[Senate Hearing 110-]
[From the U.S. Government Publishing Office]



 
TRANSPORTATION AND HOUSING AND URBAN DEVELOPMENT, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2008

                              ----------                              


                         THURSDAY, MAY 10, 2007

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:30 a.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Patty Murray (chairman) presiding.
    Present: Senators Murray, Lautenberg, Bond, Specter, 
Stevens, and Allard.

                      DEPARTMENT OF TRANSPORTATION

                    Federal Aviation Administration

STATEMENT OF HON. MARION C. BLAKEY, ADMINISTRATOR
ACCOMPANIED BY HON. CALVIN L. SCOVEL III, INSPECTOR GENERAL

               OPENING STATEMENT OF SENATOR PATTY MURRAY

    Senator Murray. The subcommittee will come to order. I want 
to welcome my witnesses this morning, FAA Administrator Marion 
Blakey and DOT Inspector General Calvin Scovel.
    Over the next 8 years, it is estimated that the number of 
air passengers will grow by 40 percent. That's pretty good news 
for our country, but it's also good news for my region, because 
we build the best airplanes in the world, and we are a gateway 
to our biggest trading partner in Asia.
    But all those new aircraft will do little to expand our 
economy if we don't have a modern air traffic control system to 
move those planes safely and with maximum efficiency. If we 
fail to modernize that system and soon, it will not just be a 
drag on the economy of my region, it's going to be a drag on 
the entire global economy.
    Unfortunately, we are years behind in this effort. We are 
years behind because just 3 years ago, the Bush administration 
and Administrator Blakey successfully advocated a cut to our 
annual investment in their traffic modernization funding by 
more than $400 million, and the program has been funded roughly 
at that reduced level every year since.
    That represents a loss of more than $1.2 billion from the 
baseline that we established back in 2004. We are years behind 
because well over a decade ago, the FAA's modernization effort 
got seriously derailed as the agency wasted billions of dollars 
in a failed effort known as the Advanced Automation System.
    That debacle was characterized by the FAA constantly 
changing its requirements and throwing good money after bad 
through undefined, open-ended contracts.
    Today, in 2007, we are still paying to replace systems that 
were slated to be fixed in the 1980s and 1990s as part of that 
failed effort. Back then, the FAA was not up to the task of 
rapidly and efficiently modernizing the system. I'm worried 
that the FAA may still not be up to the task today.
    Just last month, Administrator Blakey gave a speech that 
included the following passage. And I quote: ``It stings when I 
listen to criticisms about the FAA that are based on something 
that happened 10 or 20 or 30 years ago. In the last few years, 
we have achieved enormous management efficiencies, and at the 
end of fiscal year 2006, 97 percent of our major capital 
projects were on time and on budget.''
    The Administrator has made similar statements before 
several House and Senate committees. I don't disagree with the 
Administrator that things have improved since the bad old days 
of the Advanced Automation System, but I do have to question 
whether it's appropriate or accurate to claim that the 
overwhelming majority of FAA's capital projects are progressing 
along just fine.
    Part of my goal for this morning's hearing is to scratch 
under the surface of that claim. From my perspective, we still 
see too many examples where the FAA has signed contracts with 
under-defined requirements, and countered sizable cost overruns 
that get handed right back to taxpayers, purchased equipment 
that could not provide all the functions promised, and failed 
to produce all the operating savings that have been promised.
    Now, I'm not talking today about examples from 10 or 20 or 
30 years ago; I'm talking about examples in the last 5 years. 
I'm talking about programs that we are paying for right now, 
and I'm talking about programs for which the Administrator is 
seeking more money in 2008.
    So how can we have all of those procurement delays and cost 
overruns, but have the FAA claiming that almost all of its 
programs were on time and on budget? Well, the answer lies in a 
process known as re-baselining.
    This is a process required by OMB for major procurements 
throughout our government. When a program appears to be 
exceeding its targeted cost or failing to deliver its intended 
product, that agency is required to re-baseline the program.
    That means the agency must re-estimate the cost, schedule, 
and benefits, and decide if it still makes sense to move 
forward. As we will hear today from the Inspector General, the 
FAA has been required to re-baseline a significant number of 
programs because of substantial cost overruns and schedule 
slips.
    Let me be clear. I do not question that the FAA did the 
right thing in re-baselining these programs. What I do question 
is whether the agency is being honest with the system's users, 
Congress, and taxpayers when it establishes a new, higher cost 
estimate, a later delivery date, or a weaker performance goal, 
and then continues to proclaim that the program is on time and 
on budget.
    As the IG says in his formal testimony today, ``This re-
baselining process explains why the Wide Area Augmentation 
System, according to the FAA's logic, is still on budget, even 
though its costs have grown from $892 million to over $3 
billion since 1998.
    That's right, a program that has experienced cost growth of 
233 percent is still considered to be on budget by the FAA, and 
this is yet another program that will not produce all of the 
benefits that were originally promised, but that is how the 
Administrator can claim that 97 percent of her major capital 
programs are doing just fine.
    So it appears to me that things are not all on track at the 
FAA. I want to share a couple of examples of programs that FAA 
has re-baselined but that it still considers on time and on 
budget. The Integrated Terminal Weather System costs have grown 
by $10 million, and the schedule has been extended by nearly 6 
years, yet the FAA says they are on time and on budget. I think 
the taxpayers wouldn't agree.
    Or look at the ASR-11 radars. Instead of installing 112, 
they slashed it down to 66 units, and the schedule has been 
extended by 4 years. That doesn't sound like on track to me.
    Another worrisome case of this re-baselining process has 
been the so-called ASDE-X programs. This program is designed to 
address perhaps the greatest safety threat in our current 
commercial aviation system, which is runway incursions. It's 
designed to ensure that aircraft operating on the ground do not 
collide with other planes or vehicles on the airfield.
    These are not hypothetical threats. This past summer, two 
aircraft at O'Hare missed each other by 35 feet. As the 
Administrator knows, improved measures to prevent runway 
incursions have been on the National Transportation Safety 
Board's Most Wanted List since 2001.
    This program was re-baselined in September 2005 and as a 
part of that process, the FAA substantially changed its goals 
and reduced the number of airports to be served by 25 percent.
    The FAA also admitted that the cost of the program had 
grown from roughly $500 to $550 million, and the completion 
date would slip from 2007 to 2011. Ever since that re-
baselining took place, this program has been declared as being 
on time and on budget.
    In Administrator Blakey's formal testimony, she points with 
pride that the FAA installed five of these systems in 2006, but 
she fails to mention that the agency schedule called for seven 
systems to be installed this year--that year.
    Today, the IG will report to us that since that initial re-
baselining, the program's costs have grown by another $100 
million, and the program has gotten further behind schedule.
    Even more disturbing, the IG will testify that at present, 
the new systems are not delivering the safety benefits that 
were promised. Central to the FAA's decision to pursue this 
program was the plan to install new software upgrades that 
would greatly improve the equipment's ability to warn 
controllers of impending collisions between aircraft operating 
on converging runways.
    From my region of the country, the upgrades are necessary 
for--so that equipment can perform in rainy and foggy 
conditions, but controllers at SeaTac Airport tell me that when 
it rains, they observe so many false targets and hear so many 
false alarms that they have to turn the system down to its most 
limited setting, and use just 10 percent of its capability.
    It is precisely when the weather is bad that this 
technology is needed the most, but instead of getting the 
service promised on foggy days, the controllers have to send 
out a vehicle to the end of the runway to see whether the 
target they see on the ASDE screen is real aircraft, or just 
another false target.
    Every time they have a false target or a false alarm, the 
controllers have to fill out reports, and in the last 15 
months, they filled out more than 480 reports, including 25 
false alarms. That is more than 30 reports a month, roughly one 
false target alarm for every day of operation.
    Many incidents are now going unreported, because 
controllers are getting tired of filling out the forms. You 
don't have to use that airport every week like I do to know 
that in the Pacific Northwest, we do get a lot of rain.
    Madam Administrator, it shouldn't be a surprise to the FAA 
that safety technologies that don't work in the rain do not 
provide safety in my part of the country. Right now, the FAA is 
struggling to get those functions to work. Hopefully, they will 
succeed, but in the meantime, the rising costs are being passed 
along to taxpayers.
    That is because once again, according to the IG, the FAA's 
contract with the vendor does not have all the necessary 
taxpayer safeguards in place. The contract has a number of 
undefined requirements that are allowing costs to pile up while 
the system struggles to perform as promised.
    Now, I'm not talking about a contract from 20 years ago; 
I'm talking about a contract that is less than 2 years old. It 
is important to point out these problems persist at the FAA at 
the same time that Congress is considering a legislation to 
substantially alter how the FAA is funded.
    I view my mission as part of this reauthorization process, 
to ensure that this subcommittee continues to exercise 
appropriate oversight and budgetary control. These ongoing 
procurement problems at the FAA must not escape notice. Elected 
officials must continue to have the opportunity to withhold or 
redirect funding when the agency is not performing.
    Back during the failed Advanced Automation System, it was 
this subcommittee that began withholding funds, long before the 
FAA was prepared to recognize the extent of the failure. 
Continuing budgetary oversight is essential, whether we're 
talking about funds that are directly appropriated or funds 
that are borrowed under the administration's new proposed 
borrowing authority.
    I want to be clear. The role of this subcommittee is not 
just to cut budgets once funds are being wasted. To the 
contrary, in many critical aviation areas, this subcommittee 
has taken the lead in funding initiatives well before the FAA 
has decided they are a priority.
    I'll give you an example. For 3 of the last 6 years, this 
subcommittee has included funding well above the President's 
request to boost the number of FAA air safety inspectors.
    As the IG will testify this morning, the FAA still has a 
long way to go to ensure that the FAA's safety inspection force 
is adequately trained and deployed to deal with a growing 
amount of major aircraft maintenance that is being conducted 
overseas.
    The FAA has been losing their safety inspectors to 
retirement at a very rapid rate. If this subcommittee had not 
provided funding above the administration's request for these 
inspectors, the situation would be even more dire today.
    Similarly, the Administrator has requested funds in her 
2008 budget for both the ADS-B program and the SWIM program. 
These are critically important technologies that are needed if 
we're really going to launch the next generation of air traffic 
modernization.
    There are also two programs where this subcommittee has 
provided resources before the administration ever got around to 
asking for them. As a result, these programs are further along 
today because this subcommittee rejected the administration's 
request and funded them on our own.
    So I look forward today to discussing with the 
Administrator not just how the subcommittee will have control 
to stop wasteful programs, but also how this subcommittee will 
have the ability under the new funding regime to have funds 
that the agency desperately needs.
    The need to modernize our air traffic control system could 
not be more urgent. We have lost precious time and precious 
dollars, but given the daunting cost and urgency of this 
challenge, we must not throw dollars at programs without 
adequate oversight or fiscal control.
    We have to make sure that the taxpayer is getting what it 
pays for, and we have to quit saying that all programs are 
performing well when they're not.
    I look forward to working with the Administrator to make 
air traffic control modernization a near-term reality, and I 
know that Ranking Member Senator Bond does, as well. Senator 
Bond?

            OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

    Senator Bond. Thank you very much, Madam Chair, and good 
morning, and welcome, Marion Blakey, Administrator, and Mr. 
Scovel, Inspector General of the Department of Transportation. 
We look forward to receiving your testimony.
    I must apologize in advance. If you know the Senate 
schedule, chaos, as always, is the rule for the day, and I am 
going to leave immediately to vote, and try to return so we can 
keep the hearing going. I'm sure you won't miss me, but I will 
look forward to reading your testimony.
    Administrator Blakey, I know your term as an administrator 
expires in September, and I appreciate the opportunity to thank 
you for your hard work and dedication in ensuring the United 
States' continuing leadership in maintaining a world-class 
commercial aviation industry.
    Before I discuss the budget, I acknowledge we're at a 
critical juncture in the future of the aviation industry. Not 
only is the current authorization for aviation programs and 
Vision 100, the Century of Aviation Reauthorization Act, set to 
expire, but the current tax authority that funds the Airport 
and Airway Trust Fund also expires at the end of the fiscal 
year.
    At this point, we're looking at at least two different 
versions of FAA reauthorization, the administration-proposed 
bill, and a draft bill proposed by the Senate Commerce 
Committee, which is, I gather, expected to be marked up over 
the next several weeks. I expect the House Transportation and 
Infrastructure Committee to draft and pass its own version of 
legislation.
    In any event, any FAA reauthorization must respect the 
existing role and jurisdiction of the Appropriations Committee, 
which has played, as the Chair has indicated, a critical role 
in the oversight of FAA programs, including the prevention of 
fraud and abuse, and ensuring that heartily needed, but under-
requested funding, is provided.
    I think the most significant controversial issue facing us 
will be the amount and sources of funding that will be made 
available to support FAA programs under the reauthorization.
    In particular, the administration is proposing to establish 
new sources of income for financing aviation operations and 
capital improvements that moves away from relying primarily on 
ticket tax revenues and certain excise taxes, to a new system 
which includes revised user fees for commercial aviation and 
increased fuel taxes for general aviation, and reforms to the 
passenger facility charge program, and new bond financing 
through the Department of the Treasury.
    While I've not had an opportunity to examine adequately the 
administration's proposal, a reauthorization must provide a 
balanced system of funding to ensure the FAA and the aviation 
industry has an adequate, stable, and reliable stream of 
funding that will support the current and future needs of the 
aviation industry.
    It's especially important that we have adequate funds to 
support the NextGen Air Transportation System, which is 
intended to replace the 40- to 50-year-old system of radar and 
IT backbone with technology that will allow for some 3 times 
the current air traffic capacity.
    Finally, much of the initial debate over the 
reauthorization legislation resulted from FAA's belief that the 
Trust Fund was going bankrupt. However, the drop in revenues in 
the Trust Fund was largely due to a steep drop-off in passenger 
volume after 9/11.
    Increased confidence in aviation safety and the Nation's 
surging economy has resulted in increased passenger levels 
approaching the pre-9/11 levels, with continued growth likely. 
As a result, CBO projects the current system of taxation will 
be adequate to sustain the Trust Fund and associated funding 
needs for the foreseeable future.
    So I support a more balanced approach to the funding needs 
of FAA and its programs. There does not appear to be an 
immediate crisis that demands rapid legislative action. As for 
the FAA budget for 2008, the administration proposes $14.077 
billion in new spending commitments, a $404.5 million reduction 
from the 2007 level.
    At the same time, the FAA is proposing a new account 
structure, consistent with the anticipated passage of the 
administration's proposed new legislation.
    Let us leave aside a discussion of the desirability of the 
new account structure. The key funding issue in the budget 
request includes an increase of $352 million, or 4.2 percent, 
in operations; an increase of $8.37 billion in 2007 to $8.73 
billion in 2008; and a reduction of some $651 million, or 19 
percent, in the AIP program, from $3.4 billion to $2.75 billion 
in 2008.
    While I support the FAA operations increase necessary to 
fund additional air traffic controllers and air inspectors, I'm 
very concerned over the substantial cut to Federal investment 
in airport construction, most especially the funding reductions 
in the AIP.
    As the administration knows, the AIP program is critical to 
the future of commercial aviation in the Nation, and any 
shortfall in funding could undermine the infrastructure needs 
of airports, and most importantly, the funding needs of 
NextGen.
    In particular, the IG testimony indicates that the aviation 
industry serves some 700 million passengers per year, and 
projects this number to grow to over 1 billion passengers in 
2015.
    At the 35 busiest airports in the Nation, total operations 
are expected to grow by more than a third by 2020. 
Consequently, we cannot afford to nickel and dime our aviation 
needs, whether related to safety issues or infrastructure 
investments.
    The FAA is facing many other important issues regarding its 
oversight and administration of a number of its contracts 
designed to modernize FAA equipment.
    These issues include continued controversy over the NATCA 
contract, as well as issues related to cost, savings, and 
delays in programs, such as the Airport Surveillance Detection 
Equipment-X Program, the STARS program, FAA Telecommunications 
Infrastructure, or FTI program, and others.
    Also, as I discussed last year, the IG, in 2005, reviewed 
some 16 major acquisitions and found that FAA projects 
experienced a cost growth of over $5.6 billion, from $8.9 
billion to $14.5 billion, as well as significant delays in many 
of these programs.
    However, as the Chair has indicated, the FAA since has 
implemented a system of re-baselining its programs that have 
had delays or cost overruns. As a result, it's very difficult 
to examine adequately the programs as to projected cost savings 
and implementation dates.
    Instead of shortfalls and delays, the programs, for the 
most part, now appear to be meeting all implementation and 
funding requirements, regardless of prior problems or other 
concerns.
    Let's be clear. I'm concerned about this approach, since it 
has the feel of a three-card Monte game, where a sleight of 
hand guarantees the dealer wins. I'm sorry, but that is what it 
looks like to me.
    I'm disturbed the FAA appears to be using re-baselining to 
meet time and cost requirements. We have to have a complete and 
true understanding of the real cost of FAA programs, the amount 
of savings, any delays, and what those delays mean to cost and 
on-time requirement of related programs.
    This information is critical, since it will provide us with 
the necessary and real cost information that should be driving 
our appropriations decisions.
    I thank you, Madam Chair, and our witnesses. I look forward 
to coming back and pursuing these in the question and answer 
session. Thank you.
    Senator Murray. Senator Lautenberg.

