MARCH 19, 2009 

AUDIT REPORT

REPORT NO. IG-09-012 (ASSIGNMENT NO. S-08-013-00) 

OFFICE OF AUDITS

EVALUATION AND OVERSIGHT OF NASA’S 

UNIVERSITY-AFFILIATED SPACEPORT TECHNOLOGY 

DEVELOPMENT CONTRACT NEEDED IMPROVEMENT

OFFICE OF INSPECTOR GENERAL

National Aeronautics and 

Space Administration 

 
Final report released by: 

 signed 

Evelyn R. Klemstine 

Assistant Inspector General for Auditing 

Acronyms 

ASRC Arctic Slope Regional Corporation 

CO Contracting Officer 

COTR Contracting Officer’s Technical Representative 

FAR Federal Acquisition Regulation 

FY Fiscal Year 

GAO Government Accountability Office 

KSC Kennedy Space Center 

MIDAS Management Information Decision Analysis System 

NFS NASA FAR Supplement 

PDR Preliminary Design Review 

SB Small Business 

TO Task Order 

USTDC University-Affiliated Spaceport Technology Development Contract 

REPORT NO. IG-09-012 
MARCH 19, 2009 

REPORT NO. IG-09-012 

OVERVIEW

EVALUATION AND OVERSIGHT OF NASA’S UNIVERSITYAFFILIATED SPACEPORT TECHNOLOGY DEVELOPMENT 

CONTRACT NEEDED IMPROVEMENT

The Issue 

The Office of Inspector General received an anonymous complaint alleging that the 

performance of the Arctic Slope Regional Corporation (ASRC), ASRC Aerospace 

Corporation, did not meet the contract requirements of NASA’s University-Affiliated 

Spaceport Technology Development Contract (USTDC), NAS10-03006. Specifically, 

the complainant alleged that contract deliverables for task order (TO) 425 under contract 

NAS10-03006 were not timely and that deliverables did not meet minimum standards 

specified in the contract’s statement of work. We were unable to ascertain whether 

ASRC Aerospace Corporation deliverables for TO 425 were timely and met contract 

performance standards because TO 425 only identified a completion date for technical 

engineering support; it did not identify specific dates for design deliverables. Therefore, 

we expanded our objectives to determine whether fiscal year (FY) 2007 performance 

evaluation factors provided a fair and objective assessment of the contractor’s 

performance and whether cost data submitted to NASA by the contractor during FY 2008 

for the 9-month period of October 2007 through June 2008 was accurate. To meet our 

objectives, we initiated an audit of 191 TOs that were active at the end of FY 2007. Of 

those TOs, we identified 113 that did not include milestones, and we statistically selected 

a sample of 51 TOs for further review (see Appendix A for details of the audit’s scope 

and methodology). 

The USTDC is a performance-based; indefinite-delivery, indefinite-quantity; costreimbursement-award-fee; and incentive-fee contract administered by Kennedy Space 

Center (KSC). The objective of the USTDC is to provide a broad range of non-routine 

engineering development services and products to KSC organizations and operational 

customers. TOs are used to define contract tasks, requirements, funding targets and 

limits, milestones, performance indicators, and performance standards. TOs for the 

USTDC are drafted by TO managers, approved by the contracting officer’s technical 

representative (COTR), and issued by the contracting officer (CO). The amount of award 

fee the contractor earns is based on an evaluation of the contractor’s performance against 

criteria established in the USTDC Award Fee Plan, which includes Technical, Cost, 

Business, and Special Areas of Emphasis performance areas. 
OVERVIEW

ii REPORT NO. IG-09-012 

Results 

We found that performance evaluation factors used to assess ASRC Aerospace 

Corporation’s performance were not TO-specific and did not provide the basis for a fair 

and objective assessment of the USTDC contractor’s performance. Because performance 

evaluation factors were not TO-specific and tied to desired outcomes as required by 

acquisition regulations, the performance evaluations provided little evidence that the 

approximately $2.2 million in USTDC award fees for FY 2007 were fully justified or 

were an accurate reflection of the contractor’s performance. In addition, we found that 

overtime premium costs were not adequately monitored and cost controls were 

ineffective. Our analysis of cost data submitted to NASA by ASRC Aerospace 

Corporation from October 2007 through June 2008 identified possible unauthorized 

overtime premium pay. This occurred because the USTDC CO was never notified by 

either the contractor or any of the TO managers that overtime premiums were needed.

Performance Evaluation Factors Were Not Specific. We found that FY 2007 

performance evaluation factors did not provide a fair and objective assessment of the 

USTDC contractor’s performance. Performance evaluation factors used to assess ASRC 

Aerospace Corporation’s performance were not TO-specific and could not be 

consistently tied to desired outcomes. In addition, the Award Fee Evaluation Report that 

documents assessments of the contractor’s performance did not identify which 

performance metrics were considered critical. This occurred because TO managers and 

the COTR did not follow guidance in the NASA “Award Fee Contracting Guide,” 

June 27, 2001, and the USTDC Award Fee Plan. As a result, we were unable to verify 

that ASRC Aerospace Corporation’s FY 2007 performance evaluation rating was fully 

justified or that the award fees received were an accurate reflection of the contractor’s 

performance. ASRC Aerospace Corporation received an excellent performance 

evaluation rating (96) and $2.2 million of the available $2.4 million in award fees for 

FY 2007. 

KSC contracting personnel divided contractor performance evaluations into four 

performance areas for FY 2007: Technical, Cost, Special Areas of Emphasis, and 

Business. Our review determined that Technical performance evaluation factors were too 

general to accurately assess the contractor’s performance. Of the 51 TOs in our sample, 

we found that 46 (90 percent) did not include specific dates for contract deliverables and 

did not have performance evaluation factors that could be tied to deliverables in the TO. 

However, the USTDC Award Fee Plan identifies milestone performance as a critical 

metric that should be used to evaluate Technical performance. 

