January 2001 Major Managem

Challenges and 

Program Risks

Department of Transpo

GAO-01-253

Page 1 GAO-01-253 

Letter 

Overview 

Major 

Performance 

and 

Accountability 

Challenges

Related GAO 

Products

Performance 

and 

Accountability 

Series
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of th

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United States General Accounting Office

Washington, D.C. 20548

January 2001

The President of the Senate

The Speaker of the House of Representati

This report addresses the major performa

accountability challenges facing the Depa

Transportation (DOT) as it seeks to ensur

efficient movement of people and goods a

effective investment of resources in the n

transportation infrastructure. It includes a 

actions that DOT has taken and that are u

address these challenges. It also outlines f

that GAO believes are needed. This analys

the new Congress and administration carr

responsibilities and improve government 

of the American people.

This report is part of a special series, first 

January 1999, entitled the Performance an

Accountability Series: Major Management 

and Program Risks. In that series, GAO ad

Congress that it planned to reassess the m

and criteria used to determine which fede

government operations and functions sho

highlighted and which should be designat

risk.” GAO completed the assessment, con

comments provided on a publicly availabl

draft, and published its guidance docume

Determining Performance and Accountab

Challenges and High Risks (GAO-01-159SP

November 2000.

This 2001 Performance and Accountabilit

contains separate reports on 21 agencies—

each cabinet department, most major inde

agencies, and the U.S. Postal Service. The 
Page 4 GAO-01-253 DO

includes a governmentwide perspective on p

and management challenges across the fede

government. As a companion volume to this 

is issuing an update on those government op

and programs that its work identified as “hig

because of either their greater vulnerabilitie

fraud, abuse, and mismanagement or major c

associated with their economy, efficiency, or 

effectiveness.

David M. Walker

Comptroller General 

of the United States
Page 5 GAO-01-253 
Page 6 GAO-01-253 

With $58.5 billion in funding for fiscal yea

Department of Transportation (DOT) is re

ensuring the safe and efficient movement 

goods and the cost-effective investment o

the nation’s transportation infrastructure, 

highways and transit systems, airports, ai

railroads, ports, and waterways. The Depa

achieved many successes in accomplishin

objectives and improving its operations. F

DOT successfully addressed the Year 2000 

challenge and the Congress has resolved s

uncertainties about long-term financing fo

Department’s aviation programs and the n

airports. In addition, DOT has improved t

management of its transit grant programs 

longer are at high risk of fraud, waste, abu

mismanagement. However, we, DOT’s Insp

(IG), and the Department itself have docu

shortcomings that still remain with the pe

management of the Department and uniqu

facing passenger rail travel and aviation a

competition. Although some actions have 

address these problems, in many cases, ad

will require a sustained effort by DOT, wo

other federal, state, local, and private sect

stakeholders and the Congress. 
Page 7 GAO-01-253 

Safety and Security Ensuring the safe and secure movement o

goods on the nation’s transportation infra

top priority for DOT. Although the Departm

improvements, there are still opportunitie

deaths and injuries and enhance the safet

of the traveling public. For example, the F

Aviation Administration (FAA) has annou

government and industry initiative to iden

causes of aviation accidents and to design 

that address them. This initiative should h

aviation safety; however, we recommende

effectiveness could be enhanced by devel

evaluation procedures. Further improvem

needed in hiring and training personnel w

• Improve the safety and security of air, high

and pipeline transportation

• Enhance the management of aviation and 

Guard acquisitions and obsolete ship disp

to maximize investment of public funds 

• Increase the accountability for financial 

management activities

• Improve the oversight of highway and tran

projects to provide maximum transportatio

services for the federal dollars invested

• Strengthen the financial condition of Amtr

• Enhance competition and consumer prote

in aviation and freight rail industries to en

reasonable fares, rates, and service
Page 8 GAO-01-253 DO

checkpoints at airports to screen passengers 

on baggage for dangerous objects and in sec

air traffic control (ATC) computer systems to 

possibility of intrusions or attacks. We recom

for example, that FAA tighten controls over 

employees by ensuring that appropriate back

investigations are performed. While DOT app

making progress on some initiatives to reduc

crashes, we have advocated that it obtain ne

quality, timely data on the causes of these cr

Finally, DOT has not assessed the effectiven

revised approach to regulating pipelines that 

natural gas and hazardous liquids. According

recommended that DOT determine whether 

approach of working constructively with pip

companies and reducing the use of fines has 

compliance with pipeline safety regulations.

Management of 

Acquisitions and 

Assets

DOT’s management of its major acquisitions 

needs improvement in several areas. FAA an

Coast Guard are undertaking costly, long-term 

to modernize and replace aging equipment. O

past 19 years, FAA’s multibillion-dollar ATC 

modernization program has experienced cos

delays, and performance shortfalls of large p

FAA is making progress in addressing some 

causes of these problems, but its reform effo

complete, and major projects continue to fac

schedule, and performance problems. Becau

size, complexity, cost, and problem-plagued 

designated FAA’s ATC modernization program 

risk information technology initiative in 1995

addition, the Coast Guard is planning a 20-ye

billion project to replace or modernize its fle

deepwater ships and aircraft. Although the a

addressed many of our earlier recommendat

the project’s justification and affordability, a

needs to be focused on the adequacy of the m

controls to oversee the project. Finally, the g
Page 9 GAO-01-253 

backlog of the Maritime Administration’s 

surplus ships awaiting disposal poses env

threats and leads to continuing costs for s

maintenance, and security. DOT’s IG reco

the Department seek congressional action 

contracting process for ship scrapping. 

Financial 

Management

Major improvements are still needed in D

management systems. The Department re

unqualified opinion on its fiscal year 1999 

statements and DOT’s IG reported that sig

progress was made in improving its financ

However, the IG also reported that system

affected DOT’s ability to prepare its financ

and account for liabilities and that the De

lacked a managerial cost accounting syste

financial management weaknesses have b

particularly troublesome at FAA because 

standing nature and the agency’s slow pro

resolving them. In January 1999, we desig

financial management as a high-risk area 

serious and long-standing accounting and 

management weaknesses. Until FAA has f

management systems and related procedu

controls that provide reliable information

will continue to be at high risk of waste, f

and mismanagement.

Highway and Transit 

Grants

Over the years, many large-dollar highway 

projects have incurred cost increases and 

delays. From 1998 through 2003, DOT is e

provide at least $198 billion for highway a

projects through programs financed large

Highway Trust Fund. Although the Federa

Administration (FTA) and the Federal Hig

Administration (FHWA) have improved th

of large highway and transit projects, add

opportunities exist to improve the oversig
Page 10 GAO-01-253 DO

projects and the approach to funding them. F

example, FTA may not have the resources it 

fiscal year 2001 to adequately oversee the sig

number of new transit projects requiring ove

we recommended that the Department ident

funding shortfalls and take steps to address 

also recommended that DOT prioritize eligib

projects so that funds can be directed to the 

deserving projects.

Intercity Passenger 

Rail

Despite efforts to improve its overall financia

the National Railroad Passenger Corporation 

has made relatively little progress in reducin

for federal operating subsidies. Since 1971, t

government has provided Amtrak with over 

in operating and capital assistance. In 1994, 

request of the administration and later at the 

the Congress, Amtrak pledged to eliminate t

federal operating subsidies by the end of 200

this goal, Amtrak has reduced its need for op

subsidies by only $83 million in 6 years (1995

must make $282 million in further reduction

and 2002. While revenues have increased, it w

difficult for Amtrak to eliminate the need for 

operating subsidies by the deadline, given Am

of overall progress in reducing costs. If Amtr

meet the goal, plans for restructuring intercit

rail service and liquidating Amtrak are to be 

to the Congress. Even if Amtrak does attain 

self-sufficiency, it could require substantially 

federal funds to meet its capital needs. We es

Amtrak will need at least $9 billion (in const

dollars) to meet its identified capital needs t

2015. 

Aviation and Rail 

Competition

Lack of effective competition in certain mark

contributed to high fares and rates and poor 

commercial aviation as well as freight rail 
Page 11 GAO-01-253 

transportation. A number of communities 

benefited from increased aviation compet

because barriers inhibit the entry of new a

a result, pockets of high fares and poor se

These barriers include limited access to g

airports and “slot” controls that limit the n

takeoffs and landings at certain congested 

Congress has begun to address some of th

including requiring the phasing out of “slo

However, the recently proposed merger b

Airlines and US Airways—two of the natio

airlines—has raised concerns that it may 

decreased competition in certain markets

freight shippers are concerned that recen

mergers and consolidations have resulted 

service and high rates in certain markets. 

