CONTROLS OVER THE FEDERAL AVIATION 

ADMINISTRATION’S CONVERSION OF 

FLIGHT SERVICE STATIONS TO 

CONTRACT OPERATIONS 

Federal Aviation Administration 

Report Number: AV-2007-048 

Date Issued: May 18, 2007 
i

U.S. Department of 

Memorandum

Transportation 

Office of the Secretary 

of Transportation 

Office of Inspector General 

Subject: ACTION: Interim Report on Controls Over the 

Federal Aviation Administration’s Conversion of 

Flight Service Stations to Contract Operations 

Federal Aviation Administration 

Report Number AV-2007-048 

Date: May 18, 2007 

From: 

David A. Dobbs 

Principal Assistant Inspector General 

 for Auditing and Evaluation 

Reply to 

Attn. of: JA-10 

To: Federal Aviation Administrator 

This report presents the interim results of our audit of the controls implemented by 

the Federal Aviation Administration (FAA) over its conversion of flight service 

stations to contract operations. The objectives of our audit were to assess whether 

FAA had implemented effective plans and controls to (1) transition flight service 

stations to contract operations, (2) achieve anticipated savings, and (3) ensure that 

the operational needs of users continue to be met. 

Flight service stations provide general aviation pilots with aeronautical 

information such as pre- and in-flight weather briefings, flight planning assistance, 

and aeronautical notices. In addition, while employees at flight service stations do 

not control air traffic, they can provide in-flight support to pilots who are lost or in 

need of assistance. Flight services are provided at no charge to users and are 

intended to help promote safe flight operations. However, most of the services 

provided are optional for pilots’ use. 

On February 1, 2005, FAA awarded a 5-year, fixed-price incentive contract (with 

5 additional option years) to Lockheed Martin to operate the Agency’s 58 flight 

service stations in the continental United States, Puerto Rico, and Hawaii. The 

contract, worth about $1.8 billion, represents one of the largest non-defense 

outsourcing of services in the Federal Government. FAA anticipates that by 

contracting out flight service facilities, it will save $2.2 billion over the 10-year 

life of the agreement. On October 4, 2005, Lockheed Martin took over operations 

at the 58 flight service stations. 
ii

Under terms of the contract, during the transition period, the Government is 

responsible for costs associated with non-mandatory, Government Furnished 

Property (e.g., certain legacy systems and equipment). In October 2007, that 

responsibility shifts to Lockheed Martin. 

FAA’s anticipated savings are based on the difference between the Agency’s 

projected costs of operating the flight service stations versus the 10-year cost of 

the Lockheed Martin contract. These savings are expected to be achieved through 

a series of changes to reorganize flight service stations operations and modernize 

facilities and equipment. The main changes include the following: 

• Consolidating the 58 flight service stations currently in operation into 3 new 

hub facilities and 16 refurbished stand-alone facilities; 

• Deploying a new flight services operating system—FS-21—at the 3 hub and 

16 continuing facilities. The new system will connect the facilities through a 

single, nationwide operating system that will allow flight service specialists to 

file flight plans, access aeronautical and weather information, and provide 

other information to pilots for any airport in the country; and 

• Reducing flight service specialist staffing levels from approximately 

1,900 specialists (at the time that Lockheed Martin assumed operation of the 

flight service stations) to about 1,000 specialists as a result of the technological 

and operational changes noted above. 

Figure. Picture of the Operating Floor at the New Hub Flight 

Service Station in Ashburn, Virginia 

Source: Lockheed Martin 
iii

Our review, conducted between May 2006 and March 2007, included site visits to 

six existing flight service stations, three Lockheed Martin hub flight service 

stations, two Lockheed Martin Division Offices, FAA Headquarters, and two FAA 

Regional Offices. Exhibit A details our review scope and methodology. Exhibit 

B lists the specific organizations we contacted and visited during the audit. We 

are continuing our review to further assess FAA’s controls over ensuring that 

anticipated savings are achieved and the operational needs of users continue to be 

met. We will report on these issues again later this year. 

RESULTS IN BRIEF 

We found that FAA has implemented effective controls over the initial transition 

of flight service stations to contract operations. These controls include contractual 

performance measures that require the contractor to achieve acceptable levels of 

operational performance and service as well as internal mechanisms that oversee 

the operational and financial aspects of the program. We also found that the 

Agency is using these controls to monitor contract flight service stations and, in 

some cases, is penalizing the contractor for poor performance. 

In addition, FAA completed an internal review of the flight services transition in 

May 2006. The Air Traffic Organization’s Office of Finance conducted the 

review and recommended, among other things, that FAA conduct an independent 

assessment of the cost baseline used, update projected cost savings, and ensure 

that the quality assurance branch has sufficient resources to adequately validate 

contract performance levels. FAA is in the process of addressing those 

recommendations. 

It is uncertain, however, if the controls put in place by FAA will be sufficient to 

ensure that anticipated savings are achieved during the next and most critical 

phase of the transition. In February, the contractor began actions to complete, test, 

and implement FS-21 and to consolidate the existing 58 sites into 3 hub and 

16 refurbished locations—all within a 6-month timeframe. There are significant, 

inherent risks associated with this phase of the transition, and any slips in that 

schedule could affect the anticipated savings. For instance: 

• FAA and the contractor are facing an extremely aggressive consolidation 

schedule. According to the contractor’s transition plan, the consolidation 

involves opening the 3 hub facilities, transferring operations at 42 closing sites, 

and refurbishing the 16 continuing sites with new equipment. This is planned 

to occur during a 6-month period, which started in February 2007 and will end 

in July 2007. 
iv

• The consolidation depends upon the contractor completing and deploying 

FS-21, and Lockheed Martin has already experienced delays in 

implementing it. According to FAA officials, the current deployment 

schedule for FS-21 already includes a 10-month delay that Lockheed Martin 

experienced during development, and they believe an additional 6-week delay 

is possible. Further delays in implementing FS-21 could have a cascading 

effect on consolidation plans. 

• FS-21 requires digital capabilities and, per the contract terms, must 

interface with FAA’s Telecommunications Infrastructure (FTI) Network. 

To meet this requirement, FAA is installing digital connections between 

Lockheed Martin hub facilities and certain closing and continuing flight 

service stations. While FAA has begun installing these connections, any 

delays or problems with installation could hamper testing and operation of FS21, possibly delaying the transition. 

• Schedule delays could expose the contractor, FAA, or both parties to 

additional costs, such as extending existing leases at some locations and 

maintaining legacy systems. While the ultimate responsibility for delays and 

related costs incurred will depend upon the party responsible for the delay, it is 

likely that FAA would bear some portion of the total costs, which would 

impact the overall anticipated savings. FAA is already facing possible 

reductions to savings as Lockheed Martin is requesting nearly $177 million in 

equitable adjustments to the contract. Most of that adjustment ($147 million) 

is based on the contractor’s claim that it was not provided with the correct 

labor rates when it submitted its bid. 

• A critical tool that could assist FAA in monitoring this transition—a 

variance report comparing actual first year costs to estimates—was only 

recently completed. This tool will allow FAA to compare its baseline 

estimate of savings to actual costs, determine the reasons for shortfalls, and 

allow for adjustment to ensure that savings are realized. The variance report is 

critical because it will provide FAA management with its first opportunity to 

evaluate projections of its outsourcing efforts in areas such as operational 

costs, technical operations, and actual savings. This is particularly important 

during the next phase of the transition when delays in consolidation could have 

cascading effects on expected future savings. 

Since we issued our draft report on March 28, 2007, FAA subsequently 

provided us with a copy of its variance report on April 10, 2007. We are 

reviewing the variance report and will report on it later this year. 
v

Because of the risks associated with the next phase of the transition, we are 

recommending that FAA provide our office with an update on the status of the 

transition through the end of April 2007 (mid-point of the transition). That update 

should include at a minimum the implementation status of FS-21, the installation 

status of the FTI digital connections, the operational status of the three hub sites, 

the number of facilities closed, and the number of sites refurbished. We will 

continue reviewing this issue and report on it again later this year. 

We also found that better controls are needed to ensure that the operational needs 

of users continue to be met. Specifically, we found that staffing levels at 

outsourced facilities were lower than what the contractor anticipated, resulting in 

some users being routed to adjacent facilities that did not have adequate local 

knowledge needed by those users. While this concern should be alleviated when 

the planned consolidation and implementation of FS-21 is complete, it could be 

compounded if there are delays in fielding the new operating system or 

consolidating facilities. We will continue reviewing this issue as well and report 

on it again later this year. 

