GAO/RCED-00-110R Review of ANICS Phase II

B-284396

September 6, 2000

The Honorable Richard C. Shelby

Chairman, Subcommittee on Transportation

and Related Agencies

Committee on Appropriations

United States Senate

Subject: Aviation Infrastructure: Feasibility of Using Alternate Means to Satisfy

Requirements of Alaska National Airspace System Interfacility

Communications System (ANICS) Phase II

Dear Mr. Chairman:

In the early 1990s, the Congress authorized a satellite-based communications

network, now known as ANICS, to conduct voice and data transmissions for the

Federal Aviation Administration’s (FAA) air traffic control operations in Alaska.

ANICS supports critical, essential, and routine services, including terminal and en

route air traffic control, navigation, flight service, and weather operations. In July

1993, FAA competitively awarded a $140 million contract to the Harris Corporation.

The ANICS contract was split into two distinct phases:

• In Phase I, 52 dual satellite-earth stations (also referred to as sites) were

constructed throughout Alaska. These stations provide critical and essential

services with 99.99 percent availability—an equivalent downtime of about 52

minutes per site per year.

• Phase II is to build additional single satellite-earth stations. These stations are

designed to provide essential and routine services with 99.9 percent availability—

an equivalent downtime of about 9 hours per site per year.

The Conference Report on the Department of Transportation Appropriations Act for

Fiscal Year 1999 (H. Rpt. 105-825) directed FAA to look at alternatives to its current

contract to satisfy the requirements of Phase II. No funding would be made available

until FAA had reported on alternatives to provide these services. FAA compared the

cost estimates and other information for the needed services it received from AT&T

Alascom (AT&T) and General Communications, Inc. (GCI)—two commercial

telecommunications service providers—to the cost of ordering additional sites from

the Harris Corporation. In an April 1999 report to the Congress, FAA concluded that

Resources, Community, and

Economic Development Division

United States General Accounting Office

Washington, DC 20548
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2 GAO/RCED-00-110R Review of ANICS Phase II

the Harris Corporation could provide the needed telecommunications services at less

cost than obtaining the same services from AT&T or GCI and recommended that the

agency be authorized to order ANICS Phase II sites from Harris. You expressed

concern that FAA’s report may contain numerous factual errors and that it may lack

supporting data or analyses. You therefore asked that we examine the report to

determine if FAA’s findings were properly supported.

Generally, our review indicated that, given FAA’s assumptions and the circumstances

of the study, the agency’s findings and conclusions were supported by the

information available. FAA’s analyses were consistently applied to each of the

alternatives and performed in accordance with standard economic and engineering

methods of calculation. However, the findings and conclusions of its study could

have been strengthened if FAA had held more in-depth discussions with AT&T and

GCI about the assumptions and the adjustments it made to the data the vendors

provided, since the results were influenced by these assumptions. We briefed your

staff, and this letter summarizes the information discussed with them. (See encl. I.)

-----

In conducting our review, we discussed with and obtained information from FAA

officials in headquarters and the Alaska regional office; ANICS contract

administration officials of the Defense Information Technology Contracting

Organization, Alaska field office; AT&T local representatives; and officials from GCI,

the Harris Corporation, and New Horizons Telecom, Inc. (another Harris Corporation

subcontractor working on ANICS). FAA identified AT&T and GCI as the only other

commercial contractors in Alaska potentially capable of fulfilling FAA’s requirements

for ANICS Phase II. In addition, we requested that FAA perform additional economic

analysis beyond what it had initially done; this analysis came to conclusions similar

to those of FAA’s initial analysis. We did not validate the pricing information

provided by AT&T and GCI or the resulting adjustments FAA made to this

information; however, we reviewed in detail FAA’s analysis of this information. We

performed our work from November 1999 through August 2000 in accordance with

generally accepted government auditing standards.

We provided a draft of this report to the Department of Transportation, AT&T, the

Harris Corporation, and GCI. The Department of Transportation and AT&T generally

agreed with the facts presented and provided us with technical and clarifying

comments, which we included in the report as appropriate. Harris Corporation did

not provide comments.

