into the tirlock         Module creating      a substantial
growth In cost of the Azlock               Module proJect;      but because of
this and similar       changes It was possible           to cancel the LM
proJect    altogether      with a consequent decrease In cost of the
LM proJect,       Identlflcatlon        of such transfers       LS essential
since they do not, from the overall               point of view, constLtute
unwarranted      growth.      As written,     rndlvldual     proJect   chapters
could be construed         to imply unwarranted        growth.

Accountinq     Effects
The effect     of changes In NASA accounting has perhaps been
over-emphasized     by lmplicatlon     in Chapter l's comments
regardrng    the operating   base,     While there have been some
changes into and out of the program, we believe           that the
overall    success in holding      cost growth to 4% reflects    the
legitimate     management process at work,        [See GAOnote p. 96.1

Methods of Estzmatlnq
There are numerous references        to the fact that estimates     were
often based upon Judgment and experience          and that documents
in the file   do not preserve     the rationale    and calculations
upon which the estimates      are based.     In advanced R&D proJects
we must and should rely heavily        upon experienced    development
engzneers and estimators.        We choose that kind of people for
the work.    We ~111 continue     to attempt to improve our documen-
tatlon:  but reporting    the use of Judgment and experience
should not be construed      as a critical     comment In a program of
this nature,   and It would be helpful       if the report made this
clear.




                                        95
APPENDIXI

Other   Specxflcs
There are other specxflc    detaxls   of fact or emphasis which
are being dealt wxth routxnely      by comments from the Skylab
Program Offze    and the Centers dxectly      to GAO. MSFC 1s
making a written    response dealxng In greater    detail with
the specafx    cost history  or MSFC's proJects.


GAOnote:      The cost growth percentage was revised   from 4 per-
              cent to 5 percent in the final report.




                                96
                                                                                  APPENDIXII

                        NATIONAL     AERONAUTICS            AND SPACE ADMlNlSTRATlON
                                GEORGE      C MARSHALL       SPACE FLIGHT       CENTER
                                 MARSHALL    SPACE FLIGHT    CENTER   ALABAMA     35812


                                                MAR     1    1971



Mr.     J. J. Bevls
Audit     Manager
General      Accountmg     Office
Building     4202,    Room   B- 18
George      C. Marshall     Space Flight     Center
Marshall      Space Flight      Center,  Alabama                35812

Dear    Mr.    Bevls:

Although  we have not heretofore        provided   wrltten     comments       to the
GAO fact sheets     on cost growth     and cost estimating        procedures       of
selected  MSFC Skylab      contracts,     our concern      has been expressed
to your people    m meetings      with what we consider        Improper      context
and other  shortcommgs       of the fact sheets.

We have now received           copies    of the GAO draft         reporttiansmltted
to Mr.    McCurdy       of NASA by letter,         dated February           24, 1971,     from
Mr.    Spencer    of GAO.       Although    overall      response     to this report        will
be forthcoming       from     NASA Headquarters,             our concern         contmues
with the mdlvldual        fact sheets,     which      are contamed         in toto in the
body of the report.

In reviewing         your report,         we note that after      describing       the history
of the program,            October      1968 was selected       as the baselme          for R&D
costs through          completion        for each proJect     and system         contamed      m
the Skylab       Program,           In the selected     MSFC     contracts,       however,      the
baseline      establlshed        was 1966,       two years   earlier.         Not only 1s this
entirely     lnconslstent         with the proJect      and systems         cost examlnatron
ln the report,          but these      mdlvldual    fact sheets      alone are mlsleadmg
in several       respects

Frrst,      they do not address       the maJor          external       mfluences,      program-
matlc      or broader,     caused    by the concept            evolution      descrrbed      m the
hlstorlcal       profile.    The period       selected       was one when the Workshop
and ATM were the relatively                simple      first    mrsslon       of an extensive
p=w=n,           as compared      to their     constltutmg         the hub of the total
program        today.

                                              97
APPENDIX II

Next,      no recogmtlon       1s made that many      addltlons    to the                    lndlvldual
 contracts      were    not addltlons  to the program,         but rather                     requirement
 shifts    from    another   part of the program.        For mstance,                          many of the
functions       added to the Arlock      requirements        had formerly                        been pro-
vided by the CSM.

