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OF THE SECRETARY 

01,ait 

DEPARTMENT OF THE AIR FORCE 

WASHINGTON 20330 immilimuung 

MAR 2 6 1969 

Centro tern 

MEMORANDUM FOR DR. SEAMANS 

----- SUBJECT: MOL Funding 

Recent events and information concerning DoD's nearterm financial prospects, plus the realization that MOL has 

 yet to go through OSD/AF FY 70 Apportionment, lead me to 

 conclude that MOL is unlikely to be funded at or very near 

 the $556 million level -- assuming it survives the BoB 

 Presidential Budget Issue. 

If so, FY 70 will mark the third straight Fiscal Year 

that MOL has been funded at a level at least $85 million below 

program needs for a reasonable development pace, and the 

third straight year that development will have been stretched 

out and finances manipulated on the premise that adequate 

funding would be available "next year". 

To minimize past development stretchouts and their 

 related net increases in total program cost, the MOL Program 

 has gradually moved toward an expenditure funding basis, and 

 the maximum possible non-critical work (from a technical 

 difficulty standpoint) has been deferred as far as possible 

 into the future. As a result, there is no financial flexi- 

 bility whatsoever in the program and the planned future work- 

 flow balance can be described at best as marginal. Further, 

,t3 as the product of numerous cost reduction exercises. except 

 for items related to crew safety or the 

 resolution goal, various desirable features of the development 

 program have been eliminated. 

PROGRAM FUNDING/SCHEDULE CHRONOLOGY: 

When the past history of MOL is reviewed, it is difficult 

to be optimistic about the future. In that vein, a brief 

summary of past-to-present MOL funding/schedule gyrations 

might be helpful: 

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1. Phase II (Engineering Development) began in 

September 1966 and sufficient FY 67 and prior NOA was 

available to finance all FY 67 work toward a December 1969 

first manned launch. Unfortunately, the initial contractor 

negotiations were still underway at the time the FY 68 Budget 

Estimate was being compiled and the FY 68 dollar needs were 

not well defined and could not be adequately justified. The 

Air Force submitted a requirement to OSD for $510 million; 

this was subsequently reduced first to $480 million and then 

to $430 million in the Budget Estimate submitted to Congress. 

2. By the Spring of CY 1967, it was obvious that 

maintaining a development pace toward a December 1969 first 

manned launch might require as much as $150 million more than 

the $430 million then being considered by the Congress. To 

reduce FY 68 funding needs, the decision was made to incorporate 

a "production" camera in the first manned spacecraft rather 

than the previously planned qualification article (which, 

at best, would have provided not better than GAMBIT-3 resolution), and to proceed at a somewhat more deliberate development 

pace. The first manned launch was therefore rescheduled to 

December 1970, and FY 68 MOL development activity began with 

the Air Force planning to add $50 million to the $430 million 

NOA appropriated by Congress. For planning purposes, FY 69 

funding was assumed at various levels between $620 and 

$661 million. 

3. By the Fall of CY 1967, it was quite clear that 

(a) the program was expending funds at an annual rate in 

excess of $480 million NOA; (b) the Air Force could not 

reprogram any additional money into MOL beyond the $430 million 

appropriated by Congress; and (c) camera system development 

and production was going to take even longer than anticipated. 

Meanwhile, estimated fund requirements for MOL in FY 69 had 

increased to $680 million at one point but, by September, were 

reflected in the Five Year Defense Plan (FYDP) at $640 million. 

4. In December 1967, because of both the FY 68 fund 

shortage and the longer-than-planned camera system development 

phase, the first manned launch was rescheduled to August 1971. 

Following a SecDef-level review of program and funding 

alternatives, $600 million was included for MOL in the FY 69 

Budget Estimate submitted to Congress; and a like amount was 

reflected in the FYDP for FY 70. 

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5. MOL development activity proceeded along in the 

last half of FY 68 toward an, August 1971 first manned launch, 

with work and expenditures predicated on $600 million NOA in 

FY 69. Late in FY 68, because of the impending Congressional 

$6 billion reduction in Federal FY 69 expenditures, it was 

apparent that DoD could not fund MOL at the $600 million level. 

In June, USAF/OSD decided to reduce MOL FY 69 NOA to 

$515 million, and the first manned flight was rescheduled to 

December 1971. $600 million NOA for FY 70 was planned at that 

time. 

