Assessment of ISO 9000 Contract Support
G-97-003

Purpose and Scope

The Office of Inspector General (OIG), Inspections and Assessments (I&A), initiated an assessment of NASA's strategy for acquiring contract ISO 9000 support and certification. In performing this assessment, we reviewed the lawfulness and regulatory compliance of the Marshall Space Flight Center's (MSFC) activities in this area.

Methodology

The assessment team conducted interviews with employees and management officials from NASA Headquarters, Goddard Space Flight Center (GSFC), Kennedy Space Center (KSC), Johnson Space Center (JSC), Lewis Research Center (LeRC), MSFC, the National Institute of Standards and Technology (NIST), and three private firms involved in ISO 9000 consulting. These interviews included employees involved in quality assurance, procurement, strategic planning, directives management, internal management controls, and ISO 9000 assessment and certification. We reviewed relevant NASA policy and management issuances, documents and publications about the ISO 9000 process, marketing information from vendors, contracts and subcontracts, and other related materials. An overview of the ISO process is provided in Exhibit 1.

Background

On December 6, 1995, Daniel S. Goldin, the NASA Administrator, directed the Agency to implement ISO 9000 standards in accordance with NASA Management Instruction (NMI) 1270.3 (See Exhibit 2). NMI 1270.3 requires NASA and NASA suppliers to institute and maintain a Quality Management System (QMS). This QMS, at a minimum, should comply with the appropriate standards contained in the current version of the International Organization for Standardization's "ISO 9000" Standard series, or with the American National Standards Institute/American Society for Quality Control's "Q9000 Series" and associated documentation. ISO 9000 is a series of internationally accepted generic standards for quality management and quality assurance. The quality management standards provide guidance to implement an effective QMS, which generally increase productivity and reduce costs associated with inefficiencies. The standards also provide generic requirements to assess the adequacy of the QMS. In addition, the ISO 9000 quality system requirements may be tailored, or supplemented as necessary, to ensure that all applicable requirements are met and that unnecessary requirements are not imposed.

There is no national or Federal certifying organization for ISO 9000 in the United States (unlike most European nations where a government institution oversees and endorses the ISO 9000 registrar process). NASA must look to international qualified vendors to provide ISO 9000 certification. International standards and practices also stipulate that vendors who deliver pre-assessment support (i.e., consultation services for organizational actions leading to registration) should not register the same organization or function. Within the ISO 9000 international community, this practice would be considered a "professional conflict of interest." NASA appears to be attentive to this issue. To date, this has not been a problem. NASA plans to continually assess relationships between consulting, pre-assessment, and registrar services.

In a memorandum of November 13, 1996, the NASA Administrator established the requirement "that the Agency be third-party certified in our key processes, by an internationally recognized registrar, to ISO 9001" (See Exhibit 3). Further, Mr. Goldin formally established April 1998, as the implementation deadline for JSC, MSFC, and Stennis Space Center (SSC). The other NASA Centers and Headquarters are to be certified by September 30, 1999.

Subsequently, the Acting Deputy Administrator directed the Associate Administrator for Safety and Mission Assurance (Code Q) "to develop an implementation plan for appropriate Agencywide certification to ISO 9000" (Exhibit 4). Pursuant to this direction, Code Q submitted the ISO 9001 Integrated Agency Plan, based upon the consensus of the ISO 9001 Steering Group (See Exhibit 5). That group consists of representatives from each Institutional Program Office and Code C. As part of the plan, Code Q proposed establishing an ISO 9001 Support Office to assist the field and Headquarters in the implementation and certification process. (For additional information on the proposed support office, see Exhibit 6, Enclosure 1.) The Capital Investment Council is scheduled to consider this plan in the near future.

Currently, the ISO 9001 Steering Group is working with the contracts office at LeRC to obtain a consolidated contract for registrar services for all NASA Centers. On April 18, 1997, LeRC released for industry comment a proposed Statement of Work (SOW) for ISO 9001 Registration Services (See Exhibit 7). The release of a complete solicitation for this requirement is anticipated soon. According to the proposed SOW, the successful offeror shall provide ISO 9001 Registration Services for each site (i.e., Center), including management briefings, initial site visits, quality manual audits, preliminary assessment audits, formal assessment for registration (certification audit), non-conformity remediation reviews, and surveillance audits (as defined in Exhibit 7). In accordance with NASA's Consolidated Contracting Initiative (CCI), this requirement will contain options that allow all NASA Centers to participate (See Exhibit 8). MSFC and JSC are not likely to participate in this contract since their efforts were consolidated under an MSFC contract with Hernandez Engineering, Inc. (HEI).

