NASA's policy of contracting for most of its goods and services was established by the Space Act of 1958. Large-scale procurement expanded rapidly, and between 1962 and 1968 more than 90 percent of NASA's annual expenditures were for payments to outside contractors for a wide range of products and services. Total payments to outside contractors for goods and services during the decade 1969-78 amounted to $32,133.3 million, or 86.4 percent of NASA's total expenditures in that decade. The slight overall decline in the percentage of NASA's expenditures allocated to procurement during 1969-78 may be partially explained by the fact that construction of research facilities and installations had been almost completed in the previous decade and goods and services from outside contractors for this purpose were no longer needed. The annual net value of NASA procurement during this period ranged from a low of $2,673.4 million in 1973 to a high of $3,659.6 million in 1978. Because the number of procurement actions declined steadily from a high of 307,700 in 1969 to a low of 153,700 in 1978, the average value of a procurement action increased considerably during this decade.
Participants in the NASA procurement program consisted of business firms, educational institutions, private research organizations, and government agencies. Between 1969 and 1978, business firms received almost 80 percent of NASA's total procurement value, with large business firms receiving 92 percent of the total amount allotted to business firms. Of the total value of NASA procurement to business contractors, 65 percent represented competitive awards and 35 percent noncompetitive awards. Government agencies and the Jet Propulsion Laboratory, operated by the California Institute of Technology, were next with about 7 percent of the total value of NASA procurement each, followed by educational institutions with 3.9 percent, and nonprofit institutions and contractors from outside the United States with 1 percent each.
The Far West region of the United States consistently led in the total value of awards granted by NASA, ranging from a low of 23 percent in 1971 to a high of 53 percent in 1976. The Southeast region followed with a 20 percent average annual share of contracts awarded, the Mideast region came next with about 17 percent, and the Southwest region had about 10  percent. During the ten-year period, every state and the District of Columbia participated at one time or another in NASA's procurement program. California ranked first as the state consistently receiving the largest share of the total value of contracts awarded, its share being almost 52 percent of the total in 1976. Of the educational institutions participating in NASA's procurement program, the Massachusetts Institute of Technology ranked first nine times out of ten in the net value of awards granted annually by NASA to educational and nonprofit institutions.
From the very inception of the procurement program, NASA's policy has been to decentralize responsibility for the administration of the program. Field installations were given the right to oversee procurement that directly affected their own research and development work and that fell within certain dollar limits. Although the Administrator, the Deputy Administrator, and the Associate Deputy Administrator have final authority over the procurement process, day-to-day oversight of the procurement process rested in the early 1970s with the Associate Administrator for Organization and Management. In 1974 the Office of Procurement was established (headed by an Assistant Administrator), and in 1978 the position of Director of Procurement was created.
Stages in the NASA Procurement Process 1
Procurement Request. Once a project has been approved and a decision made as to the degree of external participation, the responsible organizational unit prepares a procurement request (PR). The PR, after approval by the proper operating officials, becomes the basic working document for the procurement specialist. The PR includes a description of what is wanted and what additional information is needed (suggested suppliers, security classification, etc.).
Procurement Plan. On the basis of the PR and other available information, the procurement specialist draws up a procurement plan. This plan outlines in detail each subsequent step to be taken to carry out the procurement action. It includes a description of the items to be procured, a list of all known sources, a schedule for completing each major phase of the action, the recommended kind of contract to be used, and special provisions to be included in the contract. If the items to be procured can be clearly and completely defined in specifications and drawings, formal advertising for competitive bids is possible. If the items cannot be well defined (and most work in research and development cannot), the negotiation route must be taken, whereby negotiations with potential suppliers (called "sources") are conducted on the basis of competitive technical and business proposals submitted to NASA. The "formal advertising" route usually results in a fixed-price contract, whereas the "negotiation route" usually involves a cost reimbursement contract--normally the cost-plus-a-fixed- fee (CPFF) variety. In NASA, 90 percent of the procurement dollar is spent via the negotiation route.
When the procurement plan has been approved by the proper authorities, the stage is set for solicitation.
Soliciting Proposals. At this stage an attempt is made to keep things as competitive as possible. When formal advertising is used, the procurement action is publicized as widely as possible, and an "Invitation for Bid" (IFB) is sent to each interested supplier. The IFB contains all the information needed to prepare a bid. It is the crucial instrument in bringing user and supplier together.
