This is the ninth in a series of articles on how to go about dramatically reducing space mission cost while maintaining a high level of mission utility. This article discusses approaches that can be used by the government or other customers to reduce cost. Some of these involve direct action by the government, but many of them have to do with creating an environment that shows that the government genuinely wants low-cost, high-utility programs.
In this respect, the attitude of the government is most clearly seen in the programs that it chooses to fund or not fund, particularly when budgets are tight. So long as government actions demonstrate a preference for expensive programs (i.e., by funding large, expensive ones and killing off small, inexpensive ones to cover cost overruns or budget shortfalls), high cost will continue to be the norm.
Implement Processes To Reduce Cost
Throughout the other articles in this series, we have presented a great many ways to reduce cost, such as making cost data available, reducing the cost of failure and fostering an attitude of wanting and rewarding low cost. Many of these are broad and indirect. However, a number of approaches, such as trading on requirements, can be implemented on individual programs. In this case, the process is straightforward. At the beginning of the program, or at the start of any particular phase, ask the prime contractor to open the kickoff meeting by spending a half-day laying out the derivation of each of the principal system requirements and identifying those that are the major cost, performance, risk or schedule drivers for the current or proposed system design. This becomes the origin of a real, quantitative discussion on which requirements drive cost, performance, risk and schedule and which options could lead to a much lower-cost system. A second item in terms of direct program action is to provide funding continuity for a program, although this is more a matter of avoiding cost and schedule overruns rather than reducing cost per se.
Decentralize Procurement
Perhaps one of the more counterintuitive approaches that the government can use to reduce cost and schedule is to decentralize space system procurement. On a fairly regular basis, calls for government reform point out “waste and inefficiency” presumably created by having multiple organizations working on a problem. Thus there are regular calls for a “launch czar” or a “spacecraft czar” to reduce inefficiency by consolidating all of one activity under a single person or organization. In fact, this is likely to drive up cost, increase schedule and be counterproductive relative to what we would like to achieve.
We all recognize the value of competition in industry. With competition, multiple approaches are tested and we pick the ones that are best for our particular circumstances. This same idea works within the government. If one person is in charge of launch, we will quickly eliminate all secondary programs in the name of efficiency, concentrate all of the work in a few large contracts (probably with the major primes) and, of course, make reliability the most important feature since if we have fewer systems it is more important than ever that they work every time.
This is a prescription for further spinning up the space spiral that we have discussed. If instead of a single U.S. launch czar there are programs for small, responsive launch systems from the Army, Navy, Air Force, NASA and Missile Defense Agency (and perhaps even separate ones from NASA’s Marshall Space Flight Center and Ames Research Center), then we have the roots of a competitive environment in which low cost and fast response become what it takes to make your program proceed. If we need a launch vehicle that can put 10,000 kilograms into low Earth orbit (LEO), we could start designing that from the outset or we could start with multiple agencies working on ideas for putting 500 kg into LEO, select the most promising three or four of those to work on 2,000 kg to LEO vehicles, and so on. This approach gets us multiple small launchers that provide competition to hold down cost, and develops and tests in-flight alternate technologies that can be used to drive down costs on larger vehicles. Rather like airplanes, ships or computers, it doesn’t necessarily make sense to have one supplier working with one government agency to solve the diverse needs of the space community.
Sponsor and Support R&D To Reduce Cost
The government controls most of the research and development (R&D) spending in space technology. Unfortunately, there is a strong bias within the R&D community toward challenging new technology and away from practical systems capable of being implemented and able to reduce cost or schedule or both. It is likely that much more rapid advances in reducing cost and schedule would be possible if the government chose to sponsor more R&D oriented toward reducing cost without demanding that it advance technology at the same time. In many ways, this is less exciting, but it ultimately allows us to create many more programs that can advance both science and the needs of the warfighter in ways that we can only guess at today.
Related to sponsoring practical research to drive down cost is the problem of overreaching on R&D goals to the point where nothing practical is created. If we look for ways to reduce cost by a factor of two to 10, there are a great many approaches to choose from and real experience to show that it’s possible. If we demand that we reduce cost by a factor of 100 or more, then it’s likely that we will throw away the mission utility along with the cost, such that the end result doesn’t really advance the needs of the warfighter or the scientist.
