oversight

Administration of Certain Programs for Developing Space Nuclear Auxiliary Power Systems

Published by the Government Accountability Office on 1971-06-03.

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

                                   llMllll~liilililllll~llllleI
                                         LM095638




    Administr tion Of Certain Programs
    For Developing
    Auxiliary PO er Systems B-164105

*   Atomic   Energy Commission




    UNITED STATES
    GENERAL ACCOUNTING           OFFICE
               UNITED   STATES GENERAL       MGOUNTING            OFFICE
                           WABHINGTON,      D.C.     20548




B-164105




Dear     Dr.    Seaborg:

          This is our report   on the administration                        of certain   programs
for    developing  space nuclear    auxiliary     power                   systems.

       Copies      of this report        are being sent to the Director,         Office
of Management         and Budget;        the Chairman       and the Vice   Chairman,
Joint Committee         on Atomic        Energy;      the Secretary  of Defense;        and
the Administrator,         National       Aeronautics      and Space Administration.

                                                   Sincerely        yours,




                                                   Director,        Civil     Division

The Honorable        Glenn    T. Seaborg
Chairman,     Atomic      Energy    Commission




                        50TH   ANNIVERSARY          1921-      1971 ---
I   GENERALACCOUNTING3FFICE                     ADMINISTRATION OF CERTAIN PRQGRAFSS
                                                                                  FOR
I
I   REPORT'TO THE CHAIRMUI                      DEVELOPINGSPACE NUCLEARAUXILIARY PObdER
I   ATOMIC ENii'RGYCOMMi-SSION                  SYSTEMS
I                                               Atomic Energy Commission B-164105
I



I
I   WHYTHE REVIEW WASM43E
I
               Since the initiation   of the U.S. scientific  space effort   in the mid-
               1950's, the Atomic Energy Commission (AEC) has been developing-nuclear
               electrical
                  "__.    power Systems for Nuclear Auxiliary    Power, called SN@?$s'-
               terns. SNAP systems have been developed using isotopic      and reactor heat
               sources to XtippTy bfectrical  power for space, land, and sea uses.

               More than $380 million    has been expended by AEC in developing SNAP sys-
               tems for space use. Some of the systems were developed for specific     mis-
               sion requirements,   others as demonstration devices3 and others under a
               technology-readiness   philosophy.

               In consideration  of the funds expended and the significance of SNAP sys-
               tems to the space program, the General Accounting Office (GAO) made a re-
               view of AEC's management activities  in developing a variety of SNAP sys-
               tems for space-use.


    FINDINGS AND CONCLUSIONS

               AEC has developed five SNAP systems that have been launched and operated
               in space. These systems have generally met or exceeded mission require-
               ments.

               GAO's review of selected SNAP development programs did not identify   any
               unnecessary costs or other adverse effects that resulted from AEC's man-
               agement of the program. GAO did find, howeverp that improvement of cer-
               tain administrative  and management practices was needed to ensure more
               effective  and economical conduct of these programs,  These practices  are
               summarized below.
I
I              AEC procurement regulations   provide that contracts be negotiated in a
I              timely manner. GAO found, however9 that the scope of work, estimated
I
4              costs, and fixed fees for changes to the cost-plus-fixed-fee     contracts
I              for the development of the SNAP-79 and SNAP-27 generator systemsg in-
I
I              valving proposed costs of $18.7 million,    were negotiated after comple-
I              tion of all, or a substantial   portion of, the related work.    (See p. 11.)
I
I
I              Also the SNAP-29 program was conducted under a letter contract for 31
I
I              months of the 36-month contract period, during which contract obligations
I
I
     Tear
      ~____ Sheet
I
totaled about $17.3 mi'llion.      While AEC provided technical   direction dur-'               /
ing this period --including    the establishment   of interim levels of effort                  I
                                                                                                I
and cost ceilings --most of the work under this letter contract was per-                        I
formed before a definitized     statement of work, estimated costs, and fixed                   I
                                                                                                I
fees were negotiated.      (See pm 13.)                                                         I
GAO believes that after-the-fact      negotiations of contracts can result in                   I
                                                                                                I
increased contract costs, because the contractors      have potential  advan-                   I
tages in the negotiations    and have less incentive   to keep costs to a min-                  i
                                                                                            I
imum. AEC advised GAO that it believed that its close technical direc-                      I
tion of the SNAP contractors     minimized the opportunity   for unnecessary
contract work and for increased contract costs.

AEC's SNAP-27 generator was developed at the request of the National
Aeronautics and Space Administration  (NASA) to supply electric   power to
experiments left on the lunar surface by astronauts.    The system was de-                  I
                                                                                            I
ployed by the Apollo 12 astronauts and has exceeded its power output and                    I
operational   lifetime goals. Another SNAP-27 generator was deployed on                     I
                                                                                            I
the lunar surface by the Apollo 14 astronauts,  and it too has performed                    I
successfully.                                                                               I
                                                                                            I

GAO found, during its review of the SNAP-27 generator development program,                  /
t>,at generally close coordination     existed between AEC and NASA, the SNAP-              ,
27 user.     GAO did note, however, that closer coordination   during the                   I
early phase of the program of the development of a satisfactory       fuel
cask--a component that houses the SNAP-27 fuel capsule containing
plutonium-238--might     have revealed certain problems at an earlier date
and might have precluded the necessity for a crash program to develop a
satisfactory   fuel cask, (See p. 17.)

AEC initiated    the SNAP-29 program with the objective    of developing a
miAltihundred-watt,   short-lived,   radioisotope thermoelectric  generator             I
                                                                                        I
for space use. This program was conducted under AEC's technology-                       I
readiness philosophy.      Under this philosophy,  technology which has a high          )
probability   of being needed in the future is developed to the point at                I
which mission planners have a basis for confidence that it will work.                   I

Technical problems which arose early in the SNAP-29 program made it
likely    that AEC could not meet its established   time schedules and cost
estimates for developing a generator to demonstrate flight       technology.
Later, due to budget reductions,     the program was phased out after the
fabrication    of an electrically heated engineering model in June lP69.
Total program costs were about $20 million.       (See p. Z?.)

AEC informed GAO that the Department of Defense, the system's primary po-           1
tential    tiser, had beer1 fully informed of the SNAP-29 program status            I
through periodic progress reports, formal meetings, and personal contazts           i
anl had continued lo express interest      in the program. AEC, however, did        t
not maintain records shcwing the various factors considered in reaching             I
decision<.                                                                          I
               I
               I
              I
              I
              I
              I
              I
             I
                       GAO believes that, cons,istent with good management prac t.ic,es , XC’S ?I -
             I
                       vision of Space Nuclear Systems should maintain records Shah; t-,5 the fdc-,
             I         tors considered in reaching decisions involving substantial      Governi:len;
             ,
             I
                       expenditures and the bases for such decisions.
             I

             I
             I     RECOMMENDATIONS
                                 OR SUGGESTIONS
             I
             I
             I         GAO suggested that:
             I
             I
             I           --AEC's Division    of Contracts emphasize to its contracting    cfficers
            I               the importance of complying with AEC's regulations      which provicie for
            I
            I               timely negotiations   of definitized  contracts and for taking action
            I               to minimize delays in such negotiations.       (See p. 16.)
            I
            I
            I            --AEC's Division   of Space Nuclear Systems include in its records doc-
           I
           I
                            umentation of discussions with potential  users regarding development
           I                programs, the factors considered in reaching decisions,   and the bases
           I                for actions taken.   (See p. 25.)
           I
           I
           I
           I
           I
                   AGENCYACTIONS AID UNR&5'OLVEDSSSUES
           I
          I
          I
                       AEC agreed with GAO's suggestions    and took appropriate    steps to imple-
          I            ment them.
          I
          I

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                          Contents
                                                               Page
DIGEST                                                           1
CHAPTER

      1    INTRODUCTION                                          4
      2    CONTRACTADMINISTRATION OF SNAP PROGRAMS               9
              Contract   change proposals     and state-
                ments of work negotiated       after com-
                pletion   of all or most of the work           11
              Lack of effective    contracting     practices
                on SNAP-29 contract                            13
              Conclusions                                      16

      3    MANAGEMENTOF SNAP-27 AND SNAP-29 PROGRAMS           17
               SNAP-27                                         17
               SNAP-29                                         19
              Conclusions                                      24
      4    SCOPE OF REVIEW                                     26

APPENDIX

      I    Excerpts from attachment   to letter     dated
             October 7, 1970, from contractor       to the
             General Accounting Office                          29
 II        Letter    dated September   29, 1970, from Iso-
              topes, Incorporated,     to the General Ac-
              counting Office                                   33

                           ABBREVIATIONS

AEC        Atomic Energy Commission
DOD        Department of Defense
GAO        General Accounting Office
NASA       National  Aeronautics and Space Administration
SNAP       Systems for Nuclear Auxiliary  Power
                                                     ADMINISTRATION  OF CERTAIN PROGRAMS FOR
                                                     DEVELOPING SPACE NUCLEAR AUXILIARY  POWER
                                                     SYSTEMS
                                                     Atomic  Energy Commission 2-164105


DIGEST
------


WHYTHE REVIEW WASMADE

         Since the initiation       of the U.S. scientific      space effort     in the mid-
         1950's,    the Atomic   Energy Commission     (AEC) has been developing        nuclear
         electrical     power Systems for Nuclear     Auxiliary      Power, called    SNAP sys-
         tems . SNAP systems      have been developed      using isotopic     and reactor     heat
         sources    to supply  electrical   power for space,       land,   and sea uses.