                STATEMENT OF SENATOR FRANK R. LAUTENBERG

    Senator Lautenberg. Thank you, Madam Chairman. Not only is 
the situation puzzling, because it never ceases to amaze me 
that despite the enormous growth in air travel, we're not 
matching it by acknowledgement that we need better planning and 
more resources to continue to meet these greatly expanding 
needs.
    In order to maintain a level of safety, we've got to hear 
FAA plans to meet these obligations, and realistic financing 
requests to match it. The FAA's greatest assets are its loyal, 
capable people. Thank goodness we have them. But in many cases, 
we don't have enough of them.
    Now, although we've experienced an excellent period of 
safety for aviation, I'm concerned that the Bush administration 
is reducing the safety levels because of structures in place 
that call for cuts in funding. Many of the air traffic control 
facilities are understaffed, and we need a surge of 
controllers, in my view.
    Safety inspectors are overextended, and cannot adequately 
oversee this industry properly, especially in non-certified 
repair stations. With one in four flights running late, the 
delays are overpowering the system, and it's time to upgrade 
the 1970s-era equipment.
    Now, I come from the corporate world. I ran a large 
company, we continuously modernized our computer systems. That 
was our basic business. As a matter of fact, I was in shock 
when I came here just over 20 years ago to see that the 
equipment being used by the FAA was impossible to give away, 
because the maintenance costs were more than the value of the 
equipment itself.
    So when I see what is being proposed--to divide the 
research and development functions of FAA--I don't think it's a 
smart move.
    At the FAA Tech Center in Pomona, New Jersey, so much 
aviation research gets done, but it's funded through different 
stovepiped programs. The budget would further divide and 
potentially even duplicate research functions by combining the 
facilities and equipment budget with the operations budget.
    Also, as President Bush continues to propose cuts to the 
Airport Improvement Program, he's got to know that, by now, 
this proposal will not fly in the Congress. The skies are ever 
more crowded, and even if you depart on time, in many 
instances, when you get to the destination, there are no gates. 
There's no opportunity to move air traffic expeditiously.
    So, Madam Chairman, we've had a good safety period, and we 
commend FAA and those involved in the management of the system, 
but we cannot cut important safety projects that are funded 
through AIP, like runway safety area upgrades. The list goes on 
with controller shortages, and this Bush budget proposal 
doesn't match with the realism that we're looking at with the 
expansion of passenger traffic in the years ahead.
    So I look forward to this appropriations examination. It's 
clear that Congress needs to maintain a strong oversight review 
of what is taking place in FAA, and Madam Chairman, I think 
we're doing exactly that, and I commend you for it.
    Senator Murray. Senator Stevens.

                    STATEMENT OF SENATOR TED STEVENS

    Senator Stevens. Thank you very much, Madam Chair. I think 
this bill shows the ludicrous problem of the battle of the 
earmarks. If I understand right, this bill started off in March 
2006 with a request for planning for 2008. The President gave 
us a budget in February of this year. We're going to pass it in 
September of this year, and it's supposed to carry the monies 
for the period from September or October of this year until 
September of next year.
    Now, the difficulty is, and particularly in the field of 
aviation, the scenery is changing, and it is changing very 
rapidly. The demands for modernization are there. The costs of 
planning for the next generation are just overwhelming.
    I wish that the Administrator had your immunity, Mr. 
Inspector General, because you have the luxury of looking at 
the way things are done without the burden of deciding how the 
money is going to be spent and who's going to meet the 
emergencies, and whether or not you have to short one area in 
order to take care of the hurricanes, typhoons, earthquakes, 
fires, and really, this rapid demand for change.
    As a matter of fact, several of the things that's been 
mentioned here this morning came about because of earmarks. 
During the process of the last few years: ADS-B, Capstone, a 
lot of the other things, even the money to start the 
modernization program came from earmarks.
    So I hope the President will ask you to stay. We're in the 
middle of a modernization, in the middle of change. We're in 
the middle of reauthorization. I think it would be a travesty 
if we had to try to figure out how we can get your successor 
confirmed and through this period that we're in.
    I do hope that we can act on the bill that is before our 
authorization committee. Many of us are on that one, too, but 
as a practical matter, there are some serious problems there, 
and I'm not sure we won't end up with just what we did before, 
which was a 2-year extension until we worked it out.
    I hope we can avoid that, but that is what happened last 
time, and with a different administration and a different 
control of Congress. So it is not something that is political. 
It's something that's just a problem of the way we do 
oversight.
    But I am here to thank you very much. No state has more 
impact from FAA than mine. Seventy percent of the people who go 
home in my state go home by air. You can't get there year-round 
any other way.
    Without the FAA, without the safety that is involved, 
without the programming that you give us, and without really 
the willingness to modernize--ADS-B started in Alaska. Capstone 
started in Alaska. The whole concept of modernization started 
in Alaska, because there's a need for it, but there wasn't any 
money in the budget.
    So I hope people keep that in mind as we go through this. 
This budget may be changed, but it's going to be awfully 
difficult to put other things in the bill, as I understand, the 
penchant of some people to impose earmarks. Without earmarks, 
the modernization of the FAA is going to be 4 or 5 years 
behind, because we cannot have the President anticipating a 
year and a half in advance on what to put in a bill that takes 
us almost a year to pass.
    Now, I think it's time for us to wake up and do the job 
right, and stop these people from screaming about earmarks, 
because this bill--this agency won't survive without earmarks. 
Thank you very much.
    Senator Murray. Senator Allard.

                   STATEMENT OF SENATOR WAYNE ALLARD

    Senator Allard. Well, first of all, Madam Chairman, I want 
to thank you for holding this hearing. We've got a great record 
on aviation. We've got the most advanced aviation system in the 
world. We're recognized for that. We have the safest.
    The challenge is to keep that record up, keep it 
economically feasible, flexible, and friendly, and still 
maintain that safety record. I would caution the Administrator, 
as well as the Inspector General, against getting so bogged 
down in procedure that we actually miss out on some new 
technology with the potential to enhance safety.
    I'm very much aware of new technology that is being used in 
other places in the world, in France, in Germany, in Hong Kong, 
but we're not able to use it in our airports, which will help 
us make those airports safer. And I happen to feel that it's 
proving itself.
    And, as you know, we obviously need to bring on new 
technology. We need to constantly be working to be aware of 
these new technologies and bring them on as soon as possible, 
because any unnecessary delay could lead to increased risk to 
passenger flight. On the other hand, if you move it in too 
fast, there's a risk there, too. So we have to reach a proper 
balance.
    But when we have technology that's being used in other 
countries at very busy airports, and we haven't yet accepted 
into our system, I think we really ought to take a very, very 
serious look at it, because it's beginning to prove itself.
    So again, we have challenges with upgrading, expanding, and 
maintaining what we have. We want to make sure that we have the 
concerns of the public in mind. You know, there's various 
interests in aviation.
    You have the private interest, you have the public 
transportation interest, and a lot of local interest. But we 
need to make sure that we don't lose sight of new technology as 
it comes along, and hopefully, in this particular piece of 
legislation, we can recognize that.
    Thank you very much for both of you for coming and 
testifying here, Administrator Blakey and Inspector General 
Scovel. I look forward to your testimony.
    Senator Murray. Thank you very much. We obviously have a 
vote on. We're going to be transferring hats back and forth 
here as we try and balance getting to the floor.
    So Administrator Blakey, I'll have you go ahead and begin 
your testimony. Hopefully, Senator Bond will be back. I'm going 
to go to vote as soon as he returns, and I will be delayed 
coming back. We will try and continue having questions, and may 
have to go into a short recess until I return, if we don't have 
any other members here. I ask all the witnesses to bear with us 
as we get through this, but I appreciate your patience.
    Administrator Blakey, we'll start with you.