Transportation Board, which approves rai

consolidations, has taken a number of acti

rail rate, service, and merger issues. Howe

Board’s actions may not fully satisfy many 

concerns that increased competition in th

is needed to improve service. Because of 

views of railroads and shippers, resolving 

competition issues will be difficult and m

congressional action. 
Page 12 GAO-01-253 

y g

Improve the Safety 

and Security of Air, 

Highway, and 

Pipeline 

Transportation

DOT is responsible for ensuring the safe a

movement of people and goods on the nat

transportation infrastructure—including i

transit systems, airports, airways, railway

waterways. Transportation safety and sec

paramount importance and a top priority 

Department. DOT has made measurable i

in many areas, as shown by the performan

tracks. For example, in fiscal year 1999, th

met two of its three goals for highway saf

of its four goals for freight railroad safety. 

there are still opportunities to reduce dea

enhance the safety and security of the tra

Our recent work shows the need for impr

(1) implementing certain aviation safety p

(2) screening passengers at airports for da

objects, such as guns and explosives; (3) 

security of ATC computer systems and the 

house them; (4) improving aspects of DOT

initiatives, including the quality of safety d

(5) identifying and integrating state partic

pipeline safety programs.

Aviation Safety The continued growth that is forecast for a

United States in the coming decade will b

fatal accidents if the current accident rate 

reduced. Commercial aviation, used by m

when they fly, experienced an average of 

accidents a year in the United States from 

general aviation experienced an average o

accidents a year during the same period.1

 

year 1999, DOT has set annual performan

1

Commercial aviation includes both large air carrier 

smaller commuter operations. General aviation inclu

of aircraft, ranging from corporate jets to small pisto

as well as helicopters, gliders, and aircraft used in su

firefighting and agricultural spraying. 
Page 13 GAO-01-253 

improve aviation safety. However, in fiscal 

Department missed all four annual perfor

for aviation safety. These goals targeted (

accident rate in commercial aviation, (2) t

dangerous incidents on airport runways, (

errors in maintaining safe separation betw

and (4) the frequency at which aircraft en

without prior coordination. (See table 1.)

Table 1: DOT’s Fiscal Year 1999 Performance Measures and Goals for Aviation Sa

a

“Activities” are total FAA facility activities, as define

System Indicators 1997 Annual Report. An example 

an air traffic controller providing guidance to a pilot 

make an instrument landing.

Source: DOT.

FAA’s annual performance goals to reduce 

fatal aviation accidents represent interim 

reaching the challenging goal set by the W

and congressional commissions—an 80-p

reduction in the fatal accident rate by 2007

effort to achieve this long-range goal, FAA 

the Safer Skies initiative in April 1998. Saf

joint effort by government and the aviatio

reduce the fatal accident rate by identifyin

Performance measure Fiscal year 1999 goal

Fiscal year 1999 

performance

Number of fatal aviation 

accidents for U.S. commercial air 

carriers per 100,000 flight hours

.034 accidents per 100,000 

flight hours

.04 accidents per 

100,000 flight hours

Number of dangerous incidents 

on airport runways (runway 

incursions)

270 incidents 322 incidents 

Number of errors in maintaining 

safe separation between aircraft 

per 100,000 activitiesa

.496 errors per 100,000 

activities

.57 errors per 100,000 

activities

Number of deviations—i.e. when 

an aircraft enters airspace 

without prior coordination—per 

100,000 activities

.099 deviations per 100,000 

activities

.18 deviations per 

100,000 activities
Page 14 GAO-01-253 DO

causes of accidents and designing interventi

address them. In June 2000, we reported tha

Skies initiative should help reduce the accide

enhance the safety of air travelers. 

We recommended, however, that the initiativ

effectiveness could be enhanced by consider

potential new safety threats caused by chang

aviation environment, developing effective s

monitor the implementation of interventions

evaluating the effectiveness of these interven

Moreover, we found that efforts to evaluate t

interventions’ effectiveness will be hampere

of (1) good baseline data on the extent of the 

prior to implementing the intervention, (2) ex

against which to measure progress, and (3) p

measures that are clearly linked to the safety 

being addressed. We recommended that base

goals, and performance measures be develop

Safer Skies initiative.

In addition, a key to improving aviation safet

to have an effective process for inspecting th

airline operations. In the past, we and others 

expressed concerns about the adequacy of F

inspection process to meet this challenge. C

about the inspection process focused on uns

nonsystematic inspections that produced few 

safety problems and on the adequacy of insp

technical training. These concerns also raise

about the quality and consistency of the resu

inspection data and their usefulness for cond

analyses and targeting FAA’s resources to the 

safety risks. In response, FAA introduced, in 

redesigned safety inspection system called th

Transportation Oversight System (ATOS). AT

designed to ensure that airlines have operati

to control risks and prevent accidents and to 

more useful information to help FAA target i

inspection resources more effectively. We re
Page 15 GAO-01-253 

initial implementation of ATOS and, in Jun

reported that it was responsive in concep

our previous concerns and recommendati

we concluded that ATOS suffered from a 

severe problems caused by an overly amb

implementation schedule. We recommend

specific actions to clarify the program’s gu

improve the usefulness of FAA’s database 

inspection resources to the areas of great

safety risk. FAA recognized the need for im

and postponed wider implementation of A

problems are corrected. FAA is continuin

our concerns with the program and recom

but has not yet fully implemented them.

Airport Security Protecting the air transport system from t

attacks or other dangerous acts remains a

national issue. FAA has a number of safeg

to prevent attacks against commercial air

the most important of these are the check

airports where passengers and their carry

screened for dangerous objects, such as g

explosives. Historically, however, screene

operate checkpoints in the United States 

difficulty detecting dangerous objects, mi

as 20 percent during tests conducted by F

In June 2000, we reported that long-stand

continue to reduce screeners’ effectivene

dangerous objects, most notably (1) the ra

of screener personnel—often above 100 p

at large airports and, in at least one airpor

percent in a year—and (2) the human fact

with screening that have for years affecte

hiring, training, and working environment

A key factor in the rapid turnover is the lo

screeners receive. Screeners are often pai

minimum wage or close to it and can freq

more at airport fast-food restaurants. 
Page 16 GAO-01-253 DO

Table 2: Turnover Rates for Screeners at 19 Large Airports, May 1998-April 1999

Source: FAA.

FAA is pursuing several initiatives to improv

training, and testing of screeners; to increase 

alertness and more closely monitor their per

and to certify the security companies that air

to staff screening checkpoints. However, mo

efforts are behind schedule. For example, FA

behind schedule in issuing its regulation requ

certification of screening companies. Furthe

has established performance improvement g

screeners, but it has not (1) developed an int

plan to tie its various efforts to improve scre

City (airport) Annual turnover 

Atlanta (Hartsfield Atlanta International) 

Baltimore (Baltimore-Washington International) 

Boston (Logan International) 

Chicago (Chicago-O’Hare International) 

Dallas-Ft. Worth (Dallas/Ft. Worth International) 

Denver (Denver International) 

Detroit (Detroit Metro Wayne County) 

Honolulu (Honolulu International) 

Houston (Houston Intercontinental) 

Los Angeles (Los Angeles International) 

Miami (Miami International) 

New York (John F. Kennedy International) 

Orlando (Orlando International) 

San Francisco (San Francisco International) 

San Juan (Luis Munoz Marin International) 

Seattle (Seattle-Tacoma International) 

St. Louis (Lambert St. Louis International) 

Washington (Washington-Dulles International) 

Washington (Ronald Reagan Washington National) 

Average turnover rate 
Page 17 GAO-01-253 

performance to the achievement of its goa

(2) adequately measured its progress in ac

goals for improving screeners’ performan

2000, we recommended that FAA complet

implement such a plan and establish addit

performance goals to better ensure the su

efforts to improve screeners’ performance

congressional concerns over screeners’ tra

to recently enacted legislation that signific

their training and testing requirements.

Air Traffic Control 

Computer Security

Security at our nation’s airports alone doe

safe air travel. It is also critical to secure F

computer systems, which provide informa

traffic controllers and aircraft flight crews 

ensure the safe and expeditious movemen

Failure to adequately protect these system

the facilities that house them, could cause 

disruption of air traffic or even a loss of li

collisions. 

In May 1998, we reported that (1) physica

management and controls at facilities tha

systems were ineffective; (2) systems secu

operational and future systems—were ine

rendering systems vulnerable; and (3) FAA

management structure for implementing a

computer security policy was ineffective. 

in December 1999, we reported that FAA w

following its own personnel security pract

had increased the risk that inappropriate 

employees might have gained access to it

information, or resources. For example, w

instances in which required background i

had not been performed—including on 36 

Chinese nationals who reviewed the comp

code of eight mission-critical systems as p

effort to ensure Year 2000 readiness. By no
Page 18 GAO-01-253 DO

own policies, FAA increased the exposure of 

to intrusion and malicious attack.

