AMR (ETR) Funding - The 1963 Negotiations
During 1962, preceding the Webb-McNamara agreement of January 17, 1963, regarding the management relationships between AMR and MILA, there had been exchanges between NASA and the DOD on this general subject. On August 25, 1962, Mr. Webb had sent a letter to Mr. Gilpatric, Deputy Secretary of Defense, enclosing a proposed draft agreement which was in response to an earlier DOD study titled "Management Aspects of NASA Use of the Atlantic Missile Range." Mr. Webb had expressed NASA's attitude toward reimbursement as follows:
As alluded to earlier, the agreement of January 17, 1963, consummated after prolonged study and negotiations by a joint committee, left open the question of reimbursement for services to NASA in the categories of general administration, management, maintenance, and operations pending the outcome of a further joint study of the budgeting for and funding of these services. The Agreement stipulated that there would be no change in funding for FY 1963, and none thereafter until the results of the study could be applied. At that time, NASA was reimbursing DOD on the order of about $5 million a year for special or peculiar services at AMR.
Pursuant to this provision, a joint DOD-NASA group was convened "...to study the matter of budgeting for and funding of the general administrative, management, maintenance, and operations cost of AMR in order to determine whether NASA should provide to DOD a pro rata share of such costs based on the relationship of NASA program workload to total workload." This group was co-chaired by Col. R. C. Anderson, USAF, for DOD and Mr. Otis F. Redfield for NASA. In the course of its review and evaluation, the Group spent considerable time on site at the Cape. I had spent two days at the Cape in February, meeting with General Cooper while there to discuss AMR-MILA relationships. On May 3, 1963, the group submitted an agreed report to the convening authorities, Dr. Seamans and Mr. Rubel, the highlights of which are summarized below:
After identifying, analyzing and evaluating the facts associated with each alternative and listing the pros and cons of each, the report stated the following findings, conclusion, and recommendation.
At first the conclusion and recommendation of this joint Group were not concurred in by key officials in NASA Headquarters. Holmes continued to press for a pro rata share arrangement, presumably as a means of obtaining a stronger voice in the operation of the Range in support of the manned space flight program. Mr. Webb tended to adhere to his position expressed to Gilpatric a year earlier; i.e., that NASA should pay a pro rata share as soon as a change could be phased into the budget cycle. He apparently was motivated by considerations of improving overall NASA-DOD relationships and of defense of the budgets of the two Agencies, as well as a desire to have more influence on the manner in which the Range was being operated in support of NASA programs.
I personally agreed with the Redfield-Anderson findings and recommendation believing that reimbursement only for readily identifiable NASA mission-peculiar costs was the method involving the least expense to the Government, and that channels would be open to us to exert the necessary influence on the manner in which NASA services would be performed. Furthermore, I felt that such an arrangement would be in accord with the concept of a National Range developed, budgeted for, funded, managed, and operated by a single designated government agency as a national asset for the benefit of all government users, a concept strongly defended by the DOD.
 The Air Force was strongly opposed to any change which would involve NASA in the management of the Range and, according to our information, preferred to continue the then current funding arrangement.
In response to a request from me on June 10, Redfield reassessed the possibilities of finding a satisfactory method for NASA to share the cost of operating AMR. He consulted with Mr. Albert F. Siepert, Administrative Deputy to Debus at LOC. Siepert felt that full pro rata sharing would not be desirable because of the accounting and mechanical difficulties and extra expense to the Government as set forth in the joint study, that the DOD should continue to budget for and fund the Range operations required to support the development and test of missile systems, and that NASA should pay only the identifiable costs of those services required by NASA from the Range that were over and above the DOD requirements. This, in general, would be the host-tenant arrangement described in the joint report and would differ only in degree from the procedures then in effect. LOC estimated that such an arrangement would increase the NASA reimbursement to a $15-20 million figure.
Redfield's soundings indicated that the DOD would not readily accept any cost-sharing basis that would involve a NASA intrusion into their administrative and management procedures. Redfield felt, however, that the arrangement proposed by LOC would be susceptible to adequate accounting, budgeting, and funding without an undue increase in administrative costs to the Government and might be negotiable with the local Range authorities.
After much discussion within NASA, Seamans sent a letter to Brown, dated July 9, 1963, in which he stated that the recommendation of the joint study Group did not meet the Administrator's concept of a proper funding arrangement at AMR, as presented in the Administrator's letter to Deputy SecDef of August 25, 1962, and that NASA still felt strongly it "...should pay a share of the cost of the operation to the extent that this would be feasible without entailing an inordinate overhead in accounting." The letter went on to say it appeared "...that it should be possible to identify in certain areas and without appreciable increase in administrative workload the impact that NASA places on the Range over and above the costs resulting from DOD programs. If so, some funding arrangement similar to the host-tenant funding discussed in the report could reasonably be employed. While this would not result in NASA paying a proportionate share of the cost of the Range, it would at least result in payment for most of the additional workload placed upon the Range by NASA." Seamans suggested initiating measures to place such a new arrangement in effect for FY 1965.
Apparently Seamans' letter triggered an intensive discussion within DOD, particularly between DDR&E and the Air Force, just as the joint study Group's report had led to a lengthy coordination of views within NASA, since DOD's reply was not sent until October 1, 1963. The gist of Brown's letter to Seamans of that date was:
Neither of these conditions was acceptable to NASA In looking into the administrative procedures of the Air Force and its prime contractor at AMR, the NASA members of the joint study Group had come to the conclusion that there was no sound, simple method by which a reasonably accurate estimate of a NASA share of Range costs could be made, primarily because the accounting procedures in effect were inadequate to permit making a breakdown of costs associate] with the individual segments of workload. Those areas in which direct NASA and DOD costs could be identified constituted only a very small percentage of the total workload and costs. Furthermore, we believed that our Committees of Congress would insist on accounting figures in justification of any requests for appropriations to cover reimbursements by NASA for a pro rata share in the total cost of operating- the Range.
 As to the alternate condition contained in Brown's letter, NASA saw no justification for burdening NASA with the entire cost of augmenting the AMR accounting system as required to establish an equitable share of total Range costs for NASA - as one, although a major, user agency - to pay. The extent of such an augmentation of administrative services would be a matter beyond NASA's control.
While all this was going on, locally negotiated agreements implementing the basic AMR-MILA agreement were resulting in NASA's paying an increasing proportion of the O&M costs of the Range.
Dr. George E. Mueller relieved Mr. Holmes on September 1, 1963. After reviewing the AMR funding study and negotiations, Mueller came to the conclusion that of the alternatives open to NASA the solution recommended by the Redfield-Anderson group was the most acceptable to NASA; i.e., to continue the then current arrangement. Since Brown had indicated that this would be acceptable to DOD, Mueller recommended to Seamans on October 15 that we accept it. Defense Affairs concurred.
On November 5, 1963, Seamans sent a letter to Brown advising him that NASA was prepared to accept the recommendation of the Redfield-Anderson study and enclosed a draft memorandum to make the agreement a matter of record. A slightly modified version of this enclosure was signed into effect on December 5, 1963, as a MEMORANDUM OF UNDERSTANDING. In it Brown and Seamans agreed that the then current funding arrangement at AMR, as specified in the Webb-McNamara agreement of January 17, 1963, would remain in effect.
By this document, the AMR (ETR) funding negotiations, which had been going on for nearly a year and in which Defense Affairs - strongly supported by Dr. D. R. Wyatt, Director of the Office of Programs, and Messrs. Malaga and Redfield of his Resources and Analysis Division - has played a leading role, were settled for the time being.
 NASA-AFSC Funding Negotiations of 1965-66
On March 15, 1965, General Schriever, Commander, AFSC, addressed a letter to Dr. Seamans in which he stated that his staff had for several months been working with the Air Staff on the subject of reimbursement and that this effort had culminated "...in the clarification, by Department of Defense and Air Force, of certain basic principles and philosophies of reimbursements." He went on to say that AFSC would continue to support NASA programs to the extent military requirements and capabilities would permit, but that this support would generally be provided on a reimbursable basis.
I arranged for Seamans, Buckley, General Davis (Range Commander), and myself to lunch together on April 1 to discuss NASA s relationships with the ETR. It was our impression at the time that this initiative to reopen the matter of ETR funding resulted from ever increasing OSD pressures on the Services to show reductions in the DOD budget. The allotment of RDT&E funds to AFSC had been cut to the point that Schriever considered it necessary to reduce the use of such funds in support of non-Air Force programs wherever possible.
