The following audit report has been posted to the NASA Office of
Inspector General Web site: Audit of Acquisition of the Space Station
Propulsion Module, IG-01-027, May 21, 2001

To access the entire report, please go to:

Synopsis: The NASA Office of Inspector General has completed an Audit
of Acquisition of the Space Station Propulsion Module. The purpose of
the Propulsion Module was to provide a U.S. propulsion capability to
mitigate the risk of a Russian failure to deliver critical elements,
such as the Service Module, or to provide logistical support to the
International Space Station. We determined that, with a life-cycle
cost of $1.558 billion and a diminished need for long-term U.S.
propulsion capability, the Propulsion Module was not cost-effective.

In March 2001, NASA cancelled the project after recognizing that the
estimated $675 million cost to complete it was not affordable.
We found that NASA implemented the United States Propulsion Module
(USPM) design before properly accomplishing acquisition planning and
preparing project documentation. For example, NASA did not validate
requirements before beginning a preliminary design review of the USPM.
As a result, the Agency spent $97 million and 19 months of effort
before it determined that the design was unacceptable. For the follow-
on design, the United States Propulsion System (USPS), NASA
appropriately analyzed alternatives, developed an acquisition strategy,
and defined requirements. However, the Agency pursued implementation
of the USPS without an approved project plan or risk management plan.
Also, NASA selected The Boeing Company (Boeing) as the sole-source
contractor without properly documenting the justification for the
noncompetitive selection.

As a result, NASA had not shown that the
selection was in the best interest of the Government.
Management’s Response: NASA concurred with the recommendation to
establish an approved project plan, acquisition plan, and risk
management plan. Management stated that it would manage all
International Space Station projects consistent with NASA policy, but
disagreed that NASA selected the USPM design without fully considering
alternatives and without developing an adequate acquisition strategy.
NASA partially concurred with the recommendation to resolve all
discrepancies prior to beginning a preliminary design review. However,
NASA disagreed that it should have closed all discrepancies from the
systems requirements review before beginning a preliminary design
review for the USPM.

NASA concurred with the intent of the recommendation on sole-source
procurements, recognizing that all procurements must follow the
appropriate regulations. However, the Agency maintained that the
Propulsion Module Project was within the scope of the contract and,
therefore, was not subject to requirements for competitive
procurements. A recent General Accounting Office report (GAO-01-576R)
supports this position. Although we disagree with that position, our
report does not conclude that a sole-source procurement was
inappropriate, but that NASA did not adequately document its reasons
for that method of contracting, even though justification for sole-
source procurements is required by the Federal Acquisition Regulation.

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