NASA OIG: Status of Services Transferred From NASA Centers and Headquarters to the NASA Shared Services Center
The Issue
NASA established the NASA Shared Services Center (NSSC) in 2006 in an effort to consolidate into a single location multiple business services in four functional areas – financial management, human resources, information technology, and procurement services – that previously were conducted by civil service and contractor personnel at NASA Headquarters and the 10 Centers.1 The NSSC, located at Stennis Space Center, is a partnership between NASA, the states of Mississippi and Louisiana, and a contractor, Computer Sciences Corporation. NASA’s goals in establishing the NSSC include providing consistent, high-quality, and timely services at lower cost; reducing resources expended for institutional support areas; and freeing up Center resources to focus on performing NASA’s core missions.2 According to the NSSC Implementation Plan, after a stabilization period of 3 years NASA could expect to save approximately $6 million per year and reassign more than 200 civil service, full-time equivalent positions (hereinafter referred to as positions) as a result of creating the NSSC.3
Our audit objective was to examine the consolidation and transfer of selected services from NASA to the NSSC. Specifically, we sought to determine whether: (1) the transfer of services was accomplished timely and as planned, (2) positions at the Centers were redirected as planned to “critical mission-related activities,” and (3) projected cost savings were realized. To conduct our audit, we interviewed staff at NASA Headquarters, the NSSC, and five Centers and reviewed relevant documentation. Details of the audit scope and methodology are in Appendix A.
Results
NASA has consolidated and transferred more than 40 services to the NSSC since its inception in 2006.4 While most of the transfers occurred on time and as planned, the transfer of accounts payable and accounts receivable services was delayed, resulting in $3.75 million in additional costs. In addition, three services that initially were transferred to the NSSC were subsequently returned to the Centers for cost reasons. Moreover, although NASA originally expected that approximately 200 civil service positions at the Centers would be freed up and reallocated from performing institutional support services to “critical mission-related activities” as a result of creation of the NSSC, we found that at the five Centers we visited positions were often redirected within the same functional area as the transferred services. Finally, we found that NASA’s claim that creation of the NSSC would save the Agency $121 million over a 10-year period (fiscal years 2006 through 2015) was based on flawed data and is therefore not accurate.
Several Services Not Transferred Timely or as Planned. NASA developed a phased schedule for the transition of institutional support services to the NSSC and for the discontinuance of those services at the Centers. The transfer of most services occurred on time and as planned. However, the transfer of accounts payable and accounts receivable services was delayed due to concerns expressed by the NASA finance community that additional time was needed to ensure that systems were ready and NSSC personnel were trained. This delay resulted in NASA incurring approximately $3.75 million in additional expenses before the transfer was completed.
In addition, three human resource services: organizing health fairs, managing logistics related to recruiting, and arranging awards ceremonies, that originally transferred to the NSSC subsequently were returned to the Centers because of unexpectedly high costs. Returning these services to the Centers resulted in fewer Center positions available for redirection to other functions.
Benefits counseling services were also a source of transition problems. Some NASA employees requesting benefits counseling from the NSSC were unsatisfied with the advice provided by the NSSC contractor staff and continued to call Center-based staff. In response, NSSC hired additional civil service staff experienced in managing Federal benefits, which resulted in higher benefits counseling costs for the NSSC.
Guidance for Redirection of Positions Not Established. NASA originally expected that approximately 200 civil service positions would be reallocated to “critical mission- related activities” upon transfer of services to the NSSC. However, NASA did not define “critical mission-related activities” or provide the Centers with a consistent plan for how positions should be redirected to such activities. As a result, Centers developed their own interpretations of the term and established their own plans for redirecting staff. While 77 positions were redirected and 50 positions were eliminated through attrition at the five Centers we visited, redirected employees were often placed in new positions or assigned to backfill positions in the same functional areas from which services had been transferred to the NSSC. Because Headquarters did not define “critical mission-related activities” and Centers were inconsistent in their interpretations of the term, we cannot determine whether Center positions were actually redirected to such activities. As a result, it is unclear to what extent NASA achieved its goal of reducing the number of Center-based positions dedicated to institutional support.
