Appendix C. Competition and Synopsis Requirements

The FAR addresses simplified acquisition procedure competition and synopsis
requirements. The requirements are summarized below.

FAR Part 13, “Simplified Acquisition Procedures”

¢ FAR 13.105 requires the contracting officer to comply with the public display and
synopsis requirements unless an exception in 5.202 applies.

FAR Part 13, “Simplified Acquisition Procedures” provides uniform policies for
simplified acquisition procedures. Specifically, FAR 13.106-1, “Soliciting Competition,”
Section (b) entitled, “Soliciting from a Single Source” states:

¢ For purchases not exceeding the simplified acquisition threshold, contracting
officers may solicit from one source if the contracting officer determines that the
circumstances of the contract action deem only one source reasonably available
(examples given, urgency, exclusive licensing agreements, or industrial
mobilization).

¢ For sole-source acquisitions of commercial items in excess of the simplified
acquisition threshold conducted pursuant to Subpart 13.5, “Test Program for
Certain Commercial Items,” the requirements at 13.501(a), “Sole Source
Acquisitions,” apply.

FAR 13.106-3(b)(3), “Award and Documentation, Special Situations,” requires that
contracting officers include additional statements in the justification as follows:

¢ Explaining the absence of competition if only one source is solicited and the
acquisition does not exceed the simplified acquisition threshold (does not apply to
an acquisition of utility services available from only one source); or

¢ Supporting the award decision if other than price-related factors were considered
in selecting the supplier.

FAR 13.501 (a), “Sole Source Acquisitions,” requires that contracting officers conduct
sole-source acquisitions, only if the need to do so is justified in writing and approved at
appropriate levels pursuant to FAR 13.501(a)(2). When conducting sole-source
acquisitions, a sole-source justification is required using the format at FAR 6.303-2,
modified to reflect an acquisition under the authority of the test program for commercial
items (section 4202 of the Clinger-Cohen Act of 1996) or the authority of the Services

Acquisition Reform Act of 2003 (Title XIV of Public Law 108-136) as implemented at
FAR 12.102(f(1).

16


Appendix A

including the justification and synopsis. We interviewed contracting officers and other
procurement officials for the selected purchase order actions.

Methodology
Synopses. For Finding A, our review focused on whether the proposed sole-source
purchase orders were sufficiently synopsized as required and whether any challenges
were properly dispositioned. Specifically, we reviewed:

¢ any applicable synopsis exceptions;

reasonableness of response times specified by the contracting officers;

¢ dispositions of any challenges received; and

¢ adequacy of descriptive detail in the synopsis.
Justifications. For Finding B, 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 expressed 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.
We did not focus on the required justification elements that were less substantive such as

whether the justification specifically identified the Agency and the contracting activity,
specifically identified the document as a “Justification,” or identified the specific

10


Appendix D. Management’s Response

National Aeronautics and
Space Administration

He

Washington, DC 20546-0001

June 6, 2005

Deputy Chief Acquisition Officer/Assistant Administrator for Procurement

TO: W/Assistant Inspector General for Auditing

FROM: HK/Director, Contract Management Division

SUBJECT: Agency Response to OIG Draft Audit Report of Sole-Source Purchase
Orders Under Simplified Acquisition Procedures

Enclosed is our response to the subject draft audit report dated May 4, 2005,

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

A0.L2.,

James A. Balinskas

Enclosure

20



SOLE-SOURCE PURCHASE ORDERS UNDER
SIMPLIFIED ACQUISITION PROCEDURES

Objectives

Our overall objective was to determine whether NASA effectively managed awards of

sole-source purchase orders under simplified acquisition procedures. Specifically, we
determined whether:

¢ Proposed sole-source purchase orders were synopsized as required and the

Agency properly dispositioned any challenges received in response to the
synopses.

© Justifications for sole-source purchases were adequately documented, supported,
and properly reviewed and approved by the appropriate NASA officials prior to
award of the purchase orders.

Background

Competition in Federal contracting under simplified acquisition procedures is a proven
and effective means of acquiring supplies and services and generally results in lower
prices and improved quality. Competition can also provide innovative, commercial
solutions to meet NASA’s needs. Federal regulations require that agencies provide for
full and open competition to the maximum extent practicable in fulfilling the
government’s requirements. The Federal Acquisition Regulation (FAR) sets forth
policies and procedures to ensure compliance with these principles.

Simplified acquisition procedures are used for making purchases of supplies or services
that do not exceed $100,000. Also, under a Government-wide pilot program (FAR
Subpart 13.5), contracting officers may now use simplified procedures for the acquisition
of commercial items for amounts greater than $100,000, but not exceeding $5 million.
During fiscal years 2002 and 2003, NASA spent $3.9 billion and $4.4 billion,
respectively, through noncompetitive contract awards. Included in those amounts,
approximately $54.3 million and $55.6 million, respectively, of supplies and services
were procured on a sole-source basis using simplified acquisition procedures.


