A wise political move by O'Keefe. Though I wonder what Admiral Hal Gehman will say. It's doubtful he will look at same analysis and come to a different conclusion- why would he assign a lower cost of shuttle [including the risk to crew] or assign a higher value to the Hubble asset?
The only options he has is to agree with the administer or offer some third option.
Hmm, the marginal cost of a shuttle launch is worth around 150 million, plus if the chance losing a shuttle is one in 50 this means if the replacement cost is 2 billion for an orbitor, then that has an addition cost of 40 million plus crew loss at 10 million. But the risk to entire program is harder number to assign- it would probably take about 2 years to build another orbitor [but also it's unlikely congress would agree to buy another orbitor when there is so little time left for it's use]. There would also be another accident investigation [which also grounds the other orbitors]. Hmm, you could lose 1 year to just to the investigation, plus another year due to the fact of only having 2 orbitors instead of 3. Which means in effect you are extending the Shuttle program by 2 two years. So if the shuttle program costs 3 billion per year, that's a total of 6 billion divided by 50 giving 120 million. Giving total cost of just the shuttle flight at 320 million. Now, you also have the cost of the mission to servicing the Hubble in addition to the basic marginal cost of the Shuttle. One has to include the cost of delaying ISS construction- both by taking the one Shuttle flight and all the needed training in the swimming pool, etc, plus there is also the chance that servicing will be unsucessful.
One option the Admiral might suggest is start building a new orbitor now. Whether you service the Hubble or not there is the risk of losing another orbitor, therefore building a new orbitor could be seen as way lower the risk to entire program or possibly ensuring or speeding up the projected construction time.
Another option might be to delay servicing Hubble until CEV [or some version of OSP] can be used to service it.