Another       shortcommg          of the fact sheets         1s a sklpplng     back and forth
 among     procurement          plan estimates,          contract     value,   and POP estimates.
Although       the amounts         cited m the fact sheets           for contract     values    and
 contract      changes      are generally       correct,       coherency     1s lost because
there     1s no connection          made between         these contract      estimates       and the
POP estnnates,           rather       they have been lumped            as a total dlfferentlal
to the current         contract       value.

For the foregomg        reasons,      we recommend                     that the MSFC    cost growth
fact sheets    be stricken     from    the report.                  If GAO feels   that mdrvidual
contract    cost growth     examlnatlons      must                be made,     we recommend       the
following*

             a.    Use October         1968     as the      baseline,       consistent        with      the
system       level   cost review,

             b.   Recognize      that each          addrtLon to a contract   1s not                  neces-
 sarlly     an addltlon    to the program,             but may be a requirement                       shift
from      another     part of the program,

             C.       Use consistent     method          of describing         projected        increases,
from      POP       to POP.

In Ime with the above,     we are               enclosing         logical     descrlptlons           of each
of the selected contracts.

We have           also  reviewed  your        individual      fact      sheets  on cost estimating
procedures            and your general          observations,            and are enclosmg     our
comments            to them.

We will be happy             to meet with       you    at any time          to provide        further
amplification  or           clarificatron.




                                                       Director

Enclosures

                                                      98
                                                                       APPENDIXII

                     COMMENTSON GAO COST GROWTHFACT SHEET
                                AIRLOCK MODULE
                            MDAC-EASTERNDIVISION
                              CONTRACTNAS9-6555



The logrcal starting      point for examining the Airlock ProJect cost
growth is early CY 1969, at the time of submission of POP 69-X.           Thbs
was the first    budget submlsslon containing MSFC estimate of require-
ments for a "wet" workshop mission and hardware that is reasonably
comparable to today's "dry't workshop. Prior to that trme, the maJor
additional    requirements to the orlglnal   pressurized tunnel had not
been firmly defined nor completely budgeted         The original pressurized
tunnel concept was based on the CSM supplying power, oxygen and nitrogen,
and environmental     control    Because of the maJor changes involved in re-
vrslng thus concept, work on Alrlock flight       hardware was suspended for
approximately     a year during 1967-68

The POP 69-1C was the frrst POP whrch provided MSFC estimates and rn-
eluded $89 5 M The Alrlock Module was to be delivered in March 1971
to support an August 1971 launch date              The primary Airlock Module
function at this time was to support the "wet" workshop mission.
Briefly,    this mrssion was to launch an orbrtal workshop as the propul-
sive Saturn IB S-IVBto be converted in orbit by the crew for habltatlon
and for the conduct of scientific           and engineering experiments.         The
mission of the Alrlock Module was to support the orbital                operations
during the planned 14-days operations using previously               qualified    hard-
ware from the Gemini and Apollo programs and to support an "open-ended"
mlsslon beyond the first        14 days up to 28 and 56-day durations.             The
Alrlock Module at thus point was to provide access hatches to the
Multiple   Docking Adapter and Workshop and an external hatch for EVA
purposes       The lnstrumentatlon       and communication systems would provide
engineering and operational        data and some limited experimental data
The command or ground control system would only provide for those func-
tlons necessary for safety and to prepare the AM-OWS-MDAfor docking by
the CSM with the crew         The electrical      power and distribution       system
would utilize     stored and drstrrbuted       electrical   power from the OWSsolar
arrays and the CSM The environmental condltronlng                system provided only
for proper mixing and pureflcation           of the breathing atmosphere           In sum-
mary , the Airlock Module was a semi-passive module with limited                 capa-
bility   for distributing     electrical     power, transmlttlng     telemetry data,
providing means for EVA and stowage of some experiments and equipment
and provrdlng equipment to maintain proper pressure and atmosphere
The next mayor cost growth and corresponding hardware changes was the
"wet" to "dry" conversion confrguratlon    as reflected In POP 69-2C at
$132 6M. The Airlock Module was to be delivered in July 1971 to sup-
port a March 1972 launch date     As a result of the new "wet" to "dry"
conflguratron   and added hardware requirements to the AM, more emphasis
was being placed on the function of the AM to support the full g-month
mission duration.    It was to be determined by analysis and additional