         More than $380 million        has been expended           by AEC in developing     SNAP sys-
         tems for space use.       Some of the systems             were developed    for specific   ml-is-
         sion requirements,     others     as demonstration           devices,   and others  under a
         technology-readiness      philosophy.

         In consideration  of the funds expended                and the significance      of SNAP sys-
         tems to the space program,     the General             Accounting   Office    (GAO) made a re-
         view of AEC's management   activities     in           developing   a variety    of SNAP sys-
         tems for space use.


FINDINGS AND i'ONCLUSIONS
-.
         AEC has developed        five   SNAP systems     that  have been launched     and           operated
         in space.   These       systems   have generally      met or exceeded   mission             require-
         ments.

         GAO's review          of selected    SNAP development        programs      did not identify      any
         unnecessary          costs  or other    adverse   effects     that    resulted      from AEC's man-
         agement      of the program.         GAO did find,       however,     that    improvement     of cer-
         tain     administrative        and management     practices       was needed to ensure         more
         effective       and economical       conduct    of these programs.            These practices      are
         summarized        below.

         AEC procurement      regulations       provide     that   contracts      be negotiated        in a
         timely    manner.    GAO found,      however,      that   the scope of work,          estimated
         costs,    and fixed    fees for changes          to the cost-plus-fixed-fee            contracts
         for the development        of the SNAP-19 and SNAP-27 generator                 systems,        in-
         volving    proposed    costs     of $18.7 million,        were negotiated       after      comple-
         tion    of all,   or a substantial        portion     of, the related       work.       (See p. 11.;

         Also the SNAP-29 program   was conducted                under a letter       contract     for 31
         months  of the 36-month  contract  period,               during which       contract     obligations
GAO bel!eves         tl,at after-the-    fc?ct nqotiaticils            uf contracts       can result     in
increased       contract     costs9   because     the contractor;           have potential        advan-
tages      in the negotiations        and have less incentive               to keep costs       to a min-
i lmumm A&C advised          GAO that    it believed        that     i:ts close     technical     direc-
tion     of the SNAP contractors           minimized      the opportunity           for unnecessary
contract      work and for increased           contract       costs*

AEC's SNAP-27 generator             was developed       at the request      of the National
Aeronautics       and Space Administration             (NASA) to supply       electric   power to
experiments       left     on the lunar     surface     by astronauts.       The system was de-
ployed      by the AyoTlo       12 astronauts       and has exceeded      its power output        and
operational       lifetime      goals.    Another      SNAP-27 generator       was deployed    on
the lunar      surface      by the Apollo      14 astronauts,       and it toa has performed
successfully.

GAO found>         during     its   review     of the SNAP-27 generator              development      program,
t43t     generally       close    coordination        existed      between     AEC and NASA, the SNAP-
27 user.         GAO did notes however,             that    closer     coordination        during   the
early     phase of the program              of the development           of a satisfactory        fuel
cask--a      component        that houses the SNAP-27 fuel                 capsule    containing
plutonium-238         --might     have revealed        certain      problems       at an earlier      date
and nlight       have precluded          the necessity        for a crash program           to develop      a
satisfactory          fuel    cask.      (See p. 17.)

AEC initiated          the SNAP-29 program         with the objective            of developing       a
m;Altihundred-watt,           short-lived,      radioisotope        thermoelectric         generator
for space use.            This program      was conducted        under AEC's technology-
readiness      philosophy.           Under this    philosophy,        technology       which has a high
probability         of being     needed in the future          is developed        to the point        at
which mission         planners       hav e a basis     for confidence        that    it will     work.

Technical        prob7ems   which arose early          in the SNAP-29 program           made it
likeiy      that    AEC could not meet its established                 time schedules     and cost
estimates        for developing        a generator     to demonstrate        flight   technology.
Later,      due to budget       reductions,        the program      was phased out after         the
fabrication         of an electrically         heated    engineering       model in June 1969.
Total     program     costs   Were about       $20 million.         (See p. :[I.)

AEC informed        GAO that      the Department       of Defense,    the system's       primary      po-
tential    user,      had been fully       informed     of the SNAP-29 program         status
through    periodic       progress     reports,     Forma1 meetings,       and personal       contacts
and had continlred          to express     interest      in the program.       AEC, however,        did
not maintain        records     showing     the various     factors   considered     in reaching
decisions.
    GAO believes that, consistent with good management practices,   AEC's Di-
    vision of Space Nuclear Systems should maintain records showing the fac-
    tors considered in reaching decisions involving substantial   Government
    expenditures and the bases for such decisions.


RECOMMENDATIONS
            OR SUGGESTIONS

    GAO suggested that:

      --AEC's Division of Contracts emphasize to its contracting      officers
         the importance of complying with AEC's regulations     which provide for
         timely negotiations of definitized   contracts and for taking action
         to minimize delays in such negotiations.      (See p. 16.)

      --AEC's Division of Space Nuclear Systems include in its records doc-
         umentation of discussions with potential  users regarding development
         programs9 the factors considered in reaching decisions,   and the bases
         for actions taken.   (See p. 25.)


AGENCY
     ACTIONSANDUNRESOLVED
                       I-SSUES
    AEC agreed with GAO's suggestions       and took appropriate   steps to imple-
    ment them.




                                        3
                                CHAPTER 1

                              INTRODuCTION

      We have examined into selected aspects of the Atomic
Energy CommissionDs Systems for Nuclear Auxiliary    Power
development programs.    The objective  of AEC's SNAP program
is to develop compact nuclear power sources for specialized
space, land, and sea uses.    Our review was limited  to cer-
tain selected power sources developed for space use.

        The responsibility        for the development of various        space
reactor    and radioisotopic         systems for the production       of elec-
tric power is vested in the Space Electric                Power Office of
AEC"s Division       of Space Nuclear Systems.          For the period
covered by our review,          the Director,    Division    of Space Nu-
clear Systems, also served as the Manager, Space Nuclear
Propulsion     Office,     a joint    National  Aeronautics    and Space
Administration       and AEC organization.        Subsequent to the com-
pletion    of our review,       all AEC and NASA space systems activi-
ties were consolidated          in a joint AK-NASA organization          under
the Director,       Space Nuclear Systems.

       AEC enters into contracts       with commercial firms for re-
search and development of SNAP systems.            AEC's Division  of
Contracts   is responsible     for developing    and maintaining
policies,   standards,   and procedures for an AEC-wide program
for the management of personal property          and supplies.    Con-
tract administration     of SNAP development programs is vested
in AEC8s various operations       offices.    At the time of our
review,   Sandia Corporation,an      AEC operating    contractor,
served as technical     advisor to AEC on SNAP development pro-
grams.

         In carrying   out its responsibility      for development of
 electric    power systems for space use, AEC has developed five
power systems that have been launched and operated in space.
These power systems have generally            met or exceeded mission
requirements.        While these power systems were developed as
a result     of user agency requirements,        AEC has also developed
other power systems for potential           space mission applications
and as demonstration       devices as defined by the user agency.
More than $380 million        has been expended by AEC in develop-
ing SNAP systems for space use.

                                    4
        The power systems developed under AEC"s SNAP program
are of two types:        one (radioisotope        generator)    using the
decay of certain      radioisotopes,       such as plutonium-238,        as a
heat source and the other (reactor              system) using nuclear
fission    reactors   as a heat source.          All SNAP systems launched
to date have utilized          a thermoelectric      power conversion      sys-
tem* The power conversion            system converts     heat into an
electric     current  flow as a result         of the differences     in
temperature      of two different      metals joined together,        called
thermocouples.       Other conversion        systems which will      have
higher conversion       efficiency     are being developed primarily
for use with'SNAP reactors.

      MC began its SNAP program in 1955, about the same time
as official    U.S. scientific     space efforts    were initiated,
to meet the anticipated        power requirements    of large satel-
lites   planned at that time.       Concurrent    development of power
sources using isotopic       and nuclear fission     reactor    heat
sources was initiated.

