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GAO-11-553R: United States Government Accountability Office: Washington, DC 20548: May 26, 2011: Congressional Requesters: Subject: Reimbursable Space Act Agreements: NASA Generally Adhering to Fair Reimbursement Controls, but Guidance on Waived Cost Justifications Needs Refinement: Over the last few years, the National Aeronautics and Space Administration (NASA) has increasingly relied on its authority under the Space Act of 1958 to enter into agreements, commonly referred to as Space Act agreements (SAA), to stimulate private sector development of systems capable of transporting cargo and crew to the International Space Station and to assist partner firms in developing their technologies.[Footnote 1] Reimbursable Space Act agreements involve the use of NASA's facilities, personnel, or equipment primarily for the benefit of the agreement partner. NASA undertakes reimbursable work when it has unique goods, services, or facilities which can be made available to another party in a manner that does not interfere with NASA mission requirements and is consistent with the agency's mission. According to NASA guidance, the agency generally collects full reimbursement for costs associated with a reimbursable agreement. These types of agreements are known as fully reimbursable SAAs. However, NASA can accept less than full reimbursement in certain instances, such as when the reimbursement is fair and reasonable when compared to the benefits NASA receives from the work. When NASA waives costs under a reimbursable SAA, NASA guidance refers to this as a partially reimbursable SAA. At the time of our review, NASA had established internal controls to help ensure it is obtaining fair reimbursement under these agreements and partners' activities do not interfere and are in alignment with the agency's mission. These controls included developing a cost estimate, obtaining required approvals from financial and legal officials, documenting the rationale for waiving costs, inserting a non-interference clause in all agreements, and describing in the purpose section of each fully reimbursable agreement how the work to be performed aligns with NASA's mission. In response to your request, we reviewed reimbursable agreements to identify the internal controls NASA has in place and assess the extent to which the agency is adhering to its controls related to 1) fair reimbursement from agreement partners and 2) ensuring partner use is consistent with NASA's mission and reimbursable Space Act agreements do not interfere with NASA's use of its facilities.[Footnote 2] We provided your offices a draft copy of the enclosed briefing on April 26, 2011. This letter formally transmits the detailed briefing slides (see enclosure I) prepared in response to your request. Scope and Methodology: To identify controls in place and assess the extent to which NASA is adhering to controls related to fair reimbursement, we analyzed all 44 partially reimbursable agreements awarded in fiscal years 2009 and 2010 as identified in the Space Act Agreement Maker (SAAM) database, including the agreement, estimated price report, and justification for waived costs. These agreements were located at five NASA centers (Glenn, Johnson, Kennedy, Langley, and Marshall). We reviewed estimated price reports for each partially reimbursable agreement, but did not validate the inputs to the cost estimate, including labor and indirect cost rates. To identify controls in place and assess the extent to which NASA is adhering to controls to help ensure alignment with NASA's mission and to minimize interference, we reviewed laws and strategic planning documents and analyzed all 34 fully reimbursable agreements awarded in fiscal year 2010 that involved the use of facilities at three NASA centers (Ames, Glenn, Marshall) and one test facility (White Sands Test Facility) as identified in the SAAM database. These centers and test facility were selected because they accounted for the highest dollar value for this type of agreement. For both objectives, we also reviewed NASA policies and procedures for reimbursable SAAs, conducted site visits to three NASA centers, and interviewed NASA officials. Additional information on our scope and methodology is provided on pages 8 to 10 of the enclosed briefing slides. We conducted this performance audit from July 2010 to May 2011 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. Summary: At the time of our review, NASA had requirements and controls in place related to fair reimbursement on Space Act agreements and was generally adhering to those controls. Unclear guidance in place at the time of our review, however, may have contributed to variation in the level of detail and format for waived cost rationales. In December 2010, NASA published an interim directive that increased oversight and provided additional guidance for determining when it is appropriate to waive costs. Partner activities appear to be consistent with NASA's mission and NASA is adhering to its internal controls to prevent interference with NASA's mission activities. Several other factors, such as a small amount of partner work at top utilized facilities and relatively open schedules to accommodate partner work at most facilities we reviewed, also help to ensure that Space Act agreement activities do not interfere with NASA work. Although NASA is generally adhering to its requirements and internal controls regarding fair reimbursement, alignment with NASA's mission, and preventing interference, the policy in place at the time of our review and the interim directive do not specify the type of information to include in the waived cost rationale or justification. In the current fiscal environment, it is important to fully and consistently document the rationale for waiving costs associated with work for NASA partners. This could help the agency ensure, in all cases, that waiving costs is fair and reasonable when compared to the benefits NASA is receiving. Although the existing mission and interference controls appear to be effective under the current state of demand placed on NASA facilities, should the level of demand materially change, NASA may have to re-evaluate its approach to managing partners' use of its facilities. We are recommending that the Administrator of NASA refine the agency's interim directive to clearly define the type of information that is required to support the waived cost rationale or justification. This type of information may include documenting that there is a clear and demonstrated benefit to NASA and quantifying the benefit to the extent practicable. Agency Comments: We provided a copy of the draft report to the National Aeronautics and Space Administration for comment and the agency agreed with our overall findings and concurred with our recommendation. In its comments, the agency stated that it is in the process of reviewing procedural requirements, including refining reporting requirements to better support the rationale or justification for waived costs in the estimated price reports. The agency also provided technical comments which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees. We are also sending a copy to the NASA Administrator. This report will also be available at no charge on the GAO Web site at [hyperlink, http://www.gao.gov]. Should you or your staff have any questions concerning this report, please contact me at (202) 512-4841 or chaplainc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. Key contributors to this report include Shelby S. Oakley, Assistant Director; Jeffrey Hartnett; Morgan Delaney Ramaker; Laura Greifner; Jean McSween; Megan Porter; Andrew Redd; Swati Thomas; and Alyssa Weir. Signed by: Cristina T. Chaplain: Director: Acquisition and Sourcing Management: Enclosures-2: List of Requesters: The Honorable Kay Bailey Hutchison: Ranking Member: Committee on Commerce, Science, and Transportation: U.S. Senate: The Honorable Bill Nelson: Chairman: Subcommittee on Science and Space: Committee on Commerce, Science, and Transportation: U.S. Senate: The Honorable Ralph M. Hall: Chairman: The Honorable Eddie Bernice Johnson: Ranking Member: Committee on Science, Space, and Technology: House of Representatives: [End of section] Enclosure I: Briefing Slides: Reimbursable Space Act Agreements: NASA Generally Adhering to Fair Reimbursement Controls, but Guidance on Waived Cost Justifications Needs Refinement: Briefing to Congressional Committees: May 26, 2011: For more information, contact Cristina Chaplain; 202-512-4841; chaplainc@gao.gov. Contents: * Introduction; * Reporting Objectives; * Background; * Scope and Methodology; * Summary; * Objective 1 — Fair Reimbursement; * Objective 2 — Mission and Interference; * Conclusions; * Recommendations for Executive Action. Introduction: Over the last few years, the National Aeronautics and Space Administration (NASA) has increasingly relied on its authority under the Space Act of 1958 to enter into agreements, commonly referred to as Space Act agreements (SAA), to stimulate private sector development of systems capable of transporting cargo and crew to the International Space Station and to assist partner firms in developing their technologies.