                                            99
APPENDIX II

testing on hardware that from a design standpoint all systems should be
capable of operating for the 8-month mission duration             The mission
requirements of this change reflected       in the Airlock Module were* (a)
addition of the Fixed Airlock Shroud (FAS) for stowage of 02 and N2 con-
sumables, formerly provided by the CSM, to support the entire mission
without orbital    resupply,   (b) added the temperature or thermal control
provisions    to the environmental control system for tne AM-MDA-OWSand
CSM; (c) additional     power storage, conditioning     and distribution      system
since the CSM would now be quiescent during operation of the OWSby the
crew; (d) expanded communication system to accomodate additional              opera-
tions,   housekeeping,   engineering  and experiment    data;  (e)  expanded     ground
control system since the crew would not be utrllzlng          the CSM; (f) added
the two-gas control system to the AM; (g) added additional            cooling loop
requirements to support ATM, and (h) provided emergency and warning
system for the safety of the crew        Many of these additional        require-
ments, including cooling for the ATM Controls and Displays and addltlonal
instrumentation,     were added to replace functions formerly provided by the
LM which had been deleted from the program for an overall savings to the
program     Deletion of the LM also required changes to the Airlock atten-
dant to its becomlng the primary EVA mode

The next major Airlock cost growth corresponded to the addition of the
Payload Shroud and the ATM Deployment Assembly as reflected       in POP 69-2
estimate of $181 8 M. These two items were added to the program as a
result of converting to the "dry" workshop concept-, but it was not until
POP 69-2 that they were included as Airlock components         The Payload
Shroud is used to protect the AM-MDA-ATMduring launch and also supports
the weight of the ATM until earth orbit is attained.       It replaces the
SLA which was provided for in another contract during the "wet" workshop
program     The ATM weight 1s then transferred    to the Deployment Assembly
for positioning   the ATM for in-orbit  operation     The Deployment Assembly
is a tubular structure not only for supporting the ATM but various ex-
periments and equipment

Since the POP 69-2, additional    mlsslon requirements and corresponding
hardware changes have been added to the Airlock Module. A new launch
date of November 1972 tJ1th flight    hardware delivery of February 1972
was reflected   in POP 70-2    A complete listing     of changes will not be
enumerated, but some examples are cited to convey the rationale            for
increased cost of the Airlock Module       Recently the AM trainer to be
dellvered to MSC for crew training     underwent a complete review and up-
date of requirements and specification     to reflect    the latest MSC crew
training   hardware requirements    The Earth Resources Experiments are
becoming more mature in design and reflect      requirements for additional
AM power, communication, and cooling.      Additional    hardware has been
required to support testing requirements that were not in earlier             pro-
gram requirements     The reviews of hardware design for the crew have
resulted in many changes that add cost to the program           A significant




                                        100
                                                          APPENDIX II

Increase In complexity of the Caution and Warning system to improve
crew safety has caused considerable cost Increase In the program    The
changes Imposed on the AM from external lnterfaclng equipment at this
poLnt in the program add to cost, especLally when hardware has to be
refabrlcated or changed late In fabrlcatlon




                                 101
APPENDIX II



                     COMMENTS                   ON GAO COST GROWTH       FACT   SHEET
                                                  WORKSHOP   PROJECT
  MCDONNELL-DOUGLAS                             ASTRONAUTICS     COMPANY     - WESTERN                                             DIVISION
                                                 CONTRACT    NAS9-6555


    The program             Identified       by POP 68-2C,           fourth    quarter       CY 1968,        funding
    represents         a common           baseline       in terms      of makmg        a direct      program
    comparison           with the program              hardware       and missions          of today      (POP 70-2C)
    In the forma’clve           period       prior    to this time the maJor             effort    was spent in
    trymg      to define       programs           and missions        that would       make      use of the basic
    Apollo      hardware.             Today’s      program       has matured        from      the orlglnal        intent
    of allowing         an EVA astronaut              to open the hatch          of a Saturn        S-IVB      spent
    stage,      enter     for a short         experrmental         period    and return         to the CSM             That
    rudimentary           concept        has evolved        into a spacecraft          that is capable          of fully
    sustalnmg         the crew         of three      astronauts,        24 hours     a day continuously              for
    the full 28 and 56 day missions.

    The $104.5M      m POP 68-2C   1s funding     for a “wet”                                            Workshop           program
    scheduled    to be completed m January      1972.    KSC                                            delivery         was March
    1971.     The basic  program conslsted    of-

               1.      One        propulsive           Saturn       IB     (S-IVB         212)     flrght       stage,

               2.      One        propulsive           Saturn       IB     (S-IVB         210)     backup            stage

                           a.    Scar modifications          to the basic propulsive                                         S-IVB       stage
    to permit        kit lnstallatlon         of Workshop      life support        equipment                                  after     the
    propellants         are evacuated,           mcludlng    pre-mstalled          open grid                                 walls      and
    floor,      quick-opening         hatch,      thermal    curtains,        fire  retardatlve                                  liner,
    mlcrometeorold             bumper        and passlvatlon        capabrllty.