       The first      successful    power system using a radioisotopic
heat source, polonium-210,           was assembled and tested in Jan-
uary 1959,        This generator,     designated   SNAP-3,1 utilized     a
thermoelectric        power conversion     system and produced 5 watts
of electricity.          SNAP-3A, a modified     SNAP-3, was first
launched on June 29, 1961, to supply supplemental               electric
power for a Department of Defense satellite             and thus be-
came the first        atomic power unit to operate in space,
MC announced in June 1970 that the SNAP-3A was heading into
 its 10th year in orbit,          5 years beyond its 5-year design
life,      Although it is no longer in operational         use, SNAP-3A
 transmits     signals regularly.        Since the launch of SNAP-3A,
a number of generators           have been developed and launched into
 space.

        As noted earlier,     development of SNAP power systems
utilizing     nuclear fission    reactors   as heat sources was also
initiated.      To date only one such SNAP power system,
SNAP-IOA, has operated in space.          It was launched in April
1965, and it operated for 43 days.


1All odd-numbered SNAP power plants use radioisotopic                   fuel.
 Even-numbered SNAP power plants use nuclear fission                  reactors
 as a source of heat.
                                       5
     This report contains our comments concerning the
SNAP-19, SNAP-27, and SNAP-29 programs.     Background informa-                '
tion on each of these SNAP systems follows.

      SNAP-19--The SNAP-19 program was initiated               in 1963
under a cost-plus-fixed-fee         contract     with Martin Marietta
Corporation    to supply auxiliary       power to NASA's Nimbus B
meteorological    satellite,       Responsibility      for the SNAP-19
program was transferred        to Isotopes,      Incorporated,    a Teledyne
company, as a result        of its acquisition       of the Nuclear Divi-
sion of Martin Marietta        Corporation     on August 4, 1968.

         Two SNAP-19's, each supplying about 25 watts of electri-
cal power, were launched on the Nimbus B satellite                 in May
1968.      This   mission  aborted   shortly     after   lift-off  due  to
booster guidance problems unrelated              to the SNAP-19 system.
Two additional        SNAP-19's were successfully          launced on the
Nimbus B-2 spacecraft        on April 14, 1969, and have been pro-
viding supplemental        power continuously        to the Nimbus weather
 satellite     since that time.     Initial     power output from the
two SNAP-19 generators         was 56 watts.        The SNAP-19 was de-
signed to operate for a l-year           period.       Subsequent to its
launch, power decreased to approximately                40 watts by Feb-
ruary 1971,

      SNAP-27--In November 1963 NASA requested ARC to investi-
gate the use of radioisotope      generators     on the lunar surface.
After completing    feasibility   and engineering      studies, AEC
awarded a cost-plus-fixed-fee      contract    for the development
of a generator   for use in the NASA-Apollo program as a power
source for the Apollo Lunar Surface Experiments Package.
This experiments    package consisted     of a series of instru-
ments and subsystems for deployment on the lunar surface
for transmission    of environmental    information     back to earth.

       The SNAP-27 is a plutonium-238-fueled       generator     designed
to provide about 65 watts of electrical         power on the lunar
surface for a period of 1 year.        The plutonium    fuel capsule
is transported      in a separate fuel cask attached to the ex-
terior    of the lltnar module, while the generator       itself   is
stored within     the lunar module.    After the lunar module
has landed on the lunar surface,       the fuel capsule is re-
moved from the fuel cask and inserted        into the SNAP-27
generator    by the astronauts.

                                    6
   . Original    plans called for deployment of the SNAR-27
system on the lunar surface in the initial       lunar landing by
the Apollo 11 astronauts.       Due to concern over the amount
of astronaut   time and energy necessary for deployment of the
experiments   package, however, only very simple experiments
which required    little power were used.     Therefore  the SNAP-27
system was not used until     the Apollo 12 mission.

      The SNAP-27 system was successfully      deployed on the
lunar surface by the Apollo 12 astronauts       in November 1969,
and has transmitted   electric    power at a relatively   constant
level of about 73 watts.       Another SNAP-27 generator   was
deployed on the lunar surface by the Apollo 14 astronauts
on February 5, 1971, and is performing      successfully.

      SNAP-29--The SNAP-29 program was undertaken                  to develop
a short-lived,        multihundred-watt,       radioisotope     thermoelectric
generator     utilizing      polonium-210     as a fuel.     This develop-
ment program was initiated            in July 1966 under a letter          con-
tract with Martin Marietta           Corporation      as a result    of inter-
est expressed in the program by DOD. Responsibility                     for the
SNAP-29 program was transferred             to Isotopes,     Incorporated,
as a result       of its acquisition       of the Nuclear Division         of
Martin Marietta         Corporation     on August 4, 1968.

      Recause of budget reductions,     the SNAP-29 program was
phased out at the end of fiscal     year 1969.   The program was
terminated   after the delivery  of an engineering    model of
the SNAP-29 generator,    along with several thermoelectric
modules which were tested with a conventional      electric  heat
source.
                                  -   -   -   -


       UC's SNAP development programs have required        extending
the state of the technology      to meet the increasing    demands
of user agencies for space electric      power capability.      The
objectives     of AEC in this program are:    (1) to provide the
long-lead-time      technology necessary for user agency de-
signers to select and use nuclear power systems with con-
fidence for future missions and (2) to develop, qualify,
and deliver     nuclear power systems for specific    missions.
It   is anticipated     that   power requirements       in the 100-     to
l,OOO-watt  range, 3s well         as in the lo- to lOO-kilowatt
range, will   be forthcoming        in the 1970's.
      Certain systems have mission requirements           at the time
of development;    other systems are developed to a state of
technology   readiness      in anticipation    of future mission re-
quirements.     Technology readiness        is defined by AEC as that
point in time when major problems of a particular            system
have been generally        defined and solved and a demonstration
of the solution    has been conducted,         According to AEC, tech-
nology readiness     is being pursued so that mission planners
can have a better      indication     of the state of technology     of
a specific   system and thereby be in a better position           to
assess its ability       to meet program goals.       AEC has stated
also that technology        readiness    is necessary to minimize the
need for crash programs and to provide meaningful            cost and
schedule data for flight         system development projections.




                                    8
                                 C'HAPTER2

            CONTRACTADMINISTRATION OF SNAP PROGRAMS

        Although AEC procurement regulations             provide that con-
tracts     be negotiated     in a timely manner, the scope of work,
estimated      costs, and fixed fees for changes to the cost-
plus-fixed-fee       contracts     for the development of the SNAP-19
and SNAP-27 generator          systems,involving      proposed costs of
about $18.7 million,         were negotiated     after completion     of
all,    or a substantial       portion   of, the related      work.

      Also the SNAP-29 generator          development program was con-
ducted under a letter       contract    for 31 months of the 36-month
contract     period,  during which contract       obligations       totaled
about $17.3 million,        AEC  provided    technical     direction      to
the program during this period and established                interim     levels
of effort     and cost ceilings.      Most of the work under this
contract,     however, was performed before a definitized               con-
tract    statement of work, total       estimated    costs, and fixed
fees were negotiated.

       We did not determine that unnecessary costs had been
incurred    as a result    of these after-the-fact      negotiations,
We believe,    however, that after-the-fact        negotiations     of
contracts    can result    in increased costs, because the con-
tractors    have potential    advantages in the negotiations          and
have less incentive      to keep costs to a minimum,

       Under a cost-plus-fixed-fee          contract,    the contractor
receives a fixed fee and is reimbursed               for allowable      costs,
Under normal circumstances         the negotiations        of a contract--
scope of work, estimated        costs, and fixed fee--precede             the
undertaking    of the contrast      work.     The fee is not adjusted
for variations    from estimated        costs of performing        the work
but may be adjusted for increases            or decreases in the scope
of work.     Since the contract       fee is fixed,      in part,     in re-
lation   to the original     estimated      costs and is not increased
as a result    of cost overruns9 the contractor             has no incentive
to incur unnecessary costs in order to increase its fee.

     A delay in the negotiation  of a contract's    scope of
work, estimated costs, snd fixed fee until     all or most of
the work has been accomplished,  however, can result     in the
                                       9
fee's being based largely     on actual costs, rather than on.
estimated     costs7 and can have the undesirable        effect    of
cost-plus-percentage-of-cost      contracting,      which can provide
contractors     with positive incentives      to inflate    contract
costs in order to increase their       profit.

      Such after-the-fact        negotiation     of a contract   also al-
lows for the possibility         of performing     work which might not
have been authorized       if the negotiations       had preceded com-
mencement of work.        Failure   to negotiate     statements   of work
prior to the initiation        of work9 or at least prior to the
completion    of a significant      amount of the workp also could
have an adverse effect        on the technical      direction   of the
program, because the contractor            is not bound to a statement
of work until     it has been negotiated.          As noted above, how-
ever, AEC provided technical          direction    of the work and estab-
lished levels of effort        and cost ceilings,

       Delays in definitizing     contracts    also can affect       the
manner in which the contractor        administers    the work per-
formed under the contract.        Late negotiation      of definitized
contracts    makes it more difficult      for the contractor       to em-
ploy good management practices,        such as long-range      planning
and budgeting of manpower and capital          equipment require-
ments.