NASA Federal Acquisition Regulation Supplement (NFS) 1816.405-274, “Award Fee 

Evaluation Factors,” states that contractor performance evaluation factors should be 

explicit and tied to desired outcomes. Additionally, a recent Government Accountability 
OVERVIEW

REPORT NO. IG-09-012 iii 

Office audit report1 states that NASA does not always follow its award fee guidance and, 

in some cases, there appears to be a significant disconnect between the contractor’s 

performance and fees paid. KSC contracting personnel did not always follow NASA 

guidance and developed Technical performance evaluation factors that were often 

generic and not specifically tied to any desired outcomes. For example, one performance 

evaluation survey included “Quality of Work” as a performance evaluation factor, but did 

not identify any of the tasks in the TO, how the tasks were to be evaluated, or any of the 

desired outcomes. 

Cost performance evaluation factors were generally inaccurate because the evaluation 

factors did not measure labor hours and labor costs that fell below the negotiated amounts 

in the contract. When the metrics were originally developed, KSC contracting personnel 

did not include formulas in the Cost performance metrics to compute labor hours and 

labor costs below the contract’s negotiated amounts. The formulas did not allow for a 

reduction in scores when labor hours and labor costs fell below the negotiated amounts, 

indicating either that the ASRC Aerospace Corporation was unable to meet the staffing 

levels required under the contract or that labor hours and cost estimates in the contract 

were overstated. For FY 2007, ASRC Aerospace Corporation’s labor hours and labor 

costs were approximately 20 percent and 19 percent, respectively, below the negotiated 

amounts. 

We also identified approximately 5,000 hours of uncompensated overtime that was 

included in the labor hours reported by the contractor for the 9-month period ending June 

2008. The contractor stated that uncompensated overtime hours were unpaid hours 

worked in support of the USTDC. However, we were unable to match uncompensated 

overtime hours reported by the contractor to individual task orders using the contractor’s 

monthly financial management report. Therefore, we were unable to verify whether the 

hours were actually worked. Including uncompensated overtime hours in the total labor 

hours could inappropriately elevate contractor performance evaluations and increase the 

amount of award fee earned by the contractor. The contractor’s average labor rate 

appears to be lower because labor costs are calculated using labor hours that include 

uncompensated overtime hours. 

Performance evaluation factors for Special Areas of Emphasis did not always identify the 

desired outcomes or how the outcomes were to be measured. This occurred because KSC 

contracting personnel did not always follow NFS guidance and developed performance 

evaluation factors for Special Areas of Emphasis that were often generic and open-ended 

statements. For example, one of the six unverifiable performance factors stated that the 

contractor should ensure support of NASA’s Exploration Mission with an appropriate 

mix of technical skills while continuing to provide superior quality support to existing 

programs. However, the performance evaluation factor did not identify what skill mix 

was appropriate or how superior quality support to existing programs would be 

 

1

 “NASA Procurement: Use of Award Fees for Achieving Program Outcomes Should Be Improved” 

(GAO-07-58, January 17, 2007). 
OVERVIEW

iv REPORT NO. IG-09-012 

measured. As a result, contractor performance in Special Areas of Emphasis could not be 

verified. We did not find any significant issues in the Business area. 

Overtime Costs Not Monitored. Our analysis of cost data submitted to NASA by 

ASRC Aerospace Corporation from October 2007 through June 2008 identified 34 active 

TOs for FY 2008 that included overtime premium pay2

 that may not have been 

authorized by the contract. Federal Acquisition Regulation (FAR) 22.103-3(c) states: 

“When it becomes apparent that overtime will be required in contract performance, the 

CO shall secure from the contractor a request for all overtime to be used during the life of 

the contract.” However, the CO was never notified by either the contractor or any of the 

TO managers that overtime premiums were needed. The CO and the COTR stated they 

were unaware that the contractor was charging overtime or that overtime premium was 

being paid. These overtime premium hours and costs were not broken out separately in 

the contractor’s monthly financial management report. Without this level of visibility, it 

is difficult for the CO to monitor these hours and costs to ensure that the discretion 

provided by the exceptions in Contract Clause 52.222-2(b), “Payment for Overtime 

Premiums,” is not abused. Therefore, we question the $136,000 in overtime premiums 

paid to the contractor for the 9-month period ending June 2008. 

Management Action 

We recommended that the USTDC CO require the COTR and TO managers to develop 

new Technical and Special Areas of Emphasis performance evaluation criteria for any 

new TO issued during the remaining option years of the USTDC. Also, performance 

evaluation criteria should be TO-specific and tied to contract deliverables, milestones, 

and desired outcomes. In addition, we recommended that the CO revise Cost 

performance metrics to ensure that Cost performance evaluation factors assess all direct 

costs. The CO should require the contractor to include uncompensated overtime hours as 

a separate line item in the contractor’s monthly financial management report. In 

addition, the CO should ensure that the COTR properly identifies critical metrics in the 

Award Fee Evaluation Report. 

To improve monitoring and controls over contract costs, the CO should require the 

contractor and TO managers to document and request overtime premiums in accordance 

with USTDC’s Contract Clause 52.222-2(b), “Payment for Overtime Premiums,” and 

FAR 22.103-3(c), “Procedures.” The CO should require the contractor to include 

overtime premium hours and costs as separate line items in the contractor’s monthly 

financial management report, thereby allowing for better monitoring of overtime 

premium costs in accordance with USTDC’s Contract Clause 52.222-2(b), “Payment for 

Overtime Premiums.” 

 

2

 Premium pay is computed at one and a half times the employee’s labor rate. 
OVERVIEW

REPORT NO. IG-09-012 v 

In response to a draft of this report, issued February 19, 2009, the Director of KSC’s 

Office of Procurement (the KSC Procurement Director) concurred with our 

recommendations and stated that the USTDC CO will require the COTR and TO 

managers to develop new Technical performance evaluation criteria for any new TO 

issued during the remaining option years of the USTDC. The KSC Procurement Director 

agreed to require the USTDC CO to revise Cost performance metrics, to ensure that Cost 

performance evaluation factors assess all direct costs and to ensure that performance 

evaluation factors identified in the Award Fee Plan as critical are also identified as 

critical in the Award Fee Report. The KSC Procurement Director also agreed to require 

that the USTDC CO document overtime premium requirements in accordance with 

FAR 52.222-2(b) and to require that the contractor include overtime premium pay hours 

and cost as separate line items in the contractor’s monthly financial management report. 