Schriever's letter requested that Seamans designate a NASA representative to engage in a joint NASA-AFSC effort to determine in detail the specifics of what should be reimbursable "...as well as phasing the implementation of the specifics into current and future support arrangements and agreements." Schriever apparently had in mind issuing jointly agreed policies as guidance for new reimbursement negotiations at the KSC-ETR level to cover both range and base support.
Seamans' reply of April 12, 1965, drew attention to the two principles existing agreements from which NASA-DOD policies on reimbursement had evolved: viz, the basic agreement of November 12, 1959, on principles governing reimbursement for cross-services and support and the Webb-McNamara agreement on the management of ETR (AMR) and MILA dated January 17, 1963, with its supplementary NASA-DOD agreement of November 5, 1963, resulting from the joint NASA-DOD study on ETR budgeting and funding. Seamans expressed NASA's willingness to join AFSC in reexamining specifics of what should and should not be reimbursable in joint and mutually supporting efforts, but stated NASA's view that any new NASA-USAF agreements must be in consonance with NASA-DOD agreements in effect.
The letter went on to assure Schriever of NASA's desire to budget for and fund the cost of discharging its responsibility to provide R&D support to other government agencies and also of its desire to pay for the support NASA received from other government agencies when there was no mutual benefit and to the extent that this would be feasible without entailing an inordinate overhead in accounting, with resulting increased cost to the Government. Mr. O. F. Redfield was designated to represent NASA in developing detailed data, and I was named to take the lead for NASA in follow-on discussions on the implementation of specifics under existing or new arrangements or agreements.
 Mr. Luther T. Lee, from the Office of the AFSC Comptroller, was designated to represent General Schriever. Following several exploratory meetings between Redfield and Lee, the Air Force side, under date of May 21, 1965, tabled a paper titled "Reimbursement Principles for AFSC/NASA Support Agreements," which was proposed as a detailed guide for drawing up NASA/USAF agreements at the field level covering reimbursements. The statement listed in detail support functions which AFSC considered should be specific reimbursement items. We distributed copies of this statement to cognizant offices in NASA Headquarters for study, and on June 10 representatives of NASA Headquarters staff and program offices met with Mr. Lee to pose questions in clarification of the AFSC statement.
A comprehensive review by NASA of the proposed "principles" resulted in a consensus that the document went beyond existing NASA-DOD agreements in parts, that it covered certain specific areas which were already covered by NASA-DOD agreements (instrumentation ships and aircraft; tracking stations), and that therefore NASA could not concur in the document as it stood. As an overriding objective, however, NASA's position was that it would be inappropriate to introduce changes at the AFSC level which would be inconsistent in some respects with agreements made at the higher DOD level without first negotiating revisions to the relevant NASA-DOD agreements.
The NASA general position was conveyed to Mr. Lee early in September and was received with some concern on his part. He urged that we not involve Air Force Headquarters and OSD in the matter. The discussions continued at a slow pace.
On October 4, 1965, Redfield sent a progress report to Dr. Seamans. He advised that our Financial Management Division was preparing a NASA version of reimbursement principles and recommended that no further action be taken until this paper had been completed and coordinated with other Headquarters offices. Redfield further recommended that this NASA draft document, when finally approved, be proposed to AFSC as the basis of an approach to OSD to effect such modifications to the basic NASA-DOD agreement on reimbursement as would be mutually agreeable and beneficial. Dr. Seamans noted his concurrence on October 8.
The staffing of this NASA position paper was not completed until the latter part of December. In its final form, it was a statement of principles and implementing guidelines which addressed the problem areas concerning reimbursement, as identified in the AFSC paper, within the context of existing DOD-NASA agreements.
In the meantime, the exercise with AFSC had been overtaken by an exchange of letters in October between Dr. Seamans and Dr. John E. Foster, Jr., who had relieved Dr. Brown as DDR&E, in which NASA responded favorably to a DOD request that the matter of sharing of overall costs at ETR be jointly reexamined.
Even though it was recognized that the NASA-AFSC discussions would, in effect, be absorbed in the higher level NASA-DOD negotiations, it was decided that I should transmit the proposed NASA guidelines  to General Schriever with a proposal that they be used as a basis for further discussions between Redfield and Lee with the objective of resolving the remaining points of difference. This I did in a letter dated January 5, 1966.
In the ensuing months, Redfield made frequent inquiries at AFSC as to when their comments on our paper might be expected. However, nothing was received until May 26, 1966, when General Carter, the USAF Comptroller, replied to my letter of January 5. He stated that the NASA paper had received considerable study, that it reflected a significant improvement in our mutual understanding on reimbursement, but that several fundamental differences of opinion remained.
The AFSC position, as Carter then went on to explain it, was somewhat surprising. It held that NASA was placing too much emphasis on mutual interest and the Webb-McNamara agreement of January 17, 1963, and that the matter of ETR funding had not been settled by the related Seamans-Brown Memorandum of Understanding of December 5, 1963.
Carter's letter concluded with a reference to Dr. Foster's invitation to reopen the matter of ETR funding and a statement that AFSC was taking steps to have further consideration of reimbursement principles and guidelines become a part of the total problem to be considered by the two Agencies.
This terminated the NASA-AFSC discussions as an independent effort, but the NASA position paper became a useful document in the protracted NASA-DOD negotiations which followed.
 ETR Funding - NASA-DOD Negotiations of 1965-67
As alluded to earlier, Dr. Foster, DDR&E, wrote to Dr. Seamans on October 12, 1965, expressing the view that the two Agencies should continue to seek ways of achieving an equitable division of significant and clearly identifiable costs at ETR while avoiding elaborate and cumbersome arrangements for dividing costs between government agencies. He pointed to the increasing magnitude of NASA activities involving ETR support, making it "less practicable" for the DOD to budget for and fund the total resources of the Range. He expressed his belief that the validity of the 1963 funding study should be reexamined periodically in the light of changing circumstances and recommended that the matter be discussed between his deputy, Mr. Dan Fink, and a NASA representative, with possible representation from the Bureau of the Budget.
On October 15, I met with Fink to explore the factors back of the Foster letter. Seamans' reply of October 22, 1965, reiterated our position that while we had always agreed that reimbursement was proper for readily identifiable, unique NASA costs, we believed that under the National Range concept and in the interest of overall economy for the Government, general purpose Range equipment and services should be provided by the Range without reimbursement. Nevertheless, Seamans agreed to reexamine the problem, and designated me as his representative to work with Fink.
With DOD's concurrence I furnished copies of the Foster and Seamans letters to Mr. Donald Crabill, BuBud, who had requested them. Mr. Crabill was our contact point in BuBud, and he closely followed these negotiations through to their conclusion.
At this point, it might be well to refer to a summary statement titled "NASA Policy Concerning Reimbursement for Exchanges with Other Federal Agencies," which I had furnished Dr. Seamans on March 17, 1965, in response to a request from him (see Attachment XI-A).
While NASA pursued certain objectives in its own right (for example the manned lunar landing) and operated systems as required to carry on its aerospace R&D, our officials generally regarded NASA as a service rather than an operating agency, directing its research efforts and performing services in such a manner as to be responsive to the interests and needs of other government agencies, industry, and the scientific and academic communities, as well as its own NASA had consistently held that under the terms of its charter, as contained in the Space Act, it had the statutory responsibility to budget for and fund the laboratories and other facilities under its control as a national resource serving the scientific and technological needs of all elements of our national life. In performing services requested by other government agencies, NASA desired reimbursement only for work and materials over and above the normal capabilities and resources of the NASA elements involved; i.e., unique out-of-pocket costs. Only under  such an arrangement could NASA keep its teams of scientists, engineers, and technicians intact and efficiently employed; maintain effective control over the operation of its facilities and the flow of work; and achieve the degree of administrative, organizational, and operational flexibility essential to the most effective, efficient, and productive planning and management of its research and development efforts. The Administrator held that the type of R&D work performed by NASA under its charter could not be done on a job order basis.
On the other hand, we were aware that Mr. McNamara was pressing hard for a government policy which would require NASA, and other government agencies, to operate under a system of full reimbursement for all cross-services performed, his expressed rationale being that only through such an accounting system could the true cost of each government program be identified.
Mr. Fink and I promptly began the long series of meeting which marked these negotiations, and each of us set in motion the necessary backup work in our respective Agencies.
