The audit report “International Space Station Spare Parts Costs” (IG-
02-011, March 22, 2002) has been posted to the NASA Office of Inspector
General Web site at:

NASA budgeted $831 million to acquire spare parts for the International
Space Station (ISS) through fiscal year (FY) 2007. We found that the
Agency did not properly acquire and account for the spare parts. NASA
used noncompetitive contract modifications to issue orders to acquire
groups of spare parts from the ISS prime contractor. Although the
Agency properly justified and approved noncompetitive contract
modifications, it did not negotiate prices for individual spare parts
as required by the ISS contract. The Agency also did not develop a
pricing history for use in purchasing additional spare parts. As a
result, NASA had no assurance that it paid fair and reasonable prices
for the $334 million spent on ISS spare parts through FY 2000. In
addition, because the Agency has no pricing histories, it may not be
able to cost-effectively and competitively procure about $608 million
in future ISS spare parts.

Additionally, we found that the ISS prime contractor omitted contractor
fee and indirect costs from the value of spare parts recorded on
receiving reports it submitted to NASA. Consequently, the Agency
cumulatively understated by about $39 million the value of ISS spare
parts in its annual financial statements from Program inception (FY
1995) through FY 2000.

We recommended that NASA require the ISS prime contractor to propose,
negotiate, track, and report prices for individual spare parts and that
NASA establish price histories for the parts. We also recommended that
NASA ensure the ISS prime contractor includes fee and indirect costs in
the value of ISS spare parts recorded in the official property records.
Further, we recommended that the Agency reestablish procedures for
acquiring spare parts and reference the procedures in NASA policy.

NASA management concurred with the recommendations to require the
contractor to propose and negotiate individual prices for spare parts
and to include fee and indirect costs of spare parts on receiving
reports submitted to NASA. NASA originally did not agree with the
recommendation to track and report individual prices for ISS spare
parts, but subsequently agreed to use contractor receiving reports to
track prices and establish price histories for high-dollar value spare
parts. NASA also agreed to reestablish procedures for acquiring spare
parts and to reference the procedures in NASA policy.

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