NASA ARC Internal Memo: Message from the Director – Cost Reductions and Efficiencies

Date: Fri, 11 Mar 2005 14:08:36 -0800

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From: Centerwide Announcement CenterWide@arcwmail.arc.nasa.gov

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Subject: Message from the Director – Cost Reductions and Efficiencies

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TO: Resident Staff

FROM: G. Scott Hubbard, Center Director

SUBJECT: Message from the Director – Cost Reductions and Efficiencies

In my All-Hands presentation of Feb 7th, I outlined the Center’s plan to address the challenge of being competitive in response to the realities of the FY 06 budget. As you recall, we will pursue four strategies in parallel: New Business, Cost Reduction, Core Competency Assessment and Workforce Reshaping. I will focus primarily on cost reduction in this memo. Deputy Center Director Stan Newberry will follow up with a report on progress in cost reduction.

We need to take immediate actions to maintain competitive overhead rates and control the cost of doing business. In implementing full cost management, we must also be mindful that individual Programs may have specific needs for hiring or purchases. However, project implementation is the responsibility of the Center and as such we must ask the Program Managers to accommodate any near term disruption. In the long run, lower costs help all programs.

Our long term goal is to reduce institutional costs by 30% so that our overhead costs are competitive with our peer group of National Labs, GSFC or JPL. (It is unrealistic to assume that our overhead will ever match that of a small University or research Institute.)

We must also be intelligent and strategic in our cost cutting, focusing on those areas where real savings can be realized. In addition, we must also maintain our ability to produce competitive proposals and be present at all required meetings, reviews and the like. As I said in the All-Hands, these competing requirements will produce a situation that may initially seem confusing or contradictory. Please bear with us as we work our way through these major changes.

An initial analysis indicates that the bulk of the institutional costs are in labor and purchased support services. We also spend significant amounts on energy to operate our buildings and on Information Technology resources. (Note that the major facilities such as wind tunnels and arc-jets are on a full cost recovery basis and thus are not part of the overhead energy bill.)

Several years ago, the Center tried an experiment of shutting down all lights, computers and the like at the end of the day. The savings were minimal because the primary consumption of energy was in heating and cooling our antiquated buildings. Thus it appears that only by consolidating staff in fewer buildings and permanently abandoning the older structures will we achieve significant savings. In the long term, we must construct new buildings that are energy efficient and far easier to maintain.

The following summarizes the direction to the Organization Directors and their staffs regarding institutional cost reduction and the efforts to seek efficiencies. Until formally advised otherwise, the following actions are to be taken, effective immediately, by all Ames organizations:

1) Information Technology (IT) Purchases: All purchases by Projects, G&A or Allocated Service Pool funds are suspended. This includes all desktop, laptop and notebook systems and associated peripherals, including PDAs, software, printers etc. It does not pertain, of course, to sustaining materials such as toner cartridges or paper. Organization Directors must approve exceptions. The intent of this directive is to review our IT purchase procedures and seek economies of scale.

2) New contractor tasks. All new contractor tasks are suspended. It is understood that Program direction may require the hiring of new staff. However, in the current environment, the Center must address how staff in the Transition Workforce could be used to accomplish the needed work rather than hiring a new contractor. Should an organization deem a task (research or institutional) “Mission Critical”, it may present the case to the Institutional Review Board (IRB) for consideration.

3) Construction and renovation. New construction or renovation of existing facilities must be reviewed for cost effectiveness and Return on Investment (ROI) by the IRB.

4) Travel. Travel for all programs and projects, new business opportunities, research reviews and the like is necessary and encouraged. Ames has often been criticized for not appearing at meetings where important project, research or institutional issues are discussed. In the current competitive environment, we must be present and effective. The Center does ask that travelers be cost conscious. However, government travel regulations are sufficiently constraining that further controls are unnecessary. Waivers to standard practice will be processed with consideration for the criticality of the project or new business opportunity.

Efficiencies and Conservation Techniques:

We are proceeding to consolidate office space with the goal of emptying entire buildings, thereby reducing allocated service pool costs and in some cases creating revenue-producing opportunities. An assessment of the number of gates required for the safe and effective operation of the Center is underway, as are any unnecessary duplications in offices, computers and the like.

There is a widespread belief that Moffett Field and the Research Park represents a major overhead cost to the Center. In fact, the resident Agencies, such as the Air National Guard, pay their fair share of the airfield usage. Our SOFIA Program will represent an “anchor tenant” when science operations begin in early 2006. Research Park residents such as Carnegie-Mellon and UC also pay into the cost pool. The Center does invest several FTE in the development of new Research Park opportunities and as part of our overall required master planning effort. Nevertheless, a study is underway to assess these issues, and determine whether the Conference Center or Airfield could be operated in a more cost effective manner.

All of the steps and actions mentioned above are just the beginning of an overall effort to control and manage our costs of operating the center and supporting our customers. Thanks for your support and participation in this effort.

Scott Hubbard