Appendix C. Competition Requirements

Both the FAR and NFS address competition requirements. Those requirements are
summarized below.

FAR 6.303-1, “Requirements”

(a) A CO shall not commence negotiations for a sole-source contract, commence
negotiations for a contract resulting from an unsolicited proposal, or award any other
contract without providing for full and open competition unless the contracting officer—

(1) Justifies, if required in 6.302, the use of such actions in writing;
(2) Certifies the accuracy and completeness of the justification; and
(3) Obtains the approval required by 6.304.

(b) Technical and requirements personnel are responsible for providing and certifying
as accurate and complete necessary data to support their recommendation for other than
full and open competition.

(c) Justifications required by paragraph (a) of this section may be made on an
individual or class basis. Any justification for contracts awarded under the authority of
6.302-7 shall only be made on an individual basis. Whenever a justification is made and
approved on a class basis, the contracting officer must ensure that each contract action
taken pursuant to the authority of the class Justification and approval is within the scope

of the class justification and approval and shall document the contract file for each
contract action accordingly.

(d) If the authority of 6.302-3(a)(2)(i) or 6.302-7 is being cited as a basis for not
providing for full and open competition in an acquisition that would otherwise be subject
to the Trade Agreements Act, the CO must forward a copy of the justification, in

accordance with agency procedures, to the agency's point of contact with the Office of -
the United States Trade Representative.

(e) The justifications for contracts awarded under the authority cited in 6.302-2 may
be prepared and approved within a reasonable time after contract award when preparation
and approval prior to award would unreasonably delay the acquisitions.

FAR 6.303-2, “Content”

(a) Each justification shall contain sufficient facts and rationale to justify the use
of the specific authority cited. Asa minimum, each justification shall include the
following information:

(1) Identification of the agency and the contracting activity, and specific
identification of the document as a “Justification for other than full and open
competition.”

15


Appendix A. Scope and Methodology

Scope and Methodology

We performed the review at four NASA Centers: Goddard, Headquarters, Johnson, and
Stennis. At the four Centers, we examined all contract actions from fiscal year 2001
through fiscal year 2003 that cited the only one responsible source exception. Our
selection of Centers was based on the significant number and dollar value of actions at
each location. We also considered other recent field work conducted at the Centers as
part of our overall series of audits relating to competition in contracting. Our overall

universe consisted of each Center’s contract actions and the dollar values displayed
below.

Center Actions Value

Ames Research Center 6 $ 5,906,793
Dryden Flight Research Center 6 26 749,365
Glenn Research Center 31 224,697,725
Goddard Space Flight Center 25 44,984,188
Headquarters 4 5,023,092
Johnson Space Center 34 987,453,138
Kennedy Space Center 7 2,067,751,415
Langley Research Center 12 29,115,539
Marshall Space Flight Center 23 864,812,937
Stennis Space Center B 618,988,317

Total 161 $4,875,482,509

After analyzing the data in the table, we made our sample selection. The four locations
selected awarded 76 (47 percent) of the total number of contract actions and $1.7 billion
(34 percent) of the total dollars of NASA contract actions during the sampled time frame.
We initially intended to review all 76 of the contract actions; however, during site visits
we determined that 8 actions were miscoded, closed out, or were involved in criminal
investigative proceedings. After eliminating those 8 actions from our sample, we
ultimately reviewed a total of 68 contract actions that cited only one responsible source.
The total actions we reviewed included 23 actions at Goddard, 4 actions at Headquarters,
30 actions at Johnson, and 11 actions at Stennis.

We reviewed pertinent Federal, Agency, and Center-specific laws, policies, and
procedures pertaining to contracting without full and open competition. For each
contract action sampled, we reviewed pertinent contract file documentation, including the
Justification and the results of any market research conducted by the procurement team.
We interviewed COs and other procurement officials for the selected contract actions.
We also interviewed COTRs, as necessary.


Appendix D

Inadequate
Description of
Short Steps to
Synopsis Eliminate
NASA Contract Response Barriers to Deficient
Center Number Value Times Competition Justifications
Johnson NAS9-01054 5,917,095 x
(continued)
NAS9-01060 2,800,000 4
NAS9-01069 28,850,414 x
NAS9-01078 337,770 x x
NAS9-01080 420,588 x
NAS9-01103 3,063,977 x
NAS9-01120 9,500,000 x
NAS9-01121 9,500,000 x
NAS9-01128 95,708 x
NAS9-01129 8,000,000
NAS9-01130 1,690,986
NAS9-01131 2,575,134
NAS9-01177 2,677,453
NAS9-01179 95,000 x x
NAS9-01183 14,602,730
NAS9-02003 226,174 x x
NAS9-02028 9,625,000
NAS9-02055 137,259 x x
NAS9-02063 300,000 x
NAS9-02071 299,988
NAS9-02099 202,703,268
NAS9-02100 15,056,766
NAS9-02098 145,000,000
NAS9-03044 10,097,059
NAS9-03045 93,700,000
NAS9-03046 116,903
Subtotal 30 $_ 635,735,540 2 16 3
Stennis NAS13-00035 $ 197,290
NAS13-01044 100,000 x x
NAS13-650 564,226,758
Mod 121
NAS13-02013 5,000,000 x x
NAS13-02014 40,533,081
NAS13-02045 2,040,480 x x
NAS13-03002 123,400 x xX
NAS13-03020 1,100,000 x
NAS13-03030 92,345
NAS13-03029 149,963
NAS13-03035 220,000 x x
Subtotal il $_ 613,783,317 5 6 0
Total 68 $1,298,381,482 7 22 4

19



Table of Contents

Executive Summary

Objectives

Background

Findings

A.

Appendixes

A.

m 5 Oo

m

Unreasonably Short Synopsis Response Times for
Acquisitions of Commercial Items

Inadequate Descriptions of Steps Taken to Remove or
Overcome Any Barriers to Competition

Scope and Methodology

Details Regarding Four Contract Actions With
Deficient Sole-Source Justifications

Competition Requirements
Contract Actions Reviewed
Management’s Response

Report Distribution

Acronyms Used in the Report

co
COTR
FAR
NFS

Contracting Officer

Contracting Officer’s Technical Representative
Federal Acquisition Regulation

NASA FAR Supplement

iv

15
18
20

26


Appendix C

(2) Nature and/or description of the action being approved.

