National Aeronautics and Space Administration
Office of Inspector General
Washington, DC  20546

June 27, 2001

RELEASE, 2001-078

2001-078 -Audit of Acquisition of the Space Station Propulsion Module

 The following audit report has been posted to the NASA Office of 
Inspector General Web site:  Audit of Acquisition of the Space Station 
Propulsion Module, IG-01-027, May 21, 2001

To access the entire report, please go to:  
http://www.hq.nasa.gov/office/oig/hq/issuedaudits.html

Synopsis: The NASA Office of Inspector General has completed an Audit 
of Acquisition of the Space Station Propulsion Module.  The purpose of 
the Propulsion Module was to provide a U.S. propulsion capability to 
mitigate the risk of a Russian failure to deliver critical elements, 
such as the Service Module, or to provide logistical support to the 
International Space Station.  We determined that, with a life-cycle 
cost of $1.558 billion and a diminished need for long-term U.S. 
propulsion capability, the Propulsion Module was not cost-effective.  
In March 2001, NASA cancelled the project after recognizing that the 
estimated $675 million cost to complete it was not affordable. 
We found that NASA implemented the United States Propulsion Module 
(USPM) design before properly accomplishing acquisition planning and 
preparing project documentation.  For example, NASA did not validate 
requirements before beginning a preliminary design review of the USPM.  
As a result, the Agency spent $97 million and 19 months of effort 
before it determined that the design was unacceptable.  For the follow-
on design, the United States Propulsion System (USPS), NASA 
appropriately analyzed alternatives, developed an acquisition strategy, 
and defined requirements.  However, the Agency pursued implementation 
of the USPS without an approved project plan or risk management plan.  
Also, NASA selected The Boeing Company (Boeing) as the sole-source 
contractor without properly documenting the justification for the 
noncompetitive selection.  As a result, NASA had not shown that the 
selection was in the best interest of the Government.  
Management's Response:  NASA concurred with the recommendation to 
establish an approved project plan, acquisition plan, and risk 
management plan.  Management stated that it would manage all 
International Space Station projects consistent with NASA policy, but 
disagreed that NASA selected the USPM design without fully considering 
alternatives and without developing an adequate acquisition strategy.  
NASA partially concurred with the recommendation to resolve all 
discrepancies prior to beginning a preliminary design review.  However, 
NASA disagreed that it should have closed all discrepancies from the 
systems requirements review before beginning a preliminary design 
review for the USPM.  

NASA concurred with the intent of the recommendation on sole-source 
procurements, recognizing that all procurements must follow the 
appropriate regulations.  However, the Agency maintained that the 
Propulsion Module Project was within the scope of the contract and, 
therefore, was not subject to requirements for competitive 
procurements.  A recent General Accounting Office report (GAO-01-576R) 
supports this position.  Although we disagree with that position, our 
report does not conclude that a sole-source procurement was 
inappropriate, but that NASA did not adequately document its reasons 
for that method of contracting, even though justification for sole-
source procurements is required by the Federal Acquisition Regulation.
To comment on this report, please send an e-mail to 
igrelease@hq.nasa.gov 

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