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Fri, Jul 11, 2003

DoT OIG Looks at FAA

Hey, Big Spender!

The Department of Transportation's Office of Inspector General released a report on the FAA yesterday, and it's not flattering to that agency's top management. We're presenting a few excerpts here; if you'd like to really get a snootful, have a look at the link at the bottom.
 
The report explained, "In 1996, Congress acted to make FAA a performance-based organization by giving the Agency two powerful tools -- personnel reform and acquisition reform.

"The expectation was that, by being relieved of Government personnel and procurement rules, FAA would operate more like a business -- that is, services would be provided to users cost-effectively, and air traffic control modernization programs would be delivered approximately on time and within budget."

However, "Seven years later, FAA's budget has grown from $8.2 billion in FY 1996 to $14 billion in FY 2004 -- an increase of $5.8 billion, or over 70 percent. About half of that increase was attributable to FAA's operating budget. During this period, we have also seen large cost overruns and schedule slips in FAA's major acquisitions."

Three areas are sinkholes:

The FAA was released from most government personnel policies. The result? "To date, the most visible results of personnel reform are increased workforce costs."

If you're an FAA employee, did you see it? Operating costs (mostly payroll) went, "...from $4.6 billion in FY 1996 to $7.6 billion in FY 2004, an increase of over 65 percent."

Maybe you saw it, if you're a controller. The report continues, "The new pay system for controllers was a significant cost driver. Between 1998 (when the new system was implemented) and 2003, the average base pay for controllers increased from $72,000 to over $106,000 -- a 47 percent increase. This compares to an average salary increase for all other FAA employees during the same period of about 32 percent." Oh -- and, "...only about 36 percent of FAA employees receive pay increases based on individual performance."

Sweetheart deals -- don't you have one? The OIG continued, "We also found that there are somewhere  between 1,000 and 1,500 side bar agreements... that FAA managers entered into." The FAA can't tell exactly how big a deal that is. "Despite the cost implications, at the time of our review FAA management did not know the exact number or nature of these agreements, there were no established procedures for approving [them], and their cost impact on the budget had not been analyzed."

Maybe it'll turn around, now...

Improvement seems possible, though. The OIG, "...briefed the FAA Administrator about our concerns in January 2003 -- 2 months after initiating this review. FAA has moved expeditiously to address this issue, including identifying those MOUs that are problematic or costly and opening discussions with NATCA to reopen several agreements."

Ignoring Congress

The report continued, "In 1996, Congress also directed FAA to have a fully-functioning cost accounting system... Now, after nearly 7 years of development and over $38 million, FAA still does  not have an adequate cost accounting system, and it expects to spend at least another $7 million to deploy the cost accounting system throughout FAA." The Inspector General seems to say it's not the FAA's fault, though: Congress only wanted to sound tough: "In our opinion, the principle reason that FAA does not have an effective cost accounting system is because it has not experienced any consequences for not having one."

OIG Recommends Cuts in Systems:

How to save money? The Inspector General has some ideas: "...we estimate FAA could realize cost savings of nearly $500 million over 7 years by reducing the number of existing automated flight service stations by over half in conjunction with deployment of new flight service software. We  also identified that FAA could save over $57 million annually by expanding the contract tower program to 71 visual flight rule towers still operated by FAA..."

Sloppy management practice extends beyond people-management:

On a roll, the OIG report writer had more to say: "We found that cost growth, schedule delays, and performance problems continue with FAA's major acquisitions. Overall, the 20 projects we reviewed have experienced cost growth of about $4.3 billion (from $6.8 billion to $11.1 billion) and schedule slips of 1 to 7 years." It warns, "Billion-dollar cost growth with acquisitions is not sustainable or affordable in light of  declining Trust Fund revenues."

What do they really think?
  • "Our work has also found that FAA has not followed sound business practices for administering  contracts. We have consistently found a lack of basic contract administration at every stage of contract management...
  • "We also found that FAA's Workers' Compensation Program continues to be subject to fraud and abuse, in terms of both stress-related claims and long-term injury claims." They found, for example, "...218 claimants still receiving workers' compensation benefits who were 80 years old or older."
  • "FAA needs to remain vigilant in its oversight of airport revenue diversions. ...we continue to find cases of airport revenue diversion." [That's a polite way of referring to criminal embezzlement --ed.]

As Senator Dirksen (R-IL, pictured) said forty years ago, "A million here, a million there... pretty soon we're talking about real money." Perhaps the top of the FAA will some day be required to be as competent as the rest of the organization, and the small cadre of political hacks will be replaced by professionals.

FMI: www.oig.dot.gov/show_pdf.php?id=1123

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