Department of Homeland Security
 

Costs Invoiced by the City of Phoenix for 


Checked Baggage Screening Projects at the 


Phoenix Sky Harbor International Airport 


American Recovery and Reinvestment Act of 2009 

OIG-12-105 July 2012
 
OFFICE OF INSPECTOR GENERAL 

Department of Homeland Security 

Wash ington. DC 20528 1 www.oig.dbs.gov 

JUL 30 1011 

MEMORANDUM FOR: Kelly Hoggan, Assistant Administrator/ 

Chief Technology Officer 

Office of Operational Process and Technology 

Transportation Security Administration 

FROM: Anne L. Richards th-.....;/ M ..-I, 

Assistant Inspector General for Audits 

SUBJECT: Costs Invoiced by the City of Phoenix for Checked Baggage 

Screening Projects at the Phoenix Sky Harbor International 

Airport 

Attached for your action our final report, Costs Invoiced by the City of Phoenix jor 

Checked Baggage Screen Projects at the Phoenix Sky Harbor International Airport. We 

incorporated the formal comments from the Administrator of the Transportation 

Security Administration in the report. 

The report contains three recommendations to address questionable invoiced costs and 

to ensure the City of Phoenix complies with the requirement to buy American goods. 

The Administrator concurred with the three recommendations. As prescribed by 

Department of Homeland Security Directive 077-1, Follow-Up and Resolutions for the 

Office of Inspector General Report Recommendations, within 90 days of the date of this 

memorandum, please provide our office with a written response that includes your 

(1) agreement and disagreement, (2) corrective action plan, and (3) target completion 

date for each recommendation . Also, please include responsible parties and supporting 

documents needed to inform us on the status ofthe recommendation. Until your 

response is received and evaluated, the recommendations will be considered open and 

unresolved. 

Consistent with our responsibility under the Inspector General Act, we are providing 

copies of our report to appropriate congressional committees with oversight and 

appropriation responsibility over the Department of Homeland Security. We will post 

the report on our website for public dissemination. 

Please call me with any questions, or your staff may contact John E. McCoy II at 

(202) 254-4100. 

Attachment 
 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Table of Contents 

Executive Summary ............................................................................................................. 1 

Background ......................................................................................................................... 2 

Results of Review ................................................................................................................ 4 

Questioned Capital Costs ........................................................................................ 4 

Questioned Administrative Costs ........................................................................... 8 

Use of American-Made Iron, Steel, and Manufactured Goods .............................. 9 

Recommendations ................................................................................................ 10 

Management Comments and OIG Analysis .......................................................... 10 

Appendixes 

Appendix A: Objective, Scope, and Methodology ............................................... 12 

Appendix B: Management Comments to the Draft Report ................................. 14 

Appendix C: Questioned Capital Costs by Task Order and Category ................... 17 

Appendix D: Major Contributors to This Report...... ............................................ 29 

Appendix E: Report Distribution .......................................................................... 30 

Abbreviations 

BHS baggage-handling system 

CBIS Checked Baggage Inspection System 

DHS Department of Homeland Security 

GMP Guaranteed Maximum Price 

OIG Office of Inspector General 

OMB Office of Management and Budget 

OTA Other Transaction Agreement 

T3 Terminal 3 

T4NO Terminal 4 North Oversize 

TSA Transportation Security Administration 

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 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Executive Summary 

The Transportation Security Administration (TSA) entered into an Other Transaction Agreement 

with the City of Phoenix to fund a portion of the costs to modify Terminal 3 and Terminal 4 

North Oversize at the Phoenix Sky Harbor International Airport to incorporate Checked Baggage 

Inspection Systems. Under the Other Transaction Agreement, TSA agreed to reimburse the City 

of Phoenix up to $26,588,898 (90 percent) of the estimated costs of $29,543,220 for designing, 

managing, and building the project. At the time of our audit, the City of Phoenix had submitted 

six invoices to TSA totaling $20,542,009 for costs through July 31, 2011. 

We conducted our audit to determine whether invoiced costs were allowable, allocable, and 

reasonable according to the funding agreement and applicable Federal requirements. 

We concluded that costs of $8,844,377 (TSA share) invoiced for construction and constructionrelated activities were questionable for reimbursement because they were not allowable under 

the terms of the Other Transaction Agreement ($3,994,119) or were not properly supported 

($4,850,258). In addition, we determined that the City of Phoenix complied with the 

requirements for submitting quarterly reports to the Federal Government and for paying 

prevailing wages, but could not provide adequate support that it complied with the 

requirement for buying goods manufactured in America. TSA agreed with our recommendations 

to resolve the questioned costs and verify that the City of Phoenix complied with the “buy 

American” requirement. 

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Background 

The AmericanfRecoveryfandfReinvestmentfActfoff2009, as amended, (Recovery Act) 

appropriated $1 billion to TSA for “procurement and installation of checked baggage 

explosives detection systems and checkpoint explosives detection equipment.” TSA 

awarded $574,023,419 of that amount to 25 airport organizations for 29 projects 

modifying airports to accommodate new baggage-screening equipment. 

Under Other Transaction Agreement (OTA) No. HSTS04-10-H-REC128, dated May 12, 

2010, TSA agreed to provide the City of Phoenix (City) up to $26,588,898 (90 percent) of 

estimated project costs of $29,543,220 for two Checked Baggage Inspection System 

(CBIS) solutions at Sky Harbor International Airport (Airport). 

According to the OTA, the additional funds are for construction modifications to the 

building infrastructure for Terminal 3 (T3) and Terminal 4 North Oversize (T4 NO). 

Terminal modifications include required changes to baggage conveyor components and 

mechanical, plumbing, electrical, structural, and telecommunications infrastructure to 

install medium-volume explosive detection system units within the two baggagescreening areas. Other features include providing for explosive trace detection 

resolution areas, a remote on-screen resolution/control room, and the installation of 

baggage-screening hardware and software.1

Table 1 presents the estimated OTA project costs. 