[Footnote 3] Reimbursable Space Act agreements involve the use of NASA's facilities, personnel, or equipment primarily for the benefit of the agreement partner. NASA undertakes reimbursable work when it has unique goods, services, or facilities which can be made available to another party in a manner that does not interfere with NASA mission requirements and is consistent with the agency's mission. Agreement partners are usually required to reimburse NASA for the full cost of these services. However, NASA can accept less than full reimbursement in certain instances, such as when the reimbursement is fair and reasonable when compared to the benefits NASA receives from the work. NASA has established internal controls to help ensure it is obtaining fair reimbursement under these agreements and partners' activities do not interfere and are in alignment with the agency's mission. Reporting Objectives: We were asked to review reimbursable Space Act agreements to identify the internal controls NASA has in place and the extent to which the agency is adhering to its controls related to: 1) Fair reimbursement from agreement partners and; 2) Ensuring partner use is consistent with NASA's mission and reimbursable SAAB do not interfere with NASA's use of its facilities. Background: NASA was given authority to enter into other transactions, commonly referred to as Space Act agreements, through the National Aeronautics and Space Act of 1958. One type of SAA is a reimbursable agreement[Footnote 4]: * Reimbursable agreements-NASA's costs associated with the undertaking are reimbursed by the agreement partner. As outlined in NASA policy,[Footnote 5] NASA may undertake reimbursable agreements when it has unique goods, services, or facilities not being fully utilized to meet mission needs, which can be made available to others in a manner that does not interfere and is consistent with NASA mission requirements. NASA has generally benefited from the work conducted under reimbursable SAAs as these agreements can provide useful programmatic knowledge and data for research and they help maximize the use of underutilized facilities and staff. According to NASA guidance, the agency generally collects full reimbursement for costs associated with a reimbursable agreement. These types of agreements are known as fully reimbursable SAAs. NASA can accept less than full reimbursement when required by statute, NASA's market pricing policies are applicable,[Footnote 6] or if the reimbursement is fair and reasonable when compared to the benefits NASA receives from the work. When NASA waives costs under a reimbursable SAA, NASA guidance refers to this as a partially reimbursable SAA. NASA has delegated the authority to enter into reimbursable agreements to its centers. Centers are able to waive either direct or indirect costs. * Direct costs include civil service salaries and benefits for employees who work directly on the project, and travel and material directly related to the reimbursable project. * Indirect costs are costs that are not specifically identifiable with any specific project; these include personnel, travel, materials, and other goods and services necessary to manage and operate the center (i.e., overhead costs). Overhead costs are calculated by multiplying direct costs by an established rate.[Footnote 7] Centers have different approaches to waiving direct and indirect costs. * For example, Glenn Research Center generally only waives direct costs. Langley Research Center waives overhead costs associated with waived direct costs. Examples of fully reimbursable work reviewed: * A commercial firm obtained services from NASA's Marshall Space Flight Center to conduct testing of an advanced coating technology, a single-layer corrosion preventative compound. * A commercial firm entered into an agreement with NASA's Glenn Research Center for use of NASA's Icing Research Tunnel to evaluate system performance of an aircraft deicing system. Examples of partially reimbursable work reviewed: * A federal agency partnered with NASA's Glenn Research Center to conduct testing that would assess the performance of elevon shaft seals. NASA waived costs in this case because the work helped NASA maintain key competencies in the area of high temperature seal development and testing. * A university collaborated with NASA's Johnson Space Center to conduct testing on the effects of collisions on cometary matter. NASA waived costs in this case because the work assisted NASA in better analyzing data retrieved from the Stardust and Deep Impact missions. Scope and Methodology: To identify controls in place and assess the extent to which NASA is adhering to controls related to fair reimbursement, we: * Reviewed NASA policies and procedures for reimbursable SAAB. * Analyzed supporting documentation for all 44 partially reimbursable agreements awarded in fiscal years 2009 and 2010 as identified in the Space Act Agreement Maker (SAAM) database, including the agreement, estimated price report, and justification for waived costs.[Footnote 8] These agreements were located at five NASA centers (Glenn, Johnson, Kennedy, Langley, and Marshall). We reviewed estimated price reports for each partially reimbursable agreement, but did not validate the inputs to the cost estimate, including labor and indirect cost rates. * Conducted site visits and interviewed relevant officials at Marshall Space Flight Center, Glenn Research Center, and Johnson Space Center. We held teleconferences with relevant officials at Kennedy Space Center and obtained written responses from officials at Langley Research Center. * Conducted analysis based on the data collected in our review to determine the total amount of waived costs, type of work conducted, and type of agreement partner. * Collected data from centers in our review regarding fiscal year 2010 total reimbursable awards and center budgets. To identify controls in place and assess the extent to which NASA is adhering to controls to help ensure alignment with NASA's mission and to minimize interference, we: * Reviewed relevant laws and strategic planning documents to describe NASA's mission and NASA policies and procedures for reimbursable SAAs. * Analyzed supporting documentation, such as the agreement, for all 34 fully reimbursable agreements awarded in fiscal year 2010 that involved the use of facilities at three NASA centers (Ames, Glenn, Marshall) and one test facility (White Sands Test Facility) as identified in the SAAM database.[Footnote 9] These centers were selected because they accounted for the highest dollar value for this type of agreement. Agreements we reviewed comprised 87 percent ($10.1 million of $11.6 million) of fully reimbursable business that included the use of NASA facilities. * Contacted 17 major NASA program customers who used the same facilities as those in our review about their ability to test on schedule in fiscal year 2010. * Obtained list of top utilized facilities and information on SAA activity at these facilities in fiscal year 2010 from three NASA centers and one test facility in our review. * Conducted site visits and interviewed relevant officials at Glenn Research Center and Marshall Space Flight Center. * Obtained written responses from relevant officials at Ames Research Center and White Sands Test Facility, and remaining contacts at Glenn and Marshall. We assessed the reliability of the SAAM database by (1) performing electronic testing of required data elements, (2) reviewing existing information about the data and the system that produced them, and (3) interviewing agency officials knowledgeable about the data. We determined that the data were sufficiently reliable for the purposes of this report. Additional data on the 78 agreements we reviewed can be found on pages 39 to 49. We conducted this performance audit from July 2010 to May 2011 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. Table 1: Total and Waived Costs for Partially Reimbursable Agreements Awarded in FY 2009 and 2010: Center[A]: Glenn Research Center (11); Total full cost: $3,579,559; Total waived costs[B]: $1,011,515; Total waived-direct: $921,850; Total waived-indirect: $89,665; Waived as percentage of total: 28%. Center[A]: Johnson Space Center (5); Total full cost: $1,319,078; Total waived costs[B]: $228,792; Total waived-direct: $107,945; Total waived-indirect: $120,847; Waived as percentage of total: 17%. Center[A]: Kennedy Space Center (1); Total full cost: $209,777; Total