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. NSF officials must decide on a contract pricing arrangement for every  contract or order. Acquisition Planning Practices Conducted to Varying Degrees, but NSF Lacks Guidance on Time Needed for Early Planning Activities

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. 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. 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. NSF Generally Followed Key Practices in the Award Phase

Contract documentation for negotiated and streamlined acquisitions  showed that NSF generally followed key practices in the award phase. 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. 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. 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 NSF Director and NSF-OIG identified the need for incurred costs  audits of an ocean drilling contract in our sample. Despite the MOU, the  agency has not made arrangements for these audits of the contract. 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. 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. In  written comments, NSF agreed with our recommendations. We are sending a copy of this report to the Director of the National  Science Foundation. 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. 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. 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. 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. To assess progress NSF made in response to prior NSF-OIG findings, we  reviewed prior NSF-OIG recommendations and corrective action plans.
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 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 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.

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.