IG-03-003

AUDIT 

REPORT NASA CONTRACTS FOR PROFESSIONAL, 

ADMINISTRATIVE, AND MANAGEMENT 

SUPPORT SERVICES 

October 16, 2002

 National Aeronautics and 

Space Administration

OFFICE OF INSPECTOR GENERAL
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Acronyms 

AS&M Analytical Services and Materials, Inc. 

CO Contracting Officer 

CPSR Contractor Purchasing System Review 

DOD Department of Defense 

FAR Federal Acquisition Regulation 

FY Fiscal Year 

OFPP Office of Federal Procurement Policy 

PBC Performance-Based Contracts
October 16, 2002 

W 

TO: R/Associate Administrator for Office of Aerospace Technology 

 D/Director, Ames Research Center 

 X/Director, Dryden Flight Research Center 

 0100/Director, John H. Glenn Research Center at Lewis Field 

FROM: W/Assistant Inspector General for Audits 

SUBJECT: Final Report on Audit of NASA Contracts for Professional, 

 Administrative, and Management Support Services 

 Assignment Number A-01-046-00 

 Report Number IG-03-003 

The subject final report is provided for your information and use. Please refer to the 

Executive Summary for the overall audit results. Our evaluation of your response has 

been incorporated into the body of the report. We consider management’s proposed or 

completed, corrective actions responsive for all recommendations. The corrective actions 

completed for recommendations 1, 2, 3, and 6 are sufficient to close the 

recommendations for reporting purposes. Recommendations 4, 5, and 7 will remain open 

for reporting purposes until corrective actions are complete. Please notify us when 

actions have been completed on the recommendations, including the extent of testing 

performed to ensure corrective actions are effective. The final report distribution is in 

Appendix G. 

We appreciate the courtesies extended to the audit staff. If you have questions 

concerning the report, please contact Mr. Lorne A. Dear, Program Director, Procurement 

Audits, at (818) 354-5634; Mr. Patrick A. Iler, Program Manager, at (216) 433-5408; or 

Mr. Michael P. Bruns, Auditor-in-Charge, at (216) 433-8918. 

[original signed by] 

Alan J. Lamoreaux 

Enclosure 
2 

cc: 

HQ/AI/Associate Deputy Administrator 

HQ/B/Deputy Chief Financial Officer 

HQ/B/Comptroller 

HQ/BF/Director, Financial Management Division 

HQ/G/General Counsel 

HQ/H/Assistant Administrator for Procurement 

HQ/JM/Director, Management Assessment Division 

JSC/AA/Director, Johnson Space Center 

LaRC/106/Acting Director, Langley Research Center 
Contents 

Executive Summary, i 

Introduction, 1 

Findings and Recommendations, 3 

Finding A. Competition for Subcontract Awards, 3 

Finding B. Fixed-Price Contracting, 11 

Appendix A - Objectives, Scope, and Methodology, 17 

Appendix B – Summary of Prior Audits and Other Reviews, 19

Appendix C – Contracts Reviewed, 21

Appendix D – Subcontract Consent Checklist, 22 

Appendix E – Noncompetitive Subcontracts, 23 

Appendix F – Management’s Response, 24

Appendix G – Report Distribution, 27 
NASA Office of Inspector General 

IG-03-003 October 16, 2002 

 A-01-046-00 

NASA Contracts for Professional, 

Administrative, and Management 

Support Services 

Executive Summary 

Background. Over the last decade, Federal agencies, including NASA, have 

substantially increased their purchases of services. Since fiscal year (FY) 1999, service 

contracts1

 in NASA have accounted for more than half of the Agency’s annual contract 

awards to business firms. In FY 2001, service contracts accounted for about $5.1 billion 

(57 percent) of about $9 billion NASA awarded to business firms. Of the $5.1 billion in 

service contracts, professional, administrative, and management support services 

(hereinafter referred to as support services) contracts accounted for about $2.7 billion 

(53 percent) of the total. 

Prior NASA Office of Inspector General and Department of Defense (DOD) Office of 

Inspector General audits identified management control weaknesses related to support 

services contracts (see Appendix B). These weaknesses included, in part, inadequate 

competition and a lack of cost control. In addition, DOD contracting officers (CO’s) did 

not use available history from prior contracts to help define costs and reduce risk by 

awarding firm-fixed-price contracts. 

We performed this audit because of NASA’s significant amount of support services 

contracts, which account for more than half of the annual service contract awards, and 

management control weaknesses in the support services area that were identified in prior 

audits. We reviewed a total of five support services contracts totaling more than $499 

million as of March 31, 2002. See Appendix C for a list and description of the five 

contracts. 

 

1

 Federal Acquisition Regulation Subpart 37.1, “Service Contracts-General,” defines a service contract as a 

contract directly engaging the time and effort of a contractor whose primary purpose is to perform an 

identifiable task rather than to furnish an end supply item. Service contracts are used, for example, for 

transportation and related services, routine recurring maintenance of real property, and housekeeping and 

base services. 
Objectives. The overall audit objective was to determine whether NASA properly 

awarded and managed its professional, administrative, and management support services 

contracts. Specifically, at the four NASA Centers visited,2

 we determined whether: 

• support services contractors obtained full and open competition for subcontract 

awards, and 

• NASA selected the appropriate contract type for its support services contracts. 

Details on our audit scope and methodology are in Appendix A. 

Results of Audit. NASA can improve its award and management3

 of support services 

contracts. For three of the five support services contracts reviewed,4 contractors did not 

obtain adequate competition for 13 (59 percent) of 22 subcontracts awarded and did not 

adequately justify the lack of competition for the 13 awards. As a result, NASA has 

reduced assurance that the selected subcontractors offered fair and reasonable prices for 

the 13 subcontracts valued at about $1.3 million (Finding A). 

NASA did not maximize opportunities to facilitate the use of fixed-price contracting for 

routine administrative services with reasonably definite requirements. As a result, NASA 

assumed more risk than necessary because the use of cost-type contracts rather than 

fixed-price contracts can minimize the contractor’s incentive to control costs and perform

effectively. In addition, cost-type contracts can be more costly and burdensome for 

NASA to administer5

 due to more stringent contract reporting and review requirements. 

 

2

 The four NASA Centers visited were the Ames Research Center (Ames), Dryden Flight Research Center 

(Dryden), John H. Glenn Research Center (Glenn), and Langley Research Center (Langley). 3

 NASA’s management of support services contracts included CO actions to ensure that contractor 

subcontract awards were competed and if not competed, that the noncompetitive subcontract awards were 

adequately justified. Federal Acquisition Regulation Part 44, “Subcontracting Policies and Procedures,” 

contains policies and procedures for CO’s to follow in reviewing and approving contractor purchasing 

systems and providing consent for support services contractors to award subcontracts. 4

 Of the five support services contracts reviewed, three contractors did not adequately justify

noncompetitive procurements. The three contractors were SecTek, Inc. at Ames, Analytical Services and 

Materials, Inc. at Dryden, and InDyne, Inc. at Glenn. We also reviewed subcontract awards made by

Northrop Grumman Information Technology, Inc.-Technical Services at Ames and considered the degree 

of competition obtained acceptable. In addition, we reviewed subcontract awards made by Swales and 

Associates, Inc. at Langley and identified an issue regarding the competitive process for subcontract 

awards made to members of independent review teams performing assessments of NASA programs for the 

Independent Program Assessment Office. However, the NASA Office of Inspections and Assessments

questioned this process in a prior report (G-01-019), issued September 28, 2001. Therefore, we plan to

compile our data on this issue and provide it to the Inspections and Assessments staff for their use as 

appropriate. 5

 Some fixed-price contracts may also have incentive fee and/or award fee provisions, which would require 

additional costs to administer. 

ii
For example, a NASA Award Fee Contracting Guide estimated that it would cost 

$387,0006

 to administer the award fee process over the life of a 5-year contract 

(Finding B). 

