Space:

Key Controls NASA Employs to Guide Use and Management of Funded Space Act Agreements Are Generally Sufficient, but Some Could Be Strengthened and Clarified

GAO-12-230R: Published: Nov 17, 2011. Publicly Released: Nov 17, 2011.

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In the National Aeronautics and Space Act of 1958, Congress granted the National Aeronautics and Space Administration (NASA) authority to enter into transactions other than contracts, leases, and cooperative agreements; this gave the agency greater flexibility in achieving its mission. NASA uses its other transaction authority through three kinds of instruments known as Space Act agreements. Specifically, NASA uses reimbursable agreements when costs associated with an undertaking are reimbursed by the agreement partner (in full or in part); the agency uses non-reimbursable agreements when each party bears the cost of participation in mutually beneficial activities. In 2006, NASA began to use a third kind of agreement--referred to as funded Space Act agreements--that have involved NASA providing significant funds to private industry partners to stimulate the development of large-scale commercial space transportation capabilities. Under a funded Space Act agreement, appropriated funds are transferred to a domestic partner, such as a private company or a university, to accomplish an agency mission. These agreements differ from Federal Acquisition Regulation (FAR) contracts in that they do not include requirements that generally apply to government contracts entered into under the authority of the FAR. For example, under these agreements, partners are not required to comply with government contract quality assurance requirements. NASA policy provides that this authority may only be used when agency objectives cannot be achieved through the use of a procurement contract, grant, or cooperative agreement. As of October 31, 2011, NASA has used funded Space Act agreements to provide industry partners with $833.1 million for completion of developmental milestones, with the aim of potentially procuring crew (i.e., transporting astronauts) and cargo transportation services to the space station. Partners can collectively earn another $248.3 million under these agreements through the first half of 2012. It is important that NASA have strong internal controls in place to ensure proper use and management of funded Space Act agreements because they (1) permit considerable latitude by agencies and companies in negotiating agreement terms and (2) may not include the same oversight requirements found in traditional FAR-governed contracts. NASA has established policies and guidance for implementing agreements under its other transaction authority, specifically NASA Policy Directive 1050.1I, Authority to Enter into Space Act Agreements and NASA Advisory Implementing Instruction 1050-1A, Space Act Agreements Guide. In this context, Congress asked us to evaluate the extent to which NASA's controls ensure the agency appropriately manages funded Space Act agreements and enters into funded Space Act agreements only when its objectives cannot be achieved through any other agreement instrument, such as a federal procurement contract. This letter is the third based on Congressional request to review NASA's use of Space Act agreements. The previous two letters dealt with NASA's use of reimbursable Space Act agreements. We have also testified recently on NASA's Commercial Orbital Transportation Services (COTS) program, which has been executed under funded Space Act agreements. COTS is focused on supporting and stimulating the development of a commercial market for space transportation, from which NASA could potentially acquire cargo transportation services (e.g., delivery of supplies to maintain the space station and equipment to conduct research).

In accordance with GAO's "Standards for Internal Control in the Federal Government," NASA policy and guidance provide internal controls for certain aspects of using and managing funded Space Act agreements, such as separation of duties and delegation of authority. For example, NASA separates duties associated with authorizing, managing, and reviewing funded Space Act agreements. According to GAO's "Standards for Internal Control in the Federal Government," risk assessment is also an important control for ensuring programmatic objectives can be met, and NASA policy and guidance provide for varying levels of risk assessment. NASA's Space Act agreement policy and guidance provide controls for risk assessment related to reasonableness of cost estimates and whether or not a Space Act agreement is the appropriate legal instrument, but do not require specific documentation related to these assessments, as GAO's Standards for Internal Control in the Federal Government call for. Other risks that are traditionally assessed when making programmatic decisions, including safety and technical risks, for example, are not addressed in NASA's Space Act agreement policy. According to NASA, once it becomes clear that the agency can appropriately use a funded Space Act agreement for a given initiative, it is not necessary to assess such additional risks because these are borne by the agreement partner. When appropriate use of a funded Space Act agreement is less definitive based on programmatic objectives, according to NASA additional risks such as safety and technical risks are addressed through use of the agency's strategic acquisition approach and related policies. It is not always clear, however, when and if the objectives of a program drive the need to follow NASA's strategic acquisition approach and assess additional programmatic risks. Finally, though federal standards for internal control highlight the importance of training to maintaining competence, NASA does not require or offer formal training for individuals responsible for managing funded Space Act agreements. For its Commercial Crew program, NASA did develop and document a process to guide program officials through procedures associated with its agreements. Although the documented process is a positive step for the Commercial Crew program, given the unique nature of funded Space Act agreements and the judgment that can be executed by agreement managers, training could help ensure that future agreements are executed appropriately. We are recommending that NASA incorporate additional internal controls relating to documentation and training in its policy and guidance for funded Space Act agreements, and that NASA clarify if, how, and to what extent agency officials should refer to NASA's broader acquisition and risk management policies when considering use of a funded Space Act agreement. Commenting on a draft of this report, NASA concurred with our recommendations.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To continue to ensure funded Space Act agreements are used and managed appropriately, the Administrator of NASA should direct the appropriate offices to update the agency's policies and guidance to incorporate controls for documenting, at a minimum, the agency's decision to use a funded Space Act agreement and its analysis supporting the determination that no other instrument is feasible, as well as the agency's assessment of the fairness and reasonableness of the costs it is contributing to an effort conducted using a funded Space Act agreement.

    Agency Affected: National Aeronautics and Space Administration

    Status: Open

    Comments: NASA is currently updating its acquisition policy directive (NPD 1000.5), which will address the use of funded Space Act agreements in its strategic acquisition planning process. Specifically, the new NPD will require development of a NASA Policy Requirements document (NPR) which will spell out the specific requirements relating to use of each (other transaction) authority (such as funded Space Act agreements) and the means of documenting the decisions from the acquisition strategy meeting for a given program. In September 2013, NASA will adopt a charter for a Partnership Integration Council (PIC) to oversee partnerships, including funded Space Act agreements. Finally, NASA's directive on the use of Space Act agreements (NPD 1050.1) expires in December 2014, and its update will incorporate the GAO recommendation, NPD 1000.5 input, and PIC activities.

    Recommendation: To continue to ensure funded Space Act agreements are used and managed appropriately, the Administrator of NASA should direct the appropriate offices to update the agency's policies and guidance to clarify if, how, and to what extent NASA officials are to refer to the agency's broader acquisition and risk management policies when contemplating use of a funded Space Act agreement.

    Agency Affected: National Aeronautics and Space Administration

    Status: Open

    Comments: NASA is currently updating its acquisition policy directive (NPD 1000.5), which will address the use of funded Space Act agreements in its strategic acquisition planning process. Specifically, the new NPD will require development of a NASA Policy Requirements document (NPR) which will spell out the specific requirements relating to use of each (other transaction) authority (such as funded Space Act agreements) and the means of documenting the decisions from the acquisition strategy meeting for a given program.

    Recommendation: To continue to ensure funded Space Act agreements are used and managed appropriately, the Administrator of NASA should direct the appropriate offices to update the agency's policies and guidance to ensure training is provided to officials involved in executing funded Space Act agreements, when appropriate.

    Agency Affected: National Aeronautics and Space Administration

    Status: Open

    Comments: As NASA has had limited use of funded SAAs to date (14 awards total since 2006) and each program implemented through funded SAAs differed in structure depending on the purpose and scope of the award (as defined in the competition announcement), NASA has adopted the practice to ensure that all officials (including warranted Agreements Officers) understand their obligations in executing funded SAAs through an appropriate Implementation Plan developed to support implementation of each set of awards. In order to ensure that NASA retains the greatest flexibility in its implementation of funded SAAs, the NASA Office of General Counsel has determined that guidance for NASA officials executing funded SAAs will be implemented through placing a requirement for an implementation plan in consultation with the Office of General Counsel on each activity. This requirement will be included in the update to NPD 1050.1.

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