FAA also needs better controls for monitoring contractor staffing and plans for 

ensuring that flight service specialists are properly trained and certified to meet 

user demand. Finally, FAA does not have a system for monitoring customer 

service that is independent of Lockheed Martin. Such a system is important to 

independently verify the quality and level of services provided during this 

transition and after consolidation. 

SUMMARY OF RECOMMENDATIONS 

Our recommendations focus on the actions FAA should take to improve controls 

over its outsourcing of flight services stations during the next phase of the 

transition. They include: 

• Providing our office with an update on the status of the next phase of the 

transition through the end of April 2007, 

• Ensuring that the contractor has appropriate and feasible contingency plans 

to maintain the quality and quantity of services during the next phase of the 

transition, 

• Developing and implementing management controls for monitoring 

contractor staffing, and 

• Developing a means for monitoring customer service that is independent of 

the contractor. 

A complete list of our recommendations can be found on page 11. 
vi

SUMMARY OF MANAGEMENT COMMENTS AND OFFICE OF 

INSPECTOR GENERAL RESPONSE 

We provided FAA with a draft copy of this report on March 28, 2007, for 

comment and requested its response by April 12, 2007. On April 30, 2007, FAA 

provided us with its formal response, which is contained in its entirety in the 

appendix to this report. FAA concurred with three of our recommendations to: 

• Provide an update on the status of the transition through the end of April 2007; 

• Ensure that the contractor has appropriate and feasible contingency plans in 

place during the transition; and 

• Develop a means for monitoring customer service that is independent of the 

contractor. 

FAA agreed to provide us with the status of the transition through the end of April 

2007, which we are awaiting. In addition, since we issued our draft report, FAA 

has (a) required the contractor to establish contingency plans to maintain services 

should there be delays in consolidation during the next phase of the transition and 

(b) established a website link (independent of the contractor) for monitoring 

customer service. We consider these recommendations resolved. 

FAA did not concur with our third recommendation to develop and implement 

management controls for monitoring contractor staffing plans to ensure that that 

the contractor has a sufficient number of specialists certified in the appropriate 

service areas. In its response, FAA states that the purpose of some of the 

performance measures included in the contract are to measure whether the 

contractor has sufficient staffing. However, most of the performance measures 

cited by FAA deal with the response time to telephone calls and radio contacts as 

well as how quickly information is entered into computer systems. For example, 

performance measure 7, cited by FAA in its response, measures the number of 

phone calls answered per day within 20 seconds on connection. 

While these measures may provide some information related to facility staffing 

levels, they do not measure whether the contractor has sufficient specialists 

certified in a particular service area to meet user needs. Each service area has 

unique conditions, such as cross-border flights or restricted flight areas, which are 

most effectively dealt with by specialists who are certified in those specific areas. 

The one performance measure cited by FAA that does deal directly with customer 

satisfaction, a customer satisfaction survey, has not been completed. We believe 

that FAA needs to implement controls that monitor staffing levels in specific 

service areas to ensure that customers receive services that meet their needs. 
vii

We believe that FAA needs to reconsider its position; accordingly, we consider 

this recommendation unresolved. 

ACTIONS REQUIRED 

In accordance with Department of Transportation Order 8000.1C, we are 

requesting that you provide us with the status update of the transition through the 

end of April 2007 (recommendation 1). We are also requesting that you 

reconsider your position regarding developing and implementing management 

controls for monitoring contractor staffing plans to ensure that that the contractor 

has a sufficient number of specialists certified in the appropriate service areas 

(recommendation 3). We would appreciate receiving your response within 

30 calendar days. 

We appreciate the courtesies and cooperation of FAA representatives during this 

audit. If you have any questions concerning this report, please feel free to call me 

at (202) 366-0500 or Dan Raville, Program Director, at (202) 366-1405. 

# 

cc: FAA Deputy Administrator 

FAA Chief of Staff 

Anthony Williams, ABU-100 
TABLE OF CONTENTS 

FINDINGS .............................................................................................. 1

FAA Has Implemented Effective Controls Over the Initial 

Transition of Flight Services to Contract Operations......................... 1

Existing Controls May Not Be Sufficient To Ensure That 

Anticipated Savings Are Achieved During the Next and 

Most Critical Phase of the Transition................................................. 2

Better Controls Are Needed To Ensure That Operational 

Needs of Users Continue To Be Met................................................. 8

RECOMMENDATIONS........................................................................ 11

MANAGEMENT COMMENTS AND OIG RESPONSE........................ 12

EXHIBIT A. SCOPE AND METHODOLOGY ..................................... 16

EXHIBIT B. LOCATIONS VISITED .................................................... 17

EXHIBIT C. PERFORMANCE MEASURES....................................... 18

EXHIBIT D. MAJOR CONTRIBUTORS TO THIS 

REPORT .............................................................................................. 19

APPENDIX. AGENCY COMMENTS................................................... 20
Findings 

1

FINDINGS 

FAA Has Implemented Effective Controls Over the Initial Transition of 

Flight Services to Contract Operations 

We found that FAA has implemented effective controls over the initial transition 

of flight service stations to contract operations. These controls include contractual 

performance measures that require the contractor to achieve acceptable levels of 

operational performance and service as well as internal mechanisms that oversee 

the operational and financial aspects of the program. For example, FAA has: 

• Realigned the Agency’s existing Headquarters Flight Services Office to 

oversee the transitional, operational, and financial aspects of the flight services 

contract. This office includes a quality assurance branch that measures 

Lockheed Martin’s performance against contractual performance measures and 

an operations branch that oversees the contractual operations of flight service 

stations. 

• Maintained an operational evaluation group separate from the Flight Services 

Office that conducts reviews of flight service stations to ensure that FAA 

regulations and procedures are followed by contractor personnel. The group 

has also adjusted its monitoring procedures to reflect changes in flight services 

provided by Lockheed Martin. 

• Convened an Executive Board of Performance and Cost Review, which 

monitors the cost and operation of the outsourced flight service stations. The 

Board; which is made up of officials from FAA’s Flight Services Program 

Office, managers from various FAA lines of business, and Lockheed Martin; 

serves as the primary managerial oversight board and reviews contractually 

mandated financial and operational reports for outsourced flight service 

activities. 

• Included 21 performance measures in the contract, which range from 

operational efficiency to customer service, by which Lockheed Martin is 

evaluated against. Lockheed Martin can earn up to $10 million annually in 

bonuses for meeting an acceptable performance level (APL) associated with 

each measure but can also be financially penalized for not meeting an APL. 

Exhibit C lists the 21 performance measures and the associated APLs. 

The Lockheed Martin Project Manager for Flight Service Stations stated that 

the contractor is having difficulties with meeting certain performance 

measures, specifically with processing pilot reports within the contractually 
Findings 

2

required time. According to FAA managers, some performance measures may 

be modified in the future. Both FAA and Lockheed Martin are still trying to 

come to a mutual agreement on scoring and collecting data for some 

performance measures. 

We also found that the controls implemented by FAA are being utilized, and, in 

some cases, FAA has penalized the contractor for poor performance. For 

example, during fiscal year (FY) 2006, FAA determined that Lockheed Martin 

failed five of the contractual performance measures, either during a quarter or for 

the year, resulting in $8.9 million in financial penalties being assessed against the 

contractor. The contractor also submitted corrective action plans to resolve other 

performance measures that were cited as deficient. 

In addition, FAA’s Air Traffic Organization Office of Finance completed an 

internal review of the flight services transition in May 2006 and recommended, 

among other things, that FAA conduct an assessment of the cost baseline used, 

update projected cost savings, and ensure that the quality assurance branch has 

sufficient resources to adequately validate contract performance levels. FAA is in 

the process of addressing those recommendations. 

Existing Controls May Not Be Sufficient To Ensure That Anticipated 

Savings Are Achieved During the Next and Most Critical Phase of the 

Transition 

It is uncertain whether the controls implemented by FAA will be sufficient to 

ensure that anticipated savings are achieved as Lockheed Martin begins the next 

and most critical phase of the transition. Starting in February, Lockheed Martin 

began consolidating the existing 58 sites into 3 hub and 16 refurbished locations 

and testing FS-21, the new software operating system for flight service stations. 

In addition, FAA will install digital communication lines to support the FS-21 

system. All of this is to occur within a 6-month timeframe, which is scheduled to 

end in July 2007. 