Between May 1998 and May 2000, we made 2

recommendations to address, among other t

weaknesses in 

• physical security—by inspecting all ATC 

that had not been recently inspected, cor

identified weaknesses, and accrediting th

facilities;2

• operational ATC systems security—by as

certifying, and accrediting3

 all systems by 

1999, and at least every 3 years thereafter, 

by federal policy;

• future ATC systems security—by includin

formulated security requirements in the 

specifications for all new ATC systems;

• security management—by developing an 

Chief Information Officer (CIO) managem

structure for implementing and enforcing 

security policy; and

• personnel security—by tightening contro

contractor employees by ensuring that ap

background investigations are performed

FAA is acting to address our recommendatio

progress in some areas has been slow. In our 

2000 testimony, we updated the status of the

2

At the time of our review, FAA’s policy required that AT

inspected to determine if they met physical security sta

inspection then served as the basis for accrediting a fac

concluding that it is secure.

3

System certification is the technical evaluation that is c

verify that FAA systems comply with security requireme

Certification results are one factor management consid

whether to accredit systems. Accreditation is the forma

that the appropriate security safeguards have been prop

implemented and that the residual risk is acceptable.
Page 19 GAO-01-253 

and found that serious and pervasive prob

to exist: 

• In the area of facilities’ physical securi

making progress in assessing its facilit

agency has identified significant weak

numerous ATC facilities have yet to be 

accredited as secure, in compliance w

policy.

• FAA does not know how vulnerable m

operational ATC systems are and cann

protect them until it performs the appr

assessments and addresses identified w

Furthermore, FAA has not always acte

implement corrective actions for the s

have undergone risk assessments and 

system access controls designed to pre

unauthorized access. 

• FAA has established an information sy

management structure under the CIO, 

yet have a comprehensive security pro

• In the area of personnel security, FAA 

perform appropriate background inves

federal employees, but many Top Secr

reinvestigations of senior personnel ar

some by over 5 years. FAA is working 

background investigations on thousan

contractor employees, but much work 

done.

• In addition, we found that FAA’s efforts 

critical operations continue without in

limited and FAA has not yet fully imple

intrusion detection capability for its co

systems that will enable it to quickly d

respond to malicious intrusions.

In December 2000, we made an additional 

recommendations to address these contin

weaknesses. Senior FAA officials have ac

weaknesses in the agency’s computer sec
Page 20 GAO-01-253 DO

and have generally agreed to address our 

recommendations. Until FAA addresses the p

weaknesses in its computer security program

its critical information systems will remain a

risk of intrusion and attack, and its aviation 

will remain at risk.

Truck Safety In 1999, about 5,400 people died on our natio

from crashes involving large trucks (those w

weight of more than 10,000 pounds), a figure 

unchanged from a decade ago. (See fig. 1.) T

this problem, the Secretary of Transportation 

of reducing truck-related fatalities to about 2

2009.

Figure 1: Number of Fatalities From Large Truck Crashes, 1989-1999

Source: DOT.

Truck-related fatalities

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

6,000

5,500

1989 1990 1991 1992 1993 1994 1995 1996 1997 
Page 21 GAO-01-253 

DOT has taken several steps to improve tr

First, as required by the Congress, in Janu

established a new organization—the Fede

Carrier Safety Administration—that is res

truck safety and places a greater emphasi

enforcement and compliance. Second, DO

developed an overall strategy to improve 

commercial motor vehicles (trucks and bu

strategy, called the Safety Action Plan, cov

through 2003 and contains 47 initiatives th

intended to be an initial step in enabling th

to reduce fatalities to meet its fiscal year 

These initiatives fall within several broad 

including increasing the enforcement of fe

regulations; increasing safety awareness; 

safety information and technology; and im

performance standards for vehicles, drive

carriers. 

The Department must overcome significa

make measurable progress in improving t

First, several key leadership positions in t

Federal Motor Carrier Safety Administrati

the Administrator and four Associate Adm

have never been filled. The longer the Dep

to fill these positions, the more difficult it 

accomplish the challenging goals to impro

safety. Second, while the Department app

making progress on some of the individua

its Safety Action Plan, it lacks high-quality

information on the causes of large truck c

1999, we brought to the forefront the prob

DOT’s data on truck crashes and, as a resu

begun to improve its data on their causes

data, DOT cannot determine the degree to 

initiatives will reduce truck-related fatalit

Department is only beginning to determin

will have the resources to complete the ac

plan. Finally, the Federal Motor Carrier Sa

Administration’s proposed revisions to its 
Page 22 GAO-01-253 DO

limit the number of hours that truck drivers m

their vehicles before resting (estimated to sa

a year) have been widely criticized by the tru

industry and safety groups. DOT has receive

20,000 comments on these revisions. The fut

revisions to rules concerning hours of servic

uncertain, in part, because DOT’s appropriat

fiscal year 2001 prohibits the Department fro

funds to promulgate a final rule on hours of 

However, it allows the agency to carry out al

rulemaking activities short of adopting a fina

Pipeline Safety DOT’s Office of Pipeline Safety (OPS) is resp

ensuring the safe transportation of natural g

hazardous liquids (such as crude oil and refi

gasoline) by pipeline. Although fatalities from 

accidents are relatively few in number when 

with those from accidents involving other fo

freight transportation, they have been increa

1989 through 1998, the number of major pipe

accidents increased by about 4 percent annu

2) and resulted in an average of about 22 fata

year.4

 During this period, 226 people died an

people were injured in 2,241 major pipeline a

More recently, in August 2000, 12 people wer

the result of a natural gas pipeline accident i

New Mexico. 

4

Major pipeline accidents are those that result in a fatali

property damage of $50,000 or more.
Page 23 GAO-01-253 

Figure 2: Accidents Resulting in Fatalities, Injuries, or $50,000 or More in Proper

1998

Source: GAO’s analysis of OPS’ data.

OPS has adopted several initiatives to imp

safety, including a risk management demo

program. It is implementing a risk-based a

regulation based, in part, on preliminary q

results from the demonstration program. 

moving toward inspecting entire pipelines 

segments of pipelines to provide a more c

assessment of a pipeline’s safety risks. Fin

changed its approach to enforcing compli

regulations by reducing its use of fines an

working with pipeline operators to identif

safety problems.

Although we agree that a risk-based appro

potential to improve pipeline safety, we h

about OPS’ actions. First, the office is imp

0

50

100

150

200

250

300

1989 1990 1991 1992 1993 1994 1995 1996 

Number of accidents
Page 24 GAO-01-253 DO

approach before obtaining quantitative evide

the results of its risk management demonstr

program. OPS has not developed performanc

for the demonstration program nor collected 

data on safety that could help evaluate the p

support the broader implementation of a risk 

management approach to pipeline safety. Se

inspecting interstate pipelines, OPS is relyin

states to inspect those portions of the pipelin

their borders. OPS made this change primari

of the logistical difficulties in scheduling sys

inspections with the states involved. States’ 

with the pipeline segments in their jurisdicti

aid in identifying the very risks that OPS is h

mitigate through its new approach. In additio

combined federal and state approach to over

pipeline safety could better leverage federal 

In May 2000, we recommended that the Secr

Transportation direct OPS to work with state 

officials to determine which federal pipeline 

activities would benefit from state participat

those states willing to participate, integrate s

participation into those activities. DOT agree

recommendation.

Finally, OPS’ approach of working construct

pipeline companies and reducing the office’s 

monetary penalties in enforcing regulations 

reasonable if pipeline companies are achievi

rates of compliance. The office has already s

reduced its use of fines—the percentage of e

actions that resulted in fines fell from nearly 

in 1990 to about 4 percent in 1998. However, O

assessed whether less punitive actions are e

achieving the desired results. In May 2000, w

recommended that DOT determine whether 

reduced use of fines has maintained, improv

decreased compliance with pipeline safety r

DOT agreed to conduct this evaluation. 
Page 25 GAO-01-253 

Key Contacts John H. Anderson, Jr., Managing Director

Physical Infrastructure

 (202) 512-2834

andersonj@gao.gov

Joel C. Willemssen, Managing Director

Information Technology 

(202) 512-6408

willemssenj@gao.gov

Enhance the 

Management of 

Aviation and Coast 

Guard Acquisitions 

and Obsolete Ship 

Disposal to 

Maximize 

Investment of 

Public Funds 

Several of DOT’s major acquisitions and a

significant challenges that require manage

attention. FAA and the Coast Guard are un

costly, long-term programs to modernize a

aging equipment. In addition, a growing b

MARAD’s surplus ships poses environmen

leads to continuing costs as these ships aw

Our work has shown that these agencies n

improve the management of these acquisi

assets to ensure that federal funds are eff

efficiently used.

Federal Aviation 

Administration’s Air 

Traffic Control 

Modernization

Faced with rapidly growing traffic volume 

equipment, FAA initiated an ambitious AT

modernization effort in 1981. This effort in

acquiring new air traffic control facilities, 

vast network of radar, automated data pro

navigation, and communications equipme

expected to cost a total of $45 billion thro

2005. To date, the Congress has appropria

billion, and FAA estimates that it will need 

more.

