Background

In 1981, FAA began a program to replace and upgrade ATC facilities and  equipment. However, systemic management issues, such as frequent  turnover in agency leadership, an ineffective organizational culture, and  problems with its acquisition process, contributed to cost growth,  schedule slippages, and performance shortfalls, leading us to classify  FAA’s ATC modernization program as high risk in 1995. That same year,  Congress passed legislation that exempted FAA from most federal  personnel and acquisition laws and regulations on the premise that FAA  needed such freedom to better manage ATC modernization. In December  2000, President Clinton signed an executive order and Congress passed  supporting legislation that, together, provided FAA with the authority to  create ATO as a performance-based organization (PBO) to control and  improve FAA’s management of the modernization effort. In February 2004,  FAA reorganized, transferring 36,000 employees, most of whom worked in  air traffic services and research and acquisitions, to ATO.
Even with the creation of ATO, the current approach to managing air  transportation is becoming increasingly inefficient and operationally  obsolete. In late 2003, Congress created JPDO to plan NGATS, a system  intended to accommodate what is expected to be three times more air  traffic by 2025 than there is today. JPDO’s scope is broader than  traditional ATC modernization in that it is “airport curb-to-airport curb,”  encompassing such issues as security screening and environmental  concerns. Additionally, JPDO’s approach will require unprecedented  collaboration and consensus among many stakeholders—federal and  nonfederal—about necessary system capabilities, equipment, procedures,  and regulations. Key to this collaboration will be the work of JPDO’s seven  partner agencies: the Departments of Transportation, Commerce, Defense,  and Homeland Security; FAA; the National Aeronautics and Space  Administration (NASA); and the White House Office of Science and  Technology Policy. Each of these agencies will play a role in creating  NGATS. For example, the Department of Defense has deployed “network  centric” systems, originally developed for the battlefield, that are being  considered as a framework to provide all users of the national airspace  system—FAA and the Departments of Defense and Homeland Security— with a common view of that system. JPDO began its initial operations in  early 2004. A Senior Policy Committee, chaired by the Secretary of  Transportation and including senior representatives from each of the  participating departments and agencies, provides oversight to JPDO.   JPDO is located within FAA and reports to the FAA Administrator and to  the Chief Operating Officer within ATO. See figure 1.
Concurrent with JPDO’s efforts, the European Commission is conducting  a project to harmonize and modernize the pan-European air traffic  management system. Known as the Single European Sky Air Traffic  Management Research Programme (SESAR), the project is overseen by  the European Organization for the Safety of Air Navigation (Eurocontrol).
Eurocontrol has contracted out the work of SESAR to a 30-member  consortium of airlines, air navigation service providers, airports,  manufacturers, and others. The consortium is receiving 60 million euros  ($73 million) to conduct a 2-year definition phase and produce a master  plan for SESAR.

	ATO Has Taken Steps to Improve ATC Modernization, but Challenges Remain

To improve its management of ATC modernization, ATO has taken steps  toward having a more results-oriented culture; a flatter, more accountable  management structure; and more businesslike management and  acquisition processes. In addition, ATO is implementing recommendations  we have made to address systemic factors that have contributed to cost,  schedule, and performance problems with major ATC acquisitions. For the  past 2 fiscal years, FAA has met its acquisition performance goals.  However, FAA still faces human capital challenges, such as  institutionalizing a results-oriented culture and hiring thousands of air  traffic controllers during the next decade. FAA also faces challenges in  keeping its major system acquisitions on track.

		ATO Has Begun Efforts to Transform Its Culture, Structures, and Processes to Operate More Efficiently as a PBO

ATO is working to establish the results-oriented organizational culture,  structures, and processes that are generally associated with a PBO. FAA,  through ATO, has established a strategic goal to become a results-oriented  organization. One key element of ATO’s strategy is to identify core values  and track employees’ attitudes about those values to monitor cultural  change. To implement this element, ATO has identified multiple core  values: integrity and honesty, accountability and responsibility,  commitment to excellence, commitment to people, and fiscal  responsibility. ATO is using FAA Employee Attitude Survey data to  determine employee attitudes toward these values and has developed a  baseline of employee attitudes for use in monitoring changes in attitudes  over time. Another key element of ATO’s strategy is to establish a viable,  stable, and sustainable organization that can transcend changes in  leadership.
In our past work, we noted that FAA’s acquisitions workforce did not have  an organizational culture and structure that supported the acquisition and  deployment of sophisticated technology on the scale used in the national  airspace system. For example, acquisitions were impaired because  employees and managers acted in ways that did not reflect a strong  commitment to mission focus, accountability, adaptability, and  coordination. Specifically, officials performed little or no mission needs  analysis, made unrealistic cost and schedule estimates, and moved to  producing systems before completing their development. We also reported  that accountability was not well defined or enforced for decisions on  requirements and contract oversight. Additionally, vertical lines of  authority impaired communication across organizations that needed to  coordinate, particularly the acquisitions and operations areas of FAA.  Finally, we reported that FAA’s culture of conservatism and conformity  rewarded employees for simply following the rules rather than considering  innovation. We recommended that FAA develop a strategy for cultural  change. Although FAA responded to our recommendation by developing a  cultural change strategy and some other related initiatives, these initiatives  were neither fully implemented nor sustained.
ATO has put a new management structure in place and established more  businesslike management and acquisition processes. ATO is structured as  a discrete management unit within FAA and is headed by a Chief  Operating Officer (COO), who is appointed to a 5-year term. It has become  a flatter organization, with fewer management layers. As a result,  managers are in closer contact with the services they deliver. ATO is also  taking some steps to break down the vertical lines of authority, or  organizational stovepipes, that we found hindered communication and  coordination across FAA. For example, the COO holds daily meetings with  the managers of ATO’s departments and holds the managers collectively  responsible for the success of ATO through the performance management  system. According to the COO, the daily meetings have been a revelation  for some managers who were formerly only focused on and responsible  for their own departments.
ATO has begun to revise its business processes to increase accountability.  For example, it has recently established a cost accounting system and  made the units that deliver services within each department responsible  for managing their own costs. Thus, each unit manager develops an  operating budget and is held accountable for holding costs within specific  targets. Managers track the costs of their unit’s operations, facilities and  equipment, and overhead and use this information to determine the costs  of the services their unit provides. Managers are evaluated and rewarded  according to how well they hold their costs within established targets. Our  work has shown that it is important, when implementing organizational  transformations, to use a performance management system to assure  accountability for change.
Finally, ATO is revising its acquisition processes, as we recommended,  and taking steps to improve oversight, operational efficiency, and cost  control. To ensure executive-level oversight of all key decisions, FAA  plans to revise its Acquisition Management System to incorporate key  decision points in a knowledge-based product development process by  June 2006. Moreover, as we have reported, ATO formed an executive  council to review major acquisitions before they are sent to FAA’s Joint  Resources Council. To better manage cost growth, this executive council  also reviews project breaches of 5 percent or more in cost, schedule, or  performance. FAA has issued guidance on how to develop and use pricing,  including guidelines for disclosing the levels of uncertainty and  imprecision that are inherent in cost estimates for major ATC systems.  Additionally, ATO has begun to base funding decisions for system  acquisitions on a system’s expected contribution to controlling operating  costs. Finally, FAA is creating a training framework for its acquisition  workforce that mirrors effective human capital practices that we have  identified, and the agency is taking steps to measure the effectiveness of  its training.