There are significant risks associated with this phase of the transition; any slips in 

this schedule could have significant implications to the costs and anticipated 

savings of the transition. One critical tool that will assist FAA in monitoring this 

transition—a variance report comparing actual first year costs to estimates—was 

only recently completed. 
Findings 

3

FAA and the Contractor Are Facing an Extremely Aggressive Schedule for 

Consolidating Locations 

FAA and Lockheed Martin plan on completing remaining aspects of the 

outsourcing by October 2007. However, the bulk of this work will occur during a 

6-month timeframe (February 2007 through July 2007). This includes beginning 

operations at the new hub facilities, temporarily closing and refurbishing the 

16 continuing sites, permanently closing 42 sites, installing and testing FS-21 

equipment and software, and training flight specialists on new flight service areas 

and FS-21. 

The contractor has already made adjustments to the consolidation schedule. 

According to Lockheed Martin officials, while the Leesburg, Virginia, hub opened 

in February 2007, the contractor switched the first facility entering the hub from 

the Leesburg Flight Service Station to the Anniston, Alabama, Flight Service 

Station, which is smaller and less complex and is therefore a lower risk to the 

consolidation plan. The Leesburg facility is now scheduled to be consolidated into 

the new hub this month. 

A delay in the hubs becoming fully operational could prove especially costly since 

they must be operational before the facilities that are slated to close can cease 

operations. The hubs are also where much of the training on FS-21 and the new 

airspace responsibilities will occur. Table 1 shows the current schedule for 

consolidating sites during the next phase of the transition. 
Findings 

4

Table 1. Planned Consolidation Schedule 

EASTERN CENTRAL WESTERN 

SITE CEASE 

OPS 

REOPEN SITE CEASE 

OPS 

RE-OPEN SITE CEASE 

OPS 

REOPEN 

Anniston 02/19/07 

Terre Haute 03/12/07 

Altoona 03/26/07 

Nashville 04/02/07 05/14/07 

Buffalo 04/09/07 

Lansing 04/09/07 05/21/07 

Macon 04/16/07 05/28/07 Fort Worth* 04/16/07 04/16/07 Prescott* 04/16/07 04/16/07 

Green Bay 04/23/07 Conroe 04/23/07 Reno 04/23/07 

Raleigh-Durham 04/30/07 06/11/07 Columbia 04/30/07 06/11/07 Oakland 04/30/07 06/11/07 

Leesburg* 05/07/07 05/07/07 

Dayton 05/07/07 Jonesboro 05/07/07 Great Falls 05/07/07 

Kankakee 05/14/07 06/25/07 McAlester 05/14/07 Denver 05/14/07 06/25/07 

Burlington 05/21/07 Albuquerque 05/21/07 07/02/07 Riverside 05/21/07 

St. Petersburg 05/28/07 07/09/07 St. Louis 05/28/07 San Diego 05/28/07 07/09/07 

Anderson 06/04/07 San Angelo 06/04/07 McMinnville 06/04/07 

San Juan 06/11/07 07/23/07 Princeton 06/11/07 07/23/07 Honolulu 06/11/07 07/23/07 

Miami 6/18/07 07/30/07 Columbus 06/18/07 Seattle 06/18/07 07/30/07 

Louisville 06/25/07 Wichita 06/25/07 Hawthorne 06/25/07 

Williamsport 07/02/07 Fort Dodge 07/02/07 Cedar City 07/02/07 

Bridgeport 07/09/07 Grand Forks 07/09/07 Rancho Murieta 07/09/07 

Elkins 07/16/07 Deridder 07/16/07 Casper 07/16/07 

Jackson 07/23/07 Huron 07/23/07 Boise 07/23/07 

Gainesville 07/23/07 

Bangor 07/30/07 

Greenwood 07/30/07 

Cleveland 07/30/07 

Islip NET 12/14/07 

*Co-located AFSS and Hub; Source: Lockheed Martin 
Findings 

5

Consolidation Depends Upon the Contractor Completing and Deploying 

FS-21 

The consolidation is contingent upon having the new flight services operating 

system (FS-21) operational. When completed, FS-21 should allow specialists to 

access weather information, Notices to Airmen, and other locality-specific 

information for any location in the Nation. This capability is limited with the 

existing software. Without the ability to access nationwide information from the 

hubs, Lockheed Martin will not be able to locate specialists to the new facilities or 

re-align geographic responsibilities. 

The contractor anticipates completing, testing, and installing FS-21 at all locations 

by July 2007. However, the current FS-21 schedule already includes a 10-month 

delay from the contractor’s original plan, and, according to FAA, another 6-week 

delay is possible. While representatives from Lockheed Martin have indicated that 

testing is going well and that implementation is thus far on schedule, the software 

testing is a highly complex process. FS-21 must meet FAA’s operational 

requirements set forth in FAA Order 7110 and provide seamless connectivity with 

the rest of the National Airspace System. Further delays in installing FS-21 could 

have a cascading effect on consolidation plans. 

FS-21 Depends Upon FAA Installing Digital Connections at Flight Service 

Stations 

FS-21 requires digital capabilities and, per terms of the contract, must interface 

with FAA’s Telecommunications Infrastructure Network. To meet this 

requirement, FAA plans on installing digital connections between the Lockheed 

Martin hub facilities and the closing and continuing flight service stations. While 

FAA has begun installing the digital connections, one FAA official noted that, 

based on the current schedule, there are only about 75 days between when the 

digital connections are installed and when operations at closing and continuing 

flight service stations are cut over. Given the tight timeframe, any delays or 

problems with the installation of these connections could hamper testing and 

operation of FS-21, possibly delaying the transition and increasing contractual 

costs. 

Because of the series of risks associated with the next phase of the transition, we 

are recommending that FAA provide our office with an update on the status of the 

transition through the end of April 2007, which would be the mid-point of the 

transition. That update should include at a minimum the implementation status of 

FS-21 and the FTI digital connections, the operational status of the three hub sites, 

the number of facilities closed, and the number of sites refurbished. We will 

continue reviewing this issue and report on it again later this year. 
Findings 

6

Delays Could Result in Additional Costs That Could Be Borne by the 

Contractor, FAA, or Both Parties 

Any delays during the transition could result in additional costs to FAA and a 

reduction in its estimated cost savings. However, the Agency’s responsibility for 

these costs is unclear. Under terms of the contract, during the transition period, 

the Government is responsible for costs associated with non-mandatory, 

Government Furnished Property (e.g., certain legacy systems and equipment). In 

October 2007, that responsibility shifts to Lockheed Martin with the exception of 

Government Furnished Property specifically noted as mandatory in the contract, 

which consists primarily of remote radios and telecommunications. 

Although FAA has structured the contract to provide Lockheed Martin with a 

strong incentive to control costs, there are several factors that could increase the 

Agency’s costs. First, FAA and Lockheed Martin have agreed to share cost 

savings underruns should the contractor’s billable costs be less than the agreedupon level or cost overruns should the contractor’s billable costs exceed the 

agreed-upon level. If the billable costs are higher, FAA would be responsible for 

some of those costs. Also, the cost implications of any delays to the planned 

consolidation are based on several variables, including the timing of the delay, the 

party responsible, and the specific items impacted by the delay. If a delay is 

caused by FAA’s actions, it could result in adjustments to the contract that could 

increase Agency costs and reduce potential savings. 

FAA is already facing potential additional reductions to its cost savings. 

Lockheed Martin is requesting nearly $177 million in equitable adjustments to the 

contract. Most of this adjustment ($147 million) is based on the contractor’s claim 

that it was not provided with the correct labor rates when it submitted its bid. 

Lockheed Martin is claiming that the actual wage rates for flight service specialists 

are significantly higher than what FAA instructed bidders to assume and that FAA 

knew, or should have known, that the rates were higher than what the company 

proposed. 

In conjunction with its equitable adjustment request, Lockheed Martin appealed 

the wage rates for flight service specialists to the Department of Labor. The 

Department of Labor issued its findings related to the wage dispute in September 

2006, in which it proposed a three-tier wage system. FAA has appealed parts of 

that finding, and the issue is not yet resolved. 

The remaining $30 million is related to FAA’s software and interface 

requirements. Lockheed Martin claims that FAA did not provide the 

documentation in sufficient time to develop the software needed for interfacing 

with its air traffic system and telecommunications systems. FAA is analyzing 
Findings 

7

Lockheed Martin’s claims regarding this issue, but no final determination has been 

made. 

One Critical Tool—a Variance Report Comparing Actual First Year Costs 

to Estimates—Was Only Recently Completed 

One critical tool that could assist FAA in monitoring the next phase of the 

transition—a variance report comparing first year actual costs to estimates—was 

only recently completed. This tool will allow FAA to identify cost overruns, 

determine the reasons for the overruns, and allow for adjustment to ensure that 

savings are realized. Since we issued our draft report on March 28, 2007, FAA 

subsequently provided us with a copy of its variance report on April 10, 2007. We 

are reviewing the variance report and will report on it later this year. 