       We were advised by AEC that it believed that its ap-
proach involving    close technical   direction  of the SNAP con-
tractors   minimized the opportunity     for unnecessary contract
work and for increased contract      costs.

        AEC's Division     of Contracts      is responsible      for develop-
ing and maintaining        policies,    standards,      and procedures for
an AEC-wide program for the management of personal property
and supplies.        The responsibility        for the contract      adminis-
tration    of SNAP programs is delegated to certain                of the AEC
operations     offices,     AEC's New York Operations          Office had
initial    contract     administration     responsibility      for the
SNAP-19 and SNAP-27 programs.            The responsibilities         for
these programs were transferred            to the Albuquerque Opera-
tions Office on April 29, 1966, and May 13, 1966, respec-
tively,     Contract     administration      for the SNAP-29 program
was the responsibility         of the Albuquerque Office from the
effective    date of the contract--July           1, 1966.

                                     10
CONTRACTCHANGE PROPOSALSAND
STATEMENTSOF WORKNEGOTIATED
                      - .-~-   AFTER
COMPLETION OF ALL OR MOST  OF THE WORK
                      -VP-.--
        Our review of certain      aspects of the contract     adminis-
tration    of the SNAP-19 and SNAP-27 contracts         showed that,
for many contract      change proposals,      the statements   of work,
the estimated     costs,  and   the  fixed  fees  had  been  negotiated
after all,     or a substantial     portion   of, the work had been
completed,

      The number of contract   changes increasing the scope of
the work under the SNAP-19 and SNAP-27 contracts     that were
negotiated   by the Albuquerque Office and the extent to which
the fees for the changes were based on actual costs are
shown below.
                                                SNAP-19
                                              (note a)          --SNAP-27
Number of contract    changes negoti-
  ated                                            33               41
Fee base for contract    changes
  (note b)                                  $2,665,387     $16,048,774
Actual costs included in fee base           $2,360,101     $12,924,496
Percent of actual costs included
  in fee base                                   88.6                81

aSNAP-     statistics   are those relating      to contract      change
 proposals    submitted  by Martin Marietta      Corporation,      the
 original    SNAP-19 contractor.

b
 The fee base is the allowable          contract costs that were
 used as a basis for negotiation          of the contract  fee.

       For 24 of the 41 contract    changes which increased      the
scope of work under the SNAP-27 contract,       the contractor's
fees were negotiated     after more than 80 percent of estimated
costs had been incurred.       The average fee rate on these 24
contract   changes was 6.21 percent,     the same average rate as
that negotiated    on the 13 contract    changes for which the
fees were negotiated     prior  to commencement of the work.


                                   li
All   fees negotiated     were within     ARC's established      fee po'l-
icy   limitations.

       Undefinitive     contract     changes were used to initiate
work, increase fund obligations,            and extend the time for
negotiation      of definitive    contract     changes under both the
SNAP-27 and SNAP-19 contracts.             For example, contract
change 4 to the SNAP-27 contract,            effective  April 21, 1966,
authorized     the performance       of work on a "thermoelectric       leg
product specification."          This change authorized      funds of
$200,000 for the work and stated that a definitive               contract
change would be negotiated          and executed within     60 days from
the date the contracting         officer    signed the change (June 22,
1966) e

      Revision    1 to change 4, dated August 22, 1966, autho-
rized an additional      $200,000 for this work,      Revisions    1
through 9 to change 4 extended the time for negotiation              of
a definitive     change to a total     of 750 days, and contract
change 17 increased      the total   funds authorized   to $430,000.
The definitive     change, including     a statement  of work, esti-
mated cost9 and fixed fee, was not negotiated          until   June
1968, after    the work had been completed at a cost of
$545,660.

        The contractor    was reimbursed        for the full     costs of
$545,660 incurred       in completing        the work authorized      under
contract    change 17. Because the contractor              had failed    to
comply with the contract           provision    requiring    that the con-
tracting    officer    be notified      when 90 percent of the obli-
gated funds had been committed or expended, however, the
fee was based on the $430,000 authorized                by the contract
change.     The negotiated       fee of $27,000, which was considered
by the contract      negotiation       panel to be consistent       with the
fee rate of 6,26 percent for other efforts                under the con-
tract,    was equivalent     to an effective        rate of 4.95 percent
on actual costs incurred.

      In another instance,   contract   change 5, effective
June 1, 1966, authorized   funds of $423,000 for phases III
and IV of the SNAP-27 program.       A memorandum dated Decem-
ber 5, 1967, by the c:lairman of the contract     negotiation
panel for phases III and IV work stated that funds autho-
rized for phases III and IV had been increased by contract


                                     12
changes 5, 9, 13, 14, 16, 17, 18, and 19 to a total        of
$11,107,811.      Contract  change 5 provided 120 days, begin-
ning September 9, 1966, for the negotiation      and execution
of a definitive     change to the contract,   The seven subse-
quent changes extended the time for execution        of a defini-
tive modification      to March 1968, a total of 600 days,      Ac-
tual costs constituted      86 percent of the negotiated   cost of
the contract    changes on which the fee of 6.26 percent had
been computed.

      Our review of the SNAP-19 and SNAP-27 contracts       showed
that in no instance had the statement of work been negoti-
ated before the contractor    was authorized    to commence work.
For the 33 change orders to the SNAP-19 contract,       the aver-
age time between the authorization     to commence work and the
negotiation   of the statement of work was 433 days; the ac-
tual time ranged from 40 to 847 days.        Similarly, for 40
change orders to the SNAP-27 contract,       the time averaged
197 days and ranged from 14 to 579 days.

       The Albuquerque Office     informed us that improvements
had been made in administrative        practices   for negotiating
contracts.     Our analysis  of SNAP-19 and SNAP-27 contract
changes for work initiated      in fiscal     years 1966 through 1969
indicated   that the amount of actual costs used in negotia-
tions had been reduced along with the number and funding
level of contract     change proposals,      as shown below.

                                                           Percent
               Number                                          of
                 of     Negotiated          Actual costs    actual
             contract      costs            included in     costs
    -Year   -than.      (fee
                         -     base)           fee base    included

    1966        39      $14,314,719         $12,150,356      84.9
    1967        15        2,548,780           2,180,544      85.6
    1968        12        1,811,684              973,949     53.7
    1969         6           237,339              87,497     36.7

LACK OF EFFECTIVE CONTRACTING PRACTICES
ON SNAP-29
__- ---.   CONTRACT
              .___
     The SNAP-29 generator      development program was conducted
under a letter contract    initially    to be effective for

                                       13
90 days, but it continued          in effect   for 31 months of     the'
36-month contract     period.       Most of the work under the        con-     '
tract was completed before the level of effort,             total     esti-
mated costs,    and fixed     fees   were   negotiated and made     a part
of the contract.

        We believe that the delays in definitizing              the SNAP-29
contract    made effective    administrative         control   over contrac-
tor operations      and technical     direction      of the program more
difficult,      AEC informed us that insufficient            and incorrect
information      supplied by the contractor          had resulted    in de-
lays in negotiating       a definitized       contract    and contract
change proposals.

       The contract   administration      of the SNAP-29 contract        is
highlighted    below.

      --AEC, on May 10, 1966, authorized           the Albuquerque Of-
         fice to negotiate a contract  for         SNAP-29 generator
         development.

      --A letter      contract   was approved by AEC Headquarters
         on August 18, 1966, and backdated to July 1, 1966.
         It authorized       $2.2 million    for the go-day letter-
         contract     period.    The letter      contract stated that a
         definitive     contract   calling     for the contractor's     best
         efforts    to produce a flight-qualified         generator    at
         the end of a 39-month period at a total             estimated
         cost of $20.6 million         would be negotiated     within
         90 days.

      --The letter  contract   was subsequently   modified 30
         times to authorize   additional  funds and/or to in-
         crease the time for negotiation     and execution of a
         definitive contract.

     --Funds authorized   under the letter contract were in-
        creased from $2,200,000 to $17,255,000 during the
        period July 1, 1966, through January 31, 1969.

     --Negotiation   of the level of effort,   estimated costs,
        and fixed fee for the contract   period July 1, 1966,
        through October 31, 1967, was completed on October 6,
        1967.

                                    14
      --Isotopes,      Incorporated,  purchased the Nuclear Divi-
          sion of Martin Marietta     Corporation  and assumed re-
          sponsibility     for the SNAP-29 program on August 4,
          1968  l




      --Negotiation   of the level of effort,   estimated costs,
         and fixed fee for the contract   period November 1,
         1967, through January 31, 1969, was completed on Jan-
         uary 16, 1969.