Recommendations. We recommended that NASA CO’s require contractors to develop 

and to improve upon company policies for documenting the rationale for noncompetitive 

subcontract awards and to follow policies for competing subcontracts and documenting 

noncompetitive procurements. We also recommended that CO’s thoroughly document 

their analysis and approval of contractor subcontract requests and that contract files 

include contractor consent requests. We further recommended that the NASA CO’s 

collect sufficient historical workload data for routine administrative services to allow for 

expanded use of fixed-price contracting in future awards when data and circumstances 

indicate fixed-price contracting is appropriate. 

Management’s Response. 

Management concurred with all of the recommendations. The complete text of 

management’s response is in Appendix F. We consider management’s proposed or 

completed corrective actions responsive. 

 

6

 We took the example from NASA’s June 27, 2001, Award Fee Contracting Guide. NASA issued the 

Guide to explain the Agency’s award fee policy and to provide examples that could not be addressed in the 

Federal Acquisition Regulation. 

iii
Introduction 

The award of all contracts including support services contracts requires the CO to select a 

contract type that is appropriate to the circumstances of the procurement in question and 

to document in the contract file why CO’s chose the particular contract type.7

 The 

management of support service contracts requires CO’s to adequately oversee the support 

services contractors’ subcontracts8

 and purchasing systems. 

Responsibility for overseeing the subcontract awards and purchasing systems depends on 

whether NASA CO’s retain contract administration authority. NASA CO’s have the 

option of retaining contract administration authority for NASA contracts or delegating 

such authority to the DOD. CO’s oversee support services contractor subcontract awards 

by granting contractors “Consent to Subcontract,” which Federal Acquisition Regulation 

(FAR) Part 2 defines as the CO’s written consent for the prime contractor to enter into a 

particular subcontract. The subcontract awards that support services contractors must 

submit to CO’s for consent vary based on whether the contractor has received a 

contractor purchasing system review (CPSR)9

 and whether the CO has approved the 

contractor’s purchasing system based on the CPSR results. The CPSR forms the basis for 

the cognizant10 CO to grant, withhold, or withdraw approval of the contractor’s 

purchasing system. Without approved purchasing systems, contractors are required to 

obtain consent to subcontract for their subcontract awards with limited exceptions.11

 

7

 Exceptions to the documentation requirement are (1) fixed-price acquisitions made under simplified 

acquisition procedures; (2) contracts on a firm-fixed-price basis other than those for major systems or 

research and development; and (3) awards on the set-aside portion of sealed bid partial set-asides for small

businesses. 

8

 To meet contractual requirements, contractors usually procure goods and services from other sources 

through subcontracts. Federal Acquisition Regulation Part 44 defines a subcontract as any contract entered 

into by a subcontractor to furnish supplies or services for performance of a prime contract or a subcontract. 

The term subcontract includes, but is not limited to, purchase orders and modifications to subcontracts. 9

 FAR Part 44 defines a CPSR as the complete evaluation of a contractor’s purchasing of materials and 

services, subcontracting, and subcontract management from development of the requirement through 

completion of subcontract purpose. The Defense Contract Management Agency usually performs the 

CPSR. However, if NASA retains contract administration authority, NASA personnel have the authority

to perform a CPSR under the guidance in NASA FAR Supplement 1844.302-71. 10 The cognizant CO is either the NASA CO or the CO within the contract administration office to whom

NASA has delegated contract administration functions such as the review and approval of a contractor’s 

purchasing system. 11 Contractors without approved purchasing systems are required to obtain consent to subcontract for costreimbursement, time-and-materials, labor-hour, or letter contracts, and for unpriced actions under fixedprice contracts that exceed the simplified acquisition threshold for (1) cost-reimbursement, time-andmaterials, or labor-hour subcontracts; and (2) fixed-price subcontracts that exceed the greater of the 

simplified acquisition threshold or 5 percent of the total estimated cost of the contract. 
NASA’s June 2001 Award Fee Contracting Guide states that performance-based 

contracting12 is NASA’s preferred way of contracting for services. There are two basic 

groups of contracts: cost reimbursable and fixed-price. FAR Part 37, “Service 

Contracting,” lists a fixed-price performance-based contract (PBC) as the preferred 

choice of contract type for service contracts. Both Office of Federal Procurement Policy 

(OFPP) and NASA publications discuss the potential for cost savings by using fixedprice PBC. OFPP statistics show that by converting previously acquired cost-type, nonPBC services to fixed-price, PBC services, cost savings of about 21 percent are possible. 

The NASA Award Fee Contracting Guide estimated that evaluating the award fee for a 6-

month period would cost $38,700. The $38,700 included costs for performance 

monitors,13 Performance Evaluation Board members,14 a Fee Determination Official,15 a 

recorder,16 and a CO. Accordingly, the cost of determining award fees, semiannually, 

over the life of a 5-year contract would be $387,000. 

 

12 Performance-based contracting is the term NASA used to describe its tailored approach to the Office of

Federal Procurement Policy’s Performance-Based Service Contracting initiative. Performance-based

contracting complements the Government’s overall approach to managing for results and can reduce 

unnecessary administration costs. 13 A performance monitor is responsible for monitoring, evaluating, and assessing contractor performance 

in assigned areas. 

14 A Performance Evaluation Board member conducts periodic evaluations of contractor performance and 

submits a Performance Evaluation Board Report to the Fee Determination Official covering the Board’s 

findings and recommendations for each evaluation period. 15 A Fee Determination Official’s primary responsibility is to determine the award fee earned and payable 

for each evaluation period. 

16 A recorder gathers performance data from monitors. 

2
Findings and Recommendations 

Finding A. Competition for Subcontract Awards 

Support services contractors did not obtain full and open competition for subcontract 

awards and did not adequately justify the lack of competition. Specifically, three NASA 

support services contractors17 did not adequately compete and justify noncompetitive 

procurements for 13 (59 percent) of 22 subcontracts reviewed. This occurred because 

support services contractors did not follow company policy for obtaining competition or 

documenting noncompetitive procurements and because contractor policies for 

documenting noncompetitive procurements were inadequate. In addition, although 

NASA CO’s at Dryden and Glenn granted consent to subcontract, the CO’s FARrequired analyses of support services contractor requests to award subcontracts were 

inadequate. As a result, NASA had reduced assurance that the selected subcontractors 

offered a fair and reasonable price for the 13 subcontracts valued at about $1.3 million. 

Competition Policies and Procedures 

FAR Requirements. FAR Part 6, “Competition Requirements,” directs CO’s to take 

specific actions to ensure compliance with Government policy on full and open 

competition in Government contract awards. The CO must solicit offers from as many 

potential sources as is practical. To identify potential sources, the CO is required to 

conduct market research, document the market research, and retain the documentation in 

the contract file. A CO can award a noncompetitive procurement when only a single 

qualified source is available to perform the contract requirements.18 However, the CO 

must prepare a written justification explaining why a noncompetitive procurement is 

appropriate. FAR 6.303-2, “Content,” requires, at a minimum, that the justification 

include a description of the market research conducted and the results or the stated reason 

for not performing market research. In addition, the CO should describe why the 

anticipated cost is fair and reasonable, identify the statutory authority permitting other 

than full and open competition, and demonstrate that the proposed subcontractor’s unique 

capability requires use of the statutory authority cited. The CO should also describe the 

planned actions to remove barriers to competition for similar future procurements. 

Lastly, depending on the dollar amount of the noncompetitive procurement, the CO must 

have the proper authority sign off as the approving official. These requirements apply to 

all noncompetitive procurements exceeding the simplified acquisition threshold of 

$100,000. 

