NATIONAL SCIENCE 

FOUNDATION 

Steps Taken to 

Improve Contracting 

Practices, but 

Opportunities Exist to 

Do More 

Report to the Chairman, House 

Appropriations Subcommittee on 

Commerce, Justice, Science, and Related 

Agencies, Committee on Appropriations, 

House of Representatives 

March 2013 

GAO-13-292 

United States Government Accountability Office

GAO 
United States Government Accountability Office

Highlights of GAO-13-292, a report to the 

Chairman, Subcommittee on Commerce, 

Justice, Science, and Related Agencies, 

Committee on Appropriations, House of 

Representatives

March 2013

NATIONAL SCIENCE FOUNDATION 

Steps Taken to Improve Contracting Practices, but 

Opportunities Exist to Do More

Why GAO Did This Study

The NSF spends more than $400 

million of its $7 billion annual budget 

acquiring goods and services in 

support of its mission to promote 

science and engineering. Much of this 

spending involves exploration activities 

in remote locations throughout the 

world, such as the Arctic and Antarctic. 

GAO examined the extent to which 

NSF uses key contracting practices in 

three phases of the acquisition 

process: (a) acquisition planning, (b) 

contract award, and (c) post-award 

contract monitoring. GAO selected and 

reviewed a nongeneralizable sample of 

11 contracts or orders with at least $3 

million in funding obligations for fiscal 

year 2011, which accounted for about 

70 percent of NSF’s total contract 

obligations for that year. Although all 

11 contracts and orders received 

funding during fiscal year 2011, some 

were awarded more than 7 years ago. 

Some were awarded more recently. 

We reviewed each of the 11 contracts 

to determine the extent to which they 

reflected the use of key contracting 

practices based on the Federal 

Acquisition Regulation, our prior work, 

and NSF-OIG findings. GAO also 

reviewed NSF contracting policies and 

met with NSF contracting and program 

officials.

What GAO Recommends

GAO recommends that the Director of 

NSF (1) supplement existing guidance 

on acquisition planning to address the 

time needed for the early stages of the 

process, and (2) arrange for audits to 

be performed on major contracts, 

consistent with the terms of the 

memorandum of understanding with 

NSF-OIG. NSF agreed with the 

recommendations.

What GAO Found

For the contracts GAO reviewed, the National Science Foundation (NSF) 

generally used key contracting practices in each of the three phases of the 

acquisition process, but the agency needs additional guidance on early 

acquisition planning as well as arrangements for contract audits. The three 

phases of the process and key practices are shown in the figure below: 

Key Practices in the Acquisition Process

The contracts GAO reviewed all involved some degree of acquisition planning, 

but NSF’s guidance does not address appropriate time frames for early planning 

activities. Without such guidance, NSF contract and program officials said they 

could not convince their colleagues of the need to initiate early planning 

activities. Delays in these activities can lead to further delays later. For example, 

NSF had to extend one order on a non-competitive basis for more than a year to 

complete planning tasks for the follow-on order. In another case, the delayed 

award of an order compressed the data collection period for a report with firm 

deadlines, which could lead to higher overall costs. Further, having sufficient time 

for early planning may facilitate an increased use of lower risk contracting 

approaches. 

Contract documentation showed that NSF generally followed key practices in the 

award phase. An NSF corrective action plan, in response to NSF’s Office of 

Inspector General’s (NSF-OIG) 2009 financial statement audits, clarifies the 

agency’s procedures for reviewing contractors’ accounting practices and financial 

disclosure statements to better align with key practices. Contract file 

documentation shows NSF improved in this area, with most of the negotiated 

contracts having documentation of accounting system reviews. Further, NSF 

generally documents price reasonableness determinations. 

NSF updated its guidance and took steps to incorporate key contract monitoring 

practices. NSF-OIG’s 2009 financial statement audits recommended that NSF 

obtain incurred cost submissions and audits for its largest cost-reimbursable 

contracts to ensure the validity of costs billed to NSF. Around the same time, the

NSF-OIG and the NSF Office of the Director signed a memorandum of 

understanding (MOU) that provides a process for arranging for contract audits. 

Audits for one of the ocean drilling contracts completed in 2012 resulted in $1.5 

million in recovered funds. The NSF Director and NSF-OIG have both identified

additional audits of this contract as a top priority. However, despite the terms of 

the MOU, and the agreement between NSF and the NSF-OIG on the need for 

further audits, arrangements have not been made to conduct additional audits of 

this contract for more recent fiscal years, according to officials. Similarly, despite 

requests from the contracting officer, NSF has not made arrangements for 

incurred cost audits for another large contract GAO reviewed. 

