National Airspace System: Experts' Views on Improving the U.S. Air Traffic Control Modernization Program
Released: 2005-04-13T00:00:00

Letter

Limitations and Qualifications

The discussion summarized in this report should be interpreted in the context of two key limitations and qualifications.

First, the panel was only an initial step in a possible long-term, evolving effort to develop and sustain discussion on ATC modernization. As such, it brought together generalists, rather than specialists, to address broad themes and consider how to organize a more comprehensive approach. Because our scope was limited, we could not include a large number of leading experts, institutions, and networks involved in specialized efforts. Furthermore, although many points of view were represented, the panel was not representative of all potential stakeholders.

Second, even though we, in cooperation with the National Academies, conducted preliminary research and heard from national experts in their fields, a day’s conversation cannot represent the current practice in this vast arena. More thought, discussion, and research are needed to develop greater agreement on what we really know, what needs to be done, and how to do it.

These two key limitations and qualifications provide contextual boundaries. Nevertheless, the panel provided a rich dialogue on ATC modernization, and the panelists developed strong messages in responding to each of the three questions. Those messages are highlighted below.

Panelists Identified Cultural and Technical Factors That Have Affected ATC Modernization and Suggested Short-term Steps to Address Them

The panelists attributed many of the ATC modernization program’s chronic problems to cultural and technical factors. In particular, they cited resistance to change at all levels within the agency and insufficient technical expertise as key factors impeding modernization. They identified multiple, currently available options for addressing these factors.

Panelists Cited Resistance to Change as a Key Cultural Factor Impeding Modernization

very resistant” to having private organizations, rather than FAA, develop new procedures and systems for FAA to approve and institute.

Several panelists saw resistance to change as a consequence of federal employment—of the security that comes from having a regular paycheck, cost-of-living pay increases, and protections against layoffs. A government organization is insulated from the economic pressures that the private sector faces, one of the panelists indicated. In his view, federal employees do not have the firsthand experience with layoffs and business failures to understand, as private aviation industry employees do, why improvements to the ATC system’s efficiency are needed to help revitalize the struggling aviation industry.

Other panelists emphasized the reluctance of management to change. According to a panelist with experience in restructuring a foreign air traffic organization, the senior and middle managers could not or would not adjust to the change and had to be let go within the first 2 years. The other employees also had difficulty adjusting and were still adjusting in some respects, he said, but getting management on the right page was the real challenge. Another panelist emphasized that cultural change starts at the top and questioned why the ATO’s new COO had, according to the panelist’s count, replaced only two top managers in the ATO and simply reassigned other managers. Still another panelist suggested that cultural change within the ATO alone would not be sufficient to ensure the ATO’s success, because so much of the ATO’s fate depends on other organizations, including FAA, DOT, the Office of Management and Budget (OMB), and Congress.

A number of panelists described the air traffic controllers’ union as also resistant to change. According to one panelist, for example, the union delayed the adoption of technologies such as the User Request Evaluation Tool (URET) because some controllers saw them as a threat to its membership. Another panelist cited the union’s long-term opposition to the implementation of a software program that tracks productivity—a key measure for a performance-based organization. The union is “very political,” several panelists asserted, and one panelist charged that it was “hindering the progress” of a performance-based organization.

Resistance to change can be an issue outside FAA as well as within it, panelists noted. For example, one panelist questioned how much support the ATO was getting from DOT, OMB, and congressional committees for changing “some extremely entrenched political fiefdoms.” Another panelist said that he had found the congressional authorizing committees amenable to changes, but the appropriators liked things the way they were.

Panelists Suggested Steps That the ATO Could Take in the Short Term to Address Cultural Impediments to Modernization

what is expected of them, how they fit into the strategy, and what the vision is for their organization.

In addition to having a vision, another panelist said, it is important for the ATO to tie that vision to the user constituency, not confine it to the agency. FAA cannot do everything alone from the inside, because airplanes and airports, for example, need to be equipped with the technologies that will help realize the vision.

Employing a team concept could help overcome resistance to the implementation of new technologies, according to another panelist. Putting engineers, finance people, controllers, and electronic technologists together, all on the same team, he said, could unite them as they moved through the stages of implementation. Therefore, when the time comes to field a technology, the focus would be on getting it up and running and operating safely—not, the panelist implied, on obstructing its implementation because it might threaten jobs.

A change in management’s approach could go a long way toward overcoming controllers’ and other employees’ resistance to change, one panelist noted. One foreign air traffic organization changed its whole approach to the unions and the staff, started talking to them as people, and began executing “participative working” programs, according to the panelist. Union representatives and managers take the same courses together and address issues of affordability together, he said, and, as a result, controllers’ pay has increased, costs have dropped, and productivity has risen. The key to these positive results, he said, is psychological change—managers have stopped seeing employees as a problem and have started to see them as part of the solution.

According to other panelists, however, people find it very difficult to change, and the only way to bring about a cultural transformation is to replace those who resist change, either by allowing them to retire or by hiring others to take their places. In the corporate world, one panelist observed, a new executive brings in a new management team to support a cultural turnaround. The new team is then loyal to the new executive. In the view of this panelist, the COO’s hiring of only two new managers and reassignment of other managers would not be sufficient to turn the ATO’s culture around. Another panelist further noted that an executive in the private sector replaced the top 200 people in his organization to achieve the transformation he was seeking.