waived costs[B]: $25,277; Total waived-direct: $0; Total waived-indirect: $25,277; Waived as percentage of total: 12%. Center[A]: Langley Research Center (23); Total full cost: $27,193,464; Total waived costs[B]: $15,614,089; Total waived-direct: $13,152,388; Total waived-indirect: $2,461,701; Waived as percentage of total: 57%. Center[A]: Marshall Space Flight Center (4); Total full cost: $2,117,478; Total waived costs[B]: $1,035,978; Total waived-direct: $915,014; Total waived-indirect: $120,964; Waived as percentage of total: 49%. Center[A]: Total (44) Total full cost: $34,419,356; Total waived costs[B]: $17,915,651; Total waived-direct: $15,097,197; Total waived-indirect: $2,818,454; Waived as percentage of total: 52%. Source: GAO analysis based on NASA data. [A] There were 44 partially reimbursable Space Act agreements awarded in total. The number in parentheses represents the number of agreements reviewed at each NASA center. [B] Total waived costs include those instances where NASA agreed to share costs with the agreement partner. [End of table] Table 2: Fully Reimbursable SAAs Using NASA Facilities Awarded in FY 2010: Center[A]: Ames Research Center (4); Reimbursed cost: $2,155,265; Percentage of reimbursed cost: 19%. Center[A]: Glenn Research Center (14); Reimbursed cost: $4,304,810; Percentage of reimbursed cost: 37%. Center[A]: Marshall Space Flight Center (13); Reimbursed cost: $1,808,572; Percentage of reimbursed cost: 16%. Center[A]: White Sands Test Facility (3); Reimbursed cost: $1,839,500; Percentage of reimbursed cost: 16%. Center[A]: Remaining Centers and Wallops Flight Facility (14); Reimbursed cost: $1,509,044; Percentage of reimbursed cost: 13%. Center[A]: Total (48); Reimbursed cost: $11,617,191; Percentage of reimbursed cost: 100%. Source: GAO analysis based on NASA data. Note: Percentages do not add to 100 due to rounding. [A] We reviewed 34 fully reimbursable SAM involving use of facilities at Ames, Glenn, Marshall, and White Sands-which accounted for 87 percent of the fully reimbursable business involving the use of facilities in FY 2010. We did not include 14 fully reimbursable SAAs involving the use of facilities at other NASA centers and Wallops Flight Facility in our review because of low cumulative dollar value of relevant agreements at these centers. [End of table] Summary: Findings: * NASA has controls in place related to fair reimbursement for SAAB and is generally adhering to those controls. * Unclear guidance in place at the time of our review may have contributed to variation in the level of detail and format for waived costs. * Partner activities appear to be consistent with NASA's mission and NASA is adhering to its internal controls to prevent interference. * Several factors also help to ensure that SAA activities do not interfere with NASA work. Conclusion: * NASA is generally adhering to its internal controls regarding fair reimbursement, alignment with NASA's mission, and preventing interference. * In the current fiscal environment, it is important to fully and consistently document the rationale for waiving costs associated with work for NASA partners to help the agency ensure, in all cases, that waiving costs is fair and reasonable when compared to the benefits NASA is receiving. * Based on the current state of demand placed on NASA facilities, the agency's internal controls appear to prevent interference while ensuring alignment with its mission. Should the level of demand materially change, NASA may have to reevaluate its approach to managing partners' use of its facilities. Recommendations: * We recommend that NASA refine its policy to clearly define the type of information required to support the rationale or justification for waived costs. This type of information may include documenting that there is a clear and demonstrated benefit to NASA and quantifying the benefit to the extent practicable. Objective 1--Fair Reimbursement: At the time of our review, NASA had controls in place in order to help ensure it received fair reimbursement on SAAs: * These controls were based on NASA policies and included: 1) Estimated Price Reports--included cost estimates that generally identify direct labor, travel, procurement, and overhead costs. [Footnote 10] 2) Required approvals--obtained from the Center Chief Financial Officer and legal officials.[Footnote 11] 3) Rationale for waived costs.[Footnote 12] Most agreements we reviewed generally adhered to the internal controls regarding fair reimbursement, but unclear NASA policy in place at the time of our review may have contributed to variation in the detail and format of waived cost rationales at the centers: * An estimated price report was prepared for all agreements. * Required approvals were obtained from the Center Chief Financial Officer and legal officials for all agreements. * Most of the agreements we reviewed provided documentation for the rationale for waived costs. However, the detail supporting and format for documenting the rationale varied within and among the centers in our review. By adhering to internal controls, NASA helps to ensure all partially reimbursable work was appropriate for the agency to conduct, such as providing a direct benefit to the agency. NASA's procedural requirements that were applicable to agreements in our review state that the Center Chief Financial Officer is required to maintain records of all reimbursable agreements, including estimated costs, waived costs, and the rationale for the waiver. The policy in place at the time of our review did not specify the type of information which should be included in the rationale, nor did it define the format for documenting the rationale for waived costs. For example, the estimated price report instructions did not clarify that this information should be included in the estimated price report. This unclear NASA policy may have contributed to variation in the detail and format of waived cost rationales at the centers. The detail included in the rationale may have varied based on the format used for documenting the rationale for waived costs. * For example, Glenn Research Center uses a memo template which requires an explanation of the benefits the agency will receive and how the work aligns with NASA's best interest. - "NASA's Hypersonics Project is interested in turbine-based combined- cycle propulsion systems for access to space application. Furthermore, joint efforts such as this one enable Fundamental Aeronautics Program projects access to system level data critically needed to validate the computational analysis and design tools being developed under the projects." Some rationales that were included as part of an estimated price report did not directly explain the rationale for the waiver. * For example, one Langley Research Center estimated price report simply stated: NASA's waived costs for this project include civil service salary and benefits, travel, a portion of material costs, plus all direct costs from the 40-hour 14 x 22 wind tunnel test. * An estimated price report from Marshall Space Flight Center simply stated: The money that the agreement partner will pay NASA is recovering housing costs for the percentage of non-NASA work that the agreement partner has won. Table 3: Number of Times in Which Various NASA Centers Formats Were Used to Document Waived Cost Rationales at Five NASA Centers: Center: Glenn Research Center (11); Memo to file: 11; Estimated price report: 0; Body of agreement: 0. Center: Johnson Space Center (5); Memo to file: 2; Estimated price report: 0; Body of agreement: 3. Center: Kennedy Space Center (1); Memo to file: 1; Estimated price report: 0; Body of agreement: 0. Center: Langley Research Center (23); Memo to file: 0; Estimated price report: 23; Body of agreement: 0. Center: Marshall Space Flight Center (4); Memo to file: 2; Estimated price report: 2; Body of agreement: 0. Source: GAO analysis based on NASA data. [End of table] In December 2010, the agency published a NASA interim directive for reimbursable agreements that increased oversight and provided additional guidance for determining when it is appropriate to waive costs.[Footnote 13] 1) Headquarters Office of the Chief Financial Officer must review agreements in which NASA centers waive direct costs (costs involving labor, travel, or procurement specifically identified with that agreement). 