View GAO-13-292. For more information, 

contact William T. Woods at (202) 512-8214 or 

woodsw@gao.gov.
Page i GAO-13-292 NSF Contracting Practices

Letter 1 

Background 2

Acquisition Planning Practices Conducted to Varying Degrees, but 

NSF Lacks Guidance on Time Needed for Early Planning 

Activities 7

NSF Generally Followed Key Practices in the Award Phase 11

NSF Followed Plans for Monitoring Performance, but Incurred 

Costs Audits Were Not Completed Regularly 12

Conclusions 15

Recommendations for Executive Action 16

Agency Comments and Our Evaluation 16

Appendix I Scope and Methodology 17

Appendix II Comments from the National Science Foundation 20

Appendix III GAO Contact and Staff Acknowledgments 21

Tables

Table 1: Use of Key Practices in the Acquisition Planning Phase for 

the 11 Contracts/Orders Reviewed 7

Table 2: Use of Key Practices in Contract Award Phase for the 11 

Contracts/Orders Reviewed 11

Table 3: Use of Key Practices in Contract Monitoring Phase for the 

11 Contracts/Orders Reviewed 12

Figures

Figure 1: Key Activities in the Acquisition Process 2

Figure 2: Contracting Obligations by Acquisition Method, Fiscal 

Year 2011 4

Figure 3: Acquisition Planning Phases 8

Contents 
Page ii GAO-13-292 NSF Contracting Practices

Abbreviations

CAS Cost Accounting Standards

DACS Division of Acquisition and Cooperative Support

DCAA Defense Contract Audit Agency

FAR Federal Acquisition Regulation

IT Information Technology

MOU Memorandum of Understanding

NSF National Science Foundation

NSF-OIG National Science Foundation Office of Inspector 

 General

T&M Time and Materials

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Page 1 GAO-13-292 NSF Contracting Practices

United States Government Accountability Office

Washington, DC 20548

March 28, 2013

The Honorable Frank Wolf

Chairman, Subcommittee on Commerce, Justice, Science, 

 and Related Agencies

Committee on Appropriations

House of Representatives

Dear Mr. Chairman,

The National Science Foundation (NSF) spends more than $400 million 

annually acquiring the goods and services it needs to carry out its mission 

to promote science and engineering. Much of NSF’s acquisition spending 

involves exploration activities in remote and austere locations throughout 

the world. Our work at several federal agencies has highlighted the 

importance of sound contracting practices—such as adequate time for 

planning, sufficient market research, and effective contract monitoring—

as critical to a strong foundation for successful acquisition outcomes. But 

in recent years, we and others, including the NSF Office of the Inspector 

General (NSF-OIG), have identified various challenges regarding the 

contracting practices at NSF, particularly involving the agency’s use of

cost-type contracts.

You requested that we assess NSF’s contracting practices. Specifically, 

our objective was to assess the extent to which NSF incorporates key 

contracting practices in the three major phases of the acquisition process: 

(a) acquisition planning, (b) contract award, and (c) post-award contract 

monitoring. To do so, we reviewed a nongeneralizable sample of 11

contracts and contract orders with funding obligations of at least $3 

million each in fiscal year 2011, the latest year for which data were 

available when we began our work. We selected contracts and orders to 

reflect a mix of program offices and a variety of contract types, such as 

fixed-price and cost-reimbursement. The sample we used is not 

generalizable to the universe of all contracts at NSF, but the 11 contracts 

and orders represent 70 percent of the total dollars obligated by NSF on 

all its contracts and orders during 2011.1 The 11 contracts and orders 

 

1

One of the contracts we selected based on 2011 obligations had expired and was 

replaced with a new contract awarded in December 2011. To provide a more current 

assessment we reviewed the contract awarded in fiscal year 2012.

 
 

Page 2 GAO-13-292 NSF Contracting Practices

consisted of 4 contracts for which NSF used the negotiation process set 

forth in Part 15 of the Federal Acquisition Regulation (FAR) and 7 orders 

under existing contracts, which involved the use of streamlined 

procedures described in other parts of the FAR. Although all 11 contracts 

were active during the time of our review, some of the selected contracts 

were awarded more than 7 years ago—before NSF updated its 

contracting manual— and some more recently. As more fully described in 

appendix I, we determined the extent to which each of the contracts and 

orders in our sample reflected the use of selected key contracting 

practices. We selected the key practices based on requirements and 

principles in the FAR, practices identified in our prior work, or matters 

raised in NSF-OIG recommendations. In our view, each of the selected 

practices is critical to the foundation of a successful acquisition.

We conducted this performance audit from February 2012 to March 2013 

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.

The acquisition process at federal agencies generally consists of three 

phases: (1) acquisition planning; (2) contract award; and (3) contract 

monitoring. Each phase involves a number of key activities, as shown in 

figure 1:

Figure 1: Key Activities in the Acquisition Process

Background 
 

Page 3 GAO-13-292 NSF Contracting Practices

In the acquisition planning phase, agencies establish their requirements 

and develop a plan to meet those requirements. Both program and 

contracting officials participate in acquisition planning activities.2 During 

this phase, agencies conduct market research to determine what 

products or services are available and on what terms. They select a 

contracting approach best suited to the nature of the acquisition, 

addressing among other things, the availability of existing contracts, 

extent of competition required, and the most appropriate contract type, 

such as cost-reimbursable or fixed-price.

In the award phase, agencies solicit bids, quotes, or proposals from 

prospective vendors, depending on the contracting method selected. In 

negotiated acquisitions, they evaluate the submissions from vendors 

under established evaluation criteria in the solicitation and award a 

contract to the vendor representing the best value to the government, 

based on a combination of technical and cost factors. Agencies follow a 

similar process when ordering from the Federal Supply Schedule, where 

quotes from contractors are evaluated using stated evaluation criteria and 

orders are awarded to the contractor that would provide the best value 

and offers the lowest overall cost alternative.