Appendix C

FAR Part 5.207, “Preparation and Transmittal of Synopses”

FAR Part 5.207(a), “Content,” states that each synopsis transmitted to the
Government-wide point of entry must address the following data elements, as applicable:

(ly
(2)
@)
(4)
G)
(6)
1)
(8)
(9)
(10)
qd)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)

Action Code

Date

Year

Government Printing Office (GPO) Billing Account Code
Contracting Office Zip Code
Classification Code

Contracting Office Address

Subject

Proposed Solicitation Number

Opening and Closing Response Date
Contact Point or Contracting Officer
Contract Award and Solicitation Number
Contract Award Dollar Amount

Contract Line Item Number

Contract Award Date

Contractor

Description

Place of Contract Performance

Set-Aside Status

FAR Part 5.207(c), “General Format for “Description,” requires that contracting officers
prepare a clear and concise description of the supplies or services that is not
unnecessarily restrictive of competition and will allow a prospective offeror to make an
informed business judgment as to whether a copy of the solicitation should be requested.

FAR 6.303-1, “Requirements”

(a) A contracting officer 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.

17


Appendix D

National Aeronautics and

Space Administration

Dryden Flight Research Center
P.O. Box 273,

Edwards, CA 93523-0273

Reny roan ot a May 4, 2005
TO: AJ/Acquisition Management Office Staff
FROM: AUChief, Acquisition Management Office
SUBJECT: — DOP-A-003, Review and Execution of Procurement Documents
REF: OIG Discussion Draft A-04-039-00

A\ linding mentioned in the referenced discussion draft recommends, “The Procurement
Officer at Dryden should adopt a more rigorous review and approval process (that is, a
higher level of review beyond the contracting officer) for synopses prior to issuance in
order to ensure all proposed sole-source acquisitions using simplified acquisition
procedures are properly synopsized as required by FAR."

DERC concurred with this recommendation and as a result, stated the following change
would be implemented: “The non-commercial review/approval policy for a synopsis of
proposed contract actions will be extended to include all proposed contract actions

{commercial and non-commercial) to be approved by the AMO Procurement Analyst."
This has been discussed in our staff meeting on April 6, 2005.

Pending forma! revision to DOP-A-003, this letter is issued to implement the
tecommendation noted in the preceding paragraph. Formal revision to the DOP will be
forthcoming with a scheduled completion date of May 31, 2005. If you have any
questions regarding this change, contact Brian G. Bowman at ext. 3329.

TO. Ee

R. H. Davis

23


Appendix C

(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

FAR 5.202 applies.

(7) A determination by the contracting officer 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.

(12) Contracting officer certification that the justification is accurate and
complete to the best of the contracting officer’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 which form a basis for the justification have been
certified as complete and accurate by the technical or requirements personnel.

19


Appendix B

Actions Not . 7
NASA Purchase Order Val Synopsized Actions With
Center Number alue and No Insu ieient
. Justifications
Exception
Langley 111042 53,000
114299 56,000
116377 39,000
L16516 75,000
L17398 67,000 x
Li7415 28,000
L17748 100,000
L17811 48,000
117883 61,000
L17999 29,000
L18007 80,000
L18010 34,000
L18031 33,000
L18061 57,000
L18071 32,000
118142 38,000
118147 47,000
118237 69,000
118354 25,000
118357 25,000
L18382 28,000
118388 42,000
L18406 29,000
L18439 34,000
L18460 39,000
L18468 56,000
L18488 49,000
L18502 29,000
118678 35,000
L18716 90,000
L71187D 26,000
L71259D 100,000 x
L71308D 60,000
L71344D 50,000
L71440D 84,000
L71459D 100,000
L71529D 43,000
L71530D 48,000
L71534D 45,000
L71536D 58,000
L71537D 60,000
1L71538D 95,000
L71615D 50,000
L71736D 44,000
L71738D 30,000
L71744D 40,000
L71772D 39,000

14



B. Deficient Justifications for Some Sole-Source Purchase Order
Actions

Of the 141 purchase order actions reviewed at the three Centers, 129 (91 percent) were
reasonable and were properly justified in writing in accordance with FAR and NASA
FAR Supplement (NFS) requirements. The justifications were generally documented,
supported, and properly reviewed and approved by the appropriate NASA officials prior
to award of the purchase orders. However, we found justifications at Dryden for some
sole-source purchase order actions under the simplified acquisition pilot program

(FAR Subpart 13.5) that were deficient. FAR Subpart 13.5, “Test Program for Certain
Commercial Items,” authorizes the use of simplified procedures for the acquisition of
supplies and services in amounts greater than $100,000 but not exceeding $5 million.

Of the 27 actions reviewed at Dryden, 12 were awarded under the pilot program. Of
those 12 actions, 8 (67 percent) totaling $2.5 million were not supported by sufficient
justifications in accordance with the FAR and NFS. The Dryden Procurement Officer
stated that those problems occurred because the contracting officers did not provide
sufficient oversight to the technical representatives to ensure justifications were prepared
in accordance with the regulations. Another factor contributing to the condition at
Dryden was that there were no reviews by higher level officials, because the contracting
officer is the sole approving official for most simplified acquisitions at the Center.
Failure to prepare sufficient sole-source justifications may preclude competition and
result in the Government paying higher prices for goods and services.