Even before the Administrator's November 1996 direction, MSFC chose to become ISO 9000 compliant through third-party registration. On December 7, 1995, MSFC began steps to implement ISO 9000 requirements. Since then, MSFC:

(1) issued Contract Modification #7 to NASA Contract NAS8-40364 with HEI. Specifically, HEI was to "provide expertise for the implementation of ISO 9000 at MSFC including, but not limited to, training of MSFC employees on ISO 9000, implementation plan and schedule development, procedure preparation and progress monitoring." HEI's subcontractor, Raytheon, was assigned these changes as part of their effort under the quality assurance portion of the HEI contract;

(2) established ISO 9000 Implementation Teams and began Implementation Team meetings in May 1996;

(3) assigned a Management Representative to the ISO 9000 process at the direction from the NASA Administrator;

(4) issued a second task directive to HEI. HEI tasked Raytheon to assist with registrar selection and with the ISO 9000 tasks outlined in Modification #7. Raytheon determined the scope of registration and surveyed the ISO 9000 registrar community. Raytheon identified qualified registrars, requested and evaluated registrar proposals for certifying MSFC as ISO 9000 compliant, and selected National Quality Assurance (NQA) to perform the certification process;

(5) issued NAS8-40364 Contract Modification #12 to include registrar services which were not previously included in Modification #7;

(6) initiated formal ISO 9000 procedure reviews, categorizations, reconciliation, and revisions in October 1996; and

(7) has dedicated approximately 150 Center personnel who are devoting 10 to 15 percent of their official time to ISO 9000 activities.

The estimated costs associated with Contract Modifications #7 and #12 are as follows:

*Denotes total value of Raytheon subcontract for registrar services valued at $70,504 and $8,000 for Raytheon to compete to contract a Registrar. HEI did not allow Raytheon to add additional fee or general and administrative expenses to their subcontract for registrar services.

Based on general ISO 9000 information and published literature, MSFC ISO 9000 personnel anticipate that the costs incurred to implement ISO 9000 will be recovered in approximately 3 years. Expected benefits include reduced documentation, a universal quality system, and compliance. MSFC assumes additional savings to NASA if JSC and SSC use work already performed at MSFC regarding registrar selection. For purposes of this assessment, we do not offer an opinion on the validity of this projection. However, we note that experience with estimating NASA ISO 9000 costs and savings is extremely limited.

I. Questionable Inclusion of JSC Support in MSFC Contract/Task

Since issuing our initial draft report, the OIG has been advised that MSFC has issued an additional change order (Modification #15) to the HEI contract to include registrar services for JSC. The value of this effort has not yet been defined, but the current estimated value of the modification is $95,000. While the ISO 9000 support obtained through HEI for MSFC is considered to be within the scope of this contract, the support associated with JSC is not. The HEI contract is clearly written to provide support to MSFC. By adding this new JSC work to the HEI contract without a Justification for Other than Full and Open Competition, MSFC may have violated the Competition in Contracting Act and FAR 6.101(a). While the OIG strongly supports NASA's contract consolidation process for the purposes of obtaining ISO 9000 support, the procurement should be competed such as the procurement in process at LeRC (See Exhibit 7).

II. Need for Agencywide Acquisition Strategy

A. NASA's commitment to open contract competition and the contract consolidation process should shape and guide the acquisition approach for ISO 9000 services. NASA has taken an important first step. It is clear that third-party certification firms or "registrars" should be selected based on specialization and experience in the targeted process (e.g., certain firms specialize in automotive manufacturing, maritime systems, aeronautics, etc.) as well as other factors, including cost. The ISO 9000 specialty requirements will vary from Center to Center within NASA based on mission and Center of excellence assignments. But, there will also be common and cross-cutting processes among the NASA installations.

The CCI, effective November 4, 1996, documents NASA's commitment to creative and cost-effective consolidations of contracts. The CCI "aims at identifying and logically grouping together similar requirements so they may be procured efficiently." Further, the CCI goal "is to develop a core of world-class contracts that will enable NASA and other government agencies to acquire common goods and services quickly, at fair and reasonable prices, with a minimum of administrative cost" (See Exhibit 8).

