DESTINATION MOON: A History of the Lunar Orbiter Program
 
 
CHAPTER V: IMPLEMENTING THE PROGRAM
 
Early Funding Considerations
 
 
 
[97] The beginning of the Lunar Orbiter Program's next stage was hardly noticed in the turbulent atmosphere in which the U.S. space program existed at home and abroad. Congress was questioning NASA and JPL about apparent poor management in the Ranger Program, while the first manned Gemini flight, scheduled for launch late in 1964, was experiencing setbacks. Everywhere, it seemed, the critics of America's space exploration efforts were finding fault with NASA. They pointed to Soviet manned and unmanned space accomplishments and asked why the United States was not keeping pace. In the midst of these inauspicious circumstances, the fledgling Lunar Orbiter Program at Langley nevertheless got off to a promising start.
 
Four aspects of the new program became important during the twelve months that followed the signing of the contract: 1) funding; 2) spacecraft design; fabrication, testing, and integration with the launch vehicle.; 3) mission design; and 4) the establishment of schedules and working relationships between the various NASA centers and the contractors. Once the definitive contract with Boeing had been approved, funding problems became more Complex. They constituted one of the dominant [98] constraints defining the flow of activities during the entire course of the program. A brief description of funding through the end of 1964 will illustrate the problem.
 
Beginning in February 1964 the Office of Space Science and Applications had decided to commit to Lunar Orbiter the full $20 million which Congress had appropriated for FY 1964 specifically for an orbiter. However, the negotiated contract of April 16 obligated NASA to provide Boeing with funds as it required them, if the contractor was to be held to the incentive provisions in the contract. This meant that NASA had to establish and maintain a minimum funding rate to avoid schedule lags. Although NASA committed the FY 1964 funds, the Lunar Orbiter Program faced a new situation in FY 1965, beginning July 1, 1964. During the contract talks Boeing had predicted an expenditure rate of $26.1 million for that fiscal year, but by May this sum had increased to $37.1 million.1
 
A detailed PERT revealed one reason for this sudden rise. It found that by compressing the development phase of the program, NASA could gain more time for the testing phase. Acceleration of development, however, would require a higher funding rate than Langley or Headquarters had originally anticipated.
 
[99] Realizing this the Office of Space Science and Applications released a guideline of $31.5 million for FY 1965 to the Langley Research Center in the spring of 1964. Of this Boeing would spend $28.9 million. Langley, on the other hand, had requested $39.1 million, of which Boeing was to spend $37.1 million. OSSA preferred to remain conservative, waiting until Boeing could supply more accurate, concrete information on funding needs before making a decision to increase the funding rate. Oran W. Nicks, Director of Lunar and Planetary Programs within OSSA, felt that the Lunar Orbiter funding requirements could increase at an uncomfortably fast pace and thus compromise other projects within OSSA.
 
Costs data for the Lunar Orbiter Program during the first quarter of the project, ending June 30, 1964, revealed that actual costs had exceeded estimated costs by $1.1 million. The estimated costs had been made by the Boeing Company on April 30, and the difference between the two constituted an underestimate by Boeing of 45% for the quarter.2
 
Throughout the summer of 1964 the rate of expenditure at Boeing remained Langley's single greatest headache. This was almost entirely due to Boeing's failure to sign [100] the two major subcontractors, Eastman Kodak and RCA, to definitive contracts. Floyd L. Thompson kept Nicks informed of the funding problem during the summer months, and in August Nicks requested Thompson to review the entire funding situation and its potential impact on other programs.3
 
The scope of the funding problem revealed the need for closer cooperation between Langley and NASA Headquarters. Both organizations sent representatives to an August 19 meeting at Langley to examine and resolve their differences and strengthen the coordination of policies pertaining to Lunar Orbiter.4 At the meeting officials from the various Langley offices connected with Lunar Orbiter gave detailed presentations of their work and requested further support of clarification of policies pertaining to the program.
 
