Boeing awarded $425 million bonus for late, costly work, federal auditors report

Boeing received a bonus of $425.3 million — 92 percent of the potential award — for work on the space station that ran eight years late and cost more than twice what was expected, according to federal auditors.

The fee was paid on a $13.4 billion so-called "cost-plus" contract where NASA reimburses all costs and pays a bonus for exceptional performance. Raytheon and Lockheed Martin received similar bonuses for troubled programs, the Government Accountability Office (GAO) said in a report set for release tomorrow.

"NASA paid most of the available fee on all of the contracts we reviewed — including on projects that showed cost increases, schedule delays and technical problems," the GAO wrote in its report for Bart Gordon, a Tennessee Democrat who chairs the House Science Committee.

The GAO in December 2005 criticized the Defense Department for such practices, spurring lawmakers to tighten the Pentagon's criteria for awarding bonuses. Similar action toward the National Aeronautics and Space Administration (NASA) could cut contractors' profits as the agency prepares to spend at least $100 billion over the next two decades to return Americans to the moon.

Gordon, in an e-mailed statement, said that, since "almost ninety percent of NASA's budget is spent on contract work, I'm troubled by GAO's determination that NASA hasn't been following its own long-standing guidelines."

"That, coupled with GAO's finding that NASA has paid the majority of the available fee on all of the contracts that GAO reviewed — whether or not the contractor met its cost, schedule, and performance requirements — tells me that NASA has a problem that needs fixing," Gordon said.

NASA Deputy Administrator Shana Dale, while not addressing specific examples of bonus payments, said in a written response included with the report that NASA would address GAO's concerns.

The space agency has defended award fees as a way to encourage excellent work. And the GAO notes that with the International Space Station contract, delays stemmed partly from the 2003 loss of the space shuttle Columbia "and other actions not within the control of the contractor."

Still, contractor overruns played a role and Boeing estimates "that it will incur an additional $76 million in overruns by the time the contract is completed," GAO said.

"The high fees paid on contracts where programs experienced disappointing results raise questions as to the effectiveness of award fees," the GAO said.

Edmund Memi, spokesman for Boeing, referred questions to NASA.

NASA awarded contractors an average 90 percent of available bonuses on its 10 biggest projects in fiscal 2004, worth about $31 billion, GAO said. The awards totaled almost $1 billion.

The GAO rapped NASA in 1994 for awarding bonuses with too little regard for project outcomes and for rolling over unearned awards to the next evaluation period.

While NASA has made progress since then, it scores contractors on vague metrics, like "organizational management," that may dilute an emphasis on concrete goals such as budgets and deadlines, GAO wrote.

The GAO also questioned a $120 million bonus given to Raytheon and Lockheed for satellite-related contracts.

NASA paid Raytheon $103.2 million, or 97 percent of the potential bonus, for the Earth Observing System Data and Information System.

The 10-year contract swelled to $1.2 billion from $766 million, and the job took two extra years to complete, finishing in 2005 the GAO said. Raytheon spokesman Jon Kasle declined to comment.

Lockheed collected $17 million, or 99 percent of the eligible bonus, for the Landsat-7 satellite, launched in 1999. The project was delayed nine months even as the scope of work shrank. Costs rose 20 percent to $409.6 million, the GAO said.

"Questions about the amount of award fee should be addressed by the customer," Lockheed spokesman Charles Manor said. The Landsat-7 contract, which included services, ended in 2005.

NASA's Dale, in her response to the report, said the space agency will re-emphasize project outcomes and minimize the use of less-tangible metrics, consider the administrative cost of overseeing award-fee contracts and collect data on how effective awards are at spurring contractors to meet deadlines and budgets, she said.

Dale also said NASA would ask the Defense Department how it measures the usefulness of awards with military contractors.

The GAO report comes as NASA prepares for a new phase of space exploration that would cost taxpayers at least $100 billion.

The agency plans to finish the space station by 2010, retire the space shuttles the same year, and build a replacement ship that can reach the moon by 2020.

Lockheed won a contract last August to build the new spacecraft, Orion, which could carry astronauts as soon as —. The contract is valued at about $3.9 billion through late — for two craft and could reach $8.2 billion by ' if more are ordered.