United States Government Accountability Office

GAO Report to Congressional Committees

TRANSPORTATION 

SECURITY 

ADMINISTRATION 

Oversight of Explosive 

Detection Systems 

Maintenance 

Contracts Can Be 

Strengthened 

July 2006 

GAO-06-795 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

July 2006

TRANSPORTATION SECURITY 

ADMINISTRATION 

Oversight of Explosive Detection 

Systems Maintenance Contracts Can Be 

Strengthened 

Highlights of GAO-06-795, a report to 

Congressional Committees 

Mandated to screen all checked 

baggage by using explosive 

detection systems at airports by 

December 31, 2003, the 

Transportation Security

Administration (TSA) has deployed

two types of screening equipment:

explosive detection systems (EDS), 

which use computer-aided 

tomography X-rays to recognize

explosives, and explosive trace 

detection (ETD) systems, which 

use chemical analysis to detect

explosive residues. This report 

discusses (1) EDS and ETD 

maintenance costs, (2) factors that

played a role in these costs, and (3) 

the extent to which TSA conducts

oversight of maintenance 

contracts. GAO reviewed TSA’s 

contract files and processes for

reviewing contractor cost and 

performance data. 

What GAO Recommends

GAO recommends that the

Secretary of Homeland Security

direct TSA to (1) establish a 

timeline to close out the contract

with Boeing Service Company 

(Boeing) and report to

congressional committees on 

actions to recover any excessive 

fees awarded to Boeing, (2)

establish a timeline to complete the

EDS life-cycle model, and (3) revise 

policies to require documentation 

for monitoring EDS and ETD 

maintenance contracts. The

Department of Homeland Security

concurred with GAO’s 

recommendations and described

actions TSA had taken or planned

to take to implement them. 

TSA obligated almost $470 million from fiscal years 2002 through 2005 for 

EDS and ETD maintenance, according to TSA budget documents. In fiscal 

year 2006, TSA estimates it will spend $199 million and has projected it will 

spend $234 million in fiscal year 2007. TSA was not able to provide GAO with

data on the maintenance cost per machine before fiscal year 2005 because, 

according to TSA officials, its previous contract with Boeing to install and 

maintain EDS and ETD machines was not structured to capture these data. 

Several factors have played a role in EDS and ETD maintenance costs. 

According to a September 2004 Department of Homeland Security’s Office of 

Inspector General report, TSA did not follow sound contracting practices in 

administering the contract with Boeing, and TSA paid provisional award fees 

totaling $44 million through December 2003 without any evaluation of 

Boeing’s performance. TSA agreed to recover any excessive award fees paid 

to Boeing if TSA determined that such fees were not warranted. In 

responding to our draft report, DHS told us that TSA and Boeing had 

reached an agreement in principle on this matter and that documentation 

was in the approval process with closure anticipated in July 2006. Moreover,

TSA did not develop life-cycle cost models before any of the maintenance 

contracts were executed and, as a result, TSA does not have a sound 

estimate of maintenance costs for all the years the machines are expected to

be in operation. DHS also stated in its comments on our draft report that a 

TSA contractor expected to complete a prototype life-cycle cost model by 

September 2006 and that TSA anticipated that the EDS model would be 

completed 12 months after the prototype was approved. Without such an 

analysis, TSA may not be identifying cost efficiencies and making informed 

procurement decisions on future purchases of EDS and ETD machines and 

maintenance contracts. TSA has taken actions to control costs, such as

entering into firm-fixed-price contracts for maintenance starting in March 

2005, which have advantages to the government because price certainty is 

guaranteed. Further, TSA incorporated standard performance requirements 

in the contracts including metrics related to machine reliability and monthly 

performance reviews. For EDS contractors, TSA has specified that the full 

agreed price would be paid only if mean downtime (i.e., the number of hours 

a machine is out of service in a month divided by the number of times that 

machine is out of service per month) requirements are met. 

Although TSA has policies for monitoring contracts, TSA officials provided 

no evidence that they are reviewing required contractor-submitted 

performance data, such as mean downtime data. TSA officials told GAO that 

they perform such reviews, but do not document their activities because

there are no TSA policies and procedures requiring them to do so. As a 

result, without adequate documentation, TSA does not have reasonable 

assurance that contractors are performing as required and that full payment 

is justified based on meeting mean downtime requirements. 

www.gao.gov/cgi-bin/getrpt?GAO-06-795.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Cathleen A. 

Berrick at (202) 512-8777 or

berrickc@gao.gov. 
Contents 

Letter 1

Results in Brief 3

Background 6

Results 8

Conclusions 14

Recommendations 15

Agency Comments and Our Evaluation 15 

Appendix I Information for Congressional Committees 17 

Appendix II Agency Comments 47 

Appendix III GAO Contact and Staff Acknowledgements 51 

Tables 

Table 1: Number of EDS and ETD Machines and Annual PerMachine Maintenance Cost, Fiscal Year 2005 and Fiscal 

Year 2006 9 

Table 2: Mean Downtime Requirement for EDS Contractors, 2005 

through 2009 12 

Figure 

Figure 1: EDS and ETD Machines Used by TSA to Screen Checked 

Baggage 7

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Page i GAO-06-795 TSA EDS Maintenance Costs
United States Government Accountability Office

Washington, DC 20548 

July 31, 2006

The Honorable Judd Gregg 

Chairman 

The Honorable Robert C. Byrd 

Ranking Member 

Subcommittee on Homeland Security 

Committee on Appropriations 

United States Senate 

The Honorable Harold Rogers 

Chairman 

The Honorable Martin Olav Sabo 

Ranking Member 

Subcommittee on Homeland Security 

Committee on Appropriations 

House of Representatives 

After the terrorist attacks of September 11, 2001, which highlighted the

vulnerability of U.S. aircraft to acts of terrorism, Congress passed and the 

President signed into law the Aviation and Transportation Security Act 

(ATSA), mandating, among other things, that all checked baggage at U.S. 

airports be screened using explosive detection systems by December 31, 

2002.

1

 To meet this requirement, the Transportation Security 

Administration (TSA) deployed two types of equipment to screen checked

baggage for explosives: (1) explosive detection systems (EDS) that use 

specialized X-rays to detect characteristics of explosives that may be 

contained in baggage as it moves along a conveyor belt and (2) explosive 

trace detection (ETD) machines, whereby an individual (i.e., a baggage 

screener, or transportation security officer) swabs baggage and then 

 1

Aviation and Transportation Security Act, Pub. L. No. 107-71, § 110(b), 115 Stat. 597, 615

(2001). Section 425 of the subsequently enacted Homeland Security Act of 2002, Pub. L. No. 

107-296, 116 Stat. 2135, 2185-86, in effect, extended this mandate to December 31, 2003. See

49 U.S.C. § 44901(d). 

Page 1 GAO-06-795 TSA EDS Maintenance Costs
inserts the swab into the ETD machine, which in turn can detect chemical

residues that may indicate the presence of explosives within a bag.2

Pursuant to ATSA, TSA assumed operational responsibility for conducting 

the screening of checked baggage, which includes the procurement, 

installation, and maintenance of EDS and ETD machines. By the end of 

fiscal year 2006, TSA will have deployed over 1,400 EDS and 6,600 ETD 

machines at baggage-screening locations in over 400 airports nationwide, 

according to TSA budget documents. TSA has used contractors to perform 

preventative and corrective maintenance on these EDS and ETD 

machines. 

House Conference Report 109-241, which accompanied the Department of 

Homeland Security Appropriations Act, 2006 (Public Law 109-90) directed

that we report on the reasons for cost increases in maintaining TSA’s 

explosive detection systems, including TSA’s contracting practices that 

may have affected cost increases.3

 With regard to this requirement, on 

April 19, 2006, we provided you with information on the results of our 

review (see app. I), which has been updated as appropriate in this report. 

Subsequently, in May 2006, the House Appropriations Committee stated in

its report accompanying the Department of Homeland Security 

Appropriations Bill for fiscal year 2007 its long-standing concerns about 

the increasing costs for EDS and ETD maintenance and specifically, TSA’s 

recovery of any excess award fees from a previous EDS and ETD 

contractor.4

 Further, the report stated that TSA should submit a report to 

the House Appropriations Committee on any actions it has taken to collect 

excessive award fees, how much has been received to date, and specific

plans to obligate these collections. 

This report addresses the following questions: 

• What are the historical, current, and projected costs for the 

maintenance of EDS and ETD machines? 