Guidance for Written Justifications

When a requirement is determined to be available from only one source, the procurement
office, in collaboration with the responsible technical program office, must make a
written justification for the proposed noncompetitive acquisition. The justification must
contain sufficient facts and rationale supporting determination that the required goods
and services are available from only one source. The contracting officer must certify that
to the best of his or her knowledge the justification is accurate and complete. Also,
technical program personnel must certify the supporting data provided to the contracting
officer as a basis for the justification. Finally, approvals by additional NASA officials
(other than the contracting officer) may be necessary depending on the dollar value of the
acquisition and individual Center policies.”

FAR 13.106-3(b)(3) requires that for actions under $100,000 contract file documentation
should include a statement explaining the absence of competition if only one source is
solicited. (See Appendix C for competition requirements.)

*The thresholds for such approvals and justifications are cited in FAR 6.304, “Approval of the
Justification,” NFS 1806.304-70 “Approval of NASA Justifications,” and individual Center policies.


Additional Copies

To obtain additional copies of this report, visit www.hq.nasa.gov/office/oig/hq/issuedaudits.html
or contact the Assistant Inspector General for Auditing at (202) 358-1232.

Comments on This Report

In order to help us improve the quality of our products, if you wish to comment on the
quality or usefulness of this report, please send you comments to Ms. Jacqueline White,

Director of the Quality Control Division, at Jacqueline. White: @nasa.gov or call
(202) 358-0203.

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.hq.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
Diane Choma, Project Manager

Lydia Lin, Audit Team Leader

Ellis Lee, Auditor

Steve Siu, Auditor

Camille Thurston, Procurement Analyst

Iris Purcarey, Program Assistant


to make an informed business decision as to whether a copy of the solicitation should be
requested from the Government for potentially submitting an offer. According to the
FAR, the primary purpose of a synopsis notice is to improve industry’s access to
acquisition information and enhance competition by identifying contracting and
subcontracting opportunities. If a required synopsis is not posted for a particular action,
the contracting officer must document why the synopsis was not prepared, including a
citation of which synopsis exception under FAR Subpart 5.202 applied.

Some Synopses Not Posted at Dryden and Kennedy

At Langley, all purchase order actions reviewed were synopsized; however, at Dryden
and Kennedy some actions were not synopsized and had no documentation explaining
whether any authorized synopsis exceptions applied. That condition occurred because
some contracting officers at those Centers either overlooked the requirement to publish a
synopsis or improperly applied one of the synopsis exceptions authorized under

FAR 5.202. Another factor contributing to the condition at Dryden and Kennedy was
that there were no reviews by higher level officials, because the contracting officer is the
sole approving official for simplified acquisition synopses at those Centers. Table 1
summarizes, by Center, the number and dollar value of purchase order actions reviewed,
as well as the number and dollar value of actions not synopsized.

Table 1. Purchase Order Actions With No Synopsis

. Value of Actions
. Actions Value of Actions Not Not Synopsized
Installation Revi Actions Synopsized and
eviewed . . and No
Reviewed No Exception E .
xception
Dryden 27 $4,839,000 8 $1,010,000
Kennedy 42 8,240,000 8 1,184,000
Langley 722 12,172,000 i) i)
Total 141 [$25,251,000 is $2,194,000 |

Actions With No Synopsis

At Dryden, eight purchase order actions with a total value of $1 million were not
synopsized and had no documentation explaining whether any of the authorized synopsis
exceptions applied. For example, one purchase order lacking a required synopsis was
valued at $500,000 for miscellaneous video, fiber optic, and telemetry transmission and
reception equipment. The contracting officer did not prepare a synopsis for that purchase
order, citing as a justification the need for continuity of management services. However,
follow-on work (continuity of services) is not one of the seven authorized exceptions
under FAR 5.202. Another Dryden purchase order lacking a synopsis was valued at
$241,000 for management consulting services. The contracting officer did not prepare a
synopsis because the proposed action resulted from the acceptance of an unsolicited
proposal. However, the unsolicited proposal was not for a unique and innovative
research concept, which is required to qualify as a valid basis for a synopsis exception
under FAR 5,202. The remaining six Dryden purchase order actions were not synopsized


Findings

A. Some Sole-Source Purchase Order Actions Were Not Synopsized

The majority of proposed sole-source purchase order actions that we reviewed at Dryden
Flight Research Center (Dryden), Kennedy Space Center (Kennedy), and Langley
Research Center (Langley) were synopsized in accordance with FAR requirements. No
challenges were received in response to those synopses. However, of the 141 actions
reviewed, 16 (11 percent) totaling approximately $2.2 million were not synopsized. That
condition occurred at two of the three Centers (Dryden and Kennedy) because some
contracting officers at those Centers either overlooked the requirement to publish a
synopsis or improperly applied one of the synopsis exceptions authorized under

FAR 5.202. Another factor contributing to the condition at Dryden and Kennedy was
that there were no reviews by higher level officials, because the contracting officer is the
sole approving official for simplified acquisition synopses at those Centers.! By not
posting synopses when required, the Government may have unnecessarily precluded
competition and, as a result, paid higher prices for goods and services.

Guidance for Synopses
FAR requirements for synopsizing proposed purchase order actions are as follows:

e FAR 5.101(a)(1), “Methods of Disseminating Information,” requires that the

contracting officer synopsize proposed purchase order actions expected to exceed
$25,000.