1 TSA initially funded modifications to the Airport for installation of in-line baggage screening equipment at Terminals 

2, 3, and 4 under a 2004 Memorandum of Agreement with the City. In the 2004 agreement, TSA agreed to reimburse 

the City for $91.5 million (75 percent) of estimated project costs of $122 million. The City completed modifications to 

Terminals 2 and 4 and started work at Terminal 3, but ran out of money before it could complete the project. The 

2010 OTA does not preclude the City from pursuing additional government funding for the engineering, design, and 

construction of modifications and reconfiguration of the Phoenix “in-line” baggage systems for Terminals 2, 3, and 4 

to install the explosives detection system equipment contained in the 2004 agreement.

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 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Table 1. Project Costs 

Description 

Amount 

T4 NO T3 Total 

Capital Costs: 

• Direct costs for Checked Baggage 

Inspection System (CBIS) and other 

related construction $1,781,000 $21,666,000 $23,447,000

Administrative and Contingency Costs 

(at a percentage of capital costs): 

• Design with Construction 

Administration (8 percent) 142,480 1,733,280 1,875,760

• Design Contingency (5 percent)* 89,050 1,083,300 1,172,350

• Construction Contingency (5 percent)* 89,050 1,083,300 1,172,350

• Project Management (2 percent) 35,620 433,320 468,940

• Construction Management (6 percent) 106,860 1,299,960 1,406,820

Total Project Costs $2,244,060 $27,299,160 $29,543,220

90 percent TSA Share of Project Costs $2,019,654 $24,569,244 $26,588,898

*The City did not use design or construction contingency funds. 

As of November 15, 2011, the City submitted six invoices to TSA for reimbursement of 

costs of $20,542,009 ($22,824,455 × 90 percent). The invoices covered the period from 

October 2009 through July 2011 and listed the costs under two task orders: Guaranteed 

Maximum Price (GMP) #6 and GMP #7. Reimbursement for eligible project costs is 

based on the scope of the agreement; Office of Management and Budget (OMB) Circular 

A-87, CostfPrinciplesfforfState,fLocalfandfIndianfTribalfGovernments; and the TSA 

publication ReimbursablefandfNon-ReimbursablefCostsfforfthefElectronicfBaggagef

ScreeningfProgram,fversionf1.0, June 2008. 

The OTA also requires the City to comply with OMB Circular A-133, AuditsfoffStates,f

LocalfGovernments,fandfNonprofitfOrganizations, and Recovery Act provisions to submit 

quarterly recipient reports to the Federal Government; pay prevailing wages as 

determined by the Secretary of Labor; and use American-made2

 iron, steel, and 

manufactured goods. 

In this report, we refer to questioned costs that are ineligible or unsupported. Ineligible 

questioned costs are expenditures that we concluded are contrary to a provision of the 

2 On October 13, 2009, TSA issued a waiver to the buy American requirements. The waiver specifies that at least 95

percent of each project be built with American-produced products and allows up to 5 percent of total project costs to 

be used for non-American products.

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 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

OTA. Unsupported questioned costs are expenditures that we believe were not 

substantiated by adequate documentation. 

Results of Review

We questioned $8,844,377 of the $20,542,009 invoiced by the City. The questioned 

costs consist of capital costs of $7,624,463 and administrative costs of $1,219,914. The 

questioned costs are summarized in table 2 and discussed in the following paragraphs. 

Appendix C lists the individual questioned capital cost items by task order and category. 

Also, we concluded that the City fulfilled the requirements for submitting quarterly 

reports and for paying prevailing wages. The City could not, however, provide adequate 

support that it complied with the requirement for buying goods manufactured in 

America. 

Table 2. Summary of Questioned Costs 

Category 

Ineligible 

Costs 

Unsupported

Costs Total 

Capital Costs $3,825,784 $4,645,842 $8,471,626

Federal Share (90 percent) $3,443,205 $4,181,258 $7,624,463

Administrative Costs $612,126 $743,334 $1,355,460 

Federal Share (90 percent) $550,913 $669,001 $1,219,914

Total Costs $4,437,910 $5,389,176 $9,827,086 

Federal Share $3,994,119 $4,850,258 $8,844,377 

Questioned Capital Costs
 

We questioned capital costs of $7,624,463 because the City invoiced costs that 

were ineligible ($3,443,205) or unsupported ($4,181,258). 

Ineligible Costs – $3,443,205 

We classified costs of $3,443,205 as ineligible because the costs were for 

activities outside the scope of the OTA. 

The OTA specifies that the project costs which TSA will reimburse are limited to 

costs associated with the CBIS,3

 the on-screen resolution room, the checked 

3 The CBIS is defined as the area from the baggage insertion point into the electronic detection system

screening matrix to the point where screened baggage is reinserted into the baggage makeup area.

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 Department of Homeland Security 

baggage resolution Area(s), and the electronic detection system network 

equipment. Figure 1 presents an example of an automated CBIS. 

Figure 1. Example of an Automated CBIS

Source: TSAfElectronicfBaggagefScreeningfProgram,fProgramfSpecificfRecoveryf

ActfPlan, dated May 15, 2009. 

The OTA also says that construction costs that are not considered reimbursable 

include the baggage-handling system (BHS) portion prior to the explosive 

detection system screening matrix area and the BHS portion exiting the 

electronic detection system screening matrix area. Maintenance, repair parts or 

spare parts, and extended warranties beyond 1 year are also not considered 

reimbursable. We classified as ineligible costs incurred for items and services we 

considered not part of the CBIS or not otherwise provided for in the OTA. 

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 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

The largest amount of ineligible costs pertains to the replacement of the legacy4

BHS. We identified legacy BHS replacement costs totaling $2,338,554, which 

consisted of the equipment purchases ($1,360,000), system controls ($297,809), 

and installation ($680,745). 

City officials and their representatives believed that replacement of the legacy 

BHS was necessary to incorporate the electronic detection system matrix into 

the T3 BHS and invoiced TSA for 85 percent of the replacement costs.5 The 

officials also said that they discussed this in numerous telephone conversations 

and emails with TSA officials, and that they believed that the T3 diagram 

included in the OTA shows the legacy BHS as part of the project. 

Although the area on the OTA diagram of the funded project appears to include 

the legacy BHS, the OTA specifically limits reimbursement to that portion of the 

BHS contained within the CBIS. We could not locate any evidence of TSA 

authorizing the replacement of the legacy BHS as part of the OTA project. 