Panelists Said FAA Personnel Lack Technical Expertise Needed to Develop Complex Systems and Oversee Contractors Effectively

Technical as well as cultural factors have impeded ATC modernization, according to several of the panelists. In the words of one speaker, FAA does not have “the engineering technical capability to deal with an extremely complex, highly nonlinear adaptive system that's got technical safety risk as a key technical parameter.” According to another panelist, FAA does not apply rigorous systems engineering expertise early in nonadvocate technical reviews of project proposals to scrub them for potential issues. As a result, a number of FAA’s programs—including complex ones such as the Wide Area Augmentation System (WAAS), as well as more “straightforward” ones such as the Standard Terminal Automation Replacement System (STARS) and the Next-Generation Air-to-Ground Communications System (NEXCOM)—had fundamental system engineering technical issues that were not identified early in the program. The risks were not mitigated, and the programs experienced significant cost growth and schedule increases. “The system engineering organization in FAA is nothing more than a process organization,” another panelist said. “The power resides with the program manager. It doesn’t matter what the systems engineering people do, their job is to keep doing plans and processes. They think that meetings are products.” good job, but who certainly have a different motivation from FAA. As this panelist put it, FAA lacks a rudder, in a technical sense, for modernization.

Panelists Suggested Steps That the ATO Could Take in the Short Term to Address Insufficient Technical Expertise

To help address its lack of technical expertise, panelists suggested, the ATO could obtain advice from an independent board or information from other countries on technologies that they have already adopted. The panelists proposed some immediate steps that the ATO could take to address this deficiency, including the following: A technical advisory board made up of system engineers could review proposals for FAA and demand the kinds of data and tests needed to scrub the proposals and identify any big roadblocks.

Hiring skilled engineers instead of relying on contractors might enable the ATO to develop systems more economically and efficiently, one panelist suggested. This panelist described how a foreign air traffic services organization develops new ATC systems in-house and seldom uses contractors. It now utilizes its engineers to build systems rather than manage contractors. As a result, he said, it is now developing the systems it needs faster and at less cost.

Maximizing the use of commercial inputs was the recommendation of another panelist, who said that FAA needs to get out of the business of designing systems. According to him, most companies no longer develop their own large, complex systems; instead, they get other people to do that for them in the private sector. Another panelist also emphasized the availability of technical expertise in the private sector. However, according to a third panelist, commercial systems have a shorter economic service life than the systems that FAA designs.

The ATO could profitably take advantage of the experiences of other countries’ air traffic organizations, which are technically as good as FAA ever was or ever will be, one panelist said. He maintained that the ATO should institute “a fundamental requirement and a cultural expectation” that it will review existing technologies before it buys or tries to develop its own. With a multibillion-dollar budget for software and other information technology, he said, the ATO has ample opportunity to save money.

In his opening remarks and in responding to panelists’ questions, the ATO’s COO made a number of observations on FAA’s culture. He also noted that FAA plans to train or hire people with needed skills to address shortfalls in technical expertise. The following summarizes some of his key observations on FAA’s culture and provides additional information from previous GAO reports and work in progress on how FAA is addressing some of the cultural and technical factors panelists identified as affecting ATC modernization: Recognizing that cultural factors can play a critical role in an organization’s success, the ATO has initiated organizational changes that are designed to create a foundation for cultural change and deliver benefits to customers efficiently. For example, the ATO established collaborative teams of technical experts and ATC system reorganized air traffic services and the research and acquisition organization along functional lines of business to bring stakeholders together and integrate goals, as well as reward cooperation by linking investments to operations; reduced layers of management from 11 to 7 to help address the hierarchical nature of the organization; and conducted an organizationwide activity value analysis to determine the full range of activities that ATO headquarters is engaged in, the value customers place on those activities, and the potential for conducting any of those activities more effectively and efficiently. indicating a desire to improve the flow of information within the agency by sending a large number of detailed e-mails in response to a call for recommendations to improve internal communications.

In the past, according to the ATO’s COO, FAA’s management culture was “intensely hierarchical, risk averse,” and “reactionary.” But now, he said, FAA is attempting to foster “results-focused, proactive and innovative behavior.” Changing the agency’s leadership model is also designed, he said, to replace a “personality-driven culture” with a sustainable, stable, viable organization that can make rational decisions that transcend changes in political leadership.

The ATO is trying to better align FAA’s priorities and stakeholders’ interests by developing a strategy map that captures the outputs desired by the ATO’s owners and customers, along with the outputs that must be achieved. Called the Strategic Management Process, this effort borrows heavily from a private-sector model and uses the ATO’s strategic goals and objectives to drive investment decisions. According to FAA, the strategy map will enable owners and customers to clearly understand both the services that the ATO is providing and the effects of products in development on those services. As a result, FAA says, future budgetary conversations will revolve around the desired level of service, instead of focusing on a product, as past discussions typically did. According to FAA, the Strategic Management Process will ensure linkage between FAA’s operating and capital budgets.

To become a “performance-based organization” and identify customer groups and their service needs, the ATO created “value-based” performance metrics; that is, it defined its performance in terms of customers’ needs and connected efforts to satisfy those needs with cost. Ultimately, the ATO wants to know how much every unit of output costs so that it can allocate and compare costs and measure productivity. Thus, each organizational unit and facility is developing applicable metrics for performance so that the ATO can compare costs, identify factors that affect costs, and use this information to improve performance. For example, each en route facility is determining its hourly cost to control flights. The ATO can then compare and analyze these costs to identify positive and negative factors affecting performance and productivity. plan is a response to a congressional mandate, based on a recommendation we made in 2002, that FAA develop a plan for addressing an impending wave of controller retirements and deal with productivity issues.

Panelists Said Funding Shortfall and Features of the Federal Budget Process Affect ATC Modernization and Suggested Short-term Steps to Address Them

The panelists identified and discussed the impact of funding constraints and the federal budget process on ATC modernization. In their view, the most immediate issue is a critical shortage of funds to meet the current modernization program’s plans and users’ demands. Additionally, they said, the federal budget process is slow, inflexible, and influenced by the political process; annual appropriations are uncertain and discourage planning; and the budget fails to show investment priorities and relationships between FAA’s capital and operating budgets. The panelists suggested a number of steps that the ATO could currently take to address these challenges.

