During the last few years, FAA has made significant progress in implementing businesslike processes and procedures for managing and acquiring air traffic control systems. This contrasts with the previous decade’s air traffic control modernization program which was characterized by chronic cost and schedule difficulties with systems acquisitions. The implementation of these businesslike operations has improved FAA’s management of the current system and should better position the agency to manage the enormously complex transition to NextGen. However, further work remains to fully address past problems and institutionalize these changes throughout the agency, especially given the changing leadership within both FAA and ATO. A successful transition to NextGen will depend, to a great extent, on FAA’s ability to manage the acquisition and integration of multiple NextGen systems. In recent years, FAA has made significant progress toward improving its management of acquisitions. However, FAA’s air traffic control modernization program remains on our list of high risk programs because of its history of systemic management and acquisition problems that contributed to cost growth, schedule slippages, and performance shortfalls and the relative recentness of the turnaround in the program’s performance. The realization of NextGen goals could be severely compromised if FAA’s improved program management and outcomes are not institutionalized and carried over into the implementation of NextGen, which is an even more complex and ambitious undertaking than past modernization efforts. By creating ATO and appointing a chief operating officer (COO) to head ATO, FAA established a new management structure and adopted more leading practices of private sector businesses to address the cost, schedule, and performance shortfalls that have plagued air traffic control acquisitions. ATO has worked to create a flatter organization, with fewer management layers, and has reported reducing executive staffing by 20 percent and total management by 16 percent. In addition, FAA uses a performance management system to hold managers responsible for the success of ATO. More specifically, to better manage its acquisitions and address problems we have identified, FAA has undertaken human capital initiatives to improve its acquisition workforce culture and build towards a results-oriented, high-performing organization; developed and applied a process improvement model to assess the maturity of its software and systems capabilities resulting in, among other things, enhanced productivity and greater ability to predict schedules and resources; and reported that it has established a policy and guidance on using earned value management (EVM) in its acquisition management system and that 19 of its major programs are currently using EVM. One outcome of the implementation of the changes in program management and operations is that for the past three fiscal years, FAA has reported exceeding system acquisition goals. FAA’s goals for fiscal year 2006 were to have 85 percent of critical acquisition programs within 10 percent of budget, as reflected in its capital investment plan, and to have 85 percent of critical acquisition programs on schedule. For fiscal year 2006, FAA reported that its critical acquisitions were 100 percent on budget and over 97 percent on schedule. FAA has also improved its management of its air traffic control program through increased efforts to achieve cost savings by outsourcing and consolidating facilities. For example, FAA is outsourcing flight service stations and estimates a $2.2 billion savings over 12 years. Similarly, FAA is seeking savings through outsourcing its planned nationwide deployment of Automatic Dependent Surveillance-Broadcast (ADS-B), a critical NextGen surveillance technology. FAA is planning to implement ADS-B through a performance-based contract in which FAA will pay “subscription” charges for the ADS-B services and the vendor will be responsible for building and maintaining the infrastructure. (FAA also reports that the ADS-B rollout will allow the agency to remove 50 percent of its current secondary radars, saving money in the program’s baseline. The remaining radars will serve as a back-up system to ADS-B.) As for consolidating facilities, FAA is currently restructuring ATO’s administrative service areas from nine offices to three offices, which FAA estimates will save up to $460 million over 10 years. We previously reported that FAA should pursue further cost control options, such as exploring additional opportunities for contracting out services and consolidating facilities. However, we recognize that FAA faces challenges with consolidating facilities, an action that can be politically sensitive. In recognition of this sensitivity, the administration’s reauthorization proposal presents an initiative in which the Secretary of Transportation would be authorized to establish an independent, five- member Commission, known as the Realignment and Consolidation of Aviation Facilities and Services Commission, to independently analyze FAA’s recommendations to realign facilities or services. The Commission would then send its own recommendations to the President and Congress. In the past, we noted the importance of potential cost savings through facility consolidations; however, any such consolidations must be handled through a process that solicits and considers stakeholder input throughout and fully