IG-00-018

AUDIT

REPORT NASA OVERSIGHT OF CONTRACTOR EXPORTS OF

CONTROLLED TECHNOLOGIES

March 23, 2000

National Aeronautics and

Space Administration

OFFICE OF INSPECTOR GENERAL
Additional Copies

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

358-1232, or visit www.hq.nasa.gov/office/oig/hq/issuedaudits.html.

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

Code W

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.

Reader Survey

Please complete the reader survey at the end of this report or at

http://www.hq.nasa.gov/office/oig/hq/audits.html

Acronyms

EAR Export Administration Regulations

ECP Export Control Program

EOS Earth Observing System

FAR Federal Acquisition Regulation

GAO General Accounting Office

ISS International Space Station

ITAR International Traffic in Arms Regulations

NPD NASA Policy Directive

NPG NASA Procedures and Guidelines

OIG Office of Inspector General
W March 23, 2000

TO: A/Administrator

FROM: W/Inspector General

SUBJECT: INFORMATION: NASA Oversight of Contractor Exports of Controlled Technologies

Assignment Number A9903300

Report Number IG-00-018

The NASA Office of Inspector General (OIG) is conducting an audit of contractor control of sensitive

technologies (controlled technologies). During the audit, we found that NASA personnel responsible

for managing major programs at the Goddard Space Flight Center, Johnson Space Center, and

Marshall Space Flight Center were unable to readily identify the types and amounts of NASA-funded

controlled technologies that contractors export.1 As a result, NASA lacks assurance that contractor

export activities are performed in accordance with applicable laws and regulations.

We also identified potential export violations by two of the three NASA contractors we reviewed who

were exporting NASA-funded controlled technologies to foreign contractors in furtherance of the

International Space Station and Space Shuttle External Tank programs. NASA did not direct or seek

these exports. Consequently, the contractors bear responsibility for full compliance with export laws.

Nevertheless, we believe that the recommendations agreed upon by NASA will provide some greater

insight on contractors’ export activities with a NASA nexus. In addition, the agreed upon

recommendations will strengthen NASA-directed controlled technology exports.

Background

As a U.S. Government agency on the leading edge of space and aeronautics technological development

and international cooperation, NASA must be a responsible exporter in its international activities.

NASA's international activities often involve the transfer of commodities, software, or technologies to

foreign partners not only by NASA, but also by its contractors. The transfers are generally subject to

export control laws and regulations, regardless of whether they occur in the United States, overseas, or

in space. Export controls are imposed on such transfers and activities in order to protect the national

security and to further U.S. foreign policy objectives.

 

1

 Exports are transfers of any commodities, software, or technologies to foreign entities and include items such as

flight hardware and software, propulsion systems, and spacecraft systems and associated equipment.
2

The majority of export licenses are governed and controlled by either the Office of Defense Trade

Controls at the Department of State or the Bureau of Export Administration at the Department of

Commerce. The Office of Defense Trade Controls is responsible for controlling items identified on the

U.S. Munitions List2 pursuant to the International Traffic in Arms Regulations (ITAR).3 The Bureau of

Export Administration controls items that are identified on the Commerce Control List4 pursuant to the

Export Administration Regulations (EAR).5

In 1995, NASA established an Export Control Program, which consists of NASA-wide procedures to

ensure that exports to foreign parties in international activities are conducted in accordance with the

provisions of the ITAR and EAR. NASA’s contractors are responsible for adherence to the same laws

and regulations.

Recommendations, Management's Response, and Evaluation of Response

We recommended that management include guidance in either a NASA Federal Acquisition Regulation

(FAR) Supplement amendment, Procurement Information Circular, or NASA Procedures and

Guidelines that all appropriate NASA contracts require the contractors to deliver (1) a plan for

obtaining any required export licenses to fulfill contract requirements, (2) a listing of the contractor

licenses obtained, and (3) a periodic report of the exports effected against those licenses. The guidance

should state that contractors should provide these deliverables to at least the Center Export

Administrator and other appropriate NASA officials as determined by project management. We also

recommended revision of the draft NASA Policy Directive 21906 to incorporate the oversight

responsibilities of appropriate NASA officials for those cases in which NASA or its contractors obtain

export licenses in behalf of a NASA program.7

Management concurred with both recommendations. The Agency agreed to provide additional

guidance through one or more of the recommended means to assure that appropriate contracts contain

requirements related to export controls. Management will also ensure that the forthcoming NASA

Procedures and Guidelines on export control will include the responsibilities of NASA officials as they

relate to the use of NASA obtained export licenses. Details on the status of the recommendations are in

the recommendations section of the report.

[original signed by]

Roberta L. Gross

Enclosure

 

2

 U.S. Munitions List, April 1999, identifies items designated by the President to be defense articles and services.

3

 The ITAR provide guidance for controlling the export and import of defense articles and services.

4

 The Commerce Control List, October 1999, identifies “dual-use” items that have military/strategic and civil

applications.

5

 The EAR implement the export and re-export requirements of the Export Administration Act of 1979.

6

 The draft directive, "NASA Export Control Program," assigns overall responsibility for the Agency's export control

program to various NASA officials. Details are on page 5 of the report.