      --Negotiation   of the scope of work, estimated  costs,
         and fixed fee for the remaining   5 months, February              1
         through June 30, 1969, was completed on March 28,
         1969.

        According   to AEC, the major problem in the negotiation
of a definitized      contract  with Martin YBrietta    Corporation,
the original      SNAP-29 contractor,  was reaching agreement on
the contractor's      proposed formula for allowability      of inde-
pendent research and development costs and related           patent
rights.      Before this matter could be resolved,      technical
problems developed necessitating       revisions   to the proposed
scope of work.

        AEC advised us that problems had also been caused by
(1) disagreement      between AEC and Martin Marietta    Corporation
on how the level of effort        was to be expressed and (2) dif-
ficulty    in obtaining    meaningful   and accurate data from both
contractors.

         Delays in definitizing       contracts     can affect    the contrac-
tors'     administration     of the program.        We were advised by
Isotopes,      Incorporated,    which assumed contract         responsibil-
ities     for the SNAP-13 and SNAP-29 programs on August 4,
1968, that the lack of definitized              contracts   made it more
difficult      for the contractor      to employ good management prac-
tices,      such as long-range     planning and budgeting         of manpower
and capital       equipment requirements.

        AEC   stated that the original       SNAP-29 contractor    had com-
plicated      negotiations  by changing      its organization    and in-
stituting      a new accounting   system     in mid-1967.     Thesechanges
required      a complete reanalysis    of    costing  under the new ac-
counting      system and necessitated       a review of cost allocations

                                      15
made to reflect     the organizational   change. A review         of the     .
contractor's    accounting   system also was necessary.

CONCLUSIONS

        We believe that AEC should have placed greater emphasis
on the timely negotiation      of definitized      SNAP-19, SNAP-27,
and SNAP-29 contracts,      to preclude the potential         advantages
to the contractors     that can result     from after-the-fact       nego-
tiations    and to provide for generally       improved overall      pro-
gram administration.

       We therefore   suggested to AEC that its Division     of Con-
tracts    emphasize to AEC contracting    officers   the importance
of complying with AEC's regulations       which provide for timely
negotiations     of definitized contracts    and for taking action
to minimize delays in such negotiations.

        AEC agreed with our suggestion         and took steps to imple-
ment it, including        the issuance of letters       emphasizing the
need for timely negotiation          of contracts     to the various AEC
operations      offices   which have contract       administration   re-
sponsibilities.         These operations    offices    have been requested
to report annually on the timeliness             of negotiation    of con-
tracts.




                                    16
                             CKAPTER 3

          IYANAGmW OF SNAP-27 AND SNAP-29 PROGRAMS

SNAP-27

       Our review of AEC's program for the development of the
SNAP-27 generator     as a power source for NASA's Apollo Lunar
Surface Experiments Package showed that generally           there was
close coordination      between AEC and NASA on interface       design
problems.     We believe,    however, that closer coordination
during the early phase of the program could have precluded
a delay of several months in determining          that the fuel cask
mounting structure      on the lunar module that was being de-
veloped by NASA would not permit the necessary free body re-
entry of the fuel cask into the earthjs          atomosphere in case
of an abort of a mission.        When a satisfactory     mounting
scheme could not be developed, a crash program was initiated
to develop a fuel cask having reentry         capability   under all
circumstances.     The fuel cask houses the SNAP-27 fuel
 (plutonium-238   microspheres).

       The original  design of the fuel cask was based on its
reentry as a free body in the event of mission abort; that
is, it would detach from the lunar module and return to the
earth's   surface separately.    AEC informed us that,     in the
early stages of the program, it was believed that such free
body reentry might occur naturally      as a result   of the lunar
modulegs burning up early in reentry       and thus rendering    the
cask a '"free body."

       The first      SNAP-27 design called for integrated     shipment
of the generator        system to the lunar surface.     To provide
additional     safety,    however, it was decided in November 1965
to transport       the SNAP-27 fuel. separately  in a fuel capsule
enclosed in a fuel cask attached to the exterior           of the lu-
nar module.        Because of this design change, the astronauts
must insert      the fuel capsule into the SNAP-27 generator        when
it is deployed on the lunar surface.

       The safety criteria   established    for the SNAP-27 sys-
tem required    the intact reentry    of the fuel cask into the
earth's   atomosphere in case of a mission abort.      These

                                  17
,
    safety- criteria, which were directly  applicable to the de-                    .
    velopment of the fuel cask since it contained the plutonium-
    238 fuel, were established  to prevent any undue radiation
    hazards to the populace.

          To meet these safety criteria,          the SNAP-27 contractor
    designed a fuel cask having at one end a reentry heat shield
    capable of withstanding      environments       resulting     from earth
    orbit  aborts.   This design required         orientation       of the fuel
    cask in a preferred    direction       so that the heat shield would
    prevent release of the fuel from the fuel capsule.                   The
    cask was designed so that this required             orientation      could be
    achieved when in a free body environment;               that is, not at-
    tached to or hindered by any other hardware,                such as the
    lunar module.

            According to the SNAP-27 contractor,     the free body ob-
    jective    might be accomplished  by (1) passive release of the
    fuel cask from the lunar module as a result         of lunar module
    breakup during reentry     or (2) forced separaticn      by use of an
    eject mechanism.     AEC informed us that,   initially,     design
    work on the SNAP-27 fuel cask had been based on the passive
    release concept.

          An interface     control   document prepared by MC's SNAP-27
    contractor    on March 23, 1966, and sent to NASA stated that
    NASA was to be responsible        for development of the systerrm for
    mounting the fuel cask on the lunar module.            AJX believed
    that in the event of an abort this system would permit re-
    lease of the cask as a free body near the start of reentry
    into the earth's     atmosphere.     In August 1966, however, AK
    1ea::ned that   the method of attachment      being devised would
    not permit separation       of the fuel cask from the lunar module
    to which it was attached.         The NASA co;ltractor   stated that
    it had utilized    titanium    bands to ensure that the cask would
    not leave the lunar module under any circumstances.

           On August 15, 1966, NASA, in an effort     to resolve the
    reentry problem, initiated      design studies to determine the
    practicality    of developing   an active release mechanism which
    would allow the cask to be separated from the lunar module
    early in an abort and fall as a free body.        In October 1966,
    the AEC contractor    was directed    to initiate backup design
    work on a release mechanism.

                                         18
       The contractor  and Sandia Laboratory conducted Z-week
feasibility    studies on a new fuel cask concept, because NASA
informed AEC in December 1966 that a Z-month delay in the
Apollo program would occur if a fuel cask ejection     system
had to be installed    on the lunar module.  NASA considered
such a delay to be very serious.

      On January 5, 1967, during a meeting at AEC Headquar-
ters, AEC, after    consultations     with NASA, decided to de-
velop a new fuel cask.        This fuel   cask was designed as an
omnidirectional    body not requiring       separation    from the lunar
module or orientation     during reentry.        Its   development was
undertaken on a crash-program        basis.

       The January 1967 decision      to change the fuel cask de-
sign resulted    in an increase in weight from 7.5 pounds to
approximately    25.5 pounds.     As a result     of this change, ac-
cording to NASA records,      certain   modifications      were neces-
sary to the Apollo Lunar Surface Experiments             Package and
the lunar module.      These modifications      resulted    in addi-
tional   costs estimated   at about $1 million        for the experi-
ments package and about $385,000 for the lunar module.

       In our opinion,  closer coordination  between AEC and
NASA during the early phase of the program could have pre-
cluded the delay in determining     that the fuel cask mounting
structure   on the lunar module that was being developed by
NASA would not permit the necessary free body reentry      of the
fuel cask in case of an abort and might have precluded the
need for the crash program to develop a satisfactory     fuel
cask for the SNAP-27 generator     system.

       We believe that, with the exception    of the fuel cask
problem, adequate coordination     existed between AEC and NASA.
This matter is being reported    on, however, to emphasize to
AEC and its contractors    the continued need for close coor-
dination   between AEC and user agencies in carrying     out de-
velopment programs,    such as S>JAP-27.

SNAP-29

      AEC's SNAP-29 development program was conducted under
its technology-readiness   philosophy--a    philosophy  also fol-
lowed by NASA in its programs.      Under this philosophy,

                                    19
technology which has a high probability        of being needed in           .
the future is developed to the point at which mission plan-
ners have a basis for confidence      that it will work, for es-
timating  the costs, and for scheduling      it for flight   system
development.   The technology-readiness      approach is geared to
making the technology   available    when it is needed and to
avoiding excessively   costly and otherwise      ineffective  crash
programs to meet a need on a short schedule,

       In the SNAP-29 program, technical       problems arose early
in the program that made it likely      that AK could not meet
the established   time schedules and cost estimates          for de-
,veloping a generator    to demonstrate   flight    technology.     At
the time the problems arose, about $5 million           of the esti-
mated $20 million    cost of the program had been incurred.