With Funding Shortfall, Flight Delays May Gradually Increase, Panelists Said

Panelists viewed the ATO’s apparent fiscal shortfall—which one panelist said would amount to a 20 percent deficit in 4 years—as a severe challenge. In terms of operations, the panelist said, this deficit was more likely to have a gradual than an immediately catastrophic onset. He did not expect to see major system outages but predicted, instead, “a slow but sure increase in delays.” However, as another panelist said, if the ATO did not carefully analyze demand and determine how that demand could be served, the ATO would find itself facing what a third panelist referred to as a “perfect storm,” reiterating a term the ATO itself has used.

Severe reductions in the funding for ATC modernization, if required to address the currently projected shortfall, could exacerbate what one panelist described as the government’s traditional underfunding of the ATC system’s capital requirements. According to this panelist, the government undercapitalizes any complex, rapidly evolving operational system, including the ATC system, and overestimates the economic service lives of information technology investments. Whereas the government typically assumes such investments will last for 15 years, he said, a 7-year estimate would be more reasonable. showing large deficits. They suggested, for example, that FAA and DOT officials might be unwilling to publicly release data that could raise questions about their management.

Funding Air Traffic Services through the Budget Process Is Slow and Inflexible, Some Panelists Said

Several panelists maintained that the federal budget cycle is too long and inflexible to meet the needs of an ATC system. According to one panelist, it is “impossible” to run the U.S. ATC system within the classic federal structure. Such a “dramatic,” “dynamic” system requires “more managerial freedom, much more day-to-day, week-to-week, month-to-month decision- making,” he said. The federal budget process freezes plans for the system 12 or 18 months in advance, but for an ATC system to succeed, “you’ve got to be 12 or 18 days ahead.”

The budget procedure requiring that capital investments be funded out of annual appropriations means that major acquisitions generally take many years to implement and projects may continue to be implemented even after they have outlived their usefulness. Particularly when annual appropriations fall short, panelists noted, projects’ development and deployment may be delayed and their costs may increase with time. Furthermore, until the acquisitions are completed, the benefits of the new technologies are deferred, aging equipment may pose risks to users, and outdated software may require costly upgrades. By the time the acquisitions are fully deployed, panelists said, they may be out of date.

Panelists Described the Effects of the Political Process on the Federal Budget

technology as New York, despite resource constraints and major differences in air traffic demand.

The political process influences budget decisions in the administration as well as in Congress, some panelists said. According to one panelist, Congress has generally supported FAA’s modernization program, but funding difficulties have ensued because the budget is consolidated and there are always pressures on it. Other panelists added that the ATO would have difficulty “deliver the bad news”—that is, publishing a business plan that projects deficit scenarios—unless revenue increases are forthcoming. According to this panelist, OMB would deny any requests for increased funding and would, instead, tell the ATO to find another way of doing business.

Panelists Said Uncertain Annual Funding Discourages Effective Planning

Panelists noted that funding from annual appropriations is uncertain, and that this uncertainty is incompatible with strategic and capital planning. The amount of money available for appropriation each year cannot be predetermined, one panelist said, and the size of the appropriation may vary from year to year. This uncertainty focuses attention on which technology will receive the funding (the inputs) rather than on what improvements in safety or capacity the technology is supposed to deliver (the outputs), he said. In debating whether this investment or that investment should receive funding, planners have lost sight of the big picture, he suggested, and the ATO has spent most of its capital investment dollars on sustaining and maintaining existing systems. Only about 14 percent of its expenditures, he recalled, were for flight enhancement. “Who anywhere would have a capital investment plan that was predominantly about standing still?” he asked.

Another panelist also considered the federal budget process incompatible with strategic planning. In his words, “it is absolutely a problem at FAA” that “budget drives strategy and strategy does not drive budget.” Although FAA is good at forecasting demand, he said, it does not evaluate “the anatomy of demand” and determine how that demand will be served. Panelists noted, for example, that the number of regional jets, low-fare airlines, and unmanned aerial vehicles are increasing, but FAA has not developed a business model or plans for managing the increased air traffic.

Congress,” one panelist said, rather than integrated, organized, and periodically revised. Another panelist observed that FAA asks for more than it can get and then carries the difference over from year to year, creating “a bow wave” of unfunded requests for capital projects that it seldom reduces. Furthermore, as a third panelist pointed out, the budget process establishes incentives for unrealistic planning: Project managers first overpromise capabilities and underestimate costs to increase the chances that new projects will be accepted. Then, after projects are accepted, they overestimate costs because they assume their requests will be cut. Although managers could include options in their budget submissions to indicate what could be accomplished at different funding levels, they do not do so because they assume items identified as options will be cut. Finally, managers are reluctant to revise ongoing projects because they do not want to be seen as fickle. By contrast, another panelist said, a private company that operates under a board of directors and obtains revenue from customers does not have incentives to play budget games to get projects approved. “Your money is your own money,” he said.

Some Panelists Believed That the Federal Budget Fails to Show Priorities and Relationships

Some panelists criticized the federal budget for failing to show priorities and relationships among proposed investments. In the budget, one panelist said, “everything is as important as everything else.” Another panelist observed that the budget sets no capital investment priorities. According to a third panelist, a line item budget tears apart a highly layered, interdependent system and does not reveal synergies between projects. Then, when the budget request goes to Congress, he said, “you have no opportunity to try to explain to anybody the interconnections of these programs.” As a result, when the appropriators decide not to fund a project, they may not understand how their decision will affect other projects. firewall discourages analyses of life-cycle costs and may lead, in some instances, to investments in technologies that end up in a warehouse because the ATO cannot afford to operate them. Similarly, another panelist observed that the separation of capital and operating costs in FAA’s accounting system makes it difficult to see the implications of capital investment decisions for operating costs, even though “everything we put in the field winds up increasing the ops budget.” Furthermore, as another panelist noted, the firewall makes it difficult to see the relationship between software replacement (capital) and maintenance (operating) costs. Thus, decisions to postpone purchases of new or upgraded software may save capital investment costs, but rising maintenance requirements may increase operating costs. Eventually, he said, the maintenance costs may “far exceed” the replacement costs.