(3) A description of the supplies or services required to meet the agency’s
needs (including the estimated value).

(4) An identification of the statutory authority permitting other than full and
open competition.

(5) A demonstration that the proposed contractor’s unique qualifications or
the nature of the acquisition requires use of the authority cited.

(6) A description of efforts made to ensure that offers are solicited from as
many potential sources as is practicable, including whether a notice was or
will be publicized as required by Subpart 5.2 and, if not, which exception
under 5.202 applies.

(7) A determination by the CO that the anticipated cost to the Government
will be fair and reasonable.

(8) A description of the market research conducted and the results or a
statement of the reason market research was not conducted.

(9) Any other facts supporting the use of other than full and open
competition, such as:

(i) Explanation of why technical data packages, specifications,
engineering descriptions, statements of work, or purchase descriptions
suitable for full and open competition have not been developed or are not
available.

(ii) When 6.302-1 is cited for follow-on acquisitions as described in
6.302-1(a)(2)(ii), an estimate of the cost to the Government that would be
duplicated and how the estimate was derived.

(iii) When 6.302-2 is cited, data, estimated cost, or other rationale as
to the extent and nature of the harm to the Government.

(10) A listing of the sources, if any, that expressed, in writing, an interest in
the acquisition.

(11) A statement of the actions, if any, the agency may take to remove or

overcome any barriers to competition before any subsequent acquisition for
the supplies or services required.

16


Appendix E

will take to ensure the training addresses these concerns, Although the Procurement
Officers were asked to respond NLT May 18, 2005, a response from LaRC has already
been received (a copy of their response is attached), The contract LaRC has with
‘Training Resource Consultants Inc. to provide training is applicable to five Centers, In
addition, TRC conducts COTR Certification and COTR Refresher classes at
Headquarters and Johnson under a GSA Schedule contract. In summary, we believe the
content of the training most of the centers are receiving adequately addresses the
preparation of Justifications as well as the role of the technical Program office in taking
action, when possible, to remove or overcome barriers to competition,

Based on the action taken, request this recommendation be considered closed.

22


Appendix D. Contract Actions Reviewed

The sole-source and limited competition contract actions, citing the “one source”
exception that we reviewed at Goddard, Headquarters, Johnson, and Stennis are listed

below.
Inadequate
Description of
Short Steps Taken to
Synopsis Eliminate
NASA Contract Response Barriers to Deficient
Center Number Value Times Competition Justifications
Goddard NASS5-00211 $ 2,032,082
NAS5-01074 11,349,697
NASS5-01092 349,309
NASS-01096 2,890,356
NASS5-01108 678,420
NASS5-01113 1,086,638
NASS-01128 597,000
NASS5-01128 165,000 x
Mod 3
NASS5-01155 917,480
NASS5-02005 749,530
NAS5-02032 15,000,000
NAS5-02049 500,000
NAS5-02050 500,000
NAS5-02062 908,184
NASS5-02088 224,520
NAS5-02089 119,835
NAS5-02090 650,000
NASS5-02131 3,000,000
NAS5-02155 316,000
NASS5-03012 320,880
NASS5-03016 360,000
NASS5-03075 134,202
NASS5-03117 990,400
Subtotal 23 $43,839,533 0 1
Headquarters NASW-00042 $ 1,981,039
NASW-00045 2,350,301
NASW-00046 441,752
NASW-02023 250,000
Subtotal 4 $5,023,092 0 0
Johnson NAS9-19549 $ 9,705,158 x
Mod 102
NAS9-00076 25,780,389 x
NAS9-01008 32,568,721
NAS9-01048 292,000 x x
Mod 1

18



Appendix B

The four Justifications with material deficiencies are described below.

© At Goddard, a contract modification, valued at $165,000, for continued
membership in a Government/University consortium called Mid-Atlantic
Crossroads was not synopsized as FAR Subpart 5.2 requires. That condition
occurred because the CO for the action improperly cited FAR 5.202(a) (11) as an
applicable exception to the synopsis requirement. The exception in
FAR 5.202(a) (11) is based on the proposed contract action being made “under
the terms of an existing contract that was previously synopsized . . .” (for
example, acquired under the terms of a previously synopsized option). However,
such was not the case for that action—the continued membership period acquired
by the modification was a new scope added to the original contract and required a
new synopsis. In addition to the problem relating to the lack of a synopsis for the
action, FAR 6.303-2 requirements were not met because the Justification was not
signed or certified by either the CO or the responsible NASA technical program
personnel. The CO stated that the signature page for the Justification was
misplaced. The CO also confirmed that market research was not conducted, but
stated that he thought the sole-source rationale was reasonable at the time.

¢ At Johnson, three Justifications did not include one or more substantive elements
that FAR 6.303-2 requires. Although the Justifications lacked key information,
the COs certified them as accurate and complete. The Johnson contract actions
with deficient justifications are described below.

- The Justification for a contract valued at $337,770 for pyrotechnic initiator
assemblies did not identify any sources that expressed in writing an interest
in the acquisition and did not address other facts supporting the use of other
than full and open competition. In addition, the description of market
research in the Justification consisted of only one brief sentence (“Initiator
Assemblies are unique pyrotechnic devices available from one source
B.F. Goodrich”). The CO who awarded the contract stated that the elements
in the Justification were inadvertently omitted. The CO also stated that
because the procurement was directly related to the Shuttle Program and
selected vendors must be certified, he felt reasonably sure no other sources
had expressed an interest in the acquisition.