7

 See Appendix C for situations in which controlled technologies are exported in support of NASA programs.
 Final Report on Audit of NASA Oversight of Contractor Exports of Controlled Technologies
FINAL REPORT

AUDIT OF NASA OVERSIGHT OF CONTRACTOR

EXPORTS OF CONTROLLED TECHNOLOGIES
W March 23, 2000

TO: H/Associate Administrator for Procurement

I/Associate Administrator for External Relations

FROM: W/Assistant Inspector General for Auditing

SUBJECT: Final Report on the Audit of NASA Oversight of Contractor Exports of Controlled

Technologies

Assignment Number A9903300

Report Number IG-00-018

The subject final report is provided for your information and use. Our evaluation of your response is

incorporated into the body of the report. The corrective actions planned for the recommendations

are responsive. The recommendations will remain open for reporting purposes until corrective

actions are completed. Please notify us when action has been completed on the recommendations,

including the extent of testing performed to ensure corrective actions are effective.

If you have questions concerning the report, please contact Mr. Kevin J. Carson, Program Director,

Safety and Technology Audits, at (301) 286-0498, or Mr. Timothy L. Bailey, Auditor-in-Charge, at

(301) 286-3355. We appreciate the courtesies extended to the audit staff. The final report

distribution is in Appendix H.

[Original signed by]

Russell A. Rau

Enclosure
2

cc:

B/Chief Financial Officer

B/Comptroller

BF/Director, Financial Management Division

G/General Counsel

JM/Director, Management Assessment Division

M/Associate Administrator for Space Flight

Y/Associate Administrator for Earth Science

100/Director, Goddard Space Flight Center

AA/Director, Lyndon B. Johnson Space Center

DA01/Director, Marshall Space Flight Center
3

bcc:

HK/Audit Liaison Representative

IM/Audit Liaison Representative

W/K.Carson

 T. Bailey

 O. Lindley
NASA Office of Inspector General

IG-00-018 March 23, 2000

 Assignment No. A9903300

NASA Oversight of Contractor Exports of Controlled Technologies

Introduction

The NASA Office of Inspector General (OIG) is conducting an audit of contractor control of

sensitive technologies (controlled technologies). Our objective related to this report was to assess

Government oversight of contractor processes for exporting controlled technologies.8 During the

audit, we identified an opportunity for NASA to improve its oversight of contractors exporting

controlled technologies for various Agency programs.

Appendix A contains further details on the audit objectives, scope, and methodology.

Results in Brief

Contractors are exporting controlled technologies to foreign entities in support of the Agency’s

international activities. However, NASA personnel responsible for managing major programs at the

Goddard Space Flight Center (Goddard), Johnson Space Center (Johnson), and Marshall Space

Flight Center (Marshall) were unable to readily identify the types and amounts of NASA-funded

controlled technologies that contractors export. As a result, NASA lacks assurance that contractor

export activities are performed in accordance with applicable laws and regulations.

Background

As a U.S. Government agency on the leading edge of space and aeronautics technological

development and international cooperation, NASA must be a responsible exporter in its international

activities. Previous audits by the NASA OIG and the U.S. General Accounting Office (GAO)

identified potential problems regarding oversight of exports effected by NASA (see Appendix B).9

NASA's international activities often involve the transfer of commodities, software, or technologies to

foreign partners not only by NASA, but also by its contractors.10 The transfers are generally subject

to export control laws and regulations, regardless of

 

8

 Exports are transfers of any commodities, software, or technologies to foreign entities and include items such as

flight hardware and software, propulsion systems, and spacecraft systems and associated equipment.

9

 NASA OIG Report IG-99-020, “NASA Control of Export Controlled Technologies,” March 31, 1999; GAO Report

GAO/NSIAD-00-14, “Export Controls – International Space Station Technology Transfers,” November 1999.

10 See Appendix C for situations in which controlled technologies are exported in support of NASA programs.
2

whether they occur in the United States, overseas, or in space. Export controls are imposed on such

transfers and activities in order to protect the national security and to further U.S. foreign policy

objectives.

The majority of export licenses are governed and controlled by either the Office of Defense Trade

Controls at the Department of State or the Bureau of Export Administration at the Department of

Commerce. The Office of Defense Trade Controls is responsible for controlling items identified on

the U.S. Munitions List11 pursuant to the International Traffic in Arms Regulations (ITAR).12 The

Bureau of Export Administration controls items that are identified on the Commerce Control List13

pursuant to the Export Administration Regulations (EAR).14 Appendix D contains further details on

the U.S. Munitions List and Commerce Control List.

In 1995, NASA established an Export Control Program (ECP), which consists of NASA-wide

procedures to ensure that exports to foreign parties in international activities are conducted in

accordance with the provisions of the ITAR and EAR. NASA’s contractors are responsible for

adherence to the same U.S. export laws and regulations.

NASA Oversight of Contractor Exports

Finding. NASA export, program, and contracting personnel at Goddard, Johnson, and Marshall

could not readily identify the types and amounts of NASA-funded controlled technologies that

contractors export in support of NASA programs. This condition exists because NASA’s current

export policies do not clearly define the Agency’s oversight responsibilities regarding its contractors

who export controlled technologies. In addition, NASA has not established contract requirements

for contractors to notify NASA when they deem it necessary to obtain an export license in

furtherance of a NASA program or when exports are effected against those licenses. Consequently,

NASA does not have assurance that contractors are exporting controlled technologies in accordance

with applicable U.S. export laws and regulations. The lack of oversight may have also resulted in

potential export violations by major NASA contractors.

