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GAO High Risk Series: An Update (NASA Excerpts) GAO-05-207

Status Report From: Government Accountability Office
Posted: Tuesday, January 25, 2005

Full Document (PDF)

Page 75

January 2005
HIGH-RISK SERIES
National Aeronautics and Space Administration Contract Management

Highlights Accountability Integrity Reliability

For additional information about this highrisk area, contact Allen Li at (202) 512-4841or lia@gao.gov.

Why Area Is High Risk

NASA's success largely depends on the work of its contractors—on which NASA spends about 85 percent of its annual budget. In 1990, GAO designated NASA's contract management as high risk. This area has been designated as high risk principally because NASA has lacked a modern financial management system to provide accurate and reliable information on contract spending and placed little emphasis on end results, product performance, and cost control. These weaknesses pose significant challenges to NASA's ability to make informed investment decisions and implement appropriate corrective actions. Due to the considerable challenges NASA continues to face in implementing effective systems and processes, contract management remains high risk.

What Remains to Be Done

GAO has recommended that NASA establish an effective architecture to guide the Integrated Financial Management Program (IFMP), address areas of IFMP financial reporting that do not comply with federal systems requirements, and follow best practices and NASA's guidance in preparing the IFMP life-cycle cost estimate. NASA agreed with these recommendations and has taken some initial implementing actions. To further improve contract management, NASA needs to

  • complete the design of and fully implement its integrated financial management system;
  • instill disciplined costestimating processes in its project development; and
  • ensure that it obtains the information needed to assess progress on its contracts.

What GAO Found

While it has taken recent actions to improve its contract management function, NASA continues to face considerable challenges in implementing financial management systems and processes that would allow it to manage its contracts effectively. As GAO has reported, NASA's failure to overcome these challenges has put a number of its major scientific and space programs at risk. For example, our recent review of selected NASA programs found that NASA lacked the disciplined cost-estimating processes and financial and performance management systems needed to establish priorities, quantify risks, and manage program costs.

One of NASA's most formidable barriers to sound contract management is the lack of an integrated financial management system. In 2003, GAO reported that, in implementing its most recent system, NASA did not reengineer its core business processes or establish adequate requirements for the system to address many of its most significant management challenges, including producing credible cost estimates. Moreover, NASA opted to defer addressing the needs of key stakeholders. In recent months, NASA has begun to take steps toward transforming how it manages its programs and projects and oversees its contractors. Specifically, NASA has inventoried its ongoing programs and projects—categorized by product line, size, and risk—and defined specific management and information requirements for each category. NASA has also established a standardized accounting code structure based on these information requirements that, if implemented as planned, would allow NASA to capture the cost information that program managers and cost estimators need to develop credible estimates and compare budgeted and actual cost with the work performed on the contract.

However, much work remains. As GAO reported in May 2004, NASA often does not obtain from its contractors the financial data and performance information needed to assess progress on its contracts. In addition, NASA lacks data analysis tools and staff trained to perform cost analyses, including earned value management. Until NASA has the data, tools, and analytical skills needed to alert program managers of potential cost overruns and schedule delays and take corrective action before they occur, it will continue to face challenges in effectively overseeing its contractors. Finally, NASA continues to use unnegotiated (that is, uncosted) contract changes, a concern GAO and NASA's Office of Inspector General have raised. Uncosted contract changes increase the government's cost risk—the longer changes remain unnegotiated, the greater the risk. Although GAO reported in 2003 that NASA's use of such actions had significantly decreased, GAO recently reported its use has begun to rise again. According to NASA officials, the increase is temporary and needed to expedite activities to return the space shuttle fleet safely to flight. However, continued management attention is needed to ensure such actions are justified.

Related Products - National Aeronautics and Space Administration Contract Management

GAO Products

  • Space Shuttle: Costs for Hubble Servicing Mission and Implementation of Safety Recommendations Not Yet Definitive. GAO-05-34. Washington, D.C.: November 19, 2004.
  • NASA: Lack of Disciplined Cost-Estimating Processes Hinders Effective Program Management. GAO-04-642. Washington, D.C.: May 28, 2004.
  • National Aeronautics and Space Administration: Significant Actions Needed to Address Long-standing Financial Management Problems. GAO-04-754T. Washington, D.C.: May 19, 2004.
  • NASA: Compliance with Cost Limits. GAO-04-648R. Washington, D.C.: April 2, 2004.
  • Business Modernization: Disciplined Processes Needed to Better Manage NASA's Integrated Financial Management Program. GAO-04-118. Washington, D.C.: November 21, 2003.
  • Business Modernization: NASA's Challenges in Managing Its Integrated Financial Management Program. GAO-04-255. Washington, D.C.: November 21, 2003.
  • Business Modernization: NASA's Integrated Financial Management Program Does Not Fully Address Agency's External Reporting Issues. GAO-04-151. Washington, D.C.: November 21, 2003.
  • Information Technology: Architecture Needed to Guide NASA's Financial Management Modernization. GAO-04-43. Washington, D.C.: November 21, 2003.
  • NASA: Major Management Challenges and Program Risks. GAO-03-849T. Washington, D.C.: June 12, 2003.
  • Business Modernization: Improvements Needed in Management of NASA's Integrated Financial Management Program. GAO-03-507. Washington, D.C.: April 30, 2003.

NASA OIG Products

  • Final Management Letter on Failures in Cost Estimating and Risk Management Weaknesses in Prior Space Launch Initiative. Assignment Numbers A-01-049-01 and A-01-049-02, IG-03-023. Washington, D.C.: September 29, 2003.
  • Integrated Financial Management Program Core Financial Module Conversion to Full Cost Accounting. IG-03-015. Washington, D.C.: May 30, 2003.

For more information on National Aeronautics and Space Administration major management challenges, see http://www.gao.gov/pas/2005/nasa.htm.

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