Results of Mathematica Study

OMB Director Shultz wrote NASA’s Low on February 27, 1971, to reiter­ate the need for the economic analysis as an input into the shuttle deci­sion process. Mathematica’s final report arrived at OMB only on July 23, even though the report was dated May 31. A major reason for the delay in submitting the report to OMB were Mathematica-NASA interactions on what the report would say. Heiss commented that “there was tremendous pressure by NASA on us to come out and say okay, the two stage shuttle is a good thing.” Drafts of the executive summary were read by NASA “12, 15 times” and Mathematica was asked “why do you need this paragraph in and this is gratuitous and this is sort of not warranted.” Mathematica “stuck with it.” The report’s language, noted Heiss, was “carefully bal­anced.” In particular, Heiss said that the report’s wording was intended to imply that “it’s not clear that the two-stage system is really the one that could accomplish this [fly the projected 1980s missions] at the least cost.”37

The Mathematica report analyzed 23 different “scenarios”—forecasts of future launch demand. One of those scenarios was based on the mission model provided by NASA and DOD, which called for 736 missions over the period 1978-1990, an average of 56 missions per year. The costs of developing a shuttle and the facilities required to operate it was estimated by Mathematica to be $12.8 billion and the incremental cost of a shuttle launch was set at $4.6 million (in 1970 dollars). For this scenario, Mathematica estimated that there would be almost an $8 billion savings in launch costs and an $18 billion savings in payload costs compared to the use of existing expendable boosters. The report concluded that at a 10 percent discount rate, the “allowable” development cost (the maximum amount that would produce economic benefits) of a fully reusable space shuttle, including the space tug needed to move payloads to orbits the shuttle could not reach, was [8]

Since NASA study contractors were estimating that shuttle development (not counting the space tug) would range between $9 and $12 billion, on a purely economic basis the case for investing in the shuttle clearly required a high flight rate for the 1980s, including not only NASA but national secu­rity and commercial missions; it would take over 40 launches per year for the investment in the shuttle to break even financially.38

While there was a relatively firm basis, based on past experience with developing large aircraft and other space systems, for estimating the costs of developing and testing the shuttle, there was no comparable experience in estimating the cost of operating a reusable space system or the payload sav­ings that could result from its use. Yet those costs were an important element in determining the system’s economic payoff. This was a significant flaw in Mathematica’s analysis, since the cost per launch and payload savings inputs to its analysis were based on what one senior NASA engineer would describe only as an “optimistic guess.”39

Mathematica went on to note that the fully reusable shuttle was poten­tially “not the only system” that could achieve these significant payload cost savings, that “other technically acceptable systems should be studied,” and that “the task of identifying the best reusable Space Transportation System among all viable alternatives” had not begun. These points resonated with Don Rice and his staff at OMB, who had been pushing NASA, without much success, to look at alternatives to the fully reusable shuttle. The report com­mented that “the economic justification of a reusable Space Transportation System is independent of the question of manned versus unmanned space flight,” suggesting that the shuttle should be seen as a means of achieving space program objectives, not an end in itself. The report said that a shuttle should be developed “only. . . if can be shown, conclusively, what it is to be used for and that the intended uses are meaningful to those who have to appropriate the funds, and to those from whom the funds are raised.”40

The Mathematica report was hardly a ringing endorsement of the case for developing the two-stage, fully reusable shuttle. Its appearance in mid-1971 was an important added input to the moves already underway within NASA to make major changes in the agency’s approach to developing the space shuttle.