Negotiation is more complicated. An instrument called a "Request for Proposal" (RFP) is used instead of an IFB. Because a proposal is infinitely more complicated and expensive to prepare than a bid, NASA attempts to limit the sending of RFPs to parties known to be qualified. This necessitates a screening process, which may be done informally through letters and telephone calls or formally through a "pre-proposal conference" held with interested parties. After the screening, RFPs are sent to firms considered to have the required experience, facilities, and capabilities. A firm may submit a proposal even if it does not initially receive an RFP. All larger RFPs are announced in the Department of Commerce's Business Daily, and thus any firm may request them.
Bid and Proposal Evaluation. When formal advertising is used, it is necessary to make sure that the low bidder is qualified and that his bid meets all requirements. When negotiation is used, a much more elaborate evaluation process is necessary because cost figures are only one factor to be considered. Proposals are usually evaluated from three angles--the quality of the proposal (design, cost, schedules, etc.), the technical competence of the proposer (personnel, facilities, experience), and the managerial competence of the proposer (reporting system, accounting system, etc.). The RFP includes the criteria on which the evaluation is made. Administrative and legal personnel, as well as technical personnel, participate in proposal evaluation.
Source Selection, Contract Negotiation, and Contract Award. In formal advertising, a standard contract is awarded to the lowest qualified bidder. When negotiation is used, a decision is made, based on the evaluation described above, on the selection of the supplier to do the work. After selection, negotiations are begun to iron out the details of the contract. Because a CPFF contract is used in most cases, thorny problems of clarifying costs and determining the fee must be solved. When both sides agree, the actual contract award is made.
Contract Administration. The award of a contract is only part of the overall procurement process. What follows afterward may be even more significant. It is true that the contractor has primary responsibility for performance and that, for routine procurements, contract administration may consist of only taking delivery of the goods or services. In contracting for research and development, however, numerous interim problems arise in which NASA has a vital interest. In such cases, reviewing and evaluating  the contractor's progress is very important and may become a specialty in itself. Elaborate reporting techniques have been developed, which sometimes reveal the need for NASA to provide technical or administrative assistance to the contractor. NASA may approve certain contractor actions that require changes in costs. In certain cases, the contract may need to be modified or terminated.
Contract administration involves NASA operating technicians, procurement specialists, and people from such activities as safety, reporting, and security.
Definition of Terms
Advertised Award. Procurement action resulting from acceptance of bids made by contractors in response to formal advertising.
Award. See Procurement Action.
Competitive Negotiation. Procurement action resulting from soliciting proposals or obtaining bids from two or more sources.
Direct Action (Direct Award). Procurement action placed directly with business firms or nonprofit institutions or organizations. The term excludes procurement actions placed with or through other Federal agencies.
Intergovernmental Award. Procurement action placed with or through other Federal agencies.
Modification. Any written alteration in the specifications, delivery point, rate of delivery, contract period, price, quantity, or other contract provision of an existing contract, whether accomplished by unilateral action in accordance with a contract provision or by mutual action of the parties to the contract. It includes (a) bilateral actions, such as supplemental agreements, and (b) unilateral actions, such as change orders, notices of termination, and notices of the exercise of an option.
Negotiated Award. Procurement action resulting from negotiation procedures authorized under Title 10 U.S.C.2304(a).
Net Value. Net amount of obligations resulting from debit and credit procurement actions.
Noncompetitive Negotiation. Procurement action resulting from the solicitation of proposals from only one source.
Procurement Action (Award). Any of the following transactions that obligate or deobligate funds:
- a. Letter contracts or other preliminary notices of negotiated awards.
- b. Definitive contracts, including purchase orders.
- c. Orders against indefinite delivery contracts.
- d. Modifications.
Small Business. A concern that meets the pertinent criteria established by the Small Business Administration and set forth in Paragraph 1.701 of the NASA Procurement Regulation. Generally, a small business concern  is one that is independently owned and operated, is not dominant in its field of operations, and with its affiliates does not employ more than a specified number of persons (usually not more than 500, 750, or 1,000), depending on the product called for by the contract. For construction and some service industries, the criterion is a specified annual dollar volume of sales or receipts instead of the number of employees.
1 Rosholt, Administrative History of NASA, pp.63-65.