2) The policy has updated guidance to further explain that cost waivers can only be considered where there is a clear and demonstrated benefit to the agency and the benefit must be quantifiable to the extent that it can be reasonably estimated. For example, valid criteria for cost waivers fall into several categories: * benefits directly related to NASA's mission, * maintenance or improvement of NASA capabilities or facilities, and, * collaborative efforts between NASA and other entities. The interim directive better defines when it is appropriate to waive costs, but it does not specify the type of information to include in the justification. Given NASA's new interim policy requirements for review by the Headquarters' Chief Financial Officer, full and consistent documentation of the rationale for waiving costs is important to facilitate the review process and help NASA ensure it receives fair reimbursement from agreement partners. [End of Objective 1] Objective 2--Mission and Interference: NASA's Space Act Agreement Guide[Footnote 14] outlines the following steps to ensure that SAA work is in alignment with NASA's mission: * The purpose section of each fully reimbursable agreement needs to describe how the activity is consistent with NASA's mission. * As part of the preliminary review process for SAA activities that could have a significant impact on the agency's mission, abstracts outlining proposed SAA activities should include a description of how activities support NASA's mission.[Footnote 15] Table 4: NASA Goals and Objectives Supported by Fully Reimbursable Agreements: 1. Advance knowledge in the fundamental disciplines of aeronautics, and develop technologies for safer aircraft and higher capacity airspace systems; 2006 NASA Strategic Plan, Strategic Sub-Goal 3E. 2. The development and operation of vehicles capable of carrying instruments, equipment, supplies, and living organisms through space; Section 102(c)(3) of the National Aeronautics & Space Act of 1958. 3. Understand the effects of the space environment on human performance, and test new technologies and countermeasures for long- duration human space exploration; 2006 NASA Strategic Plan, Strategic Sub-Goal 3F. 4. Establish a lunar return program having the maximum possible utility for later missions to Mars and other destinations; 2006 NASA Strategic Plan, Strategic Goal 6. 5. Cooperation with Public Agencies; Section 203(c)(6) of the National Aeronautics & Space Act of 1958 (as amended). Source: GAO analysis based on NASA data. [End of table] Partner activities under all 34 agreements we reviewed are consistent with NASA's mission.[Footnote 16] For example: * At Ames Research Center, the commercial partner utilized NASA's B747 flight simulator for crew training and to collect data for aviation safety research. This work is related to NASA's goal to develop technologies for safer aircraft. * At White Sands Test Facility, a federal partner used NASA's propulsion test stand to conduct rocket engine testing. This work supports NASA's goal to develop vehicles capable of carrying instruments or equipment through space. * At Glenn Research Center, a commercial partner utilized the Portable Unit for Metabolic Analysis (PUMA) and calibration systems to support development of a technology that may be used to monitor astronaut health in space based environments. This work supports NASA's goal to understand effects of the space environment on human performance. As outlined in NASA's Policy Directive[Footnote 17] and Space Act Agreement Guide, NASA has controls in place to help ensure reimbursable activities do not interfere with the use of its facilities: 1) All reimbursable agreements must provide that NASA has priority of use. The sample clause in the guide explains that NASA can put its needs before those of its partners. This may include delaying partner testing to accommodate NASA testing requirements. 2) Resource availability (funding, services, equipment, expertise, information, and facilities) is considered in the agreement development process by various NASA stakeholders including: * Agreement managers who are responsible for collecting information needed to develop and implement the agreements, including determining resource availability. * Affected and interested NASA parties involved in the preliminary abstract review process, which is coordinated by NASA's Office of Program and Institutional Integration. According to NASA center officials, management or technical points of contact also play a role in determining if the center has resources required to perform any proposed work. Partner activities did not appear to interfere with NASA's use of its facilities: * All 34 SAAs we reviewed included a priority of use clause. - According to NASA officials, there was only one instance where NASA had to enforce the priority of use clause. Officials also provided examples at two facilities where NASA and the agreement partner were able to informally address scheduling conflicts without having to invoke the priority of use clause. In both instances, the partner's test schedule was delayed to meet NASA testing needs. For example, SAA testing at the Space Environmental Effects Facility at Marshall was delayed for two months in FY2010 due to unplanned, extended testing required for NASA's Juno Program. * According to NASA officials, responsible staff conducted the necessary coordination steps to ensure resources required in proposed SAA activities were available. * We contacted 17 major NASA program users of facilities in our review. All responses indicated that SAA activities did not interfere with their testing needs. - 14 NASA program users told us that they completed all testing on schedule in FY 2010. - 3 NASA program users experienced a delay in testing unrelated to reimbursable activities conducted at the facilities. Several factors also help to ensure that SAA activities did not interfere with NASA work, including: * Relatively small amounts of SAA work at NASA top utilized facilities; * Openness in most facility schedules that accepted SAA work; * Use of appropriate methods to manage utilization, such as formal scheduling for high demand facilities. In FY 2010, reimbursable work was conducted at fewer than half of the top utilized facilities identified at centers in our review: * 31 of 51 top utilized facilities identified by NASA officials at three centers and one test facility did not support any SAA work in FY 2010.[Footnote 18] * Activities related to 36 fully reimbursable SAAB and 4 partially reimbursable SAAB were supported at 20 of 51 top utilized facilities identified by NASA officials at four centers. According to facility managers, most facilities with SAAB that we reviewed had relatively open schedules to accommodate SAA work. * Managers of 14 of 19 facilities in our review indicated that utilization rates were 85 percent or less in FY 2010. * According to NASA officials, at least 7 facilities in our review involved partner activities that occupied NASA facilities for three weeks or less in FY 2010. Table 5: Utilization of NASA Facilities in Our Review: Utilization overall, NASA and SAA partners[A]: Not utilized (Less than 30%); No. of facilities: 1. Utilization overall, NASA and SAA partners[A]: Under-utilized (30- 60%); No. of facilities: 1. Utilization overall, NASA and SAA partners[A]: Utilized (60-85%); No. of facilities: 12. Utilization overall, NASA and SAA partners[A]: Over-utilized (greater than 85%); No. of facilities: 5. Source: GAO analysis based on NASA data. [A] Utilization categories are based on laboratory utilization rate codes reported in the Federal Real Property Profile, an inventory of federal property, by all executive branch agencies including NASA. [End of table] Methods used to manage facilities and uphold NASA's non-interference policy vary depending on facility features and demand: * Facilities are managed to prevent interference by taking advantage of facility features that enable support of multiple customers and changes in the testing schedule. Facility features that enable managers to accommodate both NASA and non-NASA customer testing needs include: - Option of operating facilities for extended periods (e.g., 24 hour testing); - Availability of multiple pieces of testing equipment (e.g., four ultraviolet (UV) radiation test chambers used for UV testing); - Flexibility within the testing plan (e.g., phased testing that can be completed over a range of time); - Relatively short testing periods (e.g., 5 minutes, 1 to 3 weeks); - Facility utilization levels below capacity. * High use facilities utilize more formal scheduling processes compared to lower use facilities where formal scheduling is not necessary. - For example, the 9'x15' low speed wind tunnel is part of a wind tunnel complex that was used at capacity in FY2010 for all but 25 days when the facility was undergoing maintenance. A formal facility schedule is maintained and shared monthly to keep NASA customers updated on schedule changes. * Ongoing communication with partners and NASA customers prior and during testing was cited as a key tool in managing use at many facilities. NASA Facility Case Study: Icing Research Tunnel, Glenn Research Center: Photograph: Testing to support the development of a wing heated air ice protection system. Source: NASA. Table 6: Icing Research Tunnel, FY 