                   STATEMENT OF HON. MARION C. BLAKEY

    Ms. Blakey. Good morning, and thank you, Chairman Murray, 
and I appreciate the opportunity to testify before you, and to 
address the FAA's 2008 budget request.
    Our goal is, as always, to provide the world's safest air 
transportation system and to use the taxpayer's investment 
wisely. As always, we appreciate the wisdom, insight, and 
guidance that this committee provides, because this is a 
historic time for aviation. It is the golden age of safety.
    Commercial aviation has never been more safe, and it 
continues to get safer still. But this period is historic, as 
well, because we have the opportunity to reshape the FAA's 
funding stream.
    The bill before the Senate represents an opportunity for 
FAA's funding mechanism to switch from one that is patched 
together and instead become a dependable, consistent stream on 
which businesslike investments can be made.
    In the mid-1990s, Congress made it clear that the FAA 
needed to drop the blank check mentality. We made sweeping 
changes in our hiring and acquisition practices. We've taken 
what was a mess of redtape, and transformed it into a bottom-
line organization.
    A hundred percent of our major capital programs are right 
now on time and on budget. The criticisms of the past are no 
longer the case. We're spending wisely, and the beneficiary is 
the taxpayer.
    With delays setting records, and airlines, passengers, 
pilots, controllers, lining up to emphasize the need for 
modernization, there's little question that the solution is the 
Next Generation Air Transportation System.

                THE NEXTGEN FINANCING REFORM ACT OF 2007

    The NextGen Financing Reform Act of 2007 is the vehicle 
that will allow us to free up gridlock in our skies and on our 
runways. The act's linchpin is financing reform. Without this 
financing reform, NextGen simply will not happen on time, and 
the longer we take to put NextGen in place, America's economy 
will suffer.
    As you know, the FAA's current revenue stream has no direct 
link to our costs. We also have major inequities between what 
users pay and the services that they receive.
    The Financing Reform Act will tie cost directly to revenue, 
and give us the funding we need for the NextGen system, while 
maintaining the congressional oversight that the public and we 
expect. All revenues we collect will continue to be subject to 
appropriations.
    There's a larger issue here, as well. U.S. leadership in 
aviation is in jeopardy. Europe is moving full steam ahead with 
its modernization plan. Japan, India, Mexico, Canada, are all 
moving forward aggressively with the latest in satellite 
technology.
    Getting bogged down in a protracted debate over who pays 
for the NextGen system will prevent us from actually deploying 
one, ceding our place as the world leader in aviation.
    We're already working to leverage FAA resources. As I said, 
100 percent of our major capital programs are on schedule and 
on budget. We ended fiscal year 2007 at 97 percent. We've 
reduced layers of management and consolidated facilities, 
focusing our resources on providing service to our customers.
    Our safety metrics speak for themselves. Four errors per 
million air traffic activities, making the safest mode of 
travel even safer.
    It's a track record I think we are very justifiably proud 
of together, and while we're confident that our fiscal year 
2008 budget request hits the mark, we have changed the funding 
lines, so Operations and F&E have been replaced with a Safety 
and Operations account, and an Air Traffic Organization 
account, both of which will closely match our lines of 
business.

                        FISCAL YEAR 2008 REQUEST

    Under our reformed proposal, these accounts would be funded 
by a combination of fees, taxes, and a significant general fund 
contribution. Our 2008 request provides almost $2 billion for 
Safety and Operations. The bulk of that is directed to our 
aviation safety efforts and workforce, and would increase our 
inspector workforce by 177.
    Our Air Traffic Organization budget provides $7 billion for 
operating expenses. This will fund 1,420 new air traffic 
controllers. We have no shortage of recruits--far from it. This 
budget request makes sure that we'll have the right number of 
controllers working in the right place at the right time.
    The budget request provides unprecedented levels of funding 
for the NextGen system. Capital funding would increase by over 
40 percent, from $2.5 billion in fiscal year 2008 to $3.5 
billion by 2012.
    Our proposal would also grant the administration authority 
to borrow up to $5 billion from the Treasury starting in 2013. 
The funds would be dedicated to making capital investment in 
NextGen related equipment and facilities.
    This would leverage our limited resources to transition to 
the NextGen system. The proposal allows us to take on major new 
investments, while spreading the cost to our users over a 5-
year period, making it easier to afford.
    Satellites will be the linchpin for the next generation of 
aviation. Specifically, ADS-B. ADS-B and SWIM are very critical 
technologies, as all who have supported them already know.
    Senator Murray. Administrator Blakey, if I could have you 
sum up real quick, I'm going to have to recess and get to the 
vote. Hopefully, Senator Bond will be back.
    Ms. Blakey. I'll be happy to. Our proposal also provides 
$2.75 billion for airports in grants and aid, and funds all of 
the high-priority safety and capacity projects. There's also 
$140 million for research engineering, and we are working in 
advanced areas like synthetic jet fuel.
    But with all of that said, the system is safer than ever. 
The capacity of our airports, our runways, and our skies is 
still stretched thin. So if we fail to take action, we believe 
that the record we set last year for delays will be eclipsed 
again and again.

                           PREPARED STATEMENT

    Therefore, we're going to have to move to address these 
issues with the NextGen system. Thank you very much.
    [The statement follows:]

              Prepared Statement of Hon. Marion C. Blakey

    Good morning, Chairwoman Murray, Senator Bond and members of the 
subcommittee, I am delighted to be here today and am deeply 
appreciative for the opportunity to talk to you about the Federal 
Aviation Administration's (FAA) budget request. It is a pleasure to 
appear before you on behalf of the 44,000 men and women of the FAA to 
discuss our fiscal year 2008 budget request. As this is my first 
appearance before you in the 110th Congress, I would like to take this 
opportunity to acknowledge the new chairman and ranking member of the 
subcommittee and say that I look forward to working with you on what 
I'm sure will be a broad range of aviation issues. I also would like to 
thank you for your actions on our behalf during the full length 
continuing resolution which has allowed us to ensure continued safety 
and efficiency of our services on behalf of the flying public.
    Before discussing next year's budget, I would like to briefly 
mention the administration's reauthorization proposal introduced as S. 
1076--``Next Generation Air Transportation System Financing Reform Act 
of 2007.'' The simultaneous expirations at the end of September of the 
funding authorization for the FAA's current programs as well as the 10-
year term for existing taxes that fund the Airport and Airway Trust 
Fund (Trust Fund) present us with a unique opportunity.
    Let me just emphasize how important I believe it is to move toward 
a stable, cost-based funding structure to ensure that FAA's costs and 
revenues are better aligned and that our stakeholders are treated 
equitably and reap the benefits of their investments in the system. S. 
1076 offers a simple, transparent, and repeatable methodology to 
equitably allocate and recover the FAA's costs among aviation users. It 
also contains other needed programmatic reforms that provide airports 
with greater financing flexibilities and addresses environmental and 
congestion challenges.
    While S. 1076 has generated some debate already, I think we can all 
agree that we share two fundamental goals for reauthorization: first, 
that we continue to keep our air transportation as safe as we possibly 
can; and second, that we have the ability to grow the system to meet 
our Nation's future air transportation needs--both in the short and 
long term supported by a predictable funding system.

                        FISCAL YEAR 2008 BUDGET

    I will now turn to the issue at hand. The fiscal year 2008 budget 
requests a total of $14.1 billion to improve safety, reduce congestion, 
and improve global connectivity. The request supports our financing and 
programmatic reforms and focuses on accountability and performance. For 
several years, we have pushed to manage more effectively, rein in 
costs, and better respond to our customers' needs.
    As always, safety is FAA's primary concern. Our collaboration with 
industry speaks for itself: we are enjoying the safest period in 
aviation history. At the same time, the demand for FAA services has 
never been greater. We oversee about 50,000 flights per day. In 1995, 
the system supported about 545 million passengers. In 2005, it was 739 
million. Forecasts estimate one billion passengers annually by 2015.
    Given the anticipated growth--both in terms of passengers, and, 
critically, in the number of aircraft operations--we know that our 
services must adapt to meet the demand. We also know that the 
complexity of the future operating environment--with evolving fleet 
mixes, new aircraft technology, and environmental constraints--must be 
approached in partnership with our customers. This budget demonstrates 
a long-term commitment to the Next Generation Transportation System 
(NextGen), not as a pie-in-the-sky vision, but as embodied by tangible 
systems, processes, and capital projects that will lead us to the 
future.
    For fiscal year 2008, FAA has prepared the budget in a new account 
structure that aligns with the financing reform proposal and the 
services that we provide. While the Grants-in-Aid for Airports (AIP) 
and Research, Engineering, and Development (R, E, & D) accounts remain, 
the Operations and Facilities and Equipment accounts have been replaced 
with two new accounts. There is a Safety and Operations account and an 
Air Traffic Organization (ATO) account that align with our lines of 
business. Under our reauthorization proposal, beginning in fiscal year 
2009 these accounts would be funded by a combination of user fees, 
taxes and general fund contributions. The General Fund contributions 
for each account covers specific activities that benefit the public, 
such as safety oversight and public sector use of air traffic control 
services. We consider this structure to be more consistent with and 
supportive of our business-like approach by expanding our comprehensive 
pay-for-performance programs, consolidating operations, improving 
internal financial management, and delivering benefits to our 
customers.

