The Aug. 24 story on the Augustine Commission [“Obama Administration Mulls U.S. Human Spaceflight Future,” page 1] mentions possible cost savings within NASA’s existing programs spurs me to comment. First, would those “sources” who maintain that 40 percent cost savings could be generated by undertaking engineering designs on Constellation via firm fixed-price (FFP) contracts please provide the historical data to back up the statement? Second, would the other source show his analysis to support cost savings of $500 million to $1 billion per year by using private contractors to conduct international space station (ISS) operations? Over the course of almost four decades in the business, I heard many such statements, none of which proved out to be even close to the initial estimate.

The use of FFP contracts to do design work for new developments? Show me the record of cost savings on any spaceflight program where the article is not simply a minor modification of an existing development or a build-to-spec. Where space projects involve new technologies, require scaling up beyond understood engineering terrain and explore poorly understood space environments? FFP inherently requires of the buyer a clear and highly specific design specification, with no TBDs or requirements for extensive engineering design and test. The NASA staff engineers and in-house support contractors are subject-matter experts, and contribute enormously to program success. Our business tolerates amateur-hour productions poorly. In NASA’s history, we can point to such new ways of doing business experiments as the X-33. Readers might recall the U.S. Navy FFP contract experiments in the 1980s. Finally, on the government side, we noted often the company response to requests for FFP bids on relatively straightforward appearing tasks resulted in a “bet the company” risk premium to the cost-plus-award-fee (CPAF) estimate; the rule of thumb was one-and-a-half times the 50/50 probability for a CPAF cost estimate.

As far as privatization, comparisons of initial promises to real outcomes show no record of substantial cost savings at the agency bottom line. Some advocates provided estimates that blithely ignored the value of the work being conducted by civil servants to make the interfaces between operator and customers. Others forecast savings by eliminating civil servants and in-house contractors but neglected the issue of reassigning the civil servants involved or close-out costs from terminating contractors for convenience, hence ignoring the budgetary bottom line for NASA, not just the specific activity. Others assumed away the insurance issue; they assumed the government would continue to self-insure without obtaining the insights provided by using independent oversight/insight entities (such as expert civil servants or contractors.) Still others strangely forgot their profit motivations when they generated saving estimates compared to business as usual. Everyone assumed NASA would GFE ground support equipment, space and ground hardware and software in perfect operating condition and without need of future replenishment, and would let them as private operators obtain at government cost the software licenses required for systems.

Bottom line: For you who are “sources,” if you are serious, submit your estimates to peer review. Second, show up with a track record of savings on equivalent complexity programs, and don’t offer estimates of 40 percent savings to the present cost of doing business. Ten percent won’t raise eyebrows; 40 percent requires suspension of disbelief.


Malcolm Peterson

Former NASA comptroller

Grasonville, Md.