 

17 None of the three support services contractors had approved purchasing systems. However, a CO at the 

Lyndon B. Johnson Space Center (Johnson) approved InDyne’s purchasing system at Johnson only based 

on a review of subcontracts awarded under Johnson’s contract with InDyne, Inc. 18 FAR 6.302 outlines seven statutory authorities that permit contracting without providing for full and 

open competition. The existence of only one responsible source is one of the seven statutory authorities 

that allows for contracting without full and open competition. 

3
FAR Part 13, “Simplified Acquisition Procedures,” which applies to acquisitions of 

supplies and services costing less than $100,000, requires CO’s to promote competition 

to the maximum extent practical. Documentation requirements stated in FAR Part 13 for 

noncompetitive procurements are not as stringent as those in FAR Part 6. Nonetheless, 

Part 13 requires the CO to explain in the contract file why competition was limited to 

only one source and why the price obtained for the noncompetitive procurement was 

reasonable. The CO may base the statement of price reasonableness on various factors 

such as the extent of market research performed, a comparison with similar items in a 

related industry, or a comparison to an independent Government estimate. 

To require that contractors competitively award subcontracts to the maximum extent 

practical, the CO incorporates FAR clause 52.244-5, “Competition in Subcontracting,” 

into contracts. However, the CO was not required to incorporate the contract clause into 

the Analytical Services and Materials, Inc. (AS&M), contract we reviewed, which 

expired April 30, 2002, because it was a fixed-price contract.19 However, the CO did 

incorporate the clause into the follow-on award, also made to AS&M, which began May 

1, 2002. 

FAR Part 44, “Subcontracting Policies and Procedures,” requires CO’s to incorporate 

into contracts the FAR consent-related clauses at 52.244-1, “Subcontracts (Fixed-Price 

Contracts) (February 1995)”20 and 52.244-2, “Subcontracts (August 1998).” These 

clauses define the contractor’s requirements for seeking consent to subcontract and for 

providing information to the NASA CO in advance of placing any subcontract. The 

NASA CO’s incorporated these clauses into the support services contracts we reviewed. 

Part 44 also requires the CO responsible for the consent to subcontract to review the 

contractors’ supporting data and to consider 13 elements (see Appendix D) before 

granting consent to subcontract. The FAR emphasizes that CO’s be particularly careful 

before granting consent when contractors propose noncompetitive subcontracts or when 

contractors do not have approved purchasing systems. 

NASA Requirements and Guidance. The NASA FAR Supplement and other NASA 

guidance assist CO’s in performing oversight duties. The NASA FAR Supplement Part 

1844, “Subcontracting Policies and Procedures,” requires NASA CO’s to retain consent 

to subcontract authority unless delegation is approved in writing by the procurement 

officer. NASA CO’s retained the authority to grant consent for the three contracts in 

question. In addition, NASA FAR Supplement Subpart 1844.302.70 requires that CO’s 

be aware of purchasing system approval status for contracts within their cognizance. 

None of the three contractors with inadequately supported noncompetitive procurements 

 

19 The AS&M contract was a fixed-price requirements contract that included fixed labor rates and flexible

hours for delivery orders. In addition, the contract provided for materials, subcontracts, and other direct 

costs to be acquired at cost. 

20 FAR Clause 52.244-1 was superseded by FAR Clause 52-244-2 for all types of contracts in August

1998. The AS&M contract included FAR clause 52.244-1, and the InDyne, Inc. and SecTek, Inc. contracts 

included FAR clause 52.244-2. 

4
had approved purchasing systems. A NASA Self-Assessment Guide,21 addresses 

subcontract consent files and states that the contract file should contain information 

showing the consents requested, analysis, and actual consents granted. The Guide also 

states that contractors should support consent requests with adequate information and that 

evidence of adequate CO analysis should exist. In addition, the Ames site on NASA’s 

Virtual Procurement Office,22 accessible through NASA’s Procurement Library Web 

Site, contains a copy of a subcontract consent checklist as a tool to assist CO’s in making 

consent determinations. However, use of the consent checklist is not mandatory. 

Company Policies and Procedures. NASA relies on contractors to incorporate FAR 

and NASA FAR Supplement requirements identified in their contracts into company 

policies and procedures and to follow those company policies and procedures. However, 

FAR requirements do not necessarily bind the prime contractor to utilize the same criteria 

as the CO in competing subcontracts and documenting noncompetitive procurements. 

Therefore, company policies vary, and it is the responsibility of the CPSR review team to 

determine their adequacy. In the absence of a CPSR, NASA CO’s are responsible for 

granting contractors consent to subcontract and for being aware of company policies 

related to competition and documenting noncompetitive procurements. 

CO’s are required by FAR Part 44 to analyze contractor requests to award subcontracts 

before granting consent and to be particularly careful when subcontracts are proposed for 

award on a non-competitive basis. Therefore, NASA CO’s performing this analysis rely 

on contractors to develop competitive policies that reasonably reflect FAR requirements 

and to follow those policies. Company policies and procedures for obtaining competition 

and justifying noncompetitive procurements differed for the three contractors. All three 

contractors had procedures encouraging competition. InDyne, Inc. and SecTek, Inc. 

procedures required each contractor to obtain at least three bids, while AS&M procedures 

encouraged full and open competition. 

However, the three contractors had differing policies for justifying noncompetitive 

procurements. InDyne, Inc. policy requires the requisitioner to justify noncompetitive 

acquisitions and states that support for noncompetitive acquisitions exceeding $25,000 

should fully explain the reasons for the noncompetitive procurement. SecTek, Inc. has 

no policy/guidance for documenting noncompetitive procurements, while AS&M policy 

mirrors the FAR Part 6 requirements. 

 

21 The Self-Assessment Guide is intended for use by Center procurement staff in support of annual Center 

internal procurement reviews. 22 NASA’s Virtual Procurement Office is meant to be a one-stop reference tool with templates and samples 

for CO use. It may contain sample documents that are unique to each Center. 

5
Full and Open Competition Not Obtained for Subcontracts 

For the three contracts reviewed, support services contractors did not adequately compete 

13 (59 percent) of 22 sampled subcontracts and did not provide adequate justifications 

for the 13 noncompetitive awards. A summary, by contractor, of the sampled 

subcontracts follows: 

Noncompetitive Subcontracts 

Subcontracts Reviewed

Inadequately Justified 

Noncompetitive Subcontracts

Contractor 

(a)

Number 

(b)

Value 

(c)

Number 

(d)

Percent Not 

Competed 

(d/b)

Value 

(e)

 InDyne, Inc. 11 $1,656,195 7 64 $ 860,086 

 AS&M 6 538,999 3 50 369,836 

 SecTek, Inc. _5 55,849 3 60 27,722

 Totals 22 $2,251,043 13 59 $1,257,644

InDyne, Inc. Subcontracts Reviewed. Seven of 11 InDyne, Inc. subcontracts we 

reviewed were not competed, and the contractor’s support for the 7 noncompetitive 

procurements was inadequate. InDyne, Inc. solicited only one source for all seven 

subcontracts, although company policy required three source solicitations to promote 

competition. Three subcontracts totaling $321,495 were for office design/layout and 

specification services. The provided services included interviews, development of 

typical workstations, furniture layouts, and furniture budgets. For all three subcontracts, 

the contractor’s rationale for the lack of competition did not fully support the 

procurement and did not reflect reasonable requirements for justifying noncompetitive 

procurements such as those contained in the FAR Part 6. The InDyne, Inc. subcontracts 

administrator’s justification for the noncompetitive procurement indicated that it was in 

the Government’s best interest to retain the subcontractor due to its demonstrated 

capability in all areas of the statement of work and because the cost charged to NASA 

was reasonable.23 However, none of the justifications included the information required 

by FAR 6.303-2 such as the market research performed or the unique capability of the 

selected vendor as explanations for the repeated noncompetitive awards to this 

subcontractor. 

