Since its inception, TSA has been focused on meeting an urgent mandate to deploy more than 55,000 airport passenger and baggage screening personnel and equipment to secure the nation’s airways. To do so, it created basic organizational and acquisition infrastructures. To date, however, TSA has not developed an acquisition infrastructure that facilitates successful management and execution of acquisition activities, helps ensure that the agency acquires quality goods and services at reasonable prices, and supports informed decisions about acquisition strategy. Specifically, our review of TSA’s acquisition function and inspector general reports identified a number of challenges in each of the four areas we assessed. Organizational alignment and leadership: TSA’s Office of Acquisition is at an organizational level too low to oversee the acquisition process, coordinate acquisition activities, and enforce acquisition policies effectively. The position of the office hinders its ability to help ensure that TSA follows the acquisition processes that enable the agency to get the best value on goods and services. Senior acquisition officials told us that the Office of Acquisition is not appropriately placed within TSA; however, TSA has not elevated the office to a position that would enable it to coordinate agencywide acquisition activities or enforce acquisition policies. Policies and processes: Because TSA’s acquisition policies and processes emphasize personal accountability, good judgment, justifiable business decisions, and integrated acquisition teams, effective implementation of TSA’s policies and processes depends on clear communication, measures to evaluate performance, and incentives to reward good acquisition practices. Effective implementation of TSA’s policies and processes has been hindered, however, by several factors: (1) TSA has not effectively communicated its acquisition policies throughout the agency; (2) TSA lacks internal controls to identify and address implementation issues and performance measures to determine whether TSA’s acquisition policies achieve desired outcomes; and (3) TSA’s deadline-driven culture fails to reinforce the importance of complying with policies. Human capital: TSA risks an imbalance in the size and capabilities of its acquisition workforce that could diminish the performance of the acquisition function throughout the agency. TSA’s Office of Acquisition worked closely with the Department of Homeland Security to develop and begin implementing an acquisition workforce plan. However, TSA’s Human Resource Office, which is responsible for recruiting and hiring the acquisition workforce agencywide, did not participate in developing the acquisition workforce plan. Without input from the Human Resources Office, it is not clear that the workforce plan can be effectively implemented throughout the agency. In addition, the Office of Acquisition reports that it is having difficulty attracting, developing, and retaining a workforce with the acquisition knowledge and skills required to accomplish TSA’s mission. Knowledge and information management: While TSA is participating in the Department of Homeland Security’s efforts to develop functional requirements for an enterprisewide solution that supports the department’s resource management functions—including procurement and finance—TSA does not currently have the strategic information needed to support effective acquisition management decisions. To manage on a day-to-day basis, program and acquisition managers are relying on data derived from informal, ad hoc systems—which are often out-of-date, incomplete, inaccurate, or otherwise unreliable. TSA is in the process of adopting the Coast Guard’s procurement and financial systems as interim solutions until the Department of Homeland Security implements departmentwide systems. However, near-term improvements to TSA’s acquisition outcomes will be difficult until TSA has critical financial and procurement information systems that allow decision makers to track spending, manage budgets, and collect detailed data on goods and services, suppliers, and spending patterns. We are making four recommendations to the Secretary of Homeland Security to help improve TSA’s acquisition capabilities by elevating the placement of TSA’s Office of Acquisition, developing adequate internal controls and performance measures, addressing the needs of the acquisition workforce, and assessing proposed knowledge management systems. In written comments on a draft of this report, the Department of Homeland Security generally concurred with our report and recommendations. They also provided additional information about various initiatives related to our recommendations. Two months after the September 11, 2001, terrorist attacks, the President signed the Aviation and Transportation Security Act, establishing TSA as a new administration within the Department of Transportation responsible for securing the nation’s transportation systems. In February 2002, TSA assumed responsibility for aviation screening, and by November 2002, the agency had deployed a federal security screener workforce in the nation’s 429 commercial airports. In March 2003, TSA, along with 21 other agencies, began transferring to the Department of Homeland Security. Figure 1 shows the timeline of TSA’s brief history. When TSA was established in November 2001, the agency had no personnel, no organizational structure, no policies and processes, and no legacy systems. To begin operating, TSA adopted some of the Department of Transportation’s infrastructure components, such as the financial management system, and developed others in-house, such as a procurement tracking system. In addition, the Aviation