ATSA was enacted on November 19, 2001, in response to the September 11, 2001, terrorist attacks. ATSA established the TSA and charged it with responsibility for strengthening security in all modes of transportation, including aviation. One of the most significant changes mandated by ATSA was the shift from the use of private-sector screeners to perform airport screening operations to the use of federal screeners. Prior to ATSA, passenger and checked baggage screening had been performed by private screening companies under contract to airlines. ATSA required TSA to create a federal workforce to assume the job of conducting passenger and checked baggage screening at commercial airports. The federal workforce was to be in place by November 2002. At the same time, ATSA mandated that TSA establish a 2-year pilot program using qualified private screening companies to screen passengers and checked baggage, with TSA oversight. Pursuant to section 108 of ATSA, TSA selected five airports, one from each airport security category, to participate in the pilot program. TSA also competitively selected four contractors (one contractor serves two airports) to conduct screening at the pilot airports. Table 1 lists the airports and private screening contractors that participated in the pilot program. Section 108 further permitted the more than 400 commercial airports using federal passenger and checked baggage screeners to apply to TSA to use private rather than federal screeners at the conclusion of the pilot. Beginning on November 19, 2004, all commercial airports with federal security screening became eligible to apply to opt-out of using federal screeners through the newly established SPP. An airport operator may submit to TSA an application to have the screening of passengers and checked baggage at an airport be carried out by the screening personnel of a qualified private screening company, under a contract entered into between the private screening contractor and TSA. In addition to assessing airport applications for using private screeners, as part of the SPP, TSA plans to select qualified private screening companies that apply and meet ATSA and TSA requirements to conduct screening, including airports that seek to apply to serve as the private screening contractor. The five airports selected to participate in the pilot program have applied and been accepted to the SPP. TSA awarded, on a non-competitive basis, new extension contracts (that replaced the original pilot program contracts) to the incumbent private screening contractors at the five pilot program airports effective November 19, 2004. The contracts enable the four private screening contractors to continue performing screening operations through May 18, 2006. As in the original pilot program contracts, the new contracts require private screening contractors to adhere to several ATSA provisions, including that: the level of screening services and protection provided at the airport under the contract will be equal to or greater than the level that would be provided at the airport by federal government personnel; the private screening company be owned and controlled by a citizen of the United States; the private screening company, at a minimum, meet employment standards, compensation and benefits rates, and performance requirements that apply to federal screeners; and all private screener candidates meet the same minimum qualifications as federal screeners, including U.S. citizenship (or being a national of the United States), high school diploma or equivalent, English proficiency, and pass a criminal background check. TSA will make the final decision to approve any application submitted for participation in the SPP and reserves the right to consider airport specific threat intelligence and an airport’s record of compliance with security regulations and security requirements to determine the timing of any transition to private screening. TSA may also impose a delay on when an airport can transition to private screening based on such factors as peak travel season and the total cost of providing screening services at an airport. During the period November 2004 through January 2006, 7 out of the more than 400 commercial airports had applied to participate in the SPP. In addition to the five airports that participated in the pilot program, as of January 30, 2006, two additional airports that did not participate in the pilot program had applied to use private screeners—Elko Regional Airport in Nevada and Sioux Falls Regional Airport in South Dakota. However, after discussions with TSA officials, Elko Regional Airport submitted a letter to TSA on September 30, 2005, seeking to withdraw its application on the grounds that the City of Elko could not qualify as a private screening company, thereby mooting its intention that the airport would serve as the contractor. On October 17, 2005, TSA replied back to Elko, acknowledging Elko’s withdrawal of its application to participate in the SPP. Table 2 provides information on the two airports that applied to the SPP, as of January 2006. We did not attempt to identify the reasons that only 7 of more than 400 commercial airports that were eligible to participate in the SPP had submitted an application. However, in our November 2004 report on the SPP, we reported that of the 26 airport operators we interviewed, 20 said their airport would not apply to participate in the SPP in the first year of the program, 5 were uncertain whether to apply for the 2004 cycle, and 1 said his airport planned to apply, but only for its international passenger terminal. Among the 20, 16 said they were satisfied with federal screeners or did not see any benefit to applying to participate in the SPP and 13 cited concerns about airport liability in the event of a terrorist attack. In May 2005, TSA approved the SPP application for the Sioux Falls airport, and in December 2005, TSA awarded a contract for passenger and checked baggage screening services at Sioux Falls to a private screening contractor. In February 2006, this award enabled Sioux Falls airport to transition from TSA federal screeners to private screeners employed by the contractor. According to the contractor, it will use 30 FTEs, 7 less than TSA’s screener allocation for Sioux Falls airport, without compromising security or customer service. The contractor expects to achieve operational efficiencies and cost savings for its screening operations at this airport due to the reduction in FTEs. In addition, during February 2006, TSA awarded a contract to a private screening contractor at one of the five pilot program airports. TSA is in the process of awarding contracts to the remaining four airports that applied to use private screeners. As of February 28, 2006, TSA received proposals from private screening companies for the Greater Rochester International, Tupelo, Kansas City, and San Francisco International airports. TSA also released the request for proposals for San Francisco International airport. TSA also approved 34 private screening companies for listing on a qualified vendors list, which identifies that these companies are eligible to perform passenger and checked baggage screening services in the SPP. DHS’s fiscal year 2006 appropriations provides nearly $2.54 billion to fund the screener workforce—about $2.4 billion for federal passenger and checked baggage screener full-time equivalents and an additional $139.6 million to pay for screening contractors at the five pilot program airports. In accordance with its appropriations, TSA plans to fund the SPP from the same budget line item as federal screening operations to provide flexibility on the number of airports that can participate in the program. In this manner, the costs for contracts with private screening contractors are to be funded by the cost of the federal operations that are being displaced. The SAFETY Act, enacted as part of the Homeland Security Act of 2002, offers liability and other protections to sellers of qualified anti-terrorism technologies. According to DHS, services, such as screening services, are eligible to receive liability protection under the SAFETY Act if designated as qualified anti-terrorism technologies, thus limiting liability risks for the private screening contractor and its subcontractors, suppliers, vendors, and customers. SAFETY Act protection pertains to “claims arising out of, relating to, or resulting from an act of terrorism” where qualified anti- terrorism technologies have been deployed. According to DHS, the SAFETY Act reflects the intent of Congress to ensure that the threat of liability does not deter the potential manufacturers or sellers of anti- terrorism technologies from developing and commercializing technologies that could significantly reduce the risks or mitigate the effects of large- scale acts of terrorism. The SAFETY Act does not offer indemnification (compensation for losses incurred) to sellers of qualified anti-terrorism technology but rather limits, and in some instances may completely bar, claims brought against sellers of anti-terrorism technologies that have been deployed in defense against or response or recovery from a terrorist incident. If a seller of a potential anti-terrorism technology