2010 Facility Information: No. SAAs[A]: 9; SAA Use[A]: 58 days; Overall utilization: Under-utilized (30-60%); NASA use (percentage of overall utilization): Typically 20%; Average test time: 1-3 weeks; Formal schedule: Yes. Source: GAO representation of NASA data. [A] The "No. of SAAs° and "SAA Use columns refer to agreements in our review. This note also applies to similar tables in subsequent case study examples. [End of table] Facility Description: Among the worlds largest refrigerated wind tunnels, this facility duplicates natural icing conditions to test effects of in-flight icing on actual aircraft components and aircraft models. Facility supports icing protection system development and certification. Assessment of Interference: The risk of interference is mitigated by: * the limited and predictable use of the facility by NASA customers, * relatively short test times and low utilization rate in FY 2010 (which enable flexibility in scheduling), and, * use of a formal schedule. NASA Facility Case Study: PUMA Device and Calibration Systems, Glenn Research Center: Photograph: A prototype PUMA unit Source: NASA. Table 7: PUMA Device and Calibration Systems, FY 2010 Facility Information: No. SAAs[A]: 1; SAA Use[A]: 3-4 days; Overall utilization: Not utilized (Less than 30%); NASA use (percentage of overall ): None; Average test time: 3 days; Formal schedule: No. Source: GAO representation of NASA data. [End of table] Facility Description: The Portable Unit for Metabolic Analysis (PUMA) system is a self-contained device that measures the six key quantities (oxygen, carbon dioxide, flow, temperature, pressure, and heart rate) capable of measuring human metabolic function at rest, during exercise, in clinical settings, or in the field. PUMA and associated calibration systems are being used by Orbital Research, Inc. to support the development of its Pilot Physiologic Assessment System, to be used to provide pilots with early warning signal of hypoxic state (lack of oxygen) and could be similarly used by astronauts. Assessment of Interference: Interference was not an issue at this facility as there was no NASA work in FY 2010. NASA Facility Case Study: B747-400 Flight Simulator, Ames Research Center: Photograph: Advanced Concepts Flight and B747 simulators. Source: NASA. Table 8: B747-400 Flight Simulator, FY 2010 Facility Information: No. SAAs[A]: 1; SAA Use[A]: 2 days; Overall utilization: 60% (Utilized 60-85%); NASA use (percentage of overall utilization): 95%; Average test time: 3-9 months; Formal schedule: Yes. Source: GAO representation of NASA data. [End of table] Facility Description: The B747-400 simulator is part of the Ames Research Center's Crew Vehicle System Research Facility which is used to study air-traffic management concepts and technologies, aviation human factors and safety, and develop and improve new simulation and training tools. United Parcel Service (UPS) utilized the B747 simulator to support UPS crew operations familiarization and training and to collect flight operations quality assurance data for aviation safety research on typical UPS flight profiles. Assessment of Interference: Interference is managed at this facility through: * Use of a two-step approval process involving NASA customers required for all activity: (1) during SAA proposal and agreement development stages, and (2) to placement of SAA work on the facility schedule. * Schedule flexibility with use in FY2010 estimated at 60 percent. * Limited use of the facility by SAA partners. For example, in FY 2010 UPS used facility for only 2 days. NASA Facility Case Study: Components Services Section, White Sands Test Facility: Photograph: Precision cleaning at CSS: Source: NASA Contract Number: NJO6HCOIC. Table 9: Components Services Section, FY 2010 Facility Information: No. SAAs[A]: 1; SAA Use[A]: 250 hours; Overall utilization: Utilized (60-85%); NASA use (percentage of overall ): Predominantly NASA customers; Average test time: 3-6 hours per component; Formal schedule: Yes. Source: GAO representation of NASA data. [End of table] Facility Description: The Component Services Section (CSS) performs precision cleaning, component refurbishment and repair, and hydrostatic testing. Equipment includes ultra sonic baths, clean rooms, convection ovens, and other tooling required to perform precision cleaning as well as tooling and equipment needed for disassembling and reassembling components and pressure systems to functionally check components. Assessment of Interference: The risk of interference is mitigated by: * Multiple components can be precision cleaned and tested at the same time. In FY2010, this facility had the capacity to support work for up to 24 customers at the same time. * The facility maintained a relatively open schedule with utilization identified in the 60-85 percent range by NASA officials. * Potential SAA work must be approved by the Office Chief and is managed by a special White Sands Test Facility Work Control unit that is responsible for coordinating customer scheduling needs and managing potential schedule interference for all work at service centers. * The time necessary to complete SAA work was relatively small at 250 hours to precision clean and/or functionally test 206 components. NASA Facility Case Study: Space Environmental Effects Facility, Marshall Space Flight Center: Photograph: Ultraviolet Radiation Test Chamber: Source: NASA. Table 10: Space Environmental Effects Facility FY 2010 Facility Information: No. SAAs[A]: 1; SAA Use[A]: 21 weeks; Overall utilization: Varies by capability[A]; NASA use (percentage of overall utilization): 75%; Average test time: Ranges by capability, 1-3 weeks per sample; Formal schedule: No. Source: GAO representation of NASA data. [A] Overall utilization of the four test capabilities used to support partner activities in the five agreements we reviewed ranged from 40% (under-utilized, 30-60%) to 90% (over-utilized, greater than 85%) in FY2010, according to NASA officials. [End of table] Facility Description: The Environmental Effects Facility (SEE) houses 11 distinct testing capabilities. The Equipment is used to test materials incorporated or planned for integration in spacecraft design. Assessment of Interference: Interference is managed at this facility through: * Some test equipment used in partner activities have more than one test chamber and can support testing for multiple customers. * SEE has a relatively open schedule with only 2 or 3 test chambers out of 15 available in use at any given time, according to NASA officials. * Tests are run for relatively short periods of 1 to 3 weeks per sample. This enables facility managers to easily change test schedules to meet customer testing needs and helps prevent interference. NASA Facility Case Study: Hot Gas Facility, Marshall Space Flight Center: Photograph: Hot Gas Facility: Source: NASA. Table 11: Hot Gas Facility, FY 2010 Facility Information: No. SAAs[A]: 1; SAA Use[A]: 4 days; Overall utilization: Utilized (60-85%); NASA use (percentage of overall utilization): Top users are NASA customers; Average test time: Ranges by capability, 5 minutes; Formal schedule: No. Source: GAO representation of NASA data. [End of table] Facility Description: The Hot Gas Facility is a unique gaseous hydrogen/air combustion-driven wind tunnel that can produce combined environments of launch and reentry heating rates and dynamic pressure used to certify thermal shield material for use on spacecraft. Assessment of Interference: The risk of interference is mitigated by: * Extremely short testing time with multiple test runs per day: This facility tests sample materials for extremely short testing times of five minutes and requires no hardware changes between testing. Up to 25 test runs may be conducted in a single day. * Limited SAA activity: Planned SAA testing is expected to require 12 days, with 4 days of testing completed in FY2010. * Openness in facility schedule: The facility was used only 103 days last year. Officials also noted that the workload has decreased recently related to the planned retirement of the Space Shuttle. Conclusions: NASA is generally adhering to its internal controls regarding fair reimbursement, alignment with NASA's mission, and preventing interference. NASA policy requires documentation of the rationale or justification for waived costs. The interim directive more clearly defines when it is appropriate to waive costs than prior guidance, but it does not specify the type of information to include in the rationale or justification. In the current fiscal environment and given the new requirement for the Headquarters' Office of the Chief Financial Officer to review agreements in which direct costs are waived, it is especially important to fully and consistently document the rationale for waiving costs associated with work for NASA partners. This could help