GCI disagreed with our conclusion. We stand by our conclusion that, FAA’s

evaluation, in general, was objective and reasonable for the cost and system

requirements of the ANICS Phase II alternatives. This conclusion is based on our

review of FAA’s original economic analysis as well as additional analysis that FAA

conducted at our request. GCI also asserted that, during the course of FAA’s and our

review, it was not provided with an opportunity to validate or substantiate the

information on the system’s cost or availability that it had provided to FAA. Our

report notes that FAA did not hold in-depth discussions with AT&T and GCI about
B-284396

3 GAO/RCED-00-110R Review of ANICS Phase II

the accuracy of the assumptions and the technical basis FAA had used to adjust and

interpret the information the vendors provided. As a result, FAA’s final evaluation

did not benefit from the feedback, clarification, and greater accuracy that could have

been obtained from better communications. However, during the course of our

review, we held discussions with GCI officials about the information that they

provided to FAA and also provided them with a statement of facts for review. GCI

officials provided comments on our statement of facts, which we incorporated into

the draft as appropriate.

We are sending copies of this letter to the Honorable Rodney Slater, Secretary of

Transportation, and the Honorable Jane F. Garvey, Administrator, Federal Aviation

Administration. We also will make copies available to other interested parties upon

request.

If you or your staff have questions about this report, please contact me at (202) 512-

2834. Major contributors to this report were Charles Bausell, Sandra Cantler, Sharon

Dyer, David Hooper, Richard Hung, Ralph Lamoreaux, and Belva Martin.

Sincerely yours,

Gerald L. Dillingham, Ph.D.

Associate Director, Transportation Issues

Enclosure
Enclosure I

4 GAO/RCED-00-110R Review of ANICS Phase II

Resources, Community, and Economic

Development Division

Feasibility of Using Alternate Means to Satisfy

Requirements of Alaska National Airspace System

Interfacility Communications

System (ANICS) Phase II
Enclosure I

5 GAO/RCED-00-110R Review of ANICS Phase II

Background

• In the early 1990s, the Congress authorized a satellite-based

communications network (ANICS) to conduct voice and data

transmissions for FAA’s air traffic control operations in the

Alaska region.

• In July 1993, the $140 million ANICS contract was

competitively awarded to the Harris Corporation. The 5-year

contract, plus five 1-year options, is due to expire in 2003. A

decision to proceed with the 8th year, or third 1-year option,

was made in May 2000.
Enclosure I

6 GAO/RCED-00-110R Review of ANICS Phase II

Background

• The ANICS contract involves two types of earth stations:

• Phase I dual satellite-earth stations were established at 52

locations to provide critical and essential services with

99.99 percent availability--an equivalent downtime of about

52 minutes per site per year.

• Phase II single satellite-earth stations are to provide

essential and routine services with 99.9 percent

availability--an equivalent downtime of about 9 hours per

site per year.

• The Conference Report on the Department of Transportation

Appropriations Act for Fiscal Year 1999 (H. Rpt. 105-825)

directed FAA to report by March 31, 1999, on alternatives to

the current contract for meeting ANICS Phase II

requirements.
Enclosure I

7 GAO/RCED-00-110R Review of ANICS Phase II

Background

• In April 1999, FAA reported to the Congress that neither AT&T

Alascom (AT&T) nor General Communications, Inc. (GCI)--the

commercial telecommunications service providers in Alaska from

which FAA had requested information--met the performance

capabilities and availability level required for ANICS Phase II.

• FAA also reported that in order to obtain the required level of

availability from commercially leased telecommunications vendors

(outside the framework of the existing contract), it would have to

invest considerable money to upgrade AT&T’s and GCI’s equipment

and sites.

• FAA recommended that it be authorized to proceed with ANICS

Phase II at 29 sites. According to FAA, this authorization would

enable it to provide significantly safer, more reliable

telecommunications services at lower risk than would be possible by

leasing and upgrading services from commercial vendors.
Enclosure I

8 GAO/RCED-00-110R Review of ANICS Phase II

Research Questions

• What information did FAA provide to AT&T and GCI, and was

that information sufficient to develop approaches for satisfying

the requirements?

• What information did AT&T and GCI provide to FAA, and did

FAA properly compare this information?

• How did FAA adjust AT&T’s and GCI’s proposed pricing, and

were those adjustments justified and reasonable?

• To what extent was FAA’s evaluation objective and reasonable

with regard to cost, requirements, and responsiveness?

• Overall, to what extent was FAA’s conclusion--to continue its

contract with the Harris Corporation--supported by the available

information?
Enclosure I

9 GAO/RCED-00-110R Review of ANICS Phase II

Methods

• Spoke with and obtained relevant documentation from officials

in FAA’s headquarters and its Alaska field office, Defense

Information Technology Contracting Organization, AT&T, and

GCI.

• Examined FAA’s decision-making process and its underlying

analyses.

• Requested and obtained additional economic analysis from

FAA.

