FAA Financial Mismanagement

OPPORTUNITIES FOR COST SAVINGS EXIST WITHOUT CUTTING SERVICE TO PUBLIC

Better Use of Public Funds Will Enhance Safety and Efficiency

ISSUE

The FAA needs to have better financial oversight.  Unfortunately, it has wasted millions of taxpayer dollars through mismanagement of contracts and poor implementation of programs. Improved financial management by the FAA will reduce unnecessary costs for American taxpayers and allocate scarce resources to safety and technology programs. Instead of focusing on improving the way in which programs are managed and money is spent, the FAA is publicly asking employees to work harder for less pay to compensate for management’s inability to control program costs.

NATCA POSITION

The National Air Traffic Controllers Association believes Congress should examine the FAA’s financial mismanagement that has been uncovered by the Government Accountability Office (GAO), the Department of Transportation Inspector General (IG) and the media.  Hundreds of millions of dollars have been wasted on bad contracts, contracts that no longer exist (inactive obligations) and the mismanagement of modernization programs.  NATCA believes that better financial management  will enhance the safety of the air traffic system and improve the development and modernization of the air traffic control equipment. 

BACKGROUND

Service Contracts - Currently, the FAA has about $1.3 billion worth of service contracts.  According to a CNN report on FAA contracts, “some say the FAA’s dependence on large numbers of contractors to help do its job makes it vulnerable to financial abuses, as does a special policy that allows the FAA to contract for goods and services more quickly and with less red tape than other federal agencies.”  The report goes on to say that, “sometimes, such contracts do not include firm deadlines and in most cases they lack specific performance standards. The contractor is paid based on whether it supplied the required hours of service. In some cases, an FAA employee will retire from the government and soon after begin similar work for a contractor for more money, raising the questions of whether the government is really saving money by using the contractor.” 

A Washington Post story outlined invoices the FAA had received from a contractor (Crown Consulting) for unjustified trips to Las Vegas, a lease for a Porsche Boxster, and property leases in New Jersey, Bethesda, Herndon and Australia.  “Experts in contracting law say projects like Crown's are meant to save the government money but instead may add to costs. So-called support services contracts allow the FAA to award initial contracts to a short list of pre-qualified small companies and then add tasks amounting to as much as several million dollars without bidding. Such awards are often open-ended or loosely defined jobs to provide technical expertise, consultation or additional labor hours on programs ranging from developing a new software system to running a computer help desk.”  The Washington Post also reported that an FAA contracting officer uncovered that this contractor had hired the wife of a top FAA official and that the company later was ordered by that official to keep his wife and a former assistant on staff after the contract ended.

In a document the ATO drafted last November, reducing support contractors has the greatest impact on costed initiatives within the FAA.  According to this document the FY04 cost was $895 million, while the potential cost savings for FY05 could have ranged between $66, million and $110 million. This initiative has more than twice the savings impact as all other initiatives combined including reducing controller overtime, substituting credit hours for overtime and establishing a 2-tier ATCS pay rate for “time on/time off” position to name a few.

Modernization - The air traffic control system desperately needs a digital system for managing terminal air space. The Standard Terminal Automation Replacement System (STARS) provides one option for achieving this goal. Because of FAA mismanagement, the program continues to be hampered by numerous technological problems. According to the GAO, the agency’s failure to involve controllers and maintenance technicians prior to the deployment of STARS delayed the system’s deployment five years and increased the cost to the taxpayer by $500 million. The FAA costs for this program have continued to escalate while the prime contractor, Raytheon, has charged the FAA hundreds of millions of dollars more than the initial projections and delivered to fewer sites than originally planned.  The FAA Administrator announced last month that one of its senior executives in charge of modernization programs would be leaving FAA for a job with Raytheon.