the agency ensure, in all cases, that waiving costs is fair and reasonable when compared to the benefits NASA is receiving. The existing mission and interference controls appear to be effective under the current state of demand placed on NASA facilities, but should the level of demand materially change, NASA may have to re- evaluate its approach to managing partners' use of its facilities. Recommendations for Executive Action: To ensure a more consistent and transparent approach to documenting the rationale or justification for waived costs, we recommend that the NASA Administrator direct the Offices of the Chief Financial Officer and General Counsel to: * Refine the agency's policy to clearly define the type of information that is required to support the rationale or justification in the estimated price report. This type of information may include documenting that there is a clear and demonstrated benefit to NASA and quantifying the benefit to the extent practicable. Backup Slides: Table 12: Total Reimbursable Work and Center Budgets: Center: Glenn Research Center; FY 2010 total reimbursable awards: $30.7 million; FY 2010 budget: $609 million; Reimbursable work as percentage of budget: 5%. Center: Johnson Space Center; FY 2010 total reimbursable awards: $22.8 million; FY 2010 budget: $6.3 billion; Reimbursable work as percentage of budget: less than 1%. Center: Kennedy Space Center; FY 2010 total reimbursable awards: $85.4 million; FY 2010 budget: $1.2 billion; Reimbursable work as percentage of budget: 7%. Center: Langley Research Center; FY 2010 total reimbursable awards: $31 million; FY 2010 budget: $656 million; Reimbursable work as percentage of budget: 5%. Marshall Space Flight Center FY 2010 total reimbursable awards: $19.6 million; FY 2010 budget: $2.8 billion; Reimbursable work as percentage of budget: 1%. Source: GAO analysis based on NASA data. [End of table] Figure 1: Types of Agreement Partner for Partially Reimbursable Agreements: [Refer to PDF for image: pie-chart] Federal agency: 55%; Commercial: 32%; University/non-profit: 11%; State and local government: 2%. Source: GAO analysis based on NASA data. [End of figure] Figure 2: Types of Work Conducted for Partially Reimbursable Agreements: [Refer to PDF for image: pie-chart] Research/Testing: 86%; Other: 11%; Expertise: 2%. Source. GAO analysis based on NASA data. [End of figure] Table 13a: Partner Activities Consistent with NASA's Mission: Goal/Objective 1: Advance knowledge in the fundamental disciplines of aeronautics and develop technologies for safer aircraft and higher capacity airspace systems: Facilities utilized in SAA work[A]: * Icing Research Tunnel; * 9 x 15 Low Speed Wind Tunnel; * 11 x 11 Foot Wind Tunnel; Description of facility use in SAA work: Used to test aircraft component and/or model performance under various in-flight conditions. Facilities utilized in SAA work[A]: B747 Flight Simulator at the Crew Vehicle Systems Research Facility; Description of facility use in SAA work: To collect data for aviation safety research. Facilities utilized in SAA work[A]: Particulate Aerosol Laboratory; Description of facility use in SAA work: Supports work on cleaner combustion cycle on aircraft engines. Facilities utilized in SAA work[A]: Aero Acoustic Propulsion Lab; Description of facility use in SAA work: To measure nozzle performance of various engine air-brake designs. Source: GAO analysis based NASA data. [A] Some of the listed facilities were utilized for work under multiple fully reimbursable Space Act agreements in our review. This also applies to the information on slide 44. [End of table] Table 13b: Partner Activities Consistent with NASA's Mission: Goal/Objective 2: The development and operation of vehicles capable of carrying instruments, equipment, supplies, and living organisms through space. Facilities utilized in SAA work[A]: * National Center for Advanced Manufacturing; * Space Environmental Effects Facility; * Hot Gas Facility; * Automated Surface Mount Assembly Lab; * Failure Analysis Lab; Description of facility use in SAA work: Development and testing of new and improved materials for use in spacecraft. Facilities utilized in SAA work[A]: Inducer Test Loop; Description of facility use in SAA work: Performance pump testing for potential application in NASA projects and programs. Facilities utilized in SAA work[A]: Component Services Section; Description of facility use in SAA work: Precision cleaning and functional testing of components (e.g., space vehicle components such as valves, fitting unions, tubing). Facilities utilized in SAA work[A]: White Sands Test Facility Chemistry Lab; Description of facility use in SAA work: Analytical chemistry services relating to propellants, propellant pressurizing gases, and material compatibility testing in propellants Facilities utilized in SAA work[A]: Propulsion Test Stand 401; Description of facility use in SAA work: Rocket engine testing. Source: GAO analysis based on NASA data. [End of table] Table 13c: Partner Activities Consistent with NASA's Mission: Goal/Objective 3: Understand the effects of the space environment on human performance and test new technologies and countermeasures for long-duration human space exploration: Facilities utilized in SAA work: Portable Unit for Metabolic Analysis (PUMA) Device & Calibration Systems; Description of facility use in SAA work: Support development of technology that may be used to monitor astronaut health in space based environments. Goal/Objective 4: Establish a lunar return program having the maximum possible utility for later missions to Mars and other destinations Facilities utilized in SAA work: * Fluid Mechanics Lab in-draft wind tunnel; * Fluid Mechanics Lab water channel; Description of facility use in SAA work: Supports development of solar technologies that have potential for application in space based environments Goal/Objective 5: Cooperation with Public Agencies: Facilities utilized in SAA work: * Moffett Airfield Aircraft Maintenance Hangar; Description of facility use in SAA work: Base of operation for helicopters used to support local law enforcement and emergency response capabilities. Source: GAO analysis based on NASA data. [End of table] Table 14: SAA Activity in FY 2010 at Top Utilized Facilities at Glenn Research Center: Facility: Icing Research Tunnel; Fully reimbursable agreements FY 2010: 11; Partially reimbursable agreements FY 2010: 0. Facility: 10 X 10 Supersonic Wind Tunnel; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: 8 X 6 Supersonic Wind Tunnel; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 1. Facility: 9 X 15 Supersonic Wind Tunnel; Fully reimbursable agreements FY 2010: 2; Partially reimbursable agreements FY 2010: 0. Facility: Propulsion Systems Laboratory; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 1. Facility: Engine Research Building Complex; Fully reimbursable agreements FY 2010: 1; Partially reimbursable agreements FY 2010: 1. Facility: Aero0Acoustic Propulsion Laboratory; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Zero Gravity Research Facility; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Small Multi0Purpose Research Facility; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Total; Fully reimbursable agreements FY 2010: 14[A]; Partially reimbursable agreements FY 2010: 3. Source: GAO analysis based on NASA data. [A] Partner work for 11 of these fully reimbursable SAM was conducted at the Icing Research Tunnel at Glenn, which was included in our review. This facility is predominantly utilized for commercial work, with NASA-related work estimated at 20 percent. In addition, the facility manager described this facility as under-utilized in FY2010. [End of table] Table 15: SAA Activity in FY 2010 at Top Utilized Facilities at White Sands Test Facility: Facility: 300 Area Propulsion Blockhouse; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: 300 Area Propulsion Data Acquisition and Control; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: 400 Area Propulsion Blockhouse; Fully reimbursable agreements FY 2010: 1; Partially reimbursable agreements FY 2010: 0. Facility: 400 Area Propulsion Data Acquisition and Control; Fully reimbursable agreements FY 2010: 1; Partially reimbursable agreements FY 2010: 0. Facility: Cryogenic Storage System; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Hypergols Storage, conditioning and distribution System, 400 area; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Inert Gas Storage & Distribution System; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Materials Flammability in Oxygen Enriched Atmospheres Test Areas; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Photo and Video Test Support Laboratory; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Small Altitue Simulation System 400 Area; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Standard