NASA Contract Management - GAO/HR-93-11 [December 1992]
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Title: NASA Contract Management
Subtitle:
Report No.: GAO/HR-93-11 Date: December 1992
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Author: United States General Accounting Office
Addressee: High-Risk Series
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CONTENTS
Overview
- The Problem
- The Causes
- GAO's Suggestions for Improvement
Lack of Realism in Planning
Ineffective Oversight of Some Contractors
- Technical Activities Not Properly Monitored
- Adequate Contractor Cost Reporting Not Ensured
- Government-Owned, Contractor-Held Property Not Accounted for Properly
- Adequate Agencywide Accounting System Not Available
- Data on Extent of Contract Changes Not Provided
Some Centers Not Fully Complying With Procurement Requirements
- Proposed Contract Changes Not Adequately Evaluated
- Contract Changes Not Negotiated in a Timely Manner
- Unauthorized Personnel Directed Contractors' Work
- Sole-source Procurements Not Properly Justified
- Contract Administration Functions Not Properly Delegated
- Factors Contributing to Compliance Problems
NASA's Efforts to Improve Contract Management and Related Areas
Conclusions and Action Needed
Related GAO Products
High-Risk Series
- Lending and Insuring Issues
- Contracting Issues
- Accountability Issues
Figures
=======
Figure 1: NASA Is Pursuing More Programs Than Can Be Funded With Projected
Budget Resources
Figure 2: Increased Funding for NASA's Largest Programs May Reduce Budget
Resources for Other Programs
Figure 3: Percentage Increases in NASA Procurement Personnel and Procurement
Obligations in Fiscal Year 1990 Constant Dollars
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Office of the Comptroller General
Washington, DC 20548
December 1992
The President of the Senate
The Speaker of the House of Representatives
In January 1990, in the aftermath of scandals at the Departments of Defense
and Housing and Urban Development, the General Accounting Office began a
special effort to review and report on federal government program areas that
we considered "high risk."
After consulting with congressional leaders, GAO sought, first, to identify
areas that are especially vulnerable to waste, fraud, abuse, and
mismanagement. We then began work to see whether we could find the fundamental
causes of problems in these high-risk areas and recommend solutions to the
Congress and executive branch administrators.
We identified 17 federal program areas as the focus of our project. These
program areas were selected because they had weaknesses in internal controls
(procedures necessary to guard against fraud and abuse) or in financial
management systems (which are essential to promoting good management,
preventing waste, and ensuring accountability). Correcting these problems is
essential to safeguarding scarce resources and ensuring their efficient and
effective use on behalf of the American taxpayer.
This report is one of the high-risk series reports, which summarize our
findings and recommendations. It describes our concerns over the National
Aeronautics and Space Administration's (NASA) lack of adequate controls over
a variety of contract management and related activities. NASA has implemented
or begun to implement most of the recommendations we have made for improving
these activities. NASA has also implemented other contract management
improvement initiatives.
Copies of this report are being sent to the President-elect, the Democratic
nd Republican leadership of the Congress, congressional committee and
subcommittee chairs and ranking minority members, the Director-designate of
the Office of Management and Budget, and the Administrator of the National
Aeronautics and Space Administration.
Signed: Charles A. Bowsher
_______________________________________________________________________________
OVERVIEW
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The National Aeronautics and Space Administration's (NASA) procurement budget
is one of the largest of all civilian agencies' in the federal government.
Each year, NASA spends about 90 percent of its funds on contracts. In the last
decade, the value of NASA procurements measured in 1990 dollars has risen
dramatically from about $8.5 billion to almost $13 billion annually.
Throughout the procurement cycle--from the development of procurement plans,
through the award and performance of contracts, to their final settlement --
NASA must act to protect the government's rights and interests. An
important part of this process involves overseeing contracts after their award
in order to help ensure that contractors are acting in accordance with their
obligations and are performing as efficiently and effectively as possible.
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THE PROBLEM
Since the late 1980s, NASA has acknowledged that its contract management is
vulnerable to waste and mismanagement, based on its own internal management
reviews and audits by the NASA Inspector General. We also have reviewed
specific activities in a variety of areas related to contract management in
recent years and have reported that NASA has had problems in effectively
managing its contracts.
Without effective management of its contracts, NASA cannot reasonably ensure
that the funds provided to its contractors will be spent effectively and
accounted for properly. In some cases, inadequate contractor oversight has
contributed to cost increases, schedule delays, and development problems with
expensive space equipment. For example, the GOES-Next weather satellite
project is now at least 3 years behind schedule, and its estimated cost has
more than doubled to over $1.7 billion. Also, the $1.5 billion Hubble Space
Telescope had critical technical flaws that were not detected until after it
was launched.
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THE CAUSES
NASA's difficulties in contract management were largely linked to three major
internal problems. First, NASA's planning was not realistic; it was based
on a much higher level of funding than was likely to be made available. For
example, NASA's program plans for fiscal years 1993 through 1997 called for up
to about $20 billion more than was likely to be provided. To adjust plans to
actual budgets, NASA's projects and programs often have to be slowed down,
thereby extending schedules and increasing total contract costs.
Second, NASA sometimes used ineffective procedures and systems to oversee and
manage contractors. The lack of uniform testing policies and the inability to
adequately oversee contractors' activities contributed to problems such as
those affecting the GOES-Next weather satellites. Further, problems with cost
reporting, property management, accounting, and information systems impaired
NASA's ability to monitor contracts.
Third, some of NASA's field centers were not fully complying with
governmentwide, agency, or field center contract management requirements,
primarily because they were operating with ineffective guidance and oversight
from NASA headquarters.
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GAO'S SUGGESTIONS FOR IMPROVEMENT
We have offered numerous observations and recommendations on a variety of
issues related to contract management. NASA has taken, or is planning to take,
steps to address these issues, including modifying plans to reflect realistic
budget projections; establishing project priorities; developing overall
testing policies; tracking contract cost and schedule changes agencywide;
improving training for procurement personnel; and correcting specific problems
relating to awarding, modifying, and administering contracts.
Beyond the matters we have raised, NASA has identified the need for, and has
implemented, numerous other improvement initiatives, including increasing
procurement staffing and taking a variety of steps to help better identify
and reward efficient and effective performance by its contractors.
The nature, scope, and variety of efforts underway to improve contract
management and related areas throughout the agency illustrate the extent of
the commitment by NASA management to effectively resolving the problems in
these areas. Although this commitment is promising, these problems will
require time and sustained effort to correct. NASA's problems in contract
management and related areas were many years in the making. They will not be
corrected quickly. NASA management faces a formidable challenge that will
demand continuing vision, perseverance, and strong leadership.
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LACK OF REALISM IN PLANNING
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An overarching concern that can ultimately affect NASA's ability to manage
its contracts is the agency's failure to plan realistically for the budgetary
resources that are likely to be available to fund its programs. Unless
strategic and program plans are reasonably consistent with likely budgets,
there is an increased risk of significant adverse impact on NASA's programs.
When planning expectations are followed by substantially lower funding levels,
NASA is forced to make program changes, including adjustments to the planned
content and pace of work. Since most of NASA's work is done by contractors,
such program adjustments can contribute to contract cost increases and
schedule delays.
From the late 1980s through the early 1990s, NASA received large increases in
its budget. However, NASA's budget for fiscal year 1993 is essentially
unchanged from the previous year, and Congress has told the agency that its
future budget growth may be severely limited. Unfortunately, NASA is currently
overcommitted, with its program planning estimates for 1993 through 1997 up
to about $20 billion higher than the amounts likely to be appropriated under
current federal budget constraints, as shown in figure 1.
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Figure 1: NASA Is Pursuing More Programs Than Can Be Funded With Projected
Budget Resources
The following table represents the data for this chart in the printed
version of the report. The actual figure appears in the printed report.
(Dollars in billions)
NASA's
program Congressional President's Level
plan for Budget fiscal budgets from
fiscal years Office year 1993 fiscal year
Fiscal year 1992-97 baseline submission 1992 base
=========== ============ ============= =========== ============
1992 14.3 14.3 NA 14.3
1993 15.0 14.8 15.0 14.3
1994 17.4 15.3 15.0 14.3
1995 19.0 16.0 15.0 14.3
1996 20.0 16.4 15.0 14.3
1997 21.0 17.0 15.0 14.3
Notes: Preliminary NASA program planning estimates for fiscal years 1993
through 1997 total over $90 billion.
Congressional Budget Office baseline estimates include adjustments for
inflation only and total $79.5 billion for fiscal years 1993 through 1997.
The executive branch's fiscal year 1993 budget submission projected flat
funding levels of about $15 billion annually for NASA through 1997, or a
5-year total of about $75 billion.
Level budgets from the fiscal year 1992-enacted NASA budget of $14.3 billion
would provide total funding of $71.5 billion for fiscal years 1993 through
1997.
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In addition, NASA's largest programs, if carried out as currently planned,
will consume an increasing share of NASA's future budgets. For example, if
NASA received about $15 billion for each of the next 5 years, as anticipated
in the President's fiscal year 1993 budget submission, NASA's 11 largest
programs in that submission would have required over 75 percent of the 5-year
funding total in the President's budget. Figure 2 shows each year's increasing
share of NASA's likely funding that these large programs would have required.
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Figure 2: Increased Funding for NASA's Largest Programs May Reduce Budget
Resources for Other Programs
The following table represents the data for this chart in the printed
version of the report. The actual figure appears in the printed report.
(Dollars in billions)
Total for Funding
NASA's available for
largest other NASA
Fiscal year programs programs
=========== ========= =============
1993 9.0 6.0
1994 10.6 4.4
1995 12.0 3.0
1996 12.8 2.2
1997 13.2 1.8
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Unplanned program cost increases would, of course, further exacerbate
potential funding shortfalls. In addition, there are several support areas in
which future funding demands may emerge, including hazardous waste cleanup and
maintenance of facilities.
NASA's overcommitment, plus potential additional funding demands, mean the
agency's programs may not be able to proceed as planned. However, NASA does
not clearly differentiate between the programs it "must do" and the programs
it "should do." For example, NASA's first agencywide strategic plan, _Vision
21_, failed to recognize the budget/planning mismatch and to set relative
priorities should the agency be forced to stretch out or cancel programs
because of lower-than-planned funding. Without a set of priorities or
contingency plans, NASA will have no orderly method of choosing between or
among programs should it be faced with making such decisions. Unless it starts
to plan realistically, NASA will continue to perpetuate resource shortages
that limit its ability to effectively manage contracts by subjecting its
programs to a recurring annual cycle of cutbacks, restructurings, schedule
extensions, and potential terminations.
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INEFFECTIVE OVERSIGHT OF SOME CONTRACTORS
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NASA's technical oversight procedures and its cost reporting, property
management, accounting, and information systems did not adequately ensure
that the money paid each year to contractors and the government-owned
property they held were managed effectively or accounted for accurately.
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TECHNICAL ACTIVITIES NOT PROPERLY MONITORED
Weaknesses in NASA's technical oversight procedures included the lack of
uniform testing policies and the inability to adequately oversee contractors'
activities. In some cases, these weaknesses contributed to increased contract
costs, schedule delays, and impaired performance.
Because equipment cannot be readily repaired in orbit, it must be thoroughly
tested before launch. But deciding on appropriate test programs is not a
simple matter. Systems are not mass-produced-- most, in fact, are one of
a kind. As a result, testing programs must be tailored specifically for
each project, but there should be a general framework within which to
plan, conduct, and interpret tests. NASA, however, has no agencywide
testing policies, and project testing requirements can vary from center
to center. In some cases, hardware designed for the same mission may be
tested to different standards. For example, each of the centers developing
space station hardware had planned to use its own testing criteria for
the program. Consequently, different parts of the space station would have
been tested to different tolerances for environmental extremes of heat and
cold, under different durations of exposure. After a review team expressed
concern, environmental testing criteria that would be applied to all space
station hardware were drafted.
Contractor oversight has occasionally failed to detect critical problems at
all or early enough to prevent costly schedule slippages. For example, in
April 1990, NASA deployed the $1.5 billion Hubble Space Telescope to an orbit
380 miles above the earth. Soon after, the agency discovered that the primary
mirror had been manufactured in the wrong shape, severely degrading some of
the telescope's scientific capabilities.
NASA's work on the next generation of weather satellites, called GOES-Next,
also illustrates the impact of inadequate contractor oversight. The launch o
fthe first GOES-Next satellite is at least 3 years behind schedule, and the
program's estimated cost has more than doubled to over $1.7 billion.
Development delays have been caused, in part, by NASA's failure to initially
assign enough qualified staff to oversee the contractor developing GOES-Next
instruments. Although NASA increased its technical involvement, much of the
damage--such as the use of improper materials and other contractor errors--
had already been done. Consequently, if the only remaining operational
geostationary U.S. weather satellite fails anytime soon, the National Weather
Service's ability to predict and track hurricanes, like Hugo and Andrew, as
well as other severe weather patterns, may be degraded.
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ADEQUATE CONTRACTOR COST REPORTING NOT ENSURED
NASA managers use contractor-provided cost data to help gauge progress on
individual projects and to forecast future funding needs. On the basis of
these cost reports, NASA managers may adjust program schedules, the scope of
work, and funding requirements. However, contractor cost information was not
always accurate, timely, or properly recorded. The contractors' reports were
sometimes late, insufficiently detailed, or not received at all. Poor
reporting was often due to NASA personnel not including appropriate reporting
requirements in contracts.
Our visits to NASA's four largest centers revealed that they did not always
receive contractor-reported cost and performance data, and program analysts
sometimes inappropriately adjusted contractor cost data without supporting
documentation. In some cases, these actions concealed overruns, underruns, or
instances where costs exceeded obligations or budget plans. Internal reviews
by NASA's Comptroller personnel had also identified similar problems with
centers' adjustments to contractor reports; however, effective corrective
actions were not taken.
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Government-Owned, Contractor-Held Property Not Accounted for Properly
Contractors hold more than $13 billion in property provided or acquired under
NASA contracts. Various centers were not properly accounting for some of this
property. For example, at two of NASA's largest centers, some contractors'
annual property reports were received too late to be used to update NASA's
year-end financial statements and reports. In addition, various types of
errors were associated with contractor property reports and related
documentation at three NASA centers.
NASA relies extensively on other agencies' surveys of contractor property
systems to provide reasonable assurance that the contractors' property reports
are reliable. However, the required survey reports were not always provided
to NASA. For example, in fiscal year 1990, survey reports were not provided to
the center for 13 contractors who held $3 million in NASA property. NASA
internal reviews have also documented problems with the delinquent reporting
of the results of property systems surveys at three other centers.
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ADEQUATE AGENCYWIDE ACCOUNTING SYSTEM NOT AVAILABLE
NASA has a long-standing and well recognized need to develop an adequate
agencywide accounting system to help improve financial oversight of
contractors by providing more timely and accurate information. NASA's current
costly, outdated, and nonintegrated reporting systems require multiple data
entry and lengthy reconciliations. Deficiencies in these systems have resulted
in improper account balances and unreliable financial reports.
NASA's efforts to develop an improved accounting system have been slow, and
its planning for the project has been inadequate. Implementation of the new
system is not scheduled to begin at the first center until March 1995, and
there was no target date for full agencywide implementation, as of September
1992.
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DATA ON EXTENT OF CONTRACT CHANGES NOT PROVIDED
There were notable differences in contracts' cost and schedule growth rates at
NASA's four largest centers. On the basis of a sample drawn from more than
1,800 contracts, we estimated that about one in every three contracts at
NASA's four largest centers experienced cost increases, and more than two of
every five contracts experienced schedule changes. Contract costs were
increasing at an estimated annual rate ranging from less than half of one
percent at one center to over 6.5 percent at another--a 16-fold rate
difference. The estimated average rate of schedule delay was almost 9 percent
annually, ranging from 4.5 percent at one center to 16 percent at another.
NASA did not know the extent of cost increases and time extensions because its
procurement information system did not routinely provide this data. Thus, NASA
procurement managers did not have useful information for targeting specific
centers and contracts or types of contracts for further review to help
determine the extent to which cost increases or schedule changes were related
to contract management problems.
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SOME CENTERS NOT FULLY COMPLYING WITH PROCUREMENT REQUIREMENTS
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NASA field centers did not always fully comply with governmentwide, agency,
or center requirements when awarding and modifying contracts. For example, in
some instances at one or more of NASA's four largest centers, (1) proposed
contract changes were not adequately evaluated by technical personnel, (2)
negotiations of contract changes were not completed in a timely manner, (3)
unauthorized personnel directed contractors to perform additional work, and
(4) sole-source procurements were not properly justified. The first two
problems were the most prevalent, while the last two problems existed to a
much lesser extent. Some centers were also frequently not complying with
requirements or following good management practices in the delegation of
contract administration functions.
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PROPOSED CONTRACT CHANGES NOT ADEQUATELY EVALUATED
Ensuring the reasonableness of contract changes requires NASA personnel to
technically evaluate contractors' proposals. Such evaluations are performed by
the contracting officers' technical representatives, who are engineers or
scientists from the program office being supported by the contract. At three
of NASA's four largest centers, some of the required evaluations were not done
or were done poorly. In many instances, technical representatives did not
evaluate all the necessary technical elements of the contractors' change
proposals or explain how they had reached their conclusions. Without adequate
technical evaluations, procurement personnel lacked important information fo
rthoroughly evaluating contractors' proposals and obtaining the best prices.
NASA's management reviews have also frequently identified problems with the
quality of technical evaluations. For example, inadequate technical
evaluations have been cited as a continuing problem at one center since the
mid-1980s. In response, center management developed a training course
addressing the preparation of technical evaluations. However, the course had
been slowly implemented, and none of the technical representatives we spoke
with had attended it.
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CONTRACT CHANGES NOT NEGOTIATED IN A TIMELY MANNER
Unpriced contract changes allow a contractor to start work and incur costs
before NASA and the contractor agree on terms and conditions, including price.
Until firm prices are negotiated, contractors have limited incentive to
control costs. If work is completed before the change has been priced, the
government will have lost the opportunity to review the contractor's proposed
cost and to identify opportunities to do the work more efficiently.
Despite the advantages of pricing contract changes in a timely manner, NASA
frequently did not negotiate contract changes within the 180-day period
generally used as a guideline for completing such negotiations. For example,
in July 1991, the four largest centers reported that there were 234 changes
valued at approximately $2.2 billion outstanding for more than 180 days.
Because they were concerned about unpriced changes, NASA headquarters
procurement officials began tracking the time required by the centers to
negotiate such changes and comparing their performances. Since then, centers
have shown progress in reducing the number and value of unpriced contract
changes. However, the monitoring is continuing because as of August 31, 1992,
NASA's four largest centers still had 175 unpriced contract changes, valued at
about $1.9 billion, that were over 6 months old. Moreover, almost three-quarters of
this dollar amount was related to 56 unpriced changes over a year old.
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UNAUTHORIZED PERSONNEL DIRECTED CONTRACTORS' WORK
Only the contracting officer can authorize contract changes. However, in four
instances at one of NASA's four largest centers, other personnel directed
contractors to perform additional work. For example, after a contractor had
informed the technical representative that additional materials were needed,
the technical representative authorized the use of the materials without
consulting the contracting officer. This contract's schedule was also
extended by about 7 months due to another improperly authorized change.
In 1989, a NASA management review noted many instances in which the actions of
technical representatives at this same center seemed to be eroding the
authority of contracting officers. In response, center management prepared
guidelines for technical representatives and developed a related training
course. However, most of the technical representatives we contacted at the
center did not have the guidelines, and the training course was voluntary and
had been offered only a few times.
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SOLE-SOURCE PROCUREMENTS NOT PROPERLY JUSTIFIED
NASA personnel at two centers did not follow the requirements of the
Competition in Contracting Act (CICA) of 1984 in justifying sole-source
procurements. Under CICA, contracting officers must promote and provide for
full and open competition when soliciting offers and awarding contracts.
Contracting officers may proceed with procurements without full and open
competition only after proper justification and approval. When contracts are
not awarded competitively, the government may have less assurance that it is
paying fair and reasonable prices for goods and services, and it may lose the
opportunity to obtain lower prices and increase the efficiency of its
programs.
In late 1988, we reported that a contracting officer had not properly followed
the requirements of CICA in a noncompetitive procurement of almost $3 billion
worth of parts and fabrication services for the space shuttle's external
tanks. Three years later, we reported that personnel at another center had
improperly extended one contract and had noncompetitively added new work to
another without justifying them as sole-source procurements.
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CONTRACT ADMINISTRATION FUNCTIONS NOT PROPERLY DELEGATED
NASA procurement officials often rely on other government agencies to perform
many contract administration functions. Currently, NASA pays over $40 million
a year for such services. However, there were widespread and significant
deficiencies in some centers' management of delegated contract administration
activities that could seriously hamper contractor oversight. For example, the
four centers we visited frequently did not make delegations in a timely manner
and did not routinely inform the delegatees about major contract changes,
including modifications that extended the life of the contract. In addition,
some NASA contracting officers were unaware that contract administration
activities had been delegated on contracts for which they were responsible.
Contract administration planning at the four centers did not comply with
NASA's own guidelines. In most cases we reviewed, NASA personnel did not hold
required conferences with the delegatees to plan the nature and extent of
contract administration functions. In one case, a conference was not held on
a contract valued at over $500 million ecause the contracting officer
incorrectly believed that one was not required since the contract was for
support services. In contrast, all of the required contract administration
and quality assurance planning conferences were held on the three major work
package contracts for Space Station _Freedom._
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FACTORS CONTRIBUTING TO COMPLIANCE PROBLEMS
The NASA centers we reviewed failed to comply with requirements or to
effectively correct contract management problems for a number of reasons.
First, NASA operates largely in a decentralized fashion under which its field
centers have considerable operating latitude. For this approach to be
effective, headquarters must establish clear expectations and carefully
monitor the performance of centers. Ineffective guidance and oversight have
resulted in substandard contract management practices at some field centers.
Other factors contributing to compliance problems included (1) a primary
emphasis on awarding contracts to the detriment of oversight activities
occurring after contract award; (2) a lack of minimum agencywide standards
for training personnel who plan, monitor, and evaluate contractors' technical
performance; (3) corrective actions for contract management problems that were
not effectively implemented; (4) center personnel who were not familiar with
requirements or did not consider them to be critical; and (5) procurement
management surveys that had limited effectiveness because they generally did
not assess the causes of problems identified.
In addition, NASA officials believe that the erosion of the agency's contract
management capabilities is also partially due to a shortage of procurement
personnel. In the last decade, the value of NASA's procurement obligations
increased about 1 percent, from $8.4 billion to $12.7 billion in fiscal year
1990 dollars. Also, the number of contracts valued at over $1 million more than
doubled, and the percentage of procurement dollars NASA awarded competitively
grew steadily from 5 percent to 82 percent. Generally, the award and administration
of larger or competitive contracts require more time and effort than for smaller or
noncompetitive ones. Despite the increased value and complexity of contracts,
the number of procurement personnel awarding and administering contracts grew
only about 19 percent--from 907 to 1,082. The relative growth in procurement
personnel and procurement obligations is shown in figure 3.
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Figure 3: Percentage Increases in NASA Procurement Personnel and Procurement
Obligations in Fiscal Year 1990 Constant Dollars
The following table represents the data for this chart in the printed version
of the report. The actual figure appears in the printed report.
(Percent)
Fiscal year Personnel Obligations
=========== ========= ===========
1981 0.00 0.00
1982 0.55 0.91
1983 3.20 9.58
1984 2.21 12.49
1985 4.85 22.67
1986 3.09 17.39
1987 4.85 18.73
1988 4.85 25.00
1989 8.71 35.94
1990 12.57 50.28
1991 19.29 51.33
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NASA'S EFFORTS TO IMPROVE CONTRACT MANAGEMENT AND RELATED AREAS
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NASA has been working to improve many areas of contract management. Its
headquarters' staff have become increasingly active over the last few
years--proposing, implementing, or completing numerous initiatives. Some of
these are related to our recommendations on the need for improved oversight of
contractors and procurement centers. For example, we recommended that the NASA
Administrator
-- develop testing policies that define NASA's testing goals and establish
agencywide minimum standards for space systems' test programs;
-- direct contracting officers to enforce requirements that their technical
representatives perform and document adequate evaluations;
-- establish and enforce minimum training requirements for contracting
officers' technical representatives that emphasize their roles and
responsibilities, scope of authority, and relationship to other members of
the procurement management team;
-- ensure that procurement centers develop and implement adequate procedures
for complying with requirements for delegating contract administration
functions; and
-- improve the reliability of contractors' cost data and the controls over
government property held by contractors.
Consistent with some of these and other recommendations and observations we
have made, NASA created an organization to focus on contract management within
its headquarters' procurement office and has been working on known contract
management issues, such as improved training for members of the procurement
team and the timely negotiation of contract changes. In working on this last
matter, one NASA center recently evaluated the causes of delays in its pricing
of contract changes and recommended ways to streamline the process.
NASA also modified its procurement information system to enable cost and time
changes on its contracts to be summarized routinely and comprehensively, and
the agency has been using this information to improve the targeting of its
procurement management oversight activities. Due to rising concerns about the
management of delegated activities, NASA has been improving oversight and
coordination of delegated contract administration services. For example, it
developed a new procedure requiring that procurement supervisors ensure
appropriate contract administration planning conferences are held.
NASA is also addressing other issues we raised that may ultimately affect the
quality of its contract management. For example, the agency is developing
overall testing policies and related procedural guidelines. It has also begun
to deal with the lack of realism in planning--that is, to bring the planning
of the content and pace of its programs reasonably in line with likely future
budgets. NASA has been reviewing the costs of all major programs, and it plans
to make appropriate adjustments to ensure a balanced overall space and
aeronautics program within budget realities. Senior NASA managers have also
agreed to develop priorities in conjunction with the agency's fiscal year
1994 budget request.
Apart from our work on contract management and related areas, NASA--based on
the results of assessments by its headquarters' staff and others--has
identified the need for or implemented other contract management improvement
s
related to additional procurement staff; a special focus for dealing with
nonproductive contractor employees; the use, management, and structure of
award fees; the purchasing practices of major contractors; and subcontract
pricing.
Other procurement improvement initiatives underway would focus on streamlining
the contracting process for procurements ranging from $25,000 to $500,000;
promote better use of certain types of contracts; hold contractors more
accountable for their work; systematically measure contractors' performance;
and consider companies' past performance when awarding contracts.
_______________________________________________________________________________
CONCLUSIONS AND ACTION NEEDED
-------------------------------------------------------------------------------
NASA's contract management weaknesses were many years in the making and will
require time and sustained effort to correct effectively. A vital step related
to that effort is to do agency planning that clearly states NASA's vision for
the future and the steps to realize that future in an affordable manner.
Failure to deal aggressively with the mismatch between program plans and
likely budgets will impair NASA's ability to effectively manage its contracts
and will dampen the effects of the contract management improvements that may
result from actions currently underway or recently completed.
The commitment of NASA management to correcting the plans/budgets mismatch
and resolving the agency's contract management difficulties increases the
likelihood of, but does not guarantee, eventual success. In principle, we
support NASA's initiatives. Based on the work we have done over the last 2
years, efforts such as those currently underway throughout the agency are
necessary to the thorough consideration of actions that could, over time,
accomplish effective change. We have seen numerous corrective actions fail
time and time again to effectively correct existing problems. It is time for
bolder action.
A potential obstacle that may prevent or slow these efforts is the agency's
organizational culture. [ Footnote 1: "Organizational culture" refers to the
underlying assumptions, beliefs, values, attitudes, and expectations shared
by an organization's members. ] For many years, NASA's culture has been
characterized by a "can-do" attitude and a strong esprit-de-corps, and it has
been a major factor contributing to the agency's hard-earned reputation for
technical brilliance and monumental achievements. However, these positive
aspects of NASA's culture are accompanied by negative ones, including strong
,
center-based loyalty and resistance to change.
Eliminating resistance to change may be the more formidable challenge to the
agency's improvement efforts. For example, until recently, NASA traditionally
accepted all of the cost risk under its research and development contracts.
When NASA headquarters procurement officials began advocating that cost risk
be shared with contractors, sharp differences surfaced within NASA on how best
to apportion it, with some NASA field centers resisting any change to the
traditional approach.
NASA management faces the daunting task of changing fervent views held for
many years and injecting into NASA's culture a more open-minded approach to
evaluating the old ways of doing business while simultaneously preserving th
e
culture's positive features. To effectively do so will take time. The NASA
Administrator has noted that changing an organization's basic way of doing
business is a long and difficult process--a process NASA is just beginning.
____________________________________________________________________________
___
RELATED GAO PRODUCTS
----------------------------------------------------------------------------
---
_Financial Management: NASA's Financial Reports Are Based on Unreliable Data
_
(GAO/AFMD-93-3, Oct. 29, 1992).
_NASA: Large Programs May Consume Increasing Share of Limited Future Budgets
_
(GAO/NSIAD-92-278, Sept. 4, 1992).
_NASA Procurement: Opportunities to Improve Contract Management_
(GAO/T-NSIAD-92-33, May 7, 1992).
_Space Station: Contract Oversight and Performance Provisions for Major Work
Packages_ (GAO/NSIAD-92-171BR, Apr. 14, 1992).
_NASA Procurement: Improving the Management of Delegated Contract Functions_
(GAO/NSIAD-92-75, Mar. 27, 1992).
_NASA Procurement: Approach to Sharing Risk Under Certain Research and
Development Contracts Is Starting to Change_ (GAO/T-NSIAD-92-12, Mar. 18,
1992).
_NASA Budget: Potential Shortfalls in Funding NASA's 5-Year Plan_
(GAO/T-NSIAD-92-18, Mar. 17, 1992).
_NASA Procurement: Agencywide Action Needed to Improve Management of Contrac
t
Modifications_ (GAO/NSIAD-92-87, Mar. 2, 1992).
_NASA Procurement: Management Oversight of Contract Cost and Time Changes
Could Be Enhanced_ (GAO/NSIAD-91-259, Sept. 30, 1991).
_Space Project Testing: Uniform Policies and Added Controls Would Strengthen
Testing Activities_ (GAO/NSIAD-91-248, Sept. 16, 1991).
_Financial Management: Actions Needed to Ensure Effective Implementation of
NASA's Accounting System_ (GAO/AFMD-91-74, Aug. 21, 1991).
_Weather Satellites: Action Needed to Resolve Status of the U.S. Geostationary
Satellite Program_ (GAO/NSIAD-91-252, July 24, 1991).
_Environmental Protection: Solving NASA's Current Problems Requires Agencywi
de
Emphasis_ (GAO/NSIAD-91-146, Apr. 5, 1991).
_NASA Maintenance: Stronger Commitment Needed to Curb Facility Deterioration
_
(GAO/NSIAD-91-34, Dec. 14, 1990).
_Space Shuttle: External Tank Procurement Does Not Comply With Competition i
n
Contracting Act_ (GAO/NSIAD-89-62, Dec. 28, 1988).
____________________________________________________________________________
___
HIGH-RISK SERIES
----------------------------------------------------------------------------
---
============================================================================
===
Lending and Insuring Issues
_Farmers Home Administration's Farm Loan Programs_ (GAO/HR-93-1).
_Guaranteed Student Loans_ (GAO/HR-93-2).
_Bank Insurance Fund_ (GAO/HR-93-3).
_Resolution Trust Corporation_ (GAO/HR-93-4).
_Pension Benefit Guaranty Corporation_ (GAO/HR-93-5).
_Medicare Claims_ (GAO/HR-93-6).
============================================================================
===
Contracting Issues
_Defense Weapons Systems Acquisition_ (GAO/HR-93-7).
_Defense Contract Pricing_ (GAO/HR-93-8).
_Department of Energy Contract Management_ (GAO/HR-93-9).
_Superfund Program Management_ (GAO/HR-93-10).
_NASA Contract Management_ (GAO/HR-93-11).
============================================================================
===
Accountability Issues
_Defense Inventory Management_ (GAO/HR-93-12).
_Internal Revenue Service Receivables_ (GAO/HR-93-13).
_Managing the Customs Service_ (GAO/HR-93-14).
_Management of Overseas Real Property_ (GAO/HR-93-15).
_Federal Transit Administration Grant Management_ (GAO/HR-93-16).
_Asset Forfeiture Programs_ (GAO/HR-93-17).
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