— An attempt by House lawmakers to crack down on lax financial management at NASA could do more harm than good, according to agency observers. Language included in a report accompanying the 2010 Commerce, Justice, Science, and Related Agencies spending bill, which passed the House Appropriations Committee June 10, would require the space agency to commit money for most programs within a single year – half the time usually allowed – a move that could force NASA officials to hastily award contracts or risk losing the funds.

Observers familiar with NASA’s budget process say much of the agency’s money – often doled out in the form of competitively awarded research grants and development contracts — takes time to spend. Some assert the House language, which takes aim at a lack of transparency in NASA’s budget process and a tendency to overstate the amount of money the agency commits each year, could have unintended consequences.

“It’ll create some bad behavior in terms of shipping money out the door and creating sole-source procurements,” said one former government official who follows NASA, adding that the one-year window leaves little room for the space agency’s acquisition staff to conduct due diligence before obligating money. “You get to the end of the year and it creates a fire-drill mentality of ‘go put money on a contract, any contract.’” House appropriators do not expect the one-year obligation requirement to negatively impact the way NASA does business. According to a House aide, NASA managed last year to award or otherwise commit to spend at least 95 percent of its 2008 budget.

“Historically, NASA has demonstrated that that is an appropriate rate – from [fiscal year] 1998 through 2002, NASA typically obligated at least 94 percent of its budget authority,” the aide said. However, between 2003 and 2007, the aide said, NASA’s ability to obligate the vast majority of its annual funding, either by awarding contracts or purchase orders, waned for some programs.

“The one-year obligation requirement reflects the committee’s expectation that the obligation rate stay close to the level achieved last year and in prior years,” the aide said.

And while NASA has shown with some regularity that it can obligate most of its annual budget within the given year, actually moving the money out the door has been a different matter.

“The committee has seen an increased obligation rate on some NASA programs without seeing a corresponding increase in outlays and program activity,” the aide said.

NASA, like most government agencies in the business of buying or developing complicated, one-of-a-kind systems, has struggled to control cost growth to lawmakers’ satisfaction. During an April hearing of the House Appropriations commerce, justice, science subcommittee, Rep. Alan Mollohan (D-W.Va.) took aim at cost growth and schedule delays in major programs, and questioned whether the price tag for two of NASA’s biggest efforts – development of the Orion Crew Exploration Vehicle and its Ares 1 launcher – could be contained.

“These cost increases occur within finite annual budgets, and as such, cost increases in one program likely mean reductions in another,” said Mollohan, who chairs the subcommittee. “Given these fiscal realities, it is incumbent upon NASA to have far more reliable cost estimates at the time missions are proposed, effective management tools and empowered managers in place to minimize cost increases and schedule slippages, and greater transparency in NASA’s budgeting and execution to improve program costs, budgeting, review and oversight.”

Mollohan’s comments echoed the findings of a review of NASA financial management conducted by his committee and cited in the report accompanying the appropriations bill.

“Recent reports by Committee staff have found additional disquieting evidence concerning NASA’s financial management,” the report states. In response, the committee recommends a number of changes to NASA’s 2010 appropriation, including a provision that would limit the agency’s flexibility when setting aside money for research and development.

NASA has struggled in recent years to produce a clean audit of its financial records. In 2008, NASA was one of just four
government agencies unable to convince outside auditors that their accounting records were accurate.

But while the committee’s concerns with the agency’s financial management practices may be justified, observers say when it comes to making research and development awards, particularly those involving competitive grants for university-based researchers, two years is not unreasonable given that NASA often will not even solicit grant proposals until it has the money in hand.

“Sometimes Congress is late in appropriating funds, so NASA will wait until Congress appropriates the money before they do an announcement,” said Jim Muncy, principal of PoliSpace, an independent space consultancy here. “Then the process begins, and it’s a lengthy one. It could take a year before grants are finalized with the universities, so if you don’t start the process on Oct. 1, you don’t get that money on a contract with a university within that year.”

Although language in the report says “that cutting edge aeronautics and space research and development involves an element of uncertainty,” the report limits most funding in NASA’s operating accounts – including aeronautics, exploration, science and space operations – to one year, leaving only 10 percent in each account to be obligated over two years.

“The appropriators may be trying to police NASA’s speed at putting money on contracts, but this will cripple NASA’s ability to manage flexibly,” Muncy said. “It will especially hurt science activities where it takes longer to put money onto grants with universities.”