Finally, other panelists said, the budget is not integrated to show what investments buy in terms of productivity, safety, or environmental benefits, and FAA’s capital budget fails to show the impact of investments on the country. This can lead to mismatches—that is, to funding projects that will provide limited benefits for users.

Panelists Identified Short- term Steps within the Budget Process and Other Steps That the ATO Could Take under Its Existing Authorities to Address Budget Constraints

While recognizing the magnitude of the ATO’s projected funding shortfall over the next few years, the panelists identified a number of steps that the ATO could take to address its current financial situation. These steps included accepting the budget process as it is and reducing spending to match revenues, developing strategies for presenting the ATO’s budget request more clearly to Congress, implementing regulatory and procedural changes to allow the use of existing cost-saving technologies, contracting with the private sector to provide certain air traffic services, and obtaining information on other countries’ ATC technologies and on international technical standards.

Short-term Steps within the Budget Process

realistically be funded and to review and cut its programs in light of the current budget constraints.

This panelist also recommended looking at longer term alternatives to annual appropriations that are available within the government and work well for other organizations, such as “working capital accounts and all kinds of industrial funding schemes.”

Another panelist encouraged the ATO to focus its capital investment on avoiding outages—that is, on replacing equipment that would otherwise fail. This panelist also said that FAA needs a customer-oriented business strategy and a business plan.

One panelist, who observed that operating costs account for about three-quarters of the ATO’s total costs, suggested that the upcoming wave of air traffic controller retirements would create “an opportunity to redistribute and even to trim the work force in some areas,” as well as reduce personnel costs by offering incentives for early retirement.

Improving controllers’ productivity would be another way to save money, a fourth panelist said, but he characterized his suggestion as “touch the third rail of aviation politics.”

Another panelist emphasized the importance of starting to plan now to accommodate the airplanes that are being bought today to provide service for the next generation, which he variously estimated at 20, 30, or 40 years.

For example, one panelist said that the ATO needed to understand the interconnections between ATC systems and break the big picture into nuggets so that it could clarify for the appropriators why they should not break apart the ATO’s capital investment plan and selectively fund only some components.

Another panelist maintained that the ATO could mitigate the effects of the firewall between its capital and operating budgets by modifying its budget submissions to show the future cost implications of current investment decisions.

Steps outside the Budget Process under Current Authorities

Several panelists identified options outside the budget process that the ATO could pursue under its current authorities. They said, for example, that the ATO could pursue procedural and regulatory changes that would take advantage of existing technologies to increase capacity, pilot test contracts with the private sector to provide certain air traffic services, and obtain information on technologies and procedures developed in other countries that could be used in the United States.

Regulatory and Procedural Changes Could Allow the Use of Existing Technologies to Enhance Capacity and Efficiency Several panelists discussed the potential benefits of a more widespread use of a concept called area navigation (RNAV), which allows operators of properly equipped aircraft to use onboard navigation capabilities to fly desired flight paths without requiring direct flight over ground-based navigation aids. This provides for more direct routing, avoiding suboptimal routes prescribed by conventional “highways in the sky” that are defined by point-to-point flying over ground-based navigation aids. The RNAV concept and a major new method for exploiting it, called required navigation performance (RNP), permit flight in any airspace as long as aircraft have been certified to meet the required accuracy level for navigation performance. RNAV and RNP hold promise for saving system users time and money—largely by reducing flight times and fuel consumption by allowing users to fly shorter routes or avoid bad weather. In addition, RNAV and RNP could potentially increase the capacity of the ATC system to handle air traffic by reducing the required distance (separation) between aircraft equipped with advanced navigation capabilities if the aircraft can safely operate closer to one another than FAA’s regulations currently allow. able to use these capabilities to their full potential in the United States because FAA has not approved procedures for its use. However, the airlines are “crying for” FAA to approve RNP, one of the panelists said, because aircraft equipped with RNP capabilities could then fly alternative rolling, moving routes to avoid weather delays. Service would improve for travelers, and the airlines would avoid the substantial costs of delays, he said. Implementing RNP could also eventually lower the ATO’s costs, another panelist said, since RNP does not require any ground equipment.

RNP technologies have been installed on larger aircraft for so long that some aircraft equipped with the technologies have already been retired to the desert, one panelist said. In addition, pilots have been trained to use the technologies, and the technologies are already being used in some other countries, including Canada, where a private airline company (West Jet) developed implementation procedures in collaboration with the Canadian ATC regulatory agency and the Canadian air traffic management organization.

As a first step toward obtaining FAA’s approval of procedures for using RNP, a panelist said, the ATO could make policy announcements to set a tone and direction. These announcements would enlist the user community’s support at little or no cost to the ATO, give the ATO an early success, and help tie customers to the ATO’s mission. However, he also cautioned, it would be important for FAA to implement RNP in a way that did not “disenfranchise” general aviation interests and regional carriers whose aircraft are not already equipped with RNP technologies.

Two panelists expressed concerns about the government’s approach to regulating the use of onboard navigation equipment and the associated procedures needed to implement RNP. According to one of these panelists, FAA has “the wrong conceptual framework” for developing regulations to implement new procedures. Its current approach is disproportionate, he said, because it establishes the same safety standards for aircraft of all sizes. “We can’t keep treating airplanes that need 100 cubic miles of airspace the same from a cost and benefit point of view as airplanes that need a quarter cubic mile of airspace,” he said. In his view, FAA needs to revise its approach to assessing and balancing risks. He maintained that the role of regulatory management on the evolution of the ATC system has been underestimated and called for significant investment in understanding risk management.

