The Federal Aviation Administration’s (FAA) mission is to promote the safe, orderly, and expeditious flow of air traffic in the United States through what is commonly referred to as the National Airspace System (NAS). FAA’s ability to fulfill its mission depends on the adequacy and reliability of the nation’s air traffic control (ATC) system—the principal component of the NAS—which comprises a vast network of radars; automated data-processing, navigation, and communications equipment; and ATC facilities. It is through the ATC system that FAA provides services such as controlling takeoffs and landings and managing the flow of traffic between airports. Sustained growth in air traffic and FAA’s aging equipment have strained the current ATC system. This growth in traffic is predicted to continue as the number of passengers traveling on U.S. airlines is expected to grow from about 674 million in 1998 to 1.055 billion by 2010, an increase of about 57 percent. To relieve the problems of aging equipment and to accommodate the predicted growth in air traffic, FAA initiated a multibillion-dollar modernization effort in December 1981. Our work over the years has chronicled many of FAA’s failures in meeting projects’ cost, schedule, and performance goals. Because of the size, complexity, cost, and problem-plagued past of FAA’s modernization program, we have designated it a high-risk information technology investment since 1995. Under its ambitious modernization program, FAA is acquiring new surveillance, data-processing, navigation, and communications equipment in addition to new facilities and support equipment. Totaling 126 active projects, the modernization is estimated to cost $26.5 billion from fiscal year 1982 through fiscal 2004. Of this total, FAA estimates that it will need $12.9 billion from fiscal year 1982 through 2004 for 59 information technology projects—the software-intensive and complex information and communications systems supporting the ATC system. These projects range from those designed to replace equipment used by controllers to communicate with aircraft and with each other to radars that provide controllers with surveillance information for separating aircraft. An example of an information technology project is the Display System Replacement project that will modernize equipment in FAA’s en route facilities by replacing 20- to 30-year-old display channels, controllers’ workstations, and network infrastructure. Over the past 17 years, FAA’s modernization projects have experienced substantial cost overruns, lengthy delays, and significant performance shortfalls. To illustrate, the longtime centerpiece of the modernization program—the Advanced Automation System—was restructured in 1994 after estimated costs to develop the system tripled from $2.5 billion to $7.6 billion and delays in putting significantly less-than-promised system capabilities into operation were expected to run 8 years or more over the original estimates. These problems have persisted. For example, two key projects in the modernization effort—the Wide Area Augmentation System and the Standard Terminal Automation Replacement System—have encountered significant cost increases, delays, and changes in requirements. In the case of the Wide Area Augmentation System, between September 1997 and January 1998, total estimated costs increased by $600 million, or 25 percent, from $2.4 billion to $3 billion. The increased costs were attributable to FAA’s including previously overlooked costs for periodically updating the project’s equipment and to higher-than-expected operations and maintenance costs. In the case of the Standard Terminal Automation Replacement System, although FAA has not officially changed the project’s baseline approved in February 1996, the baseline is in jeopardy of being breached because of unions’ concerns surrounding human-factor and design issues, the refinement of requirements, and the interjection of a new project phase. FAA estimates that these issues have the potential to increase the project’s costs from $294 million to $410 million above the approved baseline. FAA also estimates that the project’s initial completion could be delayed by almost 2-1/2 years. Because of FAA’s contention that some of its modernization problems were caused by federal acquisition regulations, the Congress enacted legislation in November 1995 that exempted the agency from most federal procurement laws and regulations and directed FAA to develop and implement a new acquisition management system that would address the unique needs of the agency. On April 1, 1996, in response to the Congress’s action, FAA implemented a new acquisition management system. The system is intended to reduce the time and cost to field new products and services by introducing (1) a new investment management system that spans the entire life cycle of an acquisition, (2) a new procurement system that provides flexibility in selecting and managing contractors, and (3) organizational and cultural reform that supports the new investment and procurement systems. The Acquisition Management System (AMS) provides high-level acquisition policy and guidance for selecting and controlling FAA’s investments throughout all phases of the acquisition life cycle, which is organized into a series of phases and decision points, including (1) mission analysis, (2) investment analysis, (3) solution implementation, (4) in-service management, and (5) service life extension. AMS provides guidance on the documents and decisions that result from each of these phases. For example, through the mission analysis process, FAA identifies critical needs that the agency must meet for improving the safety, security, capacity, efficiency, and effectiveness of the NAS. Approval of a mission need statement by the Joint Resources Council—FAA’s corporate decision-making body—signifies that the agency agrees that the need is critical enough to proceed to the next phase, investment analysis. During the investment analysis phase, teams of acquisition and program specialists (1) identify and analyze alternatives, (2) develop baselines and assesses affordability, (3) prepare an investment analysis report, and (4) recommend a preferred solution to the mission need. FAA then scores and ranks each proposed project based on a number of factors, including how well, relative to other projects, it meets mission needs and has a favorable cost-benefit ratio. Once a project is selected, life-cycle cost, schedule, benefits, and performance baselines are established in a formal document called the acquisition program baseline. The acquisition program baseline, which must be approved by the Joint Resources Council, is used to monitor a project’s status in achieving those baselines throughout the remaining phases of the acquisition management life cycle. During the solution implementation phase, a multidisciplinary team develops and carries out an acquisition strategy for implementing the project. Once the project has been implemented and is in operation (the in-service management phase), the team monitors and assesses its performance, costs, and support trends; proposes fixes for any defects or other problems; incorporates product improvements; seeks new technology to enhance the capability or reduce costs; and identifies and prepares for decisions to correct capability shortfalls at the end of the project’s service-life. Finally, during the service-life extension phase, a determination is made about whether the current capability satisfies the demand for services or whether another solution offers the potential for improving safety or effectiveness or for significantly lowering costs. The team initiates a process whereby the mission need would be revalidated and the investment analysis process begun again, which could lead to a new investment decision. See figure 1.1 for a graphic depiction of FAA’s life-cycle acquisition management process. Funding for FAA’s investments is primarily provided through two of its budget accounts: (1) facilities and equipment and (2) operations. The facilities and equipment account covers the costs to develop, procure, and place the new equipment or facility in operation. Once the project goes into full operation, it is funded by the operations account, which covers the costs to support and maintain the new equipment or facility. Costs for planned product improvements and upgrades to the technology can be funded from either the facilities and equipment or the operations accounts. Some investment funding is also provided through the research, engineering, and development account. This account is relatively small compared with the facilities and equipment and operations accounts. For example, in fiscal year 1999, $150 million was appropriated for research, engineering, and development; approximately $2.1 billion for facilities and equipment; and approximately $5.6 billion for operations. Several recent management reforms—including the revision of the Paperwork Reduction Act and the passage of the Clinger-Cohen Act of 1996, the Government Performance and Results Act of 1993, and the Chief Financial Officers Act of 1990—have introduced requirements emphasizing the need for federal agencies to improve their management processes for selecting and managing information technology resources. GAO and the Office of Management and Budget have developed guidance to assist federal agencies in evaluating information technology investments. One such guide, Assessing Risks and Returns: A Guide for Evaluating Federal Agencies’ IT Investment Decision-Making, incorporates our analysis of the management practices of leading private and public sector organizations as well as of the provisions of major federal legislation (e.g., the Clinger-Cohen Act) and executive branch guidance that address investment decision-making. The guide outlines three phases of a successful investment management approach—selection, control, and evaluation. To help ensure that real, positive change is produced as agencies seek to improve their decision-making about their information technology investments, agencies need to (1) institutionalize management processes; (2) regularly validate the cost, benefit, and risk data used to support information technology decisions; and (3) focus on measuring and evaluating results. The guide provides a framework for evaluating and assessing how well a federal agency is achieving these goals and identifies specific areas where improvements can be made. Many of the concepts in our Assessing Risks and Returns have been incorporated into the Office of Management and Budget’s Capital Programming Guide, which provides guidance on the planning, budgeting, acquisition, and management of different kinds of capital assets, including information technology. Our guide has also been endorsed by the federal Chief Information Officers Council.