- The Justification for a contract valued at $226,174 for a thermal ionization
mass spectrometer did not include a description of market research, an
estimated value, a demonstration of the proposed contractor’s unique
qualifications, or a listing of sources that expressed an interest in the
acquisition. The CO who awarded the contract did not recall the

13


constitutes a reasonable response time. Rather, the syhopsis response time is left to CO
discretion based on an analysis of the particular circumstances, such as the nature and

complexity of the procurement. |

To promote competition in contracting and to ensure the integrity of the procurement
process, it is important that contracting officers establish reasonable response times in
synopsis notices for all proposed procurements, inclu fing those for commercial items or
services, :

Recommendation for Corrective Action

1. The Assistant Administrator for Procurement (formerly the Deputy Chief
Acquisition Officer/Director for Procurement) should develop and issue
guidance for the NASA procurement community for establishing reasonable
response times in synopses for commercial procurements (for example, ranges
of appropriate response times for various types of procurements based on the
nature and complexity of the particular procurements).

Management’s Response. Management concurred with the recommendation and issued
Procurement Information Circular 05-05, “Establishing Reasonable Response Times in
Synopses for Commercial Procurements,” on April 4, 2005. The Procurement
Information Circular provides guidance for the NASA procurement community regarding
reasonable response times for the synopsis process, and advises readers that the response
time should be based on a combination of many factors, including but not limited to the
complexity and dollar value of the procurement.

Evaluation of Management’s Response. Management’s actions are responsive to the
recommendation, and we consider the recommendation closed for reporting purposes.



Appendix E

LaRC response referenced in response to Recommendation 2b.

The NASA Langley Research Center uses Training Resource Consultants, Inc. for the
purpose of providing COTR Certification training and COTR Refresher training.

The COTR Certification training and COTR Refresher training classes were awarded to
Training Resource Consultants, inc. on January 22, 2002 using competitive procedures.

TRC competed against 15 other companies and was awarded the contract NAS3-02119
‘on best value procedures.

‘The contract serves five centers, NASA Ames, NASA Glenn, NASA Langley, NASA.
Goddard and NASA Stennis. In addition, TRC conducts COTR Certification and COTR
Refresher classes at Headquarters and Johnson under a GSA Schedule contract. The
contract is monitored by the Glenn Center. TRC responds positively to new initiatives
and suggestions to the classes.

In the COTR Certification class, which is three days, Chapter One-“Basic Contracting”,
has a section on Competition in Contracting that covers the Exceptions under FAR Part 6.
This section has 27 slides covering the Exceptions and Justifications and preparations of
the JOFOC. As of last year, TRC has begun using NASA IG Reports in class. For
example, the IG Repot 04-007 on “Review of Sole-Source and Limited Competition
Contract Actions Citing ‘Unusual and Compelling Urgency’ “and 1G-03-024 on
“Improving NASA Oversight of Prime Contractors’ Noncompetitive Subcontracting” are
brought to class and discussed with the students. These reports add validity to the slides
that are presented in class, TRC does not disclose which Centers need improvement or
were audited, but stresses the weaknesses in these areas. In addition, TRC uses Sole
Source Justifications and Justifications for Other than Full and Open Competition
(OFOCS) Center Procedures and procurement Initiator's Guides collected from some of
the Centers in the classroom. TRC cites case law and sources from the Federal
Acquisitions Report (Court finds nothing “urgent and compelling” in agency action-
Chapman Law Firm v. the United States). TRC will also use the Sole-Source Actions
citing “Only One Responsible Source” Audit Report when it is released on the web site.

In the COTR Refresher class, these audit reports among others (Example:
1G-03-006, “NASA’S Monitoring of Contractor Compliance with New Technology
Reporting Requirements) are discussed at the end of the class along with new objectives.

LaRC feels that TRC Inc. properly addresses in the COTR and COTR Refresher training
classes: (1) what actions the Program office can take to remove or overcome barriers to
competition, and (2) the preparation of JOFOCs.

NASA LaRC will continue to review and monitor both the COTR and COTR Refresher
training and classes that are being provided by TRC, Inc. LaRC will review the upcoming
COTR classes in May to insure that these topics are adequately covered in the classroom.

25


sufficient facts and rationale that will support the use of the exemption cited. The
Contracting Officer (CO) must certify the Justification as accurate and complete, to the
best of his or her knowledge. Also, technical program personnel must certify the
supporting data provided to the CO as a basis for the Justification. Further, approval and
justification by additional NASA officials may be necessary, depending on the dollar
value of the acquisition and individual Center policies. The thresholds for such approval
and justification are in FAR 6.304 and NFS 1806.304-70, or individual Center policies.
Procuring agencies are also required to publicly synopsize proposed sole-source contract
actions under most of the statutory authorities permitting contracting without providing
for full and open competition. In publicly synopsizing the requirement, the Government
ensures that any responsive offers are able to compete for the requirement. Further, the
public synopsis opens the procurement process to public scrutiny, under which the
Government must have a justifiable reason for limiting competition.


SOLE-SOURCE CONTRACT ACTIONS CITING
“ONLY ONE RESPONSIBLE SOURCE”

Objectives

Our overall audit objective was to determine whether NASA effectively applied and
managed awards of sole source contract actions citing “Only One Responsible Source.”
Our specific audit objectives were to determine whether:

¢ Proposed actions were synopsized as required, and the Agency adequately
addressed, documented, and dispositioned challenges received in response to the
synopses.

¢ Justifications were adequately documented, supportable based on the results of
the required market research, and properly reviewed and approved by the
appropriate NASA officials prior to the award of the contract action.

¢ Best or promising practices exist that can be disseminated to assist the Agency in
improving its competitive posture.

We conducted the audit at four NASA Centers: Goddard Space Flight Center (Goddard);

NASA Headquarters (Headquarters); Johnson Space Center (Johnson); and the Stennis
Space Center (Stennis).

Background

The Competition in Contracting Act of 1984, with limited exceptions, requires full and
open competition in Federal contracting. Full and open competition means that all
responsible sources are permitted to submit offers on Government requirements. The
Federal Acquisition Regulation (FAR) and NASA FAR Supplement (NFS) allow for
exceptions to full and open competition, but such exceptions are to be limited and fully
justified and approved. One such exception is based on only one responsible source
being capable of providing the required goods or services. FAR 6.302-1 » “Only One
Responsible Source,” states that the exception may be used when “the supplies or
services required by the agency are available from one source . . . and no other type of
supplies or services will satisfy agency requirements, full and open competition need not
be provided for.” However, agencies must use prudent business judgment and adhere to

procurement regulations when exercising the one source exception to full and open
competition.