		ATO Has Begun to Address Systemic Causes of Delays and Cost Overruns in ATC Modernization

ATO has begun taking actions to address systemic factors that our work  has shown contribute individually or collectively to schedule delays or  cost overruns in major system acquisitions. Such factors include funding  acquisitions at lower levels than called for in agency planning documents,  not considering all information technology investments as a complete  portfolio, not adequately defining a system’s requirements or  understanding software complexity, and not adequately considering  customer needs in a system’s functional and performance requirements.
Funding acquisitions at lower levels than called for in agency planning  documents. When FAA initiates a major system acquisition, it estimates,  and its top management approves, the funding plan for each year.  However, when budget constraints do not allow all system acquisitions to  be fully funded at the previously approved levels, FAA must decide which  programs to fund and which to cut, according to its priorities. When a  system acquisition does not receive the annual funding called for in its  planning documents, the acquisition may fall behind schedule. This may  also postpone the benefits of the new system and can require FAA to  continue operating and maintaining the older equipment that the  acquisition is intended to replace. For example, reduced funding was one  factor that caused FAA to reduce the initial deployment of its ASR-11  digital radar system from 111 systems to 66 systems, as well as defer  decisions on further deployment pending additional study. In the  meantime, FAA will have to continue maintaining the aging analog radars  that the new system was intended to replace. To address this issue, we  recommended that, to help ensure key administration and congressional  decision makers have more complete information, FAA identify and  annually report which activities under the ATC modernization program  have had funding deferred, reduced, or eliminated, and provide detailed  information on how those decisions have affected FAA’s ability to  modernize the ATC system and related components in the near, mid, and  longer term. Such information would make clear how constrained  budgets will affect modernization of the national airspace system and how  FAA is working to live within its means. According to FAA, the agency  intends to better inform Congress in the future by providing information in  its capital investment plan, submitted to Congress annually with the  President’s Budget, that will identify changes from the preceding year.
Not considering all information technology investments as a complete  portfolio. We pointed out that FAA does not evaluate projects beyond the  first 2 years of service to ensure that they are aligned with organizational  goals. Consequently, the agency could not ensure that projects with a  longer service history, totaling about $1.3 billion per year, were still  aligned with FAA’s strategic plans and business goals and objectives. We  recommended that FAA include these projects in its investment portfolio  management for review. FAA’s current version of its Acquisition  Management Policy calls for periodic monitoring of in-service systems to  collect and analyze performance data to use as the basis for sustained  deployment. However, we have not yet evaluated FAA’s implementation of  this policy.
Not adequately defining a system’s requirements or understanding  software complexity. Inadequate or poorly defined requirements may  contribute to the inability of system acquisitions to meet their original  cost, schedule, or performance targets, since developing or redefining  requirements as an acquisition progresses takes time and can be costly. In  addition, unplanned development work may occur when the agency  misjudges the extent to which a commercial-off-the-shelf or  nondevelopmental item, such as one procured by another agency, will  meet FAA’s needs. For example, FAA sought to use an Army radio as the  core of a new digital ATC communication system, but found that the radio  did not meet established interference requirements, which contributed to  schedule delays. When FAA underestimates the complexity of software  development or misjudges the difficulty of modifying available software to  fulfill its mission needs, acquisitions may take longer and cost more than  expected. FAA’s acquisition of the Local Area Augmentation System  (LAAS)—a system that would allow precision instrument approaches and  landings in all weather conditions—is a case in point. FAA underestimated  LAAS’s software complexity because it inadequately assessed the system’s  technology maturity. In particular, the agency misunderstood the potential  for radio interference through the atmosphere, which could limit LAAS’s  operations. The technical difficulties encountered with LAAS, among other  things, led FAA to suspend this acquisition. To reduce these risks, FAA has  developed and applied a process improvement model to a number of  acquisition projects. This model is used to assess the maturity of FAA’s  software and systems capabilities. As we reported, this approach has  resulted in enhanced productivity, higher quality, greater ability to predict  schedules and resources, better morale, and improved communication and  teamwork. However, FAA did not mandate the use of the model  throughout the organization. In response to our recommendation that FAA  institutionalize the model’s use throughout the organization, FAA has  begun developing a requirement that acquisition projects have process  improvement activities in place before seeking approval from FAA’s  investment review board.
Not adequately considering customer needs in a system’s functional and  performance requirements. We reported that FAA was not applying best  practices used in Department of Defense and commercial product  development. Best practices include balancing customer needs with  available resources. According to FAA, the agency is now including in its  acquisition guidance a requirement that top-level functional and  performance requirements reflect the needs of the customer.