      According to AEC's Division        of Space Nuclear Systems,
DOD, the system's potential       user, had been fully      informed of
program status through periodic        progress reports,      formal
meetings,   and personal contacts.        During these meetings and
contacts,   reconfirmation     of DOD's interest    in the SNAP-29
system was obtained.        The AEC Divjsion,    however, did not
maintain  a record showing various factors         considered and the
bases for decisions      reached.

       We did not identify      any adverse effects    to the program
resulting    from the lack of records.       We believe,    however,
that, consistent      with good management practices,       AK's Divi-
sion of Space -Nuclear Systems should have maintained           rec-
ords showing the factors        considered  in reaching decisions     in-
volving   substantial     Government expenditures    and the bases
for such decisions.

Jnitiation   of SNAP-29
                    -.. program
       On Flarch 31, 1966, the AEC General Manager transmitted
to DOD the results     of feasibility     studies for integration      of
a generator    system having SNAP-29 capabilities         into certain
DOD missions.      This correspondence     indicated   that such a
radioisotope    generator   would be feasible      and could be devel-
oped in 30 to 36 months at a cost of about $20 million.
Also AFX stated that its proposed development program would
include the delivery      of flight   systems to demonstrate      the
degree of reliability      required.

                                   ‘0
       On April 1, 1966, the AEC Chairman sent a similar      let-
ter to the Director,     Defense Research and Engineering,   DOD.
The Director's   reply,   dated Play 21, 1966, expressed interest
in radiosiotope    generators   in three categories,  one of which
related   to the SPTAP-29proposed capability.

       The Director   stated that spacecraft     which were ex-
pected to fly in the 1972 -73 time period would require          power
supply commitments in the 1968-69 period and that a deci-
sion to use the SNAP-29 would be based heavily          on AEC's in-
terim work on isotope system safety,        cost, and weight char-
acteristics.      The Director   noted that certain    potential  de-
velopment problems identified        by AEC would have to be re-
solved and indicated      that resolution   of these problems was
primary and that meeting the 30- to 36-month development
schedule was secondary.        He stressed,  however, that the de-
velopment effort     probably was essential     for future genera-
tor development.

       On June 17, 1966, AEC decided to award a go-day letter
contract   for development of the SNAP-29 generator         to allow
additional    time to more definitively      establish   the entire
program and to provide further        opportunity    for DOD to state
a firm requirement    for the SNAP-29 end product.

       In a letter   dated June 30, 1966, DOD advised AEC that
a review of the SNAP-29 contractor's        proposal had been com-
pleted and that conclusions      had been reached.     The letter
emphasized "key program goals which must be met to enhance
the probability    that SNAP-29 can be used."       A statement of
goals and their    effect  on the probability     of mission appli-
cations was expressed.      These goals included:

      "a.   Reliability remains a factor   of utmost im-
            portance and must be demonstrated    by ade-
            quate ground and flight  test *-/c*.

      "b.   Compatibility    of the SNAP-29 with space sys-
            tem requirements    must be insured in several
            areas. Jc** We would expect a flight    test to
            demonstrate   that such considerations    have
            been met prior    to actual application   to a
            space system."
             *              *          *          *            *


       "e.   Although the most immediately       apparent appli-
             cations are estimated    to reach flight     status
             in the 1968-1970 time period,       I believe that
             the concerns expressed by [the Director         of
             Defense Research and Engineering,       DOD, in
             his May 21, 1966, letter]    relative     to the
             30-36 month development schedule should be
             considered  in your program planning."

      DOD recommended that the development of the SNAP-29
proceed on a schedule compatible with ensuring that the
goals would be met and concluded by stating,    "We will not
commit a unit to a specific  mission until   the development is
well along and probably not before flight    demonstration."
According to AEC, in view of paragraph e above and subse-
quent communications  with DOD, achievement of technical
goals was primary and schedule was secondary.

        AEC's Albuquerque Operations      Office awarded a 90-
day letter     contract  to Martin Marietta      Corporation   on Au-
gust 18, 1966, backdated to July 1, 1966.            The report of ne-
gotiations     for this letter   contract    stated that a definitive
contract    would be negotiated    requiring     the delivery   of
flight    units by September 1969, the end of the 39th month.
This delivery      date was later revised to December 31, 1969.

Technical        problems   in SNAP-29
                                    II- development
       Late in calendar year 1966, technological             developments
 showed that the material        selected for use for the fuel block
was not adequate to meet the intact            reentry   safety criteria.
According to the AEC technical           advisor,   the Sandia Project
Director,    the fuel block problem resulted           in additional    pro-
gram costs and delays in program schedules.               The SNAP-29
contractor     estimated   that a fuel block material         change would
result    in a cost increase of $5 million          and an extension      of
the completion      date by about 8 months, which would have de-
layed the delivery       of flight    units to early in fiscal       year
1971.
        Because of the fuel block problem, the SNAP-29 devel-
' opment had to be reoriented      to provide a concentrated     ef-
  fort on the critical   materials    matter.    Resumption of most
  of the development work was deferred        pending resolution     of
  the problem since the program schedule was not critical            to
  DOD.

          In January 1967 AEC modified     its program objectives     to
  accommodate this increased fuel block development effort.
  The contractor     was informed that hardware effort      would be
  limited    to that necessary to demonstrate      SNAP-29 system
  technology    in 1969, that flight    hardware would not be re-
  quired,    and that fixed hardware schedules had been elimi-
  nated.     At that time about $5 million     of the total   estimated
  program costs of $22 million       had been expended.

         We were advised by AEC that the January 1967 program
  objective   revision     had been a temporary decision      so that em-
  phasis could be placed on solving the fuel block material
  problems.    According to AX, this revision        meant that the
  delivery   of flight-tested     hardware would probably not be
  possible within      the time constraints    of the initial    develop-
  ment schedule.

          AEC records show that in June 1968 other problems were
  experienced     in developing    a satisfactory    fuel block materials
  which required     consideration    of a fuel dispersal      safety cri-
  teria    in July 1968.    A task force was formed in September
  1968 at the direction       of the Director,    Division    of Space Nu-
  clear Systems, to expedite the study of the fuel dispersal
  approach.      By November 1968 essentially      all work on the fuel
  block had been suspended pending resolution            of the safety
  criteria    to be used.

        The Director  of AEC's Division  of Space Nuclear Sys-
  tems advised us in December 1970 that from the time of his
  appointment   in March 1967 through late 1968,

        I'*** On several occasions,     I personally    met with
        *-k-k a member of the principal    staff   of the Direc-
        tor, Defense Research and Engineering,         DOD. Even
        though we had letters    from the high management
        levels of DOD *** stating     a definite     desire for
        the development of the SNAP-29 technology,          the

                                     '3
       express purpose of those meetings was to advise
       DDR&E of SNAP-29 program status and to obtain re-
       confirmation        of the continuing    potential  need for
       the SNAP-29 technology.           In each of those meetings,
       with the exception          of the last,  J;** [the DUD offi-
       cial]    reiterated      the need for the SNAF-29 and
       strongly      urged us to continue with the work."

        Records showing the various factors  considered and the
 bases for decisions   reached were not maintained    by the AJX
 Division.

 Termination    of SNAP-29 development

       In November 1968 DOD advised AEC that a specific      sys-
 tem requirement   of the type for which a SNAP-29 generator
 could be utilized   had failed  to evolve as previously   antici-
 pated; however, DOD continued to foresee potential      applica-
 tions for a generator   of the SNAP-29 type which could com-
 pete with other power sources.

        Fiscal year 1970 budgetary reductions       necessitated  the
termination    of the SNAP-29 program at the end of fiscal       year
1969. To effect      the orderly   closeout of the program, the
contractor,    at AEC's request,    fabricated   an electrically
heated engineering      model of the SNAP-29 system which was
delivered    to AEC in June 1969.      The total  cost of the SNAP-
29 program was about $20 million.

 .CONCLUSIONS
  ..-
        We believe that,      in view of the magnitude of the esti-
 mated development work remaining to be performed at the
 time the technical       problas    with the SNAP-29 were encoun-
 tered, the likely      adverse effect     on .meeting program time
 schedules and cost estimates         and the technology-readiness
 philosophy     under which AK was proceeding without          a spe-
 cific   requirement    from the potential     user, ARC's Division
 of Space Nuclear Systems should have maintained            records
 showing the factors       considered    in reaching decisions     in-
 volving    substantial    Government expenditures     and the bases
 for such decisions.