6. In the preparation of the FY 70 Budget Estimate 

in December 1968, the NOA level for MOL was set at $576 million 

rather than the previously-planned $600 million. At about the 

same time, it was obvious to MOL management that at least 

$635-640 million would be needed in FY 70 (contractor estimates 

were considerably higher) to continue the on-going development 

pace toward a December 1971 first manned launch. It was 

understood in the AF and OSD that $576 million NOA in FY 70 

would result in some additional development stretchout and 

increase in total program cost. 

7. However, with the impending change in Administration, it was assumed that a reappraisal of MOL was in the 

offing. Therefore, because of uncertainty of the level at 

which MOL might be supported and because of the sizable effort 

and cost involved in a major rescheduling exercise, action 

was not initiated immediately to replan the MOL Program on the 

basis of $576 million NOA in FY 70. Development activity 

continued toward a December 1971 first manned launch (and 

still is) with the understanding that required rescheduling 

would be accomplished before the end of FY 69. 

8. In early March 1969, as you know, the unmanned 

MOL system development was deferred, a fourth manned launch 

was added to the program in lieu of the previously planned 

two unmanned reconnaissance flights, and the $576 million in 

the Budget Estimate was reduced accordingly to $556 million. 

9. On March 25, Gen Crow requested and received 

an impact statement on a possible further FY 70 MOL NOA 

reduction to $525 million. The MOL response pointed out that 

$525 million would represent an approximate $85 million 

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reduction below that needed to continue the development pace 

maintained to date toward a December 1971 first manned launch 

(even with the recent deferral of the unmanned development 

effort), and although a precise assessment had not yet been 

made, at least a 4-6 month development stretchout and 

$160-210 million total program cost increase was forecast. 

(Note: For your information, the estimated stretchout and 

cost increase corresponding to $556 million FY 70 NOA was 

included in the program alternatives submitted to Mr. Packard 

in late February. . . . And, while on the subject of 

rescheduling, the Systems Office and MOL contractors should 

begin at an early date the 4-6 week exercise involved in 

replanning the program towards a specific FY 70 NOA total.) 

PROGRAM IMPACT: 

In December 1966, the total estimated cost of the MOL 

seven launch manned/unmanned program was $1.98 billion. By 

December 1968, as a result of the earlier decision to fly a 

production camera at the outset; the necessity to stretchout 

development and launch schedules because of inadequate or 

unanticipated reductions in funds; recognition of a lengthier 

camera development period than originally planned; plus 

detailed system definition and refined cost estimates, the 

estimated total cost had increased to $3.04 billion. . . . 

The recent change to a six launch manned system program 

should result in a net reduction of approximately $200 million 

in total cost. 

The attached table and graph reflect most of the major 

financial fluctuations the MOL Program has undergone and the 

effect of fund/schedule changes on Associate Contractor 

manpower loading. The impact on the contractors has been 

severe in terms of both stability and efficiency. 

SUMMARY/RECOMMENDATION: 

At the $556 million level in FY 70, and assuming adequate 

future-year financial support, the first manned launch in the 

MOL Program will take place at least 27 months behind the 

initial Phase II target date of December 1969. Approximately 

half of those 27 lost months can be attributed to inadequate 

funding, and the remainder to the decision to fly a 

production model camera system at the outset plus the longerthan-anticipated time required for camera system development. 

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Of the more than $1 billion increase in estimated total 

cost since December 1966, as much, perhaps, as a third can 

be attributed to more detaiIsd program definition and refined 

cost estimates; however, the majority of the increase is a 

direct result of development and flight schedule stretchout 

for the reasons cited above. 

The MOL Program development status today is such --

sizable quantities of test hardware are flowing between contractors; initial flight hardware is in fabrication; approximately 80 percent of peak contractor manpower is on board, 

etc. -- that what seem to be relatively minor fund reductions 

result in disproportionately large development stretchouts 

and net increases in total program cost. . . . In retrospect, 

because of the many major variations between planned and 

allocated funds, certainly not all of the $1.2 billion spent 

to date has been used as effectively as it could have been. 

Past events leave little doubt that the AF and OSD 

believe MOL is a worthwhile undertaking. However, the real 

question is whether the DoD/AF can really "afford" MOL (e.g. 

fund the program at levels commensurate with a reasonable 

return from the large dollar amounts which must be committed). 

MOL history and current financial discussions indicate that 

we either will be unable or unwilling to fund the program 

properly. And if that is a correct assessment of future 

prospects, then we should face the facts and terminate MOL now. 

JAMES T. STEWART 

Major General, USAF 

Vice Director, MOL Program 

Atch 

a/ s 

cc: Dr. McLucas 

Mr. Hansen 

Gen Ferguson 

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