As an effort limited to MSFC and the other Space Flight Centers tasked with early implementation, acquisition approaches taken provided a speedy approach to implementing registrar and other support activities. The proposed modifications to the MSFC contract for ISO 9000 are estimated to be in excess of $900,000. Moreover, the MSFC contract modifications approach, if expanded to include all Centers or duplicated at other Centers, will be costly for the Agency. According to some employees we interviewed, "given NASA's diverse programs and numerous physical assets, the value of ISO 9000 pre-assessment and certification/registrar contracts may easily exceed $15 million in the next few fiscal years." If NASA does not consider an Agencywide approach, violations to the Agency's commitment to both open competition and contract consolidation to achieve savings will occur.

B. Without an overall Agency strategy, NASA may not effectively respond to and/or shape future developments in the ISO 9000 area. Although the largest source of expertise in ISO 9000 consulting and registration support resides with the vendor community, other Federal and public organizations may develop such capabilities in the future. As ISO 9000 takes hold and expands within the U.S. public sector, opportunities will exist for alternatives to the vendor-supplied support. For example, such organizations as the Defense Supply Center in Columbus, Ohio, have provided certification services to suppliers. The Agency should closely monitor the development of such capabilities to consider supplementing or replacing previous contracting approaches.

NASA, as it implements its own ISO 9000 processes, could be a leader in developing partnering arrangements that would comply with the Administrator's guidance, and are of potentially low or no cost to NASA. NIST, the Office Management and Budget, and such departments as the Department of Defense (DoD) could jointly expand Federal capability in ISO 9000 development, consulting, and registration processes.

III. Other ISO 9000 Implementation Concerns

Some managers are confused regarding the relationship of ISO 9000 with NASA's strategic planning process (only a single parenthetical reference to ISO 9000 is included in NASA's new Strategic Management Handbook), continuous improvement processes, and directives reduction activities. (Both JSC and MSFC have taken steps to include their directives managers in their ISO 9000 implementation strategies.) In addition, concurrent initiatives related to the Zero Base Review, Full Cost Accounting, the Integrated Financial Management Project (IFMP), and the Government Performance and Results Act may create duplication of effort. For example, is the Agency coordinating process flow documentation and reengineering activities between ISO 9000 and IFMP where activities overlap? NASA needs to coordinate these initiatives so they complement each other. Moreover, the employees need to understand that these initiatives are complementary.

Since the issuance of the Second Internal Draft Report (dated June 11, 1997), the Agency is making progress in its initial phases of ISO 9001 implementation and in preparing for third-party certification. The Agency is moving forward with its efforts to initiate a consolidated contract for registrar services for all Centers and Headquarters. Code Q is initiating standardized training across NASA in an attempt to reduce costs and redundancies. In addition, since the ISO 9001 Implementation Workshop held at Headquarters in April, 1997, the Agency has scheduled regular video teleconferences and workshops in order to coordinate activities and to share lessons learned.

Recommended changes to the Second Internal Draft Report are incorporated as applicable in this final report.

We recommend NASA management take the following steps:

1. Develop an integrated and comprehensive acquisition strategy to provide for all necessary ISO 9000 contracted support.

a. The strategy should fully comply with existing NASA policy governing the advocacy of open competition.

b. NASA should avoid the proliferation of potentially costly local procurements of ISO 9000 support and services. The Agency should, where possible, consolidate training services to avoid local procurements and to limit redundancies and inconsistencies.

c. NASA Enterprises and Centers should have the capability to move quickly to arrange pre-assessment and registrar support. The consolidated procurement approach should provide for flexibility in securing such ISO 9000 services from a vendor or vendors capable of handling specific industrial and service processes.

d. The Office of Safety and Mission Assurance and the Office of Procurement should monitor the development and availability of potential low-cost or no-cost partnering opportunities with other Federal and public organizations to provide ISO 9000 consulting and registrar services.

2. Monitor closely the ISO 9000 activity of MSFC and other Space Flight Centers to learn and share implementation experiences as lessons learned.

3. Expand and enhance the ISO 9000 content of forthcoming versions of the NASA Strategic Management Handbook and Program Management Handbook. Additionally, increased awareness and specialized training should be provided as early as possible for the NASA work force.

4. Assure tighter coordination between staffs and groups responsible for ISO 9000 planning and implementation, and the NASA directives management community. Common goals and objectives should be developed and understood between the ISO 9000 quality system documentation requirements and the NASA commitment to streamline its directives processes.

Last Update: September 11, 1997