                           b.          Hardware            in the form       of krts             that       could      be installed         in
    the     spent    propulsive            stage        after   passivatlon,

                             C.        One     one-g      trainer          for     use    by the         crew;

                             d        Thirty-one           (31) items    of zero-g      and neutral     buoyancy
    test,     plus     one        complete       set     of neutral   buoyancy     trainer    hardware,

                             e.        Habltablllty             Support          System      to be provided                  as GFE       by
    NASA/MSC,

                             f.        123 quallflcatlon                  and development                   tests;

                           g*   Production                  acceptance              testmg         of a %carred”                 S-IVB      to
    be the      same      as Saturn,




                                                                      102
                                                                                                APPENDIX II


                     h.    Launch      support    operations      to be covered          by Saturn/
Apollo,
                     .
                     1.  The hot gas Attitude Control                  System    and Solar         Array
System         was to be provided as GFE by MSFC,

                     Jm Twenty-seven             (27) new models         of GSE and thirty-five
(35) modtired         models,

                     k.    Program       completron        scheduled      for January           1972,

                     1.    Launch      date scheduled        for August      1971.




The $121.7M    in POP 69-lC,  first quarter CY 1969, 1s fundmg for a
“wet” Workshop    program.   The maJor program   differences from the
previous  POP 68-26 are

          1.     Flight   configured      manufacturmg          development          furture,

       2.   One one-g tramer utlllzrng the flight                       conflgured      manufacturmg
development   fixture from MDAC- WD,

          3.     Actrve    Envrronmental         Control     System,

        4.       Habltablllty      Support    System       to be provided       by the MSFC
contractor,

         5.       Production  acceptance testrng             of the scarred          stage,      plus   com-
patlbrlrty       testmg of hardware    kits,

          6.     Launch     support and mission            operations      to be funded          by the
Orbital        Workshop     ProJecC;

          7.   Four (4) additional           new models        of GSE, four          (4) fewer      modtiled
S-IVB      models of GSE,

       8.    Erghteen           (18) new development   and qualrflcatlon   tests                   on the
Habltabrlsty   Support           System.   Other development    and quallfmatlon                     tests
were reduced from               123 to 63,




                                                  103
APPENDIXII


              Program
                9.       completion                         extended     s1x months,   from January to July
   1972, to provide full coverage                          of launch     operations  with the later launch
   date of August 197 1,

             10.        Food          freezers    were     added




   The $199.3M     In POP 69-2C, third quarter   CY 1969,                                  1s fundmg for a lrdryr
   Workshop   program.    The maJor program    differences                                  from the previous
   POP 69-1C are*

                1.   One “dry”              Saturn       V (S-IVB     513) flight     stage m lieu      of a
   Saturn         IB stage,

                2.     One t’dryll          Saturn       V (S-IVB     515) backup      stage in lreu of a
   Saturn        IB    stage

                a   Hardware  to be completely    mstalled    during manufac-
  turing smce the stage would be a llvmg/worknrg      environment    and be
  launched “dry. I’ Beefed-up crew quarters    floor.    A tank access door
  was added,

                           b.           One Dynamic         Test Article       usmg     the basrc    S-NB
   facilities         stage;

                             c.         One set of zero-g           and neutral     buoyancy    hardware,

                             d.         One engureerlng        mockup        with later    conversion       to a
  one-g         traner;

                          e.     Accommodations      for twenty-two (22) GFE experiments,
   includmg           responslblllty   for Interface    Control Do%uments.  TWO s clentlflc
  Airlocks            were added,

                            f.            Habltabfilty  Support System for forjd, water,      waste and
  personal            hygiene            management,      including a closed loop refrigerator     system.
  Added         Z-local              vertical    orbit capablllty.