		FAA Met Its Acquisition Performance Goal for the Second Consecutive Year, but Use of Revised Milestones Does Not Provide Consistent Benchmarks

FAA has now met its acquisitions performance goal 2 years in a row. The  goal for fiscal years 2004 and 2005 was to have 80 percent of its system  acquisitions on schedule and within 10 percent of budget. The goal  gradually increases to 90 percent by fiscal year 2008. The increase will  make FAA’s acquisition performance goal consistent with targets set in the  Department of Transportation’s strategic plan and will comply with the  Federal Acquisition Streamlining Act of 1994.
Having such a goal is consistent with the President’s Management Agenda,  which calls for a commitment to achieve immediate, concrete, and  measurable results in the near term, and meeting this goal is a positive  step toward better acquisition management. However, if the milestones for  an acquisition have changed over the years to reflect changes in its cost  and schedule, then using those revised milestones may not provide a  complete picture of the acquisition’s progress over time. For example, the  milestones for 3 of the 16 major system acquisitions that we reviewed in  detail during 2004 and 2005 were being revised to reflect cost or schedule  changes during 2005. These revised milestones, together with revised  targets for meeting them, will become the new milestones for fiscal year  2006. While revising milestones and targets that are no longer valid is an  appropriate management action, using revised rather than original targets  for measuring performance does not provide a consistent benchmark over  time. The extent to which an acquisition meets its annual performance  targets is one measure of its performance and should be viewed together  with other measures, such as its progress against original and revised  baselines. The variance reports provided to the FAA Administrator and to  Congress may also be useful in evaluating an acquisition’s performance.
Since fiscal year 2003, the number of acquisition programs measured by  FAA has varied from 31 to 42. According to FAA, the number varies from  year to year, in part, because some programs reach completion and others  are initiated. The programs that are selected each fiscal year represent a  cross section of ATO programs, including investments in new capabilities  and others that are ready for use without modification. FAA’s Portfolio of  Goals, which provides supplementary information on the agency’s  performance goals, asserts that no bias exists in the selection of  milestones for performance review, but does not state the basis for this  conclusion. The portfolio also states that the milestones selected represent  the program office’s determination of the efforts that are “critical” or  important enough to warrant inclusion in the acquisition performance goal  for the year. However, we have not conducted a detailed examination of  the reliability and validity of FAA’s metrics for its acquisition program  performance.

		ATO Faces Human Capital Challenges in Creating a More Results-Oriented Culture and Hiring and Training Thousands of Air Traffic Controllers

ATO faces a challenge in sustaining and institutionalizing management  focus on its transformation to an effective PBO and a results-oriented  culture. Our work has shown that successful transformations and the  institutionalization of change in large public and private organizations can  take 5 to 7 years or more to fully implement. To ensure that FAA’s focus  on cultural change does not diminish as it did in the past, we  recommended that FAA provide sustained oversight of efforts to achieve a  more results-oriented workforce culture, including periodically monitoring  the agency’s progress against baseline data. As discussed, ATO has  established a baseline of employee attitudes for use in monitoring cultural  change, and similar long-term management attention will be needed to  conduct this monitoring and assess ATO’s progress toward becoming a  PBO.
FAA also faces the challenge of hiring and training thousands of air traffic  controllers during the coming decade. According to its controller staffing  plan, FAA expects to lose about 11,000 air traffic controllers due to  voluntary retirements or mandatory retirements at age 56, as well as other  reasons. These retirements stem from the 1981 controller strike, when  President Ronald Reagan fired over 10,000 air traffic controllers and FAA  then had to quickly rebuild the controller workforce. From 1982 through  1991, FAA hired an average of 2,655 controllers per year. These controllers  will become eligible for retirement during the next decade. To replace  these controllers, as well as those who will leave for other reasons, and to  accommodate forecasted increases in air traffic, FAA’s plan calls for hiring  a total of 12,500 new controllers over the next 10 years.

		FAA Faces Challenges in Ensuring Stakeholder Involvement in Major System Acquisitions and Keeping Acquisitions on Schedule and within Budget

Adequately involving stakeholders in a system’s development is important  to ensure that the system meets users’ needs. In the past, air traffic  controllers were permanently assigned to FAA’s major system acquisition  program offices and provided input into air traffic control modernization  projects. In June 2005, FAA terminated this arrangement because of  budget constraints. According to FAA, it now plans to obtain the subject- matter expertise of air traffic controllers or other stakeholders as needed  in major system acquisitions. It remains to be seen whether this approach  will be sufficient to avoid problems such as FAA experienced when  inadequate stakeholder involvement in the development of new air traffic  controller workstations (known as the Standard Terminal Automation  Replacement System (STARS)) contributed to unplanned work, which, in  turn, led to significant cost growth and schedule delays.
Three systems—all communications-related—missed the fiscal year 2005  acquisition performance goal for schedule. According to FAA, the $310  million FTI acquisition, which is replacing costly existing networks of  separately managed systems and services by integrating advanced  telecommunications services, was behind schedule because initial plans  did not allow sufficient time for installations. To complete the installations  in fiscal year 2008, as originally scheduled, FAA initiated a plan to put the  program back on schedule and has met the plan’s milestones since August  2005. Two other communications acquisition programs also missed the  acquisition performance goal for schedule—the $325 million Next  Generation Air-to-Ground Communication system, segment 1A, which  replaces analog communication systems with digital systems, and the $85  million Ultra High Frequency Radio Replacement, which replaces aging  equipment used to communicate with Department of Defense aircraft.  According to an FAA official, as the agency assessed its priorities for fiscal  year 2005, a decision was made that these programs would receive fewer  resources. The resources that were then available were not sufficient to  allow the programs to meet established milestones.
To the extent that delays in FTI persist, FAA will lose the cost savings that  the system was expected to produce. The Department of Transportation’s  Office of the Inspector General has reported that FAA did not realize $32.6  million in anticipated operating cost savings in fiscal year 2005 because of  the limited progress made in disconnecting legacy circuits. The office also  reported that without a nearly tenfold increase in its rate of transferring  service to FTI and disconnecting legacy circuits, FAA stands to miss out  on an additional $102 million in cost savings in fiscal year 2006. As an  alternative to continuing the current FTI program, some experts have  suggested that FAA consider outsourcing this activity, as it recently did for  its flight service stations.
In summary, ATO has made a number of promising moves toward  becoming a results-oriented organization, and we view ATO’s efforts to  improve its culture, management, and acquisitions process as positive  steps. However, ATO has been established for only slightly more than 2  years. Work remains to ensure that these processes become  institutionalized. Although it is still too early to evaluate the effectiveness  of many of these steps, we are monitoring ATO’s progress. As ATO moves  forward, it will play a key role in implementing NGATS, as planned by  JPDO. I will now discuss the status of JPDO’s planning efforts.