In the contract monitoring phase, agencies engage in a range of activities 

intended to ensure that the contractor delivers according to the terms of 

the contract. These activities often are described in detail in a contract 

surveillance plan, sometimes called a quality assurance surveillance plan. 

For cost-reimbursement contracts, agencies may arrange for an audit of 

costs incurred by the contractor. These audits may be performed by 

entities such as the agency inspector general or the Defense Contract 

Audit Agency (DCAA).

NSF spends most of its annual budget of about $7 billion to fund grants to 

universities and other research entities, but the agency also spent more 

than $446 million in fiscal year 2011 acquiring goods and services in 

support of its mission. The largest of these acquisitions involved contracts 

for logistics support of scientific missions in the Arctic and Antarctica, as 

well as ocean-drilling projects in various locations. For these types of 

large-scale projects, NSF uses the negotiated contracting procedures of 

 

2

GAO, Acquisition Planning: Opportunities to Build Strong Foundations for Better Services 

Contracts, GAO-11-672 (Washington, D.C.: Aug. 9, 2011); and FAR 7.102.
 

Page 4 GAO-13-292 NSF Contracting Practices

Part 15 of the FAR. NSF uses negotiated contracting methods for about 

66 percent of its contract spending, as shown in figure 2. For another 32 

percent of its contract spending, NSF uses a variety of more streamlined 

contracting methods allowed under the FAR. These include placing 

orders under Federal Supply Schedule contracts awarded by the General 

Services Administration or other pre-existing contracts.3 Placing orders 

under existing contracts is often a more simplified approach than

awarding a new contract. The remaining 1 percent or so of NSF contract 

spending is through various other methods, such as interagency 

agreements with the U.S. Navy for deep sea research vessel certification.

Figure 2: Contracting Obligations by Acquisition Method, Fiscal Year 2011

The Division of Acquisition and Cooperative Support (DACS) at NSF is 

responsible for the solicitation, negotiation, award, and administration of 

 

3

The Federal Supply Schedules program consists of contracts awarded by GSA or the 

Department of Veterans Affairs for similar or comparable goods or services, established 

with more than one supplier, at varying prices. Federal Acquisition Regulation (FAR) § 

8.401 and § 8.402. The program offers a large group of commercial products and services 

ranging from office supplies to information technology services. 
 

Page 5 GAO-13-292 NSF Contracting Practices

the agency’s contracts for NSF’s research facilities and major programs. 

DACS oversees NSF procurement systems, contracts policy, processes 

and guidance. This Division is under the Office of Budget, Finance, and 

Award Management which reports to the Office of the Director. The Office 

of Inspector General provides independent oversight of the agency’s 

programs and operations, including contracts. The NSF-OIG is 

responsible for promoting efficiency and effectiveness in agency 

programs and for preventing and detecting fraud, waste, and abuse. By 

statute, the NSF-OIG is under the general supervision of the National 

Science Board and reports to the Board and Congress.

Much of NSF’s contracting activity is for recurring needs, such as logistics 

support for its facilities in the polar regions, data collection, or surveys. 

For example, the National Survey of Recent College Graduates began in 

1973 and continues today. In our prior work on acquisition planning 

practices, we found that documenting decisions, particularly when there is 

frequent staff turnover, is key to providing insight for subsequent 

contracts. Specifically, we found that documenting cost estimates is 

particularly important to help ensure the information is available when 

planning for follow-on contracts.4 Incorporating lessons learned from prior 

acquisitions can help further refine requirements and strategies when 

planning for future acquisitions.

NSF officials must decide on a contract pricing arrangement for every 

contract or order. The major categories of pricing arrangements NSF 

uses are fixed-price, time-and-materials, and cost-reimbursement. Under 

a fixed-price contract, the government generally pays a firm price and 

may also pay an award or incentive fee related to performance. In a timeand-materials contract or order, the government pays a set amount for 

every hour of service the contractor provides, plus the cost of any 

materials used. Because the number of hours to be provided is 

dependent on a number of factors, this type of contract requires an 

enhanced level of government oversight. When using a costreimbursement contract, the government agrees to reimburse all the 

allowable costs incurred by the contractor as prescribed in the contract. 

These types of contracts can be risky because the government agrees to 

pay for costs incurred regardless of the outcome achieved. Cost-type 

 

4

GAO, Contract Management: Extent of Federal Spending under Cost-Reimbursement 

Contracts Unclear and Key Controls Not Always Used, GAO-09-921 (Washington, D.C.: 

Sept. 30, 2009).
 