¢ FAR 5.207, “Preparation and Transmittal of Synopsis,” paragraph (c), requires
that the contracting officer prepare a clear and concise description of the
supplies/services required. Further, in synopses for noncompetitive contract
actions, subparagraph (c)(14) requires the contracting officer to identify the

intended source and insert a statement for the reason justifying the lack of
competition.

e FAR 13.105(a), “Synopsis and Posting Requirements,” requires that the
contracting officer comply with FAR 5.101 unless one of the specific exceptions
addressed in FAR 5.202 applies (for example, urgency or national security).

See Appendix C for additional competition and synopsis requirements.
To ensure that sole-source purchase order actions are competed to the maximum extent

practicable, a clear and concise description of the supplies or services must be prepared
and publicized. Synopsizing, which promotes competition, allows a prospective offeror

‘All 72 of the Langley purchase order actions we reviewed were properly synopsized as required. Langley

requires a Team Lead or Branch Head to approve sole-source purchase order synopses and actions over
$25,000.


Appendix B

Actions Not

NASA Purchase Order Value Synopsized Actions With
Center Number and No Justifications
Exceptions
Langley L71787D 25,000
(continued) L71791D 30,000
L71795D 40,000
L71807D 100,000
L71957D 32,000
L71994D 50,000
L72001D 28,000
1L72007D 92,000
L72170D 47,000
1L72183D 97,000
L72505D 50,000
L72506D 33,000
L72509D 92,000
116890 359,000
L70882D 331,000
L71113D 688,000
L71188D 242,000
L71192D 154,000
L71270D 171,000
L71519D 124,000
L71525D 147,000 x
L71527D 134,000
1L71543D 1,055,000
L71545D 652,000
L71684D 5,000,000
Subtotal 72 $12,172,000 0 3
Total 141 $25,251,000 16 R

15


DOP-A-003, “Review and Execution of Procurement Documents.” The formal revision
to DOP-A-003 is expected to be completed by July 8, 2005.

Evaluation of Management’s Response. Management’s actions are responsive to the
recommendation. We consider the recommendation closed for reporting purposes.
However, Dryden Organizational Procedure DOP-A-003 has not yet been finalized and
we will follow up to ensure that it is formally issued.

2. The Procurement Officer at Kennedy should adopt a more rigorous review
and approval process (that is, a higher level of review beyond the contracting
officer) in order to ensure all proposed sole-source acquisitions using

simplified acquisition procedures are properly synopsized as required by the
FAR.

Management’s Response. Kennedy management partially concurred with the
recommendation. Kennedy management agreed with the instances of concern cited in the
audit report, but stated that they were isolated instances and not indicative of a systemic
problem. Kennedy management agreed with the intent of the recommendation, but stated
that adopting a more rigorous review and approval process for proposed sole-source
synopses would be unduly burdensome. Instead, Kennedy management proposed that
NASA procurement survey teams increase their emphasis in this area during future
reviews at the Center. If the review teams find repeated problems in this area,

management will then implement the recommended action of adopting a more rigorous
review and approval process.

Evaluation of Management’s Response. Management’s proposed actions are
responsive to the recommendation. We consider the recommendation closed for
reporting purposes.


Appendix D

Recommendation 1:
‘The Procurement Officer at Dryden should adopt a more rigorous review and approval
Process (that is, a higher level of review beyond the contracting officer) in order to ensure

all proposed sole-source acquisitions using simplified acquisition procedures are properly
synopsized as required by the FAR

Response:

Concur. Current review procedures at DERC, as stated in Dryden Organizational
Procedure DOP-A-003 requires a Synopsis for non-commercial items to be approved by
the Procurement Analyst (Dryden's Acquisition Management Office’s (AMO) review
officer) or Procurement Officer prior to proceeding with the procurement action.

‘This approval extends to commercial item purchases as well. ‘The non-commercial
review/approval policy for a synopsis of proposed contract actions will be extended to

include all proposed contract actions (commercial and noncommercial) to be approved by
the AMO Procurement Analyst.

On May 4, 2005 the Procurement Officer issued a formal letter implementing the policy
described in the previous paragraph. (enclosure 1, hard copy only)

Based on the actions taken, request this recommendation be considered closed,

Recommendation 2:

‘The Procurement Officer at Kennedy should adopt a more rigorous review and approval
Process (that is. a higher level of review beyond the contracting officer) in order to ensure
all proposed sole-source acquisitions using simplified acquisition procedures are properly
synopsized as required by the FAR,

Respon
Paral Concurrence. Although the Procurement office at KSC concurs with the intent of
the initial recommendation, they believe the specific action requested is unnecessarily
burdensome. The instances of concern cited in the audit report have been fully reviewed
by the procurement officer, and were determined to be isolated instances, not indicative
of a systemic problem. On future surveys, the HQ survey team will place increased
emphasis on reviews of proposed sole-source acquisitions using simplified acquisition
procedures to ensure they are properly synopsized as required by the FAR. If the team
sees repeated issues concerning the synopses, they will recommend the procurement

officer adopt a more rigorous review and approval process (beyond the contracting
officer)

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

Recommendation 3:
The Procurement Officer st Dryden should implement a more rigorous review and

21


AUDIT REPORT 1IG-05-022

SOLE-SOURCE PURCHASE ORDERS
UNDER SIMPLIFIED ACQUISITION PROCEDURES

July 6, 2005

Released by:

National Aeronautics and Evelyn R. Klemstine
Space Admini : a
ace Administration Assistant Inspector General for Auditing


¢ A purchase order valued at $102,000 for technical support of the Building
Automation System. Specifically, the justification did not include a description of
three elements: (1) efforts made to ensure that offers were solicited from as many
potential sources as is practicable; (2) any market research conducted; and (3) the
sources, if any, that expressed, in writing, an interest in the acquisition.