	JPDO Has Made Progress in Planning for NGATS, but Faces Challenges and Opportunities in Several Areas

JPDO has engaged in practices that facilitate collaboration among its  partner agencies, but faces challenges in continuing to leverage resources  from these agencies and in defining the roles and responsibilities of the  various entities involved. JPDO has been structured to involve both federal  and nonfederal stakeholders, but maintaining the support of nonfederal  stakeholders over the long term and soliciting the participation of some  stakeholders may prove difficult. JPDO is using a reasonable process for  technical planning, but several key technical planning activities remain.  Lastly, JPDO is including efforts toward global harmonization in its  planning for NGATS, but other opportunities for cooperation have not  been fully explored.

		JPDO Has Begun to Facilitate Collaboration among Federal Agencies, but Faces Challenges in Continuing to Leverage Resources and in Defining Roles and Responsibilities

Our work to date shows that JPDO is facilitating the federal interagency  collaboration that is central to its mission and legislative mandate.  According to our research, agencies must have a clear and compelling  rationale for working together to overcome significant differences in their  missions, cultures, and established ways of doing business. In developing  JPDO’s integrated plan, the partner agencies agreed to a vision statement  and eight strategies that broadly address the goals and objectives for  NGATS. These strategies formed the basis for JPDO’s eight integrated  product teams (IPT), and various partner agencies have taken the lead on  specific strategies. Our research has also shown that it is important for  collaborating agencies to include the human, technological, and physical  resources needed to initiate or sustain their collaborative effort. To  leverage human resources, JPDO has staffed the various levels of its  organization with partner-agency employees, many of whom work part  time for JPDO. To leverage technological resources, JPDO conducted an  interagency program review of its partner agencies’ research and  development programs to identify work that could support NGATS.  Through this process, JPDO identified early opportunities that could be  pursued during fiscal year 2007 to produce tangible results for NGATS,  such as the Automatic Dependent Surveillance-Broadcast (ADS-B)  program at FAA.
However, while JPDO’s legislation, integrated plan, and governance  structure provide the framework for institutionalizing collaboration  among multiple federal agencies, JPDO is fundamentally a planning and  coordinating body that lacks authority over the key human and  technological resources needed to continue developing plans and system  requirements for NGATS. Consequently, the ability to continue leveraging  resources of the partner agencies will be critical to JPDO’s success.  However, beginning around 2008, JPDO expects a significant increase in  its IPTs’ workloads. JPDO officials told us that although the partner  agencies have not yet expressed concerns over the time that their  employees spend on JPDO work, it remains to be seen whether agencies  will be willing to allow their staff to devote more of their time to JPDO. In  addition, JPDO anticipates needing more agency resources to plan and  implement demonstrations of potential technologies to illustrate some of  the early benefits that could be achieved from the transformation to  NGATS.
This challenge of leveraging resources arises, in part, because the partner  agencies have a variety of missions and priorities other than supporting  NGATS. NASA, for example, while conducting key aeronautical and safety  research relevant to NGATS, nonetheless has other competing missions.  Recently, NASA’s management determined that for the agency to meet its  other mission needs, it would not develop new aviation technologies to the  extent that it had in the past. As a result, additional development costs  related to NGATS will have to be borne by JPDO, industry, or some  combination.
JPDO also faces the challenge of clearly defining its partner agencies’ roles  and responsibilities. Our work has shown that collaborating agencies  should work together to define and agree on their respective roles and  responsibilities, including how the collaboration will be led. In JPDO’s  case, there is no formal, long-term agreement on the partner agencies’  roles and responsibilities in creating NGATS. According to JPDO officials,  a memorandum of understanding that would define the partner agencies’  relationships was being developed as of August 2005, but has not yet been  completed.
Defining roles and responsibilities is particularly important between JPDO  and ATO, because both organizations have responsibilities related to  planning the national airspace system’s modernization. ATO has primary  responsibility for the ATC system’s current and near-term modernization,  while JPDO has responsibility for planning and coordinating a  transformation to NGATS over the next 20 years. The roles and  responsibilities of each office are currently being worked out. ATO now  plans to expand its Operational Evolution Plan so that it applies FAA-wide  and represents FAA’s piece of JPDO’s overall NGATS plan.  As the roles  and responsibilities of the two offices become more clearly defined, there  is also a need to better communicate these decisions to stakeholders.

		JPDO Is Structured to Involve Federal and Nonfederal Stakeholders, but Faces a Challenge in Soliciting and Maintaining Support over the Long Term