                            g    l
                                        Cold gas Attitude          Control    System* (TACS);

                            h.          Solar    Array     System     to be furnished      by MSFC       contractor;




                                                                104
                                                                                         APPENDIXII


                 1. Consolidated GSE into fewer models but with more sys-
tems capability.    Number of new models reduced from 31 to 21, and
number  of modlfled   models changed from 31 to 7,

                 J*      EnvIronmental    Control          System,   Caution and Warnmg,
plus all electrical       llghtlng and provlslons           for a 28-day and two 56-day
orbital  mlssrons,

               k.        Extended program   completion  seven months,                          from    July
1972 to February         1973, due to change m the launch date,

               1.   Slipped KSC dellvery four                      months,     from    March     to July
1971,   due to change In the launch date,

             m. Slipped launch date seven months,                              from August 1971 to
&larch 1972, due to FY 70 budget restrlctlons, plus                           the use of the larger,
more complex f*dryll Workshop,

              n.      Total update of the development    and quallfrcatron      testmg
requirements    to be compatible     with the Saturn V stage, loads,      vibration
and new environments       in the “dry?’ Workshop.    The number of develop-
ment and qudllflcatlon     tests was changed from 63 to 82;

                 0.      Production     acceptance         testmg        peculiar     only to the
Workshop.




The $225.3M     m POP 69-2, fourth quarter                    CY 1969,         IS funding for a “dry”
Workshop   program.   The maJor program                      differences        from the previous
PQP 69-26 are.

        1.   Reorlentatlon       of floor     and ceilmg;

        2.   Addltlon      of a viewing      window       m the wardroom,

        3.    Crew      compartment        rearrangement,

        4.    Additional     general      lllumlnatron       lighting,

        5.    Crew      system   evduatlon       lab at MDAC-WD,

        6.   Adltlon       of a trash     disposal       hrlock,

     7,    Addltlonal         sleep accommodations                  caused    by the deletion         of a
DOD experiment.




                                                105
APPENDIXII


   The $239.4M      m POP                         70-IC,  first    quarter                       CY 1970,           1s fund&g            for a lrdryrr
   Workshop    program                            The maJor     program                         differences          from    the         previous
   POP 69-2 are*

           1.           Four       months      slip             m launch                date,     from        March         to July          1972,      due
   to a total          budget       reduction,

               2.       Changed             the     flight       mclmatlon                 traJectory            from       35’     to 50°,

               3.       Noise        suppressors                  for     fans,

               4.       Habltablllty               Support    System                     (HSS)      refrlgeratlon    subsystem                       re-
   packaging            for system                safety   improvement                           in use of coolanol,

               5.       Added        film         vaults;

               6.       OrbItal        Workshop                 proof       pressure               testing,

               7.       Added        Experiment                  S183,

               8.       High      Fldellty            Mockup




   The $286.8M       In POP                       70-2C,   third     quarter                      CY 1970,          IS fundmg             for a “dry”
   Workshop    program.                           The major      program                        differences          from   the          previous
   POP 70-1C      are

           1.     Four    months    adJustment          m KSC dellvery        date,   from  July to
   November        1971,   for better     compatlblllty       with the KSC need and July 1972
   launch   date,     plus an antlclpated       three     months    addltlonal      delay  m delivery.

               2.       MaJor     changes     In Habltablllty                               Support       System            (HSS)        (food,
   water,           waste,    sleep,    off-duty    equipment).

            3.    Numerous                        GSE        changes        for         compatlblllty             with      the     flight      hard-
   ware     changes,

            4.          Redesign             of the          Thruster             Attitude          Control        System,

               5.       Additional            measurements                        for      m-flight           monltorlng,

            6.          Orbital       Workshop                  film      vault          changes‘

               7.       Caution        and Warnmg                       System            changes,




                                                                             106
                                                                                                            APPENDI2tII


         8.    Experiment              accommodation              changes,

         9.    Optscal       vlewlng       wmdow,

        10.    AddItIonal         subsystem            assessment            and testing         for      flight      envlron-
ments     with   Increased         crlterla,

        11.    Increased         Z-local       vertxal          orbit     capability,

        12.    Added        Experiment         S063,

        13.    Fldel&y        xnprovement              of engzneermg             mockup,

        14.    Increased         stowage        capability,




The $28?.2M       m POP           70-2, fourth    quarter                 CY 1970,         1s funding              for a *xdryB1
Workshop    program               The maJor    program                   differences        from     the           previous
POP 70-2C      are-

       1,    Deleted        the cost for          a potential            three    month      delay          in dellvery
to JSSC reported           m POP 70-2C,

         2.     Added    CritIcal  Design                Review         (CDR)     and     Crew         Statron       Review
(CSR)     Review     Item Dlscrepancles                   (RID’s);

          3.     Four    months     slip m launch    date,                  from   July to November                         1972,
due to     changes      m Apollo      launch schedulmg.                       SL-1   to be launched                  five
months       after    Apollo    17,

       4.      Extended   program               completion        date from             February              1973 to
November        1973 to provide             coverage       of later   launch             operations             caused           by
a change      m launch   dates.




