NASA under fire for bonus payments to contractors

The internal watchdog for NASA says the nation’s space agency has doled out tens of millions of dollars in bonus money to its contractors — without even first making sure whether they had done the work well or not.

NASA officials are sharply disputing the findings of the agency’s own inspector general’s office about a standoff over how the agency handled nearly $70 million in awards to contractors.

“We identified incorrect payments and questioned costs totaling $69.7 million,” Inspector General Paul Martin wrote in the report released late last week. “We also concluded that NASA expended approximately $7.4 million to administer performance evaluations on contracts for which performance objectives were undefined, determinations that an award-fee contract was the most beneficial type of contract were not made, and relevant management information for informed decision-making was not gathered.”

The dispute centers on so-called “award-fee contracts,” which are meant to be provide an incentive for businesses that complete jobs by meeting specific objectives or doing them under budget and ahead of schedule.

The agency has been criticized for similar wasteful spending before, but investigators found that even supposed fixes are still wasting money. The IG said that in response to bad press and scrutiny from watchdogs, NASA implemented a system of step-by-step payments to incrementally reward businesses along the course of a contract, followed by a final payment if the product is acceptable.

But any money the contractor didn’t earn along the way is instead being lumped into the payment at the end, investigators said, undercutting any efforts to provide incentives to contractors since they know they’ll get the full sum eventually.

The practice “promotes a philosophy that as long as a mission provides good science data, the agency will overlook cost and schedule overages,” the IG said.

“NASA contracting officers incorrectly calculated provisional and interim award-fee payments in more than half of the contracts we reviewed,” investigators said. “This occurred because the mathematical formulas they are required to use to calculate the payments are overly complex.”

But the agency itself says that the IG has misunderstood the process, and that no money is being paid out during these periodical evaluations.

“The contractor does not ’earn’ award fee during an interim evaluation,” a response from NASA said. “Interim evaluations allow the government to assess the contractor’s performance prior to final delivery of the end-item. The interim evaluations provide valuable feedback to the contractor on their performance.”

Officials pointed to a separate evaluation in March by the Government Accountability Office that found no problem’s with NASA’s award-fee spending.

“The [IG] report mistakenly creates the impression that NASA overpaid contractors by approximately $66.4 million, which is not the case,” the agency said.

Investigators, however, said NASA is violating federal regulations that prevent “rollover” of unearned funds into future payments for businesses.

“NASA’s current practice for end-item contracts permits exactly that because it gives contractors a second chance to receive money the agency initially determined their interim performance did not warrant,” the IG said.

And inspectors are concerned problems could persist in the future. The agency hasn’t been tracking data on the award fees to see if they’re actually motivating contractors, they said.

“NASA’s failure to ensure the quality of data entered has impaired its ability to measure the effectiveness of current award-fee contracts and reduced its ability to correct deficiencies thereby adversely affecting the quality of future contract sourcing decisions,” investigators said.

That didn’t stop officials from spending $7.2 million on evaluations that “did not gather relevant management information,” the IG said.

The dispute has left both sides parsing the exact meanings of “earned” and “unearned” award money, with likely little agreement in sight unless an outside group — like Congress — gets involved.