JPDO has structured itself to involve federal and nonfederal stakeholders  throughout its organization. Our work has shown that involving  stakeholders can, among other things, increase their support for a  collaborative effort. Federal stakeholders from the partner agencies serve  on JPDO’s Senior Policy Committee, board, and IPTs. Nonfederal  stakeholders may participate through the NGATS Institute (the Institute).  Through the Institute, JPDO obtained the participation of over 180  stakeholders from over 70 organizations for the IPTs. The NGATS Institute  Management Council, composed of top officials and representatives from  the aviation community, oversees the policy and recommendations of the  Institute and provides a means for advancing consensus positions on  critical NGATS issues.
Although JPDO has developed the mechanisms for involving stakeholders  and brought stakeholders into the process, it faces challenges in sustaining  nonfederal stakeholders’ participation over the long term. Much as with  the federal partner agencies, JPDO has no direct authority over the human,  technical, or financial resources of its nonfederal stakeholders. To date,  these stakeholders’ investment in NGATS has been through their part-time,  pro bono participation on the IPTs and the NGATS Institute Management  Council. The challenge for JPDO is to maintain the interest and  enthusiasm of these nonfederal stakeholders, which will have to juggle  their own multiple priorities and resource demands, even though some of  the tangible benefits of NGATS may not be realized for several years. For  example, stakeholders’ support will be important for programs such as  System Wide Information Management (SWIM), which is a prerequisite to  future benefits, but may not produce tangible benefits in the near term.
In the wake of past national airspace modernization efforts, JPDO also  faces the challenge of convincing nonfederal stakeholders that the  government is financially committed to NGATS. While most of FAA’s  major ATC acquisition programs are currently on track, earlier attempts at  modernizing the national airspace system encountered many difficulties.  In one instance, for example, FAA developed a datalink communications  system that transmitted scripted e-mail-like messages between controllers  and pilots. One airline equipped its aircraft with this new technology, but  because of funding cuts, FAA ended up canceling the program. In a similar  vein, we have reported that some aviation stakeholders expressed concern  that FAA may not follow through with its airspace redesign efforts and are  hesitant to invest in equipment unless they are sure that FAA’s efforts will  continue. One expert suggested to us that the government might mitigate  this issue by making an initial investment in a specific technology before  requesting that airlines or other industry stakeholders purchase  equipment.
In addition to maintaining stakeholder involvement, JPDO faces  challenges in obtaining the participation of all stakeholders. In particular,  JPDO does not involve current air traffic controllers, who will play a key  role in NGATS. The current air traffic control system is based primarily on  the premise that air traffic controllers direct pilots to maintain safe  separation between aircraft. In NGATS, this premise could change and,  accordingly, JPDO has recognized the need to conduct human factors  research on such issues, including how tasks should be allocated between  humans and automated systems, and how the existing allocation of  responsibilities between pilots and air traffic controllers might change.  The input of current air traffic controllers who have recent experience  controlling aircraft is important in considering human factors and safety  issues, as our work on STARS has shown.
However, as mentioned, no current air traffic controllers are involved in  NGATS. In June 2005, FAA terminated its liaison program through which  air traffic controllers had been assigned as liaisons to its major system  acquisition program offices. This included the liaison assigned to JPDO.  Since that time, the National Air Traffic Controllers Association (NATCA),  the labor union that represents air traffic controllers, has not been a  participant in planning NGATS. Although the NGATS Institute  Management Council includes a seat for the union, a NATCA official told  us that the union’s head had been unable to attend the council’s meetings.  According to JPDO officials, the council has left a seat open in hopes that  the controllers will participate in NGATS after a new labor-management  agreement between NATCA and FAA has been settled.

		JPDO Is Using a Reasonable Process for Technical Planning, but Has Not Yet Completed Key Activities

To conduct the technical planning needed to develop NGATS, JPDO is  using an iterative process that appears to be reasonable given the  complexity of NGATS. Two fundamental pieces of this technical planning  are modeling and developing an enterprise architecture (a tool, or  blueprint, for understanding and planning complex systems).
JPDO has formed an Evaluation and Analysis Division (EAD), composed  of FAA and NASA employees and contractors, to assemble a suite of  models that will help JPDO refine its plans for NGATS and iteratively  narrow the range of potential solutions. For example, EAD has used  modeling to begin studying how possible changes in the duties of key  individuals, such as air traffic controllers, could affect the workload and  performance of others, such as airport ground personnel. NGATS could  shift some tasks now done by air traffic controllers to pilots. However,  EAD has not yet begun to model the effect of this shift on pilots’  performance because, according to an EAD official, a suitable model has  not yet been incorporated into the modeling tool suite. According to EAD,  addressing this issue is difficult because data on pilot behavior are not  readily available to use in creating such models. Furthermore, EAD has  not studied the training implications of various NGATS-proposed solutions  because further definition of the concept of operations for these solutions  has not been completed. As the concept of operations matures, it will be  important for air traffic controllers and other affected stakeholders to  provide their perspectives on these modeling efforts. In addition, as the  concept of operations and plans for sequencing equipment matures, EAD  will be able to study the extent to which new air traffic controllers will  have to be trained to operate both the old and the new equipment.
To develop an enterprise architecture, JPDO has taken several important  first steps and is following several effective practices that we have  identified for enterprise architecture development. However, JPDO’s  enterprise architecture is currently a work in progress. Development of  the NGATS enterprise architecture is critical to JPDO’s planning efforts,  and many of JPDO’s future activities will depend on the robustness and  timeliness of its architecture development. The enterprise architecture will  describe ATO’s operation of the current national airspace system, JPDO’s  plans for the NGATS, and the sequence of steps needed to transition  between them. The enterprise architecture will provide the means for  coordinating among the partner agencies and private sector  manufacturers, aligning relevant research and development activities,  integrating equipment, and estimating system costs.
To date, JPDO has formed an Enterprise Architecture Division and plans  to have an early version of the architecture by the end of fiscal year 2006.  The office has established and filled a chief architect position and  established an NGATS Architecture Council composed of representatives  from each partner agency’s chief architect office. This provides the  organizational structure and oversight needed to develop an enterprise  architecture. JPDO’s phased “build a little, test a little” approach for  developing and refining its enterprise architecture is similar to a process  that we have advocated for FAA’s major system acquisition programs. In  addition, this phased development process will allow JPDO to incorporate  evolving market forces and technologies in its architecture and thus better  manage change.

		JPDO Is Planning for Global Harmonization as Part of the NGATS Effort, but Additional Cooperative Activities Have Not Been Fully Explored