wishes to be awarded SAFETY Act protections, the seller must formally apply to the department using the forms provided by DHS, furnish the entire requisite supporting data and information, and successfully demonstrate compliance with the act’s requirements. TSA awarded one of two types of contracts for extending contractor performance at the five pilot program airports. Both these types of contracts were awarded on a non-competitive basis to the private screening contractors. TSA awarded the first type of contract—cost-plus- award-fee contracts (a type of cost-reimbursement contract)—to the four private screening contractors providing screening services at four of the five pilot program airports. These contracts, which are generally used when the costs are not known, provide for payment of allowable incurred costs, to the extent prescribed in the contract. A cost-plus-award-fee contract provides for a fee consisting of (1) a base amount that is a percentage of the estimated cost fixed at inception of the contract and (2) an award amount that the contractor may earn in whole or in part during the contract period and that is sufficient to provide motivation for excellence in such areas as quality, timeliness, technical ingenuity, and cost-effective management. The actual award amount is based upon an evaluation by TSA compared against criteria spelled out in the contract. This determination and the methodology for determining the award fee are unilateral decisions made solely at the discretion of the government. TSA awarded the second type of contract—a fixed-price-award-fee contract—to one private screening contractor. This type of contract is generally used when the requirements are reasonably known and a reasonable basis for firm pricing by the contractor exits. A fixed-price award fee contract establishes a fixed price (including normal profit) for the effort, which will be paid for satisfactory contract performance, and an award fee. The award fee earned (if any) will be paid in addition to that fixed-price based on periodic evaluations of the contractor’s performance against an award-fee plan. TSA awarded a fixed-price-award-fee contract to a private screening contractor at Tupelo airport, a security category IV airport, the smallest airport. According to the Federal Acquisition Regulation (FAR), which generally governs federal government procurement activities, the negotiation of contract type and price (or estimated cost and fee) should result in reasonable contractor risk and provide the contractor with the greatest incentive for efficient and economical performance.A firm-fixed-price contract, which best utilizes the basic profit motive of a business enterprise, shall be used when the contractor risk involved is minimal or can be predicted with an acceptable degree of certainty. The FAR provides that when a reasonable basis for firm pricing does not exist, other contract types (such as cost reimbursement) should be considered, and negotiations should be directed toward selecting a contract type that will appropriately tie profit to contractor performance. As a service continues to be contracted over time, however, and after experience provides a basis for firmer pricing, the FAR advises that cost risk should shift to the contractor and a fixed-price contract should be considered. The FAR specifically states that contracting officers should avoid protracted use of a cost-reimbursement contract after experience provides a basis for firmer pricing. Additionally, under the FAA acquisition policy followed by TSA, “he use of fixed-price contracts is strongly encouraged whenever appropriate.” DHS awarded some of the liability protections available under the SAFETY Act to three of the four private screening contractors that applied for it and stated that it will decide the status of future applications on a case-by-case basis in accordance with criteria described in the act. However, DHS cannot award the most extensive level of protection under the SAFETY Act, certification status, until it can determine whether contractors will perform as intended—a criterion that must be satisfied before awarding such coverage. DHS officials stated that DHS has not been able to award SAFETY Act certification status to contractors because TSA has not yet finalized performance standards for assessing whether contractors have performed as intended. While all four current screening contractors we interviewed stated that SAFETY Act protection was important, they did not state that they would be unwilling to participate in the SPP without certification under the SAFETY Act. For example, one contractor said it had too much time and money invested in providing private screening services to not participate in the SPP. Congress has since granted legal protection from lawsuits to all airports where TSA conducts or oversees passenger and checked baggage screening. Specifically, the fiscal year 2006 DHS appropriations act shields airports from, among other things, virtually all liability related to negligence or wrongdoing by private screening contractors, their employees, or federal screeners. In addition, TSA made an effort to improve the screener hiring process by granting contractors and FSDs more input and flexibility in the hiring process, though some contractors, as well as FSDs at airports with federal screeners, remain concerned about the timing of the assessments and the length of time the assessment process takes. TSA has also taken steps to clarify SPP roles and responsibilities between federal and private sectors, but the four private screening contractors we interviewed still had questions about the roles and responsibilities of TSA staff at the airports they served. Officials at DHS’ Science and Technology Division stated that all anti- terrorism technologies submitted to the department for protection under the SAFETY Act are evaluated—including screener services—on a case- by-case basis, in accordance with the criteria defined by the act’s two- tiered protection status, as follows: Designation status. Designation status protects a seller of anti-terrorism technology in the event the technology fails to thwart an act of terrorism by limiting the type and amount of damages a plaintiff may recover such that a seller’s potential liability cannot exceed the amount of insurance coverage maintained by the seller. To receive designation status, anti- terrorism technologies, including screening services, must be evaluated by DHS against the seven criteria set out in the SAFETY Act: (1) prior U.S. government use or demonstrated substantial utility and effectiveness; (2) availability of the technology for immediate deployment in public and private settings; (3) existence of extraordinarily large or unquantifiable risk of exposing the seller or other provider of such anti-terrorism technology to potential liability; (4) substantial likelihood that the technology will not be deployed unless the risk management protections of the SAFETY Act (limited liability) are conferred; (5) the magnitude of risk to the public if the technology is not deployed; (6) evaluation of all scientific studies that can be feasibly conducted to assess the capability of the technology to substantially reduce risks of harm; and (7) anti-terrorism technology that would be effective in facilitating the defense against acts of terrorism, including technologies that prevent, defeat or respond to such acts. Certification status. Once designated, qualified anti-terrorism technologies become eligible for certification under the SAFETY Act, which gives the seller the legal status of a government contractor and renders the seller virtually immune from any claims that might arise in the event the technology fails to thwart an act of terrorism, provided the seller does not act fraudulently or with willful misconduct in submitting information to DHS. To certify, DHS must determine if the qualified anti- terrorism technology will (1) perform as intended, (2) conform to the seller’s specifications, and (3) be safe for use as intended. Certification status cannot be awarded unless these three criteria have been met. DHS places certified anti-terrorism technologies and services on an Approved Product List for Homeland Security. DHS determined that the four private screening contractors serving the five pilot program airports were eligible for SAFETY Act protection. Once this determination was made, after November 2004, three of the four current private screening contractors applied for and were provided designation status under the SAFETY Act. Contractors that apply to the SPP in the future are to be evaluated individually, as their applications to the program are processed. TSA awarded a contract for private screening services at Sioux Falls and Jackson Hole airports. The status of SAFETY Act coverage for these airports, if the contractors apply for coverage, will be determined at a later point in time. As of January 2006, one issue pertaining to how the SAFETY Act would be applied to contractors remained unresolved and is a cause for concern for one of the four contractors we interviewed. Specifically, DHS officials stated that they have not been able to award SAFETY Act certification