Contracting Out

GAO reviewed contract administration at the National Aeronautics and Space Administration's (NASA) Lewis Research Center.

GAO found that: (1) the Center contracted out functions for services without comparing the contract costs to in-house performance costs; and (2) NASA does not comply with the Office of Management and and Budget (OMB) Circular A-76, which requires agencies to perform such cost comparisons. NASA officials stated that NASA does not plan to implement such policies because: (1) the quality and experience of NASA managers makes such cost comparisons unnecessary; (2) the preparation of a formal cost comparison is costly and disruptive to ongoing work; (3) the focus on cost would take emphasis away from achieving its primary missions; and (4) the research and development exclusion in the circular relieves NASA from having to perform cost comparisons for such activities. In addition to requiring cost comparisons, the circular provides that: (1) federal agencies periodically review their activities that provide products or services which could be obtained from commercial sources and annually report on their implementation progress; and (2) when personnel ceilings prevent the continuing of lower cost, in-house activities, the agencies should request additional spaces in their annual budget request. GAO found that NASA has neither performed the cost comparisons nor submitted the required annual reports. GAO believes that management decisions of the magnitude discussed should include systematic consideration of cost to ensure that the most cost-effective decisions are reached and, therefore, recommended that NASA implement the policy and procedures of the circular.