Global harmonization is one of the important strategies underlying  NGATS, and JPDO has started to plan for harmonization. JPDO officials  said they recognize the need to work toward the global harmonization of  systems and have met with officials from various parts of the world,  including China, East Asia, and Europe, to assess the potential for  cooperative NGATS demonstrations. JPDO has a global harmonization  IPT, led by managers from ATO’s International Operations Planning  Services International and FAA’s Office of International Aviation. The  IPT’s mission is to harmonize equipment and operations globally and  advocate for the adoption of U.S.-preferred transformation concepts,  technologies, procedures, and standards. The harmonization IPT finalized  its charter in March 2006 and is working to develop an international  strategy and outreach plan. In addition to external efforts, the  harmonization IPT plans to work as a crosscutting IPT that will raise  awareness of global interoperability and standards issues within the other  IPTs as they consider product development.
JPDO officials have noted the need to work toward harmonization with  the Single European Sky Air Traffic Management Research Programme  (SESAR), a major initiative to modernize the airspace system of the  European Union. Eurocontrol has been designated to conduct SESAR to  both modernize and integrate European air traffic management systems.  While similar in many respects to the NGATS planning effort, Eurocontrol  has contracted with an industry consortium to conduct the 2-year planning  phase of the project.
According to several European officials with whom we spoke, global  harmonization (and harmonization with the U.S. system specifically) is  considered to be a key ingredient for the success of SESAR. Several of  these officials said that although the European organization invited JPDO  to participate as a full member in SESAR and the organization has  indicated its willingness to have reciprocal participation with the United  States, personnel exchanges are just beginning to occur. JPDO officials  recognize the importance of cooperative efforts and noted that if Europe  and the United States were to implement different and incompatible  standards and technologies, there could be a major adverse impact on  airlines that serve international markets. Nonetheless, these officials point  out that JPDO, as a U.S. government entity, could not participate as a  member in a private industry effort like the SESAR consortium. FAA is,  however, a member of the European Commission’s Industry Consultation  Body, which provides advice to SESAR. The JPDO officials also said  personnel exchanges and other cooperative activities, such as information  exchanges and a joint working group on technical standards, are now  being conducted under a memorandum of cooperation between FAA and  Eurocontrol.
While FAA and the harmonization IPT are planning cooperative activities,  our research has identified several other areas where cooperation does  not appear to be fully developed. For example, the SESAR and NGATS  initiatives, despite their similarities, do not have coordination activities  such as peer reviews of relevant research, cooperation on safety analysis  (such as through the pooling of accident data), or validation of  technologies. It is possible that greater cooperation and exchange between  NGATS and SESAR might develop once planning has progressed to the  development and validation stage.

	ATO and JPDO are Working to Address Funding Challenges

In the face of rising operating costs, ATO has implemented a number of  cost control initiatives. Savings realized from ATO efforts to control costs  could be used for modernization efforts, including the development of  NGATS. Funding flexibility could also help to address these challenges. In  addition to the cost savings efforts initiated by ATO, JPDO is identifying  potential ways to leverage available resources to support initial NGATS  initiatives.

		ATO Has Begun to Take a Number of Steps to Address Rising Operating Costs

To address rising operating costs and improve performance, ATO has  developed a formal cost control program that includes completing the  development of a cost accounting system and using information from the  system to conduct activity value analysis—that is, to assess the value of its  products and services to its customers. The cost control program also  includes conducting annual business case reviews, primarily for its capital  programs, and assisting Congress in identifying funding priorities. To  control costs, ATO is decommissioning and consolidating ATC facilities,  improving its contract management, pursuing cost reduction opportunities  through outsourcing, and avoiding or reducing personnel costs through  workforce attrition and efficiency gains.
ATO has made significant progress in developing its cost accounting  system. In doing so, ATO is addressing our long-standing concern that  FAA lacked the cost information necessary for decision making and could  not adequately account for its activities and major projects, such as its  ATC modernization programs. ATO officials have also noted that the  system will enhance their ability to accurately determine the costs of  providing specific services or products and to compare those costs with  the value provided to the organization’s customers. This information will  be valuable in prioritizing activities and weighing the costs and benefits of  various courses of action when developing and supporting proposed  budgets. It will also allow FAA to base funding decisions for system  acquisitions on their contribution to reducing the agency’s operating costs.  These efforts facilitate ATO’s activity value analysis, through which ATO  determines (1) the costs of the products and services provided, (2) the  factors that affect the costs, and (3) the value of these products and  services, as perceived by ATO’s customers. By comparing the costs of  providing services with their value to customers, ATO officials expect the  process to help them eliminate activities with low customer value and  determine ways to reduce the costs of activities with high customer value.
ATO expects business case reviews of its capital programs to reduce its  ATC modernization costs by about $62 million in fiscal year 2007 and by  nearly $400 million by fiscal year 2008. Over the last 2 years, ATO  conducted business case reviews of 81 programs, including 67 capital  programs and 14 operations programs. Through these annual reviews,  ATO examines each program to ensure that its funding is justified, and if  ATO determines that the funding is not justified, it may terminate or  restructure the program. To date, ATO has terminated or restructured 6  programs after reviewing the business cases for them, including its  Medium Intensity Airport Weather System (MIAWS) program. ATO  canceled this program’s $4 million spending request. ATO also reduced  the funding for a radar replacement program after reviewing its business  case and identifying opportunities to conduct more effective maintenance  rather than replace radars. Through these combined efforts, FAA expects  to reduce costs by $32 million in fiscal year 2007.
ATO is working with Congress to discuss proposed projects and maximize  capital funds, as we previously recommended. ATO reported that  Congress designated approximately $300 million for specific projects in  fiscal years 2003 and 2004. In fiscal year 2005, according to ATO,  designated projects totaled almost $430 million. In fiscal year 2006, ATO  staff met with Senate offices to provide input on projects, and the value  of the congressionally designated projects declined, as indicated in table 1.
ATO has saved about $84 million to date through initiatives to control its  costs. For example, ATO has begun to decommission ground-based  navigational aids, such as compass locators, outer markers and  nondirectional radio beacons, and to close related ATC facilities as it  transitions to a satellite-based navigation system. In fiscal year 2005, ATO  decommissioned 177 navigational aids for a savings of $2.9 million.  However, ATO has thousands of navigational aids in use, many of which  could be decommissioned during the transition to NGATS. Consolidating  ATC facilities, including terminal radar approach control (TRACON)  facilities and air traffic control centers, can also save costs. According to  one estimate, undertaking all of these actions could save ATO  approximately $600 million per year. We have also found, in researching  cost control efforts undertaken by international air navigation service  providers, that consolidating regional administrative offices offers  additional potential cost savings.
While efforts to decommission navigational aids and close ATC facilities  offer potential savings, we found that ATO lacks a consistent process for  identifying the costs and benefits associated with these efforts. For  example, although ATO reported saving $2.9 million in fiscal year 2005 by  decommissioning 177 navigational aids, its report did not offset these  savings with the costs of decommissioning activities, such as real property  disposition (including buildings or real property leases, standby power  systems, and fuel storage tanks), site cleanup, and restoration. Experts  estimate that the costs of decommissioning all possible navigational aids  and conducting the needed environmental remediation could total about  $300 million. Opportunities may exist for ATO to reuse these sites to  reduce or eliminate environmental cleanup costs. For example, sites could  be used for cell phone towers, generating about $100,000 per year in  revenue per site. Other sites could be leased as warehouses. Together,  these efforts could potentially save FAA up to $14 million per year.  However, without a transparent and verifiable process for determining  both the costs and benefits, it remains difficult to accurately determine  financial savings.
As ATO proceeds with these efforts, stakeholders caution that  decommissioning navigational aids and closing facilities should entail  comprehensive risk mitigation to ensure that ATO retains adequate safety  levels. This includes risk prevention, which focuses on elements that the  agency can prevent, and risk recovery, which recognizes that some events  cannot be prevented and the system must recover from them. It is  important that facility closures happen within the context of a logical,  well-documented, and reasoned process in consultation with  congressional oversight committees. Any process to determine closures or  consolidations should use consistent, accurate data collection and a  common analytical framework to ensure the integrity of the process.
ATO is also attempting to examine existing service contracts to better  control costs. For example, it has saved about $2 million by renegotiating  task orders and modifying contracts for technical assistance provided by  contractors that manage facilities and equipment projects. According to  ATO, these renegotiations did not affect the associated programs. In  addition, ATO has saved about $1 million to date by negotiating cell phone  contracts with four large service providers. Formerly, ATO employees  arranged individual plans for their work cell phones. ATO also entered  into a new contract with natural gas and electricity providers at its  Technical Center that has saved about $358,000 to date. Lastly, through a  strategic sourcing initiative, it has newly negotiated purchasing deals for  support services, including printing and mail services, office equipment  and supplies, and information technology hardware and software.
As another cost-saving measure, ATO is exploring opportunities for  outsourcing work that is now performed by the government. Under the  Office of Management and Budget’s Circular A-76 (Revised), federal  agencies can compete with and rely on the private sector to enhance  productivity. Recently, FAA contracted with Lockheed Martin to operate  its flight service stations. According to FAA, this contract will cost  approximately $2.2 billion less over 10 years than FAA would have had to  pay to operate the stations itself. FAA’s estimate includes the savings it  expects to realize as the contractor assumes the costs of providing the  services and paying their utility and maintenance costs. FAA is currently  working to identify other opportunities to reduce costs through the A-76  process. Some experts have suggested that the time may be right for FAA  to examine opportunities to contract out the ground portion of its FTI  program, through which FAA is replacing air-ground telecommunications  networks. According to these experts, this approach could save FAA up to  $130 million a year beginning in fiscal year 2008. The FTI program is not  expected to provide financial savings until fiscal year 2010; however, the  savings might take longer to be realized because the program is falling  behind schedule.
ATO is working to control personnel costs through both attrition and  improved productivity. According to ATO, these efforts have saved about  $67 million from the beginning of fiscal year 2005 to date. For example,  ATO has saved about $44 million from the attrition of both nonsafety and  Flight Service staff. ATO further expects efficiencies and lower training  costs to allow a 10 percent reduction in the controller workforce over the  next decade. These efficiencies include relying on part-time employees  and job-sharing arrangements, implementing split shifts, and improving  the management of overtime through an optimal mix of increased staffing  and overtime hours to meet workload demands. Through gains in air  traffic controllers’ productivity, ATO has reduced its hiring requirements  by about 460 controller positions, thereby avoiding salary costs of about  $23 million, according to ATO. In addition, ATO is considering the  feasibility of saving air traffic controller training costs by allowing  graduates of its Air Traffic Collegiate Training Initiative (CTI) to bypass  the FAA Academy, where FAA provides initial qualification training to new  hires. According to an FAA Academy official, the proposal to allow these  graduates to bypass the academy is being considered as part of a  comprehensive review of the Collegiate Training Initiative that will be  completed this fall. We had previously identified this effort as offering  potential savings.