Mr. Rosen in Defense Affairs took the lead in gathering statistics from our Centers on the use made of our facilities by other agencies and the number of man-years of professional assistance provided during 1965. The resulting figures showed that thirty-five per cent of the aeronautics facility test time available at NASA Centers had been devoted to support of DOD projects. The test facility support given in the field of space was minimal. However, the technical and material assistance being given in support of the MOL was very substantial, as previously indicated. This non reimbursed cross-support would be taken into account in balancing out some of the support NASA was receiving at ETR.
The following NASA personnel were designated by the Administrator's Office to assist me in the study; all were tireless in their efforts and were of enormous help to me, as were Mr. Rosen and all of the people in my own office:
Dr. DeMarquis D. Wyatt, Head of Programming, played a major role in the difficult negotiations, joining me in several meetings with Fink. Wyatt was particularly helpful in supervising the preparation of statistics, studies, and analyses. Mr. Joseph F. Malaga and Mr. Thomas Campbell of Wyatt's office also made important contributions, and many others in Headquarters provided advice and assistance. Mr. Willis H. Shapley, Deputy Associate Administrator, with his extensive background of experience with BuBud, furnished invaluable -guidance to us and gave much of his time to the project.
 The first four meetings that I had with Mr. Fink convinced me that DDR&E had little if any negotiating latitude. At that time the total annual cost of operating the AFMTC (ETR, including down-range stations, plus Patrick Air Force Base and the 6550th Support Wing) was running about $240 million, and NASA use of ETR was accounting for approximately half of the activities of the Range. Fink appeared to be operating under a directive from higher authority to accept nothing less than reimbursement for half of the total Range costs.
Despite this apparent negotiating roadblock, we did agree in recognizing two alternative approaches to the funding problem.
DOD approached the problem of reimbursement in terms of the value to NASA of the supporting services received from the Range; i.e., what it would cost NASA to maintain and operate facilities to provide this support if the Range were not there. NASA approached the matter in terms of the cost to the DOD to provide services to NASA over and above what the cost would be to operate the Range to meet DOD requirements in the absence of any NASA workload. Fink and I spent many hours debating the relevance of this differentiation without ever coming to a meeting of the minds.
Although a number of meetings took place at which views were exchanged, arguments put forth, and the results of informal studies discussed, no significant progress was made during the six months following the agreement to reexamine ETR funding. Seamans and I met with Foster on March 16, 1966, presumably to discuss the matter (Fink probably was present), and I met with General Davis, the Range Commander, at AFSC Headquarters on April 18, 1966.
By letter dated May 3, 1966, Dr. Foster sent to Dr. Seamans proposed Terms of Reference incorporating guidelines for the restudy of the ETR funding- matter by Fink and me.
 The DOD-proposed guidelines prejudged the outcome of the study by stipulating that a new arrangement was necessary which would divide the total cost of operating the Range between NASA and the DOD in a ratio generally proportionate to the workloads imposed upon the Range by the two Agencies. Specifically, the proposed Terms of Reference called for the establishment of a joint working group to draft a cost-sharing agreement covering ETR and KSC based on the following guidelines:
Aside from the prejudgment aspect of DOD's proposed Terms of Reference, our thoughts as to the specifics were very much the same as they were in the cost-sharing study of 1963. Adequate accounting records did not exist at ETR to serve as a basis for a division of costs in the various functional areas in the ratio of workloads, and no reasonably precise method for estimating ratios was apparent. We would be concerned over the reactions of our Congressional Committees to requests for funds which were not supported by adequate accounting data. Any considerable expansion of the accounting procedures by the Air Force or its contractors, or both, would result in added costs to the Government for the operation of the Range as a national resource.
 Nevertheless, NASA was agreeable to increasing its contribution to the total cost of operating the Range and in fact desired to do so, to the extent that costs attributable to the NASA-imposed workload could be identified and substantiated with only a minor increase in overall expense to the Government.
Seamans' reply on May 20, 1966, reflected these thoughts. It drew attention to the discussions which had been going on between NASA and AFSC and to the NASA draft of guidelines on reimbursement which had been furnished to AFSC on January 6, 1955. It suggested an open-minded approach and an examination of the situation in detail before conclusions on policy were drawn. It stated that NASA could accept pro rata cost-sharing on a user basis only if we were accorded a commensurate voice in the management of the functions so funded.
The letter enclosed a proposed charter for our joint study titled "Task Assignment and Supporting Arrangements for Study of DOD-NASA Relationships at ETR-MILA" (see Attachment XI-B).
The NASA proposed charter was not acceptable to DOD and so, rather than attempt to reconcile guidelines at the Seamans-Foster level, it was agreed that Fink and I should prepare a basis upon which to proceed with the study.
Accordingly, on July 12, 1966, Fink and I issued a joint directive setting up two working groups to assist us in our study, one management and the other financial, with a tentative target date of August 12 for submission of their reports, a deadline which proved to be far too optimistic. Following an introduction of background, the directive stated as follows:
With the joint directives were furnished detailed Terms of Reference for the two working groups, copies of which are attached ( see Attachments XI-C and XI-D).
The studies by the two working groups and internal studies by NASA and the Air Force were too extensive, detailed' and complex to be described in detail in this narrative. My notes indicate numerous intra-NASA meetings as well as discussions with Fink and his principal assistants in the months that followed. I spent three days at the Cape discussing the funding problem with the local NASA and Air Force officials.
My meetings with Fink were for the most part inconclusive. I shall attempt only to record the highlights of the actions and negotiations that took place between issuance of the Fink-Boone directive to the working groups and the final result of our task assignment.
 The Management Group proceeded in the usual manner for such joint efforts and eventually submitted an agreed joint report on November 1, 1966. The report generally met the specifics of the Group's Terms of Reference.
The report of the Management Working Group set forth in detail two alternate management arrangements. Alternative A was associated with a Cost-Sharing method of reimbursement. Alternative B related to a method of reimbursement based on Identifiable Costs.
Under Alternative A, NASA would participate in the management of ETR to a degree commensurate with its share of the funding, but the final responsibility and authority for the efficient and economical operation of the Range would remain with the DOD. NASA would participate in the short term and long-term planning of those general purpose resources for which NASA participated in the funding and of NASA-peculiar resources. NASA would participate, and its concurrence would be required, in the associated cost determinations and joint funding estimates made by ETR. In general, ETR would coordinate with NASA in its planning and procedures for budget formulation, operation, and improvement of the Range, and NASA would be accorded access to accounting and auditing information as necessary to justify to BuBud and Congress its budget requests for Range support as to their merit and validity. Provision was made for joint coordination groups at the KSC-ETR and the DOD-NASA levels. The joint Working Group accepted the Defense Affairs definition of "coordination."
The Group recognized that the Alternative A arrangement would introduce a "significantly increased" workload on the NASA side, for its participation in the planning and implementation phases of Range operation and the monitoring of joint funding, and an "increased" workload on the DOD side, for establishing and maintaining accounting and work-recording procedures to establish and justify the DOD-NASA use ratios. The Group could not agree on the numbers of additional people required to meet these workload increases.
Dr. Mueller estimated that forty to fifty additional personnel spaces would be required by NASA for its participation in Range management under Alternative A.
Essentially, Management participation under Alternative B differed from A only in degree. Range management responsibility and authority would remain with DOD. Implementation of the Identifiable Cost reimbursement arrangement would be accomplished under existing planning, programming, and budgetary procedures and agreements. ETR plans to meet the support requirements specified by NASA would be coordinated with NASA. NASA would evaluate the adequacy of the support and would participate in the associated cost estimates. ETR planning for Range improvement would be coordinated with NASA. Specifications and work statements for the larger procurements where joint funding was involved would be coordinated with NASA. For contracts involving, $500,000 or more of NASA funds, NASA would be represented on the  Source Selection Board. The scope of accounting reports would be enlarged to cover support of common-use, general-purpose resources so that NASA would have all necessary information to verify and justify its budget requests for reimbursement funds. The NASA membership on the KSC-ETR Advisory Group would be reconstituted to include representation of other NASA organizational entities that interfaced with ETR. This group would be charged with implementing the NASA-ETR coordination provisions of Alternative B.
On the basis of an informal review, NASA found the findings and recommendations of the Management Working Group to be generally acceptable at that point in the negotiations.
The Financial Working Group did not jointly study the problem in the usual manner and was not able to submit a final report. In lieu of a joint approach, the Air Force farmed out the task to its prime Range contractor, Pan Am. In August, the contractor produced a comprehensive study (undated) by Pan Am, counter-signed by General Brown, the DOD Co-chairman of the Financial Group, but not by the NASA Co-chairman. The report, in addition to furnishing a large amount of data (yet incomplete), went beyond the Terms of Reference in that it selected a preferred method of funding (Cost-Sharing) and attempted to justify the choice. The Pan Am study report did not address any alternative reimbursement method and did not cover all of the specifics of the Terms of Reference of the Financial Group.