The Procurement Officer at Dryden stated that the justification deficiencies occurred
because the contracting officers did not provide sufficient oversight to the technical
representatives to ensure justifications were prepared in accordance with the regulations.
Failure to ensure that sufficient sole-source justifications exist may reduce competition
and result in the Government paying higher prices for goods and services.

Recommendation for Corrective Action

3. The Procurement Officer at Dryden should implement a more rigorous review
and approval process (that is, a higher level of review beyond the contracting
officer) under the pilot program to ensure that Dryden contracting officers
adhere to pilot program requirements under FAR 13.5 for justifying sole-
source purchase orders over $100,000.

Management’s Response. Management concurred, and the Dryden Acquisition
Management Office has implemented Dryden Organizational Procedure DOP-A-005,
“Noncompetitive Procurement Documentation,” and a desk guide for writing
justifications for other than full and open competition. A special staff meeting was
devoted to a training effort for the contracting officers to emphasize the need to comply
with all the requirements stated in FAR Part 6 and NFS Part 6. Additionally, on

June 29, 2005, the Dryden Procurement Officer issued a memorandum to the Dryden
Acquisition Management Office staff immediately implementing a requirement that all
justifications over $100,000 be reviewed by the procurement analyst. Dryden is in the
process of formally revising Dryden Organizational Procedure DOP-A-003, “Review and
Execution of Procurement Documents,” to reflect this policy change. The formal
revision to DOP-A-003 is expected to be completed by July 8, 2005.

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

However, Dryden Organizational Procedure DOP-A-003 has not yet been finalized and
we will follow up to ensure that it is formally issued.


For actions over $100,000 under the pilot program, FAR 13.501(a)(1) requires that the
contracting officer prepare a more rigorous written justification using the format provided
in FAR 6.303-2. To ensure that sole-source purchase order actions are proper, the
justification must clearly demonstrate that the sole-source action is necessary and
appropriate. FAR 6.303-2 includes 12 specific areas that must be addressed in a
justification before the Agency may proceed with a proposed sole-source procurement.
(See Appendix C for justification content requirements.)

Sole-Source Justification Deficiencies at Dryden

We found no systemic justification deficiencies at either Kennedy or Langley. However,
we found at Dryden several justifications for purchase order actions awarded under the
simplified acquisition pilot program that were deficient. Table 2 summarizes, by Center,
the number and dollar value of purchase order actions reviewed as well as the number
and dollar value with insufficient justifications.

Table 2. Purchase Order Actions With Deficient Justifications

Actions Over Value of
$100,000 Actions Over
With $100,000 With
Insufficient Insufficient
Justifications | Justifications

Actions
Installation | Reviewed

Dryden 27 8 $2,547,000

Kennedy 42 1 155,000

Langley R 1 147,000
Total | 14d io $2,849,000 |

Of the 27 Dryden justifications reviewed, 8 justifications (30 percent) had insufficient
content. Examples of three Dryden justifications with material content deficiencies are
described below.

e A purchase order valued at $750,000 for Pacific Video Products Advanced
Electro-Optical Systems did not include three of the seven substantive
justification elements. Specifically, the justification did not include a description
of three elements: (1) efforts made to ensure that offers were solicited from as
many potential sources as is practicable; (2) any market research conducted; and
(3) the sources, if any, that expressed, in writing, an interest in the acquisition.

e A purchase order valued at $500,000 for repair, design, fabrication, modification,
and integration support of the NASA Dryden Research/Support/Platform Aircraft.
Specifically, the justification did not include a description of five elements:

(1) the proposed contractor’s unique qualifications; (2) efforts made to ensure that
offers were solicited from as many potential sources as is practicable; (3) any
market research conducted; (4) other facts supporting the use of other than full
and open competition; and (5) the sources, if any, that expressed, in writing, an
interest in the acquisition.


because the contracting officers either overlooked the requirement to publish a synopsis
or improperly applied one of the synopsis exceptions authorized under FAR 5.202

At Kennedy, eight purchase order actions with a total value of $1.2 million were not
synopsized and had no documentation explaining whether any of the authorized synopsis
exceptions applied. For example, one purchase order lacking a required synopsis was
valued at $819,000 for engineering and technical support services. The contracting
officer stated that the action was not synopsized because Kennedy initially intended to
procure the services from an eligible small disadvantaged business using the authority of
section 8(a) of the Small Business Act (a valid synopsis exception under FAR 5.202).
However, Kennedy ultimately elected not to acquire the services as an 8(a) procurement,
but did not publish the required synopsis.