		ATO Faces Challenges in Funding NGATS

As the organization primarily responsible for implementing NGATS, ATO  will face substantial funding requirements beyond those needed to  maintain the current system. Funding constraints have required ATO to  carefully scrutinize capital projects and defer or eliminate funding for  systems that could support NGATS, such as a precision-landing system  augmented by satellites (LAAS), a digital e-mail-type communication  system between controllers and pilots (CPDLC), and the next generation  air/ground communication system (NEXCOM).
Although the cost of NGATS is not yet known, JPDO and ATO are  collaborating in developing rough near-term funding requirements for  NGATS’s concept definition and development for major categories of air  traffic control functions such as automation, communications, navigation,  surveillance, and weather. While these funding requirements are not in  FAA’s current 5-year spending plan, they could be included once JPDO  presents, and FAA accepts, business cases, according to an FAA official.
JPDO has identified some key factors that will drive NGATS costs. One of  the drivers is the technologies expected to be included in NGATS. Some of  these are more complex and thus more expensive to implement than  others. A second driver is the sequence in which NGATS technologies will  replace the technologies now in use. A third driver is the length of time  required to transition to NGATS, since a longer transition period would  impose higher costs. JPDO held the first in a series of investment analysis  workshops to determine the basis for developing future NGATS cost  estimates on April 25 and 26, 2006. This first workshop focused on  recommendations from commercial and business aviation, equipment  manufacturers, and systems developers.

		Resources Available to Support NGATS Could Be Enhanced through Leveraging and Funding Flexibility

Resources available to support NGATS could be enhanced to the extent  that JPDO leverages other partner agency resources. JPDO has already  moved in this direction by conducting a review of its partner agencies’  research and development programs to identify ongoing work that could  support NGATS and the potential for more effective interagency  collaboration. Through this process, for example, JPDO successfully  requested that FAA pursue funding to accelerate development of ADS-B  and SWIM, which are two key systems identified for NGATS. However,  JPDO officials told us that, while FAA did receive a funding increase for  those systems, FAA did not receive the full amount it had requested. As  noted, our past work on FAA’s national airspace modernization program  has shown that receiving fewer resources than planned was one factor  that contributed to delays in implementing technologies and significant  cost increases.
To further leverage resources for NGATS, JPDO has issued guidance to its  partner agencies identifying areas that JPDO would like to see emphasized  in the agencies’ fiscal year 2008 budget requests. JPDO is also working  with the Office of Management and Budget to develop a systematic means  of reviewing partner agency budget requests so that the NGATS-related  funding in each request is easily identified. This includes a review of  budgets submitted by the Department of Homeland Security for efforts by  the Transportation Security Administration, and the Department of  Commerce for efforts by the National Oceanic and Atmospheric  Association. Such a process would help the Office of Management and  Budget consider NGATS as a unified program rather than as disparate line  items distributed across several agencies’ budget requests.
Further enhancement to NGATS funding could be achieved by ATO  utilizing its existing funding flexibility. Under existing law, ATO has a 3- year spending authority for Facilities and Equipment funds. It also has  discretion to shift as much as 10 percent of a given program’s funds over a  fiscal year. This is important, since annual expenditures for several large  capital projects will soon be trending downward. Concurrently, FAA is  working to conduct business case reviews of existing capital projects on  an annual basis. These combined efforts could potentially yield hundreds  of millions of dollars to pursue initial NGATS projects.