Briefly, the Pan Am report found that "...the cost of having the Range there to use should be borne by the users in proportion to the cost of their actual use" and "...that joint-financing at department level might not produce perfect equity for either side, but that this was much preferred to any procedure which contemplates a ponderous accounting system at operating level which seeks precise equity...." In Pan Am's judgment, a system seeking precise equity could not be built because, sooner or later, overhead expenses must be distributed on a judgment or formula basis.
The report stated that the existing accounting system for contractor's costs, which were about fifty per cent of ETR total costs, would permit the identification of direct costs and provide a basis for allocation of other costs to Range users. The other half of ETR costs was not amenable to allocation to range system, component, or user, the report said.
Of several possible methods for determining the annual cost shares of DOD and NASA at ETR, Pan Am selected the Mission Index or Test Load Factor (TLF) method as the most practical measure of the workload imposed by each Range user. The TLF was developed by ETR to display the relative impact of different missions on the Range. A basic postulate of this measurement system is that the total Range is employed in support of the missions which have accumulated direct costs during the fiscal year under consideration. A brief explanation of the TLF computation is as follows: All costs and hours of ETR facilities and services that can be identified to missions are segregated. The Test Load Factor in a given program is  the result of the sum of total direct effort in that program divided by the actual number of launches in that program, and reduced to a standard launch unit; i.e., a Thor-Delta launch would be expressed as a specific value, 1.3, representing its impact on Range support compared with the impact of the launch of other types of vehicles. A Titan III might have a TLF value of 11.0. The basic Pan Am proposal was to share the annual Range costs in accordance with the relative percentages of agency activity as reflected in the sums of the Test Load Factor values for missions launched by each Agency in the budget year.
This method applied to FY 1968 projections gave a NASA share of forty-two per cent. Applying this ratio to FY 1968 estimates would have indicated NASA contributions of $93.7 million to Range operations and maintenance and $35.3 million to capital additions. The cost universe considered by Pan Am was the entire ETR budget, including such items as military pay and allowances, hospital operation for military personnel and dependents, military recreational facilities, operation and maintenance of Patrick Air Force Base, and other costs which we considered unnecessary for support of NASA launch requirements at the Range.
The Pan Am study did not examine the Identifiable Cost method of reimbursement in any detail, nor did it analyze and compare the two methods, - as the Financial Group was directed to do in its Terms of Reference.
In the course of their study of ETR funding, the NASA members of the Financial Working Group examined the possibility of determining some rational basis for cost-sharing as a technique for dividing Range costs. They found that application by ETR accountants of three different indices for arriving at a NASA user ratio led to radically different results. The three indices tested were: (1) the distribution of instrumentation time to projects, (2) the allocation of direct labor as recorded at each base location, and (3) the TLF method described above. All of these approaches were predicated on a relatively small data base. Applied to the accrued cost of operating the Range in FY 1966, as reported by the Air Force, the difference in the NASA share under the high and low ratios would have amounted to twelve percentage points or $31 million. These results had convinced the NASA membership that no obvious precise basis for distributing common costs existed.
All factors considered, we in NASA were evolving to a position that the most valid and equitable arrangement, and the most economical from the Government's standpoint, was one in which we would attempt to expand the base of identifiable direct costs in the Range contractor's workload area, and NASA would reimburse for such costs attributable to the NASA workload, plus a corresponding ratio of the contractor's overhead, plus that portion of Range administration costs (corporate overhead) incurred as result of the NASA support requirements. Studies by Wyatt's people and KSC indicated that by this approach NASA's annual reimbursement could be increased by a figure in the $40- to $50-million range.
 On August 24, 1966, nearly two weeks past the prescribed tentative deadline for the reports of the working groups, I sent a memorandum to the two NASA Co-chairmen, assessing the progress in terms of specific tasks yet to be accomplished as I saw them and urging every effort to complete the work as soon as possible.
On September 7, 1966, Mr. Fink sent me a letter in which he reviewed the lagging progress of the Working Groups and proposed a time table for our future discussions by subjects, including the cost-sharing proposal contained in the Pan Am report and the Management Group's report which was expected soon. He suggested that the NASA members of the Financial Group prepare a paper on the reimbursement method favored by NASA and expressed the hope that he and I could discuss the rationale and specific provisions of this alternative funding method without awaiting the availability of certain cost data which the NASA membership had requested from ETR. (Range officials had declined to assist NASA representatives in a detailed analysis of the Pan Am contract and the Range accounts.) Finally, Fink suggested that we establish a goal of September 28 for completing our deliberations and preparing a NASA-DOD agreement on a new financial arrangement and accompanying management changes at ETR.
I replied to this letter on the following day, after meeting with the NASA Co-chairmen of the Working Groups. From their progress reports, I had to say to Fink that I was not hopeful that his proposed schedule could be met. Additional data from ETR were needed for an evaluation of the Pan Am Cost-Sharing proposal. Data requested from ETR but not yet received were needed before the NASA alternate reimbursement plan could be formulated, and not until both alternative methods had been developed could they be analyzed and compared, as directed under "SPECIFICS" in the Terms of Reference of the Financial Group. Nevertheless, I agreed to meet with Fink on September 19 as he suggested.
In an internal paper dated October 13, 1966, the NASA members of the Financial Group reported on their analysis of three methods of arriving at a Cost-Sharing arrangement against the known FY 1966 funding data. This analysis showed the degree of variance in results under the three workload measurement methods referred to earlier. The NASA group found that the Test Load Factor, as used by ETR and applied in the Pan Am report, needed refinement. They further found that well defined work units as a basis for cost-sharing could not be identified, and that the ETR accounts were not structured to provide specific information on functional costs and requirements attributable to users. Other conclusions were:
After Fink and I had issued our joint directive setting up the two Working Groups and while the Groups were engaged in conducting their studies of the two alternatives in accordance with their respective Terms of Reference, DOD issued a directive dated August 25, 1966, signed by Deputy Secretary Vance, subject: "Department of Defense Support of National Aeronautics and Space Administration (NASA)," which contained the following statement of policy:
Those of us in NASA having direct cognizance of NASA-DOD relationships were surprised and concerned over the issuance and timing of this DOD directive. In its impact on NASA, it appeared to us to be inconsistent with the basic DOD-NASA (Gates-Glennan) agreement on reimbursement for cross-services of November 12, 1959, as well as the Brown-Seamans agreement of December 5, 1963, on AMR (ETR) funding. It had been issued without any prior discussions or coordination with NASA, or with the Bureau of the Budget as far as we knew.
In response to this newly annunciated DOD policy, the individual Services issued implementing directives. The Air Force directive bore a date of November 15, 1966. It stated: "Normally, support will be provided to NASA on a reimbursable basis."
On October 18, 1966, Foster sent a long letter to Seamans summarizing the DOD position on ETR funding and answering questions raised by Seamans in a prior telephone conversation. Foster generally defended the various aspects of a Cost-Sharing arrangement such as recommended in the hen Am report. He said that the current funding practices at ETR tended to obscure the visibility on costs of support of NASA and DOD programs, but that the visibility could be improved. He assured Seamans that Range cost estimates were reasonably accurate, that NASA's share could be fairly determined, that safeguards against unforeseen NASA costs during the budget year could be provided, and that NASA officials would receive the same degree  of detail on Range planning and budget estimation as did Air Force Headquarters and DDR&E for assessment and validation of overall Range budgeting and general management.
Foster felt "it would be a mistake for the DOD and NASA to attempt to manage the ETR by committee action." he was confident that existing controls were adequate to safeguard against mismanagement.
The letter concluded with a proposed set of "principles" to guide the negotiations by Fink and myself. These "principles" were essentially the guidelines initially proposed by DOD and rejected by NASA on the basis that they would serve to pre-select an arrangement on funding and management.
Seamans replied on October 26, 1966, saying that since Boone and Fink had been given the job of considering the advantages and disadvantages of alternate solutions to the problem, they should be given the opportunity to complete their task assignment under the terms of the original Foster-Seamans directive and, hopefully, to arrive at an agreed recommendation.
My meetings with Fink and our supporters continued. On October 27, 1966, I sent a long letter to Fink setting forth the NASA position on reimbursement in full, together with comprehensive supporting argumentation, as a basis for discussion. Our position was based essentially on analyses by the NASA side of the Financial Working group and by Wyatt.