status to contractors because TSA has not yet finalized performance standards for assessing whether contractors have performed as intended. DHS SAFETY Act officials stated that once TSA finalizes its performance standards, the contractors that previously received designation status may submit an application for SAFETY Act certification. The application is to include evidence demonstrating that they are meeting the TSA-defined performance standards. DHS will evaluate the material submitted by the applicant against the TSA standards. According to DHS officials, assuming the applicant is able to demonstrate that it is performing as TSA intends, there should be no impediment to granting certification. When the three contractors that already have SAFETY Act designation status were asked to comment on whether they would continue to participate in the SPP without certification status, two contractors told us they would. One of these two contractors said it had too much time and money invested in providing private screening services to not participate in the SPP. The third contractor said that its company’s $50 million in general liability insurance coverage excludes acts of terrorism, thus the company believed it “would remain exposed to serious liability concerns related to terrorist threats risks.” This contractor did not, however, explicitly state that it would not participate in the SPP going forward, if certification status were not awarded. In general, contractors may offset potential liability arising from acts of terrorism by purchasing commercially available liability insurance. Two of the four private screening contractors currently under contract to TSA purchased insurance policies that protect them from acts of terrorism. Both contractors stated that their policies were inadequate to cover the liability resulting from a major terrorism attack and that SAFETY Act protection was, therefore, additionally necessary to provide protection to the contractor. As to the importance of SAFETY Act protection to potential future participants in the SPP, in November 2004, we reported that five of six prospective SPP private screening contractors we interviewed—those not currently serving airports—stated that the issue of whether they would receive liability protection was important and would greatly affect whether they would participate in the SPP if selected by TSA as a qualified contractor. In addition, officials with two aviation associations representing hundreds of airports, whom we interviewed, stated that their members believed that SAFETY Act protection—both designation and certification—was necessary for contractors to participate in the SPP. The status of SAFETY Act coverage for airports, and liability coverage in general for airports using private screeners, differs from coverage for contractors. While DHS has determined that contractors performing screening services are eligible to receive liability protection under the SAFETY Act, the department has not determined whether airports that do not perform screening services are eligible for liability coverage under the act. In October 2005, however, Congress enacted legislation that granted airports legal protection from lawsuits. Specifically, section 547 of the Department of Homeland Security Appropriations Act, 2006, shields airport operators from virtually all liability relating to the airport operator’s decision on whether or not to apply to opt-out of using federal screening, and any acts of negligence, gross negligence, or intentional wrongdoing by either a qualified private screening company under contract to DHS, its employees, or by a federal screener. Prior to the enactment of this act, three of the seven airport operators we interviewed expressed concerns about whether the government would extend liability protection to them. They were concerned that if a security incident arose that resulted in litigation, they may become a party to a lawsuit. Officials with two aviation associations, whom we also interviewed at that time, also expressed concerns about airport liability. After the enactment of the 2006 appropriations act, one of the three airport operators that had expressed concerns about liability told us that the protection available under section 547 of the act had addressed its concerns about its airport’s liability. A second airport operator that we contacted after enactment of section 547 had not yet reviewed the provision and stated that it could not confirm whether its airport would be protected from liability. TSA made an effort to improve the screener hiring process by granting contractors and FSDs more input and flexibility in the hiring process, including more frequent assessments of screener candidates and two options for performing these assessments. Prior to November 2004, TSA had scheduled candidate assessment forums on a regional basis 1 to 2 times a year to evaluate a pool of candidates interested in screener positions. At that time, private screening contractors, like FSDs at airports with federal screeners, had to rely on TSA to authorize the hiring of screeners and establish candidate assessment forums—a process that could take several months. Beginning in November 2004, as part of the contract extensions, TSA began requiring the pilot program private screening contractors to submit annual hiring plans to TSA for review, indicating their anticipated screener staffing needs. The intention was to use this information to plan for more frequent and timely screener assessments conducted regionally and locally—up to 6 times a year. Despite TSA’s planned increase in the frequency of assessments, private screening contractors, as well as FSDs at airports with federal screeners, remain concerned about their inability to conduct hiring on an as needed basis because TSA still controls the scheduling of assessment forums. One contractor, for example, stated that despite the scheduling of more frequent assessment forums, it still could not fully implement its hiring plan because the assessments did not necessarily coincide with its hiring periods. In response to contractor concerns about the candidate assessment process, in November 2004, TSA began allowing private screening contractors two options for evaluating screener candidates: Option 1: Contractors may draw screener candidates from a pool developed by a private company under contract with TSA, which is responsible for assessing potential screener candidates. This company administers a computer-based aptitude test, mental and physical tests, and conducts background checks at regional assessment centers. The contractor is under no obligation to accept these applicants. Option 2: Contractors may use TSA’s assessment company for the aptitude test alone, and develop and implement additional assessment activities on their own, provided they meet ATSA requirements and TSA guidance. According to TSA officials, all four private screening contractors have selected from these two options for hiring screeners. The contractors’ views about the hiring process were mixed. For example, one contractor we interviewed said that because TSA has allowed it to conduct its own assessments, the length of the entire assessment process has been reduced from several months to 2 weeks. This contractor, which was using option two, is now conducting key parts of the assessment process. According to this contractor, its use of option two has resulted in a more efficient, effective, and significantly less costly process. A second contractor using option two stated that it had established a new hire recruitment, assessment, and training program. According to this contractor, its use of option two has resulted in its ability to identify more qualified screener candidates, improve screener retention, and fill screener vacancies on an as needed basis. However, the other two contractors remained concerned about the length of time the assessment process lasts. One of these contractors stated that the duration of the process was still so long that potential screeners found other jobs first and dropped out of consideration. This contractor, which was using option two, proposed using FSD staff to conduct the assessments to streamline and shorten the assessment process. According to TSA officials, TSA did not accept this suggestion because TSA’s Office of Human Resources determined it would have been too costly to allow FSD staff to conduct the assessments. TSA officials stated that they offered the contractor the same assessment options that are available to all airports with federal screeners. Officials further stated that they will continue to examine all aspects of the assessment process in an effort to offer greater efficiency and flexibility in screener hiring for both federal and contract screeners. While TSA has defined the roles and responsibilities for FSDs, FSD staff, and private screening contractors, among others, in its August 2005 SPP transition plan, the details contained in this plan have not been communicated to or shared with private screening contractors. TSA and SPP procurement officials stated that they consider the transition plan to be an internal document that TSA does not intend to distribute outside of the