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RELEASE 1 JULY 2015 --SECRETMINUTES OF MEETING 66-5 

AIR FORCE MOL POLICY COMMITTEE 

Tuesday, November 22, 1966 

Room 4E871, Pentagon 

Attendance: 

Committee: 

Honorable Harold Brown, Secretary of the Air Force, 

Chairman 

Honorable Norman S. Paul, Under Secretary of the Air 

Force 

Honorable Alexander H. Flax, Assistant Secretary of 

the Air Force (R&D) 

Honorable Leonard Marks, Jr., Assistant Secretary of 

the Air Force (FM) 

General James Ferguson, Commander, Air Force Systems 

Command 

Lieutenant General Joseph R. Holzapple, Deputy Chief 

of Staff/Research and Development 

Secretariat: 

Major General Harry L. Evans, Executive Secretary (SAF-SL) 

Proceedings: 

The meeting began at 1500 hours. 

In his opening remarks, General Berg stated that contractor 

negotiations are still underway and that the briefing would be a 

report on the current status. He noted that the proposals of 

McDonnell, General Electric and Douglas are considerably above the 

Air Force cost estimates. He described categories of items that 

have been deferred in order to expedite negotiations. Certain of 

these items, such as test operations at Vandenberg Air Force Base 

can be delayed pending improved definition by the MOL SPO and are 

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applicable to all contractors. In addition, items have been 

deferred with individual contractors. For example, with McDonnell, 

identification of Gemini spares has been withheld pending the 

status of the NASA Gemini inventory. 

General Berg emphasized his approach has been to establish the 

best government position. He stated that, while we have been in a 

price exchange for three weeks, this should not be considered an 

unreasonable time in view of the non-competitive situation in which 

he does not hold a real threat over the contractors. 

Colonel Dietrich presented the SPO planning schedule for 

accomplishing negotiations. He discussed, for each contractor, areas 

of agreement and disagreement, cost data and expenditure rates, and 

manpower buildup. 

With McDonnell, there is agreement on technical parameters and 

specifications. It appears evident that the high contractor proposal is due in part to the high hiring rate; the contract should pay 

for the work done, and not for people that are assigned to the program 

because they are available. 

There is also agreement with General Electric on technical 

matters. It was noted that the GE manpower rate appears possibly to 

reflect the number of people made available by the phase down of 

other work. 

With Douglas, definition of contractual items is considered good 

enough to support a fixed price incentive contract. Their hiring 

situation is apparently indicative of a problem throughout the Los 

Angeles area. 

Colonel Dietrich, in summarizing the split between contractor 

and Air Force cost estimates, stated the true value of the contracts 

was probably below the Air Force budget position, but because of the 

sole source environment, a final negotiated figure would likely be 

above the Air Force 

as follows: 

budget. The 

McDonnell 

Variation, in 

GE 

millions, was shown 

Douglas 

Current Contractor 205.4 FPI 198.0 CPIF 815.8/785.0 FPI/CPIF 

Proposal 

Latest AF Offer 147.9 FPI 147.3 CPIF 611.3 FPI 

AF Budget Position 174.8 177.6 680.6 

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At this point, another item on the agenda--DX priority--was 

discussed. Secretary Brown stated that the time to ask DoD for a 

DX priority is when we have the program defined to the extent of 

certain contractual coverage. 

Secretary Brown opened a discussion of negotiating strategy 

with the following observations: 

a. We are going ahead with the program. 

b. The rate is not magic. As far as possible the rate 

should be limited only by the lead-time on the optical system. 

c. An assessment is in order of the contractor hiring 

rates. 

d. There may be a management problem with Douglas 

because of their financial situation. 

General Evans noted that failure to negotiate the contractors 

down to acceptable levels could cause the program to stretch, and 

if this occurs, we should reopen competition. He proposed the 

following actions: 

a. Make a final Phase II offer to Douglas and GE, not to 

exceed total segment costs as defined in the Program Plan and Funding 

Requirements document. 

b. Reopen competition by initiating a Contract Definition 

Study with Lockheed Missile and Space Division and instructing them 

to bid as a three-way competitor to Douglas, GE, and the Douglas/GE 

team. 

c. Initiate a contract with North American Aviation, Space 

and Information Division to obtain a bid on a scaled-down Apollo 

vehicle as a competitor for the Gemini B. Concurrently, make a 

final offer to McDonnell. 

General Evans discussed the implications and possible results 

of these actions, and recommended Policy Committee consideration. 

During the discussion, Lockheed was identified as one logical candidate because they have a cleared base, have kept up to date on the 

technology for both manned and unmanned applications, and could propose on both Douglas and GE tasks, although Lockheed may have a 

manpower and facility problem. General Berg stated that opening up 

the program to new contractor proposals could result in a six to 

twelve month slip. 

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Secretary Brown concurred in the proposed action and in the 

advisability of alerting the contractors of our intentions prior to 

implementing the new approach. He said the MOL Program should 

strive to remain below the Air Force budget position if possible. 

He noted that a schedule stretchout could conceivably force the contractors to drop personnel overages. Secretary Brown agreed that 

General Berg's briefing could be given to Dr. Foster, DDR&E, on 

November 23, 1966. 

Secretary Brown expressed concern that the current Douglas 

financial problem might create an unfavorable situation for MOL at 

some future date. In the discussion it was suggested that a management change within Douglas would not necessarily impact to the 

detriment of MOL. 

In answer to General Evans' query, Secretary Brown stated that 

no further DoD program approval is necessary, but that to get money 

released from DoD they must be presented with a MOL program plan 

and the negotiated contracts. 

The Committee concurred in the following action: A message 

will be sent to General Berg directing him to prepare a program plan 

for reopening the competition for those segment packages that have 

not been negotiated. This plan will be forwarded for Secretarial 

approval no later than December 1, 1966. 

The meeting adjourned at 1600 hours. 

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APPENDIX 

MOL POLICY COMMITTEE 

November 27, 1966 

Other Attendees: 

Briefers: 

Brigadier General Russell A. Berg, Deputy Director, 

MOL Program 

Colonel Fred H. Dietrich, MOL Systems Office 

MOL Systems Office: 

Colonel Clifford D. Kester 

Major Leslie G. Thompson 

MOL Program Office: 

Dr. Michael I. Yarymovych 

Colonel Clarence L. Battle 

Colonel Richard C. Randall 

Colonel Richard L. Dennen