These exchanges probably prompted the letter from Mr. McNamara to Mr. Webb of November 2, 1966. This letter served to confirm my earlier impression that Foster and Fink were restricted in their negotiations to the Cost-Sharing alternative. The Secretary stated: "I believe that the costs of our respective programs can and should be brought into better focus without materially affecting the existing general arrangement for mutual support. Accordingly, I propose to initiate a policy of full recovery of DOD costs of support to NASA' anticipating that the Defense Department will in turn reimburse NASA for support received. ...I hope that the new Range agreement will achieve full recovery of DOD costs in FY 68, that the policy can be extended to other areas to the maximum extent possible in FY 68, and that all DOD support to NASA, and NASA support to DOD will be on this basis by FY 69."
We in NASA interpreted the content of the Secretary's letter to mean that only the Cost-Sharing alternative for ETR funding would be acceptable to him, again a prejudgment of the outcome of the joint study then in progress, and that Mr. Webb's policy and desires regarding reimbursement to NASA for services and support provided to the DOD, and to other government agencies, were not acceptable to DOD.
A draft reply to Mr. McNamara's letter, setting forth NASA's views in the premises at some length, was prepared by the General Counsel and redrafted three times by Defense Affairs over a period of nearly a month,  during which time we fully coordinated with all cognizant offices in Headquarters, but the written reply was not sent. So far as I know, the matter was overtaken by the decision, on my recommendation, to refer the troublesome issue to the Bureau of the Budget for resolution, as being essentially a selection of the most economical and efficient method of budgeting.
At this point, the Secretary attempted to force a settlement of the issue on DOD's terms by submitting a budget request for DOD support of ETR in FY 1968 which was $45 million less than a figure determined under the NASA-DOD agreed funding arrangement then in effect for ETR, apparently hoping to require NASA to add the $45 million to its budget request to insure continuation of support for the Apollo program. When this move came to the attention of the Director, Bureau of the Budget, he ruled (letter to the Administrator dated Dec. 20, 1966) that $45 million should be added to the DOD budget request, at the same time expressing the hope that the two Agencies could reach agreement on ETR funding and any accompanying management changes in time for the FY 1969 budget formulation.
Mr. Fink and I continued our efforts to convince each other of the merits of the respective positions of our Agencies. Additional areas for reimbursement for identifiable NASA costs were found in the course of the continuing KSC studies, which enabled us to make a series of increasing offers for settlement under the NASA philosophy. The increase offered in the NASA reimbursement for O&M in FY 68 finally reached an amount of about $34 million over what the figure would have been under the then current arrangement. All of these offers were rejected. At one point, the suggestion was made in DDR&E that NASA take over the operation of the Range, the DOD becoming a tenant' but no one in NASA took the suggestion seriously.
This phase of the negotiations, viewed within the context of the McNamara letter of November 2, 1966, convinced me that further negotiations on the Boone-Fink level, or indeed on the Seamans-Foster level, would be fruitless. The NASA and DOD philosophies regarding reimbursement for interagency cross-services and support were in direct conflict. To me, the only way in which the impasse could be resolved would be for Mr. McNamara and Mr. Webb jointly to refer the entire matter of NASA-DOD reimbursement to the Director of the Bureau of the Budget for decision, and to agree to accept his decision as final. To this end, I drafted a proposed report by Fink and me to Foster and Seamans in response to our task assignment, saying that we could not reach agreement. At the same time, I advanced the idea within NASA and informally to Fink of calling on BuBud for help, since l felt that the Boone-Fink group should make some kind of a constructive recommendation toward a solution. The draft report reviewed the efforts of the Working Groups, expressed our inability to reach agreement on a new funding arrangement, incorporated unilateral statements of our divergent positions on funding, set forth those areas of management changes under the alternative Cost-Sharing and Identifiable Cost reimbursement plans on which I thought we might be able to agree, and stated several non-controversial findings regarding revisions to existing agreements and the funding of instrumentation ships and aircraft.
 Mr. Fink apparently realized the fruitlessness of further negotiations at about the same time that I did. On January 17, 1967, before I had submitted my proposed report to him, he sent me a letter in which he proposed that we report to Seamans and Foster that we believed further negotiations "to be pointless until and unless the fundamentally incompatible agency policies can be reconciled." He believed that this could only occur at higher policy levels. He enclosed a proposed draft of a joint report. The draft was quite brief. It reported that the Financial Group had been unable to reach agreement on either of the alternative approaches to reimbursement which had been identified and that the report of the Management Group, while of some possible future use, could only be regarded as a point of departure, subject to modification in order to be consistent with the realities of the ultimate financial arrangement. It commented that the failure to achieve agreement on the financial issues reflected that current agency viewpoints and policies did not provide an area of possible agreement and then went on to describe very briefly the divergent agency positions on ETR funding. The draft concluded by declaring an impasse in negotiations and requesting "either that additional policy guidelines be furnished or that we be discharged from further responsibility for negotiating an agreement."
I felt that there was much more of value that Fink and I could say to our superiors than contained in his proposed report, and so I continued to refine my proposed draft, in coordination with other cognizant offices in Headquarters. My final draft, which I presented informally to Fink as a substitute for his proposed report, reflecting some hardening of the NASA position which had taken place following DOD's flat rejection of all of our ascending offers of payments under the Identifiable Costs method of reimbursement. We strongly adhered to the basic principle of reimbursement of identifiable costs as opposed to cost-sharing. The Cost-Sharing plan advocated by DOD had weaknesses which predisposed it to administrative problems. One problem of transcending importance, as pointed out by Wyatt, concerned the necessity which NASA would face of having to place an absolute priority on its budget item to cover its "common cost" share. This priority would have to prevail throughout the Executive Department review, Congressional actions, and post-appropriations Executive Department decisions concerning each budget; otherwise, the DOD would be placed in an untenable position in its operation of the Range.
The NASA position on management under a Cost-Sharing plan went somewhat beyond the report of the Management Group, primarily in calling for "joint" management of the Range in case that method were adopted.
By letter dated February 17, 1967, Fink returned a heavily revised version of my proposed report. The proposed changes were ample evidence that the two Agencies were still far apart as to the extent to which NASA would participate in the planning and management of the Range under a cost-sharing arrangement requiring NASA to pay approximately half of the total cost of maintaining the Range. It appeared at this point that we could not even agree as to how we should report that we disagreed.
 The initial reaction in both NASA and the DOD had been negative in my recommendations that Fink and I be relieved of our task assignment and that the ETR funding issue be referred to BuBud for resolution. Our records indicate that I again put forward the BuBud proposal to Fink on January 25, 1967. I also conveyed to him Seamans' thought about the possibility of Seamans and Foster discussing the matter informally with Mr. Sam Hughes of BuBud. Fink agreed to discuss the matter with Dr. Foster. Fink apparently did so, as in his letter to me of February 17 he said he believed our Agencies should not yet take a formal position with BuBud.
By this time, NASA's top management had come around to the opinion that the entire matter of NASA reimbursement to DOD for services and cross-support should be referred to BuBud for decision, but did not wish to include in such a request the matter of reimbursement of NASA by other government agencies receiving support from NASA. Opinion in DOD apparently changed to agreement on the first point, but continued to insist that the reverse case of reimbursement to NASA for all support rendered be linked with NASA-to-DOD reimbursement.
In a letter to Seamans dated March 6, 1967, Foster referred to the improbability of being able to reconcile the wide differences in the basic views of the two Agencies on the Boone-Fink level. With respect to my suggestion that the issue be referred to BuBud, he said their initial reaction had been that such action might be premature, but that upon further consideration they had concluded that involvement of BuBud might be an effective way to achieve clean-cut guidelines for the financial aspects of DOD-NASA relationships across the board. He made reference to their interest in implementing the DOD policy set forth in Mr. McNamara's letter to Mr. Webb of November 2, 1966. Foster enclosed a proposed joint letter to be sent by Seamans and Foster to the Director of the Budget. (It had been decided in informal discussions that it would be better for the request to be sent from the Foster-Seamans level than from the Secretary and the Administrator.) The draft letter covered the complete financial interface, as desired by Mr. McNamara.