Other examples of Kennedy purchase orders lacking required synopses were: (1) an order
valued at $50,000 for international medical services and (2) an order valued at $28,000
for management consulting services. Kennedy procurement officials stated that those
actions were not synopsized as required because of inadvertent oversights by the
respective contracting officers. The remaining five Kennedy purchase order actions were
not synopsized because the contracting officers improperly applied one of the synopsis
exceptions authorized under FAR 5.202. For each of those five actions, the contracting
officer was the sole approving official.

Competition in Federal contracting, including the use of simplified acquisition
procedures, is a proven and effective means of acquiring supplies and services and
generally results in lower prices and improved quality. Publicizing contract actions can
increase competition, broaden industry participation in meeting Government
requirements, and assist small business concerns in obtaining contracting opportunities.
However, by not posting synopses when required, the Government may have
unnecessarily precluded competition. As a result, the Government may have missed out
on potential benefits such as improved level of service and lower market-tested pricing.

Recommendations for Corrective Action

1. The Procurement Officer at Dryden should adopt a more rigorous review
and approval process (that is, a higher level of review beyond the contracting
officer) in order to ensure all proposed sole-source acquisitions using

simplified acquisition procedures are properly synopsized as required by the
FAR.

Management’s Response. Management at Dryden concurred with our recommendation.
On May 4, 2005, the Dryden Procurement Officer issued a memorandum to the Dryden
Acquisition Management Office staff immediately implementing a requirement that
synopses for all proposed contract actions be approved by the procurement analyst
(Dryden’s Acquisition Management Office’s review officer) in addition to the contracting
officer. Dryden is in the process of formally revising Dryden Organizational Procedure


Appendix C

(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 contracting officer 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. As a 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."

(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.

18


Appendix D

Reply 1 Aen of

National Aeronautics and

Space Administration

Dryden Flight Research Center A
P.O, Box 273

Edwards, CA 93523-0273

A June 29, 2005
TO. A/Acquisition Management Office Staff
FROM: AJ/Chief, Acquisition Management Office

SUBJECT: DOP-A-003, Review and Execution of Procurement Documents

REF: OIG Discussion Draft A-04-039-00

A finding mentioned in the referenced discussion draft recommends, “The Procurement
Officer at Dryden should implement a more rigorous review and approval process (that
is, a higher level of review beyond the contracting officer) for justifications under the
pilot program to ensure that Dryden contracting officers adhere to pilot program
requirements under FAR 13.5 for justifying sole-source purchase orders over $100,000.”

DFRC concurred with this recommendation and as a result has performed two actions.
First, DFRC provided formal JOFOC training to our acquisition staff on June 1, 2005.
The training materials used were previously provided. Secondly, DFRC changed the
review and approval requirement in our Dryden Operating Procedure (DOP) A-003. The
revised DOP-A-003 now requires Procurement Analyst (PA) review fro all JOFOCs over

$100,000, In addition, the Center's Legal Office is added as reviewer for all JOFOCs
over $100,000.

Pending formal revision to DOP-A-003, this letter is issued to immediately implement
the recommendation noted in the preceding paragraph. Formal revision to the DOP will
be forthcoming with a scheduled completion date of July 8, 2005. If you have any
questions regarding this change, contact Brian G, Bowman at ext. 3329.

FP, bes,

’ RH. Davis

24



Table of Contents

Executive Summary

Objectives
Background
Findings
A. Some Sole-Source Purchase Order Actions Were Not Synopsized
B. Deficient Justifications for Some Sole-Source Purchase
Order Actions
Appendixes

A. Scope and Methodology

B. Purchase Order Actions Reviewed
[on Competition and Synopsis Requirements
Dz. Management’s Response

m

Report Distribution

Acronyms Used in the Report

FAR Federal Acquisition Regulation
NFS NASA FAR Supplement

iti

12

20

25


Appendix A

statutory authority (for example, “section 2304(c)(1), title 10, United States Code”) for
the action. While important, those elements do not demonstrate the propriety of the sole-
source action. Therefore, while some of the justifications we reviewed were deficient in
addressing the elements, we did not consider them to be material deficiencies for
purposes of this audit.

Use of Computer-Processed Data

To identify the universe of purchase order actions at the three Centers, we used the
computer-processed data from the NASA Procurement Management System maintained
at NASA Headquarters. We compared the purchase order numbers and dollar values
from the system-processed list for the purchase order actions using the simplified
acquisition procedures against the contract file. Nothing came to our attention that
caused us to question the validity of the NASA Procurement Management System
computer-processed data. We determined that the data was sufficiently reliable for the
purposes of this report.

Management Controls

We reviewed management controls over the award of the noncompetitive purchase order
actions at the three Centers. We determined that generally management controls were
adequate, but improvements could be made at each of the three Centers (see the findings
in the main body of the report). Implementing the recommendations in this report will
help strengthen management controls.

Audit Work

We performed audit work from July 2004 through March 2005 in accordance with
generally accepted government auditing standards.