The variance report is important because it will provide FAA management with its 

first opportunity to evaluate its projections for the Flight Services Program in areas 

such as operational costs, technical operations, and actual savings. Now that the 

first variance report is complete, FAA plans to update it on a quarterly basis. We 

are requesting that FAA provide summarized results of those reports to our office. 

FAA Needs To Clarify Its Savings Estimates 

FAA originally estimated that it would save $2.2 billion from outsourcing its flight 

service activities over the 10-year life of the contract. However, FAA has also 

reported that savings over the 10-year life of the contract would be $1.7 billion. 

According to the Director of the Flight Services Program Office, the difference 

between the two estimates is that FAA’s original cost savings estimate included 

approximately $500 million in cost avoidances. Those cost avoidances were 

associated with not hiring additional flight specialists during the A-76 competition 

in 2003 in anticipation of consolidating facilities, irrespective of whether services 

would be operated by FAA or a contractor. 

We came to the same conclusion in our 2001 report on flight service stations.1

 In 

that report, we recommended that FAA consolidate its 61 flight service stations (at 

the time of our review) into 25 locations while continuing to operate them. We 

also estimated that FAA would likewise save approximately $500 million through 

attrition and reductions in overhead and acquisition costs as a result of 

consolidation. In its response to our recommendation, FAA went one step further 

by proposing the A-76 study. 

 

1

 OIG Report Number AV-2002-064, “Automated Flight Service Stations: Significant Benefits Could Be Realized by 

Consolidating AFSS Sites in Conjunction With Deployment of OASIS,” December 7, 2001. OIG reports can be 

found on our website: www.oig.dot.gov. 
Findings 

8

We believe that the $1.7 billion cost savings estimate is a more accurate 

representation of the actual savings of the contract. The decision not to replace 

departing specialists was made prior to the contract with Lockheed Martin, and the 

associated savings would have been achieved even if FAA continued to operate 

the flight service stations instead of outsourcing the services. Accordingly, we 

believe that FAA needs to clarify its savings estimates. 

Better Controls Are Needed To Ensure That Operational Needs of 

Users Continue To Be Met 

Improvements are needed to ensure that the operational needs of users continue to 

be met. We found that staffing levels at outsourced facilities were lower than 

what the contractor anticipated, resulting in some users being routed to adjacent 

facilities that did not have adequate local knowledge needed by those users. This 

issue should be corrected when the consolidation is complete and FS-21 is 

implemented at all continuing and hub locations. FAA also needs to monitor 

contractor staffing and plans for ensuring that flight service specialists are 

properly trained and certified to meet user demand. In addition, FAA does not 

have a system for monitoring customer service that is independent of the 

contractor. Such a system is important to independently verify the quality and 

level of services provided during this transition and after consolidation. 

Staffing Levels at Existing Flight Service Stations Have Been Lower Than 

What the Contractor Anticipated 

According to Lockheed Martin figures, overall staffing at flight service stations 

dropped from 1,841 employees in October 2005 to 1,603 employees in January 

2007, a reduction of nearly 13 percent. While some reduction was foreseen, 

officials from Lockheed Martin indicated that the actual attrition rates exceeded 

their original estimates and that they were experiencing staffing shortages at both 

facilities that are scheduled to be closed as well as facilities that are scheduled to 

remain open. 

For example, overall facility staffing at the Bridgeport, Connecticut, Flight Service 

Station—which is scheduled to close—dropped from 35 employees in October 

2005 to 22 in January 2007. At the Miami, Florida, Flight Service Station—which 

is scheduled to continue operations—overall staffing dropped from 73 in October 

2005 to 61 in January 2007. According to Lockheed Martin officials, specialists 

departing from a continuing facility are usually replaced but specialists departing a 

facility scheduled to close usually are not. 
Findings 

9

As an Interim Solution, the Contractor Is “Call Off-Loading” to Adjacent 

Facilities, but Specialists Often Do Not Have Local Knowledge Needed by 

Users 

As an interim solution to short-staffed facilities, the contractor is using “call offloading” to satisfy user requests. Call off-loading allows pilot calls to be 

transferred to adjoining flight service stations when the original servicing facility 

becomes too busy or does not have adequate staffing on duty to handle a user’s 

request. This reduces the wait time for services, such as pilot briefings, and 

equalizes work among the flight service stations. Call off-loading was originally 

utilized by FAA in southern California and the eastern United States in cases 

where a facility received an inordinate number of requests at the same time. The 

contractor has since expanded call off-loading into a nationwide program. 

Several FAA officials indicated that the use of call off-loading has increased 

significantly since the contract was put in place. In some cases, we found multiple 

facilities that had to adjust their operations in order to cover off-loaded calls from 

short-staffed facilities, which created a cascading effect across the country. 

For example, one flight service facility supervisor noted that calls at the San 

Diego, California, Flight Service Station were off-loaded last summer to the 

Albuquerque, New Mexico, Flight Service Station due to staff shortages. 

However, this overloaded the Albuquerque facility and required Albuquerque’s 

calls to be sent to the Fort Worth, Texas, Flight Service Station and Fort Worth’s 

calls to be transferred to facilities in the east. 

While we found that call off-loading provides users with flight services in a 

timelier manner, some users noted that they do not always receive adequate local 

knowledge when they are off-loaded to an adjacent facility. This issue should be 

corrected when the consolidation is complete and FS-21 is implemented at all 

continuing and hub locations. 

However, we are concerned that any delays in the next phase of transition could 

cause further degradation in services as facilities scheduled to close remain open 

longer than planned and call off-loading is used more and more often as a stop-gap 

measure to short staffing. This could be even more pronounced if attrition among 

flight specialists continues to increase. In our opinion, Lockheed Martin needs to 

develop contingency plans to ensure that services meet user needs should there be 

delays in consolidation during the next phase of the transition. Those plans should 

be reviewed by FAA for feasibility. Since we issued our draft report, FAA has 

required the contractor to establish contingency plans to maintain the quality and 

quantity of services to meet user demands. We will continue reviewing this issue 

and report on it again later this year. 
Findings 

10

FAA Needs To Develop an Oversight Plan That Monitors the Contractor’s 

Staffing and Plans for Ensuring That Specialists Are Properly Trained and 

Certified in Areas That Meet User Demand 

Lockheed Martin has developed a strategy for monitoring staffing at its facilities, 

which includes utilizing a workforce management system that will track flight 

specialist staffing and monitor workloads at individual flight service facilities. By 

tracking staffing and workload figures, the system will allow the contractor to 

identify staff shortages at individual facilities. The system will also let Lockheed 

Martin identify facilities with higher levels of users or seasonal shifts in traffic, 

allowing it to adjust staffing and training procedures. However, the system is still 

in developmental stages. 

While FAA is aware of Lockheed Martin’s staffing and training procedures, it 

does not have a formal system in place to monitor the contractor’s efforts in this 

area. Since the workforce management system will represent another new system 

implemented by Lockheed Martin and will still be in developmental stages during 

the next phase of the transition, we believe that FAA needs to improve its 

oversight of the contractor staffing plans to ensure that users of flight service 

stations continue to receive the local knowledge they are accustomed to. This 

includes developing procedures for monitoring the contractor’s actual staffing, 

staffing plan, and training efforts to ensure that specialists are trained and certified 

in the areas that will meet users’ demands. 

FAA Needs To Develop an Independent Customer Service Monitoring 

Process To Verify the Quality and Level of Services Provided by the 

Contractor 

FAA relies on the following two external sources for customer feedback and 

complaints regarding flight service stations. 

Contractor’s Flight Service Website: Lockheed Martin has a portal on its 

website that allows users to make comments and complaints regarding flight 

services. Complaints are then forwarded by Lockheed Martin to FAA for review. 

FAA’s flight services website also includes a link to this portal, but the process 

relies on Lockheed Martin to provide customer comments on its own performance 

to FAA for evaluation. FAA does not have an independent means for receiving 

feedback regarding Lockheed Martin’s performance. 

User Group Discussions: Although FAA holds discussions with user groups 

regarding flight service operations and receives complaints collected by the 

Aircraft Owners and Pilots Association (AOPA), AOPA officials indicated that 

they expect FAA to have its own customer service function that will respond to 
Recommendations 

11

user issues and complaints. However, the Agency does not have its own customer 

service function that is independent of the contractor. 