Under date of March 13, 1967, I prepared a draft reply to Foster's letter for Seamans signature. The draft expressed concurrence in the desirability of referring the ETR funding issue to BuBud as primarily a matter of budgetary policies and procedures. It expressed agreement in applying BuBud guidance with respect to ETR across the board to NASA reimbursement of the DOD and vice versa, for administrative, operational, and logistic support rendered. The draft disagreed, however, with DOD's position of including in the request to BuBud the matter of reimbursement for R&D services performed by NASA laboratories for other agencies. We enclosed a revised draft letter to BuBud along these lines.
This draft letter contained what I thought to be a good rationalization of NASA s position with respect to the funding of the NASA laboratories, and therefore I am quoting the rationalization in its entirety:
After fully coordinating our draft reply in NASA Headquarters and receiving Seamans' approval, I took the draft, unsigned, over to discuss it with Fink and to attempt to get his approval of our changes in the draft letter to BuBud.
About this time, Fink and I agreed on a brief joint report to Foster and Seamans which would simply state our inability to resolve the basic philosophical differences between the NASA and DOD funding policies and would enclose unilaterally prepared statements setting forth our respective Agency positions with supporting rationale. The final draft, prepared by Fink, was signed by me on March 23, 1967, and by Fink on March 28, and sent forward. Since this report, with enclosures, represented the culmination of seventeen months of study and negotiation, I am attaching a complete copy (see Attachment XI-E).
Fink had enclosed the final draft of our joint report in a letter to me dated March 21, 1967. In that letter, he said he had discussed with Foster my March 13 draft of a proposed reply by Seamans to Foster's letter of March 6 in which we proposed that the matter of NASA laboratory funding be excluded from the arbitration being requested of the BuBud. DOD adhered to its position expressed in Mr. McNamara's letter of November 2, 1966, and suggested that any exceptions we desired to a broad policy of full reimbursement be expressed in a NASA unilateral position statement to BuBud; DOD would accept the BuBud decision in this matter. (We had learned that Foster personally agreed with the NASA position regarding the funding or our laboratories.)
After some further informal discussion, a joint letter was sent from Foster and Seamans on April 4, 1967, to Mr. Charles L. Schultze, Director of the Bureau of the Budget, requesting a judgment from BuBud "concerning the complete financial interface." It had been agreed that unilateral NASA and DOD position papers would not be furnished to BuBud until requested.
Defense Affairs went to work immediately to prepare a draft NASA position paper and to fully coordinate the draft with all cognizant Headquarters offices and with KSC. The paper was ready when Mr. Ellis H. Veatch, Chief of the Military Division, BuBud, orally requested on May 11, 1967, that copies of our position statement be sent to him informally in advance of Mr. Schultze's official replies to NASA and the DOD. This paper reflected a basic principle annunciated by Mr. Webb; namely, that costs charged to NASA should represent work NASA requires and that such work should be susceptible to control by NASA (see Attachment XI-F).
On July 10, 1967, Mr. Schultze sent identical letters to Mr. McNamara and Mr. Webb in which he said: "...I accept the task of arbitration. I do so, however, only with the understanding that any decisions I  may render on the financial issue will be considered binding by both agencies." He asked for position papers with regard to reimbursements at ETR, each Agency to state the financial consequences on itself and the Government as a whole of the other Agency's position. He also requested enumerations of those activities, tasks, and cross-services considered to comprise the "complete financial interface" on which the Bureau of the Budget had been asked to rule and a brief description of the related reimbursement agreements or practices then in force. All data were to be submitted by August 7.
Defense Affairs was asked by Mr. Shapley to take the responsibility, jointly with Mr. William E. Lilly, Assistant Administrator for Administration, for preparation of the material requested by BuBud.
Collection and organization of the data requested was a major task, requiring many hours of work by many people in the Headquarters functional offices, Program Offices, the Centers, and the "front office. " Rosen played a major role in planning and organizing the work and was of tremendous help to me in accomplishing the task assignment. Lilly, of course, played a leading role throughout. Redfield and his assistant, Mr. Charles Tulip, Jr., collected and analyzed an enormous body of data covering the entire financial interface.
Mr. Webb's reply to Mr. Schultze, enclosing all of the material requested, was signed out on August 9, 1967, only two days after the target date. In his letter, Mr. Webb agreed to the stipulated condition for arbitration. (Mr. McNamara likewise agreed in his reply, dated August 16, 1967.) Mr. Webb summarized NASA's positions with respect to funding at ETR, funding of NASA laboratories, and reimbursement for the services of manned space flight mission recovery forces. The enclosures which accompanied the letter were as follows:
Copies of our data were furnished to DOD, and they reciprocated with copies of their material furnished to BuBud.
There followed a series of meetings between representatives of BuBud and key NASA officials involved in the ETR funding negotiations. Mr. Ellis Veatch was the BuBud Official immediately in charge of this phase. Mr. Donald Crabill was his assistant in assessing the NASA case, and Mr. Robert A. Linder in reviewing the DOD input. Initially, these were bilateral meetings, BuBud with NASA or DOD, but as I recall there were one or two BuBud-DOD-NASA meetings in the latter stages, attended by Seamans and Foster.
 On October 27, 1967, we furnished to BuBud, in response to their request, a comprehensive listing of ETR facilities on the mainland and downrange, divided into categories of "needed by NASA" and "not needed by NASA" in 1967 and 1968. The list was compiled by OTDA on the basis of information supplied by KSC and GSFC.
In November, OTDA received a request from the Range Commander for reimbursement for the funding of the DDMS Technical Assistance Group, the Air Force office at ETR which supports the DOD Manager for Manned Space Flight Support Operations (about thirty man-years). Also OTDA was informally approached by Air Force elements indicating their intention to ask reimbursement for various other segments of Range indirect support, such as the sixty-man management office for the Apollo instrumentation ships, which had not previously been reimbursable. We took the position that the BuBud decision to continue to operate under existing agreements through FY 68 covered these items and that therefore they were not reimbursable at that time.
The first official decision of the Director of the Bureau of the Budget in the process of arbitrating the controversial issue of the DOD-NASA financial interface was conveyed to NASA in a letter from the Director to the Administrator dated February 28, 1968, two months after my tenure as Associate Administrator for Defense Affairs had ended and two and one-half years after the matter of ETR funding had been reopened at the request of DOD. Although the Bureau's decision did not fall within the period of this narrative, it is summarized in part below to provide an ending to the protracted negotiations concerning ETR funding which had been carried on by, or under the monitorship of, Defense Affairs.
 Other Funding Issues - 1966 and 1967
Four other NASA-DOD funding issues closely related to ETR funding negotiations were raised while the negotiations were going on. These concerned COMSAT launches, Apollo recovery forces, and support services at WTR and WSMR.
 Reimbursement for Communications Satellite Corporation Launches
The Communications Satellite Act of 1962, which established the Communication Satellite Corporation (COMSAT) as a private organization, subject to extensive government regulation and control, provided that NASA would be responsible for launching the company's communication satellites on a reimbursable basis. Included in the launching services furnished by NASA were range support services furnished by the USAF at ETR.
The first, developmental COMSAT satellite was EARLY BIRD, launched on April 6, 1965. The USAF charged NASA a nominal $23,000 for EARLY BIRD range services, which NASA passed on to COMSAT. This amount was arrived at by the USAF on the basis of a DOD-NASA understanding, agreed upon in 1962, that when NASA furnished launching services for commercial space programs in an R&D stage, National Range support would be provided by USAF principally on a non-reimbursable basis. In addition to the charges for USAF range support, NASA was reimbursed for the identifiable additional costs incurred by NASA in connection with the launch, such as the cost of the Delta vehicle, launch crew services, project management, engineering support.
In about May 1966, NASA received unofficial advice that the Air Force was contemplating billing NASA an amount in excess of $650,000 for each of the Intelsat II series of satellite launches which were then pending. On June 16, 1966, Secretary McNamara addressed a letter to Mr. Webb saying that he proposed to direct that the current OSD guidance to the USAF on charges for commercial space programs be revised to permit the recovery of "...full user charges for the support rendered on behalf of the COMSAT Corporation." Mr. McNamara did not feel that this was inconsistent with DOD-NASA agreements, "...since those agreement did not contemplate unreimbursed NASA support to a private, profit-making corporation." He further believed that the matter should be treated separately from the ETR funding negotiations then in progress. He requested Mr. Webb's concurrence in this proposal.
Mr. Webb replied on July 11, 1966, making these principal points:
Since this issue was primarily a matter of a legal interpretation of the provisions and intent of the Communications Satellite Act, the NASA side of the negotiations between NASA and the DOD were largely carried on by Mr. Walter Sohier, the General Counsel, and by Mr. Edward M. Shafer, his assistant. Defense Affairs assisted as called upon. Our records indicate that Mr. Fink and I did discuss the matter as a part of our ETR funding negotiations, but in the main the negotiations on this issue were carried on outside the framework of the ETR funding study.
