Space shuttle Atlantis sits atop pad 39A. Photo: NASA

The audit report "Consolidated Space Operations Contract: Evaluating and Reporting Cost Savings" (IG-01-029, August 31, 2001) has been posted to the NASA Office of Inspector General web site. The full report can be found on the Internet at: http://www.hq.nasa.gov/office/oig/hq/issuedaudits.html.

In 1998, NASA combined most existing NASA-wide space operations contracts into the Consolidated Space Operations Contract (CSOC). NASA estimated that consolidation of existing space operations contracts under this single contract would result in savings of $1.4 billion dollars over 10 years. In 1999, the Senate Appropriations Committee directed NASA to report semiannually to the Congress the expected savings under the CSOC.

The NASA Office of Inspector General audit of CSOC cost savings found that NASA cannot substantiate the $62 million of cost savings reported to Congress for the first 2 years of the CSOC. As a result, Congress and NASA cannot evaluate current cost savings for the CSOC and cannot determine whether the contract will achieve the anticipated $1.4 billion cost savings through fiscal year 2008. Because NASA has reduced future operating budgets in anticipation of projected CSOC savings, it is imperative that the Agency determine whether current and anticipated cost savings are being achieved under the CSOC. We recommended that NASA evaluate and report cost savings based on the accumulation of actual costs for work performed under the contract. We also recommended that, in future reports to the Congress, NASA revise cost savings previously reported to reflect savings based on actual costs. These actions would help to ensure that NASA and the Congress have valid information upon which to evaluate whether CSOC will achieve its anticipated savings.

NASA did not concur with our recommendations. NASA stated that the anticipated savings from CSOC of $1.4 billion were based on a mission model that is no longer valid. (The mission model lists and describes missions for which the contractor will provide space operation services during the life of the contract.) NASA has now aligned its mission operations services with new mission models and is tracking costs differently.

The Agency stated that it does not plan to report cost savings in the future because any report based on the original model would reflect an inaccurate picture of costs and savings. NASA may seek a waiver from the requirement to report cost savings. We recommend that any waiver request should contain a full disclosure of why cost savings reports cannot be provided and should outline how the Agency is currently tracking costs. Until a waiver is granted, however, NASA is still obligated to report cost savings as directed.