Current NASA Export Control Guidance

NASA Procedures and Guidelines (NPG) 7120.5A, “Program and Project Management Processes

and Requirements,” April 3, 1998, requires program teams to ensure that the Agency’s planned

technology exchange and partnership agreements comply with all laws and regulations regarding the

transfer of export-controlled and proprietary technologies.

The “NASA Export Control Program,” pamphlet, dated November 1995 (revised October 1998),

establishes policies and procedures on an Agency-wide basis to ensure that NASA’s exports and

 

11 U.S. Munitions List, April 1999, identifies items designated by the President to be defense articles and services.

12 The ITAR provide guidance for controlling the export and import of defense articles and services.

13 The Commerce Control List, October 1999, identifies “dual-use” items that have military/strategic and civil

applications.

14 The EAR implement the export and re-export requirements of the Export Administration Act of 1979.
3

transfers to foreign parties in international activities are consistent with the requirements of the ITAR

and EAR. An essential part of the ECP is the establishment of mechanisms within the Agency

(including the Centers) that provide checks and safeguards at key steps in program development and

implementation, helping to better manage international program initiatives. Such oversight helps to

ensure that NASA export personnel ask the right questions to preclude NASA officials and

contractors from effecting transfers that may be contrary to U.S. export controls or may be

inconsistent with requirements of the ITAR and EAR. Absent an effective ECP, NASA and its

employees risk violating requirements of the ITAR and EAR, which may result in suspension of

current or future licensing privileges and criminal, civil, or administrative enforcement action against

both Government officials and private contractors.

The pamphlet also describes the authorities and responsibilities of applicable NASA Headquarters

and Center personnel with regard to export control. The pamphlet requires NASA Program and

Project Managers to establish and maintain a list of contractors, approved by the Commerce

Department’s Bureau of Export Administration, that have authority to effect exports on NASA’s

behalf for specific projects under the EAR, pursuant to specific NASA direction with adequate

safeguards against unauthorized transfers or disclosures. In addition, the Center Export

Administrator is responsible for assessing and ensuring compliance of all Center program activities

with U.S. export control laws and regulations. However, the ECP pamphlet does not clearly define

oversight responsibilities of export, program, or contracting personnel with respect to contractors

who export controlled technologies in support of NASA programs.

The Director of the NASA Office of External Relations, Assessments and Technology Division

informed us that each time NASA obtains an export license for one of the Centers, the Center

receives a cover letter with the license. The letter contains guidance on the use of the license and

directs the recipient organization to keep the Assessments and Technology Division apprised of

exports effected against the license.

The Federal Acquisition Regulation (FAR), Subpart 1.602, “Contracting Officers,” states that

contracting officers have authority to enter into, administer, or terminate contracts and make related

determinations and findings. Contracting Officers are also responsible for ensuring performance of

all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and

safeguarding the interests of the United States in its contractual relationships.

Identification of NASA Contractors Exporting Controlled Technologies

NASA personnel could not readily identify the specific contractors exporting controlled technologies

in support of NASA programs. During our visits to the Centers, we requested export, program, and

contracting personnel at Goddard, Johnson, and Marshall to identify the contractors under their

cognizance exporting controlled technologies in support of NASA programs. However, the Centers

do not maintain that information, and only Goddard procurement personnel provided a listing of the

Center’s major contractors that export controlled technologies, subsequent to our request.
4

Because export information on contractors was not available, we judgmentally selected three NASA

programs (see Appendix E) for review that potentially had exports because of international

involvement. Overall management of the individual programs selected was the

responsibility of Goddard, Marshall, and Johnson. The programs and the respective contractors

were:

• Earth Observing System (EOS) Common Spacecraft/TRW

• Space Shuttle External Tank/Lockheed-Martin

• International Space Station (ISS)/Boeing

We determined that each of the three contractors regularly exported controlled technologies in

support of their respective NASA program. The technology was exported using export licenses

obtained by NASA or the contractor from either the Department of State or Department of

Commerce. Although the contractors effected exports in support of NASA programs, NASA

export, program, and contracting officials provided no oversight of the contractors for compliance

with applicable laws and regulations.

Lack of NASA Oversight of Contractor Export Activities

Current Agency export guidance such as the NASA Export Control Program pamphlet does not

require contractors to report information such as export license applications and exports effected

against those licenses, even though the Agency’s international activities often involve the export of

controlled technologies by contractors to foreign entities. Without a requirement to identify and

report information related to export-controlled technologies, the Agency lacks assurance that

contractor export activities are effected in accordance with applicable U.S. export laws and

regulations.

NASA program and contracting personnel responsible for the EOS Common Spacecraft, the Space

Shuttle External Tank, and ISS programs told us that they did not review the respective contractors’

export control programs to determine whether they were in compliance with U.S. export laws and

regulations because current NASA export control guidance does not address oversight

responsibilities for contractor exports. As a result, NASA is relying on its contractors to ensure that

their exporting activities are compliant.