The corrective actions described by management are responsive to our recommendations. 

The recommendations are resolved and will be closed upon completion and verification 

of management’s corrective action. (See Appendix B for the full text of management’s 

comments.) 

MARCH 19, 2009 

REPORT NO. IG-09-012 

CONTENTS

INTRODUCTION

Background __________________________________________ 1 

Objectives ___________________________________________ 2 

RESULTS

Finding A: Contractor Performance Evaluations Were Not Always 

Accurate and Objective _______________________ 4 

Finding B: Overtime Premium Costs Were Not Adequately 

Monitored_________________________________ 11 

APPENDIX A 

Scope and Methodology _______________________________ 15 

Review of Internal Controls _____________________________ 16 

Prior Coverage_______________________________________ 17 

APPENDIX B 

Management Comments _______________________________ 18 

APPENDIX C 

Report Distribution ___________________________________ 21 

MARCH 19, 2009 

REPORT NO. IG-09-012 1 

INTRODUCTION

Background 

The Office of Inspector General conducted this audit after receiving an anonymous 

complaint alleging that the performance of a subsidiary of the Arctic Slope Regional 

Corporation (ASRC), ASRC Aerospace Corporation, did not meet contract requirements 

of NASA’s University-Affiliated Spaceport Technology Development Contract 

(USTDC), NAS10-03006. Specifically, the complainant alleged that contract 

deliverables for task order (TO) 425 under contract NAS10-03006 were not timely and 

that deliverables did not meet minimum standards specified in the contract’s statement 

of work. 

The USTDC, administered by Kennedy Space Center (KSC), is a performance-based; 

indefinite-delivery, indefinite-quantity; cost-reimbursement-award-fee; and incentive-fee 

contract. Award fees are intended to encourage and reward the contractor for safe, highquality, cost-conscious performance in fulfilling contract requirements. Incentive fees 

are intended to encourage the contractor to market the facilities and technical capabilities 

at KSC to commercial and other Government customers to ensure that those facilities and 

technical capabilities are fully utilized. Under a performance-based contract, contract 

requirements are described in terms of what the required output is rather than specify 

how the work is to be accomplished. TOs are used to define contract tasks, requirements, 

funding targets and limits, milestones, performance indicators, and performance 

standards. TOs for the USTDC are drafted by TO managers, approved by the contracting 

officer’s technical representative (COTR), and issued by the contracting officer (CO). 

NASA designated the Defense Contract Audit Agency as the approval authority for 

provisional billing for the USTDC; therefore, contractor invoices are sent directly to the 

Defense Contract Audit Agency and are not reviewed by the CO. 

Award fee determinations are made by the KSC Performance Evaluation Board, based on 

an Award Fee Evaluation Report and any additional information provided by the 

contractor. In the Award Fee Evaluation Report, the COTR and CO will make a 

consolidated recommendation of an overall adjective rating and numerical score. The 

NASA “Award Fee Contracting Guide,” June 27, 2001, requires the following adjective 

ratings and numerical scores to be used on all award fee contracts: Excellent, 100-91; 

Very Good, 90-81; Good, 80-71; Satisfactory, 70-61; and Unsatisfactory, less than 61. 
INTRODUCTION

2 REPORT NO. IG-09-012 

The Award Fee Evaluation Report does not include individual scores or computations 

used to arrive at the overall recommendation. Summaries of the TOs are discussed in the 

USTDC Award Fee Evaluation Report, which divides the performance evaluation into 

four performance areas: 

• Technical: combines performance data for all TOs worked during the evaluation 

period. 

• Cost: evaluates efforts and initiatives made by the contractor to control cost. 

• Business: includes factors that impact the whole contract, such as safety, quality 

assurance, and resource and contract management. 

• Special Areas of Emphasis: specific areas of contract performance that are 

emphasized in the award fee evaluation for the contract period. For example, the 

contractor was required to ensure an appropriate mix of technical skills to support 

NASA’s Exploration Mission while continuing to provide superior quality 

support to existing programs. 

ASRC Aerospace Corporation, the prime contractor for the USTDC, is an aerospace 

engineering company that specializes in systems engineering, hardware and software 

system design and development, network engineering, hardware maintenance, 

information management, and systems research and development. The base period of the 

USTDC was from March 1, 2003, through September 30, 2007, with a maximum order 

value of $220 million. However, KSC contracting personnel only issued USTDC TOs 

equaling $138 million of the $220 million, with available award fees3

 of $6.8 million and 

available incentive fees4

 of $1.7 million. During this base period, USTDC earned 

$6.3 million in award fees and $343,300 in incentive fees. In October 2007, KSC 

exercised an option to extend the contract for a 3-year period, through September 30, 

2010, increasing the maximum order value to $430 million. During this option period, 

USTDC’s available award fee could increase by approximately $12.6 million; there 

would be no increase to available incentive fee. Including all options, the maximum 

order value for the contract is $600 million. 

Objectives 

In response to the complaint, we initiated a preliminary review in February 2008 to 

determine whether TO deliverables provided by the ASRC Aerospace Corporation were 

timely and whether the ASRC Aerospace Corporation met contract performance 

standards in the USTDC statement of work. Because performance evaluation factors for 

 

3

 Available award fee is 6 percent of the adjusted target cost (total estimated cost less direct materials and 

other direct costs for each TO issued). 