AS&M Subcontracts. AS&M staff did not adequately support three noncompetitive 

subcontract awards. For example, one noncompetitive subcontract was for modifications 

to a B-52 pylon. The justification for the noncompetitive procurement contained limited 

detail and stated only that the subcontract was not competed because the previous 

 

23 The InDyne, Inc. Subcontract Administrator at Glenn prepared a statement of price reasonableness for all 

noncompetitive subcontracts we reviewed although corporate policy did not specify that such a statement 

was needed. 

6
contractor had used the same subcontractor and that because the B-52 is an old aircraft, 

few designers are familiar with the B-52 pylon. The justification was one of three that 

did not reflect support required by company policy such as evidence that adequate market 

research occurred and that the price obtained was reasonable. In addition, AS&M 

management officials did not sign and date the three justifications; signature and dating 

are required by company policy. 

SecTek, Inc. Subcontracts. Contract files for three of five subcontracts awarded by 

SecTek, Inc. did not contain evidence that the contractor solicited a minimum of three 

bids as required by company policy. The finance analyst responsible for obtaining quotes 

and documenting the contract files told us he had obtained competitive bids but had not 

documented the files. Therefore, the contractor did not consider it necessary to prepare a 

noncompetitive justification. Consequently, NASA lacks assurance that the contractor 

competitively awarded the subcontracts. 

Compliance With Company Requirements 

NASA CO’s rely on contractors to competitively award subcontracts in accordance with 

company policies that reasonably reflect FAR requirements, but NASA’s reliance failed 

because the support services contractors did not adequately compete subcontracts or 

adequately justify noncompetitive procurements. The contractors did not follow 

company policies for obtaining competition and documenting noncompetitive 

procurements. In addition, company policies for documenting noncompetitive 

procurements were inadequate. Specifically, the three contractors did not (1) follow 

company policies for obtaining competition, (2) follow company policies for 

documenting noncompetitive procurements, or (3) develop adequate company policy for 

documenting the justification for noncompetitive procurements. 

Following Company Policies for Competing Subcontracts. InDyne, Inc., SecTek, 

Inc., and AS&M procurement staff did not comply with company policies for competing 

subcontract awards. Subcontracts awarded by both InDyne, Inc. and SecTek, Inc. 

reflected a lack of competition despite policies at both companies requiring that at least 

three solicitations be obtained. In addition, AS&M staff did not always compete 

subcontract awards although company policy encouraged full and open competition. 

Following Company Policies for Documenting Noncompetitive Procurements. 

AS&M did not comply with company policy for supporting noncompetitive 

procurements. Although AS&M developed procedures for encouraging full and open 

competition and supporting noncompetitive procurements in February 2000 that mirrored 

FAR Part 6 requirements, documentation justifying three noncompetitive procurements 

did not comply with company policies. The contractor did not perform adequate market 

research, provide price reasonableness support, or sign and date justifications for the 

noncompetitive procurements, although company procedures required such actions. The 

contractor’s site manager could not explain why the deficiencies occurred. 

7
Developing Company Policies for Documenting Noncompetitive Procurements. 

InDyne, Inc. and SecTek, Inc. policies for documenting noncompetitive procurements 

were inadequate. Section 11, “ Competitive Acquisitions,” of the InDyne, Inc. 

Procurement Manual, dated April 1, 2000, contains guidance for justifying 

noncompetitive procurements. The guidance states that the requisitioner should fully 

explain and support the reasons for a noncompetitive procurement. This policy is vague 

and subject to varying interpretations by staff because requiring a “full explanation” is a 

subjective requirement. SecTek, Inc. has no policies in place to justify noncompetitive 

procurements. Personnel providing support for noncompetitive procurements need 

specific guidance to ensure that consistent and standardized justifications are prepared for 

noncompetitive procurements. An example of specific information needed to adequately 

justify a noncompetitive procurement could include: 

• the extent of market research performed, 

• the circumstances permitting other than full and open competition, 

• a statement that the anticipated cost will be fair and reasonable, 

• the actions to be taken to remove barriers to competition for future procurements, 

and 

• a provision for signatory review/approval from an official above the requisitioner. 

NASA CO Analysis of Subcontract Requests. The NASA CO analysis of contractor 

requests to award subcontracts for InDyne, Inc. and AS&M subcontract awards was 

inadequate. To support the granting of consent, contract files should contain information 

showing the consents requested, the CO’s analysis, and the actual consent letter. 

However, neither the InDyne, Inc. nor AS&M contract files we reviewed contained 

evidence that NASA CO’s analyzed the 13 FAR Part 44 elements required before 

granting consent to subcontract. For example, the Indyne, Inc. contract file did not 

contain the contractor consent requests or the CO’s analysis of the consent request.24 

Although the CO had granted consent as of May 2000 for all purchases under for the 

AS&M contract, the contract files contained no evidence of the CO’s analysis of the lack 

of competition or the price reasonableness of the noncompetitive procurement. With 

respect to SecTek, Inc. subcontract awards, consent to subcontract and the resulting 

analysis by the CO were not required because the subcontract awards reviewed were 

fixed price and under the simplified acquisition threshold. 

NASA’s Increased Risk 

Because support services contractors at Ames, Dryden, and Glenn did not fully and 

openly compete subcontract awards or adequately justify their noncompetitive 

procurements, NASA had reduced assurance that it obtained fair and reasonable prices. 

NASA’s risk 

 

24 The Glenn contract files contained some letters from the CO to InDyne, Inc. granting consent to

subcontract. However, the CO acknowledged consent letters did not exist for all subcontracts for which 

consent was required. 

8
relative to the fairness of subcontract prices also increased because CO’s did not 

adequately document their reviews of various elements required by the FAR before 

granting contractors consent to subcontract. 

Recommendations for Corrective Action 

1. The Ames Center Director should direct the CO for the Sectek, Inc. contract 

(NAS2-98068) to require the contractor to develop adequate policies for 

documenting the justifications for noncompetitive procurements. 

Management’s Response. Concur. NASA sent the contractor a letter dated September 

6, 2002, informing them of the necessity to follow FAR requirements and company 

policies in competing subcontracts and purchase orders, and documenting the rationale 

for noncompetitive procurements. The complete text of management’s response is in 

Appendix F. 

Evaluation of Management’s Response. Management’s corrective action is responsive 

to the recommendation. Based on our review of the CO’s letter to the contractor which 

addressed the need to adequately document the rationale for noncompetitive 

procurements, the recommendation is resolved and dispositioned and will be closed. 

The Dryden Center Director should direct the CO for the AS&M contract 

(NAS4-02021) to: 

2. Require the contractor to follow company policy in competing 

subcontracts and in documenting noncompetitive procurements.

Management’s Response. Concur. The CO will issue a letter to the contractor by 

October 31, 2002 directing that the contractor follow prescribed company policy (see 

Appendix F). 

Evaluation of Management’s Response. Management’s corrective action is responsive 

to the recommendation. Based on our review of the CO’s September 25, 2002, letter to 

the contractor, which addressed the need for competition and adequate documentation for 

noncompetitive procurements, the recommendation is resolved and dispositioned and will 

be closed. 

3. Document in the contract file the CO’s determination to grant consent to 

subcontract, and include in the contract file the consent request, the CO’s analysis, 

and the letter granting consent. 

Management’s Response. Concur. The Chief of Acquisitions will issue a letter before 

October 31, 2002 instructing the CO to document the contract file in accordance with the 

recommendation (see Appendix F). 

9
Evaluation of Management’s Response. Management’s planned action is responsive to 

the recommendation. The Dryden Procurement Officer issued a letter to procurement 

staff dated September 25, 2002, that required CO’s to verify that contractors are 

following FAR requirements for subcontracts and to document the CO’s consent to 

subcontract in the contract file. Based on our review of that letter, the recommendation is 

resolved and dispositioned and will be closed. 

The Glenn Center Director should direct the CO for the InDyne, Inc. contract 

(NAS3-99179) to: 

4. Require the contractor to strengthen company policies for documenting 

the justifications for noncompetitive procurements.