Over the past 19 years, the modernization 

experienced cost overruns, schedule dela

performance shortfalls of large proportion

its size, complexity, cost, and problem-pla
Page 26 GAO-01-253 DO

designated this program as a high-risk inform

technology initiative in 1995. Many of the iss

reported then remain today, and we continue 

this program remains at high risk.

Our work over the years has pinpointed the 

of the modernization program’s problems, in

(1) immature software acquisition capabilitie

lack of a complete and enforced systems arc

(3) inadequate cost estimating and cost acco

practices, (4) the lack of an effective CIO ma

structure, (5) an ineffective investment mana

process, and (6) an organizational culture th

the acquisition process. We also noted that F

many challenges in implementing its new air 

management concept known as “free flight,” 

would allow pilots more flexibility in choosi

and is intended to improve air traffic safety a

efficiency. Since 1995, we have made over 30 

recommendations to address the root causes 

modernization’s problems. For example, we 

recommended that FAA improve its software 

capabilities by institutionalizing mature proc

develop and enforce a complete systems arc

and implement an effective CIO managemen

similar to the department-level CIOs prescrib

Clinger-Cohen Act of 1996.

FAA initiated numerous activities in respons

recommendations in each of these areas. Ho

many areas, more must be done:

• FAA developed an integrated framework 

improving its software acquisition, softw

development, and systems engineering pr

The agency is also tracking several projec

to improve these processes. However, FA

yet require all systems to achieve a minim

software process maturity before being fu
Page 27 GAO-01-253 

• FAA is working to develop a complete 

architecture, or overall blueprint, and 

issue its draft of a technical architectu

• To improve cost estimates, FAA develo

standard work breakdown structure a

established an historical database for t

systems’ costs and other information. 

has not yet fully instituted rigorous co

practices. FAA is working to develop a 

accounting capability and expects to h

capability fully in place by September 

• FAA established a CIO management st

consistent with the provisions of the C

Act, and the CIO is working to manage 

complex, agencywide initiatives—whi

improving information systems securit

a complete systems architecture, and i

agency’s software acquisition processe

the CIO faces a continuing challenge in 

these initiatives are implemented and 

• To improve its investment managemen

FAA is now overseeing investments’ ri

capturing key information from the inv

selection process in a management inf

system. However, the agency has not y

guidance for validating investment ana

instituted a process for evaluating proj

implementation to identify lessons lea

improve the investment management p
Page 28 GAO-01-253 DO

• FAA issued an organizational culture fram

1997 and is working to implement it. How

IG reported in August 2000 that FAA’s cul

remains a barrier to successful acquisitio

and that integrated teams, a key mechani

deliver more cost-effective and timely pro

not working well because FAA’s culture c

operate in vertical “stovepipes,” which co

the horizontal structure of team operatio

our recent report on FAA’s Wide Area Aug

System (WAAS) confirmed that the integr

were not working as intended.6

 We found 

competing priorities between two key or

that are part of the WAAS integrated team 

the effectiveness of the team’s approach 

the agency’s goals for WAAS.

• FAA established a program office for its f

initiative to help reduce technical and fin

by implementing selected technologies o

basis and evaluating them before fully im

them. However, many challenges remain, 

developing software, integrating free fligh

technologies with other modernization pr

addressing human factor issues affecting 

and pilots. 

Clearly, FAA has initiated numerous improve

its reform efforts are not yet complete. In the 

major projects continue to face challenges th

affect their cost, schedule, and performance

example, in June 2000 we reported that FAA’

project has experienced cost increases of $5

5

DOT Office of Inspector General, Survey of the Federa

Administration’s Integrated Product Development Syste

110, Aug. 29, 2000).

6

WAAS, which will be a ground- and satellite-based navi

for airspace users, is intended to significantly augment 

the current ground-based navigation system, which requ

fly less efficient routes to arrive at their destinations.
Page 29 GAO-01-253 

and a 3-year delay. (See table 3.) However

increases are likely to grow to about $720 

the delay is likely to grow to 6 years becau

problems associated with meeting a key p

requirement to provide timely warnings w

signal is providing misleading information 

not be used. 

Table 3: Development Costs and Schedules for WAAS, 1994—September 1999

Note: Since 1996, FAA has included life-cycle costs

costs for developing, operating, and maintaining pro

2000, we reported that the life-cycle cost estimate f

$3,187.6 million.

a

The January 1998 program development costs for 

costs for the prime contractor, development of stand

procedures, technical engineering and program sup

year of costs for satellites.

b

The September 1999 estimate for WAAS developm

$1.3 billion in satellite service acquisitions through 2

estimates, satellite service acquisition costs were in

of operating WAAS.

c

FAA did not meet this milestone and has not determ

capability will be available.

Source: FAA.

FAA has acknowledged that it took a risk 

a design for the system and establishing m

its deployment before completing the rese

Dollars in millions

As of

WAAS’ cost and 

schedule 

information 1994 Jan. 1998 Jan. 1999 

Total development 

costs

$508 $1,007a $1,007 

Initial capability 

schedule

June 1997 July 1999 Sept. 2000 

Full capability 

schedule

Dec. 2000 Dec. 2001 To be determined 
Page 30 GAO-01-253 DO

development needed to demonstrate the sys

capabilities. FAA is implementing a new app

which it plans to reevaluate the system at cr

in its development. The agency has establish

of internal and external specialists in satellite 

to identify the technical changes necessary f

meet its key performance requirements.

We recommended that FAA develop a compr

plan that would include established checkpo

which the agency would determine, among o

whether users’ needs have changed and whe

technologies have matured and could better 

needs and the agency’s requirements for sate

navigation. Furthermore, we recommended 

should have an external organization evaluat

progress at established checkpoints and incl

results of this evaluation in its request for fut

of the navigation system. FAA concurred wit

recommendations and has, in fact, appointed 

independent board—consisting of external e

satellite navigation, safety certification, and 

spectrum—that reports directly to the FAA 

Administrator. The board is tasked with revi

soundness of the panel’s recommendations a

revalidating the future path for WAAS. Howe

the past problems in developing this system 

long-term effort that is still required, we beli

continued oversight by an independent group 

is warranted. It is not clear whether the curr

independent board will fulfill this role. We w

to evaluate FAA’s progress on this and other 

acquisition efforts.

The Coast Guard’s 

Deepwater Project

The Coast Guard is planning what is potentia

largest acquisition project in its history. This 

Deepwater Capability Replacement Project, 

replacing or modernizing the Coast Guard’s 9

209 aircraft. The estimated cost could total $
Page 31 GAO-01-253 

over 20 years. In October 1998, we recom

the Coast Guard more thoroughly address 

justification and affordability. The Coast G

responded by more thoroughly document

justification for the project as the followin

show: 

• In December 1999, the Interagency Tas

Roles and Missions of the Coast Guard 

report reaffirming the future roles and 

responsibilities of the Coast Guard and 

importance of the Deepwater Project. 

• The Coast Guard contracted with the C

Naval Analysis and sought our input in 

justification for the Deepwater Project

• The Coast Guard has provided more c

information on the condition of ships a

contractor teams as a basis for determ

Deepwater Project’s needs.

• The agency modified its acquisition sc

more time for contractors to adequate

updated data on current fleets of deep

and aircraft. 

Although the Coast Guard is addressing m

earlier concerns, numerous uncertainties 

including the project’s affordability and th

management controls to oversee it. These 

must be addressed both before and after t

awards a contract for its Deepwater Proje

2002. Currently, DOT plans to request $35

the Deepwater Project in February 2001, b

Guard will not complete planning the proj

2001. Asking for funds prior to completing 

process raises uncertainties about what th

acquisition strategy will be and how the fu

used. 
Page 32 GAO-01-253 DO

A key uncertainty surrounding the Deepwate

involves the contracting approach the Coast 

plans to use to procure deepwater ships and 

This approach, which calls for awarding a co

one system integrator for a period of 20 or m

has never been used on a procurement of thi

complexity. There are no models in the feder

government to guide the Coast Guard in dev

acquisition strategy for this approach. Becau

uniqueness of this approach, the large dollar

and the importance of this approach in shap

future of the Coast Guard, the agency’s plann

contracting strategy requires a carefully thou

well-documented acquisition plan. We are cu

reviewing issues related to the Deepwater Pr

including the Coast Guard’s proposed contra

strategy. As part of our review, we shared ou

preliminary observations with the Coast Gua

managers, expressing concerns about the lac

documentation and detailed analyses of the 

associated with various contracting alternati

Coast Guard’s managers agreed to examine t

contracting strategy in more detail and to do

their plans. We plan to issue a report on our 

the summer of 2001. 