4

 Available incentive fee is 1.5 percent of the adjusted target cost (total estimated cost less direct materials 

and other direct costs for each TO issued). 
INTRODUCTION

REPORT NO. IG-09-012 3 

TO 425 were not specific and tied to desired outcomes, we expanded our objectives to 

determine whether fiscal year (FY) 2007 performance evaluation factors provided a fair 

and objective assessment of the contractor’s performance and whether cost data 

submitted to NASA by the contractor during FY 2008 for the 9-month period of October 

2007 through June 2008 was accurate. See Appendix A for details of the audit’s scope 

and methodology, our review of internal controls, and prior coverage. 
RESULTS

4 REPORT NO. IG-09-012 

FINDING A: CONTRACTOR 

PERFORMANCE EVALUATIONS 

WERE NOT ALWAYS ACCURATE 

AND OBJECTIVE

Contractor performance evaluations included in the Award Fee Evaluation Report 

for the contract period ending September 30, 2007, did not always provide an 

accurate and objective assessment of the contractor’s performance. Performance 

evaluation factors used to assess ASRC Aerospace Corporation’s performance were 

not TO-specific and could not be consistently tied to desired outcomes. This 

occurred because TO managers and the COTR did not follow guidance in the NASA 

Federal Acquisition Regulation Supplement (NFS) 1816.405-274, “Award Fee 

Evaluation Factors,” and NASA “Award Fee Contracting Guide,” June 27, 2001. 

NFS and NASA’s Award Fee Contracting Guide state that contractor performance 

evaluation factors should be explicit, tied to desired outcomes, and based on 

characteristics of an individual procurement. In addition, a recent Government 

Accountability Office (GAO) audit report5

 states that NASA does not always follow 

its award fee guidance and, in some cases, there appears to be a significant 

disconnect between the contractor’s performance and fees paid. We found that 

performance evaluation factors were inaccurate, unverifiable, or too general to 

accurately assess the contractor’s performance in the Technical, Cost, and Special 

Areas of Emphasis performance areas. We did not identify any significant issues in 

the Business performance area, but we did determine that critical performance 

metrics were not properly identified in the Award Fee Evaluation Report. As a 

result, we were unable to verify that ASRC Aerospace Corporation’s FY 2007 

performance evaluation rating was fully justified or that the award fees received 

were an accurate reflection of the contractor’s performance. ASRC Aerospace 

Corporation received an excellent performance evaluation rating (96) and 

$2.2 million of the available $2.4 million in award fees for FY 2007. 

Technical Performance 

Performance evaluation factors used to evaluate Technical performance were not 

TO-specific and were too general to accurately assess the contractor’s performance. 

TO managers assess a contractor’s performance and provide an adjective rating and a 

numerical score for each TO on a quarterly basis. Adjective ratings and scores are 

 

5

 “NASA Procurement: Use of Award Fees for Achieving Program Outcomes Should Be Improved” 

(GAO-07-58, January 17, 2007). 
RESULTS

REPORT NO. IG-09-012 5 

reported to the COTR and documented in an Award Fee Evaluation Report that is 

provided to the KSC Performance Evaluation Board. 

KSC contracting personnel stated that Technical performance is the most important 

performance area considered during the award fee evaluation process. The Award Fee 

Plan for the USTDC lists milestone performance, TO performance evaluation survey, and 

overall TO ratings as critical metrics for evaluating Technical performance. However, 

KSC contracting personnel did not follow guidance in the USTDC Award Fee Plan and 

NASA’s Award Fee Contracting Guide when they developed their Technical 

performance evaluation factors. For example, of the 191 TOs active at the end of 

FY 2007, 113 (59 percent) did not have milestones. In addition, based on our review of a 

statistical sample of 51 of the 113 TOs without milestones, we determined that the TO 

managers 

• used performance evaluation surveys consisting of 17 standardized, generic 

questions that were not TO-specific (51, or 100 percent, of the TOs reviewed); 

• used performance evaluation surveys that did not contain metrics or performance 

evaluation factors that could be tied to TO deliverables (46, or 90 percent, of the 

51 TOs reviewed); and 

• did not always complete quarterly performance evaluation surveys, even though 

TO evaluation surveys were listed in the Award Fee Plan as a critical evaluation 

factor (8, or 16 percent, of the 51 TOs reviewed). 

During our audit, KSC contracting personnel attempted to improve the performance 

evaluation surveys by revising the FY 2008 surveys to include 10 standardized questions 

to evaluate the contractor’s Technical performance. However, the revised performance 

evaluation surveys still did not meet requirements in NASA’s Award Fee Contracting 

Guide because the 10 evaluation survey questions were not TO-specific. NASA’s Award 

Fee Contracting Guide, Section 3.4.1, “Performance Evaluation Factors,” states that 

evaluation factors used in award fee contracting should not be standardized. The Guide 

also states that rigid standardization tends to generate evaluation plans that either are too 

broad or include factors inapplicable to a given function. 

Cost Performance 

Cost performance evaluations used to evaluate the contractor’s labor hours and labor 

costs were not accurate. When the metrics were originally developed, KSC contracting 

personnel did not include Cost performance metrics that accurately computed labor hours 

and labor costs below the negotiated amounts in the contract. Therefore, the formulas in 

the metrics did not allow for a reduction in scores when labor hours and labor costs fell 

below negotiated amounts. The Cost performance area included five performance 

evaluation factors that assessed the contractor’s labor rate, labor hours, labor costs, 
RESULTS

6 REPORT NO. IG-09-012 

overhead rate, and other direct costs. The CO rated the contractor’s overall Cost 

performance as Good, with an average score of 73 for the five performance evaluation 

factors. However, our analysis showed that Cost performance evaluation factors did not 

accurately compute labor hours and costs that fell below the negotiated amounts in the 

contract. Our review of FY 2007 labor hours and labor costs, as reported by the 

contractor in monthly financial management reports,6 showed that labor hours and labor 

costs were approximately 19 percent and 20 percent, respectively, below the negotiated 

amounts,7

 which should have lowered the labor hour and labor cost scores. However, we 

noted that the labor hour and labor cost metrics included a calculation that automatically 

scores them as 95 or more when labor hours and costs are below or equal to negotiated 

amounts in the contract. This scoring practice results in an overall Cost performance 

score that does not adequately consider labor hours and labor costs below negotiated 

amounts in the contract. The CO noted that the metrics did not adequately consider 

underruns8

 and was in the process of revising the metrics for FY 2008 when the audit 

began. 