Specific Guidance Lacking on Oversight Responsibilities

NASA is not providing oversight of contractor exports of controlled technologies because specific

guidance requiring such oversight does not exist. For example, the Export Control Program

pamphlet does not explicitly state that its provisions apply to NASA contractors effecting exports of

controlled technologies on behalf of NASA programs. The pamphlet states only that “oversight

helps ensure that the right questions are being asked to preclude NASA officials and contractors

from effecting transfers that may be contrary to U.S. export controls or inconsistent with

requirements under the ITAR and EAR.”
5

The NASA FAR Supplement does not identify standard contract clauses requiring contractors to

notify contracting officers when contractors apply for an export license in behalf of a NASA program

or when contractors effect exports against those licenses. NASA published a proposed change to

the NASA FAR Supplement in the October 28, 1999, Federal Register, to include a standard

clause in all NASA contracts for export controlled technologies. The proposed clause has been

published in the Federal Register as a Final Rule and requires contractors to be responsible for

exporting controlled technologies in accordance with applicable laws and regulations, but does not

require reporting of information such as export license applications and exports effected against those

licenses. The proposed clause also states that NASA should not be relied upon to obtain export

licenses. Requiring contractors to periodically report on licenses applied for NASA programs and

on the actual exports effected against those licenses can further strengthen this clause in the NASA

FAR Supplement. The Center Export Administrators could use this information to augment their

efforts to assess and ensure compliance of all NASA program activities with applicable export laws

and regulations.

NASA also issued a proposed change to the NASA FAR Supplement in July 1999 concerning risk

management as part of the acquisition process. The purpose of this change is to emphasize

considerations of risk management, including export control, as part of the acquisition process. The

change proposes that acquisition planning teams include representatives from the Center offices

responsible for matters such as safety and mission assurance and export control to ensure that

NASA acquisitions are structured in accordance with Agency policy in these areas.

In September 1998, NASA began drafting NASA Policy Directive (NPD) 2190, “NASA Export

Control Program.” The draft NPD states:

It is NASA policy to ensure that exports and transfers to foreign parties and

related entities of commodities, software, or technical data are carried out in

accordance with U.S. export control laws, including the EAR and the ITAR,

and approved international practices and procedures. Further, such practices

must be consistent with U.S. foreign policy objectives and national security

interests.

The NPD assigns overall responsibility to various NASA officials for the Agency’s export control

program. Under Section 2, “Applicability,” the NPD identifies all NASA activities and the Jet

Propulsion Laboratory (to the extent specified in its contract). The NPD does not address NASA’s

oversight responsibilities regarding contractor export controls for NASA-funded controlled

technologies. NPD 2190 should be updated to clearly define oversight responsibilities for NASA

export, program, and contracting officials. In addition, any future NPG related to export controls

should provide specific guidance on how the oversight should be accomplished.

Potential Export Violations by NASA Contractors

The lack of Government oversight has also resulted in potential export violations by two of the three

NASA contractors we reviewed. Specifically, the Boeing Company and Lockheed-Martin
6

Corporation may have inappropriately exported controlled technologies to foreign entities in support

of the ISS and Space Shuttle External Tank programs without obtaining proper export licenses.

• Boeing. Boeing Missiles and Space Division has potentially committed export violations as

defined by the EAR. Specifically, Boeing shipped controlled technologies to foreign entities

without obtaining export licenses. The Missile and Space Division’s Export Compliance

Manager informed us that Division personnel inadvertently shipped berthing mechanisms for ISS

components to foreign entities. The EAR, Part 736.2, states:

You may not, without a license or license exception, export any item subject

to the EAR to another country or re-export any items of U.S.-origin if each of

the following is true:

(i) The item is controlled for a reason indicated in the applicable Export

Control Classification Number, and

(ii) Export to the country of destination requires a license for the control

reason as indicated on the Country Chart at part 738 of the EAR.

During the course of this audit, Boeing Missiles and Space Division made a voluntary disclosure of

the potential export violations to the Commerce Department’s Office of Export Enforcement.

• Lockheed-Martin. Lockheed-Martin’s Michoud Space Systems may have violated the terms

of its export license the State Department granted to Lockheed under the ITAR. The license

permitted Lockheed-Martin to ship specific quantities of aluminum alloy materials that met

specific monetary thresholds to a German contractor. These exports were effected in support of

the Space Shuttle External Tank Contract. The materials were shipped to the German

contractor for use in manufacturing dome caps for the external tank. Our review of export files

maintained by the company’s Export Compliance Coordinator showed that Lockheed-Martin

shipped aluminum alloy material that exceeded the amounts the export license authorized by

73,971 pounds and by $292,311. The ITAR, Part 127.2., “Violations and Penalties” states:

It is unlawful to use any export or temporary import control document

containing a false statement or misrepresenting or omitting a material fact for

the purpose of exporting any defense article or technical data or the

furnishing of any defense service for which a license or approval is required

by this subchapter. For the purpose of this section, export or temporary

import control documents include the following: (1) an application for a

permanent export or temporary import license and supporting documentation,

(2) shipper’s export declaration, (3) invoice, (4) declaration of destination, (5)

delivery verification, (6) application of temporary export, (7) application for

registration, (8) bill-of-lading, and (9) airway bill.

The Department of State will make the determination as to whether Lockheed-Martin violated the

provisions of ITAR with regard to exporting controlled technologies in excess of the amounts

authorized by the export license.

