Fraud, abuse found in NASA research funding to small companies

Introduction

A NASA program to encourage small companies to develop new technology has accepted questionable research from some contractors and given others multiple contracts for doing the same job, according to NASA’s inspector general.

The agency watchdog said in a recent report it “identified instances of fraud, waste, and abuse by program participants that bring into question the effectiveness of the internal controls in NASA’s Small Business Innovation Research (SBIR) Program.”

The nearly 30-year-old SBIR program was created by Congress to give small companies funding for research with commercial applications. NASA is currently negotiating with 309 small firms to award contracts for research projects that include advanced photovoltaic systems to generate cheap and reliable power for deep space exploration missions.

Eighty-five percent of NASA’s $18 billion annual budget is spent on contracts and awards. About $133 million went to NASA’s SBIR in 2009, according to the U.S. Small Business Administration.

Problems with NASA’s SBIR program have been repeatedly criticized in recent years by the agency’s inspector general. Of some 46 investigations related to the SBIR program over the past decade, 17 percent resulted in criminal convictions, civil judgments, or administrative action, the inspector general told a Senate Commerce Committee hearing last year.

While problems also plague some of NASA’s big contracts, the Nov. 12 report highlighted the SBIR program as one of the agency’s management challenges.

“OIG investigations have found that some award recipients received multiple SBIR contracts for essentially the same research and provided duplicate deliverables or questionable research products,” the report said. “An ongoing OIG audit of NASA’s SBIR Program is examining whether Program management has implemented adequate internal controls to ensure the contract funds are appropriately spent. In addition, the audit is reviewing whether SBIR contracts contain unallowable and unsupported costs.”

NASA said it is training SBIR staff to detect fraud and increasing contract oversight.

“NASA is engaged in ongoing work with the Inspector General’s office to address its concerns in the report,” the agency said in a statement to the Center for Public Integrity. “The program is continuing to review, develop improvements and exchange with the Office of the Inspector General on their findings.”

James Muncy, a policy expert with advocacy group Space Frontier Foundation, says contracting is a major problem throughout NASA — including the SBIR program.

“Some small companies just get really good at writing SBIR proposals and winning $100k and $600k contracts,” said Muncy. “The topics to be researched are supposed to fit with NASA’s needs, and the projects are supposed to lead to actual products that serve a need. But that doesn’t always happen.”

More broadly, Muncy says NASA needs to shift to fixed-cost contracts.

“NASA’s biggest problem with contracting and procurement is that, because it likes to figure out what it wants done as it goes along, NASA likes to use cost-plus contracts that pay contracts for the time they spend instead of the results they produce,” said Muncy. “NASA also likes to combine what it buys into huge systems that only a few companies – sometimes only one or two – can bid on, instead of breaking it up to allow for more competition on the pieces.”

Cost-plus contracts guarantee to pay all the costs of a contractor, plus a certain amount of profit. They account for almost half of NASA’s obligated contract dollars, the inspector general’s report said.

FAST FACT: Contract problems at NASA are not limited to the SBIR program, according to the inspector general. For example, NASA paid a contractor for the Earth Observing System Data and Information System 97 percent of the award fee despite a two-year delay and cost overruns of more than 50 percent, the watchdog said.

Following are other new watchdog reports released by the Government Accountability Office (GAO), various federal Offices of Inspector General (OIG), and other government entities.

FINANCE

• Physical security is the IRS’ top management challenge because of a “surge of hostility” toward the federal government, including the health care reform law which could lead to threats against IRS employees. (OIG)
• The IRS has boosted the dollar amount of rebates it gets through a Citibank card contract for employees’ travel but failed to ensure the rebates were properly allocated to agency offices. (OIG)

NATIONAL SECURITY

• Justice Dept. is investigating whether WikiLeaks’ publication of classified documents violates criminal law, but First Amendment issues may make such a prosecution difficult (Congressional Research Service).

HEALTH

• Indiana nursing home company agrees to pay $376,000 to settle allegations that it employed seven people who were banned from federal health care programs. (OIG)