Report Says NSF Officials Violated Rules During Effort To Redirect Major Program

WASHINGTON--The National Science Foundation violated several federal procurement laws in an attempt to replace the National Academy of Sciences as the contractor for its prestigious graduate fellowship program, according to a report issued by the agency's inspector general, Linda Sundro. These actions include a breach of confidentiality in the bidding process, conflict of interest by a staffer, and a failure to follow normal procedures in reviewing the bids of potential contractors. The results of Sundro's investigation, obtained by The Scientist through a request under the Freedom of Information Act, also reveal that decisions made by past and present NSF directors were undermined by those responsible for carrying them out. The report documents how former NSF director Erich Bloch and NAS president Frank Press decided to end the academy's 40-year stewardship of the program, but how numerous improprieties in the process of finding a new manager for the program caused current agency director Walter Massey to abort the process and start anew. The report comes shortly after a major internal reorganization at NSF and while another problem facing foundation administrators continues--the turmoil with- in the NSF division that collects data on the health of the scientific enterprise (The Scientist, Oct. 28, 1991, page 3; Sept. 22, 1991, page 1). Despite the controversy and the resulting delay in finding a new contractor to conduct the fellowship program, the day-to-day operations of the $50 million program will not be jeopardized. An agreement has been reached between NSF and the academy that maintains NAS's management for another two years. That means the fellows being selected this month for the 1992-93 academic year, along with those students who next month will receive an announcement about the awards to be made in 1993-94, will be unaffected. The IG began the inquiry into the attempt to contract out the 40-year-old graduate fellowship program last spring, and completed the work in November. The investigation grew out of complaints from unsuccessful bidders about how various NSF officials had handled the procurement. The 55-page report from the IG comes to the following conclusions: * NSF officials subverted the procurement process by giving the impression that the competition was open when they actually planned to continue their relationship with the academy if none of the six new bidders was acceptable; * Top NSF officials improperly resumed discussions with the academy on extending the contract months before canceling the search for a new contractor and informing the losing bidders; * A clear conflict of interest existed on the part of the administrator who oversaw the competition because she had directed the fellowship program at the academy for several years before joining NSF in August 1990; * The contracting officer at NSF exercised poor judgment by summarily rejecting legitimate proposals from all bidders on the grounds that their content was flawed and their estimated costs were unrealistic (either too high or too low). In a written response to the report, Massey stated that "the handling of this matter was deficient." He acknowledged that the foundation's conduct "gave rise to an appearance, and arguably an actuality, of unfairness [to prospective bidders], and of action outside proper procurement channels." The prestigious NSF fellowships are awarded each year to 1,100 graduate students in a competition that features nine applicants for every slot. NSF has calculated that among its more than 25,000 recipients to date are 12 Nobel laureates, six winners of the Fields Medal in mathematics, and seven winners of the foundation's own Waterman Award for young scientists. Begun in 1952, the program bestows a $14,000 annual scholarship upon each fellow, plus $7,500 to the host institution for tuition and fees. It has been run since its inception by the academy, which each winter convenes 16 scientific panels to select the most worthy applicants in all areas that the foundation supports. In 1987, Bloch and Press decided their institutions should part company, for several reasons mentioned in the report. In recent interviews both men discussed the separation. Bloch says that he felt that the foundation might be able to find another contractor to run the program better and for less money, and that NSF no longer needed to rely on the academy's prestige to attract top-notch reviewers. Press says that the academy originally took the job as "a public service," when NSF was young and inexperienced, but that it was not the sort of "high-profile operation" that he prefers to see at the academy. As the IG's report notes, the two men "recognized that there would be resistance within their institutions to changing the status quo, [but that] they were prepared to deal with such resistance." In fact, three years passed before NSF was ready to seek proposals from prospective contractors. The official notice went out Sept. 20, 1990. The reports suggests, however, that the request for proposals (RFP) was issued, in the minds of some NSF officials, "merely to test the waters," with no serious intent to replace NAS--also a violation of federal procurement law. And by the end of the year, according to the IG report, NSF officials had informally decided that none of the bidders was acceptable, a decision the report questions. In light of the NSF staff findings, in February 1991, the report states, acting NSF director Fred Bernthal asked academy officials if they would like to reconsider their decision to drop out. On March 27 Massey, on the job for only three weeks, wrote to Press requesting that the academy "continue its historic association with the fellowship program." On April 9, Press agreed to Massey's suggestion to form a "joint working group" to discuss the program. However, that working group never met. Six days later, according to her report, the inspector general wrote to Massey and the National Science Board, the foundation's governing body. She described her "strong concerns" about how the search for a new contractor had been conducted. On June 4, after