                         SAFETY AND OPERATIONS

    The fiscal year 2008 budget requests $2 billion for Safety and 
Operations. Most of the funds requested for Safety and Operations in 
fiscal year 2008 support maintaining and increasing aviation safety and 
efficiency, reflecting the President's commitment in this area. Of this 
request, $1.1 billion is for the agency's Aviation Safety (AVS) office. 
This level supports increasing the AVS safety workforce by 87 
inspectors and 79 other safety staff.
    The fiscal year 2008 budget requests $12.8 million for Commercial 
Space Transportation to continue its commitment to timely and 
responsive licensing and regulatory processes designed to enable a 
safe, secure, efficient, and internationally competitive U.S. space 
transportation industry. Commercial space transportation is an exciting 
area, and we are committed to supporting its continued growth.
    The Budget also requests $758 million for Staff Offices to fund 
administrative and managerial costs for FAA's international, 
engineering, and development programs, as well as policy oversight and 
management functions.

                        AIR TRAFFIC ORGANIZATION

    As a Performance Based Organization, the Air Traffic Organization 
(ATO) continues to provide safe, secure, and cost effective air traffic 
services. The budget requests $7 billion for ATO operating expenses. In 
fiscal year 2008, this will fund 1,420 new air traffic controllers to 
both address the projected 1,276 controller losses next year, and to 
fund a net increase of 144 controllers to meet increased demand for air 
travel.
    Recently, there has been a great deal of misinformation generated 
regarding controller staffing levels, and our recently updated 
controller staffing plan. Let me take this opportunity to assure you 
that our 10-year plan recognizes the dynamics of staffing to steady 
increases in overall traffic as well as accounting for workloads at 
individual facilities. We are planning for an average net increase of 
148 controllers every year for the next 10 years, resulting in a total 
count of about 16,000 controllers by 2015. FAA's goal is to have the 
right number of people in the right facilities at the right time. This 
includes using overtime more strategically. The overtime levels for 
controllers are trending downward. The overtime rate in fiscal year 
2007 to date is 0.9 percent, which is down from 1.1 percent in fiscal 
year 2006 and 1.6 percent in fiscal year 2005.
    FAA is meeting its recruiting needs, with new people coming into 
the applicant pool on a daily basis. We have actually selected and 
filled all en route controller slots for fiscal year 2007 and 
tentatively selected the majority of terminal controllers for fiscal 
year 2007. Our plans are already progressing for filling specific 
controller slots in fiscal year 2008. We have targeted vacancy 
announcements in cities around the country to ensure we have sufficient 
applicants in areas where we expect to need controllers in the future.
    Most importantly, the system is safe. In fiscal year 2006, we 
achieved our performance safety metric on operational errors which was 
down to 4.11 errors per million activities. In fiscal year 2007, the 
operational error rate is tracking even lower.
    In October 2005, ATO completed the largest non-military A-76 
competition in history. That action will save the agency $51.7 million 
in fiscal year 2008, with a 10 year projected savings and cost 
avoidance totaling almost $2.2 billion. The contract not only saves 
money, it also commits the vendor to modernize and improve the flight 
services we provide to general aviation pilots. In addition, the 
employees who left Federal service as a result of this transition were 
given offers to work for Lockheed Martin, the successful bidder of the 
contract.
    In fiscal year 2006, ATO consolidated its administrative and staff 
support functions from 9 service areas to 3. This will allow us to 
provide better service to customers while saving an estimated $360 to 
$460 million over the next 10 years. In fiscal year 2008, we anticipate 
savings of $29 million from Service Area Consolidation.

                       NEXTGEN AND CAPITAL NEEDS

    The fiscal year 2008 budget requests $2.3 billion for ATO capital 
programs and more than $100 million for Safety and Operations capital 
programs. Much of this request will support the ultimate NextGen 
vision--with $173 million requested for the transformational NextGen 
activities detailed below, and over $950 million for current programs 
that contribute to the NextGen effort. The request also supports the 
investments needed to keep the current National Airspace System (NAS) 
functioning. We know that it will take not only funding, but new 
management approaches, to transform today's aviation system to meet 
tomorrow's needs. We have done much in recent years to break down 
stovepipes and plan in a more integrated manner, but NextGen requires 
us to go further. The new OEP--formerly the Operational Evolution Plan, 
and now the Operational Evolution Partnership--is a big step in the 
right direction. OEP has gone from a 10 year rolling plan to a more 
comprehensive roadmap for how we get to NextGen. The emphasis is on 
``partnership''--within and between major FAA organizations, with the 
Joint Planning and Development Office (JPDO) and its other partner 
agencies, the private sector, and, of course Congress.
    One of our greatest challenges is our ability to define what the 
future system will look like. What technologies will the future system 
be comprised of ? In the coming months, the JPDO will publish the first 
official NextGen Enterprise Architecture and Concept of Operations. The 
significance of these foundational documents should not be understated. 
They are essential to understanding the transformed operational 
environment, which will allow us to more precisely develop a plan for 
achieving it, and will provide the basis for architecture-based, 
quantitative resource planning. Our reauthorization proposal is 
designed to strengthen the key linkages needed to implement NextGen, 
and to deliver those resources when they are needed.
    Given demand growth, we know it is essential to improve operations 
well in advance of 2025. To do so, we are requesting funding to stage 
demonstrations and develop critical infrastructure that will better 
define how we can move to trajectory-based operations and identify 
opportunities for early implementation of promising technologies and 
practices. The demonstrations will also help us to eliminate certain 
concepts and technologies from further consideration, thereby allowing 
us to focus our resources more effectively going forward. Ultimately, 
trajectory-based operations will allow pilots to select the most cost-
effective, fuel-efficient routes, achieving substantial cost and time 
savings for our customers, while maintaining the highest levels of 
safety. In addition to these demonstration projects, our capital 
request funds a growing list of NextGen transformational technologies. 
Most significantly, these include Automatic Dependent Surveillance-
Broadcast (ADS-B), the next generation of satellite-based surveillance 
technology; System-Wide Information Management (SWIM), which will 
provide a broad range of real-time information to users of the National 
Airspace System; and NextGen Network Enabled Weather, which will 
improve forecasting and information sharing and enhance safety.
    We are again requesting research funds to continue supporting the 
JPDO. As the unit that spearheads NextGen for the federal government, 
JPDO will continue defining the future operating environment, 
identifying demonstration opportunities, and working with the relevant 
agencies to implement them. We are also requesting funds to support 
wake turbulence research, the results of which will help us increase 
capacity while maintaining safety. In addition, research funds would be 
directed to environmental research, especially noise and emission 
control, critical to the design of the future system. And finally, we 
would fund further research on unmanned aircraft systems, a likely 
addition to the future fleet mix.

                    GRANTS IN AID FOR AIRPORTS (AIP)

    The FAA is committed to a healthy national air transportation 
system. Airports are a key part of the system, and that includes small 
airports that rely most on AIP funding to help meet their capital 
needs.
    We have proposed changes to the Federal funding programs, which 
will stabilize and enhance these funding sources for airports. With our 
proposed programmatic changes, the $2.75 billion requested in our 
budget will be sufficient to finance airports' capital needs and meet 
national system safety and capacity objectives. These changes will 
assure that the small airports continue to benefit from the funding 
formulas currently in place, and provide FAA and States with the level 
of discretionary AIP funds we need to finance our critical safety, 
capacity and security requirements. In addition, the proposed increase 
in the maximum passenger facility charge from $4.50 to $6.00 will 
provide commercial airports of all sizes with additional local revenues 
to meet their capital needs. This proposal would bring an additional 
$1.5 billion annually to commercial airports, with $1 billion going to 
large airports and $500 million going to small airports.