Revise SBIR Objectives
An example of the above problem is the U.S. Small Business Innovative Research (SBIR) program, an excellent vehicle for small companies, for which a major strength is finding innovative approaches to reducing cost or doing things more quickly. Microcosm undertook a survey of both Department of Defense and NASA space-related SBIR topics in 1996 for the book “Reducing Space Mission Cost” and found that only 4 percent of the topics were specifically oriented toward reducing cost. (Most of the topics were oriented toward creating new technology or improving existing software or technology.) We repeated the survey again in 2010 for the book “Space Mission Engineering: The New SMAD” and found a small change — only about 3 percent of the topics were associated directly with reducing cost. It would certainly make sense to identify the need for dramatically lower cost missions as a major objective for both NASA and the Pentagon and to orient a much larger fraction, say 30 percent or 40 percent, of innovative research toward this objective.
Make Use of SBIR Phase 3 Rules
Another SBIR approach is to make more extensive use of SBIR Phase 3s. By law, the SBIR Phase 3 meets all of the Competition in Contracting Act requirements, is strongly encouraged by Congress, and has been endorsed within the Department of Defense. This means that ideas developed under the SBIR program can go directly to being funded and built via a sole-source contract without another round of studies and competition, which can save more than a year and a large amount of money and time in the competition and contracting process. Unfortunately, this isn’t a popular law within the government bureaucracy because it eliminates another round of competition and contracting, and therefore it is often ignored.
Create a Program Specifically To Reduce Cost
One of the most important proactive steps that the government can take to reduce cost is to assign the task of reducing cost to an individual or organization or create and fund a small program intended specifically to reduce cost and schedule. In both cases, this allows reducing cost and schedule to become a part of the official hierarchy of organizational objectives, to be reported on at meetings, to get some assigned budget and to allow a flow of regular status reviews up the management chain. All of this makes it clear that this is something the organization genuinely wants to accomplish and will be judged on how well it is being achieved. Similarly, the absence of such a program suggests that reducing cost and schedule has a priority well below other things that the organization needs to do. (The process for starting such a program was described in the first article in this series.)
Create an Environment that Fosters and Rewards Low Cost
Finally, perhaps the most important thing that the government can do is to create an environment that fosters and rewards low cost. Often, exactly the opposite occurs and any attempt to create a truly low-cost solution is regarded as unacceptable or looked at with suspicion or as an attempt to create a lower-quality product.
As we have discussed previously, there are a great many ways to show that low cost really is important. Certainly one of the best ways within the contractor community is to directly incentivize low cost. We now have 50 years of cost models that can tell us what a particular program should cost. If a company can come in at 20 percent below that cost, it would make sense to devote 10 percent to government savings and split the remaining 10 percent among the company, the management team and the technical team that accomplished the work. Of course, we also then have a new lower target for future cost-reduction missions.
One of the reasons that this is not done is the fear that the contractor will “cut corners” and create an inferior product. One of the easiest solutions to this problem is to work with the contractor in a positive way to identify and agree on the methods used to reduce cost. In this way, the government and the contractor become partners in reducing cost and both learn what approaches work and don’t work in practice.
Ultimately the government or customer acting alone cannot dramatically reduce mission cost. But they do set the environment and establish what is valued most in terms of the end result. In the end, we may be forced to settle for a program that does everything we want but was 50 percent over budget and took twice as long. But that shouldn’t be regarded as a good solution, because we haven’t met the needs of the end user in a timely and efficient way. Dramatically reducing space mission cost and schedule must become a government priority in order for it to happen.
The 10th article in this series will look at approaches to reducing launch cost.
James R. Wertz is president of Microcosm Inc. He is co-author of “Reducing Space Mission Cost,” published in 1996, and has been teaching a graduate course at the University of Southern California on that topic since then. If you have questions, comments or suggestions, or simply want to discuss these issues, he can be reached at jwertz@smad.com. Information on the joint Microcosm/USC Reinventing Space Project can be found at www.smad.com/reinventingspace.html.
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