 2

To satisfy the ATSA mandate, TSA interpreted the term explosive detection system to 

include both explosive detection systems (EDS) and explosive trace detection (ETD) 

machines. 

3

 See H.R. Conf. Rep. No. 109-241, at 52 (2005). 

4

Department of Homeland Security Appropriations Act, 2007, H.R. 5441, 109th Cong. (2006); 

H.R. Rep. No. 109-476, tit. II, at 49-50 (2006). 

Page 2 GAO-06-795 TSA EDS Maintenance Costs
• What factors played a role in EDS and ETD maintenance costs, and 

what factors could affect future costs? 

• What has TSA done to control EDS and ETD maintenance costs? 

• To what extent does TSA oversee the performance of EDS and ETD 

maintenance contractors? 

To address our objectives, we reviewed TSA contract files and related cost 

data, TSA processes for reviewing contract performance data, budget 

documents for fiscal years 2003 through 2007, acquisition and strategic 

plans, a Department of Homeland Security’s Office of the Inspector 

General (DHS OIG) report,5

 GAO standards for internal controls,6 and our 

previous work on TSA’s acquisition function.7

 We interviewed TSA 

headquarters officials, DHS OIG officials, and EDS and ETD contractor 

representatives. For purposes of our review, we focused on amounts 

obligated under contracts to maintain the machines. We did not review 

TSA’s negotiations for maintenance services or the process for awarding 

contracts. Nor did we assess other direct or indirect costs that may have 

been related to TSA or DHS employees engaged in contract administration 

or other related items. 

We performed our work from January 2006 through July 2006 in 

accordance with generally accepted government auditing standards. 

According to TSA budget documents, TSA obligated almost $470 million 

from fiscal year 2002 through fiscal year 2005 for EDS and ETD 

maintenance. In fiscal year 2006, TSA estimates it will spend $199 million 

Results in Brief 

 5

U.S. Department of Homeland Security, Office of Inspector General, Evaluation of TSA’s 

Contract for the Installation and Maintenance of Explosive Detection Equipment at

United States Airports, OIG-04-44 (Washington, D.C.: September 2004). 

6

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 

(Washington, D.C.: November 1999). 

7

GAO, Transportation Security Administration: High-Level Attention Needed to 

Strengthen Acquisition Function, GAO-04-544 (Washington, D.C.: May 2004). 

Page 3 GAO-06-795 TSA EDS Maintenance Costs
and has projected it will spend $234 million in fiscal year 2007.8

 TSA did 

not provide us with projections of EDS and ETD maintenance costs 

beyond 2007. TSA officials told us that future EDS and ETD maintenance 

costs will be influenced by the number, type, quantity, and locations of 

machines necessary to support system configurations at airports and on 

decisions related to the deployment of new technologies and the 

refurbishment of existing equipment, among other things. The current 

contracts have negotiated maintenance prices per machine through March 

2009, if TSA decides to exercise option years in the contracts. 

Different factors played a role in EDS and ETD maintenance costs. 

According to a September 2004 DHS OIG report,9

 TSA did not follow 

sound contracting practices in administering the contract with Boeing 

Service Company (Boeing) that was primarily for the installation and 

maintenance of EDS and ETD machines from June 2002 through March 

2005. According to DHS OIG officials, TSA’s failure to control costs under 

the Boeing contract contributed to increases in maintenance costs. Among

other things, the DHS OIG report stated that TSA has paid provisional 

award fees totaling $44 million through December 2003 without any 

evaluation of Boeing’s performance. In response to the DHS OIG, TSA 

agreed to recover any excessive award fees paid to Boeing, if TSA 

determined that such fees were not warranted. In responding to our draft 

report, DHS told us that TSA and Boeing have reached an agreement in 

principle on this matter and the documentation is in the approval process 

with closure anticipated in July 2006. Moreover, TSA did not develop lifecycle cost estimates before any of the maintenance contracts were 

executed, and, as a result, TSA did not have a sound estimate of 

maintenance costs for all the years the machines are expected to be in 

operation. DHS also stated in its comments on our draft report that a TSA 

contractor expects to complete a prototype life-cycle cost model by 

September 2006 and that TSA anticipated that the EDS model would be 

completed 12 months after the prototype was approved. Without such an 

analysis, TSA may not be identifying cost efficiencies and making 

 8

 Amounts attributed to maintenance also include utility costs, such as electricity, that 

generally amount to less than 10 percent of the overall amount allocated for maintenance

each fiscal year, according to TSA officials. Further, TSA officials told us they could 

provide us with amounts obligated for fiscal years 2005 and 2006, but could not provide us

with the amounts expended for this time period. 

9 OIG-04-44.

Page 4 GAO-06-795 TSA EDS Maintenance Costs
informed procurement decisions on future purchases of EDS and ETD 

machines and maintenance contracts. 

TSA has taken several actions to control EDS and ETD maintenance costs, 

such as entering into firm-fixed-price contracts starting in March 2005, 

which have certain advantages to the government because price certainty

is guaranteed. Also, TSA included several performance requirements in the 

current contracts, including metrics related to machine reliability, 

maintainability, and availability, and specific cost data related to 

maintenance and repair, and required monthly performance reviews. For 

EDS contractors, TSA also incorporated provisions to specify that the full 

agreed price will be paid only if mean downtime requirements10 are met. 

Although TSA has policies for monitoring contracts, TSA officials provided 

no evidence that they are reviewing required contractor-submitted 

performance data, such a mean downtime data. TSA officials told GAO 

that they perform such reviews, but do not document their activities 

because there are not TSA policies and procedures requiring them to do 

so. As a result, without adequate documentation, TSA does not have 

reasonable assurance that contractors are performing as required and that

full payment is justified based on meeting mean downtime requirements. 

We are recommending that the Secretary of Homeland Security direct TSA 

to establish a timeline to close out the Boeing contract and report to 

congressional committees on its actions to recover any excessive fees 

awarded to Boeing; establish a timeline for completing life-cycle cost 

models for EDS, which TSA recently began; and revise policies and 

procedures to require documentation of the monitoring of EDS and ETD 

maintenance contracts to provide reasonable assurance that contractor 

maintenance cost data and performance data are recorded and reported in

accordance with TSA contractual requirements and that self-reported 

contractor mean downtime data are valid, reliable, and justify the full 

payment of the contract amount. 

We provided a draft of this report to DHS for review. DHS, in its written 

comments, concurred with our findings and recommendations and 

 10Mean downtime is a performance requirement in EDS and ETD maintenance contracts. 

Mean downtime is calculated by the number of hours a machine is out of service in a

month divided by the number of times that machine is out of service per month. For

example, if a machine has a total downtime of 50 hours per month and is out of service 5 

times in that month, the MDT would be equal to 50 divided by 5, which is 10 hours. 

Page 5 GAO-06-795 TSA EDS Maintenance Costs
described actions that it has initiated or plans to take to address the issues

identified. For a reprint of DHS’s comments, see appendix II. 

With the passage of the Aviation and Transportation Security Act (ATSA) 

in November 2001, TSA assumed from the Federal Aviation Administration 

(FAA) the majority of the responsibility for civil aviation security, 

including the commercial aviation system.11 ATSA required that TSA 

screen 100 percent of checked baggage using explosive detection systems 

by December 31, 2002. As it became apparent that certain airports would 

not meet the December 2002 deadline, the Homeland Security Act of 2002 

in effect extended the deadline to December 31, 2003, for noncompliant 

airports.12 Under ATSA, TSA is responsible for the procurement, 

installation, and maintenance of explosive detection systems used to 

screen checked baggage for explosives. Airport operators and air carriers 

continued to be responsible for processing and transporting passengers’ 

checked baggage from the check-in counter to the airplane. 

Background 

Explosive detection systems include EDS and ETD machines (fig. 1). EDS 

uses computer-aided tomography X-rays adapted from the medical field to

automatically recognize the characteristic signatures of threat explosives. 

By taking the equivalent of hundreds of X-ray pictures of a bag from 

different angles, EDS examines the objects inside of the baggage to 

identify characteristic signatures of threat explosives. TSA has certified, 

procured, and deployed EDS manufactured by three companies—L-3 

Communications Security and Detection Systems (L-3); General Electric 

InVision, Inc.13 (GE InVision); and Reveal Imaging Technologies, Inc. 

