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DATE tiPle 7 

MICROFICHE/ 

DATE (k- •=24F 7 

MEMORANDT.R4 rce DR. BROWN 

SUBJECT: Status of M(L Program Contracts 

DEC 1 6 1966 

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Dr, Flex requested that we provide a. summary paper for your 

possible use in discussions with Mt. McNamara on the current 

status and provisions of the contracts which we have neectiated 

ror the M411. Program. 

Insofar as all of the contracts negotiated to date are concerned, we have not contracted for the total procram. In the 

case 01 cacti ol the contractors, we have deferred certain items 

rendine. improved definition of our requirements. A prime example 

oz items which have been deierred across-the-board are the manpower reluirements to support out-of-plant or field test operations for all of the contracts concerned. There are certain other 

categories of equipment for -which we have deferred contractual 

coverabs pending improved deflation. Examples are: data readout 

system, various spares and name test activities. The total amomnt 

delerred is $2:5.0 million. 

As you will recall, we negotihted a cm development contract 

with Eastman Kodak in August for a total price of $25f3.5 million. 

The lee is T.3 percent so that $240.3 is contract cost and $0.2 

is 3ee. Work under this contract is progressing essentially on 

scheanle at this time. 

Insofar as the Titan TIM launch vehicle is concerned, we 

have net fixed price incentive contracts with two of the 

four associates involved. 

ru.: contracts that have be ea ne[,:otiated are with Martin 

'c' __--- 

C in the amount, of $1,T. ndllion and the AC Inectronits 

Na Compcni in the amount of $26., million. -The contract with Martin 

cc, Company calls for a tar .et COSt of $143.3 million and 55/1.5 charcr: 

N 1u,-, 0, cost variances from that target cost and lerformance iacen- 

<-4 tives mtis h add to the cost ineel_tives amountint to appro:,:imstely c‘a 

t, 

,s I percent swintabove costs and a 3 percent swing: below. The 

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parformence Incentives involve schedule. vet;:nt and overall booster 

p,a-tormtnce. Tne incentives o schedale ere $111 ae-ative and 

amount to a total possible decrease in lee of $1.1 millioh. The 

scnedul Incentives are pa..-ed to about 100 dir'irerent manuacturIn; and assembly events. Some o. the loss can be recovered key 

laanch dates art met deal.ite slirpa€e manufacturin assembly 

and test. T11, veicht incentive is related to airborne weight vita 

penaltles belnE assessed Sta .e I is overveigat by pounds or 

more and/or Sta,e 11 overvei;-ht by 2 poems. The veight incentives are neEative only and may detract ;700.000 from the fee. 

The $700.W) As spread over the seven flii,at vehicles with developmt)ntal and early operational vah3clas more heavily vatelted. 

The fliOat performance incentives heavily emphasi2e launch 

vehicle ability to place the MOIL payload tato the desired orbit.. 

Shown below is the matrix of failure combinations and the adjustment to ter6et profit. 

Fail' es * 

Development Operational hilustment 

Launches Launohes to Thr;et 

(Total of 2) Total of a Front 

0 + 5.4 million 

1 . 0 3.7 million 

2 0 - 2.0 million 

0 1 - 3.4 million 

1 1 - 4.7 million 

, 2 - li.7 million 

*Failure defined as any malfuhotion which results in 

not making 30-performance on Orbit injection. 

Although not a part of the fee structure, provision is made 

for a iroup bonus to be shared by the five Titan III associate 

contractors for on-schedule, perfect launch performance for ell • • 

The AC Eloctronics Company fixed pries incentive contract 

has a cost of $24.5 million, an a0/20 Sharing arraneement with 

a ceiltn of 123 percent. The overall performance incentives 

emoant to a plus or Minus 14 ILartant. There are negative schedule 

Incentives amountir* to $340,000 and a positive schedule award of 

470,000 for the early delivery of do specific critical items. 

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eReeleigua 

There is a plus or minus $57,000 incentive on weieht to be raid 

for variances of plus or minus 10 pounds from nominal euidance 

equipment vtieht. Major perfOrmance incentives, related to the 

ability of tee euidance equipment to provide appropriate switchover from the AC system to the redundant ouidanee systems of the 

Gemini, and minor incentives are provided for appropriate data 

recovery via the telemetry system. The AC Electronics Company 

also shares in the group bones. 

We are currently neeotiatine with United Technology Center 

ta- 7-seement solid rocket motor development and procurement 

of Meet hardvere and with the Aerojet-General Corporation for 

development of the increased eepansion ratio rocket engine and 

certain other developmental improvements. These two contracts 

vill cote be fixed price incentive type. 

The McDonnell. Aircraft Compaay has entered' into a fixed price 

Incentive agreement with the Government. The target cost is 

$163.2 million, the fee associated with target cost is 14 percent, 

with a par performance ceiline at 128 percent. The sharine ratio 

for overruns or uaderruns is SO/20 and lie have provided for a performance incentive variance of plus or minus 4 percent for above 

or below per performance. 

The performance incentives for McDonaeil Aircraft amount to 

approximately a plus or minus $S,5 million. Threeequarters of 

this amount is incentivized for miss .On performance, including 

crew safety, overall vehicle performance on-orbit, a factor for 

data recemerye and A factor portrgyinc the degree of successful 

ascent and re-entry. Ten percent of the total is incentivized 

far weight which provides for a bonus or penalty of roughly 

$2,000 per peeled of ,might decrease or increase over specified 

velent. The schedule incentives amount to the remainink! 15 percent of the total incentive and are attached to the availability 

of speeific critical, items on our schedule dates. Schedule incentives are mostly negative. There is a general provision for 

veightinG tha early flights at a higher incentive. • As an example, 

Flieht #3 is weighted at .35, Flight i4 at .28), Flight 6 at .266 

with the remainine 10 percent attached to the Gemini B eeelleacation 

Flight. It should be noted that all of these incentives have not 

been completely negotiated in detail. The extent of the performfence incentive, i.e., plus or minus 4 percent for above or below 

per performance, has been negotiated; but there are still discussions on some of the details I have outlined above. 