agency. However, officials stated that the information on roles and responsibilities under the SPP would be available to prospective private screening contractors as part of the SPP contracting process. Additionally, TSA SPP officials stated that they presumed that FSDs had communicated this information to the current private screening contractors. Further, TSA officials stated that TSA’s June 2004 guidance on the SPP provides information on roles and responsibilities of SPP stakeholders. However, our review of the guidance found that it did not clearly delineate the roles and responsibilities of TSA airport staff and the private screening contractors. For example, the guidance did not include any information on the roles and responsibilities of some TSA airport staff, such as screening managers and training coordinators, and did not clarify how their roles and responsibilities would differ from those of the private screening contractors. Additionally, the four private screening contractors we interviewed had questions about the roles and responsibilities of TSA staff at the airports they served, including screening managers and stated that, in their view, TSA had not clearly defined the roles and responsibilities of TSA staff at airports participating in the SPP. When asked whether FSD and FSD staff roles and responsibilities were clear, one contractor stated that he did not believe that TSA had recognized that the roles of training managers and screening managers at airports using federal or private screeners are different. A second contractor stated that, in his view, TSA had not standardized the roles and responsibilities of TSA airport staff across the five airports currently using private screeners. Similarly, a third contractor stated that TSA roles and responsibilities need to be more well- defined, particularly the role of FSD airport staff and TSA local contract staff. Finally, the fourth contractor stated that the separation of roles and responsibilities has been a major challenge on a daily basis in part because TSA staff at screening checkpoints assert control and impose operational changes at the checkpoints—tasks that the contractor believes it is responsible for, rather than TSA staff. This contractor identified the need for TSA to clearly define the roles of the various stakeholders involved in the SPP and to establish guidelines on TSA’s oversight and regulatory responsibilities at airports participating in the SPP. In September 2005, in reporting on the ability of FSDs to address airport security needs, we stated that TSA airport stakeholders (including airport operators) at some of the airports we visited stated that the FSD’s role was not sufficiently clear, and at least one stakeholder at every airport we visited said such information had never been communicated to them. We recommended that DHS direct TSA to communicate the authority of the FSD position, as warranted, to FSDs and all airport stakeholders. In response, TSA agreed to update the role of the FSD and communicate this information to airport stakeholders. As of December 2005, however, TSA had not yet implemented this recommendation, but stated that the matter is being considered by a TSA steering committee. In addition, a consulting firm that evaluated the private screening pilot program in April 2004 recommended that TSA clearly delineate the roles and responsibilities among federal and private screening managers and their staff and include this information in its contracts with the private screening contractors. Based on our review of the June 2004 guidance on the SPP and the contracts awarded to the current private screening contractors in November 2004, TSA had not included this information. TSA officials stated that they plan to clearly delineate roles and responsibilities of the FSD, FSD staff, and private screening contractors in the forthcoming SPP contracts. According to our standards for internal controls, agency management should ensure there are adequate means of communicating with external stakeholders on issues that may have a significant impact on the agency’s ability to achieve its goals. By not sharing detailed information on roles, responsibilities, and authorities described in the SPP transition plan with all FSDs and private screening contractors, TSA may be missing an opportunity to support the effective performance and management of essential functions related to the screening process. Additionally, without clear and specific information on roles and responsibilities under the SPP, it may be difficult for prospective SPP contractors to develop an informed estimate of the costs of providing screener services. Through its contracts, TSA offers the private screening contractors some incentives to decrease costs. Specifically, TSA’s cost reimbursement contracts for screening services at four of the five airports currently using private screeners provide some incentives in the form of an award fee tied in part to the contractor’s ability to achieve cost efficiencies and innovations. However, despite TSA’s use of cost-savings as a basis for a portion of the award fees, opportunities for government cost-savings may be limited because under the cost-reimbursement contracts the government bears most of the cost risk—the risk of paying more than it expected. TSA plans to shift more cost risk to contractors by competitively awarding fixed-price-award fee contracts for screening services at the four smallest airports that will participate in the SPP. TSA officials said they also plan to competitively award fixed-price contracts for screening services at larger airports, but will not do so for another 1 to 2 years— when they believe that screening costs at larger airports will be better known. TSA expects that the SPP will operate at a cost that is competitive with equivalent federal operations and will achieve cost-savings, where possible. However, opportunities for cost savings are somewhat limited because of various requirements that contractors must meet in performing the contract. Specifically, under ATSA, private screening companies must provide compensation and other benefits to contract screeners at a level not less than that provided to federal screeners. Further, the contracts require that contractors ensure that security checkpoints are staffed in accordance with TSA’s standard operating procedures and other government requirements and that the screeners have the qualifications and training established by the government. While these government airport security standards must be met, TSA has structured its existing contracts to provide some incentives to contractors for cost savings. Specifically, over the last 3 years, TSA has awarded cost-reimbursement contracts with an award fee component for screening services at four of the five airports currently using private screeners. These contracts provide for payment of allowable incurred costs, to the extent prescribed in the contract (typically up to a specified cost ceiling). In addition, the government also agrees to award a separate amount (base fee) fixed at inception of the contract and an award amount (award fee) that the contractor may earn in whole or in part during performance that is sufficient to provide motivation for excellence in such areas as quality, technical approach, and cost-effective management. The amount of the award fee to be paid is determined by the government’s judgmental evaluation of the contractor’s performance in terms of the criteria stated in the contract. Because cost-savings and contract management account for 20 percent of the award fee determination for the current screening services contracts, these contracts do provide some incentive for contractor cost efficiency. Specifically, the award fee plan establishes the expectation that contractors will provide screening services with cost efficiencies and innovation, while meeting the security standards, mission objectives, and compensation levels required by ATSA and TSA, respectively. These cost and contract management factors include: Overtime/personnel costs-–evaluates the contractor’s ability to control overtime and personnel costs. Innovation/continuous improvement-–evaluates the contractor’s ability to build on previous experiences/accomplishments and utilize innovative approaches, techniques and tools. Other direct/indirect cost-–evaluates the contractor’s ability to control direct labor cost and overtime costs and its ability to effectively manage its subcontract costs through use of competition to the greatest extent practicable and through documented cost analysis substantiating the reasonableness of subcontract costs. Indirect cost control evaluates the contractor’s ability to control its indirect costs. Despite TSA’s use of cost-savings as a basis for a portion of the award fees, opportunities for government cost-savings may be limited in part because under the cost-reimbursement contracts the government bears most of the cost risk—the risk of paying more than it expected. Specifically, under cost-reimbursement contracts, the government must reimburse the contractor for all allowable costs as provided in the contract. TSA plans to shift most cost risk to its contractors by moving to a