Although the CO and COTR revised all of the Cost performance evaluation factors for 

FY 2008, we noted that the overhead rates and other direct costs no longer received a 

Cost performance evaluation score for FY 2008. This occurred because KSC contracting 

personnel decided to monitor overhead rates as a trend metric9 instead of a scored 

performance evaluation factor. The evaluation factor for other direct costs was 

eliminated because contracting personnel determined that TO managers could monitor 

these items at the TO-level. However, NASA FAR Supplement 1816.405-274, “Award 

Fee Evaluation Factors,” states that the predominant consideration of a cost control 

evaluation should be a measurement of the contractor’s performance against the 

contract’s negotiated estimated costs. Our evaluation of cost data for FY 2008 identified 

that approximately $19 million of the contractor’s $66 million in direct costs were 

excluded from the cost evaluation process because of the elimination of Cost 

performance evaluation factors for other direct costs. As a result, the revised FY 2008 

Cost performance factors did not adequately measure the contractor’s Cost performance 

because approximately 29 percent of the contractor’s direct costs were excluded from the 

cost evaluation. 

We also identified approximately 5,000 hours of uncompensated overtime that was 

included in the labor hours reported by the contractor for the 9-month period reviewed. 

The contractor stated that uncompensated overtime hours were unpaid hours worked in 

 

6

 Contractors provide detailed cost data in NASA Form 533M, “Monthly Contractor Financial 

Management Report.” 

7

 Underrunning negotiated amounts indicates the contractor is unable to meet the contract’s required 

staffing levels or was overestimating work. 

8

 The CO’s rationale for revising the metrics was “Only measuring overruns incentives the contractor to 

always overestimate work.” 

9

 Those measurements that are useful to collect and evaluate over time but do not receive a performance 

evaluation score. 
RESULTS

REPORT NO. IG-09-012 7 

support of the USTDC. However, we were unable to match uncompensated overtime 

hours reported by the contractor to individual task orders because uncompensated 

overtime hours were not identified separately in the monthly financial management 

reports. Therefore, we were unable to verify whether the hours were actually worked. 

Including uncompensated overtime hours in the total labor hours could inappropriately 

elevate contractor performance evaluations and increase the amount of the award fee 

earned by the contractor. The contractor’s average labor rate appears to be lower because 

labor costs are calculated using labor hours that include uncompensated overtime. 

Including uncompensated overtime in labor hours also improves the contractor’s labor 

hour planning and total labor hour metrics. The CO and TO managers stated they were 

unaware that the contractor had included uncompensated overtime in labor hour cost data 

provided to NASA. 

Special Areas of Emphasis 

Our review determined that FY 2007 performance evaluation factors for Special Areas of 

Emphasis were generic, open-ended statements and that six of the eight performance 

evaluation factors used were unverifiable. Performance evaluation factors did not 

identify the desired results or how the desired results were measured. Following are the 

six performance evaluation factors that we determined to be unverifiable: 

• Ensure appropriate technical skill mix to support NASA’s Exploration Mission, 

while continuing to provide superior quality support to existing programs. 

• Ensure continued emphasis and support to Constellation Level III and IV 

integration efforts performed by NASA and other Constellation contractor teams. 

• Continued emphasis on teamwork and communication with NASA. 

• Continued emphasis on TO closeout when appropriate. 

• Continue progress made in implementing Management Information Decision 

Analysis System (MIDAS) features in order to enhance management reporting 

and planning. 

• Implementation of Earned Value Management principles per the Management 

Plan or as required by specific customers. 

The USTDC Award Fee Plan states that Special Areas of Emphasis are used by the 

Government to document the specific areas of contract performance that will be 

emphasized in the award fee evaluation. However, we found that six of the eight 

performance evaluation factors were subjective with no specific performance indicators. 

None of the eight evaluation factors listed “outcome” or “output” indicators or the 

method to be used to evaluate contractor performance. During interviews, both the CO 
RESULTS

8 REPORT NO. IG-09-012 

and the COTR stated that they did not agree that Special Areas of Emphasis were 

required to include measurable performance evaluation factors and that they intentionally 

left the performance evaluation factors very broad. However, NASA Headquarters 

issued Procurement Notice 04-27, dated June 29, 2007, which revises NFS 1816 to 

reemphasize the importance of tying award fee criteria to desired outcomes. These 

changes were made in response to the recommendations for improving NASA Award Fee 

Policy in the GAO audit report, “NASA Procurement: Use of Award Fees for Achieving 

Program Outcomes Should Be Improved” (GAO-07-58, January 2007). 

Further, GAO’s audit report states that while NASA’s evaluations would indicate 

generally good contractor performances, such performances did not always translate into 

desired program outcomes. The report states that such a disconnect raised questions as to 

the extent that NASA was achieving its desired outcome as intended by the award fee 

criteria. In response to the report’s recommendation, NASA agreed to reemphasize the 

importance of tying award fee criteria to desired outcomes and limiting the number of 

subfactors used in evaluations. 

Business Performance 

We did not identify any significant issues in the Business performance area. The 

November 2, 2007, USTDC Award Fee Evaluation Report rated the Business 

performance area as Excellent. The Business performance area includes performance 

evaluation factors associated with safety and mission assurance, covering work-related 

mishaps, to include injuries and property damage. The factors state that no more than 

one work-related injury per quarter is acceptable. Our review of performance evaluation 

factors indicated that the contractor had only one work-related injury and no property 

damage mishaps for FY 2007. 