• Did not validate FAA’s cost data or the cost data provided to

FAA by AT&T and GCI.
Enclosure I

10 GAO/RCED-00-110R Review of ANICS Phase II

Methods

• Interviewed officials of the Harris Corporation and New

Horizons (a Harris Corporation subcontractor); both

companies are responsible for constructing ANICS’ earth

stations.

• Conducted our work from November 1999 through August

2000 in accordance with generally accepted government

auditing standards.
Enclosure I

11 GAO/RCED-00-110R Review of ANICS Phase II

What information did FAA provide to AT&T and GCI,

and was that information sufficient to develop

approaches for satisfying the requirements?

• The lack of documentation and divergent recollections among the

principals precludes a definitive assessment of the sufficiency of the

information provided for developing approaches to satisfy the

requirements. Therefore, we had to rely on oral statements.

According to FAA, the information it provided included the following:

• a statement that the agency was responding to a

congressional request for information about alternative means

of providing the Phase II capabilities of the ANICS program,

• 67 proposed ANICS Phase II locations,*

• a stipulation that the availability level must be 99.9 percent,

and

• a request that the vendor provide an estimate of “rough” costs

incurred to meet the required 99.9 percent requirement.

* FAA’s original analysis was based on 67 proposed sites. In subsequent

analysis, FAA reduced the number of sites to 60.
Enclosure I

12 GAO/RCED-00-110R Review of ANICS Phase II

What information did FAA provide to AT&T and GCI,

and was that information sufficient to develop

approaches for satisfying the requirements?(cont.)

• According to AT&T, FAA requested an estimate of costs from

AT&T but did not give availability specifications or a complete

site listing. FAA’s request was only for the cost between

specific ANICS sites and not the costs for tail circuits and

other miscellaneous items.

• GCI officials told us that they sought clarification from FAA on

several issues, including the availability specifications.

• FAA officials told us that they did not hear of any concerns

regarding the sufficiency of the information they provided to

either AT&T or GCI.
Enclosure I

13 GAO/RCED-00-110R Review of ANICS Phase II

What information did AT&T and GCI provide to

FAA, and did FAA properly compare this

information?

• AT&T did not prepare a formal written response to FAA’s inquiry.

Instead, AT&T’s local representatives gave information to FAA

and referred FAA to the company’s public list of charges, known

as its tariff, for satellite communications services.

• GCI’s written response included cost estimates for

• 27 sites where it would use existing earth stations in its

network,

• 36 sites where it would construct earth stations, and

• 4 sites where it would use earth stations to interface with

satellites to send date to remote areas.

• GCI assured FAA that its design would meet the 99.9 percent

availability requirement.
Enclosure I

14 GAO/RCED-00-110R Review of ANICS Phase II

What information did AT&T and GCI provide to

FAA, and did FAA properly compare this

information?(cont.)

• AT&T’s local representatives said that they were not familiar with

the assumptions FAA had used and therefore could not judge the

reasonableness of FAA’s adjustments to the information provided

by its tariff.

• GCI officials told us that FAA improperly interpreted the

information they had provided. They claim that FAA evaluated

GCI’s submission and capabilities as they currently existed rather

than looking at GCI’s future ability to meet the needed system’s

requirements.
Enclosure I

15 GAO/RCED-00-110R Review of ANICS Phase II

What information did AT&T and GCI provide to

FAA and did FAA properly compare this

information?(cont.)

• On the basis of our evaluation, we believe that FAA made the

appropriate comparisons.

FAA’s comparative analysis included

• the cost estimates and other information received from

AT&T and GCI,

• the existing costs of leasing commercial communications

services at the proposed ANICS Phase II sites, and

• the costs of constructing ANICS Phase II earth stations

under the current ANICS contract.

• FAA said that the submission and information it received were

evaluated at face value. AT&T, in essence, proposed “current”

capabilities. GCI’s response demonstrated the “feasibility of

providing an industry solution.”
Enclosure I

16 GAO/RCED-00-110R Review of ANICS Phase II

How did FAA adjust AT&T’s and GCI’s proposed

pricing, and were those adjustments justified and

reasonable?

• FAA adjusted AT&T’s costs--on the basis of historical costs

incurred with the ANICS Phase I contract and other cost data--by

$200,000 per site. This is the amount FAA expected to incur to

upgrade existing equipment or add redundant equipment at AT&T

earth stations in order to meet the 99.9 percent availability

requirement.