fixed-price-award fee contract in the next 1 to 2 years. A fixed-price type of contract places upon the contractor the maximum risk and full responsibility for all costs and resulting profit or loss, providing maximum incentive for the contractor to control costs and perform efficiently. Further, in a competitive environment, pricing by contractors for a fixed- price contract would be subject to marketplace pressures that would provide incentives for the contractor to control costs and reduce prices in order to win the contract. The award fee component of a fixed-price contract is used to motivate the contractor by relating the amount of profit or fee payable under the contract to the contractor’s performance in the areas of operations, management, contract compliance, and human resources. Because the contract is fixed-priced, the award fee portion does not assess cost management. TSA has awarded a fixed-price-award-fee contract to the contractor providing screening services at the smallest of the five airports using private screeners, while the contracts for screening services for the other four airports remain as cost-reimbursement contracts. TSA officials stated that the fixed-price contract was awarded for the one airport (on a noncompetitive basis) because costs there were considered predictable and therefore a reasonable basis for firm pricing by the contractor existed. Table 3 provides information on TSA’s contracts with current private screening contractors. TSA officials stated that as of February 2006, TSA had awarded, was planning to award, or was in the process of awarding, additional fixed- price contracts on a competitive basis for screening services at three other small airports (categories II, III, and IV) under the SPP. TSA officials acknowledged that cost-reimbursement contracts place most of the cost risk on the government, rather than the contractor, but said the agency would not award fixed-price contracts for screening services at the two larger airports using private screening contractors for another 1 to 2 years. TSA officials stated that they would not award fixed-price contracts to these contractors because they did not know the costs of screening at the larger airports, where they believe costs are variable, and therefore they believe that TSA would be at greater risk of awarding a contract for a higher cost than might actually be necessary. TSA officials acknowledged that TSA already had, through an independent cost-data study, identified and collected some cost and performance data on passengers and checked baggage screening operations at 15 airports with private and federal screeners, including four category X and four category I airports and all five pilot program airports. This study, which was completed in October 2004, looked in particular at cost drivers—factors that contribute to overall expenses. Moreover, an April 2004 studyconducted for TSA by a consulting firm estimated how much TSA spent for screening operations at each of the five pilot program airports—including contract payments as well as costs borne by TSA—and compared the results with estimates of how much TSA would have spent had it actually conducted the screening operations at those airports. TSA officials stated that the cost information identified in these two studies provided useful data to help determine the costs of screening at airports currently using private screeners, but said additional information is needed to assist in transitioning to fixed-price contracts for screening services at larger airports. Specifically, TSA officials stated that additional cost information based on the actual costs of participating in the SPP is needed for the larger airports because the SPP contracts differ in two key ways from the pilot and extension contracts that TSA previously awarded. First, the SPP contracts will include specific performance measures and targets that the contractors must meet. Second, the contracts will allow for contractors to recommend and, if approved, implement innovations, and to select among options for assessing screener candidates and training screeners. The officials stated that it would therefore be difficult for prospective SPP contractors for the larger airports to accurately estimate the costs of providing screening services for a fixed-price contract for larger airports. As a result, TSA officials stated that they needed up to 2 additional years to determine estimated costs in order to potentially transition to fixed-price contracts, and therefore would continue using cost-reimbursement contracts with the largest airports (categories X and I) for that period. By using competitive bidding procedures to award fixed-price contracts to qualified firms, as TSA contemplates, TSA will also help to bring marketplace pressures to bear on competitors’ proposed costs and fees or prices and could enable TSA to maximize contractors’ incentives to control costs and ensure that the contractor, rather than the government, will bear more of the cost risk associated with performance of private screening operations. TSA has developed performance goals and draft measures and targets to assess the performance of private screening contractors under the SPP, but DHS has not yet approved them or established a time frame for doing so. Until DHS approves these measures, TSA cannot finalize and implement them to assess performance. Performance goals are measurable objectives against which actual achievement can be compared. Performance measures are the yardsticks to assess an agency’s success in meeting performance goals, while a performance target is a desired level of performance expressed as a tangible, measurable objective, against which actual achievement will be compared. Together, these performance metrics are used to assess an agency’s progress toward achieving the results expected. We reported in April 2004 that without data to assess the performance of private screening operations, TSA and airport operators have limited information from which to plan for the possible transition of airports from a federal screening system to a private system. In our November 2004 report, we stated that TSA had begun drafting performance measures for this purpose. In the current contracts that TSA awarded to the four private screening contractors, TSA established an award fee process to motivate contractor performance. These contracts were modified in February and March 2005 to implement the award fee process. TSA’s draft quality assurance surveillance and award fee plan for the SPP, dated October 2005, identifies the performance measures TSA plans to use to assess the performance of private screening contractors against TSA’s major goals for the program. According to TSA, the five goals for the SPP in the areas of security, customer service, costs, workforce management, and innovation, are: Ensure security. Provide world class customer service. Implement cost efficiencies. Respect the screening workforce. Create a partnership that leverages strengths of the private and public sector. TSA’s draft quality assurance surveillance and award fee plan for the SPP includes planned performance measures in 14 areas that are to be applied to all private screening companies that participate in the SPP. These performance measures, in addition to an innovation measure, are to be used to determine the award fee provided to contractors that participate in the SPP. Table 4 describes the performance measures. TSA established draft performance targets for 10 of the 14 measures, which all SPP contractors will be required to meet. TSA officials said individual contractors that are accepted as SPP participants in the future will be required to meet TSA’s performance targets for the remaining four measures—passenger screening threat image projection (TIP) detection rate; passenger screening TIP false alarm rate; screener recertification pass rates; and customer satisfaction. The performance indicators for the four measures for which targets have not yet been set by TSA are to be specific to each airport participating in the SPP. TSA stated that it has established baseline data for these four performance measures describing how federal screeners or private screening contractors have actually performed at individual airports, over time, as well as an overall average of performance. Using the baseline data as a starting point, performance targets would then be set for each airport. For example, if a baseline shows that historically, all airports met the performance measure for screener recertification pass rates 70 percent of the time, TSA would set the target measure at or above 70 percent. TSA officials stated that they are currently working to identify incentives to encourage better results at airports that have historically not met TSA’s performance standards for passenger and checked baggage screening. TSA is considering providing financial incentives for a limited time in an effort to quickly move its airports to meet TSA’s baseline level of performance. TSA officials stated that DHS must approve the draft performance goals, measures, and targets before they can be finalized, but as of January 2006, DHS had not yet done so, and had not set a deadline for doing