The Budget Crisis

The pattern of program growth and cost increase revealed during the spring of 1962 persisted, and with the same shortage of dependable information. To NASA's repeated pleas for more funding data, McDonnell regularly denied that any existed. [106] In mid-July 1962, three months after its first budget proposal, the company could still not provide a detailed forecast of program costs because "cost projections from suppliers and subcontractors are currently unavailable as purchase order values continue to change and negotiated costs have not been established."42 In August, when MSC and McDonnell began working out the final terms of the spacecraft contract, the contractor proposed a startling total of $498.8 million, double NASA's first estimate in December 1961 and more than $100 million higher than the company's own April 1962 proposal.43 Hard negotiation brought the new figure down to $464.1 million,44 but efforts to agree on a final price were suspended before the end of August because the whole Gemini program was in trouble.

Other costs were also on the upswing during the summer and early fall of 1962, though not as spectacularly as those for the spacecraft. SSD's March 1962 figure of $164 million for the launch vehicles [107] topped $170 million by September.45 Less than a month later, SSD submitted to NASA a formal revised budget of $172.61 million.46 Word reached MSC in July that the Atlas-Agena for Gemini now had a price tag of $12.3 million over its earlier total,47 and this despite the fact that NASA had deleted the three spares to cut the number of Atlas-Agenas on order from 11 to 8.48 A special briefing for NASA Administrator Webb on 28 September revealed that Project Gemini might cost as much as $925 million before it was over, 25 percent higher than Webb had been told in May it was going to cost and 75 percent more than MSC's first estimate.49

Such fast-rising costs would have been bad enough at any time. Now they presaged disaster, since Congress had not yet acted on NASA's appropriation for fiscal year 1963 (which began on 1 July 1962). Without an approved money bill, NASA was compelled to carry on under a joint congressional resolution that provided enough money to support projects at roughly the same level they had enjoyed the year before but not enough to cover increases.50 Gemini's status was all the more threatened because it had not even appeared in the 1962 budget. NASA had found enough money to get Gemini started, but that was a makeshift that could not support an ongoing program.

The bill that authorized NASA's funds was signed into law on 14 August, but the bill to appropriate that money was yet to come. Congressional action on NASA's 1963 appropriation was not completed until 25 September. The figure was $3,774,115,000, $113,161,000 less than NASA had asked for and $70,000,000 under the total authorized in August.51

This delay prevented the Office of Manned Space Flight in Washington from giving MSC the normal authority to spend money on the basis of the full year's budget. Instead, that authority was being granted on a month-to-month basis.52 Monthly funding brought anguished complaints from contractors, as expenses constantly threatened to outstrip the resources available to pay for them. By October, MSC was being bombarded with telegrams, each with urgent demands for full and quicker funding.53

Lack of an appropriation also prevented NASA from adopting a final financial operating plan (FOP) for fiscal year 1963. Each center prepared an annual FOP to be approved by NASA Headquarters for allotting funds at the start of the fiscal year.54 To meet the impending crisis, Associate Administrator Seamans imposed a ceiling of $1.51 billion on NASA research and development expenditures for the coming year. By this time, however, estimated funding needs for this purpose had already exceeded the figure first presented to Congress and now stood at $1.91 billion. Manned space flight chief Brainerd Holmes warned Seamans that current schedules could only be met by a supplemental appropriation from Congress.

[108]In the meantime, Holmes directed MSC to prepare two separate fiscal-year 1963 FOPs: one staying within the Seamans-imposed ceiling, the other geared to actual needs. For Gemini, this meant a limit of $234.1 million against a needed $299 million. Holmes predicted a severe setback to program schedules if the smaller budget prevailed: a three-month delay in the first launch and in the first long-duration flight, an extra ten-month wait for the initial rendezvous mission, and no paraglider before the third flight.55

Hopes for meeting the higher budget were dashed when President Kennedy rejected NASA's case for extra funding. Holmes notified MSC on 9 October that its funds for fiscal year 1963 would be limited to $660.1 million. He directed the center to prepare new schedules to reflect this limit, voicing the somewhat forlorn hope that the unavoidable delay of several months might be made good if "later developments make it possible for the Administrator to obtain a FY 63 supplemental."56

The new ceiling was $27 million less than MSC had planned for under the earlier Seamans ceiling. The situation was now critical. Already tight at the level of $687 million, a budget of $660 million was nearly crippling. And Project Gemini bore the full brunt. Upon first hearing of the newly reduced budget, MSC planned to split the $27 million cut between Gemini and Apollo. Washington, however, ordered Gemini to take all the losses. Wesley L. Hjornevik, MSC's Assistant Director for Administration, evaluating the situation for the senior staff on 19 October, saw no way out of this dilemma except to curtail Gemini sharply. "It appears", he glumly remarked, "that the consequent reduction to Gemini can only come by dropping paraglider, Agena, and all rendezvous equipment."