                                                          107
                                                            SATURN WORKSHOP
                                                                          PROGRAM

                                                      POP              POP              POP           POP            POP            POP           POP
                                                      68-2C            69-X             69-2c         69-2           70-1c          70-2C         70-2
                                                      $104.5M          $121.7M          $199.3M       $225.3M        $239.4M        $286.811      ';267.2M

     Program Completion           Date                Jan.      1972   Jlfly     1972   Feb. 1973     Feb. 1973      Feb.    1973   Feb.   1973   Nov     1973

     K8C Delivery        OWS-f                        Mar.      1971   Mar.      1971   July   1971   July    1971   July    1971   Nov. 1971     Nov.    1971

     KSC Delivery        OWSBackup                    AUG. 1971        Aug. 1971        Jan. 1972     Jan. 1972      Jan. 1972      Apr. 1972     Apr. I.972
                                                                                        No sys tst    No svs tst     No svs tst     No sys tst    p"o sys tst
     Launch Date (OWS-1)                              Aug.      1971   Aug.      1971   Mar. 1972     Mar.-l972      Jul.-l972      Jul.-1972     Nov.-l972

     ows-1                                            SAT. IB          SAT. IB          SAT. V        SAT. V         SAT. V         SAT. V        SAT. V
       (Launch Vehrcle)                               (212)            (212)            (513)         (513)          (513)          (513)         (513)
     OWSBackup                                        SAT. IB          SAT. IB          SAT. V        SAT. V         SAT. V         SAT. V        PAT V
       (Launch Vehicle)                               (210)            (210)            (515)         (515)          (515)          (515)         (515)
0'   Habitabillty   support         System            GFE (MSC)        CFE              CFE           CFE            CFE            CFE           CFC
00
     Solar      Array   System                        GFE(MSFC) GFE                     CFE           CFE            CFE            CFE           CFE

     Attitude      Control    System                  GFE(MSFC) GFE                     CFE           CFE            CFE            CFE           CFE

     One-G Trainer                                    yes              Use D.F.         Convert       Convert        Convert        Convert       Convert
                                                                                        EMU           EMU            EMU            EMU           EMU
     Development        Fixture    (D.F.)             No               yes              3-s           yes            yes            Y-            yes
     Engineering        Mockup (EMU)                  Yes              yes              yes           yes            yes            yes           yes

     O-G d Neutral        Bouyancy Hardware           limited          limited          yes           yes            yes            yes           yes
     High Fldellty        Mockup                      NO               NO               NO            NO             yes            yes           yes
     Crew System Evaluation              Laboratory   NO               NO               NO            yes            yes            yes           yes
     Dynamic Test Article                             NO               NO               yes           yes            yes            yes           yes
                                                                                                   APPENDIXII

                      COMMENTS        ON GAO COST GROWTH          FACT                      SHEET
                                      ATM   EXPERIMENT      S- 0 54
                             AMERICAN     SCIENCE    AND ENGINEERING
                                        CONTRACT      NASS- 9041



    In context      with the general       Skylab     Program        preamble,          the S-054     ex-
    periment       with American        Science     and Englneermg            went through        a
    formative       phase    durmg    the period      from    late 1966 to late 1968.              The
     design     concept    of the experiment        was fmallzed          during      the period      from
     completion       of the Preliminary         Design     Review      m December           1967 until
     completion       of the Crltlcal     Design     Review      m June 1968, at which              time
    POP 68-2 was prepared.                The resultmg         hardware         deflmtlon      was essen-
    tlally    the same as existed         on November          1970.

,   The total     cost as registered     m POP 68-2 was $14.4     M.  In POP                                70-2
    we registered      a total   cost of $20.2  M, for a cost growth  of $5.8                               M.
    This cost growth       from    POP 68-2 through   POP 70- 2 1s explamed                                 as
    follows:

    Overrun           (techmcal       problems                                                          $3.4       M
    :g

    Addltlonal          scope                                                                               .8M
    **
                                                                                                                       P
    Nine      month       launch      slip                                                                 1.0     M

    Wet      to dry      conversion          resultmg   111 Increased        mlsslon        support    $    o6 M


    *     Hycon        camera       problem
          Late      dellvery      of Falrchlld       integrated      clrcults
          Power        supply     problems
          Dlfflcultles          m manufacturing           which   necessitated         alternate      sources
          Quality       failure     m main      electronic      assembly