so. We asked TSA and DHS officials which office within DHS was responsible for approving these performance metrics, but the officials were not able to provide us with the information. Until the draft performance measures are finalized by DHS, TSA will not be able to implement its performance measures for the SPP. According to our standards for internal controls, agencies must have systems in place for measuring, reporting, and monitoring program performance. In addition, as we have reported in our prior work on the importance of using the Government Performance Results Act (GPRA) to assist with oversight and decision making, credible performance information is essential for the Congress and the executive branch to accurately assess agencies’ progress toward achieving their goals. Further, the draft measures and targets TSA developed for the SPP will also be used by DHS to determine whether to award private screening contractors certification status under the SAFETY Act. Until the SPP measures and targets are finalized, DHS officials stated that they cannot determine whether contractors will perform as intended—criteria that must be satisfied before awarding certification status. Since initiating the SPP in November 2004, DHS and TSA have taken steps to develop a legal, contractual, and programmatic framework that enables the private sector to provide passenger and checked baggage screening services, with federal oversight in place to help ensure that security and screener performance is consistent and comparable at airports, whether federal or private screeners are used. As of January 2006, only 7 of over 400 airports that were eligible to apply to participate in the SPP had submitted an application. While we did not attempt to identify the reasons for the small number of applicants to the SPP, a contributing factor may be airports’ concerns about liability. In November 2004, we reported that half of the airport operators we interviewed (13 of 26) were concerned about airport liability in the event that a private screener failed to detect a threat object that led to a terrorist incident. Aviation associations that represent hundreds of airports have also identified liability as a major concern among airports. Although Congress’ recent effort to shield airports from liability in the fiscal year 2006 DHS appropriations act may address this concern, there have been no additional applicants since the act was passed. Furthermore, by extending a level of federal liability protection through the SAFETY Act to current private screening contractors, DHS has laid the groundwork for future contractors to potentially receive comparable protection. Ongoing concerns among prospective participants in the SPP regarding the availability of the most extensive level of protection under the SAFETY Act—certification—may be alleviated once TSA finalizes a standard of performance for private screening contractors that DHS can utilize to determine if contractors have demonstrated that they will perform as intended. As TSA moves forward with implementing the SPP, several opportunities exist for strengthening the management and oversight of the program. First, SPP applicants need clear information on what their roles and responsibilities are to be at airports where a privatized screener workforce operates with federal oversight. The absence of such guidance may affect the ability of responsible officials to effectively and efficiently manage screening checkpoints and the screener program in general. Additionally, without clear and specific information on roles and responsibilities of private screening contractors under the SPP, it may be difficult for prospective SPP contractors to develop an informed estimate of their personnel needs and associated costs under the SPP—information that is needed for the competitive bidding process. Second, in addition to concerns about liability protection, airports in the past expressed concerns about the degree of management control they would have over various aspects of screening services. Since then, TSA has provided additional operational flexibilities to private screening contractors, such as granting contractors and FSDs more input and flexibility in the screener hiring process. Contractors have reported efficiencies they have achieved as a result of these flexibilities, including using fewer screeners than authorized by TSA. Although steps have been taken to address concerns regarding airports’ liability and the need for contractors to have additional management control over various aspects of screening services, only two additional airports, in addition to the five pilot program airports, applied to participate in the SPP. We believe that identifying the underlying reasons for the small number of applicants to the SPP may be helpful to TSA and others in assessing what, if any, changes may be needed to the program. Third, while TSA is not required to adhere to the Federal Acquisition Regulation with respect to contracting practices, it has acknowledged the advantages of fixed-price contracts in situations where costs are reasonably understood. To this end, TSA has begun the contract award process for the four smaller airports using a fixed-price type of contract. TSA has decided to continue to use cost-plus-award-fee contracts rather than fixed-price contracts with private screening contractors providing services at the larger airports for at least an additional 1 to 2 years so that it can continue to collect information on the costs of screening operations at these airports. Using fixed-price contracts, as TSA plans to do, would result in the contractors assuming substantial cost responsibility from the government related to screener operations and help ensure that private screening contractors deliver the most cost-effective services, while ensuring that TSA and ATSA requirements related to maintaining airport security are met. The use of competitively awarded fixed-price contracts should provide a built-in incentive for contractors to identify cost-saving opportunities and innovations, which in turn may help reduce costs of screening contracts at the larger airports using private screeners. TSA could make these cost-savings opportunities available to airports with federal screeners, as appropriate, thereby transferring the efficiencies identified by the private sector to the federal government. Finally, until DHS approves the performance goals, measures, and targets for the SPP, it will not have a mechanism in place beyond the ongoing contracts for assessing the performance of private screening contractors. Without these performance goals, measures, and targets it may be difficult for TSA to identify areas of screener operations that contractors may be able to improve. To strengthen its administration of the SPP and to help address stakeholder concerns, we recommend that the Secretary of DHS direct the Assistant Secretary, TSA, to take the following actions: Formally document and communicate with all FSDs, current private screening contractors, and entities that apply to the SPP, the roles and responsibilities of all stakeholders that participate in the SPP, pertaining to the management and deployment of screening services. To help ensure the completion of a performance management framework for the SPP so that TSA can assess SPP contractors and to promote accountability of SPP contractors for achieving desired program outcomes, we recommend that the Secretary of the Department of Homeland Security take the following action: Establish a time frame for completing its review of the performance goals, measures, and targets for the SPP so that TSA may apply them at the earliest possible opportunity. We provided a draft of this report to DHS and TSA for review and comment. On March 10, 2006, we received written comments on the draft report, which are reproduced in full in appendix II. DHS generally concurred with the findings and recommendations in the report, and stated that efforts to implement our recommendations will help them develop a more effective, efficient, and economical administration of TSA’s SPP. With regard to our recommendation that TSA formally document and communicate with all FSDs, current private screening contractors, and entities that apply to the SPP, the roles and responsibilities of all stakeholders that participate in the SPP pertaining to the management and deployment of screening services, DHS identified steps that TSA is taking to this end. Specifically, DHS stated that TSA updated its SPP transition plan, which, among other things, further clarifies the relationships among the FSD, FSD staff, and private screening contactors, and other stakeholders as they relate to SPP program management. DHS also stated that TSA has assembled a transition team to work closely with SPP stakeholders to foster awareness and ensure communication regarding the roles and responsibilities of all involved parties working under the SPP. TSA’s successful implementation of these ongoing efforts should address the concerns we raised regarding documenting and communicating roles and responsibilities under the SPP. In addition, regarding our recommendation that DHS establish a time frame for completing its