The Business performance area also included seven performance evaluation factors for 

“Business and Management Systems Reviews.” We noted that one of the seven 

evaluation factors was to evaluate the contractor’s success in meeting “Small Business 

(SB) Subcontracting Goal” in support of NASA’s Socioeconomic Program. Our review 

determined that using an SB Subcontracting Goal as a performance evaluation factor was 

not necessary because the contractor was already an 8(a)10 firm and had already received 

credit toward the Agency’s Socioeconomic Program goal. However, the SB 

Subcontracting Goal evaluation factor was only one of seven factors and had a minimal 

impact on the overall evaluation of the Business performance area. Therefore, we did not 

consider this to be a significant issue. 

 

10The 8(a) Program is named for the section of the Small Business Act that authorizes its policies and 

procedures. The purpose of the Program is to assist eligible firms to compete in the American economy 

through business development. 
RESULTS

REPORT NO. IG-09-012 9 

Critical Performance Metrics 

We determined that the USTDC Award Fee Evaluation Report, November 2, 2007, used 

by the Fee Determining Official to evaluate the contractor’s performance did not identify 

whether any of the performance metrics were critical. The USTDC’s Award Fee Plan11

identifies 8 critical metrics and 15 non-critical metrics. Critical metrics are considered 

key indicators of contract performance. However, there was no distinction between 

critical and other metrics in the USTDC Award Fee Evaluation Report because the 

COTR failed to identify critical performance evaluation factors in the Award Fee 

Evaluation Report provided to the Award Fee Board. NASA’s Award Fee Contracting 

Guide, paragraph 3.2.1, requires the Performance Evaluation Board and the Fee 

Determination Official to evaluate a contractor’s performance according to the standards 

and criteria stated in the Award Fee Plan. Therefore, it is essential that the Award Fee 

Evaluation Report identify metrics that are critical and key indicators of the contractor’s 

performance. As a result, the KSC Performance Evaluation Board and the Fee 

Determination Official’s determination included non-critical metrics in addition to 

critical metrics, which are the key indicators of the contractor’s performance. 

Recommendations, Management’s Response, and Evaluation of 

Management’s Response 

Recommendation 1. The USTDC CO should require the COTR and TO managers to 

develop new Technical and Special Areas of Emphasis performance evaluation criteria for 

any new TO issued during the remaining option years of the USTDC. Performance 

evaluation criteria should be TO-specific and tied to contract deliverables, milestones, and 

desired outcomes. 

Management’s Response. The KSC Procurement Director concurred, stating that the 

USTDC CO will require the COTR and TO managers to develop new Technical 

performance evaluation criteria for any new TO issued during the remaining option years 

of the USTDC. Performance evaluation criteria will be TO-specific and tied to contract 

deliverables, milestones, and desired outcomes. The USTDC CO will require the COTR 

and TO managers to maximize the use of objective performance outcomes for Special 

Areas of Emphasis while retaining the flexibility to use subjective evaluation techniques 

where appropriate. Action is to be completed for the unexercised option periods 

beginning October 1, 2010, in accordance with the recommendation. 

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

The recommendation is resolved and will be closed upon completion and verification of 

management’s corrective action. 

 

11The Award Fee Plan identifies contract level metrics used to evaluate the contractor’s performance. 
RESULTS

10 REPORT NO. IG-09-012 

Recommendation 2. The USTDC CO should revise Cost performance metrics to ensure 

that Cost performance evaluation factors assess all direct costs. 

Management’s Response. The KSC Procurement Director concurred, stating that the 

USTDC CO will ensure that Cost performance evaluation factors assess all direct costs. 

Action is to be completed by November 15, 2009. 

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

The recommendation is resolved and will be closed upon completion and verification of 

management’s corrective action. 

Recommendation 3. The USTDC CO should require the contractor to include 

uncompensated hours as a separate line item in the contractor’s monthly financial 

management report. 

Management’s Response. The KSC Procurement Director concurred, stating that the 

USTDC CO will require the contractor to break out uncompensated overtime to a 

separate line in the contractor’s monthly financial management report. Action is to be 

completed by May 15, 2009. 

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

The recommendation is resolved and will be closed upon completion and verification of 

management’s corrective action. 

Recommendation 4. The USTDC CO should require the COTR to identify critical 

performance evaluation factors in the Award Fee Evaluation Report provided to the KSC 

Performance Evaluation Board. 

Management’s Response. The KSC Procurement Director concurred, stating that the 

USTDC COTR will ensure that performance evaluation factors identified in the Award 

Fee Plan as critical are also identified as such in the Award Fee Evaluation Report. 

Action is to be completed by November 15, 2009. 

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

The recommendation is resolved and will be closed upon completion and verification of 

management’s corrective action. 
RESULTS

REPORT NO. IG-09-012 11 

FINDING B: OVERTIME PREMIUM 

COSTS WERE NOT 

ADEQUATELY MONITORED

We determined, based on our analysis of cost data submitted to NASA by the 

contractor from October 2007 through June 2008, that overtime costs were not 

adequately monitored. This occurred because TO managers did not adequately 

monitor overtime hours charged to their TOs. Federal Acquisition Regulation 

(FAR) 16.301-3, “Limitations,” states that a cost-reimbursement contract may be 

used only when the contractor’s accounting system can adequately determine costs 

applicable to the contract and appropriate Government surveillance during the 

performance period will provide reasonable assurance that efficient methods and 

effective cost controls are used. Our review disclosed that KSC paid $136,000 to 

the contractor during the 9-month period of our review for overtime that may not 

have been authorized by the contract. 

Overtime Premium Pay 

Because of the problems we identified with FY 2007 Cost performance evaluation 

factors, as discussed in Finding A, we reviewed cost data submitted to NASA by the 

contractor during FY 2008. Our analysis identified 34 active TOs for FY 2008 that 

included overtime premium pay12 that may not have been authorized by the USTDC. 

