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.