However, we obtained a February 25, 2010, email from TSA’s Southwest 

Deployment Manager (who served as the Contracting Officer’s Technical 

Representative) to the City and their representatives that stated,

“The entire ticket conveyor lines were colored green and I am assuming 

Phoenix is stating these are eligible costs. This is incorrect. If there was a 

decision to replace conveyor due to obsolescence, that was a preference 

of the airport and was not required for the CBIS. As Appendix F states, 

TSA does not reimburse costs associated with airport enhancements.”

The remaining ineligible capital costs of $1,104,651 consisted principally of the 

renovation of structures and replacement of systems that were outside the CBIS 

and the transporting of baggage. Examples follow: 

•	 $54,485 for the heating, ventilation, and air conditioning system 

extended warranty for T3, 

•	 $84,613 for removal and salvage of six curbside podiums and overhead 

ceiling doors, 

•	 $31,964 for relocating the USAirways ticket counter, and 

4 “Legacy” refers to the City’s designation of the section of the T3 BHS running from the ticket counters into the 

beginning of the explosive detection system matrix. The City replaced the legacy conveyance systems and 

manufactured components as part of the overall T3 explosives detection system project.

5

 Notwithstanding the fact that we questioned all the legacy BHS costs, the City could not provide support for its 

invoicing legacy costs at a rate of 85 percent. 

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 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

•	 $48,771 for paying porters to carry bags from the ticket counters to the 

collection point for transferring bags to the planes. 

At the exit conference and during followup discussions, City officials and their 

representatives agreed that $415,423 of the $1,104,651 was not eligible (see 

appendix C).

Unsupported Costs – $4,181,258 

We classified costs of $4,181,258 as unsupported because the City did not 

properly allocate the costs to the OTA-funded project. 

The basic guidelines in OMB Circular A-87 say that to be allowable, a cost must 

be properly documented and be allocable to the Federal award. The circular 

says that “a cost is allocable to a particular cost objective if the goods or services 

involved are chargeable or assignable to such cost objective in accordance with 

relative benefits received.” 

In conjunction with work under the OTA project, the City elected to replace the 

entire BHS in T3 as well as install a new extension for oversized baggage to the 

existing BHS in T4. The T4 extension included new segments both inside and 

outside of the CBIS. Although the unsupported costs benefited the OTA project 

as well as the other BHS work, the City either fully charged the costs to the OTA 

project or partially charged (86 percent to 88 percent) the costs on the basis of 

an unsupported allocation methodology. 

We believe that the costs should have been allocated to the OTA project in 

proportion to the benefits actually derived. As such, we classified all of these 

costs as unsupported because we could not determine and the City could not 

support the correct allocation for each of the charges. Examples of the 

allocations follow: 

•	 The full amount of the $1,205,086 cost of the layout and installation of 

the electrical and mechanical system in T4, 

•	 The full amount of the $682,928 cost of testing and warranties for 

equipment layout and installation in T3, 

•	 The full amount of the $300,000 cost of fabricating complete system 

conveyor for T4 BHS row, 

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7
 
 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

•	 The full amount of a $211,924 redesign of T4, and 

•	 Eighty-seven percent of the $353,439 cost of electrical work for 

relocating conduits and data cable for the BHS row. 

At the exit conference and during followup discussions, City officials agreed that 

many of the unsupported costs should not have been charged in full to the OTA 

but should have been allocated between the OTA project and the other BHS 

work performed outside the CBIS. 

Questioned Administrative Costs 

We questioned administrative costs of $1,219,914 related to the questioned 

capital costs of $7,624,463. The OTA authorized the following administrative 

and contingency cost allowances as a percentage of the direct costs for the CBIS 

and other related construction costs: design with construction administration 

(8 percent); construction management (6 percent); design contingency 

(5 percent); construction contingency (5 percent); and project management 

(2 percent). 

The City invoiced administrative costs for only design with construction 

administration, construction management, and project management. We 

computed the questioned administrative costs as follows. 

Ineligible Administrative Costs – $550,913 

We classified administrative costs totaling $550,913 as ineligible. We 

determined the ineligible amounts by applying the appropriate administrative

cost percentages to the ineligible capital costs. For example, we calculated 

ineligible design with construction administration costs of $306,063 by applying 

8 percent to the $3,825,784 of ineligible capital costs. We made similar 

calculations for the other categories, which resulted in ineligible construction 

management costs of $229,547 ($3,825,784 × 6 percent) and ineligible project 

management costs of $76,516 ($3,825,784 × 2 percent). The Federal share of 

ineligible administrative costs of $550,913 was computed by taking 90 percent of 

$612,126 ($306,063 + $229,547 + $76,516). 

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 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Unsupported Administrative Costs – $669,001 

We classified administrative costs totaling $669,001 as unsupported. We 

determined the unsupported amounts by applying the appropriate 

administrative cost percentages to the unsupported capital costs. For example, 

we calculated unsupported design with construction administration costs of 

$371,667 by applying 8 percent to the $4,645,842 of unsupported capital costs. 

We made similar calculations for the other categories, which resulted in 

unsupported construction management costs of $278,751 ($4,645,842 × 

6 percent) and unsupported project management costs of $92,917 ($4,645,842 × 

2 percent). The Federal share of unsupported administrative costs of $669,001 

was computed by taking 90 percent of $743,335 ($371,667 + $278,751 + 

$92,917). 

Use of American-Made Iron, Steel, and Manufactured Goods 

Section 1605 of the Recovery Act requires the use of American-made iron, steel, 

and manufactured goods in the construction of Recovery Act projects. Under 

the Department of Homeland Security’s (DHS) limited waiver of the requirement 

for TSA’s Electronic Baggage Screening Program projects, up to 5 percent of the 

total project costs may be used to purchase non-American goods. However, the 

City’s support to demonstrate compliance with the “buy American” requirement 

was incomplete. 

The City, the contractor, and the BHS subcontractor did not obtain any letters 

from the individual BHS vendors regarding the source of the components that 

were used for the CBIS. The BHS subcontractor did prepare a spreadsheet for 

the contractor that included a description of 15 iron, steel, and manufactured 

components used on the CBIS; the names of the vendors that provided the 

components, and the identification of American and foreign products used. 

