07 March 2011

Double It, Double It Again, and Again, and Once More

Have you ever wondered how NASA estimates the costs of space flight programs?  Courtesy of Glen Butts and Ken Linton (PDF), here is how it was done for the Apollo program:
[T]he original cost [estimate] was 1.5 billion with completion targeted in 1965. The "actual" historical events went something like this. The NASA cost estimating gurus in 1961 projected an amount close to $7 Billion to do the entire program.33 34 This figure was apparently padded to $10-$12 Billion by management prior to giving that estimate to James Webb, the NASA Administrator. Mr. Webb (within hours of receiving the $10-$12 Billion figure) placed an "administrator's discount" on NASA’s ability to predict costs with due precision and by the stroke of his own pen, changed the estimate to $20 billion and submitted it to Vice President Linden B. Johnson. In the words of Robert Seamans Jr., (the Associate Administrator at the time) "We were aghast!"35 This cavalier beginning describes how Apollo's original fiscal requirements arrived at the steps of the Capitol and was subsequently blessed by Congress.

Ironically, the $20 billion amount submitted by Mr. Webb to the Vice president appeared to be a completely arbitrary and highly irregular move. In anyone's book it was a radical cost estimating maneuver to be sure. But in the end, Mr. Webb's innate business sense and the courage to follow what that sense told him validated his action. It turned out to be a leadership demonstration of profound foresight. In the end the "real cost" of Apollo ultimately surpassed Mr. Webb's $20 billion estimate with a price tag of $25.4 billion as was reported to congress in 1973. The final program cost varies depending on what we include or exclude in the calculations,36 37 38 but in all instances exceeds $20 billion.
Today we are submitting a very short analysis of the total costs of the Space Shuttle program, 1971-2011 -- stay tuned.

8 comments:

Harrywr2 said...

Engineering programs almost always end up costing 2-3 times what the engineers think.

It's just the nature of engineers to say 'I could knock that out in 4 hours on a good day'.

The reality is not everyday is a good day, most days are mediocre and some days are downright awful.

Matt said...

A common technique (I often use it, anyways) in estimating time for software development is to create the estimate, double it, then increase the unit of measure / order of magnitude. So two hours becomes 4 days.

Applied to the original cost estimate here, we'd arrive at $30Billion.

matthew hincman said...

this is an interesting problem. I used to own a high-end metal fabrication company (three guys in a garage making really cool stuff), and we would account for every piece of metal, every hole drilled, every bit of welding, etc. We would also spell this out very clearly for the client. We got pretty good at it. When there was a seriously challenging project with lots of uncertainty (including a potentially pain-in-the-butt client) we would have a contingency line. As artists & crafts people, our line of work is littered with moments of uncertainty - and we got good at using this "uncertainty contingency" to make sure we didn't lose the shirts off of our backs.

How can one account for the massive uncertainties in a project like human space travel, when it had never been done?

jstults said...

The other way to look at this is that the work expanded to fit the budget / schedule that was provided. That money will get spent if Congress appropriates it. If the capability is unique and valuable, then the budget will expand to the level of "pain" that Congress-critters are willing to bear. In cases where the program brings lots of political value the budgeted amount is generally a lower-bound for future negotiations: you clearly haven't found the limit of pain yet.

DeWitt said...

When analyzing the cost of a program like the Space Shuttle, you should look at how it changed from the original concept as budget constraints changed over the years. The federal budget is passed one year at a time. Even 'entitlement' programs can, in theory anyway, be changed at any time. There really isn't anything like a long term capital budget. It's all expensed every year.

Roger Pielke, Jr. said...

-5-DeWitt

FYI:
http://sciencepolicy.colorado.edu/admin/publication_files/1993.03.pdf

http://sciencepolicy.colorado.edu/admin/publication_files/1992.02.pdf

Tom Cuddihy said...

A well-known similar occurence happened with the Nautilus, the world's first nuclear submarine. Nautilus was originally designed for two R-4 chilled water conditioning units, only one of which needed to run in order to meet the calculated thermal requirements of the submarine air conditioning.

Somewhat arbitarily, and apparently on a whim, Rickover ordered them to install 4 units anyway.

And a good thing, too, because with less than 2 units running, the Nautilus engineering spaces rapily became too hot to work. No one had ever run a steam plant in a closed hull before, and Rickover's instincts about how much thermal leakage a steam plant produced had been much closer than the calculations.

DeWitt said...

Roger,

I see that you were spot on on your prediction in the 1993 report of the high probability of another shuttle loss.

I don't think manned space flight at our current level of technology is justified, with the possible exception of the Hubble telescope. In terms of throwing taxpayer money away on big projects with little chance of any practical benefit for said taxpayer, the SSC would have been a much better project than the space station. Of course, the SSC was doomed as soon as a site was picked. Maybe if they could have put it in the Four Corners region with parts in all four states it would have succeeded.

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