Further complicating matters was the rate at which Gemini was piling up costs, a rate much higher than expected. Hjornevik pointed out that the program seemed to be costing $15 million a month, rather than the planned $11 million.57 A budget memorandum that reviewed Gemini funding during the first quarter of fiscal year 1963 described as "an area of growing concern and one which can no longer be left unattended" the speed at which costs for spacecraft, paraglider, launch vehicle, and target vehicle were growing. The FOP could not "support acceleration of cost rates so projected by these contractors. Unless appropriate direction is given to the contractors to restrict this buildup or a Gemini reprogramming action is effected immediately then funding difficulties will commence during the second quarter."58


42 TWX, J. M. Gardner, Jr., to Contracting Officer, "Contract NAS 9-170, Project Gemini, Financial Reporting," 16-JMG-1000, 17 July 1962.

43 Memo, Robert L. Kline to Meyer, "Project Gemini Negotiations with MAC, Letter Contract NAS 9-170," MSC-PG-4-483, 3 Aug. 1962; "Gemini Program, MAC Estimated Cost Summary as of August 8, 1962."

44 Memo, Kline for GPO, Attn: MacDougall, "Letter Contract NAS 9-170 for Gemini Spacecraft with McDonnell Aircraft Corporation (MAC)," MSC-PG-8-843, 26 Sept. 1962.

45 "Minutes of . . . NASA-SSD Meeting on Cost of Titan II Program, March 1, 1962," 2 March 1962; "Financial Plan - Gemini," SSD, I March 1962, with annotations by Richard J. Crane (MSC procurement) showing revised cost estimates supplied by Maj. Roland D. Foley in a telephone call on 10 Sept. 1962.

46 Letter, Richard C. Dineen to MSC, Attn: Chamberlin, "Budget Requirement for Gemini Launch Vehicle," 4 Oct. 1962, with enclosure, "Gemini Launch Vehicle Budget Estimate," 3 Oct. 1962.

47 Memo, Kenneth R. Irwin to Gemini Project files, "Fund Requirements for Atlas-Agena," 19 July 1962.

48 Memo, Holmes to Assoc. Adm., "Atlas-Agena Launch Vehicles for Gemini," 28 May 1962, with Robert C. Seamans, Jr.s initialed approval dated 29 May 1962; letter, Crane to Marshall, Attn: Floyd M. Clark, "Procurement Request No.100-62, dated May 1,1962, Gemini Atlas-Agena," MSC-PG-2-116, 15 June 1962, with enclosure, "Statement of Work for Atlas-Agena Target Vehicles to Be Used in Project Gemini," 1 June 1962; letter, Daniel D. McKee to MSC, Attn: Chamberlin, "Atlas-Agena Launch Vehicles for Gemini," 25 June 1962.

49 Holmes memo, 29 April 1963.

50 Memo, Clyde B. Bothmer, executive secretary, to dist.,25 June 1962, with enclosure, "Minutes of the Seventh Meeting of the Management Council, Friday, June 22, 1962,"

51 U.S. Congress, House, Report on the Activities of the Committee on Science and Astronautics, committee print, 87th Cong., 2nd sess., 1962, p. 4; Astronautical and Aeronautical Events of 1962, pp. 136, 192, 200; U.S. Congress, Senate, Subcommittee of the Committee on Appropriations, Independent Offices Appropriations, 1963: Hearings on H.R. 12711, 87th Cong., 2nd sess., 1962, pp. v-xxiii.

52 TWX, William E. Lilly to MSC, M-C P 9200.023, 28 Sept. 1962.

53 TWX, Harry W. Oldeg to Kline, "NAS 9-170, Info Regarding MAC Invoice No. 40," 306-19-804, I Oct. 1962; TWX, SSD to MSC, Attn: Irwin, SSVLP-2-10-1, 2 Oct. 1962; TWX, Oldeg to MSC, Attn: Kline, "Contract NAS 9-170, Request for Increase in Expenditure Limitation," 306-19-805, 4 Oct. 1962; TWX, Friedrich Duerr to Chamberlin, M-L&M-AP 10-8, 8 Oct. 1962; TWX, Storms to MSC, Attn: Bake, "Letter Contract NAS 9-539," MA26810, 19 Oct. 1962.

54 Robert L. Rosholt, An Administrative History of NASA, 1958-1963, NASA SP-4101 (Washington, 1966), pp. 134-35.

55 Memo, Lilly to dist., 25 Sept. 1962, with enclosure, "Minutes of the Tenth Meeting of the Management Council, Friday, September 21, 1962," pp. 6, 7, esp. enclosure 3, "Impact of FY 63 Funding Ceiling on Gemini."

56 TWX, Holmes to MSC, M-C P 9200.028, 8 Oct. 1962.

57 Purser, acting recorder, "Minutes of Senior Staff Meeting, October 19, 1962," p. 2.

58 Memo, Irwin to Budget Br., Financial Mgmt. Div., Attn: Robert M. Weinert, "Comments on First Quarter Funding Review - Gemini Program," 29 Sept. 1962, with enclosure, "Gemini Status of Funds, First Quarter."


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