The other panelist who expressed concerns about the government’s regulatory approach argued that navigational technology is evolving and shifting from ground-based to cockpit-based systems. He maintained that “you’ve got to get aircraft closer and closer together to be able to increase capacity,” and said that the government should allow the ATO to change its policies on aircraft separation to permit “the technology that exists on airplanes today to do the job.” He suggested that the private sector could assume the cost of capitalizing the equipment, but “the government’s got to allow that technology to be used, and it hasn’t.”

Although one panelist emphasized the importance of conducting thorough technical evaluations of RNP to identify any roadblocks to its use, the panelists generally considered it a highly promising, low-cost option for the ATO to improve service. One panelist recommended that the ATO create incentives, such as the right to fly in preferred airspace, for users that equip their aircraft with RNP technologies, to lower the ATO’s costs. determined in its favor. The panelists, who generally assumed that the private sector could provide flight service station services and other air traffic services more efficiently than the government, suggested that if contracting for flight service station services proved to be effective, FAA could contract for other air traffic services, such as oceanic, night, en route, or airways facilities services. The A-76 process would then serve not only as a way of saving money but also as “a pilot program for how things could get done,” one panelist said. In the view of another panelist, ongoing government oversight would ensure the safety of contracted operations, and “staged outsourcing” of the NAS’s functions might build confidence in the private sector’s ability to provide air traffic services safely and efficiently.

Obtaining Information on Other Countries’ ATC Technologies and on International Technical Standards Could Help the ATO Save Costs Obtaining information on technologies and procedures that other countries have already developed could help the ATO control costs, as well as help compensate for its lack of technical expertise, panelists noted. “We should be using and sharing” the technologies that have already been invented, one panelist said. According to his organization, the air navigation service business worldwide spends $3 billion to $4 billion a year on writing code for air traffic management software, and “at least half of that” is writing code for “something that’s already been invented and…works just fine somewhere else.” on the systems that are already running in countries, their performance, and their cost.

Sharing information on technical standards with international organizations could also help the ATO avoid costly investments in technologies whose standards were incompatible with those of other countries. A shared vision is crucial for a globally based air traffic system, one panelist said. If every country or continent had its own technical standards—a North American switch, a European switch, a South American switch, and an Australian switch, for example—an international system could not function effectively.

The following provides additional information from the ATO’s COO and from previous GAO reports and work in progress on how FAA is addressing some of the funding shortfalls and features of the federal budget process that panelists identified as affecting ATC modernization: The ATO’s COO believes that good financial management means linking FAA’s capital and operating budgets. Previously, FAA developed separate capital (Facilities and Equipment) and operating (Operations) budgets. But the ATO recognizes that capital expenditures directly affect operating costs over time, and therefore the two budgets must be developed together. Creating this linkage is important for the ATO to respond to concerns expressed by its owners and customers as well as to address internal issues, such as training, staffing, pay disparities, and infrastructure. Using the Strategic Management Process to drive budget decisions will help to ensure the establishment and maintenance of a linkage between the capital and operating budgets. financial management systems it has been putting in place. As steps toward that goal, the ATO expects everyone to learn the difference between cost and cash flow and get a better handle on unit costs as better cost accounting data become available. To gain a more complete understanding of its costs, FAA is revising its cost accounting practices and changing from a cash flow to a total cost business model for the ATO, and the ATO is developing management training in cost accounting and budgeting. Moreover, FAA plans to finish putting a new cost accounting system in place by 2006 that will allow it to assign, track, and better control costs.

In the fall of 2004, FAA updated its cost estimates in light of OMB’s revenue projections for the next 4 years and arrived at a cumulative shortfall for the period of $5 billion for the operating budget and $3.2 billion for the capital budget. According to FAA, a business plan that the ATO was preparing at that time will show, when completed, how large a funding gap the ATO faces and how far it will have to go to address that gap. Whatever the exact size of the gap may be, FAA says that it is prepared to identify and eliminate redundancies in the NAS and to review its long-term ATC modernization priorities.

FAA has already taken some steps to control the costs of ATC modernization. For example, it has adopted the phased approach to implementing new ATC systems that it used under Free Flight Phase 1, called “build a little, test a little.” This approach relies on the early and ongoing investment of stakeholders, who review the progress of new projects regularly and identify critical omissions and “no go” items that would prevent a system from operating as intended. Reviews of three projects with cost, schedule, and performance issues that our reports had identified—the Local Area Augmentation System, Controller-Pilot Data Link Communications, and Next-Generation Air-to-Ground Communications System—led FAA to reduce the funding for them in FAA’s fiscal year 2005 budget request. The ATO says it plans to continue this phased approach to acquiring new systems. customers that do equip. Now, during the first phase, FAA is implementing the redesign at very high altitudes. In January 2005, FAA doubled the airspace routes between 29,000 feet and 41,000 feet by spacing aircraft 1,000 feet apart instead of 2,000 feet. The procedure, invisible to passengers, is called Reduced Vertical Separation Minimum and is expected to save airlines $400 million in fuel costs during the first year. As technology allows, FAA says, more flight altitude levels will be added. Currently, FAA is implementing a number of improvements to airspace and procedures using RNP. In addition, according to FAA, five airports are developing RNP-based procedures in partnership with airlines that favor RNP.

Panelists Suggested Structural Changes to Improve the ATO’s Chances of Success over Time

While recognizing that the ATO could make some progress in addressing its cultural, technical, and budgetary challenges under its current authorities, the panelists generally agreed that structural changes would increase the ATO’s chances of success. These changes, which would give the ATO a more predictable source of funding and greater decision-making authority, would generally require legislative action and take time to implement. To give the ATO a more predictable source of funding, panelists suggested that it be authorized to establish and manage user fees, rather than rely on appropriated tax receipts, and that it be allowed to issue revenue bonds backed by these fees. To give the ATO greater decision-making authority, panelists proposed restructuring it to streamline and strengthen its management and provide its managers with the tools needed to address its challenges. These changes would allow the ATO to implement a “sensible” capital investment program; hire the technical expertise it needs; achieve cost efficiencies; and offer better, more responsive service. Additionally, panelists said, restructuring could resolve the conflict of interest inherent in FAA’s dual responsibility as the regulator and the operator of air traffic services.