Page 6 GAO-13-292 NSF Contracting Practices

contracts that exceed certain dollar thresholds generally are subject to the 

cost allocation rules of the government’s Cost Accounting Standards 

(CAS), and in these cases the contractor generally is required to disclose 

its cost accounting practices in a CAS Disclosure Statement. We 

previously reported on the use of cost-reimbursement contracts at several 

agencies, including NSF, finding that agencies frequently did not 

document why they selected this type of contract.5

Financial statement audits performed by an independent accounting firm 

on behalf of the NSF-OIG for fiscal years 2009 and 2010 identified 

significant deficiencies related to the use and monitoring of costreimbursement contracts at NSF. Specifically, the audits found that NSF 

did not ensure the adequacy of contractor accounting systems prior to 

award or the validity of costs incurred on the contract. In 2011, however, 

the same firm concluded that the concern had been addressed through 

the adoption of new policies and procedures. While we were conducting 

our audit work, NSF was in the process of conducting a self-assessment 

of its acquisition function in accordance with the Office of Management 

and Budget (OMB) Circular A-123. The agency also retained a consulting 

firm to review its self-assessment. In July 2012, the firm issued a report 

summarizing its findings. We did not assess the methodology, findings, or 

conclusions of either the NSF self-assessment or the consulting firm’s 

review. In October 2012, NSF updated its contracting manual to

incorporate a number of changes. For example, NSF reorganized the 

manual to align it with the FAR and added additional guidance to address 

the deficiencies identified in the financial audits. All of the contract 

activities in our review were subject to prior versions of the contracting 

manual.

 

5

GAO-09-921. 
 

Page 7 GAO-13-292 NSF Contracting Practices

The NSF contract files we reviewed reflected the use of selected key 

acquisition planning practices to varying degrees, but the agency has not 

provided guidance on the time needed to complete early planning phase 

activities. Allowing sufficient time to plan procurements may facilitate an 

increased use of lower risk contracting vehicles by providing time for the 

contracting officer to consider including more fixed-priced elements. Our 

observations of the use of some of the key practices for acquisition 

planning activities are summarized in table 1, and explained in more 

detail below.

Table 1: Use of Key Practices in the Acquisition Planning Phase for the 11 

Contracts/Orders Reviewed

Key practices

Negotiated 

acquisitions

Streamlined 

acquisitions

Acquisition 

planning

Acquisition Plan. Comprehensive plan 

for fulfilling the agency need ◐ ◐

Market Research. Collecting and 

analyzing information about capabilities 

within the market

 

Contract Type Rationale. Documents 

the agency’s choice of contract type

◐ ◐

Source: GAO analysis of NSF contract files.

 = Always or almost always used

◐ = Used to some degree

 = Used only to a limited degree or not at all

The acquisitions we reviewed all involved some degree of acquisition 

planning, but the time spent planning and the content of planning 

documents varied. Planning for the negotiated acquisitions ranged from a 

few months to more than 6 years, while many of the streamlined 

acquisitions in our sample had more abbreviated planning periods. 

Contracting and program officials responsible for one program office told 

us they often copy planning documents from predecessor orders to 

compensate for abbreviated planning periods. This practice, however, 

does not allow for incorporation of new guidance or changing contract 

requirements. In addition, some of the individual contract acquisition 

plans for the earlier contracts in our sample did not include details on how 

the agency planned to evaluate the proposals from competing vendors. 

Documenting a decision regarding the plan for proposal evaluation is an 

important component of the acquisition planning phase.

Acquisition Planning 

Practices Conducted 

to Varying Degrees, 

but NSF Lacks 

Guidance on Time 

Needed for Early 

Planning Activities
 

Page 8 GAO-13-292 NSF Contracting Practices

Contracting guidance at NSF does not identify the range of time needed 

to conduct acquisition planning activities for the types of acquisitions 

methods it employs. Currently, the guidance states that the process of 

acquisition planning should begin as soon as a program need is identified 

and it is determined that the need must be met through the use of 

resources from outside the government. The guidance does not provide 

any detail, however, on the expected range of time needed to conduct 

planning activities in the earliest stages of an acquisition when key 

documents are prepared, such as the statement of work and a cost 

estimate.6 Acquisition planning usually occurs in three phases, and while 

NSF has established expected time frames for the latter stages of 

acquisition planning, the agency has not established such expectations 

for the earliest planning phase. Figure 3 depicts what we found at NSF.

Figure 3: Acquisition Planning Phases

Allowing sufficient time to plan procurements may provide agencies a 

better opportunity to clearly define contract requirements, outline source 

selection procedures, conduct market research to support competition, 

estimate costs, and consider opportunities for increased use of lower-risk 

contracting vehicles containing more fixed-priced elements. Conversely, 

the lack of sufficient time for planning may have adverse effects, such as 

unplanned delays. For example, NSF had to extend one streamlined 

order in our review on a non-competitive basis for more than a year and a 

half in order to complete planning tasks for the follow-on order. The 

contracting officer used the additional planning time to conduct the 

analysis needed to incorporate more fixed-priced elements into the new 

order. Planning for the earlier order did not include documentation of a 

 

6

Prior to the October 2012 Acquisition Manual, the “requirements package” was known as 

the “request for contract” package. 
 

Page 9 GAO-13-292 NSF Contracting Practices

price history analysis, which, according to contracting officials, may have 

helped expedite the follow-on planning and was likely due to short 

planning time frames for the earlier order. In another case, the delayed 

award of one of the orders in our review caused a compressed period for 

data collection for a report with firm deadlines. The schedule risk from 

these delays could lead to higher overall costs. Further, officials from two 

program offices told us that they would benefit from knowing an expected 

time range to complete early planning activities. For example, in the 

absence of guidance on the time needed to complete early planning 

activities, program and contracting officials responsible for NSF’s largest 

contract told us they had difficulty convincing their colleagues of the 

appropriate time to initiate contract planning. They added that this 

acquisition required a number of changes before a follow-on contract 

could be awarded—some based on updates to the FAR and some based 

on internal decisions, including the use of a different source selection 

strategy.