Maritime 

Administration

The growing backlog of MARAD’s surplus sh

disposal poses environmental threats and lea

continuing costs for storage, maintenance, a

In October 1998, we reported that MARAD h

awaiting disposal or scrapping. In fiscal year 

number of surplus ships had grown to 112, a

DOT’s IG.7

 Ship scrapping is a labor-intensive 

with extremely high risks with respect to env

and worker safety issues. Ships typically con

7

DOT Office of Inspector General, Top 12 Management 

Department of Transportation (CE-2000-026, Dec. 22, 19
Page 33 GAO-01-253 

environmentally hazardous materials, suc

polychlorinated biphenyls (PCBs), lead, m

cadmium. If done improperly, ship scrapp

the land and water surrounding the scrapp

jeopardize the health and safety of the peo

in the scrapping process. However, storin

maintaining rather than scrapping the ship

and also poses environmental threats. For 

1999 alone, the cost to maintain the vesse

disposal amounted to $4.2 million. Figure 

deteriorating vessel awaiting disposal.

Figure 3: Deteriorating Vessel at MARAD’s James River Reserve Fleet

Source: Office of Inspector General, DOT.
Page 34 GAO-01-253 DO

From 1983 through 1994, MARAD relied prim

selling its surplus ships for overseas scrappi

However, in 1994, overseas scrapping was su

because of legal constraints on the export of 

disposal. As a result, MARAD has been relyin

domestic scrapping market, but there is a sh

qualified domestic bidders. In the 1970s, whe

of ships were scrapped domestically, the ind

comprised about 30 firms. Since then, many 

left the industry. Furthermore, the difficultie

experienced by some domestic scrappers in 

with environmental, worker safety, and othe

performance provisions have led MARAD to 

fewer firms to be technically and financially a

As of December 1999, only four companies h

MARAD’s scrapping contracts and passed th

technical compliance review to scrap vessel

8

To be financially acceptable, firms must offer to pay M

purchase price greater than $0 for the ships.
Page 35 GAO-01-253 

MARAD is required by law to dispose of it

by September 30, 2006, in a manner that p

best value to the government. DOT’s IG re

MARAD made very little progress in dispo

surplus ships during fiscal year 1999. Duri

MARAD sold 15 of the 112 ships for dome

but as of December 1999, work had starte

vessel. The other 14 vessels remained mo

MARAD’s fleets, requiring continued main

IG reported that the requirement to maxim

returns on the disposal of surplus ships m

today’s marketplace. To dispose of MARA

ships in a timely manner, the IG made sev

recommendations including that the agen

legislative approval to eliminate the requi

maximize financial returns and seek autho

funding for a program to pay for the dispo

ships.9

 In line with this recommendation, 

provided $10 million to MARAD and the D

the Navy for fiscal year 2001 to dispose of 

their surplus ships, which should start to 

backlog.

Key Contacts John H. Anderson, Jr., Managing Director

Physical Infrastructure

(202) 512-2834

andersonj@gao.gov

Joel C. Willemssen, Managing Director

Information Technology

(202) 512-6408

willemssenj@gao.gov

9

DOT Office of Inspector General, Report on the Pro

Scrapping Obsolete Vessels (MA-2000-067, Mar. 10, 2
Page 36 GAO-01-253 DO

Charles I. Patton, Jr., Director

Defense Capabilities and Management

(202) 512-8412

pattonc@gao.gov

Increase the 

Accountability for 

Financial 

Management 

Activities 

For years, DOT has struggled to improve its 

management activities, but inadequate accou

systems and related procedures and controls 

hampered its progress. DOT’s IG issued an u

opinion on DOT’s fiscal year 1999 financial s

and reported that significant progress has be

improving the Department’s financial reports

the IG also reported that systems’ deficienci

the Department’s ability to prepare financial 

and to account for liabilities and that the De

lacked a managerial cost accounting system 

costs by major program.10 In addition, in a sep

report on FAA’s fiscal year 1999 financial sta

which also received an unqualified opinion, t

reported that FAA lacked an adequate system 

for its property, plant, and equipment on an o

basis.11 In January 1999, we designated FAA’s 

management as a high-risk area because of s

long-standing accounting and financial mana

weaknesses. 

DOT’s Financial 

Management Systems

While DOT received an unqualified opinion o

year 1999 financial statements, this opinion r

extraordinary effort by the Department and 

staff and will be difficult to repeat. For exam

10DOT Office of Inspector General, Fiscal Year 1999 Con

Financial Statements, Department of Transportation (F

Mar. 8, 2000).

11DOT Office of Inspector General, Fiscal Year 1999 Fin

Statements, Federal Aviation Administration (FE-2000-0

2000).
Page 37 GAO-01-253 

because FAA lacks an adequate system to 

property, plant, and equipment on an ongo

used alternative procedures and labor-inte

methods to establish a baseline and costs 

plant, and equipment.

The IG’s audit report also cited problems 

accounting systems that prevented the De

complying with the Federal Financial Man

Improvement Act of 1996. The IG reported 

comply with the act, DOT needed to (1) m

accounting systems so they would be the p

of financial information for the consolidat

statements, (2) properly accrue liabilities

(3) implement a managerial cost accounti

can allocate costs by major program.

Because DOT’s accounting systems do no

data necessary to prepare annual financia

the Department relies heavily on year-end 

“outside” its systems. The IG reported that 

about 800 such outside adjustments totali

to prepare its fiscal year 1999 financial sta

need for this large number of adjustments 

DOT lacked reliable data on a day-to-day 

management decisions and maintain acco

the taxpayers. The IG also reported that D

have systems in place to allocate costs by 

programs. As a result, DOT’s ability to me

evaluate performance in terms of efficien

effectiveness is limited.

Because many of DOT’s problems stemme

weaknesses in FAA’s financial statements 

and because of FAA’s cost accounting and 

issues, discussed below, we designated FA

management as a high-risk area in 1999. U

financial management systems and relate

and controls that provide reliable informa
Page 38 GAO-01-253 DO

prepare financial statements and reports, (2) 

meaningfully accumulate and report costs fo

and activities, and (3) account for property, p

equipment on an ongoing basis, the agency’s 

management will continue to be at high risk 

fraud, abuse, and mismanagement.

DOT is progressing in addressing our and th

concerns by improving or replacing the capa

its accounting systems so they can provide th

data needed to prepare financial statements 

reports. The Department plans to replace its 

systems with a commercial general ledger ac

system that will be able to maintain account

information at the detailed account level. In 

DOT is implementing a new financial reporti

that will summarize detailed account inform

the general ledger for use in preparing financ

statements and other reports. The financial r

module has been implemented at two DOT a

Federal Railroad Administration and FTA. Th

Department plans to broaden the use of the 

more agencies during fiscal year 2001, with f

implementation expected by September 200

replacement system is also being designed to 

costs by major programs. 
Page 39 GAO-01-253 

FAA’s Managerial 

Cost Accounting 

Information

FAA lacks a cost accounting system or an 

means to meaningfully accumulate and re

The objective of a cost accounting system 

accurately assign basic financial costs—s

agency’s labor, overhead, and other costs—

activities and projects. Accurate cost info

essential for managing FAA’s programs in 

areas: (1) budgeting and cost control, (2) 

cost reimbursements and setting fees and 

performance measurement, (4) program e

and (5) choosing among alternative action

Deficiencies in these areas limit FAA’s and 

to make effective decisions about resourc

adequately control major projects, such a

multibillion-dollar ATC modernization pro

FAA has made substantial progress in dev

cost accounting capabilities. It is develop

comprehensive cost accounting system th

have fully operational by the end of fiscal y

system is expected to provide detailed inf

about the costs of services that FAA provi

public. As of September 30, 2000, FAA had 

three of the four Air Traffic Services cost 

systems applications.13 In July, these appli

producing reports that FAA’s managers ar

analysis and training. The fourth applicati

scheduled for implementation during the s

of fiscal year 2001. These plans address m

concerns. However, the applications bein

service are not fully integrated with other 

within DOT and FAA. Integration, which i

12The Statement of Federal Financial Accounting Sta

Managerial Cost Accounting Standards, July 31, 199

five areas for which cost information is essential in 

government programs.

13Air Traffic Services is the FAA organization respon

and maintaining the national airspace system.
Page 40 GAO-01-253 DO

fully realize the efficiency and effectiveness 

data processing systems, is dependent on th

replacement of those other systems. In addit

cost systems applications, like DOT’s system

require some costs to be manually allocated, 

allocating them automatically. As a result, th

do not provide the reliable up-to-date data n

making decisions.

FAA’s Property 

Systems

Since 1994, DOT’s IG has reported that FAA 

systems and related procedures to accuratel

routinely account for its property, plant, and 

(PP&E)—which, as of September 30, 1999, to

billion. This lack of accurate and current PP

information may impede the ability of progra

to properly manage and safeguard these asse

make prudent business decisions. It may als

ability to accurately determine the costs of o

on an ongoing basis.