When a requirement is determined to be available from one source or a limited number of
responsible sources, the procurement office, in collaboration with the responsible
technical program office, must make a written justification for the proposed
noncompetitive acquisition. The justification is known as the Justification for Other
Than Full and Open Competition (Justification) and must be in writing as well as contain


Appendix B

circumstances of the contract but agreed that the Justification was
abbreviated. The CO stated that some extenuating circumstance must have
existed for omitting the elements because the action required legal review
and approval, and would otherwise not have been approved.

- The Justification for a contract valued at $95,000 for structural engineering
support for the Space Station Crew Return Vehicle (X-3 8) Program did not
include a description of market research, a demonstration of the proposed
contractor’s unique qualifications, or a listing of sources that expressed an
interest in the acquisition. The CO who awarded the contract stated that the
contract was for a follow-on acquisition and that she believed that the
market research was addressed by describing the duplicative cost
($1.5 million) and schedule delay (6 months) that would have resulted if the
Government tried to compete the procurement.

While existing management controls for Justifications of larger dollar value actions
appear to be effective, additional controls were needed for CO accountability in ensuring
that required information is included in all Justifications, including those for actions
valued at below the $500 thousand threshold, before COs certify and approve the
documents. CO accountability is important to ensure that proposed sole-source contract
actions are proper and comply with Federal and Agency regulations.

We communicated these specific deficiencies to Agency management during our audit
debriefing. Agency management implemented corrective action to ensure the
completeness of justifications at or below the $500,000 review threshold. Because
management addressed our concerns and took responsive corrective action, we did not
make any recommendations for this condition.

14


that were unreasonable. One contract action for testing of automated battery cells
was valued at $137,259 and had a response time of 1 day. According to the CO,
the contract supported the X-38 Program. The'CO stated that because of the
unique requirements of the X-38 Program, competition was impossible. The CO
further stated that based on market research, historical data, and most importantly,
the compressed schedule for supporting parachute drop tests for the X-38, a quick
turnaround for many of their procurements was required. Another contract action
to increase the number of software licenses was valued at $292,000 and had a
synopsis response time of 5 days. The awardi: ig CO for that action stated that the

short response time was the result of pressure from NASA Headquarters to award
the contract. \

¢ At Stennis, of the 11 contract actions reviewed, 9 were for the acquisition of
commercial items. Those 9 contracts ranged in value from $100,000 to
$5 million, and the synopsis response times ranged from 5 days to 25 days. Of
the nine commercial item contracts, five (56 percent) of the actions had
unreasonably short response times. The five contract actions in question ranged
in value from $100,000 to $5 million, with response times ranging from 5 days to
9 days. One contract action—for the acquisition of polar ozone and aerosol
data—was valued at approximately $2 million and had a response time of 7 days.
Another contract action—for high spatial resolution remote sensing data—was
valued at $5 million and had a response time of 9 days. The CO stated that the
short response times were based on a perceived likelihood that no companies
would respond to the synopsis notice.

¢ In comparison, at Goddard and Headquarters, 6 of the 27 contract actions
reviewed were for the acquisition of commercial items and all 6 synopses
provided reasonable response times commensurate with the scope and complexity
of those particular procurements. The six contract actions ranged in value from
approximately $100,000 to $15 million, with response times ranging from 10 days
to 21 days (a 19-day average).

The primary purposes of synopses are to improve industry access to acquisition
information and enhance competition by identifying c mtracting and subcontracting
opportunities. The FAR generally requires that agencies provide a synopsis response
time of at least 15 days. However, FAR 5.203, “Publicizing and Response Time,” allows
CO discretion in limiting the response time in the synopsis process for the acquisition of
“commercial items.” A commercial item is defined in the FAR as “any item, other than
real property, that is of a type customarily used by the general public or non-
governmental entities for purposes other than governmental purposes and has been sold,
leased, or licensed to the general public or has been offered for sale, lease, or license to
the general public.”

FAR 5.203 further states that, for commercial item acquisitions, synopsis and solicitation
response times must afford potential offerors a “reasonable opportunity” to respond to
each proposed contract action. The FAR and the NFS do not, however, specify what


Appendix E. Management’s Response

National Aeronautics and
‘Space Administration
Headquarters

Washington, DC 20546-0001

April 13, 2005

Repy to Ato!

Deputy Chief Acquisition Officer/ Assistant Administrator for Procurement

‘TO: W/Assistant Inspector General for Auditing

FROM: HK)Director, Contract Management Division

SUBJECT: Office of Procurement Response to OIG Draft Audit Report on Sole-
Source Contract Actions Citing “Only One Responsible Source”,
Assignment Number A-04-009-00

Enclosed is our response to the subject draft audit report dated March 16, 2005.

Please call Lou Becker at 202-358-4593 if you have any questions or need further
coordination on this matter.

Ab. Z,

james A. Balinskas

Enclosure

20



AUDIT REPORT 1G-05-017

Report Recipients: —————————————
Audit Liaison

Representative, Office of SOLE-SOURCE CONTRACT ACTIONS CITING
institutions and “ONLY ONE RESPONSIBLE SOURCE”

Management/Office of
Procurement
Audit Liaison May 13, 2005
Representative,
Management Systems
Division
GSFC/201/Audit Liaison
Representative
JSC/BD/Audit Liaison
Representative
SSC/BA10/Audit Liaison
Representative

ee:
General Counsel
Assistant Administrator for
Procurement
GSFC/100/Center Director
GSFC/200/Procurement
Officer
JSC/AA/Center Director
JSC/BA/Procurement
Officer
SSC/AA00/Center Director
SSC/DA00/Procurement
Officer

we INSPECT’ ‘OR GENERAL,
Released by: i Lege van 2AM’

Evelyn R. Klemstine

National Aeronautics and Assistant Inspector General for Auditing
Space Administration



competition for future procurements.” Likewise, the Justification for another
contract, valued at $25.8 million, for parafoils and rigging services of recovery
system parachutes states, “The removal of barriers to competition will be
accomplished through searching the market availability when additional
parafoil manufacture, packing, rigging, and testing are needed.” The
statements do not indicate substantive efforts for proactively removing or
overcoming barriers to future competition.

e At Stennis, the Justifications for three contract actions awarded over a
14-month period (October 2001 through December 2002) for acquisition of
remote sensing data each contain identical statements of the steps taken to
Temove or overcome barriers to competition: “We perform continuous market
research to identify new sources of remotely sensed data. When other
procurements of this type are required in the future, attempts will be made for
full and open competition.” The statement about future attempts does not
indicate an approach that is proactive in identifying other potential sources for
procurements of this nature.

