NASA OIG: NASA Contracts for Professional, Administrative, and Management Support Services

The audit report “NASA Contracts for Professional, Administrative, and Management Support Services,” (IG-03-003) has been posted to the NASA Office of Inspector General Web site at: http://www.hq.nasa.gov/office/oig/hq/ig-03-003.pdf

Over the last decade, Federal agencies, including NASA, have substantially increased their purchases of services. In fiscal year 2001, service contracts accounted for about $5.1 billion, of which NASA paid about $2.7 billion for professional, administrative, and management support services contracts. We performed this audit because of NASA’s significant investment in support services contracts and prior NASA Office of Inspector General (OIG) and Department of Defense OIG audits that identified management control weaknesses related to support services contracts.

Results of Audit

We found that 3 NASA support services contractors did not adequately compete 13 (59 percent) of 22 subcontracts awarded and did not adequately justify the lack of competition for the 13 awards. Consequently, NASA has reduced assurance that the selected subcontractors offered fair and reasonable prices for services valued at about $1.3 million.

We also found that NASA did not maximize opportunities to use fixed-price contracting for routine administrative services. As a result, NASA assumed more risk than necessary because the use of cost-type contracts rather than fixed-price contracts can minimize the contractor’s incentive to control costs and perform effectively. In addition, cost-type contracts can be more costly and burdensome for NASA to administer due to more stringent contract reporting and review requirements. For example, a NASA Award Fee Contracting Guide estimated that it would cost $387,000 to administer the award fee process over the life of a 5-year contract.

Recommendations

We recommended that NASA contracting officers (CO’s) require contractors to develop and improve company policies for documenting justifications for noncompetitive subcontract awards and to follow policies for competing subcontracts and documenting noncompetitive procurements. We also recommended that CO’s thoroughly document their analysis and approval of a contractor’s request to subcontract and include the documents in the contract files. We further recommended that the NASA CO’s collect sufficient historical data on routine administrative services to allow for expanded use of fixed-price contracting in future awards when data and circumstances indicate that fixed-price contracting is appropriate.

Management’s Response

Management concurred with the recommendations, and we consider management’s planned and completed actions responsive.