Management’s Response. Concur. The CO will require the contractor to strengthen 

company policies for documenting the justifications for noncompetitive procurements 

before January 31, 2003 (see Appendix F). 

Evaluation of Management’s Response. Management’s planned action is responsive to 

the recommendation. The recommendation is resolved but will remain undispositioned 

and open until agreed-to corrective actions are completed. 

5. Document in the contract file the CO’s determination to grant consent to 

subcontract, and include in the contract file the consent request, the CO’s analysis, 

and the letter granting consent. 

Management’s Response. Concur. The CO agrees to document the determination to 

grant consent, and to include in the contract file the consent request, analysis 

documentation, and the letter granting consent. The CO will complete these actions by 

January 31, 2003 (see Appendix F). 

Evaluation of Management’s Response. Management’s planned actions are responsive 

to the recommendation. The recommendation is resolved but will remain 

undispositioned and open until agreed-to corrective actions are completed. 

10
Finding B. Fixed-Price Contracting 

NASA CO’s did not maximize opportunities to facilitate the use of fixed-price 

contracting for routine administrative services with reasonably definite requirements. 

Specifically, two existing cost-type support services contracts we reviewed contained 

routine administrative services that may have been suitable for fixed-price contracting.25 

CO’s appropriately justified the use of cost-type contracts for both contracts because of 

the circumstances and data available at the time of contract award. The CO’s at Ames 

and Glenn did not maximize fixed-price opportunities because they lacked adequate 

historical workload data to provide for realistic estimates of the probable cost26 for such 

services. In addition, at the time of contract award, the CO’s were concerned about 

uncertainties over possible changes in service requirements and about uncertainties 

related to converting to a PBC. As a result, NASA assumed more risk than may have 

been necessary for routine administrative services because the use of cost rather than 

fixed-price contracts can minimize the contractor’s incentive to control costs and perform

effectively. In addition, the costs to administer cost-type contracts can be significant. 

For example, NASA award fee contracting guidance provides an example that showed 

costs to administer the award fee process over the life of a 5-year contract totaled 

$387,000. NASA could experience cost savings by converting cost-type routine 

administrative services to fixed-price services in future awards. 

Contract Type Guidance 

FAR Guidance. FAR Part 16, “Types of Contracts,” provides guidance for selecting a 

contract type appropriate to the circumstances of the procurement in question. Part 16 

states “a wide selection of contract types is available to the Government and contractors 

in order to provide needed flexibility in acquiring the large variety and volume of

supplies and services required by agencies.” FAR Subpart 16.103, “Negotiating contract 

type,” states that selecting a contract type is generally a matter of negotiation and 

requires sound judgment. FAR 16.103 also states that a firm-fixed-price contract, which 

best utilizes the basic profit motive of a business enterprise shall be used when risk 

involved is minimal or can be predicted with an acceptable degree of certainty. 

However, when a reasonable basis for fixed pricing is lacking, CO’s should consider 

other contract types and should direct negotiations to selecting a contract type (or 

combination of types), that 

 

25 The two contracts were Glenn’s contract with InDyne, Inc. and the Ames contract with SecTek, Inc. 26 The Glenn CO had historical data to prepare a probable cost estimate for the services. However, the 

Glenn CO did not have the performance data correlated to the cost data to permit a realistic estimate of the 

probable cost of performance. Management decided to include performance standards in the InDyne, Inc. 

contract in order to determine the cost of performance. 

11
appropriately ties profit to contractor performance.27 In addition, FAR 16.103 states that 

CO’s should avoid protracted use of a cost-reimbursement or time-and-materials 

contract28 after experience provides a basis for firmer pricing.29

FAR Subpart 16.2, “Fixed-Price Contracts,” states that a firm-fixed-price contract is 

suitable for acquiring supplies or services on the basis of reasonably definite functional 

or detailed specifications when the CO can establish fair and reasonable prices at the 

outset, such as when available cost or pricing information permits realistic estimates of 

the probable costs of performance. FAR 16.2 also states that a firm-fixed-price contract 

provides maximum incentive for the contractor to control costs and perform effectively 

and imposes a minimum administrative burden upon the contracting parties. 

FAR Part 37, “Service Contracting,” requires the use of performance-based contracting 

to the maximum extent practicable and establishes the following order of precedence for 

selecting service contract types: (1) fixed-price PBC, (2) a PBC that is not fixed-price, 

and (3) a contract that is not performance based. FAR Subpart 37.602-5, “Follow-on and 

repetitive requirements,” states that when acquiring services that have been provided by 

contract, agencies shall rely on the experience gained from the prior contract to 

incorporate performance-based contracting methods to the maximum extent practical. 

The FAR states this will facilitate the use of fixed-price contracts for such requirements 

for services. 

OFPP Guidance. The OFPP published a “Guide to Best Practices for PerformanceBased Service Contracting,” in October 1998,30 to assist agencies in developing policies 

and procedures for implementing performance-based contracting. Performance-based 

contracting emphasizes objective, measurable performance requirements and quality 

standards in developing statements of work and determining contract type. The two 

support services contracts we reviewed with routine administrative services are PBC. 

The “Best Practices” guide states that when acquiring services that were previously 

acquired by contract, agencies should rely on knowledge and historical data gained from

the prior contract to incorporate performance-based contracting methods. The OFPP 

report on the results of a performance-based contracting 1996 pilot project demonstrated 

that converting cost-reimbursement, non-PBC to fixed-price PBC significantly reduced 

contract prices. On average, prices for these contracts were reduced by 21 percent. 

 

27 Glenn management believes that it complied with the intent of FAR 16.103 by developing technical

performance standards and tying the contractor’s technical fee to those performance standards. 28 A time-and-materials contract provides for acquiring services on the basis of direct labor hours at

specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit. 

Materials are acquired at cost, including, if appropriate, material handling costs as part of materials cost. 29 Glenn management believed that it needed more experience in PBC before making a decision to move to

a fixed-price contract. 30 This guide was not available at the time the statement of work was written for the two contracts in

question. Although the InDyne, Inc. contract was not awarded until November 1999, the statement of 

work was rewritten early in 1998, and Glenn was enjoined from issuing the request for proposal for some

time as a result of a lawsuit filed by the prior contractor. 

12
Support Services Contracts With Possible Fixed-Price Elements 

Two of the support services contracts we reviewed contained cost-type requirements for 

routine administrative functions that may be suitable for a fixed-price contract. 

• Glenn awarded InDyne, Inc.31 a cost-type contract32 in November 1999 for 

logistics, scientific and technical publishing, imaging technology, metrology 

services, library, and administrative and clerical services. The cost-type contract, 

valued initially at about $98 million,33 included routine administrative logistics 

services such as equipment, property, and supply management; and transportation 

services. Such routine administrative services may have been suitable for a fixedprice PBC. An excerpt from the “Determination and Findings”34 includes a 

statement by the CO that some logistics tasks were relatively fixed in type and 

quantity. Further, Glenn had more than 8-years experience with similar services 

under a prior support services contract. However, the CO stated that only a few 

months of historical performance data existed. 

• Ames awarded a cost-type contract35 to SecTek, Inc. in June 1998 for protective 

services that included administrative support services, security force services, and 

technical security services. The cost-type contract, valued initially at about $22 

million, included routine administrative protective services such as 

Visitor/Employee Badging; Protective Services Records Management; and 

Security Education, Awareness, and Training that may have been suitable for a 

fixed-price PBC. The CO originally planned to use a fixed-price type contract but 

decided on a cost-type contract due to various uncertainties.36 The CO stated in 

the June 1997 “Determination and Findings” supporting the use of a cost-type 

award that protective services included routine and nonroutine security activities. 

Ames had about 7-years experience with similar services under two prior 

contracts. 