In the interest of maximizing competition in contracting, the FAR requires that agencies
document in Justifications the actions, if any, the agency may take to remove or
overcome any barriers to competition before any subsequent acquisition for the supplies
or services required. While the FAR recognizes that sole-source procurements are
sometimes unavoidable, the requirement to address efforts for removing barriers to future
competition is intended to ensure that agencies diligently seek ways of transitioning from
a sole-source situation to full and open competition for future requirements.

FAR 6.303-2, “Content,” requires that each Justification include “a statement of the
actions, if any, the agency may take to remove or overcome any barriers to competition
before any subsequent acquisition for the supplies or services required.” For example, a
Justification for a sole-source procurement of proprietary software might read as follows:

The required software is proprietary to ABC Company and, therefore, no
other vendor can provide it for the Government’s use. However, the Agency
is currently planning to transition its systems to an open architecture
environment, which will eliminate our dependence on proprietary software
from ABC Company. The transition is expected to be completed by the end
of Fiscal Year 2007, which will allow us to conduct the follow-on
procurement for the required software using full and open competition.

To avoid unnecessary follow-on sole-source contract actions at a higher cost to the
Government, Agency technical and procurement personnel should actively seek
opportunities for transitioning to a competitive environment for future acquisitions and
document those efforts in Justifications.


B. Inadequate Descriptions of Steps Taken to Remove or Overcome
Any Barriers to Competition

Of 68 Justifications reviewed at 4 Centers, 22 (32 percent) did not adequately describe
actions taken to remove or overcome any barriers to competition before any subsequent
acquisition for the required supplies or services. Those 22 Justifications either did not

address the issue or contained only generic descriptions, which did not demonstrate a
meaningful effort for attempting to transition to full and open competition for future

requireme

nts.

Several Contracting Officer’s Technical Representatives (COTRs) indicated that they
were unaware of their role in actively seeking to remove barriers to future competition or
that the requirement for documenting such efforts in Justifications. Because Center
procurement offices did not institute sufficient management controls over the approval
process for Justifications deficient in addressing efforts made to remove barriers to
competition, Justifications that had inadequate discussions for removing barriers were
approved. Asa result, failure to actively seek opportunities for transitioning to a
competitive environment for future acquisitions may result in unnecessary follow-on
sole-source contract actions at a higher cost to the Government.

Table 2 summarizes, by Center, the number and dollar value of contract actions reviewed.
as well as the number and dollar value of actions with inadequate descriptions.

»

Table 2. Contract Actions With Inadequate Descriptions of Steps Taken
to Remove or Overcome Barriers to Competition

Actions with Value of Actions

Inadequate With Inadequate

Actions | Value of Actions Descriptions of Descriptions of
Center Reviewed Reviewed Removing Barriers | Removing Barriers
Goddard 23 $ 43,839,533 0 $ 0
Headquarters 4 5,023,092 0 0
Johnson 30 635,735,540 16 97,021,532
Stennis 11 613,783,317 6 8,583,880
Total 68 $1,298,381,482 22 $ 105,605,412

Examples of Justifications with inadequate descriptions of removing barriers to

competition are as follows:

¢ At Johnson, of the 30 Justifications reviewed, 16 (53 percent) either did not
include a description of actions being taken to remove or overcome any
barriers to competition or contained only generic statements. For example, one
contract, valued at $28.9 million, was for continued engineering development
and assessment of the Space Shuttle on-orbit guidance, navigation, and control
systems. The Justification for the contract merely states, “The Aeroscience and
Flight Mechanics Division will continue to look for ways to reduce barriers to



Additional Copies

To obtain additional copies of this report, contact the Assistant Inspector General for
Auditing at (202) 358-1232.

Suggestions for Future Audits

To suggest ideas for or to request future audits, contact the Assistant Inspector General
for Auditing. Ideas and requests can also be mailed to:

Assistant Inspector General for Auditing
NASA Headquarters
Washington, DC 20546-0001

NASA Hotline

To report fraud, waste, abuse, or mismanagement, contact the NASA OIG Hotline at (800)

424-9183, (800) 535-8134 (TDD), or at www.hg.nasa.gov/office/oig/hq/hotline.html#form;
or write to the NASA Inspector General, P.O. Box 23089, L’Enfant Plaza Station,

Washington, DC 20026. The identity of each writer and caller can be kept confidential,
upon request, to the extent permitted by law.

Major Contributors to the Report

Joseph Kroener, Director, Procurement Audits

Joseph Fasula, Project Manager

Amy Larkin, Auditor

Ellis Lee, Auditor

Lydia Lin, Auditor

Camille Thurston, Procurement Analyst

Iris Purcarey, Program Assistant

27


Appendix F. Report Distribution

NASA

Administrator
Deputy Administrator
Chief of Staff

Director, Management Systems Division, Office of Infrastructure and Administration,
Office of Institutions and Management

Non-NASA Organizations and Individuals

Office of Management and Budget
Deputy Associate Director, Energy and Science Division
Branch Chief, Science and Space Programs Branch
Government Accountability Office
Director, NASA Issues, Office of Acquisition and Sourcing Management

Congressional Committees and Subcommittees, Chairman and Ranking Minority
Member

Senate Committee on Appropriations
Senate Subcommittee on Commerce, Justice, and Science
Senate Committee on Commerce, Science, and Transportation
Senate Subcommittee on Science, Technology, and Space
Senate Committee on Homeland Security and Governmental Affairs
House Committee on Appropriations
House Subcommittee on Science, State, Justice, and Commerce
House Committee on Government Reform

House Subcommittee on Government Management, Finance, and Accountability
House Committee on Science

House Subcommittee on Space and Aeronautics

26


Findings

A. Unreasonably Short Synopsis Response Times for Acquisitions of
Commercial Items

Of the 68 contract actions reviewed at 4 Centers, 27 (40 percent) were for acquisition of
commercial items. Of those 27 commercial items, the specified synopsis response times
for 7 (26 percent) were unreasonably short, based on the nature and complexity of the
procurements (see Table 1). The response times for those particular procurements were
unreasonable because prospective businesses did not have enough time to make informed
business judgments about whether to respond to the notices or challenge the Agency’s
stated intent to conduct the procurements on a sole-source basis. As a result of the short
response times, competition may have been restricted by limiting the number of potential
sources. Unreasonably short response times also create an appearance of unfairness, thus
harming the integrity of the procurement process.