(Reveal). In general, EDS is used for checked baggage screening. ETD 

machines work by detecting vapors and residues of explosives. Human 

operators collect samples by rubbing bags with swabs, which are then 

chemically analyzed in the ETD machine to identify any traces of 

explosive materials. ETD machines are used for both checked baggage and 

passenger carry-on baggage screening. TSA has certified, procured, and 

deployed ETD machines from three manufacturers, Thermo Electron 

Corporation, Smiths Detection, and General Electric Company. 

 11Pub. L. No. 107-71, § 101, 115 Stat. at 597. See 49 U.S.C. § 114(d). 

12Pub. L. No. 107-296, § 425, 116 Stat. at 2185-86. See 49 U.S.C. § 44901(d). 

13 General Electric InVision, Inc. is an entity of General Electric Company. 

Page 6 GAO-06-795 TSA EDS Maintenance Costs
Figure 1: EDS and ETD Machines Used by TSA to Screen Checked Baggage

ETD machine

Uses computerized 

tomography X-rays to 

recognize the 

characteristic signatures

of explosives.

Uses chemical 

analysis to detect 

traces of explosive 

material vapors or 

residues.

Source: GAO.

EDS machine

TSA’s EDS and ETD maintenance contracts provide for preventative and 

corrective maintenance. Preventative maintenance includes scheduled

activities, such as changing filters or cleaning brushes, to increase 

machine reliability and are performed monthly, quarterly, or yearly based

on the contractors’ maintenance schedules. Corrective maintenance 

includes actions performed to restore machines to operating condition 

after failure, such as repairing the conveyer belt mechanism after a bag 

jams the machine. TSA is responsible for EDS and ETD maintenance costs 

after warranties on the machines expire.14

From June 2002 through March 2005, Boeing was the prime contractor 

primarily for the installation and maintenance of EDS and ETD machines 

at over 400 U.S. airports. TSA officials stated that the Boeing contract was 

awarded at a time when TSA was a new agency with many demands and 

extremely tight schedules for meeting numerous congressional mandates 

related to passenger and checked baggage screening. The cost 

reimbursement contract15 entered into with Boeing had been competitively 

bid and contained renewable options through 2007. Boeing subcontracted 

for EDS maintenance through firm-fixed-price contracts16 with the original 

 14A TSA official told us that typical EDS warranties are one year and ETD warranties are

for 2 years. 

15 Cost-reimbursement contracts provide for payment of allowable incurred costs, to the

extent prescribed in the contract. These contracts establish an estimate of total cost for the 

purpose of obligating funds and establishing a ceiling that the contractor may not exceed 

(except at its own risk) without the approval of the contracting officer. 

16 Firm-fixed-price contracts provide for a price that is not subject to any adjustment on the

basis of the contractor’s cost experience in performing the contract. This contract type 

places upon the contractor maximum risk and full responsibility for all costs and resulting 

profit and loss. It provides maximum incentive for the contractor to control costs and 

perform effectively and imposes a minimum administrative burden upon the contracting 

parties. 

Page 7 GAO-06-795 TSA EDS Maintenance Costs
EDS manufacturers, GE InVision and L-3, which performed the 

maintenance on their respective EDS. Boeing subcontracted for ETD 

maintenance through a firm-fixed-price contract with Siemens. Consistent

with language in the fiscal year 2005 House Appropriations Committee 

report and due to TSA’s acknowledgment of Boeing’s failure to control 

costs, TSA received DHS authorization to negotiate new EDS and ETD 

maintenance contracts in January 2005. 

In March 2005, TSA signed firm-fixed-price contracts for EDS and ETD 

maintenance. TSA awarded a competitively bid contract to Siemens to 

provide maintenance for ETD machines. According to TSA, it negotiated 

sole source contracts with L-3 and GE InVision for maintaining their 

respective EDS because they are the original equipment manufacturers 

and owners of the intellectual property rights of their respective EDS. In 

September 2005, TSA awarded a competitively bid firm-fixed-price 

contract to Reveal for both the procurement and maintenance of a 

reduced size EDS. 

TSA obligated almost $470 million from fiscal year 2002 through fiscal year 

2005 for EDS and ETD maintenance, according to TSA budget documents. 

In fiscal year 2006, TSA estimates it will spend $199 million and has 

projected it will spend $234 million in fiscal year 2007.17 According to TSA 

officials, in fiscal year 2004, TSA requested and received approval to 

reprogram about $32 million from another account to EDS/ETD 

maintenance due to higher levels of maintenance costs than expected. 

Similarly, in fiscal year 2005, TSA requested and received approval to 

reprogram $25 million to fund the L-3 contract and to close out the Boeing

contract.18 TSA was not able to provide us with data on the maintenance 

cost per machine before fiscal year 2005 because, according to TSA 

officials, TSA’s previous contract with Boeing to maintain EDS and ETD 

machines was not structured to capture these data. Table 1 identifies the

Results 

 17Amounts attributed to maintenance also include utility costs, such as electricity, that 

generally amount to less than 10 percent of the overall amount allocated for maintenance

each fiscal year, according to TSA officials. Further, TSA officials told us they could 

provide us with amounts obligated for fiscal years 2005 and 2006, but could not provide us

with the amounts expended for this time period. 

18As of April 2006, the Boeing contract had yet to be closed out, according to TSA officials.

Page 8 GAO-06-795 TSA EDS Maintenance Costs
maintenance costs19 by type of EDS and ETD machine for fiscal years 2005 

and 2006. 

Table 1: Number of EDS and ETD Machines and Annual Per-Machine Maintenance Cost, Fiscal Year 2005 and Fiscal Year 2006 

FY 2005aFY 2006 

Type of machine

Number of 

machines Cost per unit

Number of 

machines Cost per unit

EDS 

GE CTX 2500 140 $61,587 151 $ 63,590

GE CTX 5500 512 71,549 547 73,876

GE CTX 9000 172 93,286 231 96,320

L-3 ex6000 508 97,837 550 101,000

Reveal CT-80bn/a n/a 16 n/a

ETD 

Smiths Ionscan 400A 241 10,525 336 10,974

Smiths Ionscan 400AE 5 10,525 6 10,974

Smiths Ionscan 400B 3,038 8,580 3,035 8,946

Thermo EGIS 3000 2 12,899 2 13,526

Thermo EGIS II 425 13,134 545 13,695

GE Iontrack Itemiser-W 2,302 $ 7,727 2,322 $ 8,057

Source: TSA. 

NOTE: Maintenance costs represent the negotiated prices in the maintenance contracts for EDS and

ETD machines. 

a

Fiscal year 2005 per-machine maintenance costs were in effect from March through September 

2005. TSA could not provide per-machine maintenance costs before March 2005. 

b

Reveal’s EDS machines were installed in fiscal year 2006 and were still under the manufacturer’s

warranty. 

TSA did not provide us with projections of EDS and ETD maintenance 

costs beyond 2007. TSA officials told us that future costs will be 

influenced by the number, type, quantity, and locations of machines 

necessary to support system configurations at airports, such as the extent

to which EDS are integrated with airport baggage conveyor systems or are

operated in stand-alone modes. Further, TSA officials told us that future 

EDS and ETD maintenance costs are dependent on decisions related to 

the deployment of new technologies and the refurbishment of existing 

equipment, among other things. The current contracts would have 

 19Represents the negotiated prices for the maintenance of EDS and ETD machines. 

Page 9 GAO-06-795 TSA EDS Maintenance Costs
negotiated maintenance prices per machine through March 2009, if TSA 

decides to exercise option years in the contracts.

We identified different factors that have played a role in costs to date and 

that will influence future maintenance costs for EDS and ETD machines. 