receiving additional information, Massey canceled the previous competition and ordered that bidding on the contract be reopened, at some unspecified time, on a competitive basis. Since the academy has a long-standing policy never to compete for business (see accompanying story), that decision effectively shut out the academy from the bidding and ensured that it will not be awarded the contract. In the interim, to avoid jeopardizing the program itself, NSF extended for two years its current agreement with the academy. The inspector general serves as a watchdog over the agency's conduct, and operates independently of the director. But IG reports are made in the form of recommendations, not mandates. Sundro says that Massey has followed her suggestion that disciplinary action be taken against certain individuals. Massey declines to comment on what action may have been taken, citing privacy laws that protect government employees. Most of the principals in the case are saying little about the matter. Susan Sherman, who ran the program at the academy for several years before joining NSF in August 1990, in time to oversee the new competition and handle the technical review of proposals from other contractors, says she won't talk about any aspect of the investigation. The IG's report criticizes her for violating terms of a conflict-of-interest waiver she received upon joining the foundation that excluded her from any involvement in the procurement if the academy were to reenter the picture--which it did when the evaluation committee she oversaw found the initial proposals deficient, according to the report. The report also criticizes the actions of Terence Porter, her boss and director of the career development division, which funds the fellowships. It says that Porter intervened improperly to delay a decision on awarding the contract to a new bidder by telling Sherman that the matter was being handled by top management at the foundation. Sundro's report also says that Porter tried to persuade the foundation's contracting officer to cancel the procurement with a memo that had not been approved by the necessary top-level NSF officials. Porter declines comment on the IG's report other than to say that the matter "was not in my hands. I follow my orders." Porter's boss is Luther Williams, assistant NSF director for education and human resources. Williams also refuses to discuss the IG's findings. But he says that he "accepts" the report, adding that "my actions in the upcoming competition will reflect what the IG said." He estimates that the new request for proposals will be issued sometime in the spring. Federal regulations specify that the contracting officer is the person ultimately responsible for awarding a contract. Until last April, the person at NSF who handled that job for the education and human resources directorate was George Lynch. A 17-year veteran at the agency, Lynch has overseen hundreds of procurements, and he says that the process of selecting a bidder to run the graduate fellowships program was no different from most that he has handled. The IG's report criticized him for short-circuiting the review process by abruptly adjourning a meeting called to review the technical aspects of the bids, and by tainting that discussion with information on the cost of each proposal. Lynch denies the charges. "There's nothing very complicated about fellowships," says Lynch, who retired from NSF in September and now serves as manager of finance and special projects at the American Society for Engineering Education (ASEE) in Washington, D.C. "We're not talking about the Manhattan Project. I don't normally sit in on their meeting, but I had a new program officer and they asked for my input. They spent 15 to 20 minutes on each proposal, and that's certainly long enough." Lynch says that the group reached a consensus at its meeting, which he cannot disclose, but that he never received the committee's final report, making it impossible for him to proceed to negotiate a contract with the winning bidder. "I haven't read the IG's report, and I don't even care what it says," he says. "It's a matter of perceptions." Lynch says that NSF made a mistake when it decided to seek a new contractor. "It's generally not cost-effective to switch," he says. "And people have a strong aversion to change. But somebody wanted it changed, so it was changed. They never asked me for my opinion." Lynch's current employer was one of the losing bidders on the initial competition, say sources. Although he notes that federal regulations would prohibit him from playing a role in any attempt by the society to land the contract, Lynch says that ASEE is well-qualified for the assignment, based on similar scholarship programs that it runs for the Pentagon. The top-rated bidder the first time around is said by sources to have been the Educational Testing Service of Princeton, N.J. ETS officials decline to comment, but the IG's report notes that one of the objections Porter and others raised to the proposal of the leading candidate was its desire to conduct part of the evaluation of fellowship applicants "at its home base outside the Washington, D.C., area." Now that NSF is preparing for a new competition, agency officials appear eager to put the controversy behind them. Williams says that his goal is "to get the RFP out, handle it in an appropriate and absolutely fair manner, and get on with my job." Massey, in his letter to Sundro, says the procurement was conducted under "unique circumstances" and that he is confident that "our corrective actions will be effective in preventing similar problems" from occurring in the second bidding competition. Sundro says she's hopeful that the conduct described in her report will not be repeated. The IG's document contains specific recommendations to Massey, whom the report absolves, to ensure that it won't. "Once we briefed the director [last spring], he realized that he had no other choice than to cancel the RFP and start again. Let's just hope that it goes more smoothly the second time around."

Report Says NSF Officials Violated Rules During Effort To Redirect Major Program

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