In the actions cited, the COs established the short response times based solely on the
perceived urgency of the procurement, rather than establishing response times based on a
thoughtful analysis of all of the particular circumstances, such as the nature and
complexity of the procurement. In addition, the NASA Office of the Chief Financial
Officer/Procurement Directorate (now the Office of Institutions and Management/Office
of Procurement) did not provide any guidance regarding what constitutes a “reasonable”
response time, thus leading to varying interpretations by the COs.

Table 1 summarizes, by Center, the number of contract actions reviewed as well as the

number and dollar value of commercial acquisition actions with unreasonably short
synopsis response times.

Table 1. Contract Actions With Unreasonably Short Synopsis Response Times

Value of Actions
Actions for Actions With With Unreasonably
Actions Commercial Unreasonably Short Short Response
Center Reviewed Acquisition Response Times Times

Goddard 23 5 0 $ 0
Headquarters 4 1 0 0
Johnson 30 12 2 429,259
Stennis 11 9 5 7,483,880
Total 68 27 7 $ 7,913,139

Examples of actions with unreasonably short synopsis response times are as follows:

¢ At Johnson, of 30 contract actions reviewed, 12 were for the acquisition of
commercial items. Those 12 contract actions ranged in value from $100,000 to
$145 million, and the synopsis response times ranged from 1 day to 21 days. Of
the 12 commercial item contracts, 2 (17 percent) of the actions had response times



Appendix C

(12) CO certification that the justification is accurate and complete to the best
of the CO’s knowledge and belief.

(b) Each justification shall include evidence that any supporting data that is the
responsibility of technical or requirements personnel (for example, verifying the
Government's minimum needs or schedule requirements or other rationale for other
than full and open competition) and that form a basis for the justification have been
certified as complete and accurate by the technical or requirements personnel.

17


Appendix E

Enclosure 1- Letter to Survey Team referenced in response to Recommendation 2a.

Monica,

Recently, the Ottfice of the Inspector General completed an audit of Sole-Source Contract Actions
iting "Only One Reasonabie Source’. One of the recommendations resulting from the audit was
{or the Deputy Chief Acquisition Otficer/Director for Procurement to direct that Procurement
Management Survey teams focus and report on the documentation of efforts made to remove or
overcome any barriers to competition In future reviews conducted at NASA Centers, | have
reviewed this recommendation with Tom Luedtke. He concurred, and requested that | send this
message asking that the survey team focus on the OIG recommendation on all future reviews.

Your cooperation on this matter is appreciated. lf you have any questions, please call me at 358-
4593. Thank you.

Regards,
Lou

23


readers that the response time should be based on a combination of many factors,
including but not limited to the complexity and dollar value of the procurement.

In response to our second recommendation, NASA’s Assistant Administrator for
Procurement requested that the head of the Procurement Management Survey team focus
and report on the documentation of efforts made to remove or overcome any barriers to
competition in future reviews conducted at NASA Centers. He also directed that NASA
Procurement Officers at the Centers review the COTR training curriculum at their
respective Centers to ensure that the curriculums adequately address preparation of
Justifications as well as the role of the technical Program office in taking actions, when
possible, to remove or overcome barriers to competition.

The complete text of management’s response is in Appendix E.

iii


Appendix A

Scope Limitation

Our review focused on the more substantive required elements of the Justification that are

critical for supporting a decision to award noncompetitively, such as whether the
Justification included a:

description of the action being approved;

description of the supplies or services required to meet the Agency’s needs;
demonstration of the proposed contractor’s unique qualifications;

description of efforts made to solicit from other sources, including whether a
synopsis of the proposed action was published;

description and result of the market research conducted;

list of sources that express an interest in the acquisition; and

statement of other facts that support the decision to restrict competition, such as
an explanation of why technical data packages, specifications, engineering
descriptions, statements of work, or purchase descriptions suitable for full and
open competition have not been developed or are not available;

¢ CO and COTR certification that the justification is accurate and complete.

We did not focus on the less substantive required Justification elements such as whether
the Justification specifically identified the Agency and the contracting activity,
specifically identified the document as a “Justification,” or identified the specific
statutory authority [that is, “section 2304(c)(1), title 10, United States Code”] for the
action. While important, those elements do not go to the heart of demonstrating the
propriety of the sole-source action. Therefore, while some of the Justifications we
reviewed were deficient in addressing those elements, we did not consider them to be
material deficiencies for purposes of our audit.

Use of Computer-Processed Data

To identify the universe of contract actions at the four Centers, we initially used
computer-processed data from the NASA Procurement Management System maintained
at NASA Headquarters. We compared that data with data the individual Centers
provided from their Acquisition Management Systems and determined that the listings
the Centers provided were the most recent. During contract file reviews, we compared
the contract numbers and dollar values from the system-generated list with the file
documentation. Nothing came to our attention that caused us to question the validity of

the number of contract actions citing the only one responsible source exception for the
sample period.

10


Appendix B. Details Regarding Four Contract Actions With
Deficient Sole-Source Justifications

The majority of contract actions that we reviewed at the four Centers appeared reasonable
and were justified in writing in accordance with the FAR and NFS. Of the 68 contract
actions citing one source that we reviewed, 4 (6 percent) of the actions, totaling

approximately $824,000, were not supported by sufficient Justifications in accordance
with the FAR and NFS.