Based on the calculations provided by the subcontractor, the contractor 

provided a letter to the City which stated that approximately 95 percent of the 

iron, steel, and manufactured goods used on the CBIS appeared to comply with 

its understanding of the “buy American” requirements. However, without 

letters or other documents from the individual vendors certifying the source of 

the materials used on the CBIS, we could not validate the data shown on the 

subcontractor’s spreadsheet and in the contractor’s letter. 

TSA officials have not examined the City’s compliance with the requirement to 

use American goods. TSA did publish an administrative checklist to aid 

contracting officials in determining “buy American” compliance on February 3, 

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 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

2011. TSA’s Director, Security Technology Acquisition Division, told us that TSA is 

developing procedures to implement the checklist. We believe that TSA should 

use the checklist to help determine whether the City complied with the “buy 

American” requirement for the CBIS. 

Recommendations 

We recommend that TSA’s Contracting Officer: 

Recommendation #1:

Resolve the $7,624,463 of ineligible and unsupported capital costs. 

Recommendation #2: 

Resolve the $1,219,914 of ineligible and unsupported administrative costs. 

Recommendation #3: 

Review the iron, steel, and manufactured goods used in the CBIS to determine 

whether the City complied with applicable “buy American” requirements. 

Management Comments and OIG Analysis

TSA provided formal comments to our draft report, which are included as 

appendix B. 

TSA Comments to Recommendation #1 

TSA concurred with the recommendation and said it “will work with the City to 

properly assess and resolve the questioned capital costs” and provide OIG with 

further details in 90 days. 

OIG Analysis

While it concurred with the recommendation, TSA did not identify specific 

corrective actions. Therefore, the recommendation will remain unresolved and 

open until TSA provides a corrective action plan including target completion 

dates and responsible parties. 

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 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

TSA Comments to Recommendation #2 

TSA concurred with the recommendation and said it “will work with the City to 

properly assess and resolve the questioned administrative costs” and provide 

OIG with further details in 90 days. 

OIG Analysis

While it concurred with the recommendation, TSA did not identify specific 

corrective actions. Therefore, the recommendation will remain unresolved and 

open until TSA provides a corrective action plan including target completion 

dates and responsible parties.

TSA Comments to Recommendation #3 

TSA concurred with the recommendation and said it will work with the City to 

obtain certification from the vendors that the materials used were “buy 

American” compliant. TSA also said it would use a checklist that it developed for 

assessing and monitoring “buy American” compliance to help resolve this 

recommendation. 

OIG Analysis

TSA’s decision responds to the recommendation. However, the 

recommendation will remain unresolved and open until TSA provides a 

corrective action plan including target completion dates and responsible parties, 

or evidence that it has obtained the certifications. 

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 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Appendix A 

Objective, Scope, and Methodology 

The Department of Homeland Security (DHS) Office of Inspector General (OIG) was 

established by the HomelandfSecurityfActfoff2002 (Public Law 107-296) by amendment 

to the InspectorfGeneralfActfoff1978. This is one of a series of audit, inspection, and 

special reports prepared as part of our oversight responsibilities to promote economy, 

efficiency, and effectiveness within DHS. 

The objective of this audit was to determine whether costs invoiced by the City of 

Phoenix were allowable, allocable, and reasonable according to the funding agreement 

and applicable Federal requirements. Our audit covered invoiced costs of $20,542,009 

for the period October 1, 2009, to July 31, 2011. This represents the total amount 

invoiced as of November 15, 2011. 

Our tests and procedures included the following: 

•	 Reviewing the Recovery Act, OTA, and TSA and OMB guidelines 

•	 Interviewing TSA officials to obtain an understanding of the project and project 

management 

•	 Interviewing City officials and representatives to obtain an understanding of the 

project, project management, accounting, and invoicing 

•	 Examining City accounting records and supporting documents for the amounts 

invoiced to TSA 

•	 Reviewing the eligibility of 100 percent of the invoiced charges for reimbursement, 

and discussing our findings with City officials and its representatives 

•	 Inspecting the CBIS 

•	 Reviewing the audit working papers of the certified public accounting firm that 

performed the Single Audit of the City for the fiscal year ending June 30, 2010 

The Single Audit of the City was performed by Clifton Gunderson LLP and included 

Recovery Act-funded CBIS costs totaling $10,120,483 (about 49 percent of invoiced 

costs). The Single Audit report classified the CBIS as a major program. The Single Audit 

report did not identify any questionable costs related to the CBIS or any deficiencies in 

internal controls that were identified as material weaknesses. In providing us access to 

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its audit working papers, Clifton Gunderson LLP wrote that “Our audit, based on 

selective testing, is subject to inherent risk that material errors or fraud, if they exist, 

will not be detected. . . . Our use of professional judgment and the assessment of 

materiality means that matters may exist that might be assessed differently by you.” 

Based on issues identified during our preliminary work, we included the invoiced costs 

covered by the Single Audit in our audit tests. 

We tested City records to determine compliance with OMB Circular A-87 and with other 

terms and conditions of the agreement. We considered the City’s internal controls over 

the administration of TSA funds in determining our audit procedures. 

Our audit was conducted without the benefit of a technical evaluation by TSA of the 

materials and manufactured components used in the construction of the CBIS; 

therefore, our conclusions are qualified to the extent that a technical evaluation may 

affect the allowability of invoiced costs. 

We conducted this performance audit between June 2011 and March 2012, pursuant to 

the InspectorfGeneralfActfoff1978, as amended, and according to generally accepted 

government auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our

findings and conclusions based upon our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions based upon our 

audit objectives. 

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 Department of Homeland Security 

 

Appendix B 

Management Comments to the Draft Report 

u.s. Department or Hul'teland Security 

601 SmIth 12lh Street 

.-\J:lin~O[], VA 2U5':1!! 

pll'; ~;::n.;~ Tr ansportation 'IJ! ~I Security .. ~~.r Administration 

JU1121_ 

MEMORANDUM FOR: Charles Edwards 

Acting Inspector General 

u.s. Department of Homeland Security 

FROM: John S. Pistole Il 1&' d d Administrator~1 

SUBJECT: Transportation Security Administration's Response to U.S. 

