Maintaining that federal procurement requirements contributed to some of its cost, schedule, and performance problems in the 1980s and early 1990s, FAA sought a statutory exemption from the federal acquisition system, including the FAR, and those parts of title 5 of the United States Code, parts II and III, that govern federal civilian personnel management. According to FAA, exemptions from these requirements would enable it to streamline its acquisition processes, be more responsive to the airline industry’s needs, and increase the efficiency of ATC operations while maintaining safety. Congress enacted legislation in November 1995 that exempted FAA from key federal procurement statutes and the FAR, and directed FAA to develop a new acquisition management system. In response to these legislative initiatives, FAA implemented a new, streamlined acquisition process—the Acquisition Management System (AMS)— on April 1, 1996. We developed a knowledge-based model of commercial best practices based on our findings about how leading private firms manage costly and complex acquisitions effectively—that is, within cost, schedule, and performance targets. The use of this knowledge-based model has been found to reduce the risks associated with developing products and increase the likelihood of successful outcomes. The model divides the product development cycle into four phases and related activities. Table 1 presents these phases and activities and explains what takes place during each. AMS provides guidance for selecting and overseeing investments over their life cycle. Like our best practices model, it is divided into phases and activities, although the divisions sometimes occur at different points. Table 2 summarizes AMS’s phases and activities. To implement the new, performance-based organization for managing ATC modernization and operations, as the President and Congress directed in 2000, FAA appointed a chief operating officer in August 2003 and formally established the Air Traffic Organization (ATO) in February 2004. ATO, under the direction of a six-member executive council, is now responsible for further implementing acquisition reforms for major ATC systems. AMS establishes an acquisition life-cycle management system that encompasses both contracting and program management, whereas the FAR is primarily a contracting system that focuses on contract formation and contract administration. As a result, AMS is broader in scope than the FAR. See figure 1. In addition, AMS takes the form of guidance. This guidance is expressed in documentation of FAA policy, handbooks, templates, flowcharts, forms, and standard contract language. It is not regulatory. By contrast, the FAR is a set of published regulations—a legal foundation that has the force and effect of law for the federal agencies that are required to follow it. Furthermore, the FAR is more detailed and prescriptive in establishing contracting requirements and can require more administrative involvement. This fundamental difference between AMS and the FAR may suggest to some that AMS is more flexible. FAA personnel can choose how to apply AMS’s provisions to a major acquisition. Nonetheless, procurement officials under the FAR also have flexibility because the FAR encourages innovation consistent with its direction (and other applicable legal requirements), provides a wide selection of contracting solutions, and permits contracting officials to choose the methods that they consider most suitable for a given situation. AMS comprises six policy sections and five appendixes. The procurement policy section of AMS covers a range of topics, including contract funding and administration, contracting with small and disadvantaged businesses, and compliance with labor laws. According to this section, competition is FAA’s preferred method of contracting, but single-source contracting is permitted when appropriate to fulfill the agency’s mission. This policy section also describes the procurement of commercially available or nondevelopmental items. Other sections of AMS cover project management tools that the FAR does not address, such as investment analysis, configuration management, and integrated logistics support. AMS also addresses areas that fall outside project management and procurement, including real property management—an area that becomes important when FAA must lease or purchase real property so that it can install ATC systems such as radars or antennas on property that it does not currently own. FAA’s policy directs FAA staff to “conduct this business in a fair and equitable manner following best practices.” Although the FAR includes requirements that address procurement planning and major systems acquisition, it does so only in the context of government procurement policy and procedure. Agencies subject to the FAR find the broader program planning requirements, which appear in AMS but not in the FAR, in documents such as the Office of Management and Budget’s Circular A-109 and in their own planning guidance. For example, DOD has issued a series of directives and instructions on this subject. The contracting procedures set forth in section 3 of AMS do not prescribe detailed contracting procedures for various categories of procurements, as do those detailed under the FAR. Instead, AMS provides two basic contracting models for obtaining products and services through FAA’s contracting process. The first model is called “Complex and Noncommercial Source Selection” and is used for complex, large-dollar, developmental, noncommercial