In our opinion, FAA needs to develop a customer service mechanism independent 

from Lockheed Martin for users to address concerns regarding contracted flight 

services. This is necessary so that FAA can unilaterally determine if user needs 

are being adequately met under contract operations. Since we issued our draft 

report, FAA established a website link (independent of the contractor) for 

monitoring customer service. 

RECOMMENDATIONS 

We recommend that FAA: 

1. Provide our office with an update on the status of the next phase of the 

transition through the end of April 2007. That update should include at a 

minimum the implementation status of FS-21 and the FTI digital connections, 

the operational status of the three hub sites, the number of facilities closed, 

and the number of sites refurbished. 

2. Ensure that Lockheed Martin has appropriate and feasible contingency plans 

to maintain the quality and quantity of services to meet user demands should 

there be delays in consolidation during the next phase of the transition. 

3. Develop and implement management controls for monitoring contractor 

staffing plans to ensure that there are a sufficient number of flight service 

specialists certified in the appropriate service areas to adequately meet user 

demand. 

4. Develop a means for monitoring customer service that is independent of the 

contractor in order to autonomously verify the quality and level of services 

provided to users under contract operations. 
Management Comments and OIG Response 

12

MANAGEMENT COMMENTS AND OIG RESPONSE 

We provided FAA with a draft copy of this report on March 28, 2007, for 

comment and requested its response by April 12, 2007. On April 30, 2007, FAA 

provided us with its formal response, which is contained in its entirety in the 

appendix to this report. 

FAA concurred with three of our recommendations—to provide an update on the 

status of the transition through the end of April 2007 (recommendation 1), to 

ensure that the contractor has appropriate and feasible contingency plans in place 

during the transition (recommendation 2), and to develop a means for monitoring 

customer service that is independent of the contractor (recommendation 4). 

We consider recommendation 1 resolved but open pending receipt of FAA’s 

report on the status of the transition. We are closing recommendations 2 and 4 

based on the actions taken by FAA. Specifically, since we issued our draft report, 

FAA has (a) required the contractor to establish contingency plans to maintain the 

quality and quantity of services to meet user demands should there be delays in 

consolidation during the next phase of the transition (recommendation 2) and (b) 

established a website link (independent of the contractor) for monitoring customer 

service (recommendation 4). 

FAA did not concur with recommendation 3, which was to develop and implement 

management controls for monitoring contractor staffing plans to ensure that that 

the contractor has a sufficient number of specialists certified in the appropriate 

service areas. In its response, FAA states that the purpose of some of the 

performance measures included in the contract are to measure whether the 

contractor has sufficient staffing. However, most of the performance measures 

cited by FAA deal with the response time to telephone calls and radio contacts, as 

well as how quickly information is entered into computer systems. For example, 

performance measure 7, cited by FAA in its response, measures the number of 

phone calls answered per day within 20 seconds on connection. 

While these measures may provide some information related to facility staffing 

levels, they do not measure whether the contractor has sufficient specialists 

certified in a particular service area to meet user needs. Each service area has 

unique conditions, such as cross-border flights or restricted flight areas, which are 

most effectively dealt with by specialists who are certified in those specific areas. 

The one performance measure cited by FAA that does deal directly with customer 

satisfaction, a customer satisfaction survey, has not been completed. 
Management Comments and OIG Response 

13

We believe that FAA needs to implement controls such as requiring the contractor 

to submit monthly staffing reports that monitor staffing levels in specific service 

areas to ensure that customers receive services that meet their needs. Accordingly, 

we believe that FAA needs to reconsider its position and we consider this 

recommendation open and unresolved. 

In its response, FAA made additional, specific comments to several points in our 

report. FAA’s comments and our responses are as follows: 

Page 1, third paragraph, first sentence: 

OIG Draft Report: “On February 1, 2005, FAA awarded a 5-year, fixed-price 

incentive contract (with 5 additional option years) to Lockheed Martin....” 

FAA Comment: “The FAA awarded a 5-year contract with a 3-year option period 

followed by a 2-year option period.” 

OIG Response: As we state in our report, the flight services contract is a 5-year 

contract with 5 additional option years—a 3-year option period and a 2-year 

option period. Accordingly, we made no changes to our final report. 

Page 2, second paragraph, first bullet: 

OIG Draft Report: “Consolidating the 58 flight service stations currently in 

operations into 3 new hub and 17 refurbished stand-alone facilities....” 

FAA Comment: “There will be 3 new hub facilities and 16 refurbished standalone facilities.” 

OIG Response: During our review, the status of the Islip facility was uncertain. 

Since we issued our draft report, Lockheed Martin has decided that it will 

consolidate the Islip facility into the Leesburg Hub rather than refurbish it. As a 

result, there will now be 3 new hub facilities and 16 refurbished stand-alone 

facilities once the consolidation is complete. We revised our final report to reflect 

this modification. 

Page 11, second paragraph, third sentence: 

OIG Draft Report: “If the [contractor] billable costs are higher, FAA would be 

responsible for some of those costs.” 

FAA Comment: “While the FAA also shares in any cost overruns, we feel the 

risk here is minimal because of the contract structure that limits this liability to 

15 percent above target cost. Any overruns that occur are most probable in the 

first three years of the contract because of development and implementation costs. 
Management Comments and OIG Response 

14

In these first three years, our liability cap is the 15 percent profit we already have 

budgeted in the contract; so overruns occurring in this timeframe will be borne 

solely by the contractor.” 

OIG Response: We continue to believe that if the contractor billable costs are 

higher, FAA would be responsible for some of these costs. FAA’s comment that 

risk is limited does not change the fact that FAA would be responsible for a 

portion of the additional costs billed by the contractor. Accordingly, we made no 

changes to our final report. 

Page 11, third paragraph, first sentence: 

OIG Draft Report: “One critical tool that could assist FAA in monitoring the 

next phase of the transition—a variance report comparing the first year actual 

costs to estimates—has not been completed.” 

FAA Comment: “The FAA believes the variance report can be a valuable tool to 

assist us in monitoring the costs and savings for the overall program. The first 

period variance report has been completed and has been provided to the OIG 

under separate cover. The fiscal year 2007 year-to-date first quarter cost variance 

report is near finalization. This report will continue to be updated quarterly.” 

OIG Response: The Flight Services Program Office provided the variance report 

to our office on April 10, 2007; this was after we sent our draft report to FAA 

(March 28, 2007). We will address the variance report in the follow-up audit to 

this report. We revised our final report to reflect the change in the status of the 

variance report. 

Page 12, second paragraph, third through fifth sentence: 

OIG Draft Report: “...the decision not to replace departing specialists was made 

prior to the contract with Lockheed Martin, and the savings would have been 

achieved even if FAA continued to operate the flight service stations instead of 

outsourcing the services. In some references made by FAA, this cost avoidance 

has already been removed from its savings estimate. We found that on several 

occasions, FAA is reporting a lower expected savings amount of $1.7 billion 

instead of the original projection of $2.2 billion.” 

FAA Comment: “Expected savings and cost avoidances resulting from the AFSS 

program are $2.2 billion in capital and labor over a 13-year period. The OIG 

report in late 2001 and the A-76 feasibility study conducted in 2002 led to the 

decision to conduct an A-76 competition. For the period of 1991 to 2003 leading 

up to the announcement of the A-76 competition, AFSS staffing declined an 

average of 3.5 percent per year. After the announcement of the A-76 in 2003, 
Management Comments and OIG Response 

15

staffing declines accelerated significantly to over 9 percent a year for the next two 

and one-half years; in fact, the percentage drop from 2004 to 2005 was over 

19 percent. These declines would not have occurred without the actions taken 

because of the A-76 activity. The management strategy to lower AFSS staffing 

and to not replace equipment was made as a result of the decision to perform an A76 competition and the $500 million should be included as part of the cost 

avoidances attributable to the A-76 activity.” 

OIG Response: During our fieldwork, we noted that FAA had reported an 

expected savings amount of $1.7 billion rather than $2.2 billion on several 

occasions. We believe that, when discussing the outsourcing, FAA needs to do a 

better job of differentiating between the savings resulting from the actual 

outsourcing and the total savings associated with the A-76 competition. We 

reiterate that the outsourcing of flight services directly resulted in $1.7 billion in 

savings. The additional $500 million in planned savings from the elimination of 

capital programs and the staffing reduction occurred prior to the outsourcing 

decision and could have been achieved even if FAA continued to operate the flight 

service stations instead of outsourcing the services. Accordingly, we did not 

revise our final report’s conclusion on this issue. 
Exhibit A. Scope and Methodology 

16

EXHIBIT A. SCOPE AND METHODOLOGY 

This performance audit was conducted in accordance with generally accepted 

Government Auditing Standards prescribed by the Comptroller General of the 

United States and included such tests as we considered necessary to provide 

reasonable assurance of detecting abuse or illegal acts. We conducted this review 

between May 2006 and March 2007. The review included site visits to six 

existing flight service stations, three Lockheed Martin hub flight service stations, 

two Lockheed Martin division offices, FAA Headquarters, and two FAA Regional 

offices.