Department of Homeland Security Office of Inspector General's 

Draft Report: Review o/COS!S Invoiced by the elly o/Phoenix 

Relating to Checked Baggage Screening Project~' at Terminal 3 

and Terminal 4 }{orlh Oversize at the Phoenix Sky Harbor 

International Airport Under Other Transaction Agreement Number 

HSTS04-10-H-REC128 

This memorandum constitutes the Transportation Security Administration's (TSA) formal 

response to the U. S. Department of Homeland Security (DHS). Offiee of Inspector General's 

(OIG) draft report of May 201.2, Review o/Costs Invoiced by the City of Phoenix Relating to 

Checked Baggage Screening Projects at Terminal 3 and Terminal 4 North Oversize at the 

Phoenix Sky Harbor International A irport Under Other Transaction Agreement Number 

HSTS()4-J()-H-REC128 - For Official Use Only, received bye-mail on May 18,2012. TSA 

appreciates the opportunity to review and provide comments to your draft report. 

Background 

As part of the American Recovery and Reinvestment Act of2009 (Recovery Act), TSA was 

appropriated $1 billion for the "procurement and installation of checked baggage explosi,,"es 

detection systems and checkpoint explosives detection equipment .... " TSA has awarded more 

than $500 million in Recovery Act funding to airport organizations for modifying facilities to 

accommodate nCVi baggage-screening equipment through the Electronic Baggage Screening 

Program. 

One of these Recovery Act awards was to the City of Phoenix (the City) for a Checked Baggage 

Inspection System (eBIS) project at Tenninal3 and Teffilinal4 North Oversize at Phoenix Sky 

Harbor International Airport through an Other Transaction Agreement (OTA) dated May 12, 

2010. In conjunction with the Recovery Act eBIS project., the City elected to also replace its 

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 Department of Homeland Security 

 

Appendix B 

Management Comments to the Draft Report 

2 

Legacy Baggage Handling Systems (Legacy BHS) in Terminal 3 and Terminal 4 under a project 

not funded by TSA. Under the OTA, TSA agreed to reimburse the City up to $26,588,898, 

representing 90 percent of the estimated costs of$29,543,220 for designing, managing, and 

building the project. At the time the OrG conducted its audit, the City had submitted invoices for 

costs through July 31. 2011, totaling $22,824,454, of which $20.542,009 represented T8A's 

90 percent share. 

The draft 010 report questions $9,827,086 of incurred and billed costs, of which $8,844.377 

represents TSA-qucstioned costs consisting of capital and administrative oo5t5 invoiced by the 

Cily. Specifically, the 01G questions $7,624,463 ofthe invoiced capital costs, classifying 

$3,443,205 as ineligible because these costs were for activities that were not within the scope of 

the OT A. The majority of these costs were for the replacement of the Legacy BllS. The 

remaining S4,181258 of the invoiced capital costs were classified as unsupported because the 

City did not properly allocate these costs between the TSA-funded CHIS project and the City's 

non-TSA ftmded projects. The draft report notes that the City either fully or partially 

(86-88 percent) charged these costs to the CBIS project on the basis of an unsupported allocation 

methodology. 

The OTA authorized administrative cost allowances as a percentage of the direct costs for the 

eEls project. The City invoiced TSA for three cost allowances: design with construction 

administration (8 percent): construction management (6 percent): and project management 

(2 percent). By applying these administrative cost percentages to the above noted ineligible and 

unsupported c.."l.pital costs, the 010 questions $1.219,914- of the invoiced administrative costs. 

Specifically, the 010 classifies $550,913 of the invoiced administrative eosts as ineligible and 

the remaining $669,001 as wlsupponed. 

TSA wilt review all of the information regarding this project, including cost eligibility guidance, 

and will work with the City to properly assess and resolve the questioned capital and 

administrative costs. TSA will also request additional documentation from the City and obtain 

documentation that the OIG has collected during the audit. 

The draft report also finds that TSA officials did not examine the City's compliance with the Buy 

American Act. As the OIG notes, the subcontractor did provide the contractor ..,vith a 

spreadsheet that included a description of iron, steel and manufactured components. the names of 

vendors who provided the components, and the identification of the American and foreign 

products used. Based on these calculations. the contractor provided the City with a letter 

indicating that approximatciy 9S percent of the iron, steel and manufactured goods used in the 

CBrS project complied with Buy American Act requirements. However. the OIG was unable to 

validate the information without documentation from the vendors certifying the source of the 

materials used. In order to verify that the goods used arc in fact Buy American Act compliant, 

TSA will work with the City to obtain certificatjon of the sources of materials used in the ems 

project. . 

www.oig.dhs.gov OIG-12-105


15
 
 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

 

Appendix B 

Management Comments to the Draft Report 

3 

TSA concurs with the recommendations made in the subject draft report and will take the actions 

necessary to resolve these issues. 

Rei!ommendation 1: TSA's Contracting Officer resolve the $7,624,463 of ineligible and 

unsupported capital costs. 

TSA Concurs: As indicated above, TSA will work with the City to properly assess and resolve 

the questioned capital costs. '[SA intends to provide the OIG with information regarding 

resolution of this issue in the 90·day update to the final report. 

Recommendation 2: TSA's Contracting Officer resolve the $1,219.914 of ineligible and 

unsupported administrati,'e costs. 

TSA Concurs: As indicated above, TSA will work with the City to properly a<;sess and resolve 

the questioned administrative costs. TSA intends to provide the OIG with information regarding 

resolution of this issue in the 90-day update to the fInal report, 

Recommendation 3: TSA's Contracting Officer reviifW the iron, steel and manufactured 

goods used in the CBIS project to determine whether the City complied with applicable 

"'Buy American" requirements. 

TSA Concurs: In order to verify that the materials used are compliant with Buy American Act 

requirements, the Contracting Officer will work with the TSA Contracting Officer's 

Representative and the City to obtain certification fTom the vendors. 

Additionally, the TSA Office of Acquisition has begun using a checklist to assist acquisition 

workforce staff in assessing and monitoring Recovery Act recipient compliance with Buy 

American Act requirements. This checklist was provided to the OIG in TSA's 90-day update to 

OIG-li-07, Final Report. Use of American Recovery and Reinvestment Act Funds b.-v the TSAfor 

the Electronic Baggage Screening Program (November 12, 2010). This checklist has previously 

been agreed to by the OIG as a beneficial tool in the resolution of similar recommendations on 

other Recovery Act-related audits. 

www.oig.dhs.gov OIG-12-105


16
 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Appendix C 

Questioned Capital Costs by Task Order and Category 

Legend:

A - Charges benefited both CBIS work and overall BHS work. 