 Mr. McNamara delayed in answering Mr. Webb's letter. In the interim, there were informal discussions with DOD, but these resulted only in a reiteration of the DOD position. Estimates of the charges DOD would make ran as high as $1.1 million per launch.
We in Defense Affairs took the position that it was unreasonable and not consistent with the intent of the Communications Satellite Act to bill COMSAT for launch services on the basis of the value of such services instead of their actual cost to the Government. Furthermore, it seemed apparent that the estimated charges were premised on a cost universe which, as in the case of the DOD position on ETR funding in general, included costs for Air Force activities at the Cape and at Patrick AFB which we were unable to relate to COMSAT launches. Even so, we felt that the issue went beyond the question of the NASA-DOD financial interface. Considerations of national policy and international relations were involved. It was our Government's policy to assist COMSAT in every way to establish a global satellite communications net. To be required to back-bill their foreign carriers for greatly increased launch charges would be embarrassing to COMSAT, and such action would be certain to jeopardize the U.S. position in the renegotiation of the Consortium arrangements due to take place in 1969. Because of the national policy implications, we recommended that the Department of State and the White House be brought into the picture.
The Defense Affairs position was consistent with the opinions the General Counsel.
Mr. McNamara answered Mr. Webb's letter of July 11, 1966 on April 24, 1967. In the meantime, there had been extensive staff discussions on the legal, accounting, and policy ramifications of the issue. In his letter Mr. McNamara held that government-wide policy, as set forth in BuBud Circular A-25, "requires charging the full cost incurred by the Federal Government in rendering these special services" and that the "charges must include both direct and indirect costs." He went on to state: "Accordingly, the Air Force will bill full user charges for range support for the entire series of Intelsat II launches and for future COMSAT launches." The Secretary stated that because of a possible misunderstanding in the earlier exchanges between NASA and the Air Force, NASA would be billed only "for the heretofore unbilled direct costs for Early Bird." The issue, of course, was the basis for determining the actual cost to the Government in providing the launch services.
Defense Affairs was not involved in the issue of reimbursement for COMSAT launches beyond this point. We understood that discussions continued among high level representatives of NASA, DOD, COMSAT, State, and the White House. (A compromise solution was reached in May 1968, generally along the lines of reimbursement only for direct charges in the cases of the first three launches which took place prior to Mr. McNamara's letter of April 24, 1967, and direct charges plus an allocated portion of Range Indirect/Support charges in the case of all subsequent COMSAT launches.)
 Western Test Range Funding
By a DOD directive dated November 16, 1963, the principal space launch facilities on the west coast, located at Pt. Arguello, were transferred from the Navy (PMR) to the Air Force (WTR), effective in FY 1965.
A locally approved draft of a Range Support Agreement was sent to NASA Headquarters in September 1966 for review. The draft generally reflected the policy on reimbursement which had previously been in effect, but made provision to apply any change in reimbursement procedures which might come out of the ETR funding negotiations then in progress. We in Defense Affairs found the draft acceptable, subject to minor corrections to reflect changes in ETA-KSC organizational relationships. However, NASA top management decided in October 1966 that finalization of the WTR Range Support Agreement should await the outcome of the NASA-DOD negotiations on reimbursement in general. The Air Force agreed, and the question of reimbursement for range services to NASA at WTR was referred to BuBud as part of BuBud's review of the entire financial interface between NASA and DOD.
A revised draft of a Range Support Agreement, prepared locally by the WTR and the WTR Operations Division of KSC, was reviewed in Defense Affairs on March 7, 1967. (As of this writing, 1970, the draft is still under consideration, but both sides are evolving to the belief that such an agreement is not needed.)
On January 23, 1967, a local Host-Tenant Support Agreement was signed by the WTR Operations Division of KSC, as tenant, and the 1st Strategic Aerospace Division, which operated the launch area of Vandenberg AFB, as host. The agreement delineated the management responsibilities of the two parties at WTR and detailed the host support services to NASA which were reimbursable and those which were not. Reimbursable items were generally all Civil Service direct labor, plus an agreed percentage of direct labor costs for overhead, and all contractor's costs for services rendered in response to NASA written requests. Base administration and maintenance and common-use services generally were not reimbursable. No difficulties arose in the implementation of this agreement.
 White Sands Missile Range Funding
As referred to earlier in this narrative, the acquisition of land for the construction of certain NASA developmental facilities at WSMR and the support services rendered NASA by the Army at that Range were covered by two separate agreements between NASA and the DOD (executed by the Army), both effective December 18, 1962. The Range support agreement was due to expire on June 30, 1967; the land acquisition agreement, on June 30, 1970. On August 15, 1966, I addressed a letter to DDR&E requesting that the Range Support Agreement be extended for five years. DDR&E referred the matter to the Army.
With respect to reimbursement, the 1962 Range Support Agreement provided that common-use services would be furnished without reimbursement, in accordance with the DOD directive to the Service Secretaries dated October 26, 1962. Out-of-pocket costs, including Range overtime, would be reimbursable.
(Effective April 30, 1968, a revised version of the 1962 Range Support Agreement was signed, extending the Agreement to June 30, 1972. No change in the funding arrangement was made, except for an added stipulation that the Agreement would be amended as necessary to reflect future DOD-NASA financial arrangements.)
Incident to a general DOD budget squeeze, the Army issued a directive on June 20, 1966, placing restrictions on overtime use at various DOD activities, including WSMR. On September 1, 1966, we were informed that Army Headquarters had directed WSMR to restrict overtime work to certain projects. The list did not include NASA's planned thirty-per-year Aerobee launches with scientific payloads, even though NASA was prepared to pay all related overtime costs. Defense Affairs appealed the matter to the Army, and learned that WSMR had made a reclama to Army Headquarters concerning the overtime order. Eventually, without bringing the issue to a head officially, we were able to work out arrangements with WSMR whereby the Aerobee launches were accommodated on schedule.
 Recovery Forces - Availability and Reimbursement, 1966-1967.
As early as December 27, 1963, DOD began calling for a statement of NASA's requirements for Project Apollo contingency and planned recovery support, data which were necessary to enable DOD to project its resources requirements five years beyond FY 1964 under its "Five Year Force Structure Financial Program." For Mercury missions, the DOD had provided Fleet ships and aircraft for contingency and planned recoveries. Generally similar requirements for Gemini flights had been furnished to the DOD Manager, Manned Space Flight Support Operations (DDMS).
Under the terms of a NAVY-NASA agreement effective July 16, 1964, NASA was reimbursing the NAVY for ship days and aircraft hours devoted to direct participation in recovery operations and for training and test in preparation therefor. Included in the agreed formulas for ship days and aircraft hours were such costs as fuel, lube oil, spare parts, other consumables, non-scheduled repairs, and prorated cost of aircraft overhauls.
NASA also reimbursed the Navy for the installation and removal of special equipment and for any other out-of-pocket costs such as travel, telephone charges, photography, etc. Some specified indirect charges were also reimbursable.
Apollo mission planning was very much in a state of flux in 1963, and it was not until April 1, 1964, that even a preliminary estimate of Apollo recovery requirements could be furnished. Being conscious of DOD's long range planning problems, Defense Affairs had repeatedly urged OMSF to expedite their determination of recovery support required for Apollo. By letter dated December 8, 1964, OMSF forwarded to DDMS a document titled: "Preliminary Recovery Requirement, Project Apollo," together with an Apollo flight schedule, adding the caveat: ''The enclosed documents will be updated as events dictate changes."
On October 18, 1966, a meeting was held at Navy Headquarters to hear and discuss the difficulties which the Navy was forecasting in meeting the recovery requirements of both NASA and the DOD (MOL) in FY's 1967 and 1960. The meeting was attended by Mueller and Christensen from OMSF; Mr. Christopher C. Kraft and Mr. J. B. Hammack from MSC; V. Adm John B. Colwell, Deputy CNO for Operations, and R. Adm W. C. Abhau, Commander, Recovery Task Group, representing the Navy; General Davis, DDMS, and an assistant, Colonel Olson.
Only through having an observer present at a subsequent OMSF staff meeting did Defense Affairs learn that the meeting had taken place, an example of the reluctance of OMSF to recognize our office as the focal point within NASA for the NASA-DOD interface. At our request, Christensen prepared a Memorandum for the Record covering the meeting.