The four Justifications were deficient because COs and technical personnel at Goddard
and Johnson did not include adequate support, as the FAR requires. Each of the four
Justifications related to contract actions of relatively small dollar value (ranging from
$95,000 to $337,770), for which the Justification review and approval requirements are
less rigorous. The Procurement Officer and Competition Advocate do not review and
approve Justifications for actions valued at $500,000 or less; rather, justifications under
that dollar threshold require only CO and COTR certification. Although only 6 percent
of the entire sample universe (68 actions) of the Justifications reviewed were deficient,

the deficiency rate increased to 14 percent (4 of 28) for actions valued at $500,000 or
less.

The following table summarizes, by Center, the number and dollar value of contract

actions reviewed as well as the number and dollar value of actions with deficient
Justifications.

Contract Actions With Deficient Justifications

Actions With Value of Actions

Actions Value of Actions Deficient With Deficient

Center Reviewed Reviewed Justifications Justifications
Goddard 23 $43,839,533 1 $ 165,000
Headquarters 4 5,023,092 0 0
Johnson 30 635,735,540 3 658,944
Stennis ll 613,783,317 0 0
Total 68 $1,298,381,482 4 $ 823,944

To ensure that sole-source contract actions are proper, each action must be supported by a
detailed written Justification that clearly demonstrates that the one source exception is
necessary and appropriate for that particular action. The FAR includes specific areas that
must be addressed in a Justification before the Agency proceeds with a proposed sole-
source procurement. FAR 6.303-2 identifies 12 specific elements that must be addressed
in a Justification (see Appendix C for Justification content requirements).

12



short response times for vendors to reply to the synopsis notices or challenge the
proposed sole-source procurements. Of the 68 contract actions reviewed, 27 were for the
acquisition of commercial items. Of those 27, 7 (26 percent) provided what we consider
unreasonably short synopsis response times based on the nature and complexity of those
particular procurements (Finding A).

We found that the sole-source justifications we reviewed were generally well
documented and supportable based on the results of the required market research. Also,
all justifications we examined were reviewed and approved by the appropriate NASA
officials prior to the award of the contract action. However, we found that many of the
justifications we reviewed did not place sufficient emphasis on actions taken to remove
or overcome barriers to future competition as Federal and Agency procurement
regulations require. Specifically, of the 68 contract actions citing one source that we
reviewed, 22 (32 percent) did not include substantive discussion in the Justifications for
Other than Full and Open Competition (Justifications) regarding the Center’s efforts to
remove or overcome barriers to future competition (Finding B).

Of the 68 contract actions citing one source that we reviewed, only 4 (6 percent) of the
actions, totaling approximately $824,000 (.06 percent of the total dollar value of the

68 actions reviewed), were not supported by sufficient Justifications in accordance with
Federal and Agency procurement regulations. During the audit, management took action

to correct the condition that led to the cited deficiencies. Details regarding this issue are
included in Appendix B.

We did not identify any significant best or promising practices during this audit.

Summary of Recommendations. We recommend that the Assistant Administrator for
Procurement (formerly the Deputy Chief Acquisition Officer/Director for Procurement)
develop and issue guidance for the NASA procurement community for establishing
reasonable response times in synopses for commercial procurements. We also
recommend that the Assistant Administrator for Procurement: (1) direct that NASA
Procurement Management Survey teams focus and report on the documentation of efforts
made to remove or overcome any barriers to competition in future reviews conducted at
NASA Centers; and (2) review the curriculum of Agency Contracting Officer’s Training
Representative (COTR) training courses to ensure that they adequately address the
preparation of Justifications as well as the role of the technical Program office in taking
action, when possible, to remove or overcome barriers to competition.

Management Comments. Management concurred with our recommendations and has
taken or is taking appropriate corrective actions.

In response to our first recommendation, NASA’s Assistant Administrator for
Procurement issued Procurement Information Circular 05-05 entitled “Establishing
Reasonable Response Times in Synopses for Commercial Procurements.” The
Procurement Information Circular provides guidance for the NASA procurement
community regarding reasonable response times for the synopsis process, and advises


Appendix E

Recommendation 1:

‘The Deputy Chief Acquisition Officer/Director for Procurement should develop and issue
guidance to the NASA procurement community for establishing reasonable response.
times in synopses for commercial procurements (for example, ranges of appropriate
response times for various types of procurements based on the nature and complexity of
the particular procurements).

Response:

Concur. Procurement Information Circular (PIC) 05-05 titled Establishing Reasonable
Response Times In Synopses For Commercial Procurements has been posted. ‘The PIC
provides guidance for the NASA procurement community regarding reasonable response
times for the synopsis process, and advises that the response time should be based on a
combination of many factors, including but not limited to the complexity and dollar value
of the procurement,

Based on the action taken, request this recommendation be considered closed.

Recommendation 2a:
‘The Deputy Chief Acquisition Officer/Director for Procurement should direct that
Procurement Management Survey teams focus and report on the documentation of efforts

made to remove or overcome any barriers to competition in future reviews conducted at
NASA Centers.

Response:
Concur. The head of the Procurement Management Survey team has been requested to
focus and report on the documentation of efforts made to remove or overcome any

barriers to competition in future reviews conducted at NASA Centers. A copy of the
message is attached,

Based on the action taken, request this recommendation be considered closed.

Recor b:

The Deputy Chief Acquisition Officer/Director for Procurement should review the
curriculum of Agency COTR training courses to ensure that they adequately address the
preparation of Justifications as well as the role of the technical Program office in taking
action, when possible, to remove or overcome barriers to competition.