In the same report, the GAO found the FAA’s failure to enlist the technical expertise of air traffic controllers when deploying WAAS, a GPS-based navigation and landing system that provides precision guidance to aircraft in all phases of flight, is costing taxpayers billions of dollars.The agency’s mismanagement resulted in unplanned work and contributed to the rise in WAAS’ cost from the original estimate of $509 million in 1994 to a massive $2.036 billion in 2005. The program finally needed a six-year extension to its commissioning date.

In a June 2005 report the GAO concluded that the FAA’s refusal to work with air traffic controllers on the approval and development process for system acquisitions “contributed to the inability of four of the 16 major system acquisitions to meet their cost, schedule, and/or performance targets.”  These systems included a precision approach and landing system, a program that replaced outdated monochromatic monitors with multicolored ones, a program designed to replace outdated technology in automated flight service stations, and a system that helps aircrafts during the final phases of flight.

In a proactive attempt to resolve the GAO’s concerns about a lack of controller input, NATCA has proposed its involvement in collaborative development and deployment of new technology.  Unfortunately, FAA has refused NATCA’s proposals to form joint committees.

Supervisor to Controller Ratio – In the last two years, the FAA has dramatically increased the number of supervisors while the number of controllers has declines.  Air Traffic Supervisors are paid at a higher rate than the controllers they supervise and are required to be operationally certified on only two positions. This means that supervisors cannot substitute for controllers where staffing shortages exist. Currently, the ratio of supervisors to controllers is below one supervisor for every seven controllers, lower than it was in 1998 when the FAA formally recognized a desire to bring the supervisor to controller ratio more in line with accepted business practices and set a target of one supervisor for every ten controllers. To achieve this goal, controllers agreed to take on more duties under the FAA’s Controller in Charge program.  For 30 years, the FAA has used a Controller in Charge (CIC) program to cover some of the duties of supervisors while they were absent.  The CIC program is intended to reduce costs to the FAA by allowing a certain percentage of air traffic controllers to take on more responsibilities so that the FAA would not have to staff as many supervisors.  This program provided flexibility to the smaller facilities, allowing them to operate beyond eight hours a day, five days a week, without the significant cost of excessive supervisors, and it focused the staffing of operating supervisors to the larger facilities.  The 1998 collective bargaining agreement between NATCA and the FAA allowed for expansion of this program.  Under this agreement, the FAA was supposed to decrease the number of supervisors (through attrition) and give more responsibilities to the air traffic controllers certified to be CICs.  The FAA lived up to this agreement from 1999 – 2004 by reducing the total number of supervisors by 434 (from 1967 to 1533).  In fact, during the first three years (FY ’99 to FY ’01), the expanded CIC program saved the FAA almost $40 million.  But in 2004, it began to move away from that agreement, increasing the number of supervisors, and decreasing efficiency.

Inactive Obligations - The Department of Transportation Inspector General issued a report in January 2005 on the FAA’s current inactive obligations.  The Inspector General defines inactive obligations as those “with no expenditures within an 18 month period.”  “FAA accounting records showed about $2.1 billion of contract related obligations associated with the FAA’s F&E and RE&D programs on December 31, 2002.  The IG identified 3,705 obligations, totaling $117 million, with no activity within 18 months.”  Of these 3,705 obligations, the IG picked out 878 to investigate, worth $81 million.  Of the $81 million investigated, the IG reported that $35 million (43%) were unneeded obligations.  Much of these unneeded obligations were from contracts that had been completed or canceled going back 20 years.  The FAA has had a history of carrying over inactive obligations.  “In FY 1999, FY 2000 and FY 2002 the IG reported a total of $241 million in unneeded obligations in the FAA’s accounting records.”  According to the Inspector General’s report, “FAA’s policy does not require a review of inactive obligations with balances of less than $500,000.”  Of the 878 samples the IG reviewed, 846 had inactive obligations of less than $500,000 ($24 million).  With current government –wide budget shortfalls and a need to place more emphasis on modernization, the FAA needs to manage these finances more effectively in order to keep the United States at the forefront of the world’s aviation industry.

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