 It was brought out in the meeting that the Pacific and Atlantic Fleet Commanders had studied the support requirements in relation to available ships and aircraft and other commitments and had concluded that the requirements could not be met without some augmentation of current forces. To meet the situation, the Navy had prepared a recommendation for the creation of a "dedicated force" of ships and aircraft consisting of one transport aircraft carrier (AVT), with helicopters, and six destroyer escorts (DE), this force to be employed solely in recovery operations. Crews would be limited to those required for this special purpose. The U.S.S. CHAMPLAIN, originally an ESSEX class attack carrier, which was then in the process of being inactivated, was a prospective AVT. Six DE's scheduled to be decommissioned would be kept in service to comprise the remainder of the ship force. The activation and first year operating cost of such a dedicated force was estimated at $54,200,000, with yearly operating costs of $18,000,000 thereafter. This was ten times the then current rate of reimbursement to the Navy for the costs incident to the periodic use of ships and aircraft of the active Fleets in recovery operations. Our people estimated that a "dedicated force" would be needed at sea approximately thirty per cent of the time.
Also discussed at the meeting was an Air Force proposal, called "Safe Return," involving the use of heavy, land-based helicopters in lieu of ships and ship-based helicopters for the recovery of astronauts and spacecraft. This plan, which had been submitted to OSD, would have involved the augmentation of the Air Force Aerospace Rescue and Recovery Service with twenty-nine new heavy helicopters at a cost of $1.2 million each. The plan would not have met the Navy's immediate problem, however, since the required new helicopters could not be operational before 1969.
The possibilities of using Coast Guard, MSTS, or Range instrumentation ships to ease the requirement for combatant ships were considered. In response to a subsequent inquiry by Defense Affairs, it was learned that MSTS would not know until the following March whether one of its CVE's being used in transporting aircraft to SE Asia could be made available for recovery support.
NASA representatives stated at the meeting that, in recognition of this overall problem, a recent review of recovery requirements had been conducted in an effort to find ways to reduce the coverage needed but that, as a result of the review, they did not foresee any possibility of doing so.
On November 10, 1966, Mr. McNamara sent a letter to Mr. Webb in which he stated the following:
In a companion memorandum of the same date, Mr. McNamara requested DDMS to convene the joint study group and to submit a report and recommendations by December 8, 1966, on necessary action in FY's 67 and 68. The Secretary stated: "Requirements and possible solutions for recovery support beyond FY 1968 should be taken into consideration; however, the emphasis of the study should be on resolution of factors related to FY 67 and FY 68 fiscal decisions." The DOD policy on reimbursement was reiterated.
Once again it was apparent that in a joint study group convened at the instigation of DOD, the DOD side was given little, if any, latitude for negotiation, compromise, or objectivity in the outcome of the study. Only one finding would be acceptable to Mr. McNamara; i.e., recovery from NASA of what he termed "full user costs."
General Davis promptly called a meeting of the interested parties, to be held at AFSC Headquarters on November 21. Rosen and I attended, along with Dr. Mueller, Mr. Christensen, Brig. Gen. David Jones, M. Gen. John Stevenson, and Capt. Jack Holcomb from OMSF, and other NASA representatives, about forty-five attendees in all. Several presentations were made as to the problem capabilities, alternate solutions, and costs. Considerable discussion took place.
In lieu of a direct reply from Mr. Webb to Mr. McNamara, I sent a letter to General Davis on November 22, 1966, naming the following NASA officials to serve on the joint study group:
Christensen sent a long letter to Davis on December 2, 1966, enclosing a new forecast of NASA manned missions through CY 1973 and a statement of recovery support requirements, which modified in major respects a forecast which had been furnished on September 1, 1966. The letter pointed out that, as greater operational confidence was developed through added experience, the coverage requirements could be expected to decrease "to a major degree" and that on the basis of current schedules this might be expected to take place commencing in January 1969.
The letter made a number of other points:
On December 7, 1966, General Davis submitted a comprehensive, detailed, classified report of the joint study in which the NASA membership did not concur. The report recommended the creation of a nucleus "dedicated force," built around a reactivated AVT, at a total estimated acquisition and operating cost in FY's 1967 and 1968 of $31.1 million.
The NASA membership of the joint study groups prepared a comprehensive statement of the NASA position growing out of this joint examination of the alternatives for providing recovery support. This position paper, which had been fully coordinated with and concurred in by Defense Affairs, was transmitted by Mr. Christensen, as NASA Co-chairman, to General Davis, the DOD Co-chairman, in a letter dated December 8, 1966, with the understanding that it would, in turn, be transmitted to the Secretary of Defense and become a part of the report which had been submitted on December 7, 1966, by General Davis.
Since Mr. Christensen's letter summarized, from NASA's viewpoint, all of the factors bearing on the problem of recovery forces, a copy of the letter is included herein (see Attachment XI-G).
Although the source and funding of recovery forces was discussed informally by Ml. Shapley and Mr. Veatch, BuBud, as a matter possibly impacting the formulation of the FY 1968 budget, no further definitive action with respect to the availability and funding of recovery forces took place as a direct result of the joint study initiated by SecDef. The indefinite suspension of Apollo flights following the Apollo fire on January 27, 1967, relieved the Navy of the burden for the time being. The fiscal aspects of the problem, as part of the overall NASA-DOD financial interface, were encompassed in the budgetary issue referred to the Director of the Bureau of the Budget on April 4, 1967, for resolution.
 The Secretary of Defense reopened the question of recovery forces on September 19, 1967, when he sent a memorandum to DDMS requesting an independent study of the costs and effectiveness of alternative recovery systems. (M.Gen. Vincent G. Huston. USAF had relieved General Davis as on July 1, 1967.)
SecDef stated that he was concerned as to how DOD would continue to provide recovery support to meet the planned increases in both MOL and Apollo space activities during 1970-1975, but that he was deferring decisions pending the outcome of the independent study. He asked that the study be divided into two parts, one for the support of MOL alone and the other for combined MOL and Apollo support. The study was to examine three major alternatives:
The study should design and cost alternative systems against various probable capsule recovery (access) times. A report with supporting data was requested by April 1, 1968.
General Huston sent a memorandum to Dr. Mueller on October 13, 1967, enclosing a copy of Mr. McNamara's memorandum of September 19 and requesting that cognizant officials from OMSF and MSC be made available to meet with him to formulate a study development plan. Huston alerted us as to his need for a forecast of NASA flight schedules for the 1970-1975 period.
The difficulty of furnishing anything approaching reliable mission scheduling data so far in advance would be recognized by anyone generally familiar with the MOL and the Apollo and post-Apollo programs. Nevertheless, at a meeting held on November 24, 1967, pursuant to Huston's request of October 13, NASA and DOD (MOL) representatives did agree to review information available to them and to submit to DDMS their best judgment estimates of activity in the 1970-1975 period, together with statements of assumptions and/or qualifications, these data to be reviewed periodically for revalidation. This information was to be made available by January 15, 1968. (Comprehensive estimates of NASA operational and logistics support requirements and launch schedules for the 1970-1975 period, together with planning assumptions, were furnished on January 24, 1968. )
[163-164] Attachment XI-A. NASA Policy Concerning Reimbursements for Exchanges with Other Federal Agencies.
 Attachment XI-B. Task Assignment and Supporting Arrangements for study of DOD-NASA [Relationships?] at ETR-MILA.
[166-168] Attachment XI-C. Terms of Reference. Financial Working Group.
 Attachment XI-D. Terms of Reference. Management Working Group.
 Attachment XI-E. Memorandum for Dr.John S. Foster, Jr. and Dr. Robert C. Seamans, Jr. Subject: DoD/NASA Financial Relationship.
[171-173] Attachment XI-E. Statement of NASA Position with Respect to ETR Funding.
[174-178] Attachment XI-E (continued). Statement of DoD Position with Respect to ETR Funding.
[179-190] Attachment XI-F. Statement on Reimbursement for Services at Eastern Test Range.
[191-192] Attachment XI-F (continued). Statement on Funding of NASA Laboratories.
[193-195] Attachment XI-G. Memo. To: Lt.Gen. Leigton I. Davis.; From: Director, Mission Operations, Office of Manned Space Flight.; Subject: Statement of the NASA Position Incident to the Joint Examination of Recovery Requirements, Solutions, and Related Financing Requested in Mr. McNamara's CONFIDENTIAL Letter to Mr. Webb dated 10 Nov 1966.