To determine whether FAA has sufficient controls and plans in place to transition 

flight service stations to contract operations, we interviewed officials from FAA’s 

Office of Flight Services, FAA’s Safety Evaluations Office, and Lockheed Martin. 

We also reviewed the FAA and Lockheed Martin flight service contract, including 

the 21 performance measures and APLs associated with each measure, and the 

FAA and Lockheed Martin schedules, timetables, and transition plans for flight 

service transition and consolidation. We visited six operating flight service 

stations and the three Lockheed Martin hub facilities and observed FAA quality 

assurance and safety evaluations at two flight service stations. 

To determine whether FAA has sufficient controls and plans in place to achieve 

anticipated savings, we interviewed officials from FAA’s Office of Flight 

Services, Cost Accounting Standards Division (ABA), Technical Operations, the 

Air Traffic Organization’s Finance Branch, and Lockheed Martin. We reviewed 

FAA’s cost savings estimate and supporting documentation, Agency cost 

accounting data for FY 2006, contractor quarterly cost and budget reports required 

by the flight service contract, and equitable adjustment requests from Lockheed 

Martin. 

To determine whether FAA has sufficient controls and plans in place to ensure 

that the operational needs of users continue to be met, we interviewed officials 

from FAA’s Office of Flight Services and Lockheed Martin; held meetings with 

representatives from labor, aviation-interest, and other user groups; and reviewed 

customer service surveys conducted by AOPA. 
Exhibit B. Locations Visited 

17

EXHIBIT B. LOCATIONS VISITED 

Existing Flight Service Station Facilities: 

• Leesburg, Virginia, Automated Flight Service Station 

• Bridgeport, Connecticut, Automated Flight Service Station 

• Fort Worth, Texas, Automated Flight Service Station 

• Prescott, Arizona, Automated Flight Service Station 

• Cleveland, Ohio, Automated Flight Service Station 

• San Diego, California, Automated Flight Service Station 

Lockheed Martin Hubs and Offices: 

• Lockheed Martin Division Offices (Washington, District of Columbia, and 

Rockville, Maryland) 

• Lockheed Martin’s Leesburg, Virginia (Ashburn), Hub Automated Flight 

Service Station 

• Lockheed Martin’s Fort Worth, Texas, Hub Automated Flight Service Station 

• Lockheed Martin’s Prescott, Arizona, Automated Flight Service Station 

FAA Locations: 

• FAA Headquarters/Program Office 

• ATO Flight Services Western Regional Headquarters 

• ATO En-Route Central Service Area 

We also met with the following industry representatives to obtain their opinions on 

the outsourcing and other issues related to the operation of flight service stations: 

• Aircraft Owners and Pilots Association 

• General Aviation Manufacturers Association 

• National Association of Air Traffic Specialists 

• National Air Traffic Controllers Association 
Exhibit C. Performance Measures 

18

EXHIBIT C. PERFORMANCE MEASURES 

Table 2. Contractual Performance Measures With Acceptable 

Performance Levels 

ID Performance Measures Acceptable 

Performance 

Level (APL) 

Transition 

Acceptable 

Performance 

Level (APL) EndState

Acceptable 

Performance 

Level (APL) 

End-State Plus 

2 years

Payout 

Frequency 

1 AFSS Customer Satisfaction Rating 84% 90% 95% Annually 

2 Conformity Index Score 85% 85% 90% Annually 

2a Customized Info Services Conformity Index 80% 85% 90% Quarterly 

3 Employee Evaluation Index Score 90% 92% 95% Annually 

4 Number of Operational Errors Not to exceed 2 

per year 

Not to exceed 2 per 

year 

Not to exceed 2 

per year 

Annually 

5 Number of Operational Deviations Not to exceed 6 

per year 

Not to exceed 5 per 

year 

Not to exceed 5 

per year 

Annually 

6 Number of Validated Customer Complaints Less than or 

equal to 1% 

Less than or equal to 

.01% 

Less than or 

equal to .0095% 

Quarterly 

7 Percentage of Calls per Day Answered 

Within 20 Seconds 

80% 92% 98% Quarterly 

8 Percentage of Dropped Calls per Hour Over 

20 Seconds Wait 

Less than or 

equal to 7% 

Less than or equal to 

5% 

Less than or 

equal to 2% 

Quarterly 

9 Percentage of Radio Contacts Acknowledged 

Within 5 Seconds 

80% 90% 95% Quarterly 

10 Percentage of Radio Contacts Service 

Initiated Within 15 Seconds 

85% 90% 90% Quarterly 

11 Percentage of Error-Free Flight Plans Filed 95% 97% 99% Quarterly 

12 Percentage of Domestic Flight Plans Filed 

Within 3 Minutes 

95% 97% 98% Quarterly 

13 Percentage of International Flight Plans Filed 

Within 5 Minutes 

90% 95% 98% Quarterly 

14 Percentage of Urgent Pilot Reports (PIREPs) 

Processed Within 30 Seconds of Receipt 

90% 94% 98% Quarterly 

15 Percentage of PIREPSs Processed Within 30 

Seconds of Receipt 

90% 94% 98% Quarterly 

16 Emergency Services Evaluation Index Score 95% 98% 99% Annually 

17 Percentage of Overdue Aircraft Located Prior 

to Issuance of QALQ 

94% 96% 98% Quarterly 

18 Percentage of Domestic Notice to Airmen 

(NOTAMS) Accepted 

90% 92% 95% Quarterly 

19 Availability of Services Per NAS-SR100 

Per NAS-SR-100 Per NAS-SR-100 Annually 

20 Percentage of Calls per Day Blocked Less than or 

equal to 5% 

Less than or equal to 

3% 

Less than or 

equal to 1% 

Quarterly 
Exhibit D. Major Contributors to This Report 

19

EXHIBIT D. MAJOR CONTRIBUTORS TO THIS REPORT 

THE FOLLOWING INDIVIDUALS CONTRIBUTED TO THIS REPORT.

Name Title 

Dan Raville Program Director 

Susan Bader Project Manager 

Robert Romich Project Manager 

Frank Danielski Senior Auditor 

Christopher Frank Senior Auditor 

Ebonique Poteat Analyst 

Andrea Nossaman Writer-Editor 
Appendix. Agency Comments 

20

APPENDIX. AGENCY COMMENTS 

Federal Aviation 

Administration

Memorandum

Date: April 30, 2007 

To: Robin Hunt, Acting Assistant Inspector General for Aviation and Special Program 

 Audits 

From: Ramesh K. Punwani, Assistant Administrator for Financial Services/CFO 

Prepared by: Anthony Williams, x79000 

Subject: “Draft Report: Controls Over the Federal Aviation Administration’s 

Conversion of Flight Service Stations to Contract Operations “ 

As requested in your memorandum dated March 28, I have attached FAA’s written 

comments to your subject draft report. Included in this attachment is FAA’s position to the 

four recommendations contained in the report. 

Thank you for allowing the agency the opportunity to make comments and to provide the 

specific action taken or planned for each recommendation. If you have any questions, please 

contact Anthony Williams, Budget Policy Division, at (202 267-9000). 

Attachment 
Appendix. Agency Comments 

21

2 

Federal Aviation Administration's (FAA) Response to the

Office of Inspector General's (OIG) Draft Report on

Controls Over the Federal Aviation Administration's Conversions of

Flight Service Stations to Contract Operations

Specific Comments. Our specific comments follow: 

Page 1, third paragraph, first sentence: 

OIG Draft Report: “On February 1,2005, FAA awarded a 5-year, fixed-price incentive 

contract (with 5 additional option years) to Lockheed Martin....” 

FAA Comment: The FAA awarded a 5-year contract with a 3-year option period followed 

by a 2-year option period. 

Page 2, second paragraph, first bullet: 

OIG Draft Report: “Consolidating the 58 flight service stations currently in operation into 3 

new hub facilities and 17 refurbished stand-alone facilities;” 

FAA Comment: There will be 3 new hub facilities and 16 refurbished stand-alone facilities. 

Page 11, second paragraph, third sentence: 

OIG Draft Report: “If the [contractor] billable costs are higher, FAA would be responsible 

for some of those costs.” 