The lack of oversight of contractor export control programs by NASA export, program, and

contracting officials may have contributed to these potential export violations. An effective
7

oversight program will provide the Agency with assurance that controlled technologies are exported

in accordance with applicable laws and regulations and not in an unauthorized or unlicensed manner.

Recommendations, Management’s Response, and Evaluation of Response

1. The Associate Administrator for Procurement, in conjunction with the Associate

Administrator for External Relations, should include guidance in either a NASA FAR

Supplement amendment, Procurement Information Circular, or NASA Procedure and

Guidelines to include requirements in all appropriate NASA contracts that contractors

deliver (1) a plan for obtaining any required export licenses to fulfill contract requirements,

(2) a listing of the contractor licenses obtained, and (3) a periodic report of the exports

effected against those licenses. Included in the guidance will be instructions that these

deliverables be provided to at least the Center Export Administrator and any other

appropriate NASA officials as determined by the project manager.

Management Response. Concur. NASA will provide guidance through one or more of the

recommended means to assure that appropriate contracts include the requirement for contractors to

provide the necessary information on their export activities. The complete text of management's

response is in Appendix F.

Evaluation of Management’s Response. Management's planned actions are responsive to the

recommendation. The recommendation is revolved, but will remain undispositioned and open for

reporting purposes until corrective actions are completed. We address management’s comments on

the finding in Appendix G.

2. The Associate Administrator for External Relations should revise the NASA Export

Control Program pamphlet and the draft NPD 2190 to incorporate the oversight

responsibilities of the appropriate NASA officials for those cases in which NASA or its

contractors obtain export licenses in behalf of a NASA program.

Management Response. Concur. The forthcoming NPG on export control will include the

responsibilities of NASA officials as they relate to the use of NASA obtained export licenses. The

NPG will replace the current NASA Export Control Program pamphlet and will address the new

NASA FAR Supplement and the responsibilities of NASA officials for contractor obtained licenses

(see Appendix F).

Evaluation of Management’s Response. The actions planned by management are responsive to

the recommendation. The recommendation is resolved, but will remain undispositioned and open for

reporting purposes until corrective actions are completed.
8

Appendix A. Objectives, Scope, and Methodology

Objectives

Our objective was to assess NASA oversight of contractor processes for exporting NASA-funded

controlled technologies. The remaining objective of the audit, which will be addressed in a separate

report, is to determine whether major contractors have established adequate controls over NASA’s

controlled technologies to preclude unauthorized or unlicensed transfers.

Scope and Methodology

We obtained an overall understanding of NASA’s current export control program plan and how it

relates to NASA’s oversight of contractor exports. We also reviewed export policies and

procedures for selected contractors to determine contractor compliance with the International Traffic

in Arms Regulations (ITAR) and Export Administration Regulations (EAR). During the audit, we:

• Identified and reviewed NASA and selected contractors’ export policies and procedures, in

addition to the ITAR and EAR.

• Reviewed export licenses, applications, and supporting documentation dated from 1992 through

1999, at both NASA and contractor locations.

• Interviewed personnel in NASA’s Office of External Relations and program, contracting, and

export officials at Goddard, Johnson, and Marshall.

• Interviewed program, contracting, and export officials at Lockheed-Martin, Boeing, and TRW.

• Interviewed personnel with the Defense Contract Management Command at Lockheed-Martin,

Boeing, and TRW.

Management Controls Reviewed

We reviewed the following management controls relative to NASA oversight of contractor

processes for control of sensitive technologies:

• NASA Policy Pamphlet, “NASA Export Control Program,” November 1995 (revised October

1998).

• International Traffic in Arms Regulations, April 1999

• U.S. Export Administration Regulations, January 1998

Appendix A
9

• NASA Procedures and Guidelines (NPG) 7120.5A, “NASA Program and Project

Management Processes and Requirements,” April 3, 1998.

• NASA FAR Supplement, Subpart 1825, “Foreign Acquisition.”

Management controls are not adequate relative to Agency oversight of contractor processes for

exporting NASA-funded controlled technologies as discussed in the finding.

Audit Field Work

We conducted field work from May through November 1999, at NASA Headquarters, Goddard,

Johnson, and Marshall. We visited contractor locations in Huntsville, Alabama; New Orleans,

Louisiana; Houston, Texas; and Huntington Beach and Redondo Beach, California. We performed

the audit in accordance with generally accepted government auditing standards.
10

Appendix B. Summary of Prior Audit Coverage

NASA Office of Inspector General

“NASA Control of Export Controlled Technologies,” IG-99-020, March 31, 1999. The

report states that NASA has not identified all export-controlled technologies related to its major

programs and does not maintain a catalog of classifications for transfers of export-controlled

technologies. Also, Agency oversight of and training for personnel in the Export Control Program

need improvement. Specifically, annual audits of each NASA Center’s export control systems were

not adequately performed, and NASA personnel lack training in controlling and documenting exportcontrolled technologies. The report contains six recommendations to assist NASA in addressing

export-controlled technologies. Management concurred with all recommendations.

General Accounting Office (GAO)

“Export Controls – International Space Station Technology Transfers,” GAO/NSIAD-00-

14, November 1999. The House of Representatives Committee on Science requested that GAO

review NASA’s implementation of Federal export regulations. The Department of Commerce has

issued nine validated licenses to NASA to export specific items and one special comprehensive

license. The special comprehensive license allows NASA to export certain preapproved items

without seeking Commerce’s approval each time NASA needs to export them for the ISS program.