Some Panelists Considered the Steps Taken to Create a Performance-Based Air Traffic Organization Insufficient for Its Success

When Congress authorized the ATO’s creation and generally implemented the Mineta Commission’s organizational recommendations without implementing its funding recommendations, it produced an anomaly—that is, an organization charged with becoming performance-based but deprived of the means to transform itself, according to one panelist. Other panelists also portrayed the ATO as an organization that is charged with operating like a business but is not provided with the management tools available to a business. In their view, the ATO’s chances for success are limited because the COO is being asked to turn the organization around without being given the tools to do so. One panelist, who said he was skeptical about the ATO’s ability to act like a business when it is not really one, suggested that it was only at the margins that the creators of the ATO had replicated a business. According to him, the ATO is still largely a government organization and therefore remains subject to most governmental constraints.

Panelists Said a User Fee System Would Give the ATO a More Predictable Source of Funding and Link Air Traffic Services with Demand

Replacing airline ticket taxes with a user fee and allowing the ATO, rather than Congress, to manage the collected fees is a step that many panelists considered essential for the ATO’s success. While recognizing that such a fee would be controversial, since the costs for most users would likely increase, the panelists maintained that it would produce a more predictable, reliable funding stream than the annual appropriations process. and helps preclude spending for “gold-plated things that don't affect the true performance of the system and drive the costs up completely unnecessarily.” Without a direct connection to the users and their mission, another panelist said, “evolution takes very unintended and very undesirable paths over long periods of time.” As long as the customers are not directly paying the bills and providing the resources, still another panelist maintained, “it’s going to be very hard to bring about real change” and make the ATO “a customer-driven, customer-servicing organization. The ones who pay the bills are the ones you respond to and serve,” he concluded.

While panelists generally favored a user fee system, they cautioned care in proposing and implementing one. As one panelist said, the fee question, once raised, would be all-consuming and would require the expenditure of political capital. In his view, it was critical that the ATO wait to achieve some successes before seeking a user fee system. Another panelist called for figuring out “not only what problem we’re solving, but what problems we might be likely to create,” and noted that the government would have to consider what it was incentivizing through user fees. For example, if the fee was based on weight, he said, it might “incentivize even smaller planes and more planes,” thereby increasing demands on the ATC system’s capacity. Another issue that would have to be worked out, is how the common costs of air traffic services (e.g., the costs of activities in the ATC system operated by the Department of the Air Force) should be allocated— whether users should pay only for the incremental costs of the services they use, as most users would argue, or whether some cross-subsidies should continue. Another panelist pointed out that implementing a user fee alone would not guarantee efficiency, because the air traffic services provider could simply raise the fee when costs increased and the users would have to pay, since the service is a monopoly. Some method of controlling costs would have to be built into the system, he said.

Most panelists correctly assumed that legislation would be required to institute a user fee system. Specifically, a user fee system could be implemented in a government or a public-private type of air traffic services organization. However, one panelist cautioned, it would be “fatal” to implement the fee in any way that did not make the ATO financially independent of Congress. Once the airlines and general aviation users started to pay a fee to finance the ATO, then the ATO should be held accountable to them, he said, and “FAA should not be getting approval from government to spend its budget.”

Panelists Said Borrowing Authority Would Provide the Funding for Efficient Capital Investment

Revenue bonding based on a new user fee stream would create an “alternative to capital starvation,” one panelist said. Even if the user fee stream initially produced no more revenue than the airlines are now paying in aviation-related taxes, he said, the ATO could reap a “transition dividend” during the first 5 or 10 years after the bonds are issued, limiting its annual outlays to the debt service on the bonds. To facilitate the airlines’ recovery, he suggested, the ATO could cut what the airlines pay and “still have a robust modernization program being financed by the revenue bonds.” He characterized this strategy as “money that’s lying on the sidewalk waiting to be picked up” and saw it as an opportunity to buy some new equipment in bulk and get it installed before it becomes obsolete. Such a “sensible” approach would not be possible with annual appropriations, he said.

Further Organizational Restructuring Could Streamline and Strengthen the ATO’s Management

Panelists maintained that the ATO’s organizational placement, combined with its dependence on Congress for funding, limits the COO’s ability to make decisions and take actions. The COO is not a Chief Executive Officer, as one of the panelists observed. Instead, he reports to his “owners”—who include the FAA Administrator and the DOT Secretary, who in turn receive direction from the administration (the President and OMB Director) and Congress. oversight authority, making the subcommittee purely advisory. Consequently, he said, there is no oversight group that is expected to provide constructive criticism of FAA, and FAA does not get “the kind of constructive advice that you might hope for.” According to a third panelist, Europe’s Performance Review Commission provides such constructive advice for EUROCONTROL, the European air traffic management organization. The commission serves as a panel of independent advisers and costs about $2.5 million a year, he said, and “it’s well worth the investment.”

According to several panelists, the ATO’s COO lacks the management tools that would be available to a private-sector CEO. His ability to plan modernization projects, set program priorities, and implement new technologies is constrained because the FAA Administrator, DOT Secretary, and OMB Director can revise his budget request and Congress can make further changes in the ATO’s budget. In addition, the 20-year vision of the Joint Planning and Development Office (JPDO) is at odds with the ATO, according to one panelist, because it looks forward to the ATC system of 2025, rather than helping the ATO address its immediate funding needs. Other panelists observed that the controllers’ union influences management’s decisions.