11


Appendix B

Actions Not .
NASA Purchase Order V. Synopsized Actions with
Center Number alue and No Tnsu cient
. Justifications
Exception
Kennedy CC89875B $50,000 x
CC90297B 31,000
CC90347B 63,000
CC90475B 70,000
CC90534B 88,000
CC90682B 27,000
CC90736B 36,000
CC90749B 98,000 x
CC90777B 29,000
CC90792B 71,000 x
CC90817B 100,000
CC90819B 30,000
CC91207B 28,000 x
CC91558B 86,000
CC91635B 49,000 x
CC91640B 49,000
CC91648B 50,000
CC91649B 33,000
CC91669B 28,000
CC91671B 29,000
CC91726B 70,000
CC91727B 70,000
CC91733B 50,000
CC91759B 65,000
CC91764B 60,000
CC91794B 84,000
CC91931B 28,000 x
C€C91932B 41,000 x
CC91962B 39,000
CC85773B 409,000
CC86801B 327,000
CC90243B 155,000 x
CC90254B 819,000 xX
CC90340B 501,000
CC90511B 157,000
CC90520B 2,364,000
CC90766B 141,000
CC90787B 108,000
CC90810B 129,000
CC90839B 180,000
CC91808B 145,000
NAS10-03036 1,253,000
Subtotal 42 $8,240,000 8 1

13


generally documented, supported, and properly reviewed and approved by the appropriate
NASA officials prior to award of the purchase orders. However, we found two areas that
need improvement—synopses of sole-source purchase order actions and justifications of
sole-source actions under the simplified acquisition pilot program.

Of the 141 actions that we reviewed, 16 actions (11 percent) totaling $2.2 million were
not synopsized as the Federal Acquisition Regulation (FAR) requires. That condition
occurred at two of the three Centers (Dryden and Kennedy) because some contracting
officers at those Centers either overlooked the requirement to publish a synopsis or
improperly applied one of the synopsis exceptions authorized under the FAR. Another
factor contributing to the condition at Dryden and Kennedy was that there were no
reviews by higher level officials, because the contracting officer is the sole approving
official for simplified acquisition synopses at those Centers. Not publishing a synopsis
notice restricts competition. As a result, the Government may miss out on the benefits of
competition and may pay higher prices for goods and services. (Finding A)

We also found that Dryden did not follow FAR requirements when preparing written
justifications for several sole-source purchase orders awarded under the simplified
acquisition pilot program. Of the 27 actions reviewed at Dryden, 12 were awarded under
the pilot program. Of those 12 actions, 8 (67 percent) totaling $2.5 million did not have
sufficient justifications. Failure to prepare sufficient sole-source justifications may
reduce competition and result in the Government paying higher prices. (Finding B)

Summary of Recommendations. We recommend that Dryden and Kennedy adopt a
more rigorous review and approval process (that is, a higher level of review beyond the
contracting officer) that would ensure all proposed sole-source acquisitions using
simplified acquisition procedures are properly synopsized as the FAR requires. We also
recommend that Dryden management ensure that sole-source purchase order actions

under the pilot program are justified in writing as the FAR and NASA FAR Supplement
require.

Management Comments. Management at Dryden concurred with our recommendations
and has taken or is taking corrective actions. Management at Kennedy partially
concurred with our recommendation. While they agree with the intent of the
recommendation, they believe that adopting a more rigorous review and approval process
for proposed sole-source synopses would be unduly burdensome. Instead, Kennedy
management agreed to have the NASA procurement survey team increase its emphasis in
this area during future reviews at the Center. If the review teams find repeated problems
in this area, they will then implement the recommended action of adopting a more

rigorous review and approval process. The complete text of management’s response is in
Appendix D.

Audit Response. NASA’s comments are responsive and no additional comments are
requested.

ii


Appendix D

approval process (that is, a higher level of review beyond the contracting officer) under
the pilot program to ensure that Dryden contracting officers adhere to pilot program
requirements under FAR 13.5 for justifying sole-source purchase orders over $100,000.

Response:

Concur. Current review levels for justifications (pilot program o otherwise) are in
accordance with FAR and NASA FAR Supplement regulations. In addition to the above,
the Dryden AMO has implemented DOP-A-005, titled “Noncompetitive

Procurement Documentation,” and a desk guide ta writing justifications for other than

full and open competition (JOFOC) stating the content that should be in a justification,
(enclosure 2, hard copy only)

A special staff meeting was devoted to a training effort to emphasize to the contracting

officers the need to comply with all of the requirements stated in FAR Part 6 and NFS
Part 6. Presentation material is attached.

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

*Omitted because of length. Copies can be provided upon request,

22


1G-05-022
A-04-039-00 July 6, 2005

SOLE-SOURCE PURCHASE ORDERS UNDER
SIMPLIFIED ACQUISITION PROCEDURES

Executive Summary

The NASA Office of Inspector General conducted an audit to determine whether NASA
effectively managed awards of sole-source purchase orders under simplified acquisition
procedures. The specific audit objectives were to determine whether:

¢ Proposed sole-source purchase orders were synopsized as required and the
Agency properly dispositioned any challenges received in response to the
synopses.

¢ Justifications for sole-source purchases were adequately documented, supported,

and properly reviewed and approved by the appropriate NASA officials prior to
award of the purchase orders.

We performed audit work at Dryden Flight Research Center (Dryden), Kennedy Space
Center (Kennedy), and Langley Research Center (Langley). Details on our audit scope
and methodology are in Appendix A. Statistical information for the purchase order
actions reviewed is in Appendix B.