 

31 As of the November 1, 1999 award date, the company name was Information Dynamics, Inc.. The 

company changed the name to InDyne, Inc. on November 8, 1999. 32 The cost-type contract included an incentive fee and award fee, and the period of performance is 5 years. 33 The value of the logistics services, after deducting about $10 million dollars spent for Government 

supplies over the 5-year contract is about $5 million dollars. 34 FAR Subpart 1.7 defines “Determinations and Findings,” as a special form of written approval by an 

authorized official that is required as a prerequisite to taking certain contract actions. In this case, and for 

the other support services contracts discussed in this report, the Determination and Finding supports the 

CO’s decision to use a cost-type award. The determination is a conclusion or decision supported by the 

CO’s findings. The findings are statements of fact or rationale essential to support the determination. 35 The cost-type contract includes a fixed-fee, and the period of performance is 5 years. 36 The various uncertainties included budget issues and the status of Moffett Federal Airfield. Near the 

time of contract award, the Moffett Federal Airfield actively sought commercial and noncommercial

tenants that could have affected the level of protective services. Other possible uncertainties affecting the 

level of services included NASA assuming responsibility for Base Housing, the building of a light rail 

station at the South Gate where Moffett security would provide the first response to any security-related 

calls, and the conversion of Hanger 1 into an Air and Space Museum. 

13
Other NASA Centers Using Fixed-Price Contracts for Similar Services. Other 

NASA Centers currently use or plan to use fixed-price contracts for support services 

similar to those provided at Glenn and Ames. For example, the Center operations 

support services contract at Johnson provides services such as equipment and property 

management, supply management, and transportation services that are similar to services 

provided in Glenn’s InDyne, Inc. contract. Johnson’s hybrid contract37 for Center 

operations support services consists of 11 cost-reimbursable services and 3 services 

awarded on a firm-fixed-price basis. The manager of Johnson’s Institutional 

Procurement Office stated that the Center initially intended to use a firm-fixed-price 

award for its operations support services contract. In September 2000, NASA 

Headquarters approved an acquisition strategy for the follow-on Center operations 

support services contract that would have resulted in a firm-fixed-price PBC. When 

Johnson technical personnel attempted to define requirements, a lack of useful historical 

data precluded the use of a fixed-price contract. Therefore, NASA Headquarters 

procurement officials and facilities maintenance personnel encouraged Johnson 

procurement officials to require the contractor to collect and report workload data for all 

cost-type services. Headquarters believed the use of workload data would enable the CO 

to develop a realistic estimate of the costs of performance to enable the use of a fixedprice award for the future follow-on contract. 

Three NASA Centers (Goddard Space Flight Center, Glenn, and the John C. Stennis 

Space Center) use fixed-price contracts for protective services. Glenn has a fixed-price 

security contract with SecTek, Inc.. Ames, however, used a cost-type contract for its 

protective services contract with SecTek, Inc. but justified the cost-type contract due to 

various major uncertainties. 

Lack of Historical Data and Uncertainties Affect Contract Type 

Lack of Historical Data. Glenn did not use a use a fixed-price contract for routine 

administrative services because of a lack of historical cost of performance data. At the 

time of the InDyne, Inc. contract award, the CO cited the lack of historical data as an 

obstacle to using fixed pricing. The “Determination and Findings” statement supporting 

the use of a cost-type contract reads, in part: 

The services to be provided under the contract cannot be defined 

sufficiently to enable negotiation of a reasonable fixed-price for the 

effort.... Some of the logistics tasks are the only tasks included in

the MOC 1[Management Operations Contract] contract that are 

relatively 

 

37 As stated in NASA’s June 27, 2001, Award Fee Contracting Guide, situations may exist where portions 

of a contract effort, or certain performance aspects are suited to objective measurement, while others are 

not. In these situations, CO’s can combine aspects of more than one contract type into a single contract, 

creating a hybrid contract. Glenn management is concerned that hybrid contracts increase the risk of 

NASA being mischarged. 

14
fixed in type and quantity; however, sufficient historical workload data 

has not been obtained at the task level to provide a reasonable basis for 

a firm-fixed-price. 

The CO noted that only a few months of historical data existed that was related to the 

development of data for performance standards. Although a significant amount of data 

accumulated over the course of the prior contract, the program office’s lack of useful data 

for performance standard development affected the CO’s ability to use a fixed-price 

contract. Glenn management has told us that the CO had gathered sufficient historical 

data throughout the current InDyne, Inc. contract. Therefore, Glenn management firmly 

believed that sufficient historical data will be available to allow for an informed contract 

type decision for the follow-on award. 

Uncertainties Affect Contract Type. CO’s at Glenn and Ames cited uncertainties at the 

time of contract award as reasons for using cost-type contracts. The Glenn CO could not 

define services due to budget cuts that occurred during the years preceding the contract 

award. According to Glenn program officials, funding of research programs along with 

institutional funding has been extremely unpredictable in the last 8 years. In addition, 

Glenn management was concerned about converting to a fixed-price contract without 

prior PBC experience to determine whether it was possible to move to a fixed-price 

contract. 

The Ames CO stated in a procurement plan that the year-to-year uncertainties associated 

with the budget and the uncertainties of events occurring at Moffett Federal Airfield 

created the need to increase or decrease the level of protective services provided. The 

CO determined that due to these uncertainties, a cost-type contract was appropriate in 

lieu of the fixed-price contract. In addition, the Ames CO stated that the lack of 

historical data and uncertainties in writing and defining PBC requirements as well as 

uncertainties expressed by contractors in going from a cost-type, non-PBC award to a 

fixed-price PBC contributed to the use of a cost-type award. The CO acknowledged that 

some protective service functions were routine and that valid fixed-price opportunities 

existed. 

Effect of More Fixed-Price Contracting 

The use of fixed-price contracting for routine administrative services could reduce NASA 

contract administration costs. For example, the use of an award fee results in training for 

all NASA personnel involved in the award fee process. NASA’s administrative costs 

required to execute the award fee process can be significant. An example taken from

NASA’s award fee contracting guidance showed that the cost to implement the award fee 

process over the life of a 5-year contract could total $387,000. In addition, the use of 

cost-type contracting rather than fixed-price contracting can minimize the contractor’s 

incentive to control costs and perform effectively. Both the SecTek, Inc. and InDyne, 

Inc. 

15
contracts come up for renewal soon. The SecTek, Inc. contract expires June 30, 2003, 

and the InDyne, Inc. contract expires October 31, 2004. NASA has the potential to 

reduce costs by converting portions of the cost-type contracts for routine administrative 

services to fixed-price contracts. 

Recommendations for Corrective Action 

6. The Director, Ames Research Center, should direct the CO for the SecTek, Inc. 

contract (NAS2-98068) to collect sufficient historical data for routine administrative 

services to allow for the use of fixed-price contracting in future awards when the 

data and circumstances indicate that fixed-price contracting is appropriate. 

Management’s Response. Concur. The CO has collected historical data over the 

performance of contract NAS2-98068 for use in determining contract type for the 

follow-on contract. Management indicated acquisition planning for the follow-on 

contract is underway, however changes on-going at the Center make it impractical to 

predict the impact to the contract. The CO is considering contract mechanisms to 

accommodate these uncertainties. Management considers the recommendation closed. 

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

Evaluation of Management’s Response. Management’s corrective actions are 

responsive to the recommendation. Based on our understanding of the contract and 

management’s commitment to consider contract mechanisms to accommodate 

uncertainties, the recommendation is resolved and dispositioned and will be closed. 

7. The Director, Glenn Research Center, should direct the CO for the InDyne, Inc. 

contract (NAS3-99179) to utilize the additional historical data gathered under the 

existing contract for routine administrative services to allow for the use of fixedprice contracting in future awards when the data and circumstances indicate that 

fixed-price contracting is appropriate. 