Headquarters people made it clear that they wished to establish much firmer ties with Langley to ensure a better request-response relationship throughout the program. Langley people expressed concern that they had had to make decisions without the help of such useful tools as complete monthly funding reports from Headquarters which they could [101] use to gauge their expenditure flow.5
 
Another pressing matter aired at the meeting was Langley's desire to fund Boeing three months in advance. This would allow enough flexibility to keep hardware procurement from falling behind schedule. But, because of the acceleration of development during the tight money situation in FY 1965, Langley's request appeared to be out of the question. Even with the present funding plan, funding to Boeing tended toward a minimum below which it could not go without precipitating serious schedule changes.
 
Langley and Headquarters officials decided to establish a minimum level for total expenditures at $41 million for fiscal 1965.6 Cost reduction appeared unlikely in every program area except the Air Force Support Services at the Boeing Company. Here, according to Nicks, the very high projected cost figure of $2.45 million for FY 1965, which Langley's August Program Operating Plan had forecast, might be subject to reduction. In FY 1964 the U.S. Air Force had charged NASA an expensive 6% of Langley's combined contract costs as the fee for its support. NASA wanted the more reasonable rate of 1% to 2% which it received from the Navy and the Army for their various support services.
 
[102] Nicks maintained that if NASA could obtain a figure of 1.5% of the Lunar Orbiter contract costs for FY 1965 as the rate of charge for USAF support, then it could, alleviate some of the financial pressure which limited the flexibility of Lunar Orbiter funding in the coming fiscal year.7 This new arrangement would have to be worked out with Air Force representatives.
 
Meanwhile the participants in the August 19 funding meeting agreed that no contract changes would be made if the changes would increase funding above the FY 1965 guidelines or above those laid down in the Project Approval Document or above the total program guidelines, unless the Lunar Orbiter Program Office in Washington had subjected the proposed changes to the most thorough scrutiny.8
 
The fact that the bulk of the procurement and development expenditures would come in FY 1965 further clouded the Lunar Orbiter funding situation. This reality placed a strict constraint on administration of the incentive contract with Boeing; it also prompted Langley Director Floyd L. Thompson to comment that, "if we aren't prepared to play table stakes, we shouldn't be in the incentive poker [103] game."9 To this Scherer added that, "when the government asks a contractor to assume the risk of an incentive contract, it must assume itself the responsibility for funding the contractor as he needs it."10 He named the figure of $41.8 million as the rock-bottom minimum for the program in FY 1965 and stressed that any slip below this would cause schedules to lag and force basic alterations in the contract.
 
Lunar Orbiter funding became very tight in September at the time when Boeing was beginning to negotiate final contracts with Eastman Kodak and RCA. Langley informed NASA Headquarters that Boeing had received quotations from Eastman Kodak and RCA and, starting on September 14, would begin contract negotiations.11 The original costs for the photographic system, which Boeing had quoted to Langley officials, proved to be much lower than the price at which Eastman Kodak was willing to deliver the subsystem for the spacecraft. This, in turn, had slowed contract talks between the two firms.
 
Scherer's main concern about the funding situation centered upon his recognition that to allow the program [104] to fall behind schedule because of too stringent funding would be tantamount to erasing the advantages of the incentive contract. If NASA induced the contractor to lose confidence in the contract because of a necessity to renegotiate part or all of it because of NASA niggardliness, then the program's overall success would be jeopardized. But NASA Headquarters remained steadfast in its retention of the $41.8-million FY 1965 funding minimum, even though Langley had called for $45.9 million.12
 
The growing seriousness of this problem brought Headquarters and Langley officials together on September 9. They established a new funding level based upon the increased requirements of Lunar Orbiter. This raised the original $94.6 million figure for the FY 1965-FY 1966 period to $105 million.13 The new ceiling offered Langley greater flexibility and reassured the Lunar Orbiter Program Office in Washington that the incentive provisions of the Boeing contract would be maintained.
 
Both Langley and Headquarters concurred in the policy of holding all contract and schedule changes to the barest minimum. Moreover, both undertook studies of their [105] operations to determine where costs might be reduced, and by the end of 1964 they had succeeded in pinpointing several ways to save more money. Scherer summarized the areas where cost reductions seemed most feasible and sent a report to Clifford H. Nelson at Langley at the end of December.
 

 
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