Background. This audit is the third in a series designed to assess NASA’s overall
competitive contracting posture. We conducted this audit because competition in Federal
contracting under simplified acquisition procedures is a proven and effective means of
acquiring supplies and services and generally results in lower prices and improved

quality. Competition can also provide innovative, commercial solutions that meet
NASA’s needs.

Simplified acquisition procedures are used for making purchases of supplies or services
that do not exceed $100,000. Under a Government-wide pilot program, contracting
officers may now use simplified procedures for the acquisition of commercial items for
amounts greater than $100,000, but not exceeding $5 million. During fiscal years 2002
and 2003, NASA spent $3.9 billion and $4.4 billion, respectively, through
noncompetitive contract awards. Included in those amounts approximately $54.3 million
and $55.6 million were procured on a sole-source basis using simplified acquisition
procedures.

Results. Management of sole-source purchase orders under simplified acquisition
procedures at the Centers reviewed was generally effective. The majority of proposed
sole-source purchase order actions that we reviewed at Dryden, Kennedy, and Langley
were synopsized in accordance with Federal Acquisition Regulation (FAR) requirements.
No challenges were received in response to those synopses. Also, justifications were


Appendix E. Report Distribution

NASA

Administrator
Deputy Administrator
Chief of Staff
Assistant Administrator for Procurement
General Counsel
Director, Management Systems Division
Audit Liaison Team Lead
Director, Goddard Space Flight Center
Procurement Officer (GSFC/200)
Goddard Audit Liaison Representative (GSFC/201)
Director, John F. Kennedy Space Center
Procurement Officer (JSC/BA)
Kennedy Audit Liaison Representative (JSC/BD)
Director, John C. Stennis Space Center
Procurement Officer (SSC/DA00)
Stennis Audit Liaison Representative (SSC/BA10)

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

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 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

25


Appendix A. Scope and Methodology

Scope

We performed the review at three NASA Centers: Dryden Flight Research Center
(Dryden), Kennedy Space Center (Kennedy), and Langley Research Center (Langley).
For our review, we chose the top three Centers (those with the most simplified
acquisition purchase orders and highest dollar value) that were not reviewed in one of the
two previous competition in contracting audits.’ At the three Centers, we intended to
review all purchase orders awarded under simplified acquisition procedures that were
active in fiscal year 2003. Our overall universe consisted of two sets of data for each
Center: (1) purchase orders $25,000 to $100,000, and (2) purchase orders $100,000 to

$5 million awarded under the pilot program. As of April 2004, the number of actions and
their values for the Centers were:

Center Number of Actions Value of Actions
Ames Research Center 16 $2,049,000
Dryden Flight Research Center 29 5,439,000
Glenn Research Center 75 6,122,000
Goddard Space Flight Center 81 5,876,000
Headquarters 22 5,598,000
Johnson Space Center 38 3,595,000
Kennedy Space Center 44 8,366,000
Langley Research Center 78 12,659,000
Marshall Space Flight Center 41 5,472,000
Stennis Space Center 5 405,000
Total 7) $55,581,000

The three locations we reviewed awarded 151 (35 percent) of the total number of
purchase order actions and $26 million (48 percent) of the total dollars of NASA
purchase order actions during the time frame in our sample. We initially intended to
review all 151 of the purchase order actions. However, during site visits, we determined
that 10 actions were miscoded by the contracting officers. After eliminating those actions
from our sample, we ultimately reviewed a total of 141 purchase order actions that used
simplified acquisition procedures. The total actions we reviewed included 27 actions at
Dryden, 42 actions at Kennedy, and 72 actions at Langley.

We reviewed pertinent Federal, Agency, and Center-specific laws, policies, and
procedures pertaining to contracting without full and open competition. For each
purchase order action sampled, we reviewed pertinent contract file documentation,

>The two previous audits completed in the competition in contracting series are (1) IG-04-007, “Review of
Sole-Source and Limited Competition Contract Actions Citing ‘Unusual and Compelling Urgency,” issued
January 8, 2004), and (2) IG-05-017, “Audit of Sole-Source and Limited Competition Contract Actions
Citing ‘Only One Responsible Source,”” issued May 13, 2005.


Appendix B. Purchase Order Actions Reviewed

The sole-source purchase orders awarded under simplified acquisition procedures that we
reviewed at Dryden, Kennedy, and Langley are listed below.

Actions Not . Cs,
NASA Purchase Order Val Synopsized Actions With
Center Number alue and No J nsufficient
i justifications
Exception
Dryden E4137D $75,000 x
E4171D 76,000 x
ES271D 67,000
ES555D. 34,000
ES5658D 31,000 x
E5732D 30,000 Xx
E5757D 31,000
E5763D 30,000 x
E5878D 50,000
E5885D 48,000
E5901D 32,000
E5937D 73,000
ES5939D 45,000
E5978D 27,000 x
E6046D 28,000
E3848D 102,000 xX
E4107D 503,000
E4850D 203,000 xX
E5189D 241,000 x x
E5383D_ 500,000 xX x
E5548D 101,000 x
E5557D 750,000 x
E5586D 150,000 x
E5645D 500,000 x
E5765D 500,000
E5858D 500,000
E6052D 112,000
Subtotal 27 $4,839,000 8 8

12