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MEMORANDUM FOR THE DIRECTOR, MOL PROGRAM 

SUBJECT: MOL Program Plan and Funding Requirements 

The attached document is the updating of our Phase II Program 

Plan and financial requirements, and reflects the results of the 

negotiations completed with all of the major MOL contractors. 

Dr. Flax was furnished a copy of the document and a copy is 

being sent, by him, to DDR&E with a covering memorandum 

which I proposed for his signature. Copies of my memorandum 

to Dr. Flax and the proposed memorandum to DDR&E are attached. 

Mr. Marks, SAF-FM, has had an opportunity to review the 

document, and Mr. Charles, SAF-I&L has been provided a copy. 

As a separate action, we are preparing a briefing which will 

present the MOL Phase II costs, and the incentive features which 

are part of the negotiated contracts. I will have this briefing 

ready for you in January. 

The next MOL Management Meeting is on both your and Dr. 

Flax's calendar for JanuaryL 5 here in the Pentagon. I will have a 

meeting agenda delivered to you by December 30. 

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HARRY L. EVANS 

Major General, USAF 

Vice Director, MOL Program 

DORIAN 

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BARRY L. EVANS 

Major General, USAF 

Vice Director, MOL Program 

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MEMORANDUM FOR DR. FLAX 

SUBJECT: Release of FY 1967 MOL Funds 

Attached is a proposed memorandum to DDR&E which forwards 

our updated MOL Program Plan and Funding.Requirements Document 

and requests release of deferred FY 1967 funds in the amount of 

$178.4 million. Early release of these funds are required to fund 

our negotiated Phase II contracts and I urge your approval and signature 

of the memorandum. You will recall I discussed our contract and 

funding position with Dr. Brown on Saturday, December 16. As I discussed with you later, , the Secretary expressed his satisfaction with the 

results of our contract negotiations and indicated his concurrence in 

obtaining the release of the deferred funds. 

There are also several related actions which require your 

attention in conjunction with the completion of. contract negotiations. 

These are: (1) asSignment of a DX priority to the MOL Program; 

(2) approval of a contracting warrant for General Berg to enable him 

to do his own black contracting; and (3) approval to provide a manned 

, flight option on flights six and seven. Documentation on these subjects 

has been previously provided you. 

I am available to provide you with any additional information or 

assistance you may require on any of the above items. 
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MEMORANDUM FOR DIRECTOR, DEFENSE RESEARCH AND 

ENGINEERING • 

SUBJECT: Manned Orbiting Laboratory Program Plan and Funding 

Requirements 

On June 28, 1965 the Secretary .of the Air Force requested 

approval to proceed with the development of the MOL Program and 

this authority was directed by Presidential announcement on 

August 25, 1965. The attached Program Plan and Funding Requirement document presents a summary description of the MOL Program 

which has evolved, from the Definition Phase studies and design effort 

conducted since August of last year and requests a level of funding to 

• support the technical baseline and schedule for that program. 

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The development costs for a program which best balance the 

date of the first reconnaissance flight with an orderly development 

program will cost approximately $1.92 billion for the combined 

unmanned and manned options. This estimate has been developed and 

refined from detailed cost reviews, cost reduction exercises and 

completed Phase II contract negotiations. To help you better understand what has been accomplished in arriving at our total program 

estimate, a summary of the - contract costs, fee and incentive arrange- • 

rhents for the recently negotiate, contracts follows. 

A cost plus fixed fee development contract was negotiated with 

Eastman Kodak in August of this.yearlor a total price of $258.5 

million. The fee is 8.6 percent. .However, when adjustment is made 

for certain non-fee bearing indUstrial facilities covered under this 

contract, the effective fee is 7;e rcent. Work under this contract 

is progressing essentially on schedule at this time. 

A ■ 

Insofar as the Titan 111Mlalinch vehicle is concerned we have 

negotiated fixed price incentive fee contracts with two of the four 

associates involved. The contract's negotiated to date are with the 

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Martin Company in the amount of .$157. 8 million and the AC Electronics 

Division oil General Motors in the amount of $ 26.9 millio. Target n 

costs on these contracts are $143.3 million and $24.5 million respectively with cost sharing and incentive arrangements for variances from 

target costs. Negotiations are currently in progress with United 

Technology Center for the seven-segment solid rocket motor development and with Aerojet:.-General Corporation for development of the 

increased. expansion ratio rocket engine and certain other developmental 

improvements. These two -contracts will be fixed price incentive fee 

type. 