According to a September 2004 DHS OIG report, TSA did not follow sound 

contracting practices in administering the Boeing contract, which was 

primarily for the installation and maintenance of EDS and ETD machines.20

According to DHS OIG officials, TSA’s failure to control costs under the 

Boeing contract, including the lack of sound contracting practices, 

contributed to increases in maintenance costs. Among other things, the 

DHS OIG report stated that TSA had paid provisional award fees totaling 

$44 million through December 2003 without any evaluation of Boeing’s 

performance.21 In response to the DHS OIG, TSA agreed to recover any 

excessive award fees paid to Boeing, if TSA determined that such fees 

were not warranted. In commenting on our draft report in July 2006, DHS 

stated that TSA has conducted a contract reconciliation process to ensure 

that no fees would be paid on costs that exceeded the target due to poor 

contractor performance. Further, DHS stated that TSA and Boeing had

reached an agreement in principle on this matter and that the 

documentation was in the approval process with closure anticipated in

July 2006. In its report accompanying the DHS Appropriations Bill for 

fiscal year 2007, the House Appropriations Committee stated its need for a 

report from TSA on any actions it has taken to collect excessive award 

fees, how much of the fees have been received to date, and specific plans 

to obligate these collections and cited TSA’s plans to use any cost 

recoveries to purchase and install additional EDS. These actions were 

based on the committee’s long-standing concerns about the increasing 

costs for EDS and ETD maintenance.22 In addition to matters related to the 

Boeing contract, TSA officials stated that another factor contributing to 

cost increases were the larger than expected number of machines that 

came out of warranty and their related maintenance costs. According to 

TSA officials, they were not able to determine the cost impact of these 

 20 OIG-04-44. 

21 GAO has identified similar instances of agencies’ failure to properly use incentives in 

making award fees. See GAO, Defense Acquisitions: DOD Has Paid Billions in Award 

and Incentive Fees Regardless of Acquisition Outcomes, GAO-06-66 (Washington D.C.: 

December 2005). 

22 See H.R. Rep. No. 109-479, at 49-50. 

Page 10 GAO-06-795 TSA EDS Maintenance Costs
additional machines because the Boeing contract was not structured to 

provide maintenance costs for individual machines. 

With regard to future EDS and ETD maintenance costs under firm-fixedprice contracts, maintenance costs per machine will increase primarily by 

an annual escalation factor in the contracts that takes into account the 

employment cost index and the consumer price index,23 if TSA decides to 

exercise contract options. In addition, future maintenance costs may be 

affected by a range of factors, including the number of machines deployed

and out of warranty, conditions under which machines operate, contractor

performance requirements, the emergence of new technologies or 

improved equipment, and alternative screening strategies. Lastly, life-cycle

cost estimates were not developed for the Boeing, Siemens, L-3, and GE 

InVision contracts before the maintenance contracts were executed, and, 

as a result, TSA did not have a sound estimate of maintenance costs for all 

the years the machines are expected to be in operation. In August 2005, 

TSA hired a contractor to define parameters for a life-cycle cost model, 

among other things. This contract states that TSA and the contractor will 

work together to ensure that the full scope of work is planned, 

coordinated, and executed according to approved schedules. In

commenting on our draft report in July 2006, DHS stated that the TSA 

contractor estimated completing a prototype life-cycle cost model by 

September 2006. Further, DHS stated that TSA’s evaluation of the 

prototype would begin immediately upon delivery and that full 

implementation of an EDS life-cycle cost model would be completed 

within 12 months after the prototype had been approved. According to a 

TSA official, the life-cycle cost model would be useful in determining 

machine reliability and maintainability and to inform future contract 

negotiations, such as when to replace a machine versus continuing to 

repair it. 

We identified several actions TSA has taken to control EDS and ETD 

maintenance costs. First, TSA entered into firm-fixed-price contracts 

starting in March 2005 with maintenance contractors, which offer TSA 

 23 For EDS contracts, future labor and material costs could not be determined, so TSA 

negotiated an escalation factor to be used to determine pricing for the contract option 

years. For the ETD contracts, TSA determined after a review of cost data, that it would 

apply a 4 percent escalation factor to prices in the contract option years. The employment

cost index is a measure of the change in the cost of labor, free from the influence of

employment shifts among occupations and industries. The consumer price index is a

measure of the average change in prices over time of goods and services purchased by

households. 

Page 11 GAO-06-795 TSA EDS Maintenance Costs
certain advantages over cost reimbursement contracts because price 

certainty is guaranteed for up to 5 years if TSA exercises options to 2009.

Also, TSA included several performance requirements in the Siemens, L-3, 

GE InVision, and Reveal contracts, including the collection of metrics 

related to machine reliability, maintainability, and availability24 and 

required specific cost data related to maintenance and repair. TSA officials 

told us that these data will assist them in monitoring the contractor 

performance as well as informing future contract negotiations for 

equipment and maintenance. These contracts also stipulate that 

maintenance contractors meet monthly with TSA to review all pertinent 

technical schedules and cost aspects of contracts. TSA also incorporated 

provisions in the L-3 and GE InVision contracts to specify that the agreed 

price for maintaining EDS would be paid only if the contractor performs 

within specified mean downtime (MDT) requirements.25 Contractors 

submit monthly invoices for 95 percent of the negotiated contract price for 

the month and then submit a MDT report to justify the additional 5 

percent. Consequently, if the contractor fails to fulfill the MDT 

requirements, it is penalized 5 percent of the negotiated monthly 

maintenance price. As of February 2006, neither GE InVision nor L-3 had 

been penalized for missing their MDT requirements. The allowable MDT is 

lowered from 2005 to subsequent renewable years in the contract, as 

shown in table 2. 

Table 2: Mean Downtime Requirement for EDS Contractors, 2005 through 2009 

2005 2006 2007 2008 2009

24 hours 20 hours 18 hours 14 hours 12 hours

Source: TSA. 

 24 Includes metrics such as mean time between failures (generally the total time a machine

is available to perform its required mission divided by the number of failures over a given 

period of time) and operational availability (generally the percentage of time, during

operational hours, that a machine is available to perform its required mission). Such

reliability, maintainability, and availability data are standard and appropriate performance

requirements for maintenance contracts. 

25As noted in footnote 10, mean downtime is a performance requirement in EDS and ETD 

maintenance contracts. Mean downtime is calculated by the number of hours a machine is 

out of service in a month divided by the number of times that machine is out of service per 

month. For example, if a machine has a total downtime of 50 hours per month and is out of 

service 5 times in that month, the MDT would be equal to 50 divided by 5, which is 10 

hours. 

Page 12 GAO-06-795 TSA EDS Maintenance Costs
With regard to TSA’s oversight of EDS and ETD contractor performance, 

TSA’s acquisition policies26 and GAO standards for internal controls27 call 

for documenting transactions and other significant events, such as 

monitoring contractor activities. The failure of TSA to develop internal 

controls and performance measures has been recognized by other GAO28

and DHS OIG reviews.29 TSA has policies and procedures for monitoring 

its contracts and has included contractor performance requirements in the 

current EDS and ETD maintenance contracts. However, TSA officials 

provided no evidence that they are reviewing maintenance cost data 

provided by the contractor because they are not required to document 

such activities. For example, even though TSA officials told us that they 

are reviewing required contractor data, including actual maintenance costs 

related to labor hours and costs associated with replacing and shipping 

machine parts, they did not have any documentation to support this. TSA 

officials told us that they have begun to capture these data to assist them 

in any future contract negotiations. 

Further, TSA officials provided no evidence that performance data for 

corrective and preventative maintenance required under contracts are 

being reviewed. TSA officials told us that they perform such reviews, but 

do not document their activities since there are no TSA policies or 

procedures requiring them to do so. Therefore, TSA could not provide 

assurance that contractors are complying with contract performance 

requirements. For example, although TSA documents monthly meetings

with contractors to discuss performance data, TSA officials did not 

provide evidence that they independently determine the reliability and 

validity of data required by the contracts, such as mean time between 

failures and mean time to repair, which are important to making informed 

decisions about future purchases of EDS and ETD equipment and their 

associated maintenance costs. Further, TSA officials provided no evidence 

 26 TSA uses the Federal Aviation Administration (FAA) Acquisition Management System 

which, as adopted by TSA, requires contractors to act on contractual quality assurance 

commitments and ensure that government quality and reliability needs are met (FAA 

Acquisition Management Policy 3.10.4.2). 

27 GAO/AIMD-00-21.3.1. 

28 GAO has identified contract surveillance issues in other agencies, such as the 

Department of Defense. See GAO, Contract Management: Opportunities to Improve 

Surveillance on Department of Defense Service Contracts, GAO-05-274 (Washington, D.C.: 

March 2005). 

29 OIG-04-44. 

Page 13 GAO-06-795 TSA EDS Maintenance Costs
that they ensure that contractors are performing scheduled preventative

maintenance. TSA officials told us that they review the contractorsubmitted data to determine whether contractors are fulfilling their 

contractual obligations, but do not document their activities because there 

are no TSA policies or procedures to require such documentation. 