review of the performance goals, measures and targets for the SPP so that TSA may apply them at the earliest possible opportunity, DHS stated that TSA had established performance metrics and had provided it to DHS for its review. However, DHS did not specify a time frame for completing its review. We continue to believe that it is important for DHS to establish a time frame for completing its review of the performance goals, measures, and targets for the SPP. Without these performance metrics, TSA will not have a mechanism in place beyond the ongoing contracts for assessing the performance of private screening contractors. Further, until performance metrics are finalized, it remains unlikely that DHS will award such contractors certification under the SAFETY Act. DHS also provided updated information on the status of the SPP, which we incorporated where appropriate. As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 7 days from the date of this report. At that time, we will send copies of this report to the Secretary of the Department of Homeland Security and the Administrator of the Transportation Security Administration and interested congressional committees. We will also make copies available to others upon request. In addition, the report will be made available at no charge on GAO’s Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-3404 or berrickc@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff that made major contributions to this report are listed in appendix IV. To assess the Transportation Security Administration’s (TSA) efforts to implement the Screening Partnership Program (SPP), we analyzed (1) the status of federal efforts to determine whether and to what extent liability protection will be provided to private screening contractors and airports, and actions taken on other stakeholder concerns related to participation in the SPP; (2) how TSA has determined it will achieve cost-savings goals for screener operations through the SPP, specifically through choice of contract used and contract terms; and (3) TSA’s progress in developing and implementing performance goals, measures, and targets to assess the performance of the private screening contractors who will be participating in the SPP. To assess the status of federal efforts to determine whether and to what extent liability protection should be provided to private screening contractors and airports, and actions taken on other stakeholder concerns related to participation in the SPP, we reviewed Department of Homeland Security (DHS) and TSA documentation on the Support of Anti-terrorism by Fostering Effective Technologies Act (SAFETY Act) and the SPP. Specifically, we reviewed DHS guidance posted on its Web site related to the SAFETY Act and other DHS documentation on this act. We also reviewed TSA’s written responses to stakeholders frequently asked questions about the SPP, including information on liability protection; TSA’s transition plan for the SPP, which documents internal guidance on transitioning an airport from a federal screener workforce to a private screener workforce; TSA’s communications plan for the SPP; airport applications to the SPP; and other guidance-related materials TSA developed for airports and private-screening contractors. Additionally, we reviewed relevant legislation, such as Aviation and Transportation Security Act and the SAFETY Act, our prior reports that addressed issues related to the SPP and the use of private sector screeners, and testimony at congressional hearing on the SPP. Further, we interviewed DHS officials regarding the SAFETY Act and TSA headquarters officials responsible for implementing the SPP to determine efforts underway to address stakeholder concerns regarding the SPP. We also conducted semi- structured telephone interviews with the four private screening contractors currently providing passenger and checked baggage screening services, the airport directors at the seven airports that applied to participate in the SPP (the five pilot program airports and two airports that applied to participate in the SPP, namely, Elko Regional Airport in Elko, Nevada and Sioux Falls Regional Airport in Sioux Falls, South Dakota), and the federal security directors (FSD) at each of these airports to obtain their views on TSA’s efforts to implement the SPP and to address stakeholders concerns. Finally, we interviewed officials from two aviation associations—the American Association of Airport Executives and the Airports Council International, and a major liability insurance provider— to obtain information on the type of insurance available to private screening contractors. To assess the status of TSA’s efforts to achieve cost-savings in screener operations through the SPP, specifically with respect to the choice of contract used, and contract terms, we reviewed TSA’s contracts for screening services for the four contractors currently providing passenger and checked baggage screening services. We did not review the contracts that TSA awarded in early 2006 to two contractors to provide private screening services in the SPP. Additionally, we reviewed TSA’s acquisition policies and procedures, the Federal Acquisition Regulation, and the Federal Aviation Administration’s acquisition management system, to identify standards and guidance for contracting practices of TSA and the federal government. Further, we reviewed TSA’s transition plan and other SPP guidance to identify TSA’s current and planned approaches for identifying screening program costs. We also reviewed TSA’s activity- based costing study that assessed the cost of passenger and checked baggage screening operations at 15 airports, including the 5 that participated in the 2-year pilot program using private screeners. We determined that the results of the activity-based costing study were sufficiently reliable for the purpose of our review. Finally, to gather perspectives on opportunities for cost-savings under the SPP, we interviewed TSA SPP and contracting officials, the four contractors currently providing screening services, the seven airport directors who applied to the SPP and the FSDs at these airports, and representatives of the American Association of Airport Executives and the Airports Council International. We did not review TSA’s actual determination of the amount of contractor award fee. Nor did we review the conduct of TSA’s performance evaluation boards or fee determining official in evaluating contractor performance against award fee criteria (including cost-savings) and determining the amount of the contractors’ award fee. However, we did verify that TSA had evaluated contractor performance (including cost- savings) in making award fee determinations. To assess TSA’s progress in developing and implementing performance goals, measures, and targets to assess the performance of the private screening contractors who will be participating in the SPP, we reviewed the terms of TSA’s award fee process specified in the current contracts and TSA’s draft quality assurance surveillance and award fee plan. We also reviewed TSA’s June 2004 guidance on the SPP, other guidance-related material TSA developed for private screening contractors and airports regarding the SPP, TSA’s contracts for the private screening contractors currently providing screening services, TSA testimony at congressional hearings, and our prior reports that addressed issues related to the SPP and the use of private-sector screeners. A listing of our prior reports is contained in appendix IV. Additionally, we interviewed TSA headquarters officials responsible for the SPP. We performed our work from March 2005 through March 2006 in accordance with generally accepted government auditing standards. In addition to the contact named above, David Alexander, C. Jenna Battcher, Chuck Bausell, Amy Bernstein, David Hooper, Lara Laufer, Thomas Lombardi, Hugh C. Pacquette, Lisa Shibata, Maria Strudwick, and Adam Vodraska made key contributions to this report. Aviation Security: Significant Management Challenges May Adversely Affect Implementation of the Transportation Security Administration’s Secure Flight Program. GAO-06-374T. Washington, D.C.: February 9, 2006. Aviation Security: Federal Air Marshal Service Could Benefit from Improved Planning and Controls. GAO-06-203. Washington, D.C.: November 28, 2005. Aviation Security: Federal Action Needed to Strengthen Domestic Air Cargo Security. GAO-06-76. Washington, D.C.: October 17, 2005. Transportation Security Administration: More Clarity on the Authority of Federal Security Directors Is Needed. GAO-05-935. Washington, D.C.: September 23, 2005. Aviation Security: Flight and Cabin Crew Member Security Training Strengthened, but Better Planning and Internal Controls Needed. GAO-05-781. Washington, D.C.: September 6, 2005. Aviation Security: Transportation Security Administration Did Not Fully Disclose Uses of Personal Information During Secure Flight Program Testing in Initial Privacy Notes, but Has Recently Taken Steps to More Fully Inform the Public. GAO-05-864R. Washington, D.C.: July 22, 2005. Aviation Security: Better Planning Needed to Optimize Deployment of Checked Baggage Screening Systems. GAO-05-896T. Washington, D.C.: July 13, 2005. Aviation