Market research is a key element in the acquisition planning phase that 

provides insight into available sources for the acquisition and may provide 

information on estimated costs. We found evidence of market research in 

each of the acquisition plans we reviewed, though the link between the 

research conducted and the impact on the acquisition strategy was not 

always clear. For example, the acquisition plan for one streamlined 

acquisition noted concerns about the lack of offerors for past solicitations. 

The acquisition plan stated that NSF would use the Federal Supply 

Schedule and release the request for quotations to six potential offerors, 

but it did not address how market research impacted this decision. By 

contrast, NSF engaged in extensive planning for its Integrated OceanDrilling Program, including requirements development and market 

research to identify potential sources to support its mission. According to 

officials, this planning, which occurred over about a 5-year period, 

consisted of soliciting interest from more than 30 international institutions 

using various techniques such as market surveys and sources sought 

notices. NSF used this multi-year planning period to set up the funding 

and organizational infrastructure requirements of this complex 

international program.

All of the files we reviewed showed that during the planning phase 

agency officials had addressed how the contract would be priced. 

However, the planning documentation for the cost-reimbursable 
 

Page 10 GAO-13-292 NSF Contracting Practices

acquisitions in our review did not consistently include assessments of the 

additional risk and burden these high-risk contracts place on the agency 

or an assessment of the potential for firmer pricing in future acquisitions.7

Knowing the risk of using a cost-reimbursable contract and identifying 

opportunities to use a less risky contract type after experience provides a 

basis for firmer pricing is a sound practice identified by our prior work, by 

the Department of Defense, and, more recently, in federal regulation.8

Despite the risk associated with cost-type contracts, NSF contracting 

officials did not document their acknowledgment of this risk for an early 

contract for the ocean drilling program or whether they would attempt to 

minimize the future use of a cost-type contracts. Further, in a prior report 

we noted that NSF’s procurements of data collection and analysis 

services for mandated surveys did not consider pricing history and 

whether there was a basis to transition to firmer pricing.9 According to 

NSF officials, when re-awarding these types of survey procurements, staff 

will make an effort to identify tasks to convert to firmer pricing. In fact, a 

contracting officer responsible for the survey-related orders in our sample 

told us he has been conducting analysis to determine what tasks could be 

transitioned to a fixed-price contract type rather than a time-and-materials 

contract type. He stressed that some tasks are less suitable for fixedpricing due to the unknowns and “what ifs” inherent in the work, but his 

goal is to incorporate fixed-pricing into 70 to 80 percent of each survey 

order. We identified examples of this transition to firm fixed-price 

elements in some of NSF’s more recently awarded streamlined 

acquisitions.

 

7

While assessing risk and identifying opportunities to use a less risky contract is a sound 

practice, there was no requirement to document this analysis prior to FAR changes 

effective March 16, 2011. 76 Fed. Reg. 14,543 (interim rule). 77 Fed. Reg. 12,925 (March 

2, 2012) (final rule, effective April 2, 2012)). FAR § 16.103(d).

8

GAO-09-921; GAO, Defense Contracting: Improved Insight and Controls needed Over 

DOD’s Time-and-Materials Contracts, GAO-07-273 (Washington, D.C.: June 29, 2007); 

DOD, September 2004 Defense Procurement and Acquisition Policy Memo, 

Requirements for Service Contracts; and FAR Part 16.

9

GAO-09-921. 
 

Page 11 GAO-13-292 NSF Contracting Practices

Contract documentation for negotiated and streamlined acquisitions 

showed that NSF generally followed key practices in the award phase. 

Table 2 summarizes our findings based on the contracts and orders we 

reviewed.

Table 2: Use of Key Practices in Contract Award Phase for the 11 Contracts/Orders 

Reviewed

Key practices

Negotiated 

acquisitions

Streamlined 

acquisitions

Award

Price 

reasonableness.

Determination that the price 

or cost is fair and reasonable

 

Cost Accounting System 

Review and pre-award 

audits. Help ensure 

contractor’s cost accounting 

systems are adequate

 n/aa

CAS Disclosure 

Statement. Describes 

contractor’s cost accounting 

practices and procedures

 n/a

Source: GAO analysis of NSF contract files.

 = Always or almost always used

◐ = Used to some degree

 = Used only to a limited degree or not at all

n/a = Practice is not required / applicable for this type of acquisition

a

Cost accounting system reviews, pre-award audits, and CAS disclosure statement reviews are not 

applicable to streamlined acquisitions we reviewed.

Most of the contracts in our sample included price reasonableness 

determinations, as outlined in both federal regulation and NSF guidance 

current at the time of our review. For most of the streamlined acquisitions 

we reviewed, NSF documented reasonable price determinations, 

including an analysis of the contractor’s proposed labor hours and the 

level of effort. In one case, contracting staff worked with an offeror to 

obtain lower labor rates that were more in line with the government cost 

estimate. These actions decreased the cost of the order by approximately 

8 percent ($1.2 million).