Additionally, for EDS contracts with possible financial penalties, TSA 

officials told us that they review contractor-submitted mean downtime 

data on a monthly basis to determine the reliability and validity of the data

and to determine whether contractors are meeting contract provisions or 

should be penalized. However, TSA officials do not document these 

activities because there are no TSA policies or procedures requiring them 

to do so. As a result, without adequate documentation, there is no 

assurance as to whether or not contractors are meeting contract 

provisions or that TSA has ensured that it is making appropriate payments 

for services provided. 

The cost of maintaining checked baggage-screening equipment has 

increased as more EDS and ETD machines have been deployed and 

warranties expire. TSA’s move in March 2005 to firm-fixed-price 

maintenance contracts for EDS and ETD maintenance was advantageous

to the government in that it helps control present and future maintenance 

costs. Firm-fixed-price contracts also help ensure price certainty and 

therefore are more predictable. However, unresolved issues remain with 

the past contractor, specifically fees awarded to former contractor Boeing

that may have been excessive due to a lack of timely evaluation of the 

contractor’s performance. The House Appropriations Committee has 

expressed concern about these unresolved issues; specifically, what 

actions TSA has taken to recover these excessive fees, and the extent to

which any collections might impact future TSA obligations. Closing out the 

Boeing contract is essential to resolving these issues. In responding to our 

draft report, DHS stated that the completion of an EDS life-cycle cost is 

over a year away. Absent such a life-cycle cost model, TSA may not be

identifying cost efficiencies and making informed procurement decisions 

regarding the future purchase of EDS and ETD machines and maintenance 

contracts. Further, TSA must provide evidence of its reviews and analyses

of contractor-submitted data and perform analyses of contractor data to 

determine the reliability and validity of the data and to provide assurance 

of compliance with contract performance requirements and internal 

control standards. Without stronger oversight, TSA will not have 

reasonable assurance that contractors are performing as required and that

full payment is justified based on meeting mean downtime requirements. 

Conclusions 

Page 14 GAO-06-795 TSA EDS Maintenance Costs
To help improve TSA’s management of EDS and ETD maintenance costs 

and strengthen oversight of contract performance, we recommend that the 

Secretary of Homeland Security instruct the Assistant Secretary, 

Transportation Security Administration, to take the following three 

actions: 

• establish a timeline to complete its evaluation and close out the Boeing 

contract and report to congressional appropriations committees on its 

actions, including any necessary analysis, to address the Department of 

Homeland Security Office of Inspector General’s recommendation to 

recover any excessive fees awarded to Boeing Service Company; 

• establish a timeline for completing life-cycle cost models for EDS, 

which TSA recently began; and 

• revise policies and procedures to require documentation of the 

monitoring of EDS and ETD maintenance contracts to provide 

reasonable assurance that

• contractor maintenance cost data and performance data are 

recorded and reported in accordance with TSA contractual 

requirements and 

• self-reported contractor mean downtime data are valid, reliable, and 

justify the full payment of the contract amount. 

We provided a draft of this report to DHS for its review and comment. On

July 24, 2006, we received written comments on the draft report. DHS, in 

its written comments, concurred with our findings and recommendations, 

and agreed that efforts to implement these recommendations are essential 

to a successful explosive detection systems program. DHS stated that it

has initiated efforts to improve TSA’s management of EDS and ETD 

maintenance costs and strengthen oversight of contract performance. 

Regarding our recommendation that TSA establish a timeline to close out 

the Boeing contact and report to congressional committees on its actions 

to recover any excessive fees, DHS stated that TSA has conducted a 

contract reconciliation process to ensure that no fees would be paid on 

costs that exceeded the target due to poor contractor performance and 

that Boeing and TSA have reached an agreement in principle on this 

matter and the documentation is in the approval process with closure 

anticipated in July 2006. Regarding our recommendation to establish a 

timeline for completing the EDS life-cycle cost model, DHS stated that 

TSA expects to complete its prototype evaluation in September 2006 and 

that the EDS life-cycle cost model will be completed 12 months after the 

prototype has been approved. Regarding our recommendation to revise 

TSA policies and procedures to require documentation of its monitoring of 

Recommendations 

Agency Comments 

and Our Evaluation 

Page 15 GAO-06-795 TSA EDS Maintenance Costs
EDS and ETD maintenance contracts, DHS stated that a TSA contractor is

developing automated tools to perform multiple analyses of contractorsubmitted data that DHS said would allow TSA to accurately and 

efficiently certify the contractors’ performance against their contractual 

requirements and would allow TSA to independently validate and verify 

maintenance and cost data. The department’s comments are reprinted in 

appendix II.

We will send copies of this report to the Secretary of Homeland Security 

and the Assistant Secretary, Transportation Security Administration, and 

interested congressional committees. We will also make copies available 

to others upon request. In addition, the report will be available at no 

charge on GAO’s Web site at http://www.gao.gov. If you or your staffs have 

any questions or need additional information, please contact me at (202) 

512-8777 or berrickc@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Key contributors to this report are acknowledged in 

appendix III. 

Cathleen A. Berrick 

Director, Homeland Security and Justice Issues 

Page 16 GAO-06-795 TSA EDS Maintenance Costs
Appendix I: Information for Congressional Appendix I: Information for Congressional Committees 

Committees 

1

Transportation Security Administration

Explosive Detection Systems

Maintenance Costs

Information for Congressional Committees

April 19, 2006

Page 17 GAO-06-795 TSA EDS Maintenance Costs
Appendix I: Information for Congressional 

Committees 

Page 18 GAO-06-795 

2

Introduction

House Conference Report 109-241—which accompanied the 

Department of Homeland Security Appropriations Act, 2006

(Public Law 109-90)1—directed GAO to report on the reasons

for cost increases in maintaining TSA’s explosive detection

systems,2 including TSA’s related contracting practices. In 

February 2006, a House Appropriations staffer told us that this

information would assist in the committee’s budget

deliberations.

1H.R. Conf. Rep. No. 109-241, at 52 (2005).

2TSA interprets the term explosive detection system to include both explosive detection systems (EDS) and explosive trace detection (ETD) machines.

TSA EDS Maintenance Costs
Appendix I: Information for Congressional 

Committees 

Page 19 GAO-06-795 

3

Objectives

• What are the historical, current, and projected costs for the 

maintenance of explosive detection systems (EDS) and 

explosive trace detection (ETD) machines?

• What factors played a role in EDS and ETD maintenance

costs and what factors could affect future costs?

• What has TSA done to control EDS and ETD maintenance 

costs?

• To what extent does TSA oversee the performance of EDS 

and ETD maintenance contractors? 

TSA EDS Maintenance Costs
Appendix I: Information for Congressional 

Committees 

Page 20 GAO-06-795 

4

Scope and Methodology

• To determine TSA costs to maintain EDS and ETD machines we

• reviewed TSA contract files and budget documents for fiscal years 2003 through 2007, and

• interviewed TSA headquarters officials, Department of Homeland Security Office of the Inspector General 

(DHS OIG) officials, and EDS and ETD contractor representatives. For purposes of our review, we

focused on the amounts obligated under contracts to maintain the machines. We did not review TSA’s 

negotiations for maintenance services or the process for awarding contracts, nor did we assess other 

direct or indirect costs related to TSA or DHS employees engaged in contract administration or other 

related items.

• To determine what factors played a role in maintenance costs and what TSA has done to control costs, we:

• reviewed TSA contract files, acquisition and strategic plans, budget documents, TSA processes for

reviewing contract cost and performance data, and a DHS OIG report;1 and

• interviewed TSA headquarters officials, DHS OIG officials, and EDS and ETD contractor representatives.

• To determine the extent of TSA contract oversight, we:

• reviewed TSA contract files and processes for reviewing contract performance data,

• interviewed TSA headquarters officials and EDS and ETD contractor representatives, and

• reviewed GAO standards for internal controls2 and our previous work on TSA’s acquisition function.

3

• We performed our work from January 2006 through June 2006 in accordance with generally accepted

government auditing standards.

1U.S. Department of Homeland Security, Office of Inspector General, Evaluation of TSA’s Contract for the Installation and Maintenance of Explosive 

Detection Equipment at United States Airports, OIG-04-44 (Washington, D.C.: September 2004). 2GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 3GAO, Transportation Security Administration: High-Level Attention Needed to Strengthen Acquisition Function, GAO-04-544 (Washington, D.C.: May 2004).

