NASA is moving to change its management and procurement strategy for billions of dollars in shuttle, Station and Space Launch Initiative (SLI) contracts--including a possible full restructuring of the shuttle program--in the wake of a Rand Corp. study which found that contract management and safety reform is essential across all U.S. manned space projects.

NASA has just hired three of the 12 Rand team members to jump-start reforms within the space agency.

The Rand-led effort was focused on a shift to shuttle competitive sourcing in place of privatization, but found such efforts must be closely coupled to the International Space Station and especially to SLI developments to replace the shuttle.

Aviation Week & Space Technology obtained a copy of the report by the Rand-led "Shuttle Competitive Source Task Force," whose members spoke on background.

Actions from the report could significantly affect hundreds of civil service jobs at the Kennedy, Marshall and Johnson space centers. "A shift to competitive sourcing is likely to transfer many personnel out of NASA," the report said.

It could also greatly affect the multibillion-dollar United Space Alliance joint Boeing/Lockheed Martin Space Flight Operations Contract (SFOC) at Kennedy.

"Implementing some competitive source options will likely require breaking up the SFOC contract; others could be built upon the current SFOC structure," the task force said.

The closely held assessment is to be briefed to NASA Administrator Sean O'Keefe on Sept. 23. O'Keefe plans to use the Rand findings as another major weapon to bring NASA cost management into the 21st century. But the report will also spark more debate on space shuttle launch safety as those moves are made.

"Decaying infrastructure and shuttle component obsolescence . . . are significant contributors to a future declining safety posture," the Rand report said. The report said NASA should consider restructuring the shuttle program to restrain costs within shrinking budgets and to facilitate competitive sourcing--short of privatization. It proposed several management options on how to restructure the program and the impact of those options.

The Rand assessment also raises cost and contracting issues that challenge the wisdom of retaining the Marshall Space Flight Center shuttle procurement structure for main engines, solid rocket boosters and external tanks.

The report indicates that transferring those Marshall contract responsibilities to the Kennedy Space Center, under corporate as opposed to NASA management, should be assessed for potential annual multimillion dollar savings. A consolidation of main engine propulsion work at the Stennis Space Center, Miss., instead of having it spread across Marshall, Stennis and at Edwards AFB, Calif., could also bring savings.

And the report said shuttle infrastructure repair and upgrade costs--a factor in decisions on keeping the shuttle operating toward 2020--may be as much as $800 million--about double NASA's current estimates. A better timetable for when the shuttle will truly be replaced is another key goal.

The issues raised by the Rand study will also draw into question whether NASA should maintain its current approach toward the $50-60-billion Space Launch Initiative designed to develop options for replacement of the shuttle by 2020.

The study team was made up of about a dozen nationally known experts from business, finance, management and technology, supplemented with experienced space personnel.

There are no criticisms of SLI in the Rand study--other than a strong view that shuttle reform would be highly synergistic to the course of SLI. But Rand team members have met with members of a Langley Research Center team charged to review SLI as part of the overall U.S. Integrated Space Transportation Plan. That team works under NASA's Independent Project Assessment Office based at Langley.

RAND MEMBERS said both they and the Langley team are concerned about the accuracy of NASA's current SLI cost estimates--findings that could spark management and contractor changes in SLI. Langley team members said their findings are still secret.

O'Keefe requested the Rand competitive source analysis for guidance on the shuttle privatization issue and how to bring the annual $3.8-billion shuttle program in line with the Bush administration's "Management Agenda" for the federal government.

The Bush agenda has as its guiding principle "that government should be market-based." The assessment found that the shuttle program's true annual cost is $3.8 billion--about $600 million more per year than calculated by the agency--but that the program is generally well run even if the structure is flawed.

The results are being presented to O'Keefe just as the shuttle is scheduled to return to flight early next week after a three-month grounding caused by hydrogen flow liner cracks. The liftoff of Atlantis is scheduled for Oct. 2 at an undisclosed time between 2-6 p.m. EDT to help thwart any terrorist threats (AW&ST Sept. 16, p. 60).

The report also comes just a week after O'Keefe was forced to cancel Kennedy's Checkout Launch and Control System (CLCS) project that is four years behind schedule with costs threatening to double the original $207 million estimate (AW&ST Sept. 2, p. 42). More than 400 jobs could be affected by the cancellation, which O'Keefe believes was announced here in a callous manner. But the CLCS issue pales in comparison with the personnel and safety issues in the Rand assessment.