In recent years, NSF has taken steps to address deficiencies related to 

accounting system and disclosure statement reviews identified in its fiscal 

year 2009 financial statement audits. Specifically, NSF clarified its CAS 

disclosure statement and accounting system review procedures to better 

NSF Generally 

Followed Key 

Practices in the 

Award Phase
 

Page 12 GAO-13-292 NSF Contracting Practices

align with sound practices identified by the NSF-OIG and in federal 

regulation.10 Contract file documentation indicates that NSF has improved 

in this area, with most of the negotiated contracts we reviewed having 

documentation of more recent accounting system and CAS disclosure 

statement reviews, and the most recent contract having documentation of 

pre-award audits of all contractors in the competitive range. One of the 

earlier contracts did not have pre-award audits on file or an accounting 

system review prior to award. NSF officials told us that they did not think 

this requirement applied. In another earlier case, the contracting officer 

waived the requirement for a CAS disclosure statement adequacy 

determination prior to award with the expectation that the determination 

would be made shortly after award. However, NSF did not have 

documentation of the final disclosure statement adequacy determination.

NSF updated its guidance and took steps to incorporate sound practices 

related to contract monitoring, but the agency has not made 

arrangements for audits of some of the larger contracts we sampled. Our 

findings are summarized in table 3.

Table 3: Use of Key Practices in Contract Monitoring Phase for the 11 

Contracts/Orders Reviewed

Key practices

Negotiated 

acquisitions

Streamlined 

acquisitions

Contract 

monitoring

Monitoring Plans. Describe how the 

contract will be monitored  

Monitoring Activities. Help ensure the 

supplies and services acquired under the 

contract conform to requirements

 

Incurred Cost Audits. Help ensure 

direct and indirect costs are allowable 

◐ n/aa

Source: GAO analysis of NSF contract files.

 = Always or almost always used

◐ = Used to some degree

 = Used only to a limited degree or not at all

n/a = Not required/applicable for this type of acquisition

a

Incurred cost audits are not required for the type of streamlined acquisitions we reviewed.

 

10Cost Accounting Standards generally apply to cost-reimbursable contracts above a 

certain dollar threshold. 

NSF Followed Plans 

for Monitoring 

Performance, but 

Incurred Costs Audits 

Were Not Completed 

Regularly 
 

Page 13 GAO-13-292 NSF Contracting Practices

Most of the contracts we reviewed included documentation of surveillance 

plans outlining how NSF would monitor contractor performance and 

costs, although one of the streamlined acquisitions did not have the 

surveillance documents called for in the acquisition plan. Further, we 

found evidence that at least some monitoring activities occurred for all the 

procurements we reviewed, though not always as specified in the 

monitoring plans or using deliverables described in the contract or order. 

For example, the acquisition plan for a large, information technology (IT) 

order states that the contractor shall provide “daily, weekly, and monthly 

progress reports” as well as an IT Management Plan and other ad hoc 

reports as required, with similar requirements reflected in the order. The 

contracting officer for this order was not aware of any daily progress 

reports for this order, and added that the monitoring process for these 

types of acquisitions depends on the quality of the contractor, noting that 

for some contracts with few performance issues, the monitoring is less 

rigorous. In another case, the contracting officer noted that despite the 

statement of work calling for a Quality Assurance Plan, such a plan would 

be too restrictive for an IT support contract due to the frequent changes in 

IT systems.

Our prior reports state that without consistent cost surveillance, such as 

through incurred cost audits, an agency may be exposed to the 

unnecessary risk of overpaying the contractor.11 Further, NSF-OIG’s fiscal 

year 2009 financial statement audits recommended that NSF obtain 

incurred cost submissions and audits for its largest cost-reimbursable 

contracts, depending on materiality and risk, to assure the validity of costs 

billed to NSF. In response, NSF updated its guidance on incurred cost 

audits and took the necessary steps to obtain incurred cost audits for its 

largest contract.

Around the same time, in August 2009, NSF-OIG and the NSF Office of 

the Director signed a memorandum of understanding (MOU) that provides 

procedures to ensure appropriate coordination between the NSF-OIG and 

NSF for the performance and funding of contract audits. The MOU 

indicates that the NSF-OIG will provide, within its resources, appropriated 

 

11GAO-09-921; GAO, DCAA Audits: Widespread Problems with Audit Quality 

Require Significant Reform, GAO-09-468 (Washington, D.C.: Sept. 23, 2009); 

Defense Contracting: DOD Initiative to Address Audit Backlog Shows Promise, 

but Additional Management Attention Needed to Close Aging Contracts, 

GAO-13-131 (Washington, D.C.: Dec. 18, 2012).
 

Page 14 GAO-13-292 NSF Contracting Practices

funds necessary to perform contract audits selected for its annual audit 

plan. The NSF-OIG solicits recommendations from NSF per the MOU and 

prioritizes its annual audit plan based on this input, its own needs, and a 

variety of risk factors. The MOU identifies the following factors the NSFOIG uses to prioritize contract audits: type of contract, materiality, 

whether NSF is the cognizant agency responsible for contractor 

oversight, known prior audit concerns, contract administration at other 

federal agencies, and whether NSF expects to continue to have a 

relationship with the contractor. For audits that NSF determines 

necessary that are not in the NSF-OIG audit plan, the MOU states that 

“NSF will obtain and fund the services of an outside auditor.” The 

contracts branch officials told us that their first option is to ask the NSFOIG to obtain an audit, and if the NSF-OIG does not complete the 

contract audit, the branch tries to obtain alternative funding. NSF officials 

told us, however, that alternate funding requires approval at senior 

management levels, and contracting staff continue relying on the NSFOIG as the primary means for obtaining contract audits.