    *e$     .3    C&D components
            .2    Rocket    shot
            . 1   Main   electromc           assembly     problem
            . 1   Filter
            .l    Camera




                                                          109
        APPENDIXII

                            COMMENTS                ON GAO COST GROWTH            FACT                      SHEET
                                                    ATM   EXPERIMENT        S- 0 55
                                                      HARVARDCOLLEGE
                                                      CONTRACT      NAS5-3949

        In context           with the general        Skylab     Program     preamble,       the S-055      ex-
        periment            with Harvard       College      went through      a formative       phase during
        the period            from  late 1966 to late 1968.             The design      concept     of the
         experiment             was finalized     during     this period.       The resulting       hardware
        defmitlon           was mltlally      the same as exlsted          in November          1970.

        The total     cost registered      in POP                  68-2 was $14.7   M.  In POP 70-Z
        we registered      a total    cost of $22                  M, for a cost growth   of $7.3 M.
        Thus cost growth        from    POP 68-2                   through POP 70-2 is explained     as
        follows      l




        Under        estimate           of phase      two     in November             1968                            $1.6       M

        Overrun            (technical         problems)                                                                    1.9   M
        aI:

        Added        scope                                                                                                 1.4   M
        **
.   .
        Increase           m field       support       - 9 month          extension          in duration                   1.6   M

        Wet     to dry        configuration           with    increased         mission          duration                   .8 M

        ::cDetecter     unit problems                 - Bendix       quallficatlon             of primary
        mirror      assembly

        *:gPower            supplies       and     pressure      relief      valve                                    .3
        Mirror           launch      lock                                                                             .2
        Alternate            launch      lock                                                                          .4
        Additional             UV testing                                                                              .2
        Pressure             gauge                                                                                  A 3
                                                                                                                     1.4




                                                                   110
                                                                                                  APPENDIX           II


  GENERAL            COMMENTS              ON GAO         COST       ESTIMATING              FACT        SHEETS



Throughout        the fact        sheets   dealing      with cost estimating,        there    are
repeated      references           to the lack of available           documentation      to support
change     estimates.            We feel that an ampllflcation              of the change     proJection
process     is in order          to provide      proper     perspective       to the references.

In preparation            of a POP,        the projects          are asked to state their                   require-
ments      in order        of their     maturity        of definition.            Naturally,          therefore,
the contract          value    1s stated       first.       Next come the changes                     which      have
been authorized             but not defmitized.               Normally,            these     changes        will have
complete         detalled      documentation             of costs      in the form           of firm      proposals
wlthm      sixty days of authorlzatlon.                      Prior      to that time,            documentation
may consist           of ECP estimates,               contractor           ROM’s,        or MSFC           ROM’s,
As cited       in the fact sheets,             a small       portion        (2+-o/o cited      in the Airlock
fact sheet)        of these      changes        do not have written                documentation             describing
the breakdown             of the cost estimate.                In a development                program         of this
magnitude,           and with the interface                complexity,          there      are necessarily
 some instances             when changes            must     be authorized            on relatively           short
notlce     in order        to mlnlmlze          program         Impact.          In these        Instances,         an
estimate        obtained       by means         of meetings          or telephone            conversations              *
among       the prmclpals           affected        may satisfy          the immediate              requirement.

 The next category            of requirements,         known     and probable      changes,       con-
 sists of potential         requirements        that have been defined         to some degree
of detail     but which       have not been authorized.             A considerably         larger
percentage        of the changes         cited   in the fact sheet as not having             supporting
documentation          of cost estimate         detail   are in this category.           It should      be
noted,      however,      that there       1s usually    a large    amount    of documentation
describing       the technical         aspects    of the problem      or requirement.             This
information        provides        the basis   for proJect      ROM cost estimates             of the
 change,      and conversation           or meetings      with the contractor         provide      con-
tractor      ROM’s.

 The definitions        of these      known      and probable         changes       mature      as they
proceed      through      the ECP cycle,             preparation,        evaluation,        declslon.
 There     is a concurrent         maturation           of the cost estimate           from    ROM to
ECP estimate          to firm     proposal.           Detailed     docurnentatlon          of cost estl-
mate     at beginning        of cycle      1s not warranted          because       the definition
process      results     in changes0           As was pointed          out in the Airlock            Cost
Estimating        Fact Sheets,         later     estimates        may be 507’0 or more             different
from     the orlgmal        ROM’s,        although        the sum of these         estimates        agrees
within     4% of the ROM’s.