In fiscal year 1999, FAA started an extensive 

intensive project to reconstruct the detailed 

needed to document its PP&E costs. With a s

effort and commitment of resources, FAA m

progress and, for the first time, established a 

baseline. This extraordinary effort resulted i

corrections to previously reported PP&E am

including a $3 billion increase in the reporte

PP&E and an $806 million increase in accum

depreciation. While this special effort establ

baseline for PP&E costs, without adequate s

controls, FAA will have difficulty tracking its 

activity on a routine basis. In its report on FA

financial statement for fiscal year 1999, the I

concluded that the manual and labor-intensiv

could not be sustained in the future and are 

errors, mistakes, and inaccuracies. As a resu

classified the internal controls over FAA’s PP

material weakness.
Page 41 GAO-01-253 

During fiscal year 2000, FAA began implem

system to maintain detailed PP&E record

calculate depreciation. In the past, the dep

expense, which is an important componen

operating costs, required the preparation 

electronic spreadsheets. The new system 

be fully operational by September 2001. H

full benefits of the new detailed record sys

will not be realized until it is integrated w

changes (or replacements) to FAA’s existi

property systems that identify and track P

such as property acquisitions and disposa

not expect these related PP&E systems to 

implemented until fiscal year 2003. We wi

monitor FAA’s progress in implementing t

systems to determine if they are responsiv

concerns that we and the IG raised.

Key Contact Linda Calbom, Director

Financial Management and Assurance

(202) 512-9508

calboml@gao.gov

Improve the 

Oversight of 

Highway and 

Transit Projects to 

Provide Maximum 

Transportation 

Services for the 

Federal Dollars 

Invested

For fiscal years 1998 through 2003, DOT i

provide a total of at least $198 billion for a 

transit and highway projects. These funds 

continue to play an important role in build

expanding the nation’s transit and highwa

DOT has opportunities to improve its ove

its approach to funding these projects. Fo

FTA has agreements to fund a significant 

ongoing projects to construct new transit 

extend existing ones and expects to enter 

agreements in fiscal year 2001. As a result

have sufficient resources in fiscal years 20

enter into additional agreements to fund t

projects. Furthermore, FTA may not have 

it needs after 2001 to adequately oversee t
Page 42 GAO-01-253 DO

projects requiring oversight. FHWA faces the 

of completing steps that could help prevent 

overruns and delays on major highway proje

improving the reliability of the process it use

estimate the portion of tax receipts contribu

state to the Highway Trust Fund. 

Federal Transit 

Administration

We have reported on a number of transit pro

funded, in part, by the federal government th

experienced cost and schedule problems and 

areas in which FTA needs to improve its ove

large transit projects. FTA has taken steps de

mitigate these problems. In particular, FTA ha

its oversight activities since the early 1990s w

grant management program for transit proje

our list of high-risk programs. In 1995, as a r

various initiatives FTA was undertaking to im

grants management oversight, we removed th

from our high-risk list. For example, we repo

April 1998 that FTA improved its guidance an

for staff and grantees, standardized oversigh

procedures, and effectively used contractor 

project management oversight program. In p

we noted that the agency’s risk assessment p

helped target limited oversight resources and 

strong foundation for improved oversight. In 

2000, we reported that FTA’s project manage

oversight program—which is designed to he

that grantees constructing major capital proj

qualified staff and procedures to build and o

them—has resulted in benefits for both gran

FTA. Transit agencies commended the progr

cited numerous examples of how FTA’s proje

management contractors have improved qua

and provided FTA with early warnings of issu

problems that could lead to increased costs 

schedule delays. 
Page 43 GAO-01-253 

Nevertheless, we also noted in the Septem

report that FTA believes that the funds av

project management oversight program m

sufficient to allow the necessary level of o

activity to continue. According to FTA, th

demand for oversight is largely due to the 

projects in the new starts program, which 

construct new systems and extend existin

identified as eligible for funding in the Tra

Equity Act for the 21st Century (TEA-21). 

number of transit projects needing monito

strain FTA’s oversight resources. For exam

agency anticipates a $5 million shortfall in 

management oversight program in fiscal y

recommended that the Secretary of Trans

determine the amount of funds needed, an

and the steps needed to cover any shortfa

conference report accompanying the Dep

fiscal year 2001 appropriations act directe

develop a plan to address any expected sh

include this information in its fiscal year 2

submission. 

FTA is also likely to exhaust its commitme

for transit projects funded under its new s

before the end of the funding period for T

result, FTA will be able to enter into few, i

additional agreements to fund new starts 

fiscal years 2002 and 2003. FTA rates prop

according to a variety of criteria and, base

ratings, expects to enter into agreements 

additional projects during 2001. These 15 

together with 14 ongoing projects already 

funds under the new starts program, will 

almost all of FTA’s available commitment 

under TEA-21. We recommended that DO

prioritize the transit projects it rates as “h

recommended” and “recommended” so av

can be directed to the most deserving pro
Page 44 GAO-01-253 DO

agreed and said it would seek ways to furthe

eligible projects. 

Federal Highway 

Administration

Projects to improve or expand highways can 

hundreds of millions of dollars and pose sign

management and logistical challenges. For e

Central Artery/Tunnel Project in Boston—th

expensive and complex federally assisted hi

project ever undertaken—continues to be tr

cost increases and management problems, le

management changes and increased oversigh

measures.14 In spite of the increased oversigh

2000, the estimated cost of the project increa

by over $1 billion to total about $14 billion (t

share is about $8.5 billion). The original cost 

for the project, made in 1985, was $2.6 billio

years, we reported on the likelihood of futur

increases in this project because of several s

problems affecting it and FHWA. Furthermo

February 1997, we identified several options 

improve the management of all large-dollar h

projects, including improving the preparatio

cost estimates and requiring states to track a 

progress against its initial baseline cost estim

Another option we identified was the establi

federal approval process for large-dollar pro

including the approval of a project’s finance 

FHWA has taken some steps in this direction

example, as required by TEA-21, it now requ

states to submit finance plans for projects th

expected to cost over $1 billion. Furthermor

14The Central Artery/Tunnel Project will replace a deter

elevated section of Interstate 93 through Boston with an 

expressway and extend the Massachusetts Turnpike un

Harbor to Logan Airport. 
Page 45 GAO-01-253 

has recently issued guidance concerning t

format of such plans.

Allocation of 

Highway Trust Fund 

Receipts

TEA-21 continued the use of the Highway 

which is funded by taxes on highway user

mechanism to account for federal highwa

receipts that fund various surface transpo

programs. Furthermore, under TEA-21, th

highway user tax receipts in the Fund’s H

Account and federal highway program fun

was enhanced by (1) guaranteeing specifi

funding levels for most highway programs 

of the projected receipts in the Fund’s Hig

and (2) providing that the guaranteed spe

each fiscal year would be adjusted upward 

according to the receipt levels in the High

FHWA is responsible, together with the Tr

Department, for estimating the amount of 

and the overall portion of the receipts attr

each state. Under TEA-21, billions of dolla

program funds—about $13 billion in fisca

alone—are distributed to the states on the 

information developed by the Treasury an

Transportation departments. 

In June 2000, we reported that the proces

Treasury and FHWA to estimate overall re

portion of those receipts attributable to h

in individual states are highly complex an

to error and that the reliability of the estim

been demonstrated. The process for distr

tax receipts has two separate components

Treasury Department determines the over

receipts to be distributed to the Highway 

(2) FHWA estimates the portion of the ove

that is attributable to each state by using 

motor fuel usage. Some of the complexity 

component stems from the fact that busin

make deposits of highway user taxes to th
Page 46 GAO-01-253 DO

Department in combination with other excis

do not report them by tax type at the time th

are made. Several offices in the Treasury De

play roles in determining which portion of ex

collections to allocate to the Highway Trust 

according to payment data and quarterly tax 

Regarding the second component, highway u

on motor fuels are not paid directly by consu

gas pump. Oil companies generally pay the ta

fuels—which made up 89 percent of the high

taxes paid in fiscal year 1999—when the fue

into a tanker truck or rail car. As a result, FH

estimate receipts attributable to highway use

state, on the basis of data provided by each s

order to distribute Highway Account funds t

states. 

Our June 2000 report concluded there is littl

that the actual amounts distributed to the sta

accurate, although there is no way of knowin

extent of over- or underpayments, if any, to i

states, given the information currently availa

the two agencies. Although the Treasury Dep

and FHWA are taking actions to review and i

their estimating processes, these actions are 

sufficient to correct all the weaknesses. The

report made recommendations to the Treasu

that are designed to reduce the risk of errors 

increase the reliability of the information use

distribute federal highway program funds to 

FHWA officials agreed with all of our recomm

aimed at improving the reliability of FHWA’s 

process, and they are developing an action p

implement the recommendations. FHWA has 

to prepare an annual report to the Congress 

summarizing its progress in implementing ou

recommendations, with the first report to be 

July 2001. 
Page 47 GAO-01-253 

Key Contact John H. Anderson, Jr., Managing Director

Physical Infrastructure

(202) 512-2834

andersonj@gao.gov

Strengthen the 

Financial Condition 

of Amtrak 

Since 1971, the federal government has pr

$23 billion in operating and capital assista

a private corporation that provides nation

passenger rail service. Amtrak operates tr

states, serving more than 20 million riders 

Secretary of DOT sits on Amtrak’s board o

and the Department sets annual performa

improve Amtrak’s ridership and service. In 

2000, the railroad lost $943 million.15 In 19

request of the administration and later at t

the Congress, Amtrak pledged to eliminat

federal operating subsidies by the end of 2

Amtrak has made relatively little progress 

need for federal operating subsidies. In fis

Amtrak’s revenues increased substantially

increased more. As a result, Amtrak’s cost 

wiped out the impact of the revenue gains

2000, Amtrak reduced its need for operatin

$5 million—substantially less than its plan

of $114 million. (See fig. 4.) Moreover, for 

2001 and 2002 combined, Amtrak will nee

about $282 million in savings to reach ope

sufficiency. 