Response:

Concur, The Deputy Chief Acquisition Officer/Assistant Administrator for Procurement
has sent an emai) to all Procurement Officers (copy attached) to review the COTR:
training curriculum at their Centers to ensure that they adequately address the preparation
of Justifications, as well as the role of the technical Program office in taking action, when
possible, to remove or overcome barriers to competition. They were requested to explain
what they did to determine the curriculum is adequate in this area, or what actions they

21


1G-05-017 May 13, 2005
A-04-009-00

SOLE-SOURCE CONTRACT ACTIONS CITING
“ONLY ONE RESPONSIBLE SOURCE”

Executive Summary

The NASA Office of Inspector General conducted an audit to determine whether NASA
effectively applied and managed awards of sole source contract actions citing “Only One
Responsible Source.” The specific audit objectives were to determine whether:

¢ Proposed actions were synopsized as required, and the Agency adequately
addressed, documented, and dispositioned challenges received in response to the
synopses.

e  Justifications were adequately documented, supportable based on the results of
the required market research, and properly reviewed and approved by the
appropriate NASA officials prior to the award of the contract action.

e Best or promising practices exist that can be disseminated to assist the Agency in
improving its competitive posture.

See Appendix A for a discussion of the audit scope and methodology.

Background. We conducted the audit at four NASA Centers: Goddard Space Flight
Center (Goddard); NASA Headquarters (Headquarters); Johnson Space Center (Johnson);
and the Stennis Space Center (Stennis). We conducted this audit because competition in
contracting improves the efficiency and economy of the government, and competition is
the preferred method of procurement in the Federal Government. As stated in NASA’s
“Competition Requirements Quick Reference Guide,” competition can result in “lower
prices, better products, safe effective performance, and can also provide innovative,
commercial solutions . . .” to meet the Government’s needs. Improper sole-source
contracting deprives the Government of the benefits of competition.

Results. The use of sole-source awards citing one source as the authority was generally
effective at the four NASA Centers we reviewed. We found that in most cases Agency
procurement officials were diligent in promoting competition to the maximum extent
practicable and adhered to Federal and Agency procurement regulations in justifying
those specific contract actions for which competition was not possible.

We found that the contract actions we reviewed were generally synopsized (that is,
publicly advertised) as required and that the Agency adequately addressed, documented,
and dispositioned any challenges received in response to the synopses. However, we
found that some synopses for the acquisition of commercial items provided unreasonably

i


Appendix E

Enclosure 2- Letter referenced in response to Recommendation 2b.

Procurement Officers,

As we have discussed in the past, the area of Competition in Contracting remains a
significant area of concern; not just for the contracts folks, but for the technical
community as well. Bach of us has an obligation to seek ways to remove barriers to
future competition. Competition in contracting improves the efficiency and economy of
the government, and competition is the preferred method of procurement in the Federal
Government. As stated in NASA's “Competition Requirements Quick Reference
Guide,” competition can result in “lower prices, better products, safe effective
performance, and can also provide innovative, commercial solutions to meet the

Government's needs. Improper sole-source contracting deprives the Government of the
benefits of competition.

The OIG has recently issued a draft audit report on Sole-Source Contract Actions Citing
“Only One Responsible Source”. Included in the report is a recommendation for the
Deputy Chief Acquisition Officer/Director for Procurement (now the Assistant
Administrator for Procurement) to review the curriculum of Agency COTR training
courses to ensure that they adequately address the preparation of Justifications as well as
the role of the technical Program office in taking action, when possible, to remove or
overcome barriers to competition.

I understand the COTR training courses are designed to be flexible enough to allow
centers to tailor the training to their needs, but they should all address (1) what actions
the Program office can take to remove or overcome barriers to competition, and (2) the
preparation of JOFOCs, Please review the training to ensure that the COTRs understand
the need/importance of competition, have the tools to maximize its use, and when
competition is not feasible, as a last resort, that they understand how to put together an
adequate JOFOC. We should be doing everything possible to achieve competition, but
should also realize that it’s not an “all or nothing” proposition - if full competition is not
feasible, then limited competition is still preferable to sole source. Please provide a
statement as to why you believe your COTR training adequately addresses these areas. If

it doesn’t, please identity what actions/changes you will incorporate to insure they are
addressed in future training,

‘Your response should be forwarded to Lou Becker at the above email address NLT May
18, 2005. The responses will be consolidated, and forwarded to the OIG for further
review. It is quite likely the OIG will follow-up with several of you to verify you really

did review the training course, and made changes to it where necessary (kind of a “trust
but verify”).

If you have any questions, please call Lou at (202) 358-4593, Thank you for your
cooperation in this matter.

Tom

24


Recommendation for Corrective Action
2. The Assistant Administrator for Procurement should:

a. Direct that Procurement Management Survey teams focus and report on the
documentation of efforts made to remove or overcome any barriers to
competition in future reviews conducted at NASA Centers.

Management’s Response. Management concurred with the recommendation, stating
that the head of the Procurement Management Survey team was requested to focus and
report on the documentation of efforts made to remove or overcome any barriers to
competition in future reviews conducted at NASA Centers.

Evaluation of Management’s Response. Management’s actions are responsive to the
recommendation. We consider the recommendation closed for reporting purposes.
However, we will spot check future survey team reports to ensure that the topic of
removing barriers to competition is being sufficiently addressed.

b. Review the curriculum of Agency COTR training courses to ensure that
they adequately address the preparation of Justifications as well as the role

of the technical Program office in taking action, when possible, to remove or
overcome barriers to competition.

Management’s Response. Management concurred with the recommendation. The
Deputy Chief Acquisition Officer/Assistant Administrator for Procurement directed that
NASA Procurement Officers at the Centers review the COTR training curriculum at their
respective Centers. Specifically, Center Procurement Officers were directed to ensure
that their respective COTR training curriculums adequately address preparation of
Justifications as well as the role of the technical Program office in taking actions, when
possible, to remove or overcome barriers to competition.

Evaluation of Management’s Response. Management’s actions are responsive to the
recommendation. We consider the recommendation resolved, but the recommendation
will remain open for reporting purposes pending completion of the Center Procurement

Officers’ review and completion of any necessary corrective action resulting from those
reviews.


Appendix A

Management Controls Reviewed

We reviewed management controls over the award of the noncompetitive contract actions
at the four Centers. We determined that, generally, the management controls were
adequate. However, improvements could be made at all four Centers (see the findings in
the main body of the report). Management controls will be strengthened by
implementing the recommendations in this report.

Audit Work

We performed this audit from January through December 2004 in accordance with
generally accepted government auditing standards.

11