considers the safety implications of both proposed facility closures and consolidations. Sustaining the acquisition progress achieved to date and addressing the remaining program risks remains a challenge for FAA. FAA’s air traffic control modernization program has been on GAO’s high-risk list since 1995. In recent years the agency has made measurable improvements in its acquisition processes. GAO acknowledged those improvements in its 2007 high risk report. In 2005, FAA submitted a plan to OMB for reducing the risks of cost overruns, schedule slippages, and performance shortfalls with goals and milestones for FAA to meet in further reducing acquisition risks. FAA expects to complete the risk mitigation plan by the end of calendar year 2008. Additionally, we have an ongoing study that is examining FAA’s performance and reporting on its critical acquisitions, including applicable performance measures. We are exploring FAA’s use of the most recently approved cost and schedule baselines, which may have changed significantly since the start of an acquisition, to measure and report on program performance. Rebaselining acquisitions is an accepted practice and there can be valid reasons for doing so, such as when changes in a program’s requirements fundamentally alter the acquisition and make the originally approved schedule unrealistic. Because rebaselining resets the cost and schedule variances to zero, however, we want to verify that FAA’s practice is not masking acquisition performance problems and is providing full disclosure to the Congress. We expect to issue a report on these issues later this year. It will be important, as FAA begins to implement NextGen systems, to maintain critical acquisitions on schedule and on budget to meet the goal of transitioning to NextGen by 2025 and to prevent escalation of the costs of NextGen. While FAA has implemented many positive changes to its management and business processes in recent years, it currently faces the loss of key leaders. We reported that the experiences of successful transformations and change management initiatives in large public and private organizations suggest that it can take 5 to 7 years or more until such initiatives are fully implemented and cultures are transformed in a sustainable manner. Such changes require focused, full-time attention from senior leadership and a dedicated team. However, FAA will have lost two of its significant agents for change—the FAA administrator and the COO—by the end of September 2007. The administrator’s term ends in September 2007; the COO left in February 2007, after serving 3 years. For the financial, management, and acquisition improvements to further permeate the agency, and thus provide a firm foundation upon which to implement NextGen, FAA’s new leaders will need to demonstrate the same commitment to improvement as the outgoing leaders. Because this is a critical time for FAA, the agency needs to move expeditiously to find a new COO for ATO. A COO who could commit to the current statutory 5- year term also would be useful in providing stable leadership at ATO as foundational NextGen systems begin to be implemented. JPDO has continued to make progress in furthering its key planning documents, but still faces challenges in institutionalizing its collaborative practices. JPDO’s authorizing legislation requires the office to create a multi-agency research and development plan for the transition to NextGen. To comply, JPDO is developing several key documents that together form the foundation of NextGen planning. These documents include a NextGen Concept of Operations, a NextGen Enterprise Architecture, and an Integrated Work Plan. The Concept of Operations is the most fundamental of JPDO’s key planning documents, as the other key documents flow from it. Although an earlier version was delayed so that stakeholder comments could be addressed, Version 1.2 of the Concept of Operations is currently posted on JPDO’s Website for review and comment by the aviation community. This 226-page document provides written descriptions of how the NextGen system is envisioned to operate in 2025 and beyond, including highlighting key research and policy issues that will need to be addressed. For example, some key policy issues are associated with automating the air traffic control system, including the need for a backup plan in case automation fails, the responsibilities and liabilities of different stakeholders during an automation failure, and the level of monitoring needed by pilots when automation is ensuring safe separation between aircraft. Over the next few months, JPDO plans to address the public comments it receives and issue a revised version of the Concept of Operations. In addition to the Concept of Operations, JPDO is working on an Enterprise Architecture for NextGen—that is, a technical description of the NextGen system, akin to blueprints for a building. The Enterprise Architecture is meant to provide a common tool for planning and understanding the complex, interrelated systems that will make up NextGen. According to JPDO officials, the Enterprise Architecture will provide the means for coordinating among the partner agencies and private sector manufacturers, aligning relevant research and development activities, and integrating equipment. JPDO plans to issue an early version of its Enterprise Architecture next month, although three previous release dates—March 2006, June 2006, and September 2006—were not met.