B - Charges appeared to be for BHS work outside the CBIS. 

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA. 

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423). 

Category Questioned Costs

Ineligible

* 

Unsupported Explanation

Task Order GMP #6 

01000 

General

Requirements 

Small tools $1,732 A 

Miscellaneous materials 40 A

Scaffolding base 1,376 A 

Light plants – plants and fuel 1,273 A

Temporary utilities – light towers 12,518 A 

Temporary toilets 1,560 A

Construction building cleaning 15,128 A 

General labor – miscellaneous cleaning 29,066 A 

Housekeeping, trash removal 25,041 A 

Rubbish removal dumpsters 11,940 A 

Dumpsters 45 yd. capacity 2,738 A

General protection/safety 6,352 A 

Temporary protection 106 A 

Escort of unbadged subcontractors 8,472 A 

Modification of gate panels at western 

laydown 2,780 A 

Base temporary fencing and relocation 1,504 A 

Security site fencing 6,868 A 

Relocate/modify fencing 3,530 A 

Temporary protection at roof expansion 

joint $2,212 B

www.oig.dhs.gov OIG-12-105 

17 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Legend: 

A - Charges benefited both CBIS work and overall BHS work.

B - Charges appeared to be for BHS work outside the CBIS.

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA.

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423).

Category Questioned Costs

Ineligible

* 

Unsupported Explanation

General labor $5,483 A 

Equipment maintenance 4,644 A 

Miscellaneous consumables/general safety 

items 5,216 A

First aid supplies 91 A

Installation of benches at medium $270 B

02000 

Sitework

* 

* 

* 

Demo block at ticket counter (TC) 2 Line 3,521 B 

Demo doghouse behind Jet Blue 1,142 B 

Remove concrete masonry unit (CMU) wall 

at service level 6,994 B 

Removal and salvage six curbside podiums 

and overhead coiling doors. 84,613 B 

T3 Remove concrete curb below existing 

baggage makeup units (MU) at Northeast 

(NE) corner of service level 6,774 B 

03000 

Concrete

Base concrete 63,057 A 

05000 

Metals 

Base conveyor support steel 68,377 A 

Damaged ceiling under bridge #7 3,478 B

Base stainless steel and wainscot scope 66,862 B

6100 

Rough 

Carpentry

T3 Roadway (R ) general labor and materials 71,425 A 

T3R general labor sat work 4,764 A 

Exterior wall furring and shelf 3,119 B

Revised protection for future BHS row 22,459 B

www.oig.dhs.gov OIG-12-105 

18 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Legend:

A - Charges benefited both CBIS work and overall BHS work. 

B - Charges appeared to be for BHS work outside the CBIS. 

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA. 

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423). 

Category Questioned Costs

Ineligible

* 

Unsupported Explanation

T3R equipment maintenance $1,822 C

Replace AirTran graphic at ticket counter 5,030 B

09000 

Finishes 

Exterior painting 19,231 * 

* 

B

Paint the new median fence 7,388 B

Field paint roof expansion joint 1,692 * 

* 

* 

* 

* 

B

Paint all new steel at service level 2,214 B

T3 painting of roof accessories 2,635 B

New wallpaper: American Airlines ticket 

counter 650 B

Paint wall at TC5 conveyor at ticket counter 186 B 

Painting: Delta Airlines sign relocation 121 B 

Paint wall behind AirTran ticket counter 229 B 

15300 

Fire 

Protection

System

Relocate 4-inch main around conveyor 

motor in T3 basement tunnel 1,287 B 

Relocate 4-inch main for BHS row in T3

basement tunnel 10,418 B 

T3R sprinkler pipe conflict with BHS at 

service level 7,491 B 

Fire sprinkler relocation for BHS Row 779 B 

15700 

HVAC

Provide new filters and perform scheduled 

preventative maintenance 2,549 C 

Cleanout cover at T3 elevator lobby 289 B 

Heating, ventilation, and air-conditioning 

(HVAC) relocation 25,536 B 

www.oig.dhs.gov OIG-12-105 

19 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Legend:

A - Charges benefited both CBIS work and overall BHS work. 

B - Charges appeared to be for BHS work outside the CBIS. 

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA. 

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423). 

Category Questioned Costs

Ineligible

* 

Unsupported Explanation

Relocate conduits $562 B 

Plumbing relocation 1,526 B 

Relocate plumbing for BHS row 214 B 

Relocate ductwork for BHS row 2,646 B 

Reroute roof drain to avoid BHS motors 1,152 B 

Clean clogged drain at existing canopy time 

and materials (T&M) work 2,649 B 

Relocate storm drain cleanout for BHS row 506 B 

Relocate roof drain leader/overflow drain 

leader at west bridge for BHS row 1,946 B 

Relocate existing condensate at BHS row 4,377 B 

Relocate existing 4-inch copper water line 

for BHS row 5,458 B 

16000 

Electrical

*

Relocate plumbing fixture 2,505 B 

T&M work to relocate waste and storm lines 

in conflict with BHS service level 25,539 B 

T3 relocation of conduit for BHS row 39,611 B 

Base contract – T3 electrical demolition 4,250 B 

Light fixture relocation due to BHS

installation 1,299 B 

Relamp existing light fixtures in service level 902 B

Relocate electrical because of new layout 418 B 

T3 investigation of data conduits for BHS row 40,435 B 

Task Order GMP #7

14000 

T3 Equipment 

Legacy TC (85 percent) 1,360,000 B

www.oig.dhs.gov OIG-12-105 

20 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Legend:

A - Charges benefited both CBIS work and overall BHS work. 

B - Charges appeared to be for BHS work outside the CBIS. 

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA. 

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423). 