TSA EDS Maintenance Costs
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Page 21 GAO-06-795 

5

Results in Brief

• According to TSA budget documents, TSA has obligated almost $470

million from fiscal year 2002 through fiscal year 2005 for EDS and ETD

maintenance. In fiscal year 2006, TSA estimates it will spend $199 million 

and has projected it will spend $234 million in fiscal year 2007.1 

• TSA was unable to provide us data on maintenance cost per machine 

prior to fiscal year 2005 because, according to TSA officials, its 

previous contract with Boeing Service Company (Boeing) to maintain

EDS and ETD machines was not structured to capture these data.

• TSA did not provide us with projections of EDS and ETD maintenance 

costs beyond fiscal year 2007, although TSA has negotiated

maintenance prices per machine through fiscal year 2009. 

1Amounts attributed to maintenance also include utility costs, such as electricity, that generally amount to less than 10 percent of the overall amount

allocated for maintenance each fiscal year, according to TSA officials. Further, TSA officials could provide us with amounts obligated for fiscal years 2005

and 2006, but could not provide us with the amounts expended for this time period.

TSA EDS Maintenance Costs
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Committees 

Page 22 GAO-06-795 

6

Results in Brief

• Different factors have played a role in costs to date and will influence future maintenance costs: 

• According to the DHS OIG, TSA had awarded excessive fees under the Boeing contract,

which ran from June 2002 to March 2005. TSA agreed to recover any excessive fees paid

to Boeing, if TSA determines that such fees are not warranted. However, as of April 2006, 

TSA had not yet completed its evaluation of Boeing’s performance and thus had not yet 

determined if there are any fees to recover. TSA officials stated that they did not know

when TSA would make a final determination on this matter. 

• TSA officials stated that cost increases were due, in part, to the larger than expected

number of machines that came out of warranty.

• Lifecycle cost estimates were not developed for Boeing, or for Siemens Maintenance 

Services (Siemens), L-3 Communications Security and Detection Systems (L-3), and

General Electric InVision, Inc. (GE InVision), which also have maintenance contracts with

TSA. However, in August 2005, TSA contracted for the development of a lifecycle cost

model, including cost estimates, which TSA officials say will assist them in managing future

maintenance costs. In February 2006, the contractor had begun work on the model,

however, TSA did not know when the model would be completed.

TSA EDS Maintenance Costs
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Committees 

Page 23 GAO-06-795 

7

Results in Brief

• TSA’s move to firm fixed price contracting in March 2005 provided

advantages over cost-reimbursement type contracts, such as price 

certainty. Additionally, TSA included performance requirements in

contracts, including financial penalties in some contracts.

• Although TSA has included contractor performance requirements in the 

EDS and ETD maintenance contracts, some oversight issues remain. For 

example, although TSA officials told us that they review the contractorsubmitted data to determine whether contractors are fulfilling their 

contractual obligations, such as mean downtime data, they do not

document their activities because there are no TSA policies or procedures

to require such documentation. As a result, there is no assurance as to 

whether or not contractors are meeting contract provisions or should be 

penalized.

TSA EDS Maintenance Costs
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Committees 

Page 24 GAO-06-795 

8

Results in Brief

• We are making three recommendations to the Secretary of Homeland Security to help improve

TSA’s management of EDS and ETD maintenance costs and oversight of contractor 

performance. We are recommending that:

• TSA report to the congressional appropriations committees on its actions, including any 

necessary analysis, to address the DHS OIG recommendation to recover any excessive

fees awarded to Boeing;

• TSA establish a timeline to complete lifecycle cost models for EDS and ETD machines,

which TSA recently began; and

• TSA revise its polices and procedures to document its monitoring of EDS and ETD 

maintenance contracts to provide reasonable assurance that contractor performance data

are recorded and reported in accordance with TSA contractual requirements and selfreported contractor mean downtime is valid, reliable and justify the full payment of the

contractor amount.

• TSA reviewed these slides in their entirety and provided several technical comments, which we 

incorporated as appropriate.

TSA EDS Maintenance Costs
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Committees 

Page 25 GAO-06-795 

9

Background

• TSA was mandated to screen all checked baggage using explosive 

detection systems at airports by December 31, 2003.1

• Explosive Detection Systems (EDS) use computer-aided 

tomography X-rays to recognize the characteristics of explosives. 

In general, EDS are used for checked baggage screening. 

• Explosive Trace Detection (ETD) machines use chemical analysis 

to detect traces of explosive material vapors or residues. ETD 

machines are used for both passenger carry-on baggage and 

checked baggage screening.

• According to TSA budget documents, TSA will have deployed over 

1,400 EDS and 6,600 ETD machines at baggage screening 

locations in over 400 airports nationwide by the end of fiscal year 

2006.

1The Aviation and Transportation Security Act, Pub. L. No. 107-71 § 110(b), 115 Stat. 597, 615 (2001) mandated, among other things, that all checked baggage at

U.S. airports be screened using explosive detection systems by December 31, 2002. Section 425 of the subsequently enacted Homeland Security Act of 2002,

Pub. L. No. 107-296, 116 Stat. 2135, 2185-86, in effect, extended this mandate to December 31, 2003. See 49 U.S.C. § 44901(d).

TSA EDS Maintenance Costs
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10

Background

• TSA is responsible for the EDS and ETD maintenance costs

after their warranties expire.1

• EDS and ETD maintenance includes preventative 

maintenance—scheduled activities to increase machine

reliability that are performed monthly, quarterly, and yearly 

based on the contractors’ maintenance schedules and 

corrective maintenance—actions performed to restore 

machines to operating condition after failure. 

1A TSA official told us that typical EDS warranties are for one year and that ETD warranties are for 2 years.

TSA EDS Maintenance Costs
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Committees 

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11

Background—TSA Cost Reimbursement 

Contract with Boeing

• From June 2002 through March 2005, Boeing was the prime contractor for the installation and

maintenance of EDS and ETD machines at over 400 U.S. airports. TSA officials stated that the 

Boeing contract was awarded at a time when TSA was a new agency with many demands and 

extremely tight schedules for meeting numerous congressional mandates related to passenger 

and checked baggage screening. Boeing had a cost reimbursement contract

1 with TSA, which

was competitively bid and contained renewable options to 2007.

• Boeing subcontracted EDS maintenance through firm fixed price contracts2 with the original

EDS manufacturers, GE InVision and L-3, which performed maintenance on their 

respective EDSs.

• Boeing subcontracted ETD maintenance through a firm fixed price contract with Siemens.

• Consistent with language in the fiscal year 2005 DHS House Appropriations Committee 

report and due to TSA’s acknowledgment of Boeing’s failure to control costs, TSA received

DHS authorization to negotiate new EDS and ETD maintenance contracts in January 2005.

1Cost reimbursement contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts establish an estimate of total cost for the purpose of

obligating funds and establishing a ceiling that the contractor may not exceed (except at its own risk) without approval of the contracting officer. 2Firm fixed price contracts provide for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. This contract type places upon

the contractor maximum risk and full responsibility for all costs and resulting profit and loss. It provides maximum incentive for the contractor to control costs and perform effectively and

imposes a minimum administrative burden upon the contracting parties.

TSA EDS Maintenance Costs
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12

Background—TSA Firm Fixed Price Contracts 

with Siemens, L-3, and GE InVision

• In March 2005, TSA signed firm fixed price contracts for EDS and ETD

maintenance.

• TSA awarded a competitively bid contract to Siemens to provide maintenance

for ETD machines.

• TSA negotiated sole source contracts with L-3 and GE InVision because they

are the original equipment manufacturers and owners of the intellectual 

property of their respective EDS.

• TSA can exercise 4 1-year options on all three contracts through March 2009.

• In September 2005, TSA awarded a competitively bid firm fixed price contract to

Reveal Imaging Technologies, Inc., (Reveal) for both the procurement and 

maintenance of a reduced-size EDS.

TSA EDS Maintenance Costs
Appendix I: Information for Congressional 

Committees 

Page 29 GAO-06-795 

13

Historical, Current, and Projected Costs for 

EDS and ETD Maintenance

TSA EDS Maintenance Costs
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Committees 

Page 30 GAO-06-795 

14

EDS and ETD Maintenance Costs

• According to TSA budget documents, TSA

has obligated almost $470 million for EDS

and ETD maintenance from fiscal years

2002 through 2005.

• Overall, costs for EDS and ETD 

maintenance grew from $14 million in

fiscal year 2002 to an estimated $199

million in fiscal year 2006. In fiscal year

2007, TSA projects it will spend $234 

million.