The NSF Director and NSF-OIG identified the need for incurred costs 

audits of an ocean drilling contract in our sample.12 Despite the MOU, the 

agency has not made arrangements for these audits of the contract. 

Officials stated for earlier years of this contract, the Contracts Branch 

identified and provided funds for the contracting officer to initiate audits 

for this contract through DCAA. According to officials, an audit of a prime 

subcontractor for this contract resulted in $1.5 million in recovered funds. 

But at the time of our review, despite agreement on the importance of 

additional audits, the findings from the prior year’s audits, and NSF’s 

continued relationship with the contractor, the agency had yet to make 

arrangements to plan and fund incurred cost audits for more recent fiscal 

years for this contract, according to officials. Similarly, despite the 

contracting officer requesting incurred cost audits for another major 

contract in our review, the audit did not meet the NSF-OIG priorities. 

According to officials, NSF has not conducted or planned for audits on 

this contract. In addition, audits for another major contract we reviewed 

are not scheduled to be completed until fiscal year 2015, which is about 

two years after the contract expires. In a recent report, we pointed out 

that timely closing of contracts, including completing any necessary 

 

12Incurred cost audits are an important tool that enables management to assess 

a contractor’s compliance with the financial terms and conditions of a contract.
 

Page 15 GAO-13-292 NSF Contracting Practices

incurred cost audits, can help the government limit its financial risk and 

possibly recover improper payments.13

Sound acquisition planning, including cost estimation and identification of 

the most cost-effective contract type, is important to establishing a strong 

foundation for successful outcomes for the millions of dollars NSF spends 

annually on acquisitions. Without sufficient planning time frames to 

develop acquisition plans that align with sound acquisition practices NSF 

may have a limited ability to develop a strong foundation for its 

acquisitions. How long the early acquisition planning activities should take 

is not covered in existing NSF guidance and will vary based on the 

complexity of the acquisition. However, without a clear understanding of 

the time frames needed for the early acquisition planning process, 

program officials may not know when to start planning or how long the 

planning will take, potentially increasing the likelihood of poorly prepared 

documents and contract delays. Better insights into when acquisition 

planning should begin would help ensure sufficient time to carry out the 

important acquisition planning activities that are designed to facilitate 

more successful outcomes.

When an acquisition involves substantial uncertainties and the agency 

deems a cost-type contract as the most appropriate vehicle, contract and 

program staff need to provide additional oversight to protect the 

government’s interests. NSF has taken steps to address NSF-OIG 

recommendations to increase contract oversight. NSF has a management 

responsibility to ensure that adequate resources are available to enable 

contracting officers to determine that costs billed by contractors are 

allowable, through incurred cost audits or similar assessments. The 

process in place to ensure the necessary audits occur requires 

coordination between the NSF-OIG and the NSF Office of the Director; 

however, the process has not worked for some of the contracts we 

reviewed. Further, the Contracts Branch continues to place a strong 

reliance on the NSF-OIG to provide the resources to obtain the audits.

Without a process to ensure audits are conducted in cases when NSFOIG resources are not available, NSF exposes itself to unnecessary risk 

and cannot assure the validity of costs billed.

 

13GAO-13-131. 

Conclusions 
 

Page 16 GAO-13-292 NSF Contracting Practices

We recommend that the Director of NSF take the following two actions:

• To help ensure good acquisition outcomes through comprehensive 

acquisition planning, direct DACS to supplement existing guidance on 

the time frames for acquisition planning to include a focus on the early 

stages. 

• Consistent with the terms of the existing MOU with the Office of the 

Inspector General, take steps to arrange, and fund as necessary, 

timely audits of major contracts.

We provided a draft of this report to NSF for review and comment. In 

written comments, NSF agreed with our recommendations. NSF also 

provided technical comments, which we incorporated as appropriate. NSF 

comments are reprinted in appendix II.

We are sending a copy of this report to the Director of the National 

Science Foundation. In addition, the report is also available at no charge 

on the GAO Web site at http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-4841 or WoodsW@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on 

the last page of this report. GAO staff who made key contributions to this 

report are listed in appendix III.

Sincerely yours,

William T. Woods

Director, Acquisition and Sourcing Management

Recommendations for 

Executive Action

Agency Comments

and Our Evaluation
Appendix I: Scope and Methodology

Page 17 GAO-13-292 NSF Contracting Practices

As requested by the Subcommittee on Commerce, Justice, Science, and 

Related Agencies, House Committee on Appropriations, we reviewed the 

National Science Foundation’s (NSF) contracting practices. Specifically, 

we assessed the extent to which the NSF incorporates key contracting 

practices in the three major phases of the contracting process: (a) 

acquisition planning, (b) contract award, and (c) post-award contract 

monitoring.

Within each contracting phase, we focused our work on selected 

elements:

• Acquisition planning. We focused on the completeness and review of 

written acquisition plans, market research, contract type 

determinations, and time frames for planning. We selected these 

elements because they are critical to the successful planning of a 

contract and, in one case, had been identified in the past by the NSF 

Office of the Inspector General (NSF-OIG) as a potential concern.

