National Aeronautics and Space Administration
Office of Inspector General
Washington, D.C. 20546

April 2, 2002

RELEASE, 2002-052: INTERNATIONAL SPACE STATION SPARE PARTS COSTS

 The audit report "International Space Station Spare Parts Costs" (IG-
02-011, March 22, 2002) has been posted to the NASA Office of Inspector 
General Web site at:  
http://www.hq.nasa.gov/office/oig/hq/ig-02-011.pdf

NASA budgeted $831 million to acquire spare parts for the International 
Space Station (ISS) through fiscal year (FY) 2007.  We found that the 
Agency did not properly acquire and account for the spare parts.  NASA 
used noncompetitive contract modifications to issue orders to acquire 
groups of spare parts from the ISS prime contractor.  Although the 
Agency properly justified and approved noncompetitive contract 
modifications, it did not negotiate prices for individual spare parts 
as required by the ISS contract.  The Agency also did not develop a 
pricing history for use in purchasing additional spare parts.  As a 
result, NASA had no assurance that it paid fair and reasonable prices 
for the $334 million spent on ISS spare parts through FY 2000.  In 
addition, because the Agency has no pricing histories, it may not be 
able to cost-effectively and competitively procure about $608 million 
in future ISS spare parts.  

Additionally, we found that the ISS prime contractor omitted contractor 
fee and indirect costs from the value of spare parts recorded on 
receiving reports it submitted to NASA.  Consequently, the Agency 
cumulatively understated by about $39 million the value of ISS spare 
parts in its annual financial statements from Program inception (FY 
1995) through FY 2000.  

We recommended that NASA require the ISS prime contractor to propose, 
negotiate, track, and report prices for individual spare parts and that 
NASA establish price histories for the parts.  We also recommended that 
NASA ensure the ISS prime contractor includes fee and indirect costs in 
the value of ISS spare parts recorded in the official property records.  
Further, we recommended that the Agency reestablish procedures for 
acquiring spare parts and reference the procedures in NASA policy.

NASA management concurred with the recommendations to require the 
contractor to propose and negotiate individual prices for spare parts 
and to include fee and indirect costs of spare parts on receiving 
reports submitted to NASA.  NASA originally did not agree with the 
recommendation to track and report individual prices for ISS spare 
parts, but subsequently agreed to use contractor receiving reports to 
track prices and establish price histories for high-dollar value spare 
parts.  NASA also agreed to reestablish procedures for acquiring spare 
parts and to reference the procedures in NASA policy.

To comment on this report, please send e-mail to igrelease@hq.nasa.gov 

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