Category Questioned Costs

Ineligible Unsupported Explanation

14000 

T3 Controls 

Legacy TC (85 percent) $297,809 B

14000 

T3 

Engineering

BHS design changes per DWL Architects + 

Planners, Inc., coordination $5,306 A 

Electrical installation drawings 18,000 A 

Mechanical drawings with plan elevations 

bill of materials (BOM) – Legacy 18,000 B 

Typical control device description 15,000 A 

Motor control panel (MCP) locations and 

programmable logic controller (PLC) zones 12,000 A 

Product data – high load capacity 

components 6,000 A 

Functional design specifications (FDS) 

remote work station 18,000 A 

Sequence of operations 12,000 A 

Emergency stop (E-stop) zone drawings 18,000 A 

PLC programming code 40,000 A 

Facilities acceptance testing (FAT) plans for 

emulation and simulation 50,000 A 

Static, dynamic, load, functional test plan $20,000 A 

CAGE Inc., specific tests 10,000 A 

Mechanical installation drawings 40,000 A 

Spare parts list 10,000 A 

Operation and maintenance manual – draft 20,000 A 

Operation and maintenance manual – final 20,000 A 

Training plans (airlines, TSA, operation and 

maintenance) 20,000 A 

T3 removal of legacy conveyor and catwalk 

with lead paint 49,414 B 

www.oig.dhs.gov OIG-12-105 

21 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Legend:

A - Charges benefited both CBIS work and overall BHS work. 

B - Charges appeared to be for BHS work outside the CBIS. 

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA. 

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423). 

Category Questioned Costs

Ineligible

* 

* 

* 

* 

* 

Unsupported Explanation

Provide engineering, materials, installation 

for in-line configure TC1, TC2, TC3, TC4, TC5 $80,640 B 

14000 

T3 Install

Legacy TC (85 percent) 680,745 B

Provide and buy preventative maintenance 

on the matrix 4,301 C

Relocate delta conduit in basement for BHS 

install 8,362 B

Overtime wages for legacy, phase 2 12,590 B

Overtime wages for legacy install 6,754 B

Integration of curbside security doors to T3 

BHS 47,555 B

Provide porters at MU to help airlines 

w/bags going to default makeup 1,066 B

Provide porters to monitor/correct baggage 

hygiene at ticket counters 11,657 B 

Labor Day weekend coverage (Change Order 

[CO] #12, same as prior two charges) 8,991 B

Bag porters in T3 ticket lobby to makeup 

area 48,771 B

T3 South (S) and T4 North (N) FAT $118,150 A 

Engineering labor for new reports, human 

machine interface graphic and PLC changes, 

internal FAT, E-stops 256,445 A 

Extend conveyor TC3 27,372 A 

Balance of costs for extension of TC3 4,811 A 

Add limit switches to eight existing curbside 

doors 7,401 A 

Modify railing around makeup units 8,894 * B 

Revise BHS logic 6,120 A 

Replace motor at TC3-02 4,812 A 

www.oig.dhs.gov OIG-12-105 

22 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Legend:

A - Charges benefited both CBIS work and overall BHS work. 

B - Charges appeared to be for BHS work outside the CBIS. 

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA. 

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423). 

Category Questioned Costs

Ineligible

* 

Unsupported Explanation

Site-specific test plan (SSTP) and Batelle 

testing support $871 A 

BHS modification at T4 N 4,324 A 

Program ticket counter service door alarm 

signal 3,696 A 

T4 one programmer and one engineer for 30 

days 43,966 A 

Evaluate makeup units sortation rates $762 B 

14000 

T3 Testing

Overtime hours for schedule acceleration – 

T3 S Phase 3 Legacy 16,199 B 

Portering bags from CTX explosive detection 

machines to TC3 for Delta 3,708 B 

CAGE Inc., testing – punch list complete 245,978 A 

Pre-integrated site acceptance testing (ISAT) 57,873 A 

CAGE Inc., pre-ISAT 202,555 A 

Battelle ISAT – Category 1 9,646 A 

Battelle ISAT – Category 2 9,646 A 

Battelle ISAT – Category 3 9,646

BHS modifications due to point loads 69,727 A 

Overtime hours for schedule acceleration 20,973 A 

Bag portering 3,435 B 

Warranties 147,584 A 

30-day technical support 16,400 A 

14000 

T4 

Engineering

PLC programming code 20,000 A 

FAT plans for emulation and simulation 25,000 A 

www.oig.dhs.gov OIG-12-105 

23 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Legend:

A - Charges benefited both CBIS work and overall BHS work. 

B - Charges appeared to be for BHS work outside the CBIS. 

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA. 

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423). 

Category Questioned Costs

Ineligible Unsupported Explanation

Spare parts list $10,000 A 

Operation and maintenance manual – draft 10,000 A 

Operation and maintenance manual – final 10,000 A 

Training plans (airlines, TSA, operation and 

maintenance) 10,000 A 

List of lubricants 3,000 A 

Mechanical installation drawings 20,000 A 

Control systems architecture 10,000 A 

FDS remote work package 20,000 A 

Standard BHS reports 30,000 A 

T4 redesign 211,924 A 

Sequence of operation 6,000 A 

T4 product data: mechanical components 3,000 A 

T4 product data: electrical field devices 3,000 A 

Electric typical control device description 6,000 A 

Electric MCP locations and PLC zones 20,000 A 

Electric motor manifest 6,000 A 

Power requirements, per MCP 4,500 A 

Electrical installation drawings 9,000 A 

Electric E-stop zone drawings 9,000 A 

Remove side guards for install of trilogy

locks, TC 1, 2, 3, 4 1,018 A 

14000 

T4 Equipment

Complete system conveyors – procurement 

and fabrication 300,000 A 

14000 

T4 Installation

Mechanical – site mobilization 100,000 A 

Mechanical – system layout/header install 180,000 A 

www.oig.dhs.gov OIG-12-105 

24 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Legend:

A - Charges benefited both CBIS work and overall BHS work. 

B - Charges appeared to be for BHS work outside the CBIS. 

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA. 

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423). 