                                   24
      We therefore  suggested to AEC that its Division   of
Space Nuclear System's records include documentation     of dis-
cussions with potential    users regarding  development pro-
grams, the factors   considered  in reaching decisions,  and
the bases for actions taken.     ffiC agreed with our sugges-
tion and took action to implement it.
                             CHAPTER 4

                          SCOPE OF REVIEW

        Our review was performed at AEC Headquarters         in German-
town, Maryland;      at its Albuquerque Operations     Office,   Albu-
querque, New Mexico; at its contractor-operated           Sandia Lab-
oratories,     Albuquerque,  New Mexico; at its Canoga Park Area
Office,    Canoga Park, California;    and at NASA's Manned Space-
craft Center, Houston, Texas.        We visited  various AEC con-
tractors    during the review.

      Our review was directed   primarily  toward examining into
the contracts   for the development of the SNAP-19, SNAP-27,
and SNAP-29 generator   programs and the management of the
SNAP-27 and SNAP-29 programs.      We also conducted a limited
review of AEC's zirconium hydride reactor      development pro-
gram.

     We also reviewed AEC's policies,       procedures,   and avail-
able records and obtained the views       of 'knowledgeable ARC,
NASA, and contractor  personnel.
APPENDIXES
-.




  27
                                                                                                                     APPENDIX I

                               COMMENTS OF THE SNAP-27                             CONTRACTOR

                                                   [See       GAO note,          p.      32.1

                             DEVELOPPlENT OF THE SNAP-27                                 FUEL CASK

        The design       and development                of the fuel         cask is the key element                        in the

discussion          of the SNAP-27 program                    in the draft         report.             Our records          disclose

facts     not reflected             in the GAO report,              and we will               attempt      to clarify            certain

aspects      and expand upon the report                        in the following                paragraphs.

        The cask in which                the SNAP-27 fuel           capsule        is     transported             to the moon

represented,           for   its        time,     a unique      development.             It was required               to furnish

reentry      protection            to    a high      temperature         body which            could      approach         the

earth's      atmosphere            in a random fashion              with     no active              orientation        systems.

        It was determined                early     in the program           that       this        objective       might     be

accomplished           in either          of two ways:           1) passive            release         of the cask from

the LEM as a result                 of its        breakup      during      reentry,           or    2) forced        separation

by use of an eject                 mechanism.

        In order       to determine              the acceptability           of depending               on the Lunar Module

breakup,       it    was necessary               to conduct      a complicated                analytical          program.         This

analysis       demonstrated              that     the Lunar Module breakup                     could      not be depended

upon to occur           quickly          enough to generate              free      body reentry             at a sufficiently

early      stage      in case of an abort,                   to give     assurance            of the necessary              high

degree      of nuclear           safety         confidence.        Accordingly,               an active        ejection          mechanism

was adopted           as the design              concept      to assure         free     body reentry,             and active

ejection       was determined               by AEC and NASA to be feasible.                             Under that          approach,

an ejection           mechanism with              appropriate          performance            characteristics              would

separate       the cask from the LEM.                        The significance             of this          feature      is that            the

cask was designed                to orient          itself     when it      encountered               the atmosphere             as a

free      body,      so that       reentry        protection       materials            were needed only              on those

surfaces       exposed to heating.                     This    approach         not only           would have yielded                  a

light-weight           cask,       but also         took maximum advantage                    of configurations                  and

materials           thoroughly          characterized           in previous            NASA and DOD programs.
            Without      provisions       for     ejection,       the cask could remain           attached        to the

    Lunar Module and would have no way of reentry                               in a preferred       direction.

    Accordingly,          omni-directional            reentry       shielding     was reqlired,       and ^,his created

    a problem         involving       a greater       extension       of the state-of-the-art.               For these

    reasons,         the free      body approach        was incorporated            into   the design     specifica-

    tions      for    the cask.

i




                                            [See GAO note,               p@ 32.1




            After     completion      of the design           of the free        body cask,     the evolution

    of the Apollo         program plans           indicated       a serious       design     and schedule      problem

    in incorporating              the ejection       system,      especially       the required      sensory       equip-

    ment,     and ***      [the     contractor]       has instructed            to proceed    with   the design

    of an omni-directional               reentry      capability.




                                           [See GAO note,                p. 32.5




                                                                30
                                                                                      APPENDIX I




                              [See GAO note,           p. 32.1




                      DELAYED NEGOTIATIONS - CCN PROPOSALS


    This     is a widespread      and difficult        problem,   particularly       on programs

which    contain   research    such as the SNAP-27.           We agree     that    every    effort

should     be made by contractor       and procurement        agency alike        to conduct

prompt and reasonable         negotiation     of revised      and additional        costs    gen-

erated     under contract     change notices.




                              [See GAQ note,           32.1




                                                  31
APPENDIX I



      The report    mentions        that     a fixed   fee of 6.2% was negotiated

 consistently.       We negotiated           a total   of $1,497,000     in fixed       fees.

 This equates      to a fee percentage            of 5.32% on total      program       costs     of

 $28,160,000.

      The profit     realized      by the contractor        will    be significantly            reduced

 during   post-contract         audit      because of certain      disallowances        required

 in the AEC regulations           (e.g.,      unallowable   bid and proposal           expenses,      et al).

 GAO note:         Material    deleted from the letter   was concerned with
                   information     included in the report draft which is not
                   included in the final report.       At the contractor's
                   request, its name has been deleted from the report
                   and the above comments.




                                                       32
                                                                                                    APPENDIXII


ROB<RT   KLEINER                                                                             ISOTOPES
  wee President                                                                              WESTWOOD                 LABORATC)RlEF
                                                                                             ,I’ I .Y R, RI,            \’       \I     I
                                                                                             ,\,,!.‘.‘li!l~           \!I             I*,,   ‘,
                                                                                             .    !,I,l       : -8,          I               ,I   ,;




                                                                                 September         29, 1970



          Mr. Daniel F. Stanton
          Assistant   Director
          United States General Accounting             Office
          Washington,    D. C. 20548

          Dear Mr. Stanton:

          Reference    is made to your letter         addressed    to Dr. J. Laurence Kulp, President
          of Isotopes,      Incorporated,     dated August 21, 1970.        As you may recall    Mr. Peter
          Vogelberger,      Vice President     in charge of our Nuclear Systems Division          in
          Timonium, .and I visited        with you and your staff        on Thursday, September 17,
          1970, to review the matters          contained     in your report   as they pertained     to
          Isotopes,    Incorporated.       We were extremely      pleased at the courteous      and
          attentive    treatment      we were given in your office.

          You asked us to forward   our comments to you in writing.    This letter                                          briefly
          outlines   the position of Isotopes,  Incorporated with respect   to your                                         proposed
          report   to Congress.

          At the outset,       it is our corporate         position    that these comments be incorporated
           into your report       as an attachment       thereto     and that various    factual matters
          which will be specifically          referred      to herein be inserted      into the body of
           the report.      We also hope that you          will take these comments into account in
          your final     revisions    to the report.          We have no objections      to your making
          reference    to our corporate       name in      connection     with these comments.

          Turning    first     to the specific      revisions       to be made to the body of the report,
        , we indicated       to you that your report           should make a clear distinction              between
          the tenure of Martin Marietta             Corporation        with respect     to its responsibility
          for the SNAP-29 and SNAP-19 programs and Isotopes,                      IncorporatedPs        subsequent
          management of these programs.               As you know, Isotopes,           Incorporated       ( a wholly
          owned subsidiary         of Teledyne,     Inc.)     acquired     the Nuclear Division         of Martin
          Marietta     Corporation     on August 4, 1968 and the responsibility                    for the SNAP-29
          Contract     was transferred       to Isotopes,        Incorporated     by a novation        agreement,
          Contract     AT-(29-2)-2660       executed     on 31 August 1968.          flence, your analysis
          of the contractors'         performances       vis-a-vis
                                                         ---            the period during which Martin
          Marietta     Corporation     was the contractor           and Isotopes,      Incorporated       was the
          contractor       should be clearly       delineated.

          Referring   to the second paragraph       on page 10 which relates to SNAP-29,
                                                                                -~       you
          should insert    in the fourth    sentence between "1966" and "because"   the words
          "with Martin Marietta    Corporation".


                                                                33
    Mr.   Daniel     F. Stanton                                                         Septemuer      29,    1970


    i!n page 30, you have printed    a table with respect         to SNAP-19.
                                                                       --       You agreed
    to revise   this table to show the relative       portions      allocable to Martin
    Marietta  Corporation  and Isotopes,    Incorporated       with respect   to SNAP-19.
                                                                                 --
    On page 34, paragraph           3, ~011 should add the following:                 "..,and      covered
    contractually        by Contract    AT-(29-2)-2062          executed in July 1968 by Martin
    Marietta      Corporation     and the AEC."          Also on page 34, there should be a
    sentence between the third            and fourth        paragraphs     which reads substantially
    as follows:        "The original      contractor,        Martin Marietta        Corporation,          sold
    its Nuclear Division          to Tsotopes,       Incorporated        (a wholly owned subsidiary
    of Teledyne,       Inc.)    on August 4, 1968 and this Contract                 was novated to
    Isotopes,      Incorporated      by Contract       ,4T-(29-2)-2660      dated 31 August 1968-I'
    Page 34, paragraph          5, you should add the following:                "...and       definitized
    by Modification         2 to Contract     ,4T-(29-2)-2062        executed     in <June 1969,"
    Further     on page 34, in the paragraph              which reads, "According             to AEC....",
    between the words !'definitized             contract"       and "was reaching"          you should
    insert    the words "with Martin Marietta                Corporation".