Security: TSA Screener Training and Performance Measurement Strengthened, but More Work Remains. GAO-05-457. Washington, D.C.: May 2, 2005. Aviation Security: Secure Flight Development and Testing Under Way, but Risks Should Be Managed as System Is Further Developed. GAO-05-356. Washington, D.C.: March 28, 2005. Aviation Security: Systematic Planning Needed to Optimize the Deployment of Checked Baggage Screening Systems. GAO-05-365. Washington, D.C.: March 15, 2005. Aviation Security: Measures for Testing the Impact of Using Commercial Data for the Secure Flight Program. GAO-05-324. Washington, D.C.: February 23, 2005. Transportation Security: Systematic Planning Needed to Optimize Resources. GAO-05-357T. Washington, D.C.: February 15, 2005. Aviation Security: Preliminary Observations on TSA’s Progress to Allow Airports to Use Private Passenger and Baggage Screening Services. GAO-05-126. Washington, D.C.: November 19, 2004. General Aviation Security: Increased Federal Oversight Is Needed, but Continued Partnership with the Private Sector Is Critical to Long-Term Success. GAO-05-144. Washington, D.C.: November 10, 2004. Aviation Security: Further Steps Needed to Strengthen the Security of Commercial Airport Perimeters and Access Controls. GAO-04-728. Washington, D.C.: June 4, 2004. Transportation Security Administration: High-Level Attention Needed to Strengthen Acquisition Function. GAO-04-544. Washington, D.C.: May 28, 2004. Aviation Security: Challenges in Using Biometric Technologies. GAO-04-785T. Washington, D.C.: May 19, 2004. Nonproliferation: Further Improvements Needed in U.S. Efforts to Counter Threats from Man-Portable Air Defense Systems. GAO-04-519. Washington, D.C.: May 13, 2004. Aviation Security: Private Screening Contractors Have Little Flexibility to Implement Innovative Approaches. GAO-04-505T. Washington, D.C.: April 22, 2004. Aviation Security: Improvement Still Needed in Federal Aviation Security Efforts. GAO-04-592T. Washington, D.C.: March 30, 2004. Aviation Security: Challenges Delay Implementation of Computer- Assisted Passenger Prescreening System. GAO-04-504T. Washington, D.C.: March 17, 2004. Aviation Security: Factors Could Limit the Effectiveness of the Transportation Security Administration’s Efforts to Secure Aerial Advertising Operations. GAO-04-499R. Washington, D.C.: March 5, 2004. Aviation Security: Computer-Assisted Passenger Prescreening System Faces Significant Implementation Challenges. GAO-04-385. Washington, D.C.: February 13, 2004. Aviation Security: Challenges Exist in Stabilizing and Enhancing Passenger and Baggage Screening Operations. GAO-04-440T. Washington, D.C.: February 12, 2004. The Department of Homeland Security Needs to Fully Adopt a Knowledge-based Approach to Its Counter-MANPADS Development Program. GAO-04-341R. Washington, D.C.: January 30, 2004. Aviation Security: Efforts to Measure Effectiveness and Strengthen Security Programs. GAO-04-285T. Washington, D.C.: November 20, 2003. Aviation Security: Federal Air Marshal Service Is Addressing Challenges of Its Expanded Mission and Workforce, but Additional Actions Needed. GAO-04-242. Washington, D.C.: November 19, 2003. Aviation Security: Efforts to Measure Effectiveness and Address Challenges. GAO-04-232T. Washington, D.C.: November 5, 2003. Airport Passenger Screening: Preliminary Observations on Progress Made and Challenges Remaining. GAO-03-1173. Washington, D.C.: September 24, 2003. Aviation Security: Progress Since September 11, 2001, and the Challenges Ahead. GAO-03-1150T. Washington, D.C.: September 9, 2003. Transportation Security: Federal Action Needed to Enhance Security Efforts. GAO-03-1154T. Washington, D.C.: September 9, 2003. Transportation Security: Federal Action Needed to Help Address Security Challenges. GAO-03-843. Washington, D.C.: June 30, 2003. Federal Aviation Administration: Reauthorization Provides Opportunities to Address Key Agency Challenges. GAO-03-653T. Washington, D.C.: April 10, 2003. Transportation Security: Post-September 11th Initiatives and Long- Term Challenges. GAO-03-616T. Washington, D.C.: April 1, 2003. Airport Finance: Past Funding Levels May Not Be Sufficient to Cover Airports Planned Capital Development. GAO-03-497T. Washington, D.C.: February 25, 2003. Transportation Security Administration: Action and Plan to Build a Results-Oriented Culture. GAO-03-190. Washington, D.C.: January 17, 2003. Aviation Safety: Undeclared Air Shipments of Dangerous Goods and DOT’s Enforcement Approach. GAO-03-22. Washington, D.C.: January 10, 2003. Aviation Security: Vulnerabilities and Potential Improvements for the Air Cargo System. GAO-03-344. Washington, D.C.: December 20, 2002. Aviation Security: Vulnerability of Commercial Aviation to Attacks by Terrorists Using Dangerous Goods. GAO-03-30C. Washington, D.C.: December 3, 2002. Aviation Security: Registered Traveler Program Policy and Implementation Issues. GAO-03-253. Washington, D.C.: November 22, 2002. Airport Finance: Using Airport Grant Funds for Security Projects Has Affected Some Development Projects. GAO-03-27. Washington, D.C.: October 15, 2002. Commercial Aviation: Financial Condition and Industry Responses Affect Competition. GAO-03-171T. Washington, D.C.: October 2, 2002. 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Summary: In November 2004, as required by law, the Transportation Security Administration (TSA) began allowing all commercial airports to apply to use private screeners in lieu of federal screeners as part of its Screening Partnership Program (SPP). GAO's prior work found that airports and potential private screening contractors had concerns about the SPP, including whether they would be liable in the event of a terrorist attack and how roles and responsibilities would be divided among TSA airport staff and private screening contractors. This report addresses TSA's efforts to (1) provide liability protection to private screening contractors and airports and address other SPP stakeholder concerns; (2) achieve cost-savings through the SPP; and (3) establish performance goals and measures for the SPP. DHS and Congress have begun to address whether liability protection may be offered to current and prospective private screening contractors and airports using private screeners. DHS has already provided some liability protection to three of the four current private screening contractors. However, DHS officials stated that they cannot provide additional coverage, which would render contractors virtually immune from all pertinent claims, because TSA has not finalized performance standards that would allow DHS to determine if contractors will perform as intended--a criterion that must be satisfied before providing such additional protection. Recently enacted legislation shields airports from virtually all liability resulting from the negligence or wrongdoing committed by a private screening company or its employees. TSA has also taken action to improve the screener hiring process by granting contractors and TSA airport officials more input and flexibility in the hiring process. Additionally, TSA has defined the roles and responsibilities for SPP stakeholders--TSA airport staff and private screening contractors, among others--in its August 2005 SPP transition plan. However, the details in this plan have not been shared with private screening contractors, and all four contractors we interviewed were unclear about TSA staff roles and responsibilities at the airports they served. TSA has stated that the SPP will operate at a cost that is competitive with equivalent federal operations and will achieve cost-savings where possible. Over the last 3 years, TSA has awarded cost-reimbursement contracts with an award fee component for screening services at four of the five airports currently using private screeners. The award fee is based, in part, on contractor cost-savings. However, opportunities for TSA cost-savings may be limited because under the cost-reimbursement contracts TSA bears most of the cost risk--the risk of paying more than it expected. TSA plans to shift more cost risk to contractors by competitively awarding fixed-price-award fee contracts for screening services at the four smallest airports that will participate in the SPP. TSA also plans to competitively award fixed-price contracts for screening services at larger airports, but stated that they cannot do so for up to 2 years--when officials believe that screening costs at larger airports will be better known. TSA has developed performance goals and has begun drafting related measures and targets to assess the performance of private screening contractors under the SPP in the areas of security, customer service, costs, workforce management, and innovation. For example, one of the measures would require contractors to ensure that new hires receive required training. TSA's related target for this measure is that 100 percent of new hires will complete required training. These same measures and targets will also be used by DHS to assess whether to award full liability coverage under the SAFETY Act. TSA officials stated that DHS must approve the draft performance measures and targets before they can be finalized. As of January 2006, DHS had not yet completed its review.