3 Strategy - Framework 3.4 Management and Finance

3.4.2 Cost management

Although efficient organization is a good step toward creating a successful program, it is necessary to examine how the proposed organizations may manage the costs of the major projects discussed in the strategy. Before managing costs, however, we must first understand what budget is available over time.

We assume that current governmental spending on space will remain more or less level for the USA, Europe, and Japan. The space budgets of China, Russia, India, and Brazil are assumed to increase as economic conditions improve and the countries work their way towards first world level Gross Domestic Products (GDP) over the long term. This will represent a real increase in world space spending by the time this strategy requires significant international financial commitments. However, if recent trends hold true, space exploration will generally represent only a fraction -- perhaps 20% -- of world public space funding as most government spending will likely remain focused on science, technology development, and programs to support commercial enterprises such as the development of launch vehicles, advanced satellites, and related technologies.

Although there are certainly overlaps between technology development and science programs and human exploration, using the 20% figure, the total amount of funding specifically available for exploration programs is about 4.4 billion US dollars per year. This is based on a total world budget of approximately 22 billion US dollars today , (p. 2-5, Houston and Rycroft, 1999), (Space News, Aug 9, 1999).

Although an international strategy spreads the cost over many nations, it is often true that the overall cost of the project rises with the added complexity of multiple partners (p. 2-20 Houston and Rycroft, 1999). Without a major increase in budgets for exploration, the strategy must depend on using innovative cooperative agreements like those discussed in section 3.4.1 and continued emphasis on low cost mission design as part of the smaller, better, faster paradigm to provide an effective method for managing costs.

The International Human Exploration Consultative Group (IHECG) provides a way for each agency to understand the needs and requirements of human exploration efforts as part of a worldwide effort. Based on group dynamics, we expect that while some members will attempt to remain generalists and participate in many areas, many will seek out niches and areas where they can excel. Consequently, this informal group can help ensure that the worldwide human space exploration effort retains redundancy across key functions while avoiding major duplication of effort. Likewise, the move to more formal international organizations will combine the best efforts of agencies and companies around the world in a focused effort under one unified project structure. By creating this focused structure and management, the project shareholders may demand accountable and effective leadership for international space exploration efforts. This is perhaps the number one way to reduce overhead costs, reduce schedule delays, and manage decision making so that projects may be completed in the most efficient manner.

It is very important to consider the effects of occasional rises and falls in national budgets and the impact this may have on international exploration efforts. This is a very real problem that has seriously impacted the completion of the International Space Station. There are several ways to handle this challenge:

  • Do not proceed past critical milestones without assurances that capital and intellectual support have been acquired or will remain available.
     
  • Reduce the influence of politics on making program decisions by using carefully designed management structures similar to INTELSAT (see section 3.4.1).
     
  • Ask for the money up front. Reduce the reliance on "in kind" contributions.
     
  • Keep the program on a fast pace to reduce the opportunities for project support to falter.
     
  • Apply standard good business practices:
     
    • Attempt to keep access to multiple suppliers
    • Choose suppliers based on a demonstrated ability to deliver
    • Provide incentives for on-time, on budget delivery
  • Although it is desirable to reduce the influence of politics, political involvement is a key element of space exploration. The shareholders of any exploration venture, whether public, private, or a combination of the two, must value not only the tangible results of the effort, but the process and management as well. Exploration is about prestige, and political involvement is how prestige is maintained. For a further discussion on motivations for space exploration see Chapter 1 and section 3.5.2.

    One of the most desirable characteristics of the management approach outlined in 3.4.1 is that it is conducive to reducing the time required to implement the project. Coordination through the IHECG builds consensus about roles and mission objectives long before any formal negotiation is required.

    When the nations of the world gather to form an exploration company, such as the MoonCorp and MARCO examples provided in 3.4.1, the organization may move quickly to proceed with the objectives of the project. This is unlike the ISS, which, although intentionally designed as a flexible arrangement among spacefaring nations, has had numerous political troubles due to changing mission objectives. Furthermore, if mission objectives are clear, and international support is strong (as it should be at the beginning of any new, focused international organization) then the organization may be funded with "start up" capital sufficient to begin serious work. This allows the organization to focus on the task at hand and avoid yearly budget battle justifications that sometimes embroil international projects funded by the space agencies. ISS is again, a prime example. Assuming the organization effectively implements its initial steps, further rounds of financing, perhaps not even from the original shareholders, should be likely. Just as in business, good execution and performance against objectives builds confidence in the international community. Also, just as in business, start up investors are not always the same ones who provide second- and third-round financing. As the project grows, so should its value and the willingness of shareholders to commit additional funds.

    Finally, by setting the project up as an international organization with a corporate-like structure, the project may proceed even if one or more investors drop out. Unlike the ISS, where if a critical partner drops out or delays their participation, all partners may suffer and the partner may lose the value of their contribution to date, this new system of shareholders and independent management allows governments to benefit even if they must cease active participation later in time. As long as they are a shareholder, they shall benefit in proportion to their share value.

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