We have recently completed our negotiations with the General 

Electric Company for a cost plus incentive fee contract. Target cost 

is $157.4 million. Fee for target cost is at 8 percent, or $12.6 million, 

and performance incentives provide for an additional 6 percent fee. 

The cost sharing on overruns or underruns amounts to 85/15, with zero 

fee being attained at $173.1 Million. 

The McDonnell Aircraft Company has entered into a fixed price 

incentive fee agreement with the Government for a contract price of 

$180.0 million. Target cost,is $163.0 million with an associated fee 

of 10-1/4 percent, or $17.0 million, for par performance. 

The Douglas Aircraft Company contract is, of course, the 

largest. We have spent considerable time to define a contract which 

recognizes the development nature, of the laboratory and at the same 

time provides suitable incentives to the contractor to encourage his 

effective management. To this end we have arrived at a fixed price 

incentive contract with Douglas in the amount of $687.8 million. The 

target cost is $625.6 million for which the contractor will receive a 

9-1/2 percent fee. We have provided for an incentive structure which 

will limit the Government's liability, including deferrals of approximately 

$125.4 million, to not more than $875.0 million. This ceiling includes 

all of the cost and performance incentives which he can possibly 

achieve. These incentives can add as much as $38.2 million in addition 

to target cost profit, or can cost the contractor as much as $34.9 

million for less than par performance. 

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Based on these, negotiated figures, the Fiscal Year RDT.&.:.' 

fund levels which are judged to ,be best - phased with baseline pro:,.-;ran-1 

objectives and schedules are summarized as follows: 

FY 1967 ry 1968 FY 1969 FY 1970 FY 1971 TOTAL 

Negotiated 214.0 5085 552.5 261.4 90.2 1626.;) 

Contract 

Deferrals 14.0 78.5 82.1 26.5 295. 1 

TOTAL 228.0 587.0 646.5 343.5 116.7 1921.7 

You will note that insofar as the contracts negotiated to date, we 

have not contracted for the total program. In the case of each of the 

contractors, we have deferred from the current negotiations certain 

items of services and equipfnents pending improved definition of our 

requirements. However, these deferrals are an integral part of the 

baseline program and must be funded on a fiscal year schedule consistent 

with the contracted effort. These include the manpower requirements 

to support mission training and the factory-to-pad test flow for all of 

the contracts concerned. Other examples of deferred equipment include 

the improved resolution Acquisition Tracking Scope, Automatic Support 

Module, V/R Sensor, Data Readout System and various spares. The 

total amount of these deferrals is, estimated at $295.0 million. 

It is readily apparent that the FY 1968 requirement exceeds the 

$510.0 million the Air Force recommended in October. The $587.0 

million requirement is our developed estimate of contractors' needs 

based on negotiated target prices together with allowances for deferreditems of services and equipment. Since the FY 1967 program requirement resulting from contract negotiations is consistent with budgeted 

funding levels, I recommend the program continue throughout the 

remainder of FY 1967 on the baseline schedule contained in the MOL 

Program Plan and Funding Requirements document. During this 

period we will exploit all lawfulMeasures to Minimize FY 1968 obligations to the previously recommendedllevel of $510.0 million and will 

continually track and evaluate program progress against established 

fiscal and development milestones.-Then in. early FY 1968, with the 

DORIAN 

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benefit of more development experience, the program fund requirements will be thoroughly reviewed to determine whether available 

funds are adequate, whether additional funds can be reprogrammed, 

or the development and flight schedules adjusted to bring fund requirements in line with fund availability. 

With your approval and release of the deferred $178.4 million 

for FY 1967, I will continue with the Engineering Development Phase, 

holding funding to a minimum consistent with meeting the schedule 

and primary objective for the first manned flight and advise you in 

early FY 1968 of any disparity that might exist between fund availability and requirements. 

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