The special comprehensive license has been used only once, even though its purpose was to

preclude the need for individual licenses.

The GAO also determined that NASA erroneously authorized the export of radiation-hardened

electronic parts to a Russian firm in 1997 without obtaining a license from the Department of State.

Further, NASA’s internal and external reviews of Agency export control activities have identified

weaknesses. The GAO made one recommendation aimed at improving the quality of NASA’s

internal audits.
11

Appendix C. Situations in Which Controlled Technologies are Exported

Situation 1: NASA exports controlled technologies for its behalf. NASA exports controlled

technologies on its behalf, usually for in-house programs and projects. In this situation, NASA is the

authority of export. NASA is responsible for administration and oversight of the export licenses

obtained from either the Department of State or Department of Commerce.

Situation 2: NASA granted license exemptions (Department of State only). In some cases,

NASA can grant contractors authorization to export controlled technologies without the contractor

having to obtain licenses from the Department of State. As a Government agency, NASA is entitled

to certain license exemptions not available to industry. NASA, in turn, utilizes its exemptions to

authorize contractors to export controlled technologies for NASA programs. In this situation, the

contractor is the authority of export and does not have to obtain approval from the Department of

State.

Situation 3: NASA obtains export license and the exporting authority is consigned to

contractors. NASA obtains export licenses and consigns the authority to effect the export to

contractors. For certain programs, such as the ISS, NASA can obtain a single or special

comprehensive export license from the Department of Commerce. This process enables the

contractor to export controlled technologies to NASA’s international partners pursuant to NASA

contract direction. In this situation, NASA typically will obtain the export licenses for those

programs with heavy international involvement. NASA is the authority of export and is responsible

for administration and oversight of the license.

Situation 4: Contractor obtains export license from the Departments of State or Commerce

for NASA funded programs. Contractors directly obtain the export licenses for controlled

technologies to be transferred to foreign entities. In this situation, the contractor is the authority of

export. The contractor is also responsible for administration of the export license.

Situation 5: Contractor obtains export license from the Departments of State or Commerce

for NASA-funded technologies exported commercially. For certain programs such as the ISS,

the contractor has authority to commercially market ISS hardware and software containing NASAfunded controlled technologies. In this situation, the contractor obtains the export license, is the

authority of export and is responsible for administration of the export license.
12

Appendix D. Laws, Regulations, and Guidance

Relating to Controlled Technologies

Arms Export Control Act, 22 U.S.C. § 2778. The Arms Export Control Act authorizes the

President to control the export of defense articles and services. This authority has been delegated to

the Department of State, which implements the Act through the ITAR. Defense articles and services

subject to the Act are identified in broad categories on the United States Munitions List. Violations

of the Act are punishable by debarment; fines of up to $500,000; and imprisonment for up to 10

years.

Export Administration Act of 1979, as amended, 50 U.S.C., Appendix 2401-2420. The

Export Administration Act is a legal authority underlying the Export Administration Regulations.

U.S. Export Administration Regulations (EAR), 15 Code of Federal Regulation (CFR), Part

730. The Commerce Department’s Bureau of Export Administration issues the EAR under laws

relating to the control of exports and re-exports. The EAR were designed to implement the Export

Administration Act of 1979. The term "dual-use" distinguishes the types of items covered by the

EAR from those covered by regulations of certain other U.S. Government departments and agencies

with export licensing responsibilities. The term dual-use also distinguishes EAR-controlled items that

can be used both in military and other strategic uses and in civil applications from those that are

weapons and for military-related use or designs and are subject to the controls of the Department of

State. The export items are classified in at least 1 of the 10 categories of the Commerce Control

List:

• Category 0 - Nuclear Materials, Facilities and Equipment, and Miscellaneous

• Category 1 - Materials, Chemicals, Microorganisms, and Toxins

• Category 2 - Materials Processing

• Category 3 - Electronics

• Category 4 - Computers

• Category 5 - Telecommunications and Information Security

• Category 6 - Lasers and Sensors

• Category 7 - Navigation and Avionics

• Category 8 – Marine

• Category 9 – Propulsion Systems, Space Vehicles, and Related Equipment

International Traffic in Arms Regulations (ITAR), 22 CFR, Parts 120-130. The Bureau of

Political-Military Affairs, Office of Defense Trade Controls, Department of State, issues the ITAR to

control the export and import of defense articles and defense services. The President shall designate

the articles and services deemed to be defense articles and services. These defense articles and

services constitute the U.S. Munitions List, a subpart of the ITAR. The intended use of the article or

service after its export is not relevant in determining whether the article or service is subject to the

controls of the ITAR. The defense articles or services fall into 1 of the 21 categories of the U.S.

Munitions List:
13

Appendix D

• Category 1 - Firearms

• Category 2 - Artillery Projectors

• Category 3 - Ammunition

• Category 4 - Launch Vehicles, etc.