and Transportation Security Act directed TSA to adopt the Federal Aviation Administration’s (FAA) Acquisition Management System, which establishes policy, processes, and guidance for all aspects of the acquisition life cycle. The act gives TSA’s administrator the latitude to make modifications to FAA’s system as appropriate. Because FAA is, by law, generally exempt from federal acquisition laws as well as the Federal Acquisition Regulation (FAR), and TSA was directed to adopt FAA’s system, TSA is also exempt from these requirements. TSA has relied on contractors to accomplish much of its mission. In fiscal year 2002, TSA obligated more than $3.7 billion for goods and services procured under contracts awarded by TSA, FAA, and the Department of Transportation. TSA currently has contracts to manage human resource needs, including recruiting, hiring, training, and outfitting passenger and baggage screeners; develop and manufacture screening equipment; and provide the information technology systems the agency uses to manage its day-to-day operations. These contracts represent about 48 percent of TSA’s fiscal year 2003 budget. TSA’s large expenditures on goods and services have prompted reviews by the Inspectors General of the Departments of Transportation and Homeland Security, who found a lack of contractor oversight and significant cost overruns. For example, in January 2004, the Department of Homeland Security Inspector General reported that inadequate contractor oversight contributed to TSA’s lack of timely background checks on screeners at airports. Specifically, inadequate oversight of contractors contributed to more than 500 boxes of background check documentation remaining unprocessed for months. The Department of Transportation’s Inspector General also found that inadequate oversight and contracts without clearly defined deliverables caused the cost of TSA’s initial contracts to balloon. For example, TSA’s initial human resource contract to recruit, screen, hire, and train screeners grew from $100 million to $700 million within 1 year. In late 2003, the Department of Homeland Security’s Inspector General cited integrating the procurement functions of the department’s component organizations as a major management challenge, adding that some of the procurement functions lacked important management controls. Despite TSA’s efforts to resolve initial problems, the Inspector General cited TSA as an example of an agency lacking procurement management controls. In a 2004 update to the previous year’s report on management challenges, the Inspector General’s Office reported that TSA was taking steps to address weaknesses in contract oversight, such as increasing the size of its contract management staff, devising policies and procedures that require adequate procurement planning, and arranging for the Defense Contract Audit Agency to perform over 130 contract audits and support contract administration. The appropriate placement of the acquisition function within an agency can facilitate efficient and effective management of acquisition activities. In our work on best practices, we learned that leading companies elevated or expanded the role of the company’s acquisition organization; designated commodity managers to oversee key services; and made extensive use of cross-functional teams to help identify the company’s service needs, conduct market research, evaluate and select providers, and manage performance. To cut across traditional organizational boundaries that contributed to a fragmented approach to acquiring services, these companies generally restructured their procurement organizations, typically assigning them greater responsibility and authority for strategic planning, management, and oversight of the companies’ service spending. In making such changes, the companies acknowledged that acquisition is an important strategic function and that success in this area contributes to the accomplishment of company missions. These changes transformed the role of the purchasing unit from one focused on mission support to one that was strategically important to the company’s bottom line. Recent legislation recognizes the importance of placing the acquisition function at an appropriate level and mandates that most executive departments appoint a chief acquisition officer. This official will have the responsibility to monitor the performance of acquisition activities and programs; evaluate the performance of acquisition programs; increase the use of full and open competition; increase the use of performance-based contracting; establish clear lines of authority, accountability, and responsibility for acquisition decision making; manage the direction of the agency’s acquisition policies; advise the head of the executive agency regarding the appropriate business strategy to achieve the mission of the executive agency; and develop and maintain an acquisition career management program to ensure that there is an adequate acquisition workforce. TSA’s Office of Acquisition is at an organizational level too low to oversee the acquisition process, coordinate acquisition activities, and enforce acquisition policies effectively. As shown in figure 2, the Office of Acquisition is at a lower level than other key offices involved in the acquisition process. Its current position within the organizational structure essentially relegates acquisition to the status of one of many administrative functions. The placement of the Office of Acquisition hinders the ability of the office to oversee the acquisition process and to coordinate with other offices involved in that process—responsibilities that are particularly critical given that almost half of TSA’s budget is spent on acquisitions.