15Amtrak’s fiscal year 2000 financial results had not b

November 2000.

16The Amtrak Reform and Accountability Act of 199

Amtrak from using federal funds for operating expen

amount equal to excess Railroad Retirement Tax Ac

2002. Amtrak participates in the railroad retirement 

which each participating railroad pays a portion of th

and benefit costs for employees of the industry.
Page 48 GAO-01-253 DO

Figure 4: Amtrak’s Budget Gap, Fiscal Years 1994-

Note: Amtrak must reduce its budget gap to an amount 

excess Railroad Retirement Tax Act payments, estimat

million in fiscal year 2002, to achieve operational self-s

Source: GAO’s analysis of Amtrak’s data.

Given Amtrak’s lack of overall progress in re

costs and increasing revenues, it will be diffi

Amtrak to eliminate the need for federal ope

subsidies by the end of 2002. Amtrak’s costs 

expected to increase, and its ability to realize 

revenue increases and productivity improvem

uncertain. Nearly three quarters of the $1.9 b

financial benefits that Amtrak expects to ach

between 2000 and 2004 have either not been 

or are based on initiatives that have yet to be 

implemented. 

Key decisions have to be made about the fut

Amtrak and the future of intercity passenger 

Amtrak does not reach operational self-suffi

Dollars in millions

0

50

100

150

200

250

300

350

400

450

500

550

550

600

1994 1995 1996 1997 1998 19

578

554

522 512

494

4
Page 49 GAO-01-253 

Amtrak Reform and Accountability Act of 

the Amtrak Reform Council to submit a p

Congress for a restructured national inter

rail system and Amtrak to submit a plan f

liquidation. Basic decisions will need to b

the nation’s intercity passenger rail system

scope of a national intercity passenger rai

any; how it would be operated; and the lev

funding that would be provided to suppor

Alternatively, if Amtrak does attain operat

sufficiency, it could require a substantially 

of financial support than it receives now (

million annually) to meet its capital needs 

Railroad Retirement Tax Act expenses. In 

we estimate that Amtrak will need at leas

constant 1999 dollars) to meet its identifie

needs through 2015 and substantial sums 

million in 2004, according to Amtrak) to c

Railroad Retirement Tax Act payments. 

Key Contact John H. Anderson, Jr., Managing Director

Physical Infrastructure

 (202) 512-2834

andersonj@gao.gov

Enhance 

Competition and 

Consumer 

Protection in 

Aviation and 

Freight Rail 

Industries to 

Ensure Reasonable 

Fares, Rates, and 

Service 

The lack of effective competition in certai

contributed to high fares and rates and po

commercial aviation and freight rail servic

of communities have not benefited from i

aviation competition largely because of ba

inhibit the entry of new airlines, and, as a r

of high fares and poor service exist. Freigh

concerned that recent railroad mergers an

consolidations have resulted in poor servi

rates in certain markets. Increasing comp

improving aviation and freight rail service 

range of solutions by DOT, the Surface Tr
Page 50 GAO-01-253 DO

Board (which approves railroad mergers and 

consolidations), the Congress, and the privat

Aviation Deregulation of the airline industry in 1978 i

considered to have been a success, having lo

and improved service for most air travelers. 

benefits largely resulted from increased com

from the entry of new airlines into the indust

vigorous competition among established airl

existing markets. However, airlines’ problem

gaining access to certain airports and the su

marketing strategies employed by establishe

have limited competition at certain major U.

For example, limited access to gates at six m

airports in the East and Upper Midwest has m

difficult for new airlines to begin service to t

airports.17 Many gates at those six airports ar

exclusively leased to just one airline. In addi

major airports—Chicago’s O’Hare, Reagan W

National, and New York’s Kennedy and LaGu

established airlines control access to most of 

and landing times, known as “slots,” that FAA 

and distributed. In addition, perimeter rules, 

prohibit most flights that exceed certain dist

LaGuardia and Reagan Washington National 

ability of airlines based in the West to compe

airports. Moreover, even where new airlines 

managed to enter certain markets, establishe

strategies, such as frequent flyer programs a

discounts given to large corporate customer

prevented some new entrant airlines from su

competing in certain markets.

In addition, the recently proposed merger be

of the nation’s largest airlines—United Airlin

17The six airports are located in Charlotte, Cincinnati, D

Minneapolis, Newark, and Pittsburgh.
Page 51 GAO-01-253 

Airways—has raised concerns that it migh

decreased competition in certain markets

Department of Justice is reviewing the pro

to determine if it complies with U.S. antitr

reported on the implications of this propo

December 2000.

Furthermore, small communities have exp

concerns about poor air service and relativ

As we reported in April 2000, few airlines 

small communities where demand for air 

limited. When service is provided, it is usu

in less popular turboprop aircraft. Howev

introduction of regional jets (small jet airc

carry between 30 and 70 passengers) by th

affiliates of major airlines may provide op

replace turboprops and expand service to 

In early 2001, we will report on the potent

these jets on the airline industry, includin

on service to smaller communities and on 

larger airports.

Actions by the Congress and DOT could in

competition and improve air service. In th

Investment and Reform Act for the 21st C

Congress required FAA to phase out slot r

airport by 2002 and at Kennedy and LaGu

by 2007. The act also required FAA to imm

a limited number of exemptions to the pe

slot rules at Reagan Washington National 

addition, the act directed that, by fiscal ye

airports submit plans to the Secretary of T

that show how they will provide for acces

entrant airlines and expansion by incumb

Furthermore, in 1998, DOT issued draft gu

describing what the Department consider

anticompetitive practices in the airline ind

had not issued final guidelines as of Dece
Page 52 GAO-01-253 DO

Finally, the quality of air service has also em

public issue. In 1999, we examined the “Cust

Service Commitment” that the airlines made 

congressional committees and the traveling 

found that it restated and extended some asp

airlines’ existing agreements with passenger

notifying passengers of flight cancellations i

manner. By July 2000, the major airlines had 

implementing these commitments and streng

efforts at customer service. The commitment

did not address key underlying aspects of cu

dissatisfaction, such as flight delays and long 

lines, and, as a result, travelers’ discontent w

quality of service is likely to continue. We ha

work examining air traffic congestion and fli

along with their effects on competition at th

most affected by these problems and plan to 

these issues in the near future.

Freight Rail Continued consolidation of the railroad indu

condition that has been occurring throughou

century—has led rail shippers and others to 

concerns about the lack of competition in th

the extent to which railroads are using their 

power to set unreasonably high rates, and th

service provided, especially for those shippe

fewer alternatives to rail transportation to m

goods to market. In 1976, there were 30 inde

Class I systems (consisting of 63 Class I railr

nation’s largest railroads). By 2000, there we

railroad systems (consisting of eight Class I 

Concerns have been raised about whether th

Transportation Board is adequately protectin

against unreasonable rates and poor service 

Board approves mergers and consolidations 

adjudicates complaints concerning rail rates 

service. 
Page 53 GAO-01-253 

Rail rates are sensitive to competition. Fo

April 1999 we found that rates in some ma

considered to have less effective competi

the northern Plains states, were generally 

rates where there might be more effective 

options, such as barges or other railroads

have increasingly criticized railroads for p

service, such as inconsistent pickup and d

railcars and a lack of railcars when and w

About 60 percent of the 525 coal, grain, an

shippers that responded to a survey questi

service believed their service was worse t

preceding years and attributed this poor s

in part, to railroad mergers and consolida

The Surface Transportation Board has tak

of actions to address rate, service, and me

response to complaints over unreasonabl

eliminated certain tests related to market 

reducing the burden on shippers and railr

relief proceedings. Regarding service qual

adopted new procedures allowing shipper

expedited temporary relief from inadequa

through service from an alternative carrie

Board has proposed changes to its approa

reviewing and approving mergers. Howev

actions are not likely to satisfy many ship

that increased competition in the rail indu

to improve service. Because of the diverg

railroads and shippers, resolving service a

competition issues will be difficult and m

congressional action.