• Contract award. We focused on cost and price analyses, cost 

accounting system reviews and pre-award audits, and Cost 

Accounting Standards (CAS) Statement reviews. We selected these 

elements because they were identified by the NSF-OIG as 

deficiencies in the past and are essential to determining that the 

contractor has the ability to complete the contract cost requirements.

• Contract monitoring. We focused on the development of monitoring or 

surveillance plans, monitoring activities, and incurred cost audits. 

These activities were previously identified by the NSF-OIG as 

deficiencies and are key to determining if the contractor is performing 

as expected and within allowable costs.

To determine key practices in each of these areas, we relied on prior 

reports and findings from the GAO, NSF-OIG, and other agencies. Below 

is the list of GAO reports we relied on:

• GAO, Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999);

• GAO, Contract Management: Trends and Challenges in Acquiring 

Services, GAO-01-753T (Washington, D.C. May 22, 2001);

• GAO, Defense Contracting: Improved Insight and Controls needed 

Over DOD’s Time-and-Materials Contracts, GAO-07-273

(Washington, D.C.: June 29, 2007);

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 18 GAO-13-292 NSF Contracting Practices

• GAO, Contract Management: Extent of Federal Spending under CostReimbursement Contracts Unclear and Key Controls Not Always 

Used, GAO-09-921(Washington, D.C.: Sept. 30, 2009); and

• GAO, Acquisition Planning: Opportunities to Build Strong Foundations 

for Better Services Contracts, GAO-11-672 (Washington, D.C.: Aug. 

9, 2011).

We also reviewed internal NSF guidance and the Federal Acquisition 

Regulation (FAR) for additional key practices.

To determine the extent to which NSF’s contracting practices incorporate 

key practices and address prior NSF-OIG recommendations, we reviewed 

a nongeneralizable sample of 11 contracts and orders with funding 

obligations over $3 million in fiscal year 2011, the latest year for which 

data were available when we began our work.14 We used a risk-based 

approach to select our sample to ensure it included NSF acquisitions with 

the highest obligation dollar amount. The 11 contracts and orders 

selected for review represent 70 percent of total contract obligations in 

fiscal year 2011 and reflect a mix of program offices, a range of obligation 

amounts, and a variety of contract types, such as fixed-price and costreimbursement. We selected four contracts for which NSF used the 

negotiation process set forth in Part 15 of the Federal Acquisition 

Regulation and seven orders on existing contracts for which NSF used 

streamlined procedures described in other parts of the FAR. The four 

negotiated acquisitions in our sample are cost-reimbursement contracts 

and represent about 56 percent of NSF’s total fiscal year 2011 contract 

obligations and about 80 percent of the obligations in our sample. The 

seven streamlined acquisitions represent about 14 percent of NSF’s fiscal 

year 2011 contract obligations and 20 percent of the obligations in our 

sample. One of the seven streamlined orders is a hybrid contract type 

using fixed-price and time-and-materials (T&M) elements; one is a costreimbursable order; and the other five are T&M orders. Although the 11 

contracts were active during the time of our review , some of the selected 

contracts were awarded more than 7 years ago—before NSF updated its 

contracting manual to provide more procedural guidance— and some 

more recently.

 

14One of the contracts we selected based on 2011 obligations had expired and was 

replaced with a new contract awarded in December 2011. To provide a more current 

assessment we reviewed the contract awarded in fiscal year 2012.
Appendix I: Scope and Methodology

Page 19 GAO-13-292 NSF Contracting Practices

We reviewed the files for the selected contracts and used practices 

identified in the FAR, NSF internal guidance, and prior GAO reports to 

assess NSF’s use of key practices and procedures for the acquisition 

planning, award, and contract monitoring phases. In addition to contract 

file review, we met with contract and program officials to confirm our 

understanding of information in the contract files and of NSF’s practices 

and procedures as evidenced by the contract files. We also reviewed and 

considered additional documentations provided by the program and 

contract officials that were not maintained in the contract files.

To assess progress NSF made in response to prior NSF-OIG findings, we 

reviewed prior NSF-OIG recommendations and corrective action plans. 

We met with NSF-OIG officials to better understand their 

recommendations related to our review and used this information to 

provide assessments of progress made in response to these findings.

NSF was in the process of a full acquisition system assessment when we 

initiated our review. While we were completing our audit work, NSF 

issued a review of its acquisition function in July 2012. While we met with 

the internal controls officials involved in this review to understand their 

process, we did not assess the NSF review as part of this review.

We conducted this performance audit from February 2012 to March 2013 

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.
Appendix II: Comments from the National 

Science Foundation

Page 20 GAO-13-292 NSF Contracting Practices

Appendix II: Comments from the National 

Science Foundation
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 21 GAO-13-292 NSF Contracting Practices

William T. Woods, (202) 512-4841 or woodsw@gao.gov

In addition to the contact named above, Penny Berrier, Assistant Director, 

Caryn Kuebler, Margaret Childs, Danielle Greene, Jeffrey Hartnett, Julia 

Kennon, Jean McSween, Emily Owens, Ken Patton, Erin Schoening, 

Roxanna Sun, and Alyssa Weir also made key contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(121038)
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