Materials Test Areas; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Test Materials Preparation,Staging,and Controlled Access Storage Areas; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Test Stand Support Buildings (400 Area); Fully reimbursable agreements FY 2010: 1; Partially reimbursable agreements FY 2010: 0. Facility: WSSH Shuttle Landing Training and Shuttle Landing Facility; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Ordnance Storage Bunkers; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Total; Fully reimbursable agreements FY 2010: 1[A]; Partially reimbursable agreements FY 2010: 0. Source: GAO analysis based on NASA data. [A] The work at the 400 Area Propulsion Blockhouse and Data Acquisition and Control and Test Stands Support Buildings was related to one fully reimbursable SAA. [End of table] Table 16: SAA Activity in FY 2010 at Top Utilized Facilities at Ames Research Center: Facility: 11 foot Wind Tunnel; Fully reimbursable agreements FY 2010: 2; Partially reimbursable agreements FY 2010: 0. Facility: 80 x 120 Wind Tunnel; Fully reimbursable agreements FY 2010: 1; Partially reimbursable agreements FY 2010: 0. Facility: Ames Research Center Arcjet Facility; Fully reimbursable agreements FY 2010: 1; Partially reimbursable agreements FY 2010: 0. Facility: Fluid Mechanics Laboratory, 48 x 32 Wind Tunnel Facility; Fully reimbursable agreements FY 2010: 1; Partially reimbursable agreements FY 2010: 0. Facility: Hangar 3; Fully reimbursable agreements FY 2010: 2; Partially reimbursable agreements FY 2010: 0. Facility: Hangar 144; Fully reimbursable agreements FY 2010: 2; Partially reimbursable agreements FY 2010: 0. Facility: Magnetic Test Facility, N-217/A; Fully reimbursable agreements FY 2010: 1; Partially reimbursable agreements FY 2010: 0. Facility: Moffett Federal Airfield; Fully reimbursable agreements FY 2010: 4; Partially reimbursable agreements FY 2010: 1. Facility: NASA Ames Crew Vehicle Systems Research Facility (CVSRF); Fully reimbursable agreements FY 2010: 1; Partially reimbursable agreements FY 2010: 0. Facility: NASA ARC Laboratories; Fully reimbursable agreements FY 2010: 1; Partially reimbursable agreements FY 2010: 0. Facility: Vertical Motion Simulator (VMS) Facility; Fully reimbursable agreements FY 2010: 1; Partially reimbursable agreements FY 2010: 0. Facility: Total; Fully reimbursable agreements FY 2010: 17; Partially reimbursable agreements FY 2010: 1. Source: GAO analysis based on NASA data. [End of table] Table 17: SAA Activity in FY 2010 at Top Utilized Facilities at Marshall Space Fight Center: Facility: Building 4705 Mechanical Fabrication (including surface treat/plating/painting); Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Building 4755 ECLSS Development Facility; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Building 4487 Software Development Facility (SDF); Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Hot Gas Facility; Fully reimbursable agreements FY 2010: 4; Partially reimbursable agreements FY 2010: 0. Facility: Test Stand 1160 high pressure engine system components; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Test Stand 1150 multi-purpose, multi-position oxygen/hydrogen facilities for scale-model combustion devices; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Environmental Test Facilities in West end of 4619; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Structural (Static and Dynamic) Testing in East end of 4619 Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Mechanical Metallurgy and Corrosion Research Facilities (MMTF); Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Materials Diagnostic Facility; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Hydrogen Test; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Ceramic Composite and Ceramic Testing Lab; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Propulsion Research Development Laboratory; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Payload Operations Center; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Imaging Lab; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Human Factors La; Fully reimbursable agreements FY 2010: 0; Partially reimbursable agreements FY 2010: 0. Facility: Total; Fully reimbursable agreements FY 2010: 4; Partially reimbursable agreements FY 2010: 0. Source: GAO analysis based on NASA data. [End of table] GAO on the Web: Web site: [hyperlink, http://www.gao.gov/]. Contact: Chuck Young, Managing Director, Public Affairs, youngc1@gao.gov; (202) 512-4800: U.S. Government Accountability Office: 441 G Street NW, Room 7149: Washington, D.C. 20548: Copyright: This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately. [End of Enclosure I: Briefing Slides] Enclosure II: Comments from the National Aeronautics and Space Administration: National Aeronautics and Space Administration: Headquarters: Washington, DC 20546-0001: May 20, 2011: Reply to attention of: Office of the General Counsel: Ms. Cristina Chaplain: Director: Acquisition and Sourcing Management: United States Government Accountability Office: Washington, DC 20548: Dear Ms. Chaplain: The National Aeronautics and Space Administration (NASA) appreciates the opportunity to review the Government Accountability Office (GAO) draft reports entitled "NASA Reimbursable Space Act Agreements" (GAO- 11-553R; report number 120926) and "NASA Data Issues and Compliance" (GAO-11-552R; report number 120983). NASA values the continued open communications between NASA and the GAO team and appreciates the constructive comments arising as a result of this effort. NASA agrees with GAO's concern regarding managing programs and projects as efficiently and effectively as possible, especially within a budget that is likely to be constrained due to the fiscal limitations currently faced by all Federal Government agencies. NASA remains dedicated to continuous improvement of the Agency's Space Act Agreement's (SAA) internal controls and business practices. We are pleased that GAO recognized the policy requirements and other internal controls in place related to Agency SAA practices and found that NASA is generally adhering to those controls. We also appreciate GAO's constructive findings from the two reports regarding the need to clarify existing Agency guidance in regard to certain Reimbursable SAA pricing policies (i.e., waived costs), the need for improved training and internal controls to ensure the data integrity in NASA's Space Act Agreement Maker (SAAM) system, and the need for improved training and internal controls to ensure that NASA does not violate statutory provisions or policy regarding competition with the private sector. NASA is committed to promptly address these issues and, in fact, has already taken several actions and has planned additional action toward that end, as discussed below. In the two draft reports, GAO makes a total of four recommendations to the NASA Administrator to address the findings identified in the reports. Those recommendations, and NASA's responses, are as follows: GAO-11-553R: Recommendation 1: Direct the Offices of the Chief Financial Officer and General Counsel to refine the agency's policy to clearly define the type of information that is required to support the justification in the estimated price report. This type of information may include documenting that there is a clear and demonstrated benefit to NASA and quantifying the benefit to the extent practicable. NASA's Response: Concur. The Office of the Chief Financial Officer (OCFO) is already working with the Office of General Counsel (OGC) and other offices addressing this recommendation. We are in the process of reviewing these and other refinements to NASA Interim Directive 9090.1, as part of the transition to a NASA Procedural Requirement this year. Among the refinements being reviewed are reporting requirements including the additional types of information recommended above. GAO-11-552R: Recommendation 1: Direct the Office of Program and Institutional Integration to rectify the data inaccuracies in the SAAM database that we have identified in this report. NASA's Response: Concur. All of the data inaccuracies identified in the GAO report have been corrected in coordination with the respective Center and Headquarters Agreement Managers. Recommendation 2: Direct the Office of Program and Institutional Integration to assess why the coding errors identified in this report occurred and develop procedures for enhancing the accuracy of the data. NASA's Response: Concur. The Mission Support Directorate (MSD) has assessed each instance and found that there were two primary causes for the data entry errors: 1) Initial misclassification by the Agreement initiator due to a lack of understanding of how to classify certain Agreements in the system. We also identified some problematic SAAM data entry protocols that confused users and allowed erroneous classification entries such as "Fully Nonreimbursable" or "Fully Reimbursable [with waived costs entered]," which contributed to this problem. 