Contracting Enters the New Frontier

or years, the name NASA has been synonymous with technological advancement. Now, as the agency seeks to recover from the space shuttle Columbia tragedy, it is also trying to position itself at the cutting edge of acquisition reform.

But with about 87 percent of its $15 billion budget for fiscal 2003 already committed to contractors and vendors, the National Aeronautics and Space Administration is fine-tuning existing procurement procedures rather than making radical changes.

NASA Administrator Sean O'Keefe has challenged the agency to adopt new ways of doing business. Most of his initiatives are in line with procurement process improvements NASA started making in the late 1980s. "They were important to people in procurement, but perhaps people elsewhere in the agency never noticed them," says Tom Luedtke, NASA's assistant administrator for procurement.

NASA is touting five procurement innovations under way:

• Risk-Based Acquisition Management. Aiming to reduce the impact of unforeseen events such as mishaps, contractor performance problems, funding shortfalls and technological obstacles.
• Set Fee Initiative. Setting fees in selected contract solicitations to attract competitors and motivate contractors to perform better.
• Virtual Procurement Office. Providing access to procurement tools and regulations on the Internet so those involved in acquisitions have complete and current information at their fingertips.
• Award-Term Contracting. Extending the terms of selected contracts as a reward for top performance.
• Performance-Based Contracting. Describing work in terms of desired outcomes rather than necessary efforts, and making payments contingent on performance that meets or exceeds contract standards.

O'Keefe energetically promotes the Bush administration's competitive sourcing philosophy, which holds that putting government work of a commercial nature through the bidding process will motivate both civil servants and potential contractors to come up with the best way of getting work done.

The much-ballyhooed Consolidated Space Operations Contract is one instance where NASA is rethinking its acquisition strategy. Five years after appointing Lockheed Martin Space Operations Co. to manage all of its data collection, telemetry and communications operations for Earth-orbiting satellites, planetary exploration and human space flight activities, NASA is dismantling the $3.4 billion contract.

Market assumptions upon which the consolidation was based did not play out. The contract garnered only about half the $1.4 billion in savings it was expected to achieve over its five-year base period. Next March, NASA will break up the work into five smaller contracts collectively worth about $400 million a year for specific kinds of communications support services.

The Consolidated Space Operations Contract "was not a failure by any means," O'Keefe says. "But it certainly wasn't the most constructive way to go about doing it, we come to find."