           RESEARCH, ENGINEERING, AND DEVELOPMENT (R, E, & D)

    The fiscal year 2008 request for R, E, & D is $140 million. The 
request includes $91.3 million for continued research on aviation 
safety issues. The remaining research funding is for reduced congestion 
and environmental issues, including $14.3 million for the JPDO to 
continue defining and facilitating the transition to NextGen. An 
additional $3.5 million in support for JPDO is contained in the ATO 
capital request, related specifically to the work on the demonstration 
projects.

                         FLIGHT PLAN 2007-2011

    The Flight Plan is FAA's rolling 5-year strategic plan that we 
first undertook in 2004. As scheduled, we updated it last fall, with 
input from our internal and external stakeholders. The Flight Plan is 
organized around the agency's primary goals: increased safety, greater 
capacity, international leadership, and organizational excellence. The 
Flight Plan is our blueprint for managing the agency. It has made FAA 
more business-like, performance-based, and customer-focused.
    As part of our Flight Plan, each FAA organization now has its own 
individual business plan. Each of these plans is linked to the Flight 
Plan, budgeted and tied to what the customers need. The agency's 
business plan goals have been built into a performance-based tracking 
system that is posted to the FAA website each quarter. It lists each of 
the agency's goals, performance targets, who is responsible, and the 
status of each. Using this data, the senior management team conducts a 
monthly review of our performance. When used with other cost and 
performance data, the Flight Plan information clearly and precisely 
identifies the effectiveness of a program across the entire agency. 
With this perspective, the agency is able to capitalize on successful 
strategies. Let me address our performance and requests under each of 
our goals.

                            INCREASED SAFETY

    At FAA, safety is our top priority, and approximately 66 percent of 
our budget request, $9.4 billion, supports this goal. Over the last 
three years, the accident trends in both commercial and general 
aviation have been at all-time lows. Commercial space transportation 
continues its remarkable safety record, without a fatality, injury, or 
any significant property damage to the public. The Flight Plan 
continues our commitment to reduce commercial and general aviation 
fatal accidents. We continue to strive toward a 3-year rolling average 
for our commercial airline fatal accident rate of 0.010 fatal accidents 
per 100,000 departures or below.
    We have achieved the highest safety standards in the history of 
aviation. Even so, our goal is--as always--to continue to improve 
safety. We address our operational vulnerabilities to reduce risk. One 
major key to our successful safety efforts is cooperation among our 
stakeholders. We constantly work with our stakeholder groups to meet 
our safety goal. Each group helps us with technology, communications, 
and its own unique expertise. In our responsibility for safety 
oversight, we work with them to establish their own safety management 
systems to identify potential areas of risk. Then we work together to 
address these risk areas.
    To help reduce runway incursions, we deployed the Airport Surface 
Detection Equipment-Model X (ASDE-X) warning system at 5 major airports 
in fiscal year 2006. We also strengthened the airfield paint markings 
standard for taxiway centerlines at 72 large airports to alert pilots 
when they are approaching hold short lines so they won't inadvertently 
enter a runway without a clearance.
    Our efforts also are helping controllers do their jobs more safely, 
especially when it comes to tracking and eliminating operational 
errors. In response to a long-standing recommendation by the Department 
of Transportation Inspector General and the National Transportation 
Safety Board to improve reports of operational errors, we've added a 
new initiative to automate data collection. The Traffic Analysis and 
Review Program--known as ``TARP''--is a state-of-the-art traffic 
analysis and playback system that will improve operational error 
identification and quality assurance. We're putting the software in 
place for use next year, with all installations complete by 2011. The 
high-fidelity, near-real time playback feature of TARP will also 
support more effective and efficient air traffic controller training.
    At airports, over 48 percent of our AIP grants go to safety-related 
projects, such as upgrades to runway safety areas, runway safety action 
team recommendations, purchase of airport rescue and fire fighting 
vehicles, and airfield signing, marking and lighting. AIP also supports 
projects that reduce runway incursions. For example, end-around 
perimeter taxiways at Atlanta and Dallas-Fort Worth will not only 
increase capacity, but will also reduce the risk of runway incursions 
by substantially reducing the number of runway crossings.
    The work of the Commercial Aviation Safety Team (CAST), which 
includes representatives from government, industry, and employee 
groups, has been instrumental in using data to drive decisions. The 
team's disciplined and focused approach to analyzing accidents and 
incidents, identifying precursors, and developing targeted 
implementation strategies helped to reduce the risk of an airline fatal 
accident rate by 60 percent in the last 10 years. We are also working 
with this team to develop new metrics and goals to more effectively 
measure performance in commercial aviation safety.
    Finally, we continue our work to expand the growing field of 
commercial space transportation. In 2006, there were seven commercial 
launches. We are issuing experimental permits and are now ready to 
grant safety approvals of commercial space launch and reentry vehicles, 
safety systems, processes, services and personnel. We met our 
commercial space launch target and continued improvement of internal 
processes and partnerships with the Air Force, other government 
agencies, and the commercial space transportation industry.

                          INCREASING CAPACITY

    While safety is always our primary concern, our mission includes 
expanding capacity throughout the aviation system--both in the air and 
on the ground. The fiscal year 2008 budget requests $3.6 billion to 
support expansion of capacity on the ground, in the form of new 
runways, and the continued deployment of new technologies that allow 
more efficient use of the system. Given the anticipated growth--both in 
terms of passengers, and, critically, in the number of aircraft 
operations--we know that our services must adapt to meet the demand. We 
also know that the complexity of the future operating environment--with 
evolving fleet mixes, new aircraft, technology, and environmental 
constraints--must be approached in partnership with our customers.
    Since fiscal year 2000, FAA has provided approximately $1.7 billion 
in AIP funding to increase capacity and decrease delays at the most 
congested airports in the country. These 13 new runway projects have 
provided these airports with the potential to accommodate 1.6 million 
more annual operations. In addition, funding is being provided to two 
of the busiest airports in the United States (Atlanta and Dallas-Fort 
Worth) to construct end around taxiways which improves efficiency, but 
eliminates runway crossings that improve airfield safety.
    Every day, our capacity accomplishments, such as Domestic Reduced 
Vertical Separation Minimum (DRVSM), help provide more economical and 
efficient aircraft operations. DRVSM created an additional six layers 
of cruise levels at higher altitudes enabling aircraft to operate at 
more fuel-efficient cruising altitudes while also increasing system 
capacity. Implemented in fiscal year 2005, DRVSM was estimated to yield 
over $5.3 billion in savings from fiscal year 2005 through fiscal year 
2016, but with the rise in jet fuel prices, the savings will exceed 
$13.4 billion, a 152 percent increase.
    Advanced Technologies and Oceanic Procedures (ATOPs) are now 
available in 24 million square miles of airspace. ATOPs set the stage 
for reducing aircraft separation from 100 nautical miles to 30. ATOP 
modernizes the systems and facilities we use to manage over 24 million 
square miles of airspace over the Atlantic and Pacific Oceans. Using 
ATOPs, the Atlantic routes will save airlines 6.5 million pounds of 
fuel and $8 million per year.
    Three operating capabilities are key to handling the traffic demand 
forecast for 2025 and beyond: Navigation, Communications, and 
Surveillance. We have already developed design criteria as well as 
aircraft and operator requirements for Required Navigation Performance 
(RNP) approaches--a critical element of NextGen's near term operational 
environment. We published 6 special RNP approaches in 2005, 28 in 2006, 
and set a goal of 25 each for fiscal year 2007 and fiscal year 2008. In 
addition to its safety benefits, we expect RNP to help keep runways 
accessible and that could mean fewer canceled or diverted flights, 
thereby saving time and money.