Contract Clause 52.222-2, paragraph (a), “Payment for Overtime Premiums,” states that 

overtime premiums are not authorized unless the overtime premium is paid for work that 

meets one of the exceptions in FAR 52.222-2, paragraph (a)(1-4). We attempted to 

verify that the overtime premium paid met one of the exceptions; however, the contractor 

was unable to provide documentation for the overtime premiums in question. Therefore, 

we question the $136,000 in overtime premiums paid to the contractor for the 9-month 

period ending June 2008. 

Contract Clause 52.222-2(a) states: 

[T]he use of overtime is authorized under this contract if the overtime premium does 

not exceed *$0 or the overtime premium is paid for work—(1) Necessary to cope 

with emergencies such as those resulting from accidents, natural disasters, 

breakdowns of production equipment, or occasional production bottlenecks of a 

sporadic nature; (2) By indirect-labor employees such as those performing duties in 

connection with administration, protection, transportation, maintenance, standby plant 

protection, operation of utilities, or accounting; (3) To perform tests, industrial 

processes, laboratory procedures, loading or unloading of transportation conveyances, 

and operations in flight or afloat that are continuous in nature and cannot reasonably 

 

12Premium pay is computed at one and a half times the employee’s labor rate. 
RESULTS

12 REPORT NO. IG-09-012 

be interrupted or completed otherwise; or (4) That will result in lower overall costs to 

the Government. 

* Insert either “zero” or the dollar amount agreed to during negotiations. The inserted figure 

does not apply to the exceptions in paragraph (a)(1) through (a)(4) of the clause.

FAR 22.103-3, “Procedures,” paragraph (c), states that “[w]hen it becomes apparent . . . 

that overtime will be required in contract performance, the contracting officer shall 

secure from the contractor a request for all overtime to be used during the life of the 

contract.” However, the CO stated that because the Defense Contract Audit Agency had 

delegation authority to approve contractor vouchers for provisional payments, he did not 

review contractor vouchers. Therefore, he was unaware that the contractor was receiving 

overtime premium payments. FAR 1.602-2, “Responsibilities,” requires the CO to 

ensure that the contractor complies with terms and conditions in the contract. The CO 

was never notified by either the contractor or any of the TO managers that overtime 

premiums were needed. Only 1 of the 16 TO managers responsible for the 34 TOs stated 

that he was aware that overtime premiums were being charged to his TO. Further, the 

contractor’s monthly financial management report did not identify overtime premium 

hours and costs separately from regular overtime hours. Therefore, the CO and the 

COTR did not have adequate information to provide sufficient oversight in this area. 

Contract Clause 52.222-2(b) states: 

[R]equests for estimated overtime premiums shall: (1) identify the work unit in which 

the requested overtime will be used, together with workload, staffing, and other data 

to permit the Contracting Officer to evaluate the necessity for the overtime; 

(2) demonstrate the effect that denial of the request will have on the contract delivery 

or performance schedule; (3) identify the extent to which approval of overtime would 

affect the performance or payments in connection with other Government contracts; 

and (4) provide reasons why the required work cannot be performed by using multishift operations or by employing additional personnel. 

Recommendations, Management’s Response, and Evaluation of 

Management’s Response 

Recommendation 5. The USTDC CO should require the contractor and TO managers 

to document and request overtime premiums in accordance with USTDC’s Contract 

Clause 52.222-2(b), “Payment for Overtime Premiums,” and FAR 22.103-3(c) 

“Procedures.” 

Management’s Response. The KSC Procurement Director concurred. The USTDC CO 

agreed that overtime premium requirements that do not meet the exceptions found in 

FAR 52.222-2(a) should be documented in accordance with FAR 52.222-2(b). The 

USTDC CO will issue a letter to the contractor calling attention to the contractor’s 

responsibilities under FAR 52.222-2. Action is to be completed by April 1, 2009. 
RESULTS

REPORT NO. IG-09-012 13 

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

The recommendation is resolved and will be closed upon completion and verification of 

management’s corrective action. 

Recommendation 6. The USTDC CO should require the contractor to include overtime 

premium pay hours and costs as separate line items in the contractor’s monthly financial 

management report thereby allowing for better monitoring of Overtime Premium costs in 

accordance with USTDC’s Contract Clause 52.222-2(b), “Payment for Overtime 

Premiums.” 

Management’s Response. The KSC Procurement Director concurred, stating that the 

USTDC CO will require the contractor to include overtime premium pay hours and costs 

as separate line items in the contractor’s monthly financial management report. Action is 

to be completed by May 15, 2009. 

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

The recommendation is resolved and will be closed upon completion and verification of 

management’s corrective action. 

APPENDIXES

REPORT NO. IG-09-012 15 

APPENDIX A 

Scope and Methodology 

We performed this audit from February 2008 through February 2009 in accordance with 

generally accepted government auditing standards. Those standards require that we plan 

and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe that the 

evidence obtained provides a reasonable basis for our findings and conclusions based on 

our audit objectives. 

We interviewed KSC contracting officials, KSC Engineering Directorate officials, KSC 

Office of the Chief Financial Officer officials, USTDC governmental TO managers, and 

ASRC Aerospace Corporation contract employees. We discussed areas related to the 

USTDC and contract modifications, as well as ASRC Aerospace Corporation 

background, contract option years, USTDC TOs, TO processes and costs, contract award 

fee and performance evaluation procedures, and contract employee wages and labor 

hours. 

To evaluate whether ASRC Aerospace Corporation met contract performance standards, 

we initially reviewed the USTDC Statement of Work and Data Requirement Deliverables 

for TO 425. In addition, we reviewed the TO evaluation performance history by 

interviewing the COTR and obtaining the completed FY 2007 TO performance history 

and the first three quarters of FY 2008 performance history from the COTR and USTDC 

Internal Surveillance Reports. The COTR identified 191 TOs that were active at the end 

of FY 2007. Our review of the 191 TOs identified 113 TOs without milestones. Using 

EZ-Quant statistical sampling techniques, we statistically selected 51 of the 113 TOs for 

in-depth review. We interviewed TO managers and reviewed the performance history 

from October 1, 2006, through March 31, 2008, for the 51 TOs in our sample. We also 

reviewed in detail the performance evaluation metrics and factors used for the FY 2007 

award fees and individual TOs and the performance evaluation factors for FY 2008 TOs 

to ensure compliance with NASA award fee guidance. 

