GAO Finds No Wrongdoing On Constellation Slowdown

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While some NASA contractors have pulled personnel off the Constellation program in anticipation of its cancellation, the U.S. Government Accountability Office (GAO) says the space agency is heeding a congressional mandate to continue funding the space shuttle replacement effort while lawmakers weigh a White House proposal to scrap development of the Ares family of rockets and Orion crew transport vehicle and have NASA commercialize human spaceflight.

“We found no evidence that NASA is withholding Exploration appropriations from obligation in anticipation of future programmatic changes,” or that NASA is taking any steps to terminate program contracts, the GAO wrote in a July 23 opinion, which follows a four-month investigation called for by U.S. House lawmakers concerned NASA is selectively applying a standard but rarely invoked contracting rule in an effort to halt work on key elements of Constellation.

NASA told contractors earlier this year they were legally obligated to set aside funds that might otherwise be spent on project work to cover costs they could incur as a result of having to cancel orders, vacate leases and pink-slip employees if the program is shut down. In a June 9 letter to key U.S. lawmakers, NASA Administrator Charles Bolden said Constellation was facing a potential $1 billion funding shortfall in part because contractors had not accurately accounted for these costs, and that the situation likely would force contractors to scale back work on major elements of the program before the agency obtained the congressional authority it needs to officially terminate it.

The GAO found that NASA continues to fund Constellation’s prime contracts, “and that the obligation rates have not changed in response to either the President’s budget request or to the Administrator’s June 9 Letter.”

But three of NASA’s five Constellation prime contractors told GAO in June they are reducing the program workforce, either by reassigning staff to other projects or through layoffs.

“Of these three contractors, one states that the changes were necessary because NASA funded the contract at a lower level than the contractor had previously expected, while another asserts that the changes were necessary because NASA changed its practice with regard to the funding of termination liability,” the GAO states.

In June, Magna, Utah-based ATK Aerospace, prime contractor on the first stage of Constellation’s Ares 1 rocket, said termination liability funds historically have not been included in contractor costs.

As recently as 2007, NASA indicated that termination costs would be handled outside the Ares 1 contract and that “funds will be made available to the Contracting Officer to support a termination if and when a termination become(s) necessary,” according to Emil Posey, a NASA contracting official based at NASA’s Marshall Space Flight Center in Huntsville, Ala., who explained the agency’s practice in a July 26, 2007, e-mail that NASA sent to ATK.

Although GAO took “no position” on NASA’s termination cost accounting, the GAO said if NASA agreed to pay termination costs that exceed the amount allotted under federal acquisition regulations in the contract, “NASA would need to have sufficient funds available to obligate the amount that it agreed to pay” or risk violating federal law.