18Our April 1999 report focused on the shipment of c

markets in the northern and central Plains states.
Page 54 GAO-01-253 DO

Key Contact John H. Anderson, Jr., Managing Director

Physical Infrastructure

(202) 512-2834

andersonj@gao.gov
Page 55 GAO-01-253 

Safety and 

Security

Federal Aviation 

Administration

FAA Computer Security: Recommendatio

Continuing Weaknesses (GAO-01-171, Dec

FAA Computer Security: Actions Needed 

Critical Weaknesses That Jeopardize Avia

Operations (GAO/T-AIMD-00-330, Sept. 27

FAA Computer Security: Concerns Remai

Personnel and Other Continuing Weaknes

(GAO/AIMD-00-252, Aug. 16, 2000).

Aviation Safety: Safer Skies Initiative Has 

Steps to Reduce Accident Rates by 2007

(GAO/RCED-00-111, June 28, 2000).

Aviation Security: Long-Standing Problem

Airport Screeners’ Performance (GAO/RC

June 28, 2000).

Computer Security: FAA Is Addressing Pe

Weaknesses, but Further Action Is Requir

(GAO/AIMD-00-169, May 31, 2000).

Aviation Security: Vulnerabilities Still Exi

Aviation Security System (GAO/T-RCED-0

2000).

Computer Security: FAA Needs to Improv

Over Use of Foreign Nationals to Remedia

Software (GAO/AIMD-00-55, Dec. 23, 1999

Aviation Safety: FAA’s New Inspection Sys

Promise, but Problems Need to Be Addres

(GAO/RCED-99-183, June 28, 1999).
Page 56 GAO-01-253 

Aviation Security: FAA’s Actions to Study 

Responsibilities and Funding for Airport S

Certify Screening Companies (GAO/RCED

Feb. 25, 1999).

Air Traffic Control: Weak Computer Secur

Jeopardize Flight Safety (GAO/AIMD-98-1

1998).

Federal Motor 

Carrier Safety 

Administration

Commercial Motor Vehicles: Effectivenes

Being Taken to Improve Motor Carrier Sa

Unknown (GAO/RCED-00-189, July 17, 20

Commercial Motor Vehicles: Significant A

to Improve Truck Safety (GAO/T-RCED-00

2000).

Truck Safety: Motor Carriers Office Hamp

Limited Information on Causes of Crashes 

Data Problems (GAO/RCED-99-182, June 

Truck Safety: Motor Carriers Office’s Acti

Reduce Fatalities Are Likely to Have Little 

Effect (GAO/T-RCED-99-89, Feb. 23, 1999)

Office of Pipeline 

Safety

Pipeline Safety: Office of Pipeline Safety I

How It Oversees the Pipeline Industry

(GAO/RCED-00-128, May 15, 2000).
Page 57 GAO-01-253 DO

Management of 

Acquisitions and 

Assets

Federal Aviation 

Administration

National Airspace System: Persistent Proble

New Navigation System Highlight Need for P

Reevaluation (GAO/RCED/AIMD-00-130, Jun

Federal Aviation Administration: Challenges 

Modernizing the Agency (GAO/T-RCED/AIM

Feb. 3, 2000).

Air Traffic Control: FAA’s Modernization Inve

Management Approach Could Be Strengthen

(GAO/RCED/AIMD-99-88, Apr. 30, 1999).

Coast Guard Coast Guard: Budget Challenges for 2001 an

(GAO/T-RCED-00-103, Mar. 15, 2000).

Coast Guard: Strategies for Procuring New S

Aircraft, and Other Assets (GAO/T-RCED-99-

Mar. 16, 1999).

Coast Guard: Key Budget Issues for Fiscal Ye

and 2000 (GAO/T-RCED-99-83, Feb. 11, 1999)

Coast Guard’s Acquisition Management: Dee

Project’s Justification and Affordability Need 

Addressed More Thoroughly (GAO/RCED-99

1998).

Maritime 

Administration

Federal Surplus Ships: Government Efforts t

the Growing Backlog of Ships Awaiting Disp

(GAO/NSIAD-99-18, Oct. 22, 1998).
Page 58 GAO-01-253 

Financial 

Management

Financial Management: Financial Audit R

EPA, and DOT (GAO/T-AIMD-99-301, Sept

FAA Financial Management: Further Actio

Achieve Asset Accountability (GAO/AIMD

30, 1999).

Federal Aviation Administration: Financia

Issues (GAO/T-AIMD-99-122, Mar. 18, 1999

Financial Management: Federal Aviation A

Lacked Accountability for Major Assets

(GAO/AIMD-98-62, Feb. 18, 1998).

Air Traffic Control: Improved Cost Inform

to Make Billion Dollar Modernization Inve

Decisions (GAO/AIMD-97-20, Jan. 22, 1997

Highway and 

Transit Grants

Federal Highway 

Administration

Surface Infrastructure: Costs, Financing, a

for Large-Dollar Transportation Projects

(GAO/RCED-98-64, Feb. 12, 1998).

Federal Transit 

Administration

Mass Transit: Project Management Oversi

and Future Funding Requirements (GAO/

Sept. 15, 2000).

Mass Transit: Implementation of FTA’s Ne

Evaluation Process and FY 2001 Funding 

(GAO/RCED-00-149, Apr. 28, 2000).
Page 59 GAO-01-253 DO

Mass Transit: Challenges in Evaluating, Over

Funding Major Transit Projects (GAO/T-RCE

Mar. 8, 2000).

Highway Trust Fund Highway Funding: Problems with Highway T

Information Can Affect State Highway Fund

(GAO/RCED/AIMD-00-148, June 29, 2000).

Intercity Passenger 

Rail

Intercity Passenger Rail: Decisions on the Fu

Amtrak and Intercity Passenger Rail Are App

(GAO/T-RCED-00-277, Sept. 26, 2000).

Intercity Passenger Rail: Amtrak Will Contin

Difficulty Controlling Its Costs and Meeting 

Needs (GAO/RCED-00-138, May 31, 2000).

Intercity Passenger Rail: Amtrak Needs to Im

Accountability for Taxpayer Relief Act Fund

(GAO/RCED/AIMD-00-78, Feb. 29, 2000).

Intercity Passenger Rail: Amtrak’s Progress in 

Its Financial Condition Has Been Mixed

(GAO/RCED-99-181, July 9, 1999).

Aviation and Rail 

Competition

Aviation Aviation Competition: Issues Related to the U

Airlines—US Airways Merger (GAO-01-212, D

2000).

Essential Air Service: Changes in Subsidy Le

Carrier Costs, and Passenger Traffic (GAO/R

Apr. 14, 2000). 
Page 60 GAO-01-253 

Reagan National Airport: Capacity to Han

Flights and Impact on Other Area Airport

(GAO/RCED-99-234, Sept. 17, 1999).

Aviation Competition: Changes in Airfares

Quality, and Barriers to Entry (GAO/RCED

1999).

Aviation Competition: Effects on Consum

Domestic Airline Alliances Vary (GAO/RC

Jan. 15, 1999).

Freight Rail Railroad Regulation: Changes in Railroad 

Service Quality Since 1990 (GAO/RCED-9

1999).

Railroad Regulation: Current Issues Assoc

Rate Relief Process (GAO/RCED-99-46, Fe
Page 61 GAO-01-253 

Major Management Challenges and Progr

Governmentwide Perspective (GAO-01-24

Major Management Challenges and Progr

Department of Agriculture (GAO-01-242)

Major Management Challenges and Progr

Department of Commerce (GAO-01-243)

Major Management Challenges and Progr

Department of Defense (GAO-01-244)

Major Management Challenges and Progr

Department of Education (GAO-01-245)

Major Management Challenges and Progr

Department of Energy (GAO-01-246)

Major Management Challenges and Progr

Department of Health and Human Service

(GAO-01-247)

Major Management Challenges and Progr

Department of Housing and Urban Develo

(GAO-01-248)

Major Management Challenges and Progr

Department of the Interior (GAO-01-249)

Major Management Challenges and Progr

Department of Justice (GAO-01-250)

Major Management Challenges and Progr

Department of Labor (GAO-01-251)

Major Management Challenges and Progr

Department of State (GAO-01-252)
Page 62 GAO-01-253 

Major Management Challenges and Progr

Department of Transportation (GAO-01-25

Major Management Challenges and Progr

Department of the Treasury (GAO-01-254)

Major Management Challenges and Progr

Department of Veterans Affairs (GAO-01-2

Major Management Challenges and Progr

Agency for International Development (G

Major Management Challenges and Progr

Environmental Protection Agency (GAO-0

Major Management Challenges and Progr

National Aeronautics and Space Administ

(GAO-01-258)

Major Management Challenges and Progr

Nuclear Regulatory Commission (GAO-01

Major Management Challenges and Progr

Small Business Administration (GAO-01-2

Major Management Challenges and Progr

Social Security Administration (GAO-01-2

Major Management Challenges and Progr

U.S. Postal Service (GAO-01-262)

High-Risk Series: An Update (GAO-01-263
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