To assess the adequacy of performance standards included in TOs under USTDC, we 

reviewed the 51 TOs in our statistical sample and specifically evaluated whether 

deliverables were generic and only provided expertise, support, or services for unspecific 

deliverables. We also interviewed TO managers to determine whether the contractor 

achieved the primary purpose of the TO during its stated period of duration. 

To evaluate whether the USTDC contractor met contract cost performance standards, we 

obtained from the COTR the Award Fee Evaluation Report, the financial management 

report (NASA Form 533M), Cost Performance Evaluation Standards, and Cost Metrics 
APPENDIX A 

16 REPORT NO. IG-09-012 

Report for October 1, 2006, through March 31, 2008. In addition, for the same period, 

we obtained the contractor’s monthly Labor Rate Analysis, Task Order Target Cost Data 

from the Task Order Cost Sheets, and Statement of Indirect Expenses. We also reviewed 

the March 2003 Contract Proposal Volume IV – Cost Proposal and the March 2003 and 

August 2007 Contract Modification 3, Attachment J-5A, Task Order Pricing Schedule. 

We compiled information from all these sources in a database and spreadsheets. We 

applied the metric formulas and the cost performance evaluation standards to determine 

whether the contractor met contract cost performance standards. 

Computer-Processed Data 

We assessed the reliability of ASRC’s computer-generated data by comparing monthly 

payroll data with the monthly NASA Form 533M for the period of October 2007 through 

June 2008 to verify whether the financial report was supported, complete, and accurate. 

We also obtained the USTDC’s June 2008 Project Resource Analysis report, which 

covered October 2007 through June 2008, and compared the data in the report with 

payroll data to determine allocation of TO costs. Further, we compared data from 

MIDAS with the Project Resource Analysis report to verify the TO requirements, plans, 

and funding authority. Finally, we compared data from the USTDC Earned Value 

Management report for the period October 2007 through March 2008 with the Project 

Resource Analysis report to determine whether any TOs exceeded their funding 

authority. We assessed the data as sufficiently reliable, given our research questions, 

verification procedures, and intended use of the data. 

Review of Internal Controls 

We reviewed and evaluated the internal controls associated with documenting TO 

requirements, meeting milestones, and reviewing costs. We found internal control 

deficiencies in all three areas, as discussed in this report. Our recommendations, if 

implemented, should correct the weaknesses we identified. 
APPENDIX A 

REPORT NO. IG-09-012 17 

Prior Coverage 

During the last 5 years, GAO has issued one report of particular relevance to the subject 

of this report: “NASA Procurement: Use of Award Fees for Achieving Program 

Outcomes Should Be Improved” (GAO-07-58, January 17, 2007). The report states that 

approximately half of NASA’s obligated contract dollars for FYs 2002–2004 were for 

cost-plus-award-fee contracts and that NASA generally does not follow the preferred 

approach laid out in its guidance. The report also notes that numerous subfactors may 

dilute the emphasis on any specific criteria. GAO concludes that although NASA’s 

evaluations of contractor performance generally indicate good contractor performance, 

contractor performance did not always translate into desired program outcomes. The 

report also states that NASA has not evaluated the overall effectiveness of award fees and 

does not have metrics in place for conducting such evaluations. Unrestricted reports can 

be accessed over the Internet at http://www.gao.gov (GAO). 
APPENDIX B 

18 REPORT NO. IG-09-012 

MANAGEMENT COMMENTS
APPENDIX B 

REPORT NO. IG-09-012 19 
APPENDIX B 

20 REPORT NO. IG-09-012 
APPENDIX C 

REPORT NO. IG-09-012 21 

REPORT DISTRIBUTION

National Aeronautics and Space Administration Headquarters 

Administrator 

Deputy Administrator 

Chief of Staff 

General Counsel 

Associate Administrator for Institutions and Management 

Kennedy Space Center 

Director 

Director, Engineering Directorate 

Director, Office of Procurement 

USTDC Contracting Officer 

USTDC Contracting Officer’s Technical Representative 

Non-NASA Organizations and Individuals 

Office of Management and Budget 

Deputy Associate Director, Energy and Science Division 

Branch Chief, Science and Space Programs Branch 

Government Accountability Office 

Director, Defense, State, and NASA Financial Management, Office of Financial 

Management and Assurance 

Director, NASA Issues, Office of Acquisition and Sourcing Management 

Congressional Committees and Subcommittees, Chairman and 

Ranking Member 

Senate Committee on Appropriations 

Subcommittee on Commerce, Justice, Science, and Related Agencies 

Senate Committee on Commerce, Science, and Transportation 

Subcommittee on Space, Aeronautics, and Related Sciences 

Senate Committee on Homeland Security and Governmental Affairs 

House Committee on Appropriations 

Subcommittee on Commerce, Justice, Science, and Related Agencies 

House Committee on Oversight and Government Reform 

Subcommittee on Government Management, Organization, and Procurement 
APPENDIX C 

22 REPORT NO. IG-09-012 

Congressional Committees and Subcommittees, Chairman and 

Ranking Member (continued)

House Committee on Science and Technology 

Subcommittee on Investigations and Oversight 

Subcommittee on Space and Aeronautics 
Major Contributors to the Report: 

Raymond Tolomeo, Acting Director, Space Operations Directorate 

Larry Chisley, Project Manager 

Wayne Emberton, Auditor 

Arnold Pettis, Auditor 

Madhu LeFevre, Procurement Analyst 

Elizabeth Shifflett, Editor 

REPORT NO. IG-09-012 23 
MARCH 19, 2009 

REPORT No. IG-09-012 

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