• TSA was not able to provide us data on

the maintenance cost per machine prior to 

fiscal year 2005 because, according to

TSA officials, its previous contract with

Boeing to maintain EDS and ETD 

machines was not structured to capture

these data.

• According to TSA officials, in fiscal year

2004, TSA requested and received

approval to reprogram about $32 million 

due to higher levels of maintenance costs

than expected.

• In fiscal year 2005, TSA requested and 

received approval to reprogram $25 million 

to fund the L-3 contract ($16.6 million) and 

to closeout the Boeing contract ($8.4

million), which has yet to be closed.

2007 234

2006 200 199 199 199 b

2005 205 175 5 25 205 195

2004 100 75 61 32 168 168

2003 75 75 25 100 93

2002a 14

Amount

Obligated

Total

available 

ReprogrammedPrior year

carry over

Appropriated

(as revised)

Amount

Requested

Fiscal

year

EDS and ETD Machine Maintenance Budget Amounts, Fiscal Years 2002 through 2007

(In millions)

Source: TSA.

Note: TSA's budgeted amounts for EDS and ETD maintenance include utility costs for the 

operation of the machines. Such costs comprise less than 10 percent of the total amounts

budgeted for maintenance each fiscal year. According to TSA, in fiscal year 2002 and fiscal

year 2003, the amount for utilities was negligible. GAO did not independently verify budget

amounts.

aAccording to TSA officials, in fiscal year 2002, TSA was budgeted approximately $527 million 

for EDS equipment installation and maintenance, of which $14 million was expended for

maintenance. TSA carried forward fiscal year 2002 funding for EDS and ETD maintenance to

fiscal year 2003 and fiscal year 2004.

bFiscal year 2006 obligations are estimated.

TSA EDS Maintenance Costs
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15

EDS and ETD Maintenance Costs

• TSA officials did not provide us with projections of costs

beyond 2007. However, current contracts have negotiated 

maintenance prices per machine through March 2009, if TSA

decides to exercise option years in the contracts.

• Future EDS and ETD maintenance costs depend on 

decisions made as outlined in a February 2006 TSA strategic 

planning framework for screening checked baggage using 

EDS and ETD. Among other things, the plan discusses 

options for the deployment of new technologies and 

refurbishment of existing equipment.

TSA EDS Maintenance Costs
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Page 32 GAO-06-795 

16

Factors That Played a Role in EDS and ETD 

Maintenance Costs

TSA EDS Maintenance Costs
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Committees 

Page 33 GAO-06-795 

17

Factors That Played a Role in Maintenance 

Costs and Could Impact Future Costs

• Different factors have played a role in costs to date and will influence future maintenance costs for EDS 

and ETD machines:

• According to a September 2004 DHS OIG report, TSA did not follow sound contracting practices in 

administering the Boeing contract, which was primarily for the installation and maintenance of EDS and 

ETD machines.1

• Among other things, the DHS OIG found that TSA had paid provisional award fees totaling $44 

million through December 2003 without any evaluation of Boeing’s performance.2

• In response to the DHS OIG, TSA agreed to recover any excessive award fees paid to Boeing if 

TSA determines that such fees are not warranted. However as of April 2006, TSA had not yet 

completed its evaluation of Boeing’s performance and thus had not yet determined if there were

any fees to recover.

• TSA officials told us that they did not know when TSA would make a final determination on this 

matter. 

• TSA officials stated that cost increases were also due to the larger than expected number of machines

that came out of warranty. 

1OIG-04-44. 2GAO has identified similar instances of agencies’ failure to properly use incentives in making award fees. See GAO, Defense Acquisitions: DOD Has Paid Billions in

Award and Incentive Fees Regardless of Acquisition Outcomes, GAO-06-66 (Washington, D.C.: December 2005).

TSA EDS Maintenance Costs
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18

Factors That Played a Role in Maintenance 

Costs and Could Impact Future Costs

• Under the current firm fixed price contracts, if TSA exercises

4 1-year options through March 2009, maintenance costs per

machine would increase primarily by an annual escalation 

factor in the contracts that takes into account the employment

cost index and the consumer price index.

1

1For EDS contracts, future labor and material costs could not be determined, so TSA negotiated an escalation factor to be used to determine pricing for the contract option years. For the ETD

contracts, TSA determined after a review of cost data, that it would apply a 4 percent escalation factor to prices in the contract option years. The employment cost index is a measure of the

change in the cost of labor, free from the influence of employment shifts among occupations and industries. The consumer price index is a measure of the average change in prices over time

of goods and services purchased by households.

TSA EDS Maintenance Costs
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Committees 

Page 35 GAO-06-795 

19

Factors That Played a Role in Maintenance 

Costs and Could Impact Future Costs

• Future maintenance costs will be impacted by a range of factors, including the number of

machines deployed and out of warranty, conditions under which machines operate, mean

downtime requirements, the emergence of new technologies or improved equipment, and

alternative screening strategies.

• TSA’s February 2006 strategic plan framework for screening checked baggage over

the next 20 years discusses factors that may impact future maintenance costs. For

example, the framework discusses the refurbishment of existing machines and the

deployment of new technologies, but does not outline the number of machines or

specific time frames for implementation. Additionally, the impact of these strategies

on future maintenance costs is unknown.1

• If no new equipment or maintenance providers emerge, TSA may pay a premium in

future sole source contracts where intellectual property rights are involved. For

example, because L-3 and GE InVision had intellectual property rights on their

machines, their maintenance contracts were not bid competitively and therefore

prices were not subject to the benefits of market forces. 

1TSA issued its strategic plan framework for screening checked baggage using EDS and ETD machines in response to various

congressional mandates, congressional committee directives, and GAO recommendations.

TSA EDS Maintenance Costs
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20

Factors That Played a Role in Maintenance 

Costs and Could Impact Future Costs

• Lifecycle cost estimates were not developed for the Boeing, 

Siemens, L-3, and GE contracts before the maintenance

contracts were executed and, as a result, TSA did not have a 

complete picture of all maintenance costs. In August 2005,

TSA hired a contractor to define parameters for a lifecycle

cost model. A TSA official told us that the contractor began

work on a lifecycle cost model for EDS in February 2006 and

did not know when the model would be completed.

TSA EDS Maintenance Costs
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21

TSA Actions to Control

EDS and ETD Maintenance Cost Increases

TSA EDS Maintenance Costs
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Committees 

Page 38 GAO-06-795 

22

TSA Actions to Control EDS and ETD

Maintenance Cost Increases

• Firm fixed price contracts starting in

March 2005 offer TSA certain

advantages over cost

reimbursement type contracts:

• Price certainty is guaranteed

for up to five years if TSA

exercises options to 2009.

• Siemens and Reveal

contracts were competitively 

bid, although the GE InVision

and L-3 contracts were sole

source contracts.

• TSA did not provide per-unit 

maintenance costs prior to March

2005 because the Boeing contract 

was not structured to capture these 

data.

Number of EDS and ETD Machines and Annual Per Machine Maintenance Cost,

Fiscal Year 2005 and Fiscal Year 2006

GE Iontrack Itemiser-W 2,302 $ 7,727 2,322 $ 8,057

Thermo EGIS II 425 13,134 545 13,695

Thermo EGIS 3000 2 12,899 2 13,526

Smiths Ionscan 400B 3,038 8,580 3,035 8,946

Smiths Ionscan 400AE 5 10,525 6 10,974

Smiths Ionscan 400A 241 10,525 336 10,974

ETD

Reveal CT-80 n/a n/a 16 n/a b

L-3 ex6000 508 97,837 550 101,000

GE CTX 9000 172 93,286 231 96,320

GE CTX 5500 512 71,549 547 73,876

GE CTX 2500 140 $61,587 151 $ 63,590

EDS

Cost

per-unit

Number of

machines

Cost

per unit

Number of

Type of machine machines

FY 2005 FY 2006 a

Source: TSA.

NOTE: Maintenance costs represent the negotiated prices in the maintenance contracts for EDS and 

ETD machines. aFiscal year 2005 per-machine maintenance costs were in effect from March through September

2005. TSA could not provide per machine maintenance costs prior to March 2005. bReveal EDS were installed in fiscal year 2006 and were still under the manufacturer’s warranty.

TSA EDS Maintenance Costs
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Page 39 GAO-06-795 

23

TSA Actions to Control EDS and ETD

Maintenance Cost Increases

• TSA included several contractor performance requirements in the 

Siemens, L-3, GE InVision, and Reveal contracts.