FAA Comment: While the FAA also shares in any cost overruns, we feel the risk here is 

minimal because of the contract structure that limits this liability to 15 percent above target 

cost. Any overruns that occur are most probable in the first three years of the contract 

because of development and implementation costs. In these first three years, our liability cap 

is the 15 percent profit we already have budgeted in the contract; so overruns occurring in 

this 

timeframe will be borne solely by the contractor. 

Page 11, third paragraph, first sentence: 

OIG Draft Report: “One critical tool that could assist FAA in monitoring the next phase of 

the transition—a variance report comparing first year actual costs to estimates—has not been 

completed.” 

FAA Comment: The FAA believes the variance report can be a valuable tool to assist us in 

monitoring the costs and savings for the overall program. The first period variance report has 

been completed and has been provided to the OIG under separate cover. The fiscal year 2007 
Appendix. Agency Comments 

22

3 

year-to-date first quarter cost variance report is near finalization. This report will continue to 

be updated quarterly. 

Page 12, second paragraph, third through fifth sentences: 

OIG Draft Report: “...the decision not to replace departing specialists was made prior to the 

contract with Lockheed Martin, and the savings would have been achieved even if FAA 

continued to operate the fight service stations instead of outsourcing the services. In some 

references made by FAA, this cost avoidance has already been removed from its savings 

estimate. We found that on several occasions, FAA is reporting a lower expected savings 

amount of $1.7 billion instead of the original projection of $2.2 billion.” 

FAA Comment: Expected savings and cost avoidances resulting from the AFSS program are 

$2.2 billion in capital and labor over a 13-year period. The OIG report in late 2001 and the 

A-76 feasibility study conducted in 2002 led to the decision to conduct an A-76 competition. 

For the period of 1991 to 2003 leading up to the announcement of the A-76 competition, 

AFSS staffing declined an average of 3.5 percent a year. After the announcement of the A-76 

in 2003, staffing declines accelerated significantly to over 9 percent a year for the next two 

and one-half years; in fact, the percentage drop from 2004 to 2005 was over 19 percent. 

These declines would not have occurred without the actions taken because of the A-76 

activity. The management strategy to lower AFSS staffing and to not replace equipment was 

made as a result of the decision to perform an A-76 competition and the $500 million should 

be included as part of the cost avoidances attributable to the A-76 activity. 

OIG Recommendations. 

OIG Recommendation: Provide our office with an update on the status of the next phase of 

the transition through the end of April 2007. That update should include at a minimum the 

implementation status of FS-21 and the FTI digital connections, the operational status of the 

three hub sites, the number of facilities closed, and the number of sites refurbished. 

FAA Response: The FAA agrees the schedule to implement FS2 1, install the needed FTI 

circuits, and consolidate legacy AFSSs is aggressive. The FTI office, to date, has a 92 

percent success rate in installing circuits on time and has installed all circuits needed to 

achieve initial operating capability at 33 of the 57 AFSSs. While there was a ten-month 

schedule slip immediately after contract award, Lockheed Martin is meeting the revised 

implementation schedule and has opened the Washington hub and consolidated six AFSSs 

into the hub. The two remaining hubs in Fort Worth and Prescott will open over the next two 

weeks. The FAA will provide the OIG with an update on the transition status through the end 

of April 2007 as requested. 

OIG Recommendation: Ensure that Lockheed Martin has appropriate and feasible 

contingency plans to maintain the quality and quantity of services to meet user demands 

should there be delays in consolidation during the next phase of the transition. 
Appendix. Agency Comments 

23

4 

FAA Response: The Flight Services Program Office (FSPO) has required the contractor 

have in place contingency plans for each facility to ensure the expected service is provided. 

A contingency plan is used for each consolidating site to allow for fallback in the event the 

transition or any piece of the transition to the hub is unsuccessful. These plans are 

coordinated on a site-by-site basis between the contractor and the FAA before each 

consolidation. To date, no fallback has been necessary for any consolidated site. 

OIG Recommendation: Develop and implement management controls for monitoring 

contractor staffing plans to ensure that there are a sufficient number of flight service 

specialists certified in the appropriate service areas to adequately meet user demand. 

FAA Response: The OIG recommends management controls for monitoring contractor 

staffing plans. The purpose, in part, for several of the performance measures and associated 

acceptable performance levels (APL) is to measure whether the contractor has sufficient 

staffing. The contractor must submit corrective action plans (CAP) when one or more of 

these APLs are not achieved. The FAA monitors the actions taken as a result of the CAP and 

may assess monetary credits if the APLs are not met. These APLs are 1, 6- 10, 12-14, and 

generally deal with maximum times allowed to perform a service. 

OIG Recommendation: Develop a means for monitoring customer service that is 

independent of the contractor in order to autonomously verify the quality and level of 

services provided to users under contract operations. 

FAA Response: The FAA agrees with the recommendation for having a method of 

monitoring customer services independent of the contractor. The FAA has placed a link on 

the FAA homepage directing customers to provide comments on service to 

9-AWA-ATO-SYSOPS-FS@faa.gov. This address is also posted prominently on the FSPO 

Web site. Complaints are validated, researched, and responded to in a timely manner, 

normally within two weeks. The FSPO also has mechanisms in place to independently 

receive and act on feedback from internal units that deal with the contractor, e.g., towers, 

centers, etc. The Safety Services organization within the FAA also evaluates the facilities on 

a regular basis. This action is done independently from the FSPO.
The following pages contain textual versions of the graphs and charts found in this 

document. These pages were not in the original document but have been added here to 

accommodate assistive technology. 
Controls Over the Federal Aviation Administration’s Conversion of Flight Service 

Stations to Contract Operations 

Section 508 Compliant Presentation 

Table 1. Planned Consolidation Schedule 

Schedule for Eastern United States

• The Anniston, Alabama, site is scheduled to cease operations on February 19, 2007. 

• The Terre Haute, Indiana, site is scheduled to cease operations on March 12, 2007. 

• The Altoona, Pennsylvania, site is scheduled to cease operations on March 26, 2007. 

• The Nashville, Tennessee, site is scheduled to cease operations on April 2, 2007. The 

Nashville site is scheduled to re-open on May 14, 2007. 

• The Buffalo, New York, site is scheduled to cease operations on April 9, 2007. 

• The Lansing, Michigan, site is scheduled to cease operations on April 9, 2007. The 

Lansing site is scheduled to re-open on May 21, 2007. 

• The Macon, Georgia, site is scheduled to cease operations on April 16, 2007. The Macon 

site is scheduled to re-open on May 28, 2007. 

• The Green Bay, Wisconsin, site is scheduled to cease operations on April 23, 2007. 

• The Raleigh-Durham, North Carolina, site is scheduled to cease operations on April 30, 

2007. The Raleigh-Durham site is scheduled to re-open on June 11, 2007. 

• The Leesburg, Virginia, site is scheduled to cease operations on May 7, 2007. The 

Leesburg site is scheduled to re-open on May 7, 2007. (This is a co-located AFSS and 

hub.) 

• The Dayton, Ohio, site is scheduled to cease operations on May 7, 2007. 

• The Kankakee, Illinios, site is scheduled to cease operations on May 14, 2007. The 

Kankakee site is scheduled to re-open on June 25, 2007. 

• The Burlington, Vermont, site is scheduled to cease operations on May 21, 2007. 

• The St. Petersburg, Florida, site is scheduled to cease operations on May 28, 2007. The 

St. Petersburg site is scheduled to re-open on July 9, 2007. 

• The Anderson, South Carolina, site is scheduled to cease operations on June 4, 2007. 

• The San Juan, Puerto Rico, site is scheduled to cease operations on June 11, 2007. The 

San Juan site is scheduled to re-open on July 23, 2007. 

• The Miami, Florida, site is scheduled to cease operations on June 18, 2007. The Miami 

site is scheduled to re-open on July 30, 2007. 

• The Louisville, Kentucky, site is scheduled to cease operations on June 25, 2007. 

• The Williamsport, Pennsylvania, site is scheduled to cease operations on July 2, 2007. 

• The Bridgeport, Connecticut, site is scheduled to cease operations on July 9, 2007. 

• The Elkins, West Virginia, site is scheduled to cease operations on July 16, 2007. 

• The Jackson, Mississippi, site is scheduled to cease operations on July 23, 2007. 

• The Gainesville, Florida, site is scheduled to cease operations on July 23, 2007. 

• The Bangor, Maine, site is scheduled to cease operations on July 30, 2007. 