• At GAO’s request, AT&T provided a budgetary cost estimate to

provide 99.9 percent availability, which was based on a survey of

23 ANICS sites, 2 of which did not require any additional

equipment. AT&T’s cost estimates were $64,000 less per station

than FAA had estimated.

• According to FAA, the adjustment of $200,000 per site is an

estimate and is not based on detailed costs for specific

equipment at each of the vendors’ sites.
Enclosure I

17 GAO/RCED-00-110R Review of ANICS Phase II

How did FAA adjust AT&T’s and GCI’s proposed

pricing, and were those adjustments justified and

reasonable?(cont.)

• AT&T’s local representatives said that they were not familiar with

the assumptions FAA had used and therefore could not judge the

reasonableness of FAA’s adjustments to the information provided

by AT&T’s tariff. However, they believed that there might have

been internal FAA costs and other costs that were added by FAA

to AT&T’s tariff information that they were not familiar with.

• For GCI’s proposed pricing, FAA added $200,000 per site to

GCI’s cost estimate to upgrade each AT&T earth station. It took

this action because it determined that GCI relied on AT&T earth

stations at 20 proposed ANICS Phase II locations that did not

meet the 99.9 percent requirement.
Enclosure I

18 GAO/RCED-00-110R Review of ANICS Phase II

How did FAA adjust AT&T’s and GCI’s proposed

pricing, and were those adjustments justified and

reasonable?(cont.)

• According to GCI officials, the cost adjustments FAA made were

unjustified because FAA discounted GCI’s submission that the

upgraded facilities would meet availability requirements and

adjusted the pricing upward to compensate for an

unsubstantiated deficiency.

• According to FAA officials, neither AT&T nor GCI was informed of

the amount of the adjustments for upgrading sites to meet the

99.9 percent requirement.
Enclosure I

19 GAO/RCED-00-110R Review of ANICS Phase II

How did FAA adjust AT&T’s and GCI’s proposed

pricing, and were those adjustments justified and

reasonable?(cont.)

• Our review of FAA’s economic analysis, which included the

present value of cost, indicated that, given the values that FAA

expected for major cost parameters, ANICS Phase II (as now

under contract with the Harris Corporation) was the least costly

option among the following four options that were considered:

leasing communications services as was currently being done;

Phase II, as it was to be constructed under the ANICS contract;

AT&T; and GCI.

• FAA appeared to have a reasonable basis for its adjustments to

the pricing information and the values applied to the various

options. The adjustments appeared to us to have been made

fairly and consistently.
Enclosure I

20 GAO/RCED-00-110R Review of ANICS Phase II

To what extent was FAA’s evaluation objective and

reasonable with regard to cost, requirements, and

responsiveness?

• Generally, FAA’s evaluation was objective and reasonable for

the cost and the requirements of the ANICS Phase II

alternatives. FAA did not request, nor did AT&T and GCI

provide, information on responsiveness (i.e., restoration of

services).

• FAA--through its own research--determined that neither

company could meet the 99.9 percent availability requirement.

FAA made certain adjustments to the costs submitted by both

AT&T and GCI for the facilities, equipment, and other

upgrades that it thought would be necessary to ensure that the

99.9 percent requirement was met during ANICS Phase II.
Enclosure I

21 GAO/RCED-00-110R Review of ANICS Phase II

To what extent was FAA’s evaluation objective and

reasonable with regard to cost, requirements, and

responsiveness?(cont.)

• However, FAA did not discuss with AT&T or GCI how it

determined that neither company met the 99.9 percent

availability requirement; nor did it discuss the way it adjusted

the cost to meet the availability requirements in its

comparative or net present value analyses.

• Consequently, FAA’s final evaluation did not benefit from the

feedback, clarification, and greater accuracy that could have

been obtained from better communication with AT&T and

GCI.
Enclosure I

22 GAO/RCED-00-110R Review of ANICS Phase II

(348200)

Overall, to what extent was FAA’s conclusion--to

continue its contract with the Harris Corporation

supported by available information?

• Given FAA’s set of assumptions and the circumstances of its study,

FAA’s conclusions were supported by the available information. It

consistently applied its analytical framework to each of the

alternatives and conducted its analyses in accordance with

standard economic and engineering methods of calculation.

• However, FAA’s findings and conclusions could have been

strengthened with more in-depth discussions with vendors.

Because the results of FAA’s analyses depend heavily on assumed

values for key cost parameters, FAA could have benefited from

discussions with AT&T and GCI about the accuracy of key

assumptions and the technical basis it used to adjust and interpret

the information the vendors provided.