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Avve recently comoleted our nsotiations with the General 

Electric Company and nave defined with them a cost plas incentive 

fee type contract. Terzet cost is $157.4 million, fee for tarret 

cost is at percent and performance incentives provide for a 

additional percent fee. The cost snaring on overruns or underruns amounts to 35/15, with zero fee being attained at 41711 

million and continuin thereafter. 

The performance incentives for the General Electric Company 

aalai -tall in the catecories of schedule, wei-tnt and on-orbit 

performance. Schedule incentives are negative for a maximum o 

$71.4,;)00. In r11 cases they are attached to critical itams,need 

dates and penalties accrue on t daily basis. As en faselPle, one 

partictaar set of miseon module forward section equipment contains penalties OT $1,300 per day for a maximum petaity of .$'1,000 

for late delivery of that particular set of equinment. Weight 

lncentives are both positive and nezative with a maximum bonus o 

,000 spread over tae ieveral flichts betnt: provided for =winoso 2.7) pounds or ;rester and penalties to a maximum of 

76L,')00 spread over several flithts for overweleht of 3,fi pounds 

or Lrtater. The flight performance Incentives are computed in 

accordance oath the formals oqtlined below on a per.-f11:-1t basis 

and provide pins incentives only i: par is achieved. 

100 R Kc KD POINTS MIMED = 

1' 

R = Number of orbits until first critical event 

i.e., GE equipment malfunction) 

Ic = Crew Safety Factor (1.0 for safe return, 

0 for loss attributed to GE) 

= Data Return Factor (1.0 - data collected loss 

due to GE) 

P = Number of orbits planned 

Par 

Doualas schedule• incentives are both positive and negative 

and are based on a point system for each nicht. A certain number 

of points are given for the shipment of critical end it of equipment, as well as for the Integration of various equipments received 

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by Do las from other associate coutractors. .00ce ol the schedule 

ineeatives is eositive only, eteentially a bones for Lneertne 

availability of the simulator at an early date. Others are negative ouly, *ace as failure to launch by a spetieled date. Par 

oereormance on schedule eneeetiees requires the achievement of 

appremimate/y 60 percent of the total possible points ass-tenet 

schedule incentives. 

• Incentives on weight are both positive and negative, ameentine to approximately $2,000 per pound. Weight increases or 

decreases are atraieht-lined. from specified weight to a plus or 

minus 750 pounds from that value. 

The session-oriented performance incentives for Douglas are 

auite telex, They are tapered with higber incentives far shove 

per performance on earlier fliebts. The total proportion of laacenUwe allocated to the three aenned fliahts are .286, ,LBe and .167. 

The inceettves for the last two automatic mode flights are .184 and 

.17e. In addition to the feature ce tapered Lacentives, the total 

missiom eerformance incentive formula contain consideratione of 

crew safety, data recovery, orbital time achieved, mode o oeeratine donditions on-orbit, primary mission accomplishment and onoredt communications. In eenerel, positive inoentives are provided 

Li ear performance is acbieved with penalties .four below par performance. Per is about 60% of maeLmum possible performance. The 

crew safety factor incolevrated prevides for a value of either zero 

or one, with one being complete success and zero being loss of crew 

due to any melfunctioc due to Douglas. 

The Dee las A/meet COmeany contract is, of course, the largest 

and ee have spent considereble time to define a contract ehice recognizes the developmental nature of the laboratory and at the same time 

provides suitable incentives to the eontraetor to encourage nie 

effective mann .east. We here arrived at a axed price incentive 

contract 'with Douglas. The target cost is *625 million for which 

he will receive a ei percent fee. We have provided far an incentive 

structure which will limit the Uovernment's liability to net more 

than $375 million. That celline includes all of the eoet and pereermance incentives Which he can possibly achieve. All incentives 

then fell, inside our ceiling figure. lwthermore, le: the contract 

costs approach e7 e0.0 million, the performance incautivee are 

drastically reduced. The coat incentives provide for an 3D/20 

sharine and the performance incentives provide approximately a 

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5 pere2at sTaLrl_ which add to or subtract from ais basic file and 

cost inL:entives, wi laave also provided for a vertable tarEet 

cost pernittir., r,ao contra(ttor a slSOltly al,her cost for outstandin lorforsiance. Th.x absolute evaint; is 2.41 percent o: 

normal tar,,et cost and 17. - 3p percent ea nominal tart price. 

If o were to aiply tree usual iormula when considerint per:;:orm 

aria* incentives as outside the a comparable fl.rwe for 

au efOective cei1ir4, for par performance would be 13,,percent 

based on nomlnel tarGet cost. 

In additon to the forerFold., sumonry, I 'lave attaclied a 

larEs amount or detailed iniormetLon, coverik_ all the Incentives 

or all contracts, the formulae used nor mission perqormance and 

rationale for the .actors involved. This inIormation vas very 

recently received and teas not been screened nor awl/lately 

assimilated I suould aureciate its return when you have no 

iurther use for the data. 

SIGNED 

HUEY L. EVANS 

Major General; USAF 

Vice Director, MI L Proram 

INwe 0: 4; pees 

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