• Category 5 - Explosives, Propellants, Incendiary Agents, and Their Constituents

• Category 6 - Vessels of War and Special Naval Equipment

• Category 7 - Tanks and Military Vehicles

• Category 8 - Aircraft and Associated Equipment

• Category 9 - Military Training Equipment

• Category 10 - Protective Personnel Equipment

• Category 11 - Military Electronics

• Category 12 - Fire Control, Range Finder, Optical and Guidance and Control Equipment

• Category 13 - Auxiliary Military Equipment

• Category 14 - Toxicological Agents and Equipment and Radiological Equipment

• Category 15 - Spacecraft Systems and Associated Equipment

• Category 16 - Nuclear Weapons Design and Related Equipment

• Category 17 - Classified Articles, Technical Data, and Defense Services Not Otherwise

Enumerated

• Category 18 - Reserved

• Category 19 - Reserved

• Category 20 - Submersible Vessels, Oceanographic, and Associated Equipment Category

• Category 21 - Miscellaneous Articles
14

Appendix E. Contracts Selected for Review

Because export information on contractors was not readily available, we randomly selected the

following three contracts for review that had potential international involvement.

Contractor/Contract

Number Description/Value

Location of

Performance

Cognizant

NASA Center

Boeing Missiles and

Space Division,

NAS5-10000

International Space Station

Alpha Program

$7.1 billion

Houston, TX

Huntington Beach, CA

Huntsville, AL

Canoga Park, CA

Johnson

TRW, NAS5-32954 EOS Common Spacecraft

$396 Million

Redondo Beach, CA Goddard

Lockheed-Martin

Michoud Space

Systems, NAS8-

36200

Space Shuttle External Tanks

$3.7 billion

New Orleans, LA Marshall
15

Appendix F. Management’s Response
16

Appendix F
17

Appendix F
18

Appendix F
19

Appendix F
20

See

Appendix G,

OIG

Comment 1

See

Appendix G,

OIG

Comment 2
21

Appendix G. OIG Comments on Management’s Response

NASA management provided the following comments in its response to our draft report. Our

responses to the comments are also presented.

Management’s Comment. NASA management stated that it is the NASA position, based on

U.S. law and regulation, that contractors are separately responsible for their own export compliance

and that broad NASA oversight of the compliance is neither required nor an appropriate Agency

function. The recent creation of NASA FAR Supplement Section 1825.1103-70, "Export control,"

was specifically promulgated for the purpose of highlighting a contractor's responsibility in this area.

Contractors must submit license applications to the appropriate regulatory agency and must maintain

required records. The principal agencies charged with broad export review and compliance are the

Departments of State and Commerce.

1. OIG Comments. We agree that NASA contractors are responsible for ensuring that their export

activities are in compliance with U.S. export laws and regulations. However, NASA officials should

be aware of the types and amounts of controlled technologies that contractors are exporting in

support of NASA programs and that such exports are accomplished in accordance with applicable

laws and regulations. Our position on this matter is further strengthened by a request made to the

NASA Inspector General by the Senate Committee on Appropriations.15 Specifically, the

Committee requested that NASA, in conjunction with the NASA Inspector General, conduct an

annual assessment and report to the Congress on all procedures, protocols, and policies governing

the export or transfer of NASA-related technologies and to determine the extent to which NASA

and NASA contractors are carrying out activities in compliance with Federal export control laws.

We believe that it is clearly intended by this request and its specific mention of contractors that

NASA bears some responsibility in ensuring that contractors are exporting controlled technologies in

accordance with applicable laws and regulations.

Management’s Comment. The finding further states that the perceived lack of Agency oversight

may have resulted in potential export violations by major NASA contractors. This statement, and

the subsequent discussion pertaining to it in the report, omits two essential facts. First, any export

control violation by a NASA contractor, unless specifically directed by the Agency, results from the

contractor's own acts or omissions. Second, the potential contractor violations cited in the report

pertain to exports made by the contractors of their own accord, as part of their own business

practices, without NASA having sought or directed the exports. In the Boeing case, the transaction

was a private commercial transaction not involving a NASA contract. Therefore, the statement that

"the lack of Government oversight has also resulted in potential export violation by two of the three

NASA contractors we reviewed" is without basis.

 

15 The request was contained in Senate Report 106-161 on the Departments of Veteran Affairs and Housing and

Urban Development, and Independent Agencies Appropriations Bill for fiscal year 2000.
22

Appendix G

2. OIG Comments. While we agree that the examples cited in the report occurred without NASA

having sought or directed the exports, the Agency should be concerned that in some cases, its

contractors have potentially violated export laws in exporting controlled technologies developed

under NASA contracts to commercial foreign entities. For example, the two contractors cited in the

report, Boeing and Lockheed-Martin, were exporting NASA-funded controlled technologies to

foreign contractors in furtherance of the ISS and Space Shuttle External Tank programs.

While we acknowledge that Boeing's potential violations occurred as part of a private commercial

transaction not involving a NASA contract, the items exported were identical to those Boeing was

also exporting on NASA's behalf as part of the ISS contract. As the prime contractor for the U.S.

portion of the ISS, NASA granted Boeing the authority to act on the Agency's behalf to export

NASA-funded controlled technologies through the use of NASA-obtained export licenses.