• The Greenwood, Maine, site is scheduled to cease operations on July 30, 2007. 

• The Cleveland, Ohio, site is scheduled to cease operations on July 30, 2007. 
• The Islip, New York, site is scheduled to cease operations on NET December 14, 2007. 

Schedule for Central United States

• The Fort Worth, Texas, site is scheduled to cease operations on April 16, 2007. The Fort 

Worth site is scheduled to re-open on April 14, 2007. (This is a co-located AFSS and 

hub.) 

• The Conroe, Texas, site is scheduled to cease operations on April 23, 2007. 

• The Columbia, Missouri, site is scheduled to cease operations on April 30, 2007. The 

Columbia site is scheduled to re-open on June 11, 2007. 

• The Jonesboro, Arkansas, site is scheduled to cease operations on May 7, 2007. 

• The McAlester, Oklahoma, site is scheduled to cease operations on May 14, 2007. 

• The Albuquerque, New Mexico, site is scheduled to cease operations on May 21, 2007. 

The Albuquerque site is scheduled to re-open on July 2, 2007. 

• The St. Louis, Missouri, site is scheduled to cease operations on May 28, 2007. 

• The San Angelo, Texas, site is scheduled to cease operations on June 4, 2007. 

• The Princeton, New Jersey, site is scheduled to cease operations on June 11, 2007. The 

Princeton site is scheduled to re-open on July 23, 2007. 

• The Columbus, Ohio, site is scheduled to cease operations on June 18, 2007. 

• The Wichita, Kansas, site is scheduled to cease operations on June 25, 2007. 

• The Fort Dodge, Iowa, site is scheduled to cease operations on July 2, 2007. 

• The Grand Forks, North Dakota, site is scheduled to cease operations on July 9, 2007. 

• The Deridder, Louisiana, site is scheduled to cease operations on July 16, 2007. 

• The Huron, South Dakota, site is scheduled to cease operations on July 23, 2007. 

Schedule for Western United States

• The Prescott, Arizona, site is scheduled to cease operations on April 16, 2007. The 

Prescott site is scheduled to re-open on April 16, 2007. (This is a co-located AFSS and 

hub.) 

• The Reno, Nevada, site is scheduled to cease operations on April 23, 2007. 

• The Oakland, California, site is scheduled to cease operations on April 30, 2007. The 

Oakland site is scheduled to re-open on June 11, 2007. 

• The Great Falls, Montana, site is scheduled to cease operations on May 7, 2007. 

• The Denver, Colorado, site is scheduled to cease operations on May 14, 2007. The 

Denver site is scheduled to re-open on June 25, 2007. 

• The Riverside, California, site is scheduled to cease operations on May 21, 2007. 

• The San Diego, California, site is scheduled to cease operations on May 28, 2007. The 

San Diego site is scheduled to re-open on July 9, 2007. 

• The McMinnville, Oregon, site is scheduled to cease operations on June 4, 2007. 

• The Honolulu, Hawaii, site is scheduled to cease operations on June 11, 2007. The 

Honolulu site is scheduled to re-open on July 23, 2007. 

• The Seattle, Washington, site is scheduled to cease operations on June 18, 2007. The 

Seattle site is scheduled to re-open on July 30, 2007. 

• The Hawthorne, California, site is scheduled to cease operations on June 25, 2007. 
• The Cedar City, Utah, site is scheduled to cease operations on July 2, 2007. 

• The Rancho Murieta, California, site is scheduled to cease operations on July 9, 2007. 

• The Casper, Wyoming, site is scheduled to cease operations on July 16, 2007. 

• The Boise, Idaho, site is scheduled to cease operations on July 23, 2007. 

Source: Lockheed Martin 

Table 2. Contractual Performance Measures With Acceptable Performance Levels (APL) 

Performance 

Measure 1 

AFSS Customer Satisfaction Rating APL during 

transition: 84% 

APL at end-state: 

90% 

APL at end-state 

plus 2 years: 

95% 

Payout 

Frequency: 

Annually 

Performance 

Measure 2 

Conformity Index Score APL during 

transition: 85% 

APL at end-state: 

85% 

APL at end-state 

plus 2 years: 

90% 

Payout 

Frequency: 

Annually 

Performance 

Measure 2a 

Customized Info Services Conformity 

Index 

APL during 

transition: 80% 

APL at end-state: 

85% 

APL at end-state 

plus 2 years: 

90% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 3 

Employee Evaluation Index Score APL during 

transition: 90% 

APL at end-state: 

92% 

APL at end-state 

plus 2 years: 

95% 

Payout 

Frequency: 

Annually 

Performance 

Measure 4 

Number of Operational Errors APL during 

transition: Not 

to exceed 2 per 

year 

APL at end-state: 

Not to exceed 2 per 

year 

APL at end-state 

plus 2 years: 

Not to exceed 2 

per year 

Payout 

Frequency: 

Annually 

Performance 

Measure 5 

Number of Operational Deviations APL during 

transition: Not 

to exceed 6 per 

year 

APL at end-state: 

Not to exceed 5 per 

year 

APL at end-state 

plus 2 years: 

Not to exceed 5 

per year 

Payout 

Frequency: 

Annually 

Performance 

Measure 6 

Number of Validated Customer 

Complaints 

APL during 

transition: Less 

than or equal to 

1% 

APL at end-state: 

Less than or equal 

to .01% 

APL at end-state 

plus 2 years: 

Less than or 

equal to .0095% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 7 

Percentage of Calls per Day Answered 

Within 20 Seconds 

APL during 

transition: 80% 

APL at end-state: 

92% 

APL at end-state 

plus 2 years: 

98% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 8 

Percentage of Dropped Calls per Hour 

Over 20 Seconds Wait 

APL during 

transition: Less 

than or equal to 

7% 

APL at end-state: 

Less than or equal 

to 5% 

APL at end-state 

plus 2 years: 

Less than or 

equal to 2% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 9 

Percentage of Radio Contacts 

Acknowledged Within 5 Seconds 

APL during 

transition: 80% 

APL at end-state: 

90% 

APL at end-state 

plus 2 years: 

95% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 10 

Percentage of Radio Contacts Service 

Initiated Within 15 Seconds 

APL during 

transition: 85% 

APL at end-state: 

90% 

APL at end-state 

plus 2 years: 

90% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 11 

Percentage of Error-Free Flight Plans 

Filed 

APL during 

transition: 95% 

APL at end-state: 

97% 

APL at end-state 

plus 2 years: 

99% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 12 

Percentage of Domestic Flight Plans 

Filed Within 3 Minutes 

APL during 

transition: 95% 

APL at end-state: 

97% 

APL at end-state 

plus 2 years: 

98% 

Payout 

Frequency: 

Quarterly 
Performance 

Measure 13 

Percentage of International Flight 

Plans Filed Within 5 Minutes 

APL during 

transition: 90% 

APL at end-state: 

95% 

APL at end-state 

plus 2 years: 

98% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 14 

Percentage of Urgent Pilot Reports 

(PIREPs) Processed Within 30 

Seconds of Receipt 

APL during 

transition: 90% 

APL at end-state: 

94% 

APL at end-state 

plus 2 years: 

98% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 15 

Percentage of PIREPSs Processed 

Within 30 Seconds of Receipt 

APL during 

transition: 90% 

APL at end-state: 

94% 

APL at end-state 

plus 2 years: 

98% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 16 

Emergency Services Evaluation Index 

Score 

APL during 

transition: 95% 

APL at end-state: 

98% 

APL at end-state 

plus 2 years: 

99% 

Payout 

Frequency: 

Annually 

Performance 

Measure 17 

Percentage of Overdue Aircraft 

Located Prior to Issuance of QALQ 

APL during 

transition: 94% 

APL at end-state: 

96% 

APL at end-state 

plus 2 years: 

98% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 18 

Percentage of Domestic Notice to 

Airmen (NOTAMS) Accepted 

APL during 

transition: 90% 

APL at end-state: 

92% 

APL at end-state 

plus 2 years: 

95% 

Payout 

Frequency: 

Quarterly 

Performance 

Measure 19 

Availability of Services APL during 

transition: Per 

NAS-SR-100 

APL at end-state: 

Per NAS-SR-100 

APL at end-state 

plus 2 years: Per 

NAS-SR-100 

Payout 

Frequency: 

Annually 

Performance 

Measure 20 

Percentage of Calls per Day Blocked APL during 

transition: Less 

than or equal to 

5% 

APL at end-state: 

Less than or equal 

to 3% 

APL at end-state 

plus 2 years: 

Less than or 

equal to 1% 

Payout 

Frequency: 

Quarterly