                        INTERNATIONAL LEADERSHIP

    The United States established world leadership in aviation with a 
consistent commitment to make safety our most important export. Today, 
FAA has operational responsibility for about half of the world's air 
traffic, certifies more than two-thirds of the world's large jet 
aircraft, and provides technical assistance to more than 100 countries 
to improve their aviation systems. In fiscal year 2006 alone, FAA 
provided technical guidance and training to 66 countries and 5 
international organizations. The fiscal year 2008 budget requests $78 
million for global connectivity activities so FAA can be even more 
globally focused, helping to ensure that U.S. citizens can travel as 
safely and efficiently around the world as they do at home, and 
strengthen America's aviation leadership role in both safety and air 
traffic control.
    We cooperate with bilateral and multilateral partners in Europe and 
Asia to negotiate executive agreements and implementation procedures 
supporting the transfer of aviation products to help lower accident 
rates in areas that are experiencing substantial growth in operations. 
We have also developed initiatives to collaborate with key 
international partners to implement NextGen technologies globally as 
they become available to improve aviation safety and capacity. Last 
June, FAA entered into a cooperative agreement with European aviation 
organizations to participate in each other's air traffic management 
modernization programs to harmonize operations. These efforts are 
essential to seamless operation of aircraft.
    We are also leading the world in the development of both private 
human spaceflight and commercial spaceports.

                       ENVIRONMENTAL STEWARDSHIP

    The FAA is committed to managing aviation's growth in an 
environmentally sound manner. Indeed, NextGen recognizes the need to 
develop and insert technology to reduce levels of aviation noise and 
emissions, thereby reducing environment as a constraint on capacity. 
The fiscal year 2008 budget requests $354 million to support 
environmental stewardship for noise mitigation, air and water quality, 
fuel efficiency, environmental streamlining, and facility remediation. 
We are on track to reduce the impacts of airport noise on more than 
100,000 people over the next 5 years through AIP grants in our fiscal 
year 2008 budget.
    In April 2006, the Office of Airports issued its revised 
environmental guidance handbook. This handbook is the most recent 
product in our continuing efforts to meet the streamlining goals of 
Vision 100 and the President's Executive Order (13274) on environmental 
stewardship and streamlining of transportation infrastructure projects. 
Recent environmental review for capacity enhancing projects at O'Hare, 
Dulles, and Philadelphia Airports demonstrated that this integration 
process produces meaningful results.
    We are also working with our Center of Excellence for Aircraft 
Noise and Aviation Emissions Mitigation to foster breakthrough 
scientific, operations, and program advances. We call the Center 
``PARTNER'', and it truly is an excellent partnership of government, 
academic, and industry participants--led by MIT. Our work this year 
includes Continuous Descent Approaches to airports that can reduce 
noise, emissions, and fuel use; the feasibility of alternative fuels 
for aircraft; and assessing fuel burn reduction through en route 
optimization. In fiscal year 2008, with our reauthorization and budget 
request, we plan to expand PARTNER's work to develop and certify lower 
energy, emissions, and noise engine and airframe technology over the 
next 10 years.

                                SECURITY

    While the U.S. Department of Homeland Security's Transportation 
Security Administration (TSA) has primary responsibility for 
transportation security, FAA also works closely with TSA and other 
federal agencies to support aviation security, transportation security, 
and other national security matters. FAA also has responsibility for 
the security of its personnel, facilities, equipment and data. FAA 
ensures the operability of the national airspace, which is essential to 
the rapid recovery of transportation services in the event of a 
national crisis. The budget request includes $246 million to continue 
upgrading and accrediting facilities, procure and implement additional 
security systems, enhance IT security, and upgrade Command and Control 
Communications equipment to meet the increased national security 
demands that have resulted since the September 11 attacks.

                       ORGANIZATIONAL EXCELLENCE

    The budget requests $384 million to support our organizational 
excellence initiatives. FAA's progress over the past four years has 
been steady, as we've embraced the vision of the President's Management 
Agenda (PMA) and its strategy to improve management throughout the 
Federal Government. Through the Flight Plan and PMA, we've made 
significant management gains relating to human capital, competitive 
sourcing and consolidations, financial performance--including 
controlling costs; and, in terms of accountability to Congress, the 
taxpayers, and our customers.

   CONTROLLING LABOR COSTS/PAY-FOR-PERFORMANCE--HUMAN CAPITAL REFORM

    We know that labor costs drive a significant share of our budget, 
and we have been working to slow the rate of growth of these costs, as 
was evidenced by our efforts in the recent controller negotiations. 
We're also increasing workforce productivity in several ways and we are 
on track to achieve cost efficiencies of 10 percent by fiscal year 2010 
in controller staff costs. We achieved the first 5 percent of this goal 
in fiscal years 2005-2006 by staffing our facilities based on traffic 
levels and controller workload, and through imposing greater scrutiny 
of controller duties that take them away from controlling traffic. Our 
budget request assumes we will achieve controller productivity 
improvements of 2 percent in both fiscal years 2007 and 2008.
    Our improved oversight and proactive management of our worker's 
compensation caseload resulted in a cost avoidance of $5.5 million in 
fiscal year 2005 and $7 million in fiscal year 2006. The estimated cost 
avoidance for fiscal year 2007 is $7 million.
    I have mentioned in the past of ATO's efforts to streamline its 
organization. Over the last several years, ATO reduced its overhead 
expenses by cutting multiple levels of senior management, reducing its 
executive ranks by 20 percent. In addition to the Service Area 
Consolidation noted above, ATO has used Activity Value Analysis to help 
streamline its operations, and eliminate and consolidate administrative 
staffs and support functions. Since fiscal year 2003, ATO non-safety 
workforce was reduced by 16 percent.
    Many of the efficiencies I've noted are the result of the personnel 
reform that was granted to the agency in 1996. It has enabled FAA to 
transition from the traditional General-Schedule pay system to pay-for-
performance. Accountability for results is systemic throughout our 
organization, with 80 percent of our employees on a pay-for-performance 
system, including our executives. Flight Plan performance targets must 
be achieved before annual pay raises are calculated. The system 
provides discretion to reward high-performing employees, and incentives 
are available to ensure that quality work and innovation are rewarded.
    In December 2003, we strengthened the approval process for 
negotiated agreements by requiring, among other things, an analysis of 
the budget impact of all proposed agreements.

      SMARTER CAPITAL INVESTMENT CHOICES AND IMPROVED PERFORMANCE

    A capital investment team was created in 2004 to review financial 
and performance data. The team completes an evaluation of baseline 
performance and includes associated variances, obligations, schedule 
milestones and earned value management (EVM) data. EVM will provide an 
early warning for potential and actual variances as well as help the 
program manager develop corrective actions. The members of this team 
apply a business case approach to each project as the program is 
assessed. Since April 2004, over 100 projects have been reviewed. Seven 
major projects (a total of $60 million) have been significantly 
restructured and segmented. Three projects were terminated. These 
changes alone resulted in $460 million in lifecycle savings to FAA. In 
the fiscal year 2006 Flight Plan, all of our major capital programs 
were on schedule and we missed only a single program milestone. As we 
move to the NextGen environment, it will be critical to maintain 
rigorous oversight of our capital investments.

                                 SAVES

    The Strategic Sourcing for the Acquisition of Various Equipment and 
Supplies (SAVES) initiative is an ambitious effort begun in fiscal year 
2006 to implement best practices from the private sector in the 
procurement of administrative supplies, equipment, and IT hardware. It 
is expected to achieve $5 million in savings in fiscal year 2007 and 
annualized savings of $6 million thereafter.

               IMPROVED FINANCIAL MANAGEMENT PERFORMANCE

    We're making significant strides in improving our financial 
management. The Government Accountability Office (GAO) removed us from 
its high-risk list in 2006, a particular accomplishment since FAA 
Financial Management had been a high-risk item since 1999. We also 
received, for the third year in a row, the Association of Government 
Accountants' prestigious Certificate of Excellence in Accountability 
Reporting (CEAR) for our 2005 Performance and Accountability Report.

                                CLOSING

    I'll end where I began. At FAA, our top priority is safety. Because 
of the growth forecasted in air traffic, however, we must also focus 
significant energy on training and transitioning to a NextGen air 
transportation system. Even with new efficiencies, the current system 
cannot meet future demand. America's ability to launch NextGen depends 
on the enactment of FAA's reauthorization proposal and our fiscal year 
2008 budget request which supports it. I thank you for your time and 
look forward to discussing this legislation and our budget request in 
greater detail today and in the coming weeks.

    Senator Murray. Thank you very much. Inspector General 
Scovel, I'm going to take a short recess. I believe Senator 
Bond should be here in just a minute, and we will take your 
testimony, and then we'll move to questions. We'll go into a 
recess for a few minutes.
    Senator Bond [presiding]. The hearing will resume. Senator 
Murray has passed the baton to me, and I apologize. I'm slowing 
down as I get older. It takes me longer to run and get back.
    All right. We are now ready to hear the testimony from the 
Inspector General. Mr. Scovel?