The report found "full-scale privatization of the shuttle program is premature" but proposed several other competitive sourcing options.

The findings, however, will generate controversy among astronauts and managers over shuttle safety oversight. This is, in part, because portions of the Rand findings run directly counter to a major shuttle privatization review led by the Johnson Space Center in late 2001. That assessment said any delay in shuttle privatization would threaten shuttle safety (AW&ST Dec. 24, 2001, p. 36).

"We debunked the Johnson findings," a Rand participant said. "All the Johnson team data was skewed toward NASA's current culture--and a cultural change in NASA is required."

"Competitive sourcing could significantly expand private sector responsibility for safety," the report said.

But Rand members said Kennedy Space Center Director Roy Bridges, a former astronaut and retired major general who also commanded the Air Force Flight Test Center at Edwards AFB, Calif., told them that some commercial concepts could end up "with a shuttle being flown into the water."

RAND TEAM participants pointed out, however, that had "corporate contractors" had a vote the day Challenger exploded, no launch would have taken place because Challenger was launched after a NASA manager overruled strong objections from Thiokol.

Another Rand team member stressed that a truly independent safety oversight group formed as part of shuttle restructuring could step in rapidly to prevent problems. He said that if such an organization were in place earlier, it not only could have prevented Challenger, "but may also have averted" the near-disastrous Apollo 13 emergency and the 1967 Apollo 1 pad fire that killed astronauts Gus Grissom, Ed White and Roger Chaffee.

"The worry is that the transition from the current NASA-led safety oversight structure to a new independent safety body be done properly without adding complications," he said.

The Rand team proposes that "Three-Key" structure be established where an independent safety organization separate from NASA has a "key," the prime contractor has a key, and NASA has a key. To validate the "certificate of flight readiness," all three participants would have to turn their keys--in a bureaucratic sense--to approve launch.

The Rand report has praise for current shuttle safety efforts by NASA and United Space Alliance but also notes that the metrics used to calculate current shuttle safety "do not provide true insight into the shuttle programs' (SSPs) state of safety."

"NASA has been attempting to generate . . . 'leading indicator' safety metrics, but to date has not been successful," Rand found.

"While there is a strong safety focus, there are still too many shuttle safety problems being discovered 'by chance' to say you really have an effective safety program," a study team member said.

About 90% of the shuttle program work is done by several thousand contractor personnel. But the Rand report found contractors have only about 10% of the management oversight authority--with NASA retaining 90% of that role.

"But NASA has not implemented a program of management reforms to crystallize efficiencies and cost savings to get ready for competitive sourcing," the Rand study found. More aggressive competitive sourcing could change that and "theoretically" save hundreds of millions of dollars in shuttle, station and SLI costs if enacted now.

The group had two key findings in this regard:

* Program "right sizing" could lead to streamlined, lower cost and safer operations. The "right sizing" goal means providing Houston with "full managerial authority over shuttle infrastructure and personnel." That role is now largely shared with Marshall and run as if the shuttle--21 years into flight operations--is still a research and development system.

"If 'right-sizing' is not implemented it is unlikely that the current budget blueprint will cover future funding requirements," the report said.

* Transformation of the shuttle program now "into an operations program" with a field center matrix management structure could also save costs. "The program now is very 'NASA center-centric.' You have four major NASA centers with overlapping responsibilities as they were set up for the development program," a study participant said. That should be restructured to a "program-centric" both geographically and contractually with the functions consolidated at fewer centers--primarily Johnson and Kennedy. Again, Marshall's role is a wild card, but its engineering expertise must be protected.

"Before you can move into competitive sourcing, you need to realign and streamline the program so you can package something the private sector can deal with," a team member said.

By making such moves, NASA could reduce the overall shuttle cost by nearly 10%, making major cost savings as the program finally tails off, the report said.

But making such changes will require O'Keefe--and the Bush administration--to expend a lot of political capital. The Rand report suggests that if O'Keefe is not willing to make such changes, shuttle program costs will continue to grow.

"If NASA cannot overcome political and bureaucratic resistance to 'right sizing'--the annual cost of the space shuttle program will likely rise," the Rand team found.