NASA wastes money with outsourcing deal, audit finds

The U.S. Aeronautics and Space Administration (NASA) has overpaid by an average of 24 percent for computer accessories and supplies purchased through a 5-year-old desktop IT outsourcing arrangement, according to a recent audit by the NASA inspector general’s office.

The space agency in 1998 signed a nine-year, $1.3 billion deal awarding seven companies a contract to provide desktop, server and communication equipment and support services. Dubbed the Outsourcing Desktop Initiative for NASA (ODIN), the program requires participating vendors to maintain at each NASA site they support an online catalog of supplemental computing supplies and accessories, such as keyboards, printer cartridges and PDAs.

The seven vendors include OAO Corp. (since acquired by Lockheed Martin Corp.), Affiliated Computer Services Inc. and Science Applications International Corp. (SAIC). NASA spent $13.9 million last year on products from ODIN catalogs.

That total could have been trimmed significantly had NASA officers compared the catalog prices against current market prices, according to the audit report. Unnecessary product bundling and support choices restricted to the most expensive levels helped artificially inflate the catalog prices of components. At one NASA research center, a hard-drive cable listed at $52.14 could have been purchased for $2, had the catalog offered the part without installation and maintenance support.

Missed volume discounting opportunities could have also helped NASA cut its supply costs, the report found. Some facilities had already negotiated discounting provisions with vendors. The Goddard Space Flight Center, in Greenbelt, Md., for example, saved $200,000 off the list price of antivirus software by purchasing 5,000 units. Not all NASA sites, though, had plans in place to take advantage of consolidation purchasing.

While some NASA installations allowed employees to buy equipment from sources other than the ODIN catalogs, other sites mandated the use of the catalogs, citing the advantages of centralized procurement and support. Those advantages don’t outweigh the cost savings from using outside suppliers, the audit found.

Conducted from November 2001 though March 2003, the inspector general’s audit generated a set of recommendations sent to NASA CIO Patricia Dunnington. She concurred with all of the recommendations and has taken steps to implement them, according to a response letter sent from her office to the inspector general.

The use of ODIN catalogs for purchases will be made optional at all NASA sites, the letter said. The ODIN Program Office will issue guidelines to administrators for reviewing catalog prices to check their reasonableness, and will require the results of those reviews to be documented. The office will also draft volume discounting provisions to be included in all orders, and encourage sites to coordinate on consolidation purchases.

NASA has already landed a $9,000 refund check from one vendor as a result of the audit. SAIC, the ODIN contractor for NASA’s headquarters, used a higher-than-allowed profit rate to price some catalog products during a six-month stretch in 2002, the report found.

Notified by the auditors of the excess charges, NASA said it recovered its overpayment.