     We are seriously          concerned      with the implications            and inferences          which
     will be drawn from the Albuquerque                  self-justification            for the delays in
     negotiation       on page 34 which reads as follows:                     We were informed            by
     Albuquerque       that delays in negotiation               -dere caused by (1) disagreement
     between 4EC and the contractor                 on how the level of effort               was to be ex-
     pressed and (2) difficulty               in obtaining        meaningful      and accurate         data from
     the contractor."           Point one ostensibly            involves     Martin Marietta           Corporation
    but that is not made clear in the context                        of the paragraph.             Point two
    presumably       involves     both Martin ?larietta            Corporation       and Isotopes,         Incorporated.
    The facts are these:             On December 27, 1968, Albuquerque                    finally      was able
     to define the desired SN.llP-23 statement                    of work for the period November 1,
    1967 to *January 31, 1969 and requested                     a cost proposal         which was expeditiously
     submitted     by Isotopes,        Incorporated's         letter      numher 3110-201A on December 27,
    1968.      Negotiations       were conducted         during the period January 6, 1969 to
    tJanuary It,, 1969 at Albllquerque,               and Modification          No. 1 to Contract              AT(29-2)-
    2062 covering         the period November 1, 1969 to January 31, 1968 was executed
     in early February 1969.              Modification       No. 1 to A'T(23-2)-2062              required      that
    a further      Modification       be negotiated        by February 28, 1969 to cover the
    balance of SNAP-29 work through June 30, 1969.                           Again Tsotopes,           Tncorporated
    responded      immediately.         The detailed       sequence of requests,               responses and
    negotiations         was as follows:          In its letter         of #January 29, 1969, Albuquerque
    requested      a cost proposal         for the period February              1, 1969 to June 30, 1969
    to I)e submitted         by February       7, 1969 (nine days).             On February         7, 1969,
    Isotopes,      Incorporated        submitted      the requested         cost proposal.           Albuquerque
    reviewed     the cost proposal           for a week and then requested                  additional       infor-
    mation hy TWX o-f February 14, 1969.                     Tsotopes,       Incorporated         provided      the
I   additional       information      on February 19, 1969 and February 21, 1969.                            Further




                                                              34
                                                                                               APPENDIX II




Mr. Daniel      F. Stanton                                                       September      29, 1970


proposal   revisions      were provided      at Albuquerque's     request     on March 4, 1969
and March 5, 1969.          Negotiations     were completed     during the periods      March 10
to March 14, 1969 and March 26 to March 28, 1969.                   The total    elapsed time
from request      for cost proposal        to completion    of negotiations      was approximately
two months.      The AEC forwarded         a signed Modification      No. 2 for execution
by Isotopes,      Incorporated       on June 2, 1969 and the executed          contract  was
returned    to Albuquerque       on June 25, 1969.

 In view of the broad and non-specific         nature of the                 Albuquerque   information
to the GAO, it is our recommendation         that the entire                   paragraph  quoted above
viz.,    ("We were informed....")      should be deleted.                    If you desire to retain
it,   we request  that the information      contained   in our                 proposed paragraph      be
added on page 34 following        the "We were informed...."                    clause.

The first      paragraph        of the history         of the SNAP-19 program,           on page 9 of
your report,        should be revised            to read as follows:        "The SNAP-19 program
was initiated        in 1963 under Contract              AT(30-l)-3607      with the Martin Marietta
Corporation       for the purpose of supplying                 auxiliary    power to the NASA Nimbus B
meteorological         satellite.          Two SNAP-19's each supplying              about 25 watts of
electrical       power were launched             on the Nimbus B satellite            in May 1968.         This
mission     aborted     shortly       after   lift-off      due to booster       guidance      problems
unrelated      to the SNAP-19.             Two additional        SNAP-19's each supplying            about
28 watts of electrical              power were fabricated            by Isotopes,       Incorporated
under a new Contract              AT(29-2)-2650        and successfully       launched      on the Nimbus B-2
 satellite     on April 14, 1969.             Isotopes,       Incorporated      delivered      the generators
 for the April 1969 launch ahead'of                    schedule and for nearly            10% less than the
estimated      cost.      Initial       power output       for the two SNAP-19 generators               on the
Nimbus B-2 space craft              was 56 watts.          The SNAP-19 was designed            to operate       for
a one year period.              Since its launch,          power has decreased          to approximately
48 watts as of February 1970.

Reference      is made to your review of SNAP-29 on pages 14, 15 and 16.               Based
upon our oral conversation,        you agreed to clarify         that section  to indicate
that the production       of an "engineering      model" of a SNAP-29 generator        was
not to be interpreted        as an unsatisfactory      conclusion     to the SNAP-29 program.
You should add the words " . ..due to a change of safety philosophy               of pre-
liminary      studies"  to the end of the second sentence beginning           "We found
that . . . . " and ending with the word "encountered",           in the second paragraph
on page 14 of your review of the SNAP-29 program.

Isotopes,    Incorporated    feels         that the substance      of the above comments should
be incorporated       in the final         report.   Additionally,      we feel that there are
other aspects of a subjective                nature with respect     to your report  which should
be seriously     considered.




                                                         35
APPENDIX II




'2r.   Daniel     1‘. Stanton                                                      September      29,    1970


 Yost important           is the CA0 analysis             of the supposed advantages                 the contractor
recei\Ted as the result                of AEC's issuing           of letter       contracts       and the delay
 in obtaining          the final       contract.         We can assure you, as we did orally,                      that
the contractor            suffers      far more than the government                  with respect        to a letter
 contract.         First,      the contractor          cannot properly          follow     good business          manage-
 ment practices           such as long range planning,                  sales forecasting,             budgeting
manpower requirements,                 forecasting        capital      equipment       requirements        and the
like.       Contract        requirements         can be changed by the governmental                     agency at
L.511.      There is no protection                for the contractor            in the event of Termination
 for Convenience            by the government            and employees are in a temporary                    status.
 4dditionally,           no fixed fees are payable or awarded and in the event a final
contract       is never executed,              there is no fixed           fee.      As a matter of fact in
the SNAP-29 program,               nearly one million             dollars     of unbilled         fee had accumu-
lateawhile           Martin      Arietta       Corporation        had the program and this could not
be billed        lInti      the contract         was finally       executed.         The loss in interest
alone amounted to many thousands                       of dollars.         Even more important             is the
disparity        in the respective             positions      of the government            and the contractor
at the time the contract                  is finally       negotiated.          At these negotiations,
 since the work has already                  heen completed,          the contractor           is entirely       at
the mercy of the governmental                     agency with respect             to fixed fee since the
government         can 1i.teral.l.y       dictate      the fee to be allowed.                It should be pointed
out that once the contract                   has novated to Isotopes,                Incorporated,         numerous
visits     were made to the General Xanager of the AEC and to Albuquerque                                        urgently
requesting         a contract        for the total         period of performance.




                                  [See GAOnote, p. 37.1




                                                          36
                                                                                       APFEWIX       II




  Mr. Uaniel           F. Stanton                                          September    3",   1970


  With respect        to your third    recommendation,      we also agree with the general
  statement      but many times such after-the-fact            negotiations       at times are
  inevitable       due to the internal       agency changing       of priorities.       This approach
  implies     a very heavy responsibility           on the part of the .4EC to maintain
  strong planning        and budgeting     functions     so as not to introduce         major delays
  and work interruptions          in the contractor's       efforts      and jeopardize     the
  user's     mission.




                                         [See GAO note.]




  On page 16, regarding        the third   paragraph    of the chronology,       the real reason
  for reverting     to consideration      of fuel dispersal      safety criteria      in April
  1968 was not the problem of satisfactory             heat block material       development    but
  rather    a combination    of scheduling     problems at the fueling       facility     and a
  developing    awareness that the gadolinium          polonide   fuel form developed        by
  the AEC was probably       inadequate    to meet intact/impact       safety criteria.

   If you have any questions, p lease do not hesitate    to contact me at any time
   at the above address and I will be happy either    alone or with Mr. Vogelberger
   to discuss the matter with you again.

                                                           Sincerely,



                                                           Robert       Kleiner

   RK:jm


 GAOnote:                    titerial  deleted from the letter was concerned
                             with information  included in the report draft
                             which is not included in the final report.

U.S.   GAO   Wash..   D.C.