Management’s Response. Concur. The CO will review historical performance 

standards data gathered under the existing contract for the five logistics areas; property 

management, freight traffic, stock purchasing, supply management and transportation 

operations; to allow for the possible use of fixed price contracting in future awards. 

Management plans to complete this action before January 31, 2003 (see Appendix F). 

Evaluation of Management’s Response. Management’s planned actions are responsive 

to the recommendation. The recommendation is resolved but will remain 

undispositioned and open until agreed-to corrective actions are completed. 

16
Appendix A. Objectives, Scope, and Methodology 

Objectives

The overall audit objective was to determine whether NASA properly awarded and 

managed its professional, administrative, and management support services contracts. 

Specifically, we determined whether: 

• support services contractors obtained full and open competition for subcontract 

awards, and 

• NASA selected the appropriate contract type for its support services contracts. 

Scope and Methodology 

The initial scope for the audit was to select two contracts of significant value for review 

that NASA awarded to small and disadvantaged businesses. Based on the results of our 

review of the 2 contracts, we expanded our work and selected 3 additional contracts from

a universe of the top 40 support services contractors with contract expiration dates in and 

beyond fiscal year 2003. The selection criteria for the three additional contracts included 

a combination of factors such as the dollar value and time remaining on the contract 

award. 

We examined contractor policies and procedures, subcontract awards, related task orders 

and delivery orders, statements of work, justifications for noncompetitive procurements, 

and file correspondence. We also reviewed a Contractor Purchasing System Review 

(CPSR) of InDyne, Inc. done at the Lyndon B. Johnson Space Center by the Defense 

Contract Management Agency CPSR team. We also reviewed documentation pertaining 

to consent requests, contracting officer (CO) analyses, and actual consents. 

We also reviewed documents related to contract type such as procurement plans and 

minutes of acquisition strategy meetings and Determination and Findings statements.38 

We discussed the rationale for contract-type decisions with NASA CO’s and procurement 

officials at several Centers and with program officials such as managers from the Glenn 

Research Center (Glenn) Logistics Technical Information Division, and the CO’s 

technical representative for the InDyne, Inc. contract. 

 

38 The Federal Acquisition Regulation definition for the Determination and Findings statement is shown in

footnote 34. 

17
Appendix A 

Use of Computer-Processed Data 

We used computer-generated data from the NASA Headquarters Financial and 

Contractual Status System to generate our universe of support services contracts. We

verified that the selected contracts were properly classified as support services contracts. 

We did not perform additional testing of the accuracy and validity of the data, but 

nothing came to our attention to cause us to question the validity of the data.

Management Controls Reviewed 

We reviewed management controls over the award of subcontracts and the selection of 

contract type. We determined that management can improve controls over competition 

obtained for support services contractors’ subcontract awards justifications for 

noncompetitive procurements and over the CO’s contract-type selection process as 

discussed in Finding B. 

Audit Field Work 

We performed audit field work from November 2001 through June 2002 at Ames 

Research Center, Dryden Flight Research Center, Glenn, and the Langley Research 

Center. We performed the audit in accordance with generally accepted government 

auditing standards. 

18
Appendix B. Summary of Prior Audits and Other Reviews

NASA Office of Inspector General Reviews. The NASA Office of Inspector General 

has issued two reports on subcontract management and one report on a contractor’s use 

of professional and consultant services. For copies of those reports visit 

http://www.hq.nasa.gov/office/oig/hq/issuedaudits.html. Details follow. 

“Lockheed Martin Space Operations’ Use of Professional and Consultant Services,” 

Report Number IG-02-013, March 26, 2002. NASA can improve its controls over the 

contractor’s use of professional and consultant services, and the contractor’s management 

controls did not ensure compliance with Federal Acquisition Regulation requirements. 

For two of seven professional and consultant service subcontracts reviewed, Lockheed 

Martin Space Operations officials had not properly justified noncompetitive 

procurements. We recommended that the contracting officers for the two contracts in 

question coordinate with the administrative contracting officers to require the contractor 

to follow its established procedures by preparing written justifications for future 

noncompetitive procurements. Management concurred with our recommendation. 

“Allied Signal Subcontract Management,” Report Number IG-99-042, 

September 16, 1999, and “Raytheon Subcontract Management,” Report Number 

IG-00-002, December 21, 1999. Purchasing department buyers for the two contractors 

did not maintain documentation to support justifications for noncompetitive 

procurements. The contractors’ purchasing policies did not require contractor personnel 

to keep supporting documentation. Additionally, Government oversight reviews of the 

contractors’ procurement systems did not include examinations of supporting 

documentation for noncompetitive procurements. As a result, NASA had reduced 

assurance that contractors maximized competition. In response to our recommendations, 

NASA management instructed the contractors to maintain adequate documentation in 

support of noncompetitive procurements. NASA management also took actions to 

include reviews of supporting documentation in future reviews of the contractors’ 

purchasing systems. 

Department of Defense (DOD) Inspector General Reviews. The DOD Office of 

Inspector General issued the following report on professional, administrative, and 

management support services contracts. 

“Contracts for Professional, Administrative, and Management Support Services,” 

Report Number D-2000-100, March 10, 2000. This report discusses a review of 

procurement procedures for support services contracts at 15 DOD contracting activities 

and program offices. The report identified problems in each of 105 contract actions. 

Problems included inadequate technical reviews, inadequate competition, and lack of cost 

control. In addition, contracting officials did not use available history from prior 

contracts to help define costs and reduce risks by awarding firm-fixed-price contracts. 

The DOD Office of Inspector General recommended that the Deputy Under Secretary of 

19
Appendix B 

Defense (Acquisition Reform) develop training on planning and defining requirements 

for contracts for support services; train contracting and program personnel in the award 

and administration of contracts for these services; and emphasize, in the training, the 

need to avoid the kinds of deficiencies noted in the report. 

20
Appendix C. Contracts Reviewed 

The five contracts we reviewed, their dollar value as of March 31, 2002, and an 

explanation of the provided services follow: 

Contractor Contract Number Contract Value 

Swales and Associates, Inc. NAS1-00135 $240,000,000 

SecTek, Inc. NAS2-98068 22,333,633 

Northrop Grumman Information Technology, 

Inc.-Technical Services – NAS2-98084 90,382,058 

InDyne, Inc. NAS3-99179 100,852,756 

Analytical Services and Materials, Inc. (AS&M) NAS4-50066 45,750,000

Total $499,318,447

Explanation of Contractor Services 

Swales and Associates, Inc. performs research and development and provides 

engineering support services to Langley Research Center under a 5-year indefinite 

delivery-indefinite quantity contract, with a maximum value of $240 million. 

SecTek, Inc. provides protective services to Ames Research Center (Ames) and the 

Moffett Federal Airfield. 

Northrop Grumman Information Technology, Inc.-Technical Services (formerly 

Logicon, Inc.), provides operations, development, maintenance, and modification of the 

Simulation Laboratory Facilities to Ames. 

InDyne, Inc. provides logistics services, scientific and technical publishing, imaging 

technology, metrology services, library, and administrative and clerical services to the 

Glenn Research Center. 

AS&M provides engineering and technical services in support of Dryden Flight Research 

Center projects and functions. 

21
Appendix D. Subcontract Consent Checklist 

In accordance with Federal Acquisition Regulation (FAR) Subpart 44.202-2, 

“Considerations,” paragraph (a), the contracting officer responsible for consent to 

subcontract must, at a minimum, review the request and supporting data and consider the 

following: 

(1) Is the decision to subcontract consistent with the contractor’s make-or-buy program, 

if any (see 15.407-2)?

(2) Is the subcontract for special test equipment or facilities that are available from

Government sources (see Subpart 45.3) ?

(3) Is the selection of the particular supplies, equipment, or services technically justified?