2) Failure or inability of the Agreement Manager to update the initial classification of an Agreement if it changed during the course of discussions with the partner (e.g., from "Fully reimbursable" to "Partially reimbursable" or vice versa). We also found that system restrictions that prohibited the Agreement Managers from being able to directly make changes to the agreement classification after it had been initially established contributed to this problem. In order to enhance the accuracy of the system data, we conducted training on proper agreement classification protocols during the Space Act Agreement Community of Practice Meeting at Stennis Space Center on May 18-19.2011. In addition, we implemented changes to the SAAM system to allow designated Center and Headquarters Agreement Managers to make changes to the classification of their Agreements as needed. Finally, are in the process of implementing additional changes to the SAAM system to automatically "flag" such errors and eliminate the possibility of confusing or contradictory agreement classification entries. Recommendation 3: Direct the Office of Program and Institutional Integration to provide refresher training, as part of NASA's annual Space Act agreement community of practice, to SAAM users to explain the various agreement types, stress the importance of accurately inputting data into the SAAM database, and clarifies NASA's policy regarding competition with the private sector. Management's Response: Concur. MSD will conduct training on proper agreement classification protocols during the upcoming Space Act Agreement Community of Practice Meeting referenced above. As part of that training, we discussed the findings from the GAO's audit and provided both policy and technical training regarding how to properly classify and enter SAAs in SAAM, emphasizing the importance of users accurately inputting data into the system. During the meeting, MSD and OGC also covered the legal and policy requirements relating to the "competition with the private sector" issue and the related policies and internal controls in place to prevent that. The GAO report finding regarding "competition with the private sector" in SAAM 7492 (CRC's SAA3-1112 wiTechnical Directions Inc.), we have reviewed the circumstances surrounding that particular agreement. We agree with the facts as stated in the GAO report, and offer the following additional background information for further context. Under the agreement, GRC performed work on a small jet engine that the company was developing for the Department of Defense (Dort) using CRC's Propulsion Systems Laboratory (PSL). The PSL is NASA's only ground-based test facility that can provide true flight simulation for experimental research on air-breathing propulsion systems. When the Agreement was initiated, the GRC Agreements Manager relied on the written statement in SAAM by the PSL facility manager that there were no other vendors available who could do the work. After additional inquiry, however, it appears that there may have been another vendor capable of performing the testing conducted under the agreement. GRC indicated that, although the agreement was with a commercial entity (DTI), the work was known to be for the direct benefit of DoD. Accordingly, the testing was conducted within the context of a policy arrangement between NASA and DoD regarding aerospace research of mutual interest to both agencies. For example, GRC waived certain costs incurred under the agreement pursuant to its practice of waiving such costs for testing conducted in conjunction with the DoD. While we understand that these facts do not fully address the issue of avoiding competition with the private sector, we believe that the context of NASA and DoD's mutual commitment to conduct joint aeronautics research at reduced costs and on appropriate terms and conditions is useful in providing an understanding of the circumstances surrounding this particular agreement. GRC is planning to conduct additional Center-level training in response to the GAO report finding. Specifically, GRC has taken the following three corrective actions: (1) Since January 2011, shortly after this issue became known, the GRC Agreement Managers make it a standard practice to more extensively question GRC staff to gain better understanding of the uniqueness of requested NASA facilities and the possible existence of other potential vendors; (2) The GRC Office of Chief Counsel and the GRC Chief Technologist convened a meeting with the Propulsion Systems Laboratory facility manager and his management on May 3, 2011, to re-emphasize and explain the NASA policy that NASA must not compete with the private sector in performing reimbursable work; and (3) The GRC Offices of Chief Counsel and Technology Partnerships and Planning have agreed to hold refresher training sessions for GRC staff on initiating and implementing Space Act Agreements. NASA is committed to continuous improvement of our SAA internal controls and practices, as with all Agency practices, in order to explore and utilize Space in an affordable way for the benefit of the Nation. Toward this end, we look forward to continuing to work with the GAO to measure and improve our performance and management practices. Thank you for the opportunity to comment on the two draft reports. If you have any questions or require additional information, please contact Richard McCarthy at (202) 358-2031. Sincerely, Signed by: Michael C. Wholley: General Counsel: [End of Enclosure II] Footnotes: [1] The National Aeronautics and Space Act of 1958, Pub. L. No. 85-568. [2] As part of this review, we identified two other issues that were not directly related to our audit objectives and have included a discussion of those issues in a separate management letter to NASA. See GAO, Training Necessary to Address Data Reliability Issues in NASA Agreement Database and to Minimize Potential Competition with Commercial Sector, [hyperlink, http://www.gao.gov/products/GAO-11-552R] (Washington, D.C.: May 26, 2011). [3] The National Aeronautics and Space Act of 1958, Pub. L. No. 85-568. [4] There are two other types of SAAs that are not included in our review. Funded SAM are those under which appropriated funds are transferred to an agreement partner to accomplish an Agency mission. Non-reimbursable SAM involve NASA and one or more partners in a mutually beneficial activity that furthers NASA's mission, where each party bears the cost of its participation and there is no exchange of funds between the parties. [5] NASA Policy Directive 1050.11 "Authority to Enter into Space Act Agreements" (2008). [6] Under certain circumstances, the NASA pricing policy requires the agency to charge market rates which are based on a market survey. [7] Our review did not include an evaluation of the methods used by NASA to determine the established rate. [8] We limited our review on fair reimbursement to partially reimbursable SAM because we determined that agreements involving waived costs represented the greatest risk to NASA obtaining fair reimbursement. [9] We limited our review on NASA's mission and interference to fully reimbursable SAM involving the use of facilities because there is a direct benefit to NASA's mission under partially reimbursable SAAs and we determined it was more feasible to assess interference involving a facility than with goods and services. [10] NASA Procedural Requirements, 9090.1, Section 3.12 (Sept. 30, 2008) (superseded by NASA Interim Directive, 9090.1, "Reimbursable Agreements" (Dec. 15, 2010)). [11] NASA Procedural Requirements, 9090.1, Section 1.2 (2008) (superseded). [12] NASA Procedural Requirements, 9090.1, Section 1.2.6(i) (2008) (superseded). [13] NASA Interim Directive 9090.1 "Reimbursable Agreements," December 2010. [14] NASA Advisory Implementing Instruction, 1050-1A, "Space Act Agreement Guide" (Aug. 15, 2008). [15] SAAs generally not requiring an abstract include renewals or extensions of existing routine, previously vetted agreements with partners, or agreements for routine, previously vetted activities with U.S. partners with whom NASA has worked repeatedly in the past. Guidance on proposed SAAs generally requiring an abstract is provided in the Space Act Agreement Guide. [16] Further description of SAA activities in our review that support listed NASA goals and objectives can be found on slides 43 to 45. [17] NASA Policy Directive 1050.11 "Authority to Enter into Space Act Agreements" (2008). [18] For a list of top utilized facilities and corresponding SAA activity at each of the four centers, see slides 46 to 49. 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