The cost of running the space shuttle never met the predictions, and was more expensive (Largely due to the standing army of folk it took to prepare and manage it).
Then after the Columbia broke up on re-entry the lack of options for aborts, bailouts, etc, and the inherent danger in the foam on the main tank hitting the wings the notion slowly morphed into the idea of replacing it.
Initially the Constellation program was suggested as Shuttle SRB as the first stage for Ares-1, and then a heavy lift Ares-V with two SRB's and a stretched shuttle main tank, but with the payload on top, instead of on the side.
The thinking was, SRB's were at this point well charecterized and mostly thought to be understood. The equipment to make the main tank and stretch it was not a big deal.
Retiring the complex shuttle component was thought to make it cheaper to run, since a capsule would be much simpler than the shuttle orbiter.
The DIRECT guys, ex-NASA folk were pushing a similar plan, but focussing on commonality and minimal changes to keep costs down.
However the shuttle program had turned out to be less about space access and more about a jobs program. Tens of thousands are employed in the shuttle program in many states and thus there is a strong desire to keep the jobs going. Alas, that was the truly expensive part of the program.
Thus we got Constellation a compromise that started looking like the DIRECT plan, and slowly changed to be less and less of a good deal.
Then it was cancelled and replaced with the Space Launch System, which sadly is probably a worse approach. (I wish it were not so). The focus was changed as well to invest in and then hire commercial carriers (Like SpaceX (crewed Dragon), Boeing (CST-100), SNC (Dream Chaser)) for operations just to the space station. NASA would then focus on the 'hard' missions, since it was becoming clear that commercial options might actually succeed.
Thus the Orion capsule (remained mostly intact from Constellation) is designed for the radiation environment outside LEO, and for longer term missions than any of the other commercial providers. Alas, to do so it is too heavy to launch on pretty much anything other than Delta-4 Heavy (and maybe one day a Falcon Heavy? Who knows!). So the single SRB approach was tossed out, and the SLS booster, which needed a stretched SRB for additional thrust was required (Constellation needed them as well, but DIRECT tried very hard to avoid needing modifications).
Alas, the SLS appears to be as much of a jobs program, and is looking less and less likely to fly seriously. Current plans are a launch of the Orion capsule on a Delta-4 Heavy in 2015 (This did happen, Dec 2014), and then the next launch on an actual SLS is 2018 (Which has since been delayed till at least 2022). The next flight is possibly 4 years after that, which is of course, completely untenable.
Time will tell, and the success of SpaceX with a Falcon Heavy will have a huge effect upon the program. If Falcon Heavy launches, and is available at the cost currently advertised it will be very hard to maintain the need for SLS at it Shuttle sized cost.