(4) Has the contractor complied with the prime contract requirements regarding- 

(i) Small business subcontracting, including, if applicable, its plan for subcontracting 

with small, veteran owned, service-disabled veteran-owned, HUBZone, small

disadvantaged and woman-owned small business concerns (see Part 19); and 

(ii) Purchase from nonprofit agencies designated by the Committee for Purchase From

People Who Are Blind or Severely Disabled (Javits-Wagner-O’Day Act (JWOD) 

(41U.S.C.48)) (see Part 8) 

(5) Was adequate price competition obtained or its absence properly justified?

(6) Did the contractor adequately assess and dispose of subcontractors’ alternate 

proposals, if offered?

(7) Does the contractor have a sound basis for selecting and determining the 

responsibility of the particular subcontractor?

(8) Has the contractor performed adequate cost or price analysis or price comparisons 

and obtained accurate, complete, and current cost or pricing data, including any required 

certifications?

(9) Is the proposed subcontract type appropriate for the risks involved and consistent

with current policy?

(10) Has adequate consideration been obtained for any proposed subcontract that will 

involve the use of Government-furnished facilities?

(11) Has the contractor adequately and reasonably translated prime contract technical 

requirements into subcontract requirements?

(12) Does the prime contractor comply with applicable cost accounting standards for 

awarding the subcontract?

(13) Is the proposed subcontractor on the List of Parties Excluded from Federal

Procurement and Nonprocurement Programs (see Subpart 9.4)?

FAR 44.202-2, paragraph (b) states that “particularly careful and thorough consideration 

under paragraph (a) of the section is necessary when:” 

• the prime contractor’s purchasing system or performance is inadequate, and 

• subcontracts are proposed for award on a noncompetitive basis. 

22
Appendix E. Noncompetitive Subcontracts 

We reviewed the following noncompetitive subcontracts that were not adequately 

justified by the contractors. Their accompanying values, by Center and contractor, are 

also shown: 

Glenn Research Center InDyne, Inc. Subcontracts

INC-06240 FM: Solutions $ 86,375 

INC-07443 FM: Solutions 111,485 

INC-08890 FM: Solutions $123,635

 FM: Solutions Subtotal $321,495 

INC-06225 Harcar and Assoc. $54,604 

INC-07445 Harcar and Assoc. 71,154 

INC-00888 Harcar and Assoc. 27,000 

 Harcar Subtotal $152,758 

INC-08758 History Enterprises* $385,833

 InDyne, Inc. SubTotal $ 860,086 

 

Dryden Flight Research Center Analytical Services and Materials (AS&M), Inc. 

Subcontracts

P9157544LK John T. McCarthy $ 59,107 

P9230RS2KH Eagle Aeronautics 52,808 

Various Orders Modulus Engineering 257,921

 AS&M SubTotal $ 369,836 

Ames Research Center SecTek, Inc. Subcontracts

Ames 0902 Draeger Safety, Inc. $ 9,722 

Ames 0807 Alpha Controls 11,640 

Ames 1003 Johnson Controls 6,360

SecTek, Inc. SubTotal $ 27,722

Total $1,257,644

*

Information presented to the auditors after issuance of our discussion draft report indicated that support

for this noncompetitive procurement existed. However, InDyne’s Subcontract Administrator at Glenn 

Research Center did not develop and document this information before processing the subcontract award 

and, therefore, did not adequately justify the noncompetitive acquisition in the official subcontract file. 

23
Appendix F. Management’s Response 

24
Appendix F 

25
Appendix F 

26
Appendix G. Report Distribution 

National Aeronautics and Space Administration (NASA) Headquarters 

HQ/A/Administrator 

HQ/AI/Associate Deputy Administrator 

HQ/B/Deputy Chief Financial Officer 

HQ/B/Comptroller 

HQ/BF/Director, Financial Management Division 

HQ/G/General Counsel 

HQ/H/Assistant Administrator for Procurement 

HQ/HK/Director Contract Management Division 

HQ/HS/Director, Program Operations Division 

HQ/J/Assistant Administrator for Management Systems 

HQ/JM/Director, Management Assessment Division 

HQ/L/Assistant Administrator for Legislative Affairs 

HQ/M/Associate Administrator for Space Flight 

NASA Centers 

ARC/D/Director, Ames Research Center 

DFRC/X/Director, Dryden Flight Research Center 

GRC/0100/Director, John H. Glenn Research Center at Lewis Field 

JSC/AA/Director, Lyndon B. Johnson Space Center 

LaRC/106/Acting Director, Langley Research Center 

KSC/CC/Chief Counsel, John F. Kennedy Space Center 

Non-NASA Federal Organizations and Individuals 

Assistant to the President for Science and Technology Policy 

Deputy Associate Director, Energy and Science Division, Office of Management and 

 Budget 

Branch Chief, Science and Space Programs Branch, Energy and Science Division, Office 

 of Management and Budget 

Managing Director, Acquisition and Sourcing Management Team, General Accounting 

 Office 

Senior Professional Staff Member, Senate Subcommittee on Science, Technology, and 

 Space 

27
Appendix G 

Chairman and Ranking Minority Member – Congressional Committees and 

Subcommittees 

Senate Committee on Appropriations 

Senate Subcommittee on VA, HUD, and Independent Agencies 

Senate Committee on Commerce, Science, and Transportation 

Senate Subcommittee on Science, Technology, and Space 

Senate Committee on Governmental Affairs 

House Committee on Appropriations 

House Subcommittee on VA, HUD, and Independent Agencies 

House Committee on Government Reform

House Subcommittee on Government Efficiency, Financial Management, and 

 Intergovernmental Relations 

House Subcommittee on Technology and Procurement Policy 

House Committee on Science 

House Subcommittee on Space and Aeronautics 

Congressional Member 

Honorable Pete Sessions, U.S. House of Representatives 

28
NASA Assistant Inspector General for Audits 

Reader Survey 

The NASA Office of Inspector General has a continuing interest in improving the 

usefulness of our reports. We wish to make our reports responsive to our customers’ 

interests, consistent with our statutory responsibility. Could you help us by completing 

our reader survey? For your convenience, the questionnaire can be completed 

electronically through our homepage at http://www.hq.nasa.gov/office/oig/hq/audits.html

or can be mailed to the Assistant Inspector General for Audits; NASA Headquarters, 

Code W, Washington, DC 20546-0001. 

Report Title: NASA Contracts for Professional, Administrative, and Management 

Support Services 

Report Number: IG-02-0XX Report Date: September XX, 2002 

Circle the appropriate rating for the following statements. 

Strongly 

Agree Agree Neutral Disagree 

Strongly 

Disagree N/A 

1. The report was clear, readable, and logically 

organized. 

5 4 3 2 1 N/A

2. The report was concise and to the point. 5 4 3 2 1 N/A 

3. We effectively communicated the audit 

objectives, scope, and methodology. 

5 4 3 2 1 N/A 

4. The report contained sufficient information to

support the finding(s) in a balanced and 

objective manner. 

5 4 3 2 1 N/A 

Overall, how would you rate the report? 

# Excellent # Fair

# Very Good # Poor

# Good

If you have any additional comments or wish to elaborate on any of the above 

responses, please write them here. Use additional paper if necessary. 
How did you use the report?

How could we improve our report?

How would you identify yourself? (Select one) 

# Congressional Staff # Media 

# NASA Employee # Public Interest 

# Private Citizen # Other:

# Government: Federal: State: Local:

May we contact you about your comments? 

Yes: ______ No: ______ 

Name: ____________________________ 

Telephone: ________________________

Thank you for your cooperation in completing this survey. 
Major Contributors to the Report 

Lorne Dear, Program Director, Procurement Audits 

Patrick A. Iler, Program Manager, Procurement Audits 

Michael Bruns, Auditor-in-Charge 

Stephen K. Siu, Auditor 

Nancy C. Cipolla, Report Process Manager 

Debra A. Schuerger, Program Assistant