                                                           111
 APPENDIXII

The last category,             anticipated       changes,     covers       potential       problem      areas,
many     of which     have been identlfled,              but whose       extent      has not been defined.
The estimates         made for these            changes,     from      the wide range            of possible
costs,     are based on the Project                Manager’s       knowledge           and prior     experl-
ence w&h similar            changes.          The contingency         reserve         added in the Program
Manager’s       review       is a further        range    of antlcrpated        change       based    on
Program       Manager’s          knowledge        and experience          m overall        program       aspects,
and may include          allowance         for out-of-plan        assessment            and Headquarters
directed     contingency          reserve.

It should     be apparent       from     the foregoing         description       that the amount        of
detail   for cost estimates           should     be proportional           to the maturity      of the
change     definition,       and that record         documentation           of cost estunates,        other
than the POP record,              1s warranted         generally       only when the change          reaches
the ECP stage of definltlon.                 Therefore,         the percentages         of avalPable
documentation          cited   m the fact sheets          are considered           reasonable     when
examined       in the proper        context.

In the General           Observation           Fact Sheet,          there     is an erroneous             lndlcatlon
that conflictmg           statements          were      made      about mcluslon            of provisions            for
mflation        In cost estimates.                To set the record             straight,      provlsion          for
inflations          made     in the cost estimates,                  but is not separately              identified
 as a percentage           factor.         The labor        rates     used in making            government
cost estimates           are comparable               to rates       negotiated        W&I the contractor.
 Those      negotiated       rates      are mid-point            rates,      which     allow    for cost of
llvlng     increases,         projected        overhead         changes,        and other       factors        usually
referred         to as Inflation.           Higher      rates      are used for estimates                 for changes
beyond       the current        contract        life.

We have further             comments          on details   such as arithmetic                   errors      wbch
we will be happy            to discuss        III a meetmg     with you.




                                                             112
                                                     APPENDIX III


                 PRINCIPAL OFFICIALS OF THE

       NATIONAL AERONAUTICSAND SPACE ADMINISTRATION

               RESPONSIBLE FOR THE ACTIVITIES

                  DISCUSSED IN THIS REPORT

                                         Tenure of office
                                         From             To

ADMINISTRATOR:
    James C. Fletcher                Apr.     1971    Present
    George M. Low (acting)           Sept.    1970    Apr.    1971
    Thomas 0. Paine                  Oct.     1968    Sept. 1970
    James E. Webb                    Feb.     1961    Oct.    1968

DEPUTY ADMINISTRATOR:
    George M. Low                    Dec.     1969    Present
    Thomas 0. Paine                  Mar.     1968    Oct.    1968
    Robert C. Seamans, Jr.           Dec.     1965    Jan.    1968
   Hugh L. Dryden                    Oct.     1958    Dec. 1965
ASSOCIATE ADMINISTRATOR:
   Homer E. Newell                    Oct.    1967    Present
   Robert C. Seamans, Jr.             Sept.   1960    Sept. 1967
ASSOCIATE ADMINISTRATOR FOR MANNED
  SPACE FLIGHT:
    Dale D. Myers                    Jan.     1970    Present
    Charles W. Mathews (acting)      Dec.     1969    Jan.    1970
    George E. Mueller                Sept.    1963    Dec. 1969
    D. Brainerd Holmes               Nov.     1961    Sept. 1963
DIRECTOR, KENNEDY SPACE CENTER:
    Kurt H. Debus                    July     1962    Present
DIRECTOR, MANNEDSPACECRAFTCEN-
  TER:
    Robert R. Gilruth                Nov.     1961    Present




                               113
Kjj, t*
          APPENDIXIII

                                                 Tenure of office
                                                 From           To
                                                                -
          DIRECTOR,MARSHALLSPACEFLIGHT
            CENTER:
              Eberhard F. M. Rees             Mar.   1970   Present
              Wernher von Braun               July   1960   Mar. 1970
          DIRECTOR,SKYLABPROGRAM:
              William C. Schneider            Jan.   1969   Present
              John H. Disher (acting)         Nov.   1968   Jan. 1969
              Harold T. Luskin                May    1968   Nov. 1968
              Charles W. Mathews              Jan.   1967   Apr. 1968
              Major General David M. Jones,
                USAF (acting)                 Aug.   1965   Jan.           1967




                                                            iT S   GAO   Wash,   D C


                                       114