ES, IG-00-002, Raytheon Subcontract Management

RAYTHEON SUBCONTRACT MANAGEMENT
IG-00-002

Executive Summary

Background

Under NASA contract NAS9-18181, Raytheon Technical Services Company provides development, maintenance, operations, and sustaining engineering for the Space Station Training Facilities and the Part Task Trainer.⁽¹⁾ The cost-plus-award-fee contract began on October 23, 1989, and runs through April 30, 2003. Negotiated contract costs total about $595.1 million.⁽²⁾
Raytheon has an approved purchasing system and authority to award subcontracts through January 24, 2000. The contract requires Raytheon to subcontract on a competitive basis to the maximum practical extent. The subcontracts awarded since contract award through August 20, 1999, total about $134.7 million, or about 23 percent of total negotiated costs. To issue subcontracts valued at more than $500,000, Raytheon must first obtain written consent from the NASA contracting officer.

Objectives

The overall audit objective was to determine whether Raytheon appropriately awarded and effectively managed subcontracting activities on NASA's contract with Raytheon. Additional details on the objectives, scope, and methodology are in Appendix A.

Results of Audit

Raytheon officials appropriately awarded and effectively managed subcontracting activities on contract NAS9-18181, except for maintaining supporting justifications of noncompetitive procurements. NASA officials incorporated the required contract clauses into the prime contract, and Raytheon officials incorporated the clauses into subcontracts. Also, Raytheon officials appropriately obtained consents-to-subcontract for subcontracts valued at more than $500,000 as required by the contract. However, our review of four noncompetitive procurements with a total value of $399,300 showed that Raytheon officials did not maintain supporting documentation for the justifications for the noncompetitive procurements. As a result, NASA has reduced assurance that the contractor maximized the competition of its subcontracts.

Recommendations

Management should direct Raytheon to maintain adequate documentation to support justifications for noncompetitive procurements. Additionally, management should ask the NASA contracting officer and the Defense Contract Management Command (DCMC) to include reviews for supporting documentation in their respective purchasing system reviews. We believe that these actions will provide additional assurances that Raytheon officials select subcontractors on a competitive basis to the maximum practical extent as required by the Federal Acquisition Regulation.

Management's Response

Management concurred with each recommendation. The complete text of the response is in Appendix B. We consider management's comments responsive.

FOOTNOTES

1. The Part Task Trainer is a single system, stand-alone training device designed to provide subsystem training for the Space Station Distributed Systems.

2. The amount consists of $562.5 million in estimated costs and $32.6 million in contractor fees.

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Background	Under NASA contract NAS9-18181, Raytheon Technical Services Company provides development, maintenance, operations, and sustaining engineering for the Space Station Training Facilities and the Part Task Trainer.⁽¹⁾ The cost-plus-award-fee contract began on October 23, 1989, and runs through April 30, 2003. Negotiated contract costs total about $595.1 million.⁽²⁾ Raytheon has an approved purchasing system and authority to award subcontracts through January 24, 2000. The contract requires Raytheon to subcontract on a competitive basis to the maximum practical extent. The subcontracts awarded since contract award through August 20, 1999, total about $134.7 million, or about 23 percent of total negotiated costs. To issue subcontracts valued at more than $500,000, Raytheon must first obtain written consent from the NASA contracting officer.
Objectives	The overall audit objective was to determine whether Raytheon appropriately awarded and effectively managed subcontracting activities on NASA's contract with Raytheon. Additional details on the objectives, scope, and methodology are in Appendix A.
Results of Audit	Raytheon officials appropriately awarded and effectively managed subcontracting activities on contract NAS9-18181, except for maintaining supporting justifications of noncompetitive procurements. NASA officials incorporated the required contract clauses into the prime contract, and Raytheon officials incorporated the clauses into subcontracts. Also, Raytheon officials appropriately obtained consents-to-subcontract for subcontracts valued at more than $500,000 as required by the contract. However, our review of four noncompetitive procurements with a total value of $399,300 showed that Raytheon officials did not maintain supporting documentation for the justifications for the noncompetitive procurements. As a result, NASA has reduced assurance that the contractor maximized the competition of its subcontracts.
Recommendations	Management should direct Raytheon to maintain adequate documentation to support justifications for noncompetitive procurements. Additionally, management should ask the NASA contracting officer and the Defense Contract Management Command (DCMC) to include reviews for supporting documentation in their respective purchasing system reviews. We believe that these actions will provide additional assurances that Raytheon officials select subcontractors on a competitive basis to the maximum practical extent as required by the Federal Acquisition Regulation.
Management's Response	Management concurred with each recommendation. The complete text of the response is in Appendix B. We consider management's comments responsive.