The COO lacks key financial data needed to determine, analyze, and manage the ATO’s costs. When he was “parachuted” into the ATO, as one panelist put it, he did not have the numbers he needed to know where the ATO stood because FAA did not maintain basic information on the costs and value of existing systems, reducing the ATO’s potential to be data driven. As a result, he spent most of his first year overseeing the implementation of a cost accounting system and collecting other key data. their performance is constrained because their terms of employment and compensation are based largely on negotiated agreements rather than on performance. In addition, salary caps limit FAA’s ability to pay for technical expertise.

Restructuring Could Resolve the Conflict of Interest Inherent in FAA’s Dual Role as the Regulator and the Operator of Air Traffic Services

As one panelist observed at the end of the panel, the ATO’s creation did not address the structural conflict of interest that exists because FAA is both the regulator and the operator of air traffic services. “We didn’t have arms length regulation of air traffic control in FAA,” he said, “and the ATO didn’t do anything to accomplish that.” Another panelist noted that when his country restructured its air traffic organization, it immediately eliminated the same structural conflict of interest, and “overnight” the regulator became more effective and the operator’s safety performance “significantly improved.” According to the first panelist, other countries that have reorganized their air traffic organizations have also instituted arms’ length regulation if they did not have it already. “We remain one of the few places that somehow thinks that self-regulation is a good idea, in spite of sort of overwhelming evidence in lots of arenas that it's not a very good idea,” he said.

The following is additional information from the ATO’s COO and from previous GAO reports and work in progress that indicates how FAA is addressing some of the structural changes that panelists proposed to improve the ATO’s success over time: In addition to the business plan that the ATO is developing to guide and improve its operations and financial management, FAA has worked to develop three longer term planning documents. First, it has published its Flight Plan for 2005 through 2009, a multiyear strategic effort that sets a 5-year course for FAA in the areas of safety, capacity, international leadership, and organizational excellence. Second, it has developed a rolling 10-year effort, called the Operational Evolution Plan (OEP), through which FAA plans to increase the capacity of the NAS by one- third. Finally, FAA is participating in a multiagency effort, sponsored by the JPDO, to develop a national plan for aviation in 2025 and beyond. Both the OEP and the JPDO’s plan are designed to meet the Flight Plan’s commitment to help the NAS flow smoothly and meet future needs. According to FAA, the Vice President of the Operations Planning Service Unit in the ATO is also the Director of the JPDO, helping to ensure integration of near-term and long-term planning.

According to the ATO’s COO, the restructuring of U.S. air traffic services that has taken place thus far, through the establishment of a performance- based air traffic organization, constitutes “the first building block” of the longer term effort to transform the aviation system envisioned in the JPDO’s 20-year plan. According to the COO, this vision of the U.S. aviation system will incorporate both technologies and processes. However, he acknowledged that the ATO has not yet connected this long- term vision with the financial and other challenges it currently faces. He said that his goal is to establish an organization that can execute the long-term vision and manage not only its finances but also its future— an organization that can, in effect, ensure the viability of the long-term vision. Over time, he said, he plans to expand the OEP to include a strategy and the JPDO’s long-term vision, thereby “tie the vision to the viability of the future.” The OEP will then be “not just a set of projects,” but a project plan with a vision and a strategy that goes out 20 years. But given the current budget constraints, he conceded, the path to that goal is not clear.

In March 2004, FAA created the Air Traffic Safety Oversight Service (AOV), under FAA’s Office of Aviation Safety. This step established separate reporting relationships for the ATO, which is responsible for managing the ATC system, and for the AOV, which is responsible for ensuring the safety of changes to air traffic standards and procedures. The establishment of the AOV responds directly to a recommendation by the 1997 National Civil Aviation Review Commission that safety oversight of FAA’s traffic function be provided by a separate part of the agency. Although both organizations remain within FAA, under the FAA Administrator, they are less closely joined than they were previously. Hence, this step is a positive move toward providing “arm’s length” safety oversight, although it does not go as far as placing the two organizations in separate federal agencies or removing one of the agencies from the federal government altogether.

Concluding Observations

At our request, the panelists concluded the panel with their parting thoughts on the day’s discussion, including any advice they had for FAA or for Congress. Overall, the panelists were united in their desire for the ATO to succeed, but they generally agreed that its opportunities for success were constrained within a government system. For many, the steps taken thus far to create a performance-based organization were insufficient, in large part because the ATO lacks control over its revenues and funding priorities, and the ATO still had a long way to go to achieve its goals.

Some panelists stressed the importance of progressing by small steps within the existing system, at least for the time being. Such small steps might include obtaining good performance and cost information, scoping programs in accordance with current budget projections, contracting out some air traffic services, and obtaining outside expertise from systems engineers and other technical and management experts. It was critical, one panelist said, for the ATO to “have some small early practical successes” to enlist the political support of the user community and help tie the customers to the ATO’s mission.

Other panelists focused on the obstacles within the system that they believed would impede or prevent success. Among the obstacles they cited were the counterproductive incentives inherent in the budget process, the government’s refusal to allow new air traffic technologies to be used, and opposition to organizational and technological change. It was important, one panelist said, to overcome this opposition by describing “the difference between how things are and how they might be.” Descriptions of accomplishments elsewhere, together with actions to implement whatever safeguards and regulatory framework might be necessary, could perhaps make the argument for change “compelling,” he said.

Still other panelists looked to the future, calling for international technical benchmarks to promote efficient development, business models that take into account operational trends (e.g., the growing market share of regional jets and low-fare airlines) and incentives to help users overcome cost barriers to acquiring new technologies. As one panelist said, “we have to target the future mix of real operations that we’re really going to see, not build the world’s most perfect system from 1956.”