Projected Cost Savings Based on Unreliable Data. According to the Implementation Plan, NASA estimated it would save approximately $6 million per year by establishing the NSSC. In May 2009, 3 years after its inception, the NSSC reported projected cost savings of $121 million from fiscal year (FY) 2006 through FY 2015. NSSC also reported that NASA achieved the breakeven point on its investment in the NSSC in December 2008, 4 months earlier than had been predicted.
However, our analysis determined that cost data supplied by the Centers, which were essential in determining the baseline cost calculations and return-on-investment projections, were not reliable or verifiable. For example, some Centers’ salary calculations did not match applicable Office of Personnel Management pay scales and Center personnel told us that some time estimates were “guesstimates” based on tasks that were not clearly defined. We also found that NASA did not include in its return-on- investment calculations $15.2 million of funding (including $3.75 million for the delayed transfer of accounts payable and accounts receivable) the Agency used to supplement NSSC start-up costs. As a result, NASA’s claim of a $121 million savings for FYs 2006 through 2015 and the reported breakeven point of December 2008 was based on flawed data and therefore is not accurate.
Management Action
For NASA to accurately demonstrate cost savings and redirection of positions, it needs to ensure that the data used to evaluate the cost associated with consolidation of services at the NSSC is reliable and that the term “critical mission-related activities” is defined and uniformly applied across the Centers. We recommend that the NASA Associate Administrator for Mission Support (Associate Administrator): (1) develop a full-cost benefit assessment prior to transferring or implementing additional services to the NSSC; (2) develop a plan with milestones for the periodic re-evaluation of transitioned services to ensure their performance by NSSC personnel continues to be cost effective; (3) define and identify “critical mission-related activities,” develop a plan to ensure that Center resources are redirected to those activities, and document any instances where such redirection is not possible; and (4) provide clear guidance on what data should be obtained and the methodology that should be used to project cost savings to ensure savings projections are supported by documented and verifiable data.
We submitted a draft of this report for comment to the Associate Administrator on December 13, 2010, and requested a response to our recommendations. On January 14, 2011, we received comments from the Associate Administrator in coordination with the NSSC Executive Director regarding our recommendations. The Associate Administrator also provided technical comments to our report. We considered the technical comments and incorporated them into the body of our report as appropriate.
The Associate Administrator concurred with all of our recommendations and in his response described a series of ongoing and planned actions by the Agency, including:
1. Refining the process the Agency uses for transferring or assigning services to the NSSC for the NSSC to include a cost-benefit analysis;
2. Continuation of regular briefings to the NSSC Board of Directors by NSSC Senior Leadership concerning the quality, timeliness, and cost of services provided by the NSSC, as well as submission to all Centers of detailed financial information concerning NSSC-provided services;
3. Development of a generic definition for “critical mission related activities” and an Employee Transition Plan as appropriate for transferred services; and
4. Development by February 28, 2011, of clear guidance and templates for collecting workforce and cost data for Business Case Analyses for NSSC activities.
We consider these actions to be responsive to our recommendations, and accordingly consider the recommendations to be resolved. We will close the recommendations upon completion and/or verification of the proposed corrective actions.
Footnotes
1 NASA noted in the NSSC Implementation Plan that because IT activities had already undergone a consolidation, the IT community would not experience a reduction in total civil servants and contractors as a result of transitioning services to the NSSC. Therefore, no cost savings or consolidation for IT services was expected. Accordingly, we did not consider IT activities in our analysis.
2 “NASA Shared Services Center (NSSC) Implementation Plan Report” (NSSC-RPT-02, Volume 1, September 2003), p. 2.
3 Office of Management and Budget (OMB) Circular A-11 defines full-time equivalent (FTE) employment as the total number of hours worked divided by the number of compensable hours applicable to each fiscal year. For example, an FTE can equal one employee working full time for 1 year or 2 employees working full time for 6 months.
4 See Appendix B for a list of the 44 services transferred to the NSSC.