                 STATEMENT OF HON. CALVIN L. SCOVEL III

    Mr. Scovel. Madam Chairman, Ranking Member Bond, members of 
the subcommittee, we appreciate the opportunity to testify 
today regarding the Federal Aviation Administration's fiscal 
year 2008 budget request. FAA is presenting its $14.1 billion 
budget request in a new format and structure that mirror its 
plans to reform how the agency is financed.
    FAA has proposed changing the existing revenue stream to 
one that is based primarily on user fees, and Congress is 
currently deliberating on that proposal.
    However, regardless of the funding mechanism ultimately 
decided upon by Congress, there are a number of front and 
center issues that demand attention and will shape FAA's 
requirements over the next several years.
    We see three key areas. First, keeping existing 
modernization efforts on track and reducing risks with NextGen. 
Currently, we are reviewing the progress of 18 projects with a 
combined cost of $17 billion. Overall, we have not seen the 
massive cost growth and schedule slips that we did in the past 
with FAA's major acquisitions. This is due to FAA's efforts to 
re-baseline major efforts and segment investment decisions.
    However, there are projects, such as FAA's 
Telecommunications Infrastructure Program, that are at risk of 
not achieving expected cost savings and benefits because of 
schedule slips.
    ASDE-X, we're also concerned about further cost increases 
and schedule slips with the Airport Surface Detection Equipment 
Model-X, an important program to reduce the risk of accidents 
on runways. ASDE-X was initially designed to provide a low-cost 
alternative to FAA's ASDE-3 radar systems, but has now evolved 
into essentially a replacement system for ASDE-3.
    In September 2005, FAA increased ASDE-X costs from $505 
million to $550 million, and extended the completion date from 
2007 to 2011. As of March 2007, FAA had commissioned only 8 of 
the 35 ASDE-X sites. Further, it's uncertain when key safety 
features will be delivered.
    For example, FAA has yet to commission an ASDE-X system 
that can alert controllers of potential collisions on 
intersecting runways or converging taxiways. Because of these 
issues, we believe the program is at risk of not meeting its 
current cost and schedule plans to deliver all 35 ASDE-X 
systems by 2011. We are reviewing ASDE-X and will issue a 
report later this year.
    NextGen. A central question in the debate about financing 
FAA is what it will cost to develop and implement NextGen. The 
most current estimates suggest the agency will require $15.4 
billion for capital projects between 2008 and 2012, which 
includes $4.6 billion for NextGen initiatives.
    However, there are still unknowns with respect to 
requirements for new software, intensive automation systems, 
and data communications. Considerable development will be 
required to refine these concepts.
    We've recently made a number of recommendations to FAA 
aimed at reducing the risks associated with NextGen. Those 
included providing Congress with costs along three vectors: the 
research and development, adjustments to existing projects, and 
funds for new initiatives.
    Second, addressing attrition in FAA's critical workforces. 
FAA is facing significant attrition issues within two of its 
most critical workforces, air traffic controllers and aviation 
safety inspectors. Through 2016, FAA must hire and train over 
15,000 new controllers, as controllers hired after the 1981 
strike begin to retire.
    In December 2004, FAA developed a comprehensive workforce 
plan to address this challenge. This past February, we 
completed our review of FAA's progress to implement its 
controller workforce plan.
    Overall, we found that FAA continues to make good progress 
to implement key aspects of the plan. However, further progress 
is still needed in several areas, including completing actions 
to validate its facility level staffing standards, and 
continuing efforts to reduce the time and costs associated with 
controller on-the-job training.
    FAA concurred with our recommendations. This issue will 
remain a high priority for FAA and Congress over the next 10 
years, and we will continue to monitor and report on FAA's 
efforts.
    Inspectors. Like its controller workforce, FAA is facing 
significant attrition among its aviation safety inspectors. As 
of May 7, FAA currently had 3,821 inspectors to oversee foreign 
and domestic aspects of the NAS.
    Clearly, FAA will never have an inspection workforce that 
is large enough to oversee all aspects of aviation operations, 
so it's important that inspectors are located where they're 
most needed.
    The National Research Council recently completed its study 
of FAA's methods of allocating inspector resources, and 
concluded that the agency's current model is ineffective.
    Ranking Member Bond, with your permission, if I may have 
another minute or two to wrap up?
    Senator Bond. Under the circumstances, you can have two, if 
you wish.
    Mr. Scovel. Thank you. Thank you very much. FAA must 
develop a reliable staffing model to ensure that it has the 
right number of inspectors at the right locations. However, 
completion of the model is likely years away, and we will 
continue to monitor and report on FAA's efforts here, as well.
    Finally, determining the appropriate amount of airport 
funding. Over the last 2 years, FAA's budget requests for the 
AIP have been significantly less than authorized levels. 
However, Congress has provided FAA with close to the authorized 
amounts each year. For fiscal 2008, FAA has requested nearly $1 
billion less than 2007 levels.

                           PREPARED STATEMENT

    With growing demands for airport improvement projects and 
potentially less AIP funding available, AIP funds must be 
directed to the Nation's highest priority projects, while 
meeting the unique needs of small airports.
    That concludes my statement. I'll be happy to answer any 
questions you and other members of the subcommittee may have.
    [The statement follows:]

            Prepared Statement of Hon. Calvin L. Scovel III

    Chairman Murray, Ranking Member Bond, and members of the 
subcommittee: We appreciate the opportunity to testify today regarding 
the Federal Aviation Administration's (FAA) fiscal year 2008 budget 
request. Our testimony will focus on the key issues that will frame 
FAA's financial requirements over the next several years.
    A significant challenge facing FAA today is how to move forward 
with the next generation air transportation system. The current system 
handles over 700 million passengers per year, a number that will grow 
to over 1 billion travelers by 2015. This system must also be poised 
for the introduction of thousands of very light jets \1\ during the 
same timeframe. This influx of new aircraft will strain the Agency's 
air traffic control systems and its inspection and certification 
workforces.
---------------------------------------------------------------------------
    \1\ These are small, ``affordable'' aircraft that will carry up to 
six passengers. Priced as low as $1 million per aircraft, very light 
jet manufacturers anticipate that these aircraft will find a niche 
among corporate and private owners and as on-demand air taxi services. 
According to FAA, up to 5,000 very light jets will vie for airspace by 
2017.
---------------------------------------------------------------------------
    FAA oversees the busiest and most complex aviation system in the 
world. In 2006, FAA enroute centers--facilities that manage high-
altitude traffic--handled 46 million operations, which approximated the 
activity levels in 2000. However, with respect to delays, operational 
performance of the National Airspace System (NAS) slipped slightly in 
2006 with one in four flights arriving late, the worst level since 
2000.
    It is against this backdrop that we would like to discuss FAA's 
fiscal year 2008 budget request. FAA is presenting its $14.1 billion 
budget request in a new format and structure that mirror its plans to 
reform how the Agency is financed. Currently, FAA is financed by two 
mechanisms: excise taxes (primarily those from ticket taxes on airfare) 
and a contribution from the General Fund. FAA has proposed changing 
that revenue stream to one that is based primarily on user fees; 
Congress is currently deliberating that proposal.
    The focus of our testimony today, Madam Chairman, is that 
regardless of the funding mechanism ultimately decided upon by 
Congress, a number of ``front-and-center'' issues demand attention and 
will shape FAA's requirements over the next several years. These 
include the following:
    Keeping Existing Modernization Efforts on Track and Reducing Risks 
With the Next Generation Air Transportation System (NextGen).--FAA is 
requesting $2.46 billion for its capital programs in fiscal year 2008, 
the majority of which is for the Air Traffic Organization's capital 
efforts. The fiscal year 2008 request also includes funding for key 
NextGen initiatives, such as the Automatic Dependent Surveillance-
Broadcast Program (ADS-B) and the System Wide Information Management 
Program (SWIM), and for demonstration projects.
    Currently, we are reviewing the progress of 18 projects with a 
combined cost of $17 billion. We do not see the massive cost growth and 
schedule slips that we have in the past with FAA's major acquisitions. 
This is due to FAA's efforts to re-baseline major efforts and segment 
investment decisions. However, there are projects, such as FAA's 
Telecommunