Report: NASA Needs to Improve Oversight of Contracts and Grants

NASA finished assembling the main structural components for the Space Launch System (SLS) rocket core stage on Sept. 19. Engineers at NASA’s Michoud Assembly Facility in New Orleans fully integrated the last piece of the 212-foot-tall core stage by adding the engine section to the rest of the previously assembled structure. Boeing technicians bolted the engine section to the stage’s liquid hydrogen propellant tank. (Credit: NASA/Steven Seipel)

by Douglas Messier
Managing Editor

Between 2014 and 2017, NASA awarded Boeing a total of $64 million in performance awards for its work on the Space Launch System (SLS) despite significant schedule delays and cost overruns in the program.

It was only after the NASA Office of Inspector General (OIG) questioned the propriety of the awards that SLS program officials began “providing Boeing award fees that better reflected actual performance,” the space agency’s watchdog said in a new report.

The questionable awards were just a part of NASA’s poor management of the SLS program, which is designed to return American astronauts to the moon. The shortcomings have contributed to 2.5 years of delay and $4 billion in overruns, the report added.

The OIG used the Boeing awards as an example of how NASA needs to improve its financial oversight. The watchdog identified the management of contracts, grants and cooperative agreements as one of the space agency’s top seven performance challenges. [Full Report]

“Collectively, our audit and investigative work has consistently shown that NASA’s poor management and oversight of contracts, grants, and cooperative agreements has resulted in inappropriate expenditures, wasted taxpayer dollars, and negatively impacted the Agency’s mission,” the OIG said.

The report recounts a number of examples of NASA’s weak oversight, including:

  • a “persistent failure” to adequately manage its agreement with CASIS, a non-profit organization tasked with commercializing research aboard the International Space Station;
  • providing the California Institute of Technology (Caltech) with more than $16 million in unsupported award fees for its management of the Jet Propulsion Laboratory; and,
  • improperly allowing the National Space Biomedical Research Institute to use $7.8 million in research funding to renovate and pay rent for laboratory space in a private building contrary to federal law.

NASA’s contracts and awards has been the subject of fraud. Aluminum producer Sapa Profiles falsely certified aluminum components provided to NASA and the Missile Defense Agency (MDA) for decades, OIG said.

In 2009, NASA’s Orbital Carbon Observatory was lost when the payload shroud on Orbital Sciences’ Taurus XL booster failed to separate due to substandard Sapa Profiles aluminum. Two years later, the Glory spacecraft when a payload shroud on a different Taurus XL rocket also failed to separate.

“The criminal behavior involved the fraudulent alteration of material properties test results for parts manufactured for use in rockets and military hardware, poor materials that NASA maintains caused two satellite launch failures resulting in losses exceeding $700 million,” the report stated.

“The aluminum manufacturing company agreed to pay $34.1 million in combined restitution to NASA, MDA, and commercial customers, and also agreed to forfeit $1.8 million in ill-gotten gains,” the document added.

OIG said it has long had concerns about fraud and misconduct in NASA’s Small Business Innovation Research (SBIR) and Small Business Technology Transfer programs.

“For example, a Delaware company and one of its co-owners agreed to pay $2.75 million in a civil settlement to resolve allegations the company mischarged labor costs and falsely certified work it performed by duplicating the same work under multiple SBIR/Small Business Technology Transfer contracts,” the report said.

Key Implemented Recommendations
Ensure annual [CASIS] metrics and targets are quantifiable and address recruitment of commercial users, the balance of applied research, support to commercial service providers, a mechanism to match projects seeking funding with funding sources, and soliciting funds other than sponsored program funds.

Assess the feasibility of implementing internal controls, policies, and procedures to ensure that grant officers consider the financial condition of intended grant recipients prior to award and that additional reporting requirements are imposed and/or enhanced oversight efforts undertaken in appropriate circumstances.

The OIG review found that NASA’s progress on improving its oversight has been slow.

“While NASA has made some enterprise-wide changes to address challenges related to its procurement oversight and acquisition management, substantial progress appears slow. In what we view as a positive trend, NASA’s use of award-fee contracts has diminished as a percentage of procurement dollars paid to businesses from 56 percent in FY 2014 to 48 percent in FY 2018.

Furthermore, in 2016 the Agency revised the NASA Federal Acquisition Regulation Supplement to address a number of questionable practices we identified in a 2013 report, including award fees not justified by contractor performance and high ratings not supported by technical, cost, and/or schedule performance. However, NASA continues to struggle with proper oversight and application of award fees.

In his response, NASA Administrator Jim Bridenstine wrote the space agency’s Office of Procurement (OP) is taking several steps to tighten controls on contracts and awards.

“OP received approval by NASA’s Mission Support Council (MSC) to implement its Mission Support Future Architecture Program (MAP) transformation approach which includes an enterprise approach to governance, hiring, training, performance metrics, new and improved IT tools, and knowledge sharing among the Procurement workforce,” Bridenstine wrote.

“The transformation included a realignment of OP’s historical decentralized budget (labor, travel, and procurement) to a centrally controlled budget managed by NASA Headquarters’ OP. Supervision of the local Procurement directors has also been realigned to Headquarters enabling consistency in management of procurement processes,” he added.

NASA is also implementing an enterprise-wide, end-to-end grants management system to make the process more efficient, transparent and accountable, Bridenstine added.

Key Unimplemented Recommendations
Include requirements in the pending IT Transition Plan associated with NASA’s contract with Caltech for implementation of continuous monitoring tools that provide the Agency’s Security Operations Center with oversight of JPL network security practices to ensure they adequately protect NASA data, systems, and applications.

Develop a community of practice to analyze what contract structure changes lead to the greatest efficiencies and to share these lessons learned with the Agency’s procurement community.

Establish policies and procedures as part of the NASA Grant and Cooperative Agreement Manual to periodically review a recipient’s actual cost match and document award requirements are met prior to obligating the next increment of funding.

Bridenstine said NASA is working to implement three recommendations that OIG has made in previous reports.

The Office of the Chief Financial Officer “is in the process of revamping the Grant and Cooperative Agreement Manual (GCAM), which is utilized by NASA Program Managers, Technical Officers and Grant Officers as internal guidance to implement Government-wide and NASA-specified regulations,” he wrote. “When done, the updated GCAM will address several open OIG recommendations, including the above mentioned recommendation.”

OIG Ongoing and Anticipated Future Audit Work

The Offices of Audits and Investigations, in conjunction with the OIG’s Advanced Data Analytics Program, will continue to assist NASA in its acquisition oversight efforts by examining Agency-wide procurement and grant-making processes. These efforts will include steps NASA is taking to identify and mitigate grant fraud risks; auditing individual contracts, grants, and cooperative agreements; and investigating potential misuse of contract and grant funds. Examples of ongoing audits include:

Management of the Stratospheric Observatory for Infrared Astronomy (SOFIA) Airborne Observatory
The overall objective is to assess NASA’s management of the SOFIA airborne observatory during its ongoing prime operations phase relative to cost, technical performance, and scientific achievements.

NASA’s Efforts to Manage Space Launch System Program Costs and Contracts
This audit is evaluating how the SLS Program is tracking and reporting overall costs as well as NASA’s effectiveness in controlling cost growth for four major SLS contracts, including the RS-25 engines, solid rocket boosters, and upper stage.

NASA’s Management of the Mobile Launcher
This audit is examining the status of Mobile Launcher 1 as well as NASA’s development plans for Mobile Launcher 2 and the extent to which the EGS Program is meeting cost, schedule, and performance goals related to the Mobile Launchers.

Additionally, we will continue to assess the impact of NASA’s management and oversight of contracts, grants, and cooperative agreements relative to the Agency accomplishing its aeronautics, space, and science missions, as well as its ability to adequately protect its IT systems and data.