Public Policy: Missiles & Mismanagement

Never in its history has the U.S. tried to do anything so intricate in so short a time as its missile program. The nation has achieved notable feats in an undertaking that calls for crash construction of the most complicated equipment ever devised. Failures are inevitable in exploring the unknown. Batting averages are not the full test of success in the missile league, but misses do cost millions—and of 193 attempted launchings of U.S. satellites and Atlas and Titan missiles since 1957, only 118 have been completely successful. The original goal of the Mercury astronaut program was to put a man in orbit by late 1960 at a cost of $200 million; now the target date is late 1961 and the anticipated cost $500 million. All in all, the U.S. missile effort is something less than it should be.

Who is to blame? In recent weeks. much of the guilt has been assigned to labor unions, whose bickering and strikes have cost 162,872 man-days on missile-site construction alone. So undeniable is labor’s share in the failure that last week President Kennedy set up an eleven-man mediation board to settle without strikes labor disputes involving missile and space programs. But in the endless, echoing corridors of the Pentagon—and even within industry itself—there is a growing feeling that a large share of the blame for what is wrong must go to the U.S. missile manufacturer.

Same Old Mistakes. “Failure is a management problem.” says Leslie Ball, outspoken director of Boeing Co.’s rigid quality-control program. The U.S. missile effort, he insists, is suffering from “the same management mistakes made over and over again.”

The biggest management mistakes result from the bad habits incidental to the technique that made U.S. industry great: mass production. Geared to building products that could always be fixed up with a spare part—or, at worst, replaced—management has found it hard to adjust to building custom products that must work perfectly the first time. Building a missile or a satellite, says Boeing’s Ball, “is like building a television set that will operate four hours a day for 500 years without an adjustment.” For such a job, asserts the Harvard Business School’s Pro fessor J. Sterling Livingston, “the control techniques industry has used are hopelessly inadequate.” Proof of Livingston’s contention is that the overwhelming majority of missile failures have been caused by faulty parts rather than faulty design.

Too many U.S. companies do not accept the fact that if a missile is to work 75% of the time, the components made by each subcontractor must function perfectly 99% of the time. Building this kind of reliability into a product drives costs up: quality-conscious Minneapolis-Honeywell figures that its control systems add 20% to the cost of the items it makes for inertial-guidance systems. Worse yet in the eyes of manufacturers rushing to meet over-optimistic production schedules, uncompromising quality control is a time-consuming process.

Plans, More Plans. In response to Pentagon criticism—generally made behind closed doors and “not for attribution”missile manufacturers point out that the National Aeronautics and Space Administration and the armed services have not been good managers either. On missile-site programs, Air Force engineers regularly send through so many design changes —some necessary, some whimsical—that one contractor has run off 82,000 copies of plans, amended plans and new plans.

Between pressure from Congressmen and admonitions from the Small Business Administration not to forget the little fellow, contracts have been given to firms that were either incompetent or underfinanced. At the Offutt Air Base launching site near Omaha, the construction contract was awarded to a builder who in one Pentagonian’s words “didn’t even own a wheelbarrow.” His frantic efforts to subcontract the entire job produced such confusion and delay that the Air Force ruled that henceforth a contractor must be able to do at least 20% of the work with his own organization.

Wasted Talent. But abuses of the contract system are common to missilemakers, too. Many companies combine hard sell with soft performance, put their best technical talent to drawing up new contract proposals and use lesser lights to finish the work they actually get. One engineer in the missile field complains that 75% of his time is spent designing equipment for which another company ultimately gets the contract.

Management has grown slothful under the prevailing cost-plus-fixed-fee contract—an arrangement that actively encourages careless spending and accounting.

Not long ago, the General Accounting Office caught accounting oversights in which the Hughes Aircraft Co. charged twice for a $150,000 tooling bill on the Falcon missile and failed to pass on to the Government a $103,000 saving in the price of materials. Hughes adjusted the errors when they were pointed out.

One Pentagon official justifies cost-plus missile contracts by insisting: “We are not buying large quantities of anything except research, and that can’t be done at a fixed price.” But he concedes that guaranteeing industry a profit has the devastating result of putting no premium on success, no penalty on failure. “The guy who dumps ten missiles in a row in the drink shouldn’t get the same profit as the man who has a successful flight on his first attempt. But the way things are now, he’d probably make more.”

Take Notice. The Pentagon is trying to find new formulas. The Navy, which has shown how to move fast and effi ciently with its Polaris program, is developing a management-control system nicknamed “Mascot.” Mascot’s goal: to give on one giant diagram a clear picture of the function of each contractor and sub contractor, which ones have to be speeded up to keep the project on schedule, and what the effect of speedups or delays would be on costs. And in a contract recently signed with RCA for the SAINT satellite-inspection system, the Air Force stipulated that RCA gets a bonus if the system is completed on schedule, lower profits if failures mount.

In the end, no one but U.S. management can make U.S. industry perform more effectively. Writing in Ordnance magazine, Russell A. Crist, until recently director of production policy at the Defense Department, bluntly noted: “There are rumblings loud enough to cause us all to ask whether the American free-enterprise system is properly geared to serve the national interest as well as itself. The mere fact that such opinion exists should cause businessmen to sit up and take notice.” To make sure that they do take notice, Senator John McClellan’s investigations subcommittee is about to examine missilemakers’ performance.