• Metrics related to Reliability, Maintainability, and Availability (RMA) of the machines must be reported to TSA.

1

• Specific cost data related to maintenance and repair must be

reported to TSA.

• Contractors are required to meet monthly with TSA to review all

pertinent technical, schedule, and cost aspects of the contract, including an estimate of the work to be accomplished in the 

next month; performance measurement information; and any

current and anticipated problems.

1Includes metric s such as m ean tim e between failur es (gener ally the total time a m achine is av ailable to perform its required mission divided by the num ber of

failur es over a given period of time) and oper ational availability (generally the percentage of time, during operational hours, that a machine is available to perform

its requir ed mission). Such reliability, maintainability, and availability data ar e standard and appropriate perform anc e requirements for maintenanc e contracts.

TSA EDS Maintenance Costs
Appendix I: Information for Congressional 

Committees 

Page 40 GAO-06-795 

24

TSA Actions to Control EDS and ETD 

Maintenance Cost Increases

• Provisions in the L-3 and GE InVision contracts specify that the agreed price for maintaining EDS will 

be paid only if the contractor performs within specified mean downtime (MDT) requirements.

• MDT is calculated by the number of hours a machine is out of service in a month divided by 

the number of times that machine is out of service per month.1

• Contractors submit monthly invoices for 95 percent of the negotiated contract price for the 

month and then submit an MDT report to justify the additional 5 percent. Consequently, if the 

contractor fails to fulfill the MDT requirements, it is penalized 5 percent of the negotiated 

monthly maintenance price. 

• As of February 2006, neither GE InVision nor L-3 have been penalized for missing their MDT.

• The allowable MDT is lowered from 2005 to subsequent renewable years in the contract, as 

shown in the table below.

1For example, if a machine has a total downtime of 50 hours per month and is out of service 5 times in that month, the MDT would be equal to 50 divided by 5,

which is 10 hours.

Source: TSA

Mean Downtime Requirement for EDS Contractors, 2005 through 2009

14 hours

2008

18 hours

2007

20 hours

2006

24 hours 12 hours

2005 2009

TSA EDS Maintenance Costs
Appendix I: Information for Congressional 

Committees 

Page 41 GAO-06-795 

25

TSA Oversight of

EDS and ETD Contractor Performance

TSA EDS Maintenance Costs
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Committees 

Page 42 GAO-06-795 

26

TSA Oversight of EDS and ETD

Contractor Performance

• TSA’s acquisition policies1 and GAO’s standards for internal controls2 call for documenting transactions and

other significant events, such as monitoring contractor activities. Although TSA has policies and procedures

for monitoring their contracts and TSA has included contractor performance requirements in the current EDS

and ETD maintenance contracts, some oversight issues remain. The failure of TSA to develop internal

controls and performance measures has been recognized by other GAO and DHS OIG reviews.3

• TSA officials provided no evidence that they are reviewing maintenance cost data provided by the 

contractor because they are not required to document such activities. For example, even though TSA

officials told us they are reviewing required contractor data, including actual maintenance costs related

to labor hours, costs associated with replacement parts, and the costs of shipping machine parts, they 

did not have any documentation to support this. TSA officials told us that they have begun to capture 

these data to assist them in any future contract negotiations.

• TSA officials provided no evidence that performance data for corrective and preventative maintenance 

required under the contract is being reviewed. TSA officials told us that they perform such reviews, but 

do not document their activities since there are no TSA policies or procedures requiring them to do so. 

Therefore, TSA could not provide assurance that contractors are complying with contract performance

requirements. For example, although TSA documents monthly meetings with contractors to discuss 

performance data, TSA did not provide evidence that it independently determines the reliability and

validity of data required by the contracts, such as mean time between failures and mean time to repair, 

which are important to making informed decisions about future purchases of EDS and ETD equipment 

and their associated maintenance costs.

1TSA uses the Federal Aviation Administration (FAA) Acquisition Management System which, as adopted by TSA, requires contractors to act on contractual quality assurance commitments and ensure that government

quality and reliability needs are met (FAA Acquisition Management Policy 3.10.4.2). 2GAO/AIMD-00-21.3.1. 3GAO has identified contract surveillance issues in other agencies, such as the Department of Defense. See GAO, Contract Management: Opportunities to Improve Surveillance on Department of Defense Service 

Contracts, GAO-05-274 (Washington, D.C.: March 2005). See also OIG-04-44.

TSA EDS Maintenance Costs
Appendix I: Information for Congressional 

Committees 

Page 43 GAO-06-795 

27

TSA Oversight of EDS and ETD

Contractor Performance

• For EDS contracts with possible financial penalties, TSA officials 

told us that they review contractor-submitted mean downtime data 

on a monthly basis to determine the reliability and validity of the 

data and to determine whether contractors are meeting contract

provisions or should be penalized. However, TSA officials said they

do not document these activities because there are no TSA policies

or procedures to do so. 

• As a result, without adequate documentation, there is no assurance 

on whether contractors are meeting contract provisions that TSA 

has ensured that it is making appropriate payments for services

provided.

TSA EDS Maintenance Costs
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Committees 

Page 44 GAO-06-795 

28

Conclusions

• TSA’s move to firm fixed price maintenance contracts was advantageous to the

government in that it helps control present and future maintenance costs. Firm fixed price

contracts also help ensure price certainty and therefore are more predictable. 

• Unresolved issues remain with the past contractor, specifically fees awarded to former

contractor Boeing that may have been excessive due to a lack of timely evaluation of the 

contractor’s performance.

• Although TSA has begun to develop a lifecycle cost model in order to control costs and

negotiate future contracts, TSA has not set a timeframe to complete this model. Without

such a time frame, TSA may not be identifying cost efficiencies and making informed

procurement decisions.

• Further, TSA must provide evidence of its reviews and analyses of contractor-submitted 

data and perform analyses of contractor data to determine the reliability and validity of the

data and to provide assurance of contractor compliance with contract performance 

requirements and internal control standards. Without stronger oversight, TSA will not have

reasonable assurance that contractors are performing as required and that full payment is

justified based on meeting mean downtime requirements.

TSA EDS Maintenance Costs
Appendix I: Information for Congressional 

Committees 

Page 45 GAO-06-795 

29

Recommendations

• To help improve TSA’s management of EDS and ETD maintenance costs and 

strengthen oversight of contract performance, we recommend that the Secretary of

Homeland Security instruct the Assistant Secretary, Transportation Security

Administration to take the following three actions

• report to the congressional appropriations committees on its actions, including any

necessary analysis, to address the DHS OIG recommendation to recover any 

excessive fees awarded to Boeing;

• establish a time line for completing a lifecycle cost model for EDS, which TSA 

recently began; and

• revise its policies and procedures to require documentation of its monitoring of EDS 

and ETD maintenance contracts to provide reasonable assurance that

• contractor maintenance cost data and performance data are recorded and 

reported in accordance with TSA contractual requirements and

• self-reported contractor mean downtime data are valid, reliable, and justify the 

full payment of the contract amount.

TSA EDS Maintenance Costs
Appendix I: Information for Congressional 

Committees 

Page 46 GAO-06-795 

30

Agency Comments

• TSA reviewed these slides in their entirety and provided several

technical comments, which we incorporated as appropriate. TSA

officials told us that they are not making formal comments on our 

recommendations.

TSA EDS Maintenance Costs
Appendix II: Agency Comments Appendix II: Agency Comments 

Page 47 GAO-06-795 TSA EDS Maintenance Costs
Appendix II: Agency Comments

Page 48 GAO-06-795 TSA EDS Maintenance Costs
Appendix II: Agency Comments

Page 49 GAO-06-795 TSA EDS Maintenance Costs
Appendix II: Agency Comments

Page 50 GAO-06-795 TSA EDS Maintenance Costs
Appendix III: GAO

A

 Contact and Staff 

cknowledgements 

Page 51 GAO-06-795 

Appendix III: GAO Contact and Staff 

Acknowledgements 

Cathleen A. Berrick (202) 512-8777 

In addition to the individual names above, Charles Bausell, R. Rochelle 

Burns, Glenn Davis, Katherine Davis, Michele Fejfar, Richard Hung, Nancy 

Kawahara, Dawn Locke, Thomas Lombardi, Robert Martin, and William 

Woods. 

TSA EDS Maintenance Co

GAO Contact 

Staff 

Acknowledgements 

(440482) 
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