Despite their reservations about the ATO’s potential for success as a government organization, the panelists generally agreed that stakeholders should not “allow the concept of privatization to be the enemy of moving forward with the ATO,” as one panelist said, or “sacrifice the good for the better” in the words of another. Instead, taking a two-pronged approach— telling people “what’s to be done now to get results” and telling them “that they have an obligation to build for the future”—would be the best way, in the view of most panelists, for the ATO to meet its immediate and longer term challenges.

GAO Panel Members

Clinton V. Oster, Jr. (Panel Moderator) Professor of Public and Environmental Affairs, School of Public and Environmental Affairs, Indiana University Anthony J. Broderick Independent Consultant Former FAA Associate Administrator for Regulation and Certification Steven R. Bussolari Assistant Division Head, Tactical Systems Division Manager, Air Traffic Control System Group, Lincoln Laboratory, John W. Crichton President and CEO, NAV Canada George L. Donahue Director, The Center for Air Transportation Systems Research, George Former FAA Associate Administrator for Research and Acquisition John J. Fearnsides Professor of Public Policy, George Mason University Chief Strategist and Partner of MJF Strategies Xavier Fron Head, Performance Review Commission, EUROCONTROL Richard Golaszweski Executive Vice President, Gellman Research Associates (GRA), Inc.

Ian Hall Director of Operations, National Air Traffic Services, United Kingdom Thomas Imrich Chief Pilot, Research, Boeing Commercial Aircraft Satish C. Mohleji Principal Engineer, Center for Advanced Aviation System Development, The MITRE Corp.

Robert W. Poole, Jr. Director of Transportation Studies, Reason Foundation Michael Powderly President, Airspace Solutions John A. Sorensen Chief Executive Officer, Seagull Technology, Inc.

GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the individual named above, Elizabeth Eisenstadt, Brandon Haller, Bert Japikse, Maren McAvoy, Beverly Norwood, and Richard Scott made key contributions to this special product.

Related GAO Products

Cultural and Technical Factors

Air Traffic Control: FAA Needs to Ensure Better Coordination When Approving Air Traffic Control Systems. GAO-05-11. Washington, D.C.: November 17, 2004.

Air Traffic Control: FAA’s Acquisition Management Has Improved, but Policies and Oversight Need Strengthening to Help Ensure Results. GAO-05-23. Washington, D.C.: November 12, 2004.

Air Traffic Control: System Management Capabilities Improved, but More Can Be Done to Institutionalize Improvements. GAO-04-901. Washington, D.C.: August 20, 2004.

Information Technology: FAA Has Many Investment Management Capabilities in Place, but More Oversight of Operational Systems Is Needed. GAO-04-822. Washington, D.C.: August 20, 2004.

Federal Aviation Administration: Plan Still Needed to Meet Challenges to Effectively Managing Air Traffic Controller Workforce. GAO-04-887T. Washington, D.C.: June 15, 2004.

Air Traffic Control: FAA’s Modernization Efforts--Past, Present, and Future. GAO-04-227T. Washington, D.C.: October 30, 2003.

National Airspace System: Current Efforts and Proposed Changes to Improve Performance of FAA’s Air Traffic Control System. GAO-03-542. Washington, D.C.: May 30, 2003.

Human Capital Management: FAA’s Reform Effort Requires a More Strategic Approach. GAO-03-156. Washington, D.C.: February 3, 2003.

National Airspace System: Better Cost Data Could Improve FAA’s Management of the Standard Terminal Automation Replacement System. GAO-03-343. Washington, D.C.: January 31, 2003.

National Airspace System: Status of FAA’s Standard Terminal Automation Replacement System. GAO-02-1071. Washington, D.C.: September 17, 2002.

National Airspace System: FAA’s Approach to Its New Communications System Appears Prudent, but Challenges Remain. GAO-02-710. Washington, D.C.: July 15, 2002.

Air Traffic Control: FAA Needs to Better Prepare for Impending Wave of Controller Attrition. GAO-02-591. Washington, D.C.: June 14, 2002.

Air Traffic Control: Role of FAA’s Modernization Program in Reducing Delays and Congestion. GAO-01-725T. Washington, D.C.: May 10, 2001.

National Airspace System: Problems Plaguing the Wide Area Augmentation System and FAA’s Actions to Address Them. GAO/T-RCED-00-229. Washington, D.C.: June 29, 2000.

Aviation Acquisition: A Comprehensive Strategy Is Needed for Cultural Change at FAA. GAO/RCED-96-159. Washington, D.C.: August 22, 1996.

Budgetary Factors

FAA Budget Policies and Practices. GAO-04-841R. Washington, D.C.: July 2, 2004.

Air Traffic Control: FAA’s Modernization Efforts--Past, Present, and Future. GAO-04-227T. Washington, D.C.: October 30, 2003.

National Airspace System: Current Efforts and Proposed Changes to Improve Performance of FAA’s Air Traffic Control System. GAO-03-542. Washington, D.C.: May 30, 2003.

National Airspace System: Reauthorizing FAA Provides Opportunities and Options to Address Challenges. GAO-03-473T. Washington, D.C.: February 12, 2003.

National Airspace System: Better Cost Data Could Improve FAA’s Management of the Standard Terminal Automation Replacement System. GAO-03-343. Washington, D.C.: January 31, 2003.

National Airspace System: FAA’s Approach to Its New Communications System Appears Prudent, but Challenges Remain. GAO-02-710. Washington, D.C.: July 15, 2002.

National Airspace System: Free Flight Tools Show Promise, but Implementation Challenges Remain. GAO-01-932. Washington, D.C.: August 31, 2001.

Structural Issues

Federal Aviation Administration: Challenges for Transforming Into a High-Performing Organization. GAO-04-770T. Washington, D.C.: May 18, 2004.

National Airspace System: Current Efforts and Proposed Changes to Improve Performance of FAA’s Air Traffic Control System. GAO-03-542. Washington, D.C.: May 30, 2003.