Category Questioned Costs

Ineligible Unsupported Explanation

Mechanical – product 

receipt/storage/inventory $150,000 A 

Electrical – site mobilization 90,000 A 

Electrical – system layout/homerun piping 

and wiring 300,000 A 

Electrical field product submittals 100,000 A 

Mechanical installation – rough-in 112,200 A 

Mechanical installation – finalized 56,100 A 

Electrical installation 116,786 A 

14000 

T4 Testing

Battelle ISAT – Category 1 2,411 A 

Battelle ISAT – Category 2 2,411 A 

Warranties 12,670 A 

Battelle ISAT – Category 3 2,411 A 

100 percent payment and performance bond 166,590 A 

01000 

Gen. 

Requirements

Temporary lighting and power for basement, 

street, and curbside 488 A 

Additional rental fencing 8,840 A 

Relocate existing wall for safety at 

USAirways 1,261 A 

Paint temporary wall at TC-5 $538 B

Install temporary wall at TC-5 8,412 B

Demolish wall at TC-5 1,884 B

02000 

Sitework

Delta Airlines sign relocation 526 B

T3 demolition of oversized bag room for BHS 

installation 6,455 B

www.oig.dhs.gov OIG-12-105 

25 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Legend:

A - Charges benefited both CBIS work and overall BHS work. 

B - Charges appeared to be for BHS work outside the CBIS. 

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA. 

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423). 

Category Questioned Costs

Ineligible

* 

* 

* 

* 

Unsupported Explanation

05000 

Metals 

T3 fencing in T3 matrix $4,381 D

06000 

Rough 

Carpentry

Curbside podium inserts (CO #30) 11,879 B

Curbside podium inserts (CO #21) 24,672 B

Additional items at curbside podiums 434 B

09000 

Finishes 

T3 stainless steel cladding at dog houses 29,098 B

Demolition of wall at TC-5 4,782 B

Cleanup and repair of walls behind TC 5 1,967 B

Relocate signage behind Delta ticket counter 3,039 B

Paint wall at new TC-5 conveyor 146 B

Paint walls at ticket counters 1,927

* 

* 

* 

* 

* 

B 

Paint all impacted areas behind Delta ticket 

counter 659 B

Install safety signage at T4 International (I),

T4 N, T4 S, T4 R, and T2 3,916 B

10000 

Specialties

T3 relocate fans at service level 1,451 B

14000 

Conveying

Systems 

Modification to existing legacy conveyor 28,078 B 

Catwalk modification at TC Induction Line #2 

in T4 I 4,643 B 

Modify PLC logic for T2 alarm line 10,560 B 

Furnish and deliver tubs (large gray bins) for 

T3 airlines 15,987 B 

www.oig.dhs.gov OIG-12-105 

26 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Legend:

A - Charges benefited both CBIS work and overall BHS work. 

B - Charges appeared to be for BHS work outside the CBIS. 

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA. 

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423). 

Category Questioned Costs

Ineligible

* 

* 

* 

* 

* 

Unsupported Ineligible

T3 provide technical oversight and 

decommissioning $22,782 A 

Relocate USAirways ticket counters $31,964 B 

Work included minor adjustments to T4 east 

and west matrix 19,992 B 

Monitor T3 service level makeup area 882 B

Provide porters at each T3 counter 1,260 B

Baggage monitoring support 169 A 

Engineering support to modify T4 N east and 

west matrix 36,523 B 

High-efficiency motors 180,020 A 

T3 design changes 140,093 A 

15400 

Plumbing 

T3 R plumbing relocation for BHS row 3,558 B

Relocate water line in conflict with BHS at 

service level-south side 18,752 B

Relocate waste lines in conflict with BHS at 

service level-north side 1,221 B

15300 

Fire 

Protection

System

* 

* 

Repair fire sprinkler caused by Delta 1,126 B

Relocation of sprinklers for BHS row 6,266 B

15700 

HVAC

Extended warranty for T3 54,485 C 

Relocate controls conduit – conflict with BHS 20,623 B 

Relocate HVAC for BHS row 10,248 B 

Chilled water relocation for BHS row 4,387 B 

www.oig.dhs.gov OIG-12-105 

27 
 

 

 

 

 

 

 

 

 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Legend:

A - Charges benefited both CBIS work and overall BHS work. 

B - Charges appeared to be for BHS work outside the CBIS. 

C - Charges for preventive maintenance and/or extended warranties that are not allowed by the OTA. 

D - Charges for fencing which the City agreed was not installed in the building containing the CBIS.

* - Charges that the City and its representatives agreed were ineligible ($415,423). 

Category Questioned Costs

Ineligible

* 

Unsupported Ineligible

16000 

Electric

Monitor ticket counter security door $38,040 B 

Relocate conduits for BHS row 246,130 B 

T3 relocation of data cable for BHS row 61,362 B 

New fans at service level 6,892 B 

Subguard $195,785 A 

Total 3,825,784 4,645,842 

Federal Share (90 percent) 3,443,205 4,181,258

www.oig.dhs.gov OIG-12-105 

28 
 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Appendix D 

Major Contributors to This Report 

Roger La Rouche, Director 

Robert Leonard, Audit Manager 

Shawn Cosman, Auditor 

Ralleisha Dean , Report Referencer

www.oig.dhs.gov OIG-12-105
 

29
 
 

 OFFICE OF INSPECTOR GENERAL 

 Department of Homeland Security 

Appendix E 

Report Distribution 

Department of Homeland Security

Secretary 

Deputy Secretary 

Chief of Staff 

Deputy Chief of Staff

General Counsel 

Executive Secretary 

Director, GAO/OIG Liaison Office 

Assistant Secretary for Office of Policy 

Assistant Secretary for Office of Public Affairs 

Assistant Secretary for Office of Legislative Affairs 

Recovery Act Coordinator 

Acting General Manager, Checked Baggage Division/Program Manager 

 Electronic Baggage Screening Program, TSA 

Audit Liaison Official, TSA 

Office of Management and Budget

Chief, Homeland Security Branch

DHS OIG Budget Examiner 

Congress

Congressional Oversight and Appropriations Committees, as appropriate 

www.oig.dhs.gov OIG-12-105
 

30
 
 

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request to (202) 254-4305, or e-mail your request to our Office of Inspector General 

(OIG) Office of Public Affairs at: DHS-OIG.OfficePublicAffairs@dhs.gov. 

For additional information, visit our website at: www.oig.dhs.gov, or follow us on Twitter 

at: @dhsoig. 

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Should you be unable to access our website, you may submit your complaint in writing 

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