items and services. This is the model that typically would be used for investments approved by the Joint Resources Council. The second model is called the “Commercial and Simplified Purchase Method” and is typically used for commercial items that are less complex and less costly. Procurements of such products or services may be routine in nature and are generally purchased on a fixed-price basis. Generally, source selection under AMS follows a screening process, with the awardee being selected on a “best value” basis from among those who remain in consideration when the selection is made. AMS sets out a nonregulatory FAA policy that is binding on FAA personnel as FAA employees. AMS also sets out other guidelines that FAA states should be followed unless there is a rational basis for doing otherwise. AMS is subject to such internal controls and enforcement as the Administrator decides and to general overarching legal requirements, such as the Government Performance and Results Act of 1993 (GPRA).FAA has also deemed certain acquisition laws applicable to its procurements (sometimes with modifications), such as the Service Contract Act. There is also a legal requirement, created by the 1995 legislation exempting FAA from the FAR, that small and socially or economically disadvantaged firms be given all reasonable opportunities to receive contract awards. FAA has adopted a dispute resolution process with some legal underpinnings. Otherwise, as the preface to AMS states, “nothing in this document creates or conveys any substantive rights.” In short, although FAA is subject to the general legal requirement that government decisions cannot be arbitrary or capricious, AMS does not establish regulatory requirements for the conduct of procurements and does not create or convey substantive legal rights. In contrast to AMS, the FAR is a set of published regulatory requirements. It has the force and effect of law, and agencies that are subject to it are bound to follow it. The FAR’s requirements provide for a range of procurement strategies and approaches. In addition to negotiated procurement methods, it allows two-step sealed-bid and two-phase design-build methods, among others. It includes streamlined procedures for soliciting and evaluating offers to furnish commercial items, as well as permits the use of simplified acquisition procedures in a broad range of procurements. Furthermore, the FAR supports a diverse selection of available contract types, product- testing tools, and other tools that an agency’s contracting personnel may select when conducting an acquisition to meet the agency’s needs. Although contracting personnel in agencies subject to the FAR are required to comply with it, they enjoy broad discretion in their management of procurements. For example, the FAR allows wide latitude in drafting requirements statements, from performance-based statements of work to design specifications as necessary. It allows broad discretion in framing solicitations and in conducting procurements, including scoring proposals, determining how negotiations will be conducted, eliminating firms whose proposals are not competitive, and selecting the awardees whose proposals afford the government the best value when evaluated against the selection criteria established in the solicitations. Because AMS consists of broad guidance while the FAR comprises detailed and prescriptive regulatory requirements, FAA managers view AMS as giving them more flexibility than they would have under the FAR, particularly in two areas—competition and oversight. Whereas the FAR generally requires full and open competition, AMS calls for providing “reasonable access to” competition to firms interested in obtaining contracts—a less rigorous standard than full and open competition. AMS further states that the “preferred” method of selecting sources is to compete requirements among two or more sources. By contrast, full and open competition requires that all responsible sources be permitted to compete. Under AMS, there is no policy that firms that want to participate actually get a chance to do so. Rather, FAA told us that its system is beneficial because the agency can use screening requests to preselect competing firms, eliminating those firms that FAA believes are not likely to receive an award. The following example illustrates the differences between AMS and the FAR in their respective requirements on exceptions to competition. FAA may contract with a single source when this approach is determined to be in the best interest of FAA. The FAR, however, allows exceptions to full and open competition only for certain specified conditions (such as unusual and compelling urgency or the availability of only one source). The FAR describes in detail the circumstances of these conditions and the requirements for using them as justification for not providing for full and open competition. The FAR also requires the contracting officer to prepare a justification document that must generally be approved by higher-level agency procurement officials (up to the agency’s senior procurement executive) depending on the estimated dollar value of the procurement. The content of this justification is prescribed by the FAR. When not providing for full and open competition, the contracting officer is required under the FAR to solicit offers from as many potential sources as is practicable under the circumstances. The FAR prohibits contracting if the justification for less than full and open competition results from a lack of advanced planning.