NASA Contract Management:

Improving the Use of DCAA's Auditing Services

NSIAD-94-229: Published: Sep 30, 1994. Publicly Released: Nov 15, 1994.

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Pursuant to a congressional request, GAO reviewed the National Aeronautics and Space Administration's (NASA) management and use of the Defense Contract Audit Agency's (DCAA) audit support services, focusing on NASA: (1) need for an enforcement mechanism to deter contractors from claiming unallowable costs; (2) use of DCAA proposal audit services; (3) involvement in audit planning; (4) oversight of contract audit and administration services; and (5) backlog of contracts awaiting closeout.

GAO found that: (1) Congress recently gave NASA authority to assess penalties against its contractors for unallowable cost claims, which amount to millions of dollars; (2) although NASA requested proposal pricing support from DCAA in appropriate circumstances and adequately considered DCAA recommendations, over 70 percent of NASA contracts did not properly document the status of contractors' business systems prior to negotiations; (3) NASA and DCAA have improved communication and audit coordination, but NASA is still not sufficiently involved in the DCAA audit planning process or DCAA audit coverage to ensure that contractors receive appropriate and timely audits; (4) NASA contract audit tracking and follow-up systems are incomplete and not in compliance with guidance; (5) NASA does not make timely resolution decisions on contract audit report recommendations or consistently oversee and document Department of Defense (DOD) audit resolutions on those contracts delegated to DOD; and (6) NASA does not timely close out contracts after work has been completed, which increases its exposure to contractors' financial and internal control problems, delays corrective actions, and could lead to excessive billings on subsequent contracts.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: NASA's Associate Administrator for Procurement established a policy requiring all NASA contracting officers to maintain an ongoing dialogue with Defense Department administrative contracting officers (ACO) who have been delegated activities on NASA contracts. The new policy also requires contracting officers to conduct semi-annual reviews on the status and disposition of significant audit findings and document the results in contract files. This new policy is a significant change from past practice of not coordinating with DOD ACOs on a regular basis. Though the policy does not specifically establish a headquarters monitoring function, it does set up a monitoring mechanism at the level most able to deal with audits on a detailed, contract-specific basis. As such, this action satisfies the intent of the recommendation.

    Recommendation: The Administrator, NASA, should monitor audit findings and recommendations that could affect NASA contracts that are resolved by DOD administrative contracting officers and document their status and disposition in contract files.

    Agency Affected: National Aeronautics and Space Administration

  2. Status: Closed - Implemented

    Comments: NASA issued a new NASA Federal Acquisition Regulations Supplement on March 31, 1995, that included audit tracking resolution provisions. NASA is also developing a NASA-wide tracking system for DCAA cost audits similar to a tracking system now in use for GAO/Inspector General audits. The tracking system is expected to be online in late 1997.

    Recommendation: The Administrator, NASA, should track and follow up on contract audit reports in the timely and comprehensive manner required by Office of Management and Budget Circular A-50.

    Agency Affected: National Aeronautics and Space Administration

  3. Status: Closed - Implemented

    Comments: NASA developed an audit planning process plan that provided for each agency to work in concert to establish priorities in the conduct of audits. The plan was tested at NASA's Johnson Space Center and DCAA's Houston office. Following review of the pilot test and comments received from each organization's field installations/regional offices, NASA headquarters decided not to implement the JSC model on an agencywide basis because it would be too resource-intensive. Because the number and size of procurements at NASA centers varies greatly, each center was told to use the JSC model as a guide, implement the new process in conjunction with the local DCAA office, and provide headquarters with a written summary of how this will be accomplished. Because NASA reduced the number of open audits by 50 percent between December 1995 and June 1996, it believes these actions comply with the recommendation, and no future effort is planned.

    Recommendation: The Administrator, NASA, should, in coordination with the NASA Inspector General and DOD administrative contracting officers where applicable, annually assess and prioritize audit coverage of NASA contractors and provide contractor-specific input to the DCAA audit planning process. If necessary, the Administrator should develop and consider alternatives or strategies to achieve more complete and timely contract audits.

    Agency Affected: National Aeronautics and Space Administration

  4. Status: Closed - Implemented

    Comments: NASA amended its Procurement Survey Guide to strengthen oversight of documentation; the new guide is being printed. In the interim, NASA headquarters sent a memo to all center procurement officers reemphasizing the importance of documenting the status of inapplicability of all contractor business systems in negotiation memoranda.

    Recommendation: The Administrator, NASA, should re-emphasize the requirement that contracting officers document the status or nonapplicability of all contractor business systems in negotiation memoranda, including those not specifically mentioned as examples in the federal acquisition regulations.

    Agency Affected: National Aeronautics and Space Administration

  5. Status: Closed - Implemented

    Comments: NASA completed the revision of the Source Evaluation Board Handbook. However, NASA decided that this was not the proper vehicle for deterring contractors from claiming unallowable costs, and subsequently decided to rely on the penalty and certification provisions in the Federal Acquisition Streamlining Act and the guidance contained in NASA FAR 42.1501 covering unallowable costs in lieu of the Federal Acquisition Streamlining Act. NASA intends no further action on this recommendation.

    Recommendation: The Administrator, NASA, should develop, test, and implement initiatives to help deter NASA contractors from claiming unallowable costs, such as considering prior unallowable cost claims as part of contractors' past performance when awarding future contracts. These initiatives would be in addition to the recently passed legislation on certification and penalty provisions.

    Agency Affected: National Aeronautics and Space Administration

  6. Status: Closed - Implemented

    Comments: NASA has undertaken 3 initiatives to reduce existing backlogs of delinquent physically completed but unclosed contracts: (1) the Associate Administrator for Procurement sent a letter to all procurement officers reiterating the use of quick closeout procedures to the maximum extent possible; (2) all procurement officers are now required to complete a training and awareness program for all procurement professionals involved in the closeout process; and (3) the Office of Procurement at NASA headquarters added closeout data to its metrics tracking program. Further, in an effort to eliminate as much of the backlog of overage contracts as possible, NASA provided DCAA with a listing of those contracts for the audit agency to target.

    Recommendation: The Administrator, NASA, should develop, test, and implement initiatives to reduce existing backlogs of delinquent physically completed but unclosed contracts, and direct NASA personnel to periodically report to senior management on the results of these initiatives.

    Agency Affected: National Aeronautics and Space Administration

 

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