In addition to these licenses, Boeing also maintains an ISS commercial program that essentially

allows Boeing to market similar and sometimes identical technologies developed under the NASA

ISS contract to foreign partners involved in the ISS program. Boeing obtains the licenses when

exports are effected in this manner. The potential violations by Boeing involved the shipment of items

containing NASA-funded controlled technologies without the benefit of NASA or contractor export

licenses. Boeing shipped an ISS component called a Common Berthing Mechanism to private

companies located in Japan and Italy without first obtaining export licenses, a clear violation of the

Export Administration Regulations.

While we agree that contractors are responsible for ensuring that their export activities are in

compliance with U.S. Export Laws and Regulations, NASA should also be concerned that

technology developed under a NASA contract is being exported to foreign entities under a

contractor's commercial program in potential violation of the law.
23

Appendix H. Report Distribution

National Aeronautics and Space Administration (NASA) Headquarters

A/Administrator

AE/Chief Engineer

AF/Chief Technologist

AI/Associate Deputy Administrator

B/Chief Financial Officer

B/Comptroller

BF/Director, Financial Management Division

G/General Counsel

H/Associate Administrator for Procurement

I/Associate Administrator for External Relations

ID/Director, Assessments and Technology Division

IM/Director, Resources Management Office

J/Associate Administrator for Management Systems

JM/Director, Management Assessment Division

L/Associate Administrator for Legislative Affairs

M/Associate Administrator for Space Flight

P/Associate Administrator for Public Affairs

R/Associate Administrator for Aero-Space Technology

S/Associate Administrator for Space Science

U/Associate Administrator for Life and Microgravity Sciences and Applications

Y/Associate Administrator for Earth Science

Z/Associate Administrator for Policy and Plans

NASA Centers

Director, Ames Research Center

 Center Export Administrator, Ames Research Center

 Center Export Counsel, Ames Research Center

 Procurement Office, Ames Research Center

Director, Dryden Flight Research Center

 Center Export Administrator, Dryden Flight Research Center

 Center Export Counsel, Dryden Flight Research Center

 Procurement Office, Dryden Flight Research Center

Director, John H. Glenn Research Center at Lewis Field

 Center Export Administrator, John H. Glenn Research Center at Lewis Field

 Center Export Counsel, John H. Glenn Research Center at Lewis Field

 Procurement Office, John H. Glenn Research Center at Lewis Field

Director, Goddard Space Flight Center

 Center Export Administrator, Goddard Space Flight Center

 Center Export Counsel, Goddard Space Flight Center
24

 Procurement Office, Goddard Space Flight Center

Appendix H

NASA Centers (Cont.)

Director, Jet Propulsion Laboratory

 Center Export Administrator, Jet Propulsion Laboratory

 Procurement Office, Jet Propulsion Laboratory

Director, Lyndon B. Johnson Space Center

 Center Export Administrator, Lyndon B. Johnson Space Center

 Center Export Counsel, Lyndon B. Johnson Space Center

 Procurement Office, Lyndon B. Johnson Space Center

Director, John F. Kennedy Space Center

 Center Export Administrator, John F. Kennedy Space Center

 Center Export Counsel, John F. Kennedy Space Center

 Procurement Office, John F. Kennedy Space Center

Director, Langley Research Center

 Center Export Administrator, Langley Research Center

 Center Export Counsel, Langley Research Center Director

 Procurement Office, Langley Research Center Director

Director, George C. Marshall Space Flight Center

 Center Export Administrator, George C. Marshall Space Flight Center

 Center Export Counsel, George C. Marshall Space Flight Center

 Procurement Office, George C. Marshall Space Flight Center

Director, John C. Stennis Space Center

 Center Export Administrator, John C. Stennis Space Center

 Center Export Counsel, John C. Stennis Space Center

 Procurement Office, John C. Stennis 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

Associate Director, National Security and International Affairs Division, Defense Acquisition

 Issues, General Accounting Office

Professional Assistant, Senate Subcommittee on Science, Technology, and Space

Chairman and Ranking Minority Member - Congressional Committees and Subcommittees

Senate Committee on Appropriations

Senate Subcommittee on VA, HUD, and Independent Agencies
25

Senate Committee on Commerce, Science, and Transportation

Senate Subcommittee on Science, Technology, and Space
26

Appendix H

Chairman and Ranking Minority Member - Congressional Committees and Subcommittees

(Cont.)

Senate Committee on Governmental Affairs

House Committee on Appropriations

House Subcommittee on VA, HUD, and Independent Agencies

House Committee on Government Reform and Oversight

House Subcommittee on Government Management, Information, and Technology

House Subcommittee on National Security, Veterans Affairs, and International Relations House

Committee on Science

House Subcommittee on Space and Aeronautics

Congressional Member

Honorable Pete Sessions, U.S. House of Representatives
NASA Assistant Inspector General for Auditing

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 Auditing; NASA Headquarters, Code W, Washington, DC 20546-0001.

Report Title: Final Report on the Audit of NASA Oversight of Contractor Exports of

Controlled Technologies

Report Number: Report Date:

Circle the appropriate rating for the following statements.

Strongl

y

Agree

Agree Neutra

l

Disagre

e

Strongl

y

Disagre

e

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

Major Contributors to this Report

Kevin J. Carson, Program Director, Safety and Technology Audits

Timothy L. Bailey, Auditor-in-Charge

Oscar E. Lindley, Auditor

Iris Purcarey, Program Assistant

Nancy C. Cipolla, Reports Process Manager