	Concluding Observations

ATO has put mechanisms in place to change the culture and business  processes that have plagued the past modernization efforts of FAA. ATO’s  new cost accounting system and management practices are important  steps toward improved accountability. Similarly, it has taken steps, in  response to our recommendations, to improve its acquisition processes.  However, as I mentioned, ATO faces challenges in sustaining and  furthering its transformation to a results-oriented culture, and in many  cases, it is still too early to judge the long-term success of these attempts  at fundamental organizational change. ATO must continue to measure its  progress and work to change the culture at all levels of the organization,  as our work has shown that these types of transformations can sometimes  take close to a decade to truly become entrenched within the organization.  We believe that, overall, ATO is moving in the right direction, and we will  continue to monitor its progress.
We also believe that JPDO is moving in the right direction in creating an  organizational structure that facilitates the federal interagency  collaboration that must occur for the office to be successful in its mission.  JPDO is working to leverage the various human, technological, and  financial resources of its partner agencies. This is key given the  coordinating role of JPDO and its lack of authority over key resources  needed to continue developing the NGATS plan. However, because of this  lack of authority, JPDO could be challenged to maintain partner agency  and stakeholder commitment to the NGATS effort in the long term. Also,  much of the NGATS planning and implementation depends on the  development of the NGATS enterprise architecture. Although JPDO has  said that a version of the enterprise architecture will be completed later  this year, the architecture will require further refinement and commitment  from the partner agencies into the future.
Transforming the national airspace system to accommodate what is  expected to be three times the current amount of traffic by 2025, providing  adequate security and environmental safeguards, and doing these things  seamlessly while the current system continues to operate, will be an  enormously complex undertaking. Both ATO and JPDO have been given  difficult tasks in a difficult budgetary environment. Going forward, efforts  to control costs and leverage resources will become even more critical.  Success also depends on the ability of ATO and JPDO to define their roles  and form a collaborative environment for planning and implementing the  next generation system.
Mr. Chairman, this concludes my statement for the record.

	Contact and Staff Acknowledgments

For further information on this statement for the record, please contact  Gerald Dillingham at (202) 512-2834 or dillinghamg@gao.gov. Individuals  making key contributions to this statement include Nabajyoti Barkakati,  Christine Bonham, Jay Cherlow, Elizabeth Eisenstadt, Colin Fallon, David  Hooper, Heather Krause, Elizabeth Marchak, Maren McAvoy, Edmond  Menoche, Faye Morrison, Richard Scott, Sarah Veale, and Matthew  Zisman.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. It may be reproduced and distributed in its entirety without further  permission from GAO. However, because this work may contain copyrighted images or  other material, permission from the copyright holder may be necessary if you wish to  reproduce this material separately.

Summary:
Why GAO Did This Study

Over a decade ago, GAO listed the Federal Aviation Administration's (FAA) effort to modernize the nation's air traffic control (ATC) system as a high-risk program because of systemic management and acquisition problems. Two relatively new offices housed within FAA--the Air Traffic Organization (ATO) and the Joint Planning and Development Office (JPDO)--are now primarily responsible for planning and implementing these modernization efforts. Congress created ATO to be a performance-based organization that would improve both the agency's culture, structure, and processes, and the ATC modernization program's performance and accountability. Congress created JPDO, made up of seven partner agencies, to coordinate the federal and nonfederal stakeholders necessary to plan a transition from the current air transportation system to the "next generation air transportation system" (NGATS). This statement is based on GAO's recently completed and ongoing studies of the ATC modernization program. GAO provides information on (1) the status of ATO's efforts to improve the ATC modernization program, (2) the status of JPDO's planning efforts for NGATS, and (3) actions to control costs and leverage resources for ATC modernization and the transformation to NGATS.

What GAO Found

ATO has taken a number of steps as a performance-based organization to improve the ATC modernization program, but continued management attention will be required to institutionalize these initiatives. ATO has adopted core values, streamlined its management, and begun to revise its acquisition processes to become more businesslike and accountable. For the past 2 years, ATO has met its major acquisition performance goals. ATO still faces challenges, including sustaining its transformation to a results-oriented culture, hiring and training thousands of air traffic controllers, and ensuring stakeholder involvement in major system acquisitions. JPDO has made progress in planning for NGATS by facilitating collaboration among federal agencies, ensuring the participation of federal and nonfederal stakeholders, addressing technical planning, and factoring global harmonization into its planning, but JPDO faces challenges in continuing to leverage the partner agencies' resources and in defining the roles and responsibilities of the various agencies involved. JPDO could find it difficult to sustain the support of stakeholders over the longer term and to generate participation from some key stakeholders, such as current air traffic controllers. JPDO has taken steps to develop an enterprise architecture (the blueprint for NGATS) and will have an early version later this year. The robustness and timeliness of this enterprise architecture are critical to many of JPDO's future NGATS planning activities. ATO has taken a number of actions to control costs and maximize capital funds, which will become increasingly important during the transition to NGATS. ATO has established cost control as one of its key performance metrics, developed a cost accounting system, and is using its performance management system to hold its managers accountable for controlling costs. ATO has developed a formal cost control program that includes, among other things, (1) conducting annual business case reviews for its capital programs, (2) decommissioning and consolidating ATC facilities, and (3) pursuing cost reduction opportunities through outsourcing. These cost control initiatives represent an important first step to improved performance but will require review and monitoring.