Audit of Incentive Award Fee Structure Under the Space Flight Operations Contract

National Aeronautics and Space Administration Office of Inspector General Washington, D.C. 20546-0001 Reply to Attn of: W March 23, 2004 TO: M/Associate Administrator for Space Flight FROM: W/Assistant Inspector General for Auditing SUBJECT: Audit of Incentive/Award Fee Structure Under the Space Flight Operations Contract, Assignment Number A-04-02-00 Report No. IG-04-014 We conducted an audit of the incentive/award fee structure under NASA’s Space Flight Operations Contract (SFOC). The purpose of this audit was to determine whether the incentive/award fee structure of the SFOC was conducive to safe Shuttle operations. Enclosure 1 provides background for this audit activity, and Enclosure 2 provides details on the objectives, scope, and methodology of the audit. We are unable to reach a conclusion on whether the fee structure of the SFOC was conducive to safe Shuttle operations. However, we make two observations (without recommendations) relating to management of the SFOC award fee process that may be relevant to future management of the SFOC award fee process. The observations concern: (1) shifts in the Agency’s weighting of the “operational safety” and “quality” award fee evaluation factors, and (2) changes in the communication of award fee evaluation criteria to United Space Alliance (USA). Shifts in the Award Fee Weighting for Operational Safety and Quality Evaluation Factors We identified notable ...