Since 1990, we have designated NASA’s contract management as a high- risk area. This contract type accounted for  48 percent of obligated contract dollars and 7.7 percent of contract actions  from fiscal years 2002 through 2004. NASA Has Not Always Followed the Preferred Approach Laid Out in Its Award- Fee Guidance

Although the revisions in NASA’s regulations and guidance on award-fee  contracts address many weaknesses previously identified, the contracts  that we reviewed did not always demonstrate use of award fees by the  centers in the way that NASA prefers as outlined in its guidance. Also, although the FAR and NASA’s  award-fee guide calls for a consideration of the costs and benefits of using  cost-plus-award-fee contracts because of the cost and administrative  burden involved, we found no examples of a documented analysis of costs  and benefits. Further, NASA has not evaluated the overall effectiveness of  award fees in promoting program outcomes and does not have metrics in  place for measuring their effectiveness in achieving program outcomes. Award-Fee Payments at Times Did Not Reflect Program Outcomes

While NASA officials expressed satisfaction with the results of the  contracts, in some cases there appeared to be a disconnect between the  fee paid and program results. NASA officials expressed satisfaction with contract results, which was  further evidenced by its evaluations of contractor performance against  criteria established in the award-fee plan. While NASA’s evaluations would  indicate generally good performance, such performance did not always  translate into desired program outcomes. That disconnect raises questions  as to the extent NASA is achieving the effectiveness it sought through the  establishment of guidance on the use of award-fees. The contractor for the Earth Observing System Data and Information  System (EOSDIS) Core System (ECS) was paid 97 percent of the  available award fee—$103.2 million—despite a delay in the completion  of the contract by more than 2 years and an increase in the cost of the  contract from $766 million to $1.2 billion. NASA’s satisfaction with the results of these contracts is evidenced by the  level of fee paid on all of the contracts we reviewed and is based on  NASA’s evaluation of compliance with criteria contained in its award-fee  plans. Appendix I: Scope and Methodology

Our objectives were to determine (1) the extent the National Aeronautics  and Space Administration’s (NASA) guidance addresses the problems  previously identified with the use of award-fee contracts and (2) whether  NASA follows its guidance in using award fees to achieve desired  outcomes. The contracts we  selected were the top 10 dollar value contracts active from fiscal years  2002 through 2004.
Why GAO Did This Study

Cost-plus-award-fee contracts accounted for almost half of the National Aeronautic and Space Administration's (NASA) obligated contract dollars for fiscal years 2002-2004. Since 1990, we have identified NASA's contract management as a high-risk area--in part because of a lack of emphasis on end results. Congress asked us to examine (1) the extent NASA's guidance on award fees addresses problems previously identified with the use of award-fee contracts and (2) whether NASA follows its guidance in using award fees to achieve desired outcomes. We reviewed the top 10 dollar value award-fee contracts active from fiscal years 2002 through 2004.

What GAO Found

NASA guidance on the use of cost-plus-award-fee (CPAF) contracts provides criteria to improve the effectiveness of award fees. For example, the guidance emphasizes outcome factors that are good indicators of success in achieving desired results, cautions against using numerous evaluation factors, prohibits rollover of unearned fee, and encourages evaluating the costs and benefits of such contracts before using this contract type. However, NASA does notalways follow the preferred approach laid out in its guidance. For example, some evaluation criteria contained input or process factors, such as program planning and organizational management. Moreover, some contracts included numerous supporting subfactors that may dilute emphasis on any specific criteria. Although the Federal Acquisition Regulation and NASA guidance require considering the costs and benefits of choosing a CPAF contract, NASA did not perform such analyses. In some cases there appears to be a significant disconnect between program results and fees paid. For example, NASA paid the contractor for the Earth Observing System Data and Information System Core System 97 percent of the available award fee despite a delay in the completion of the contract by over 2 years and an increase in the cost of the contract of more than 50 percent. NASA officials expressed satisfaction with the results of the contracts we reviewed, and this was further evidenced by the extent of fee paid. NASA's satisfaction was based on its evaluations of contractor performance against criteria established in the award-fee plan. While NASA's evaluations would indicate generally good contractor performance, that performance did not always translate into desired program outcomes. That disconnect raises questions as to the extent NASA is achieving the effectiveness it sought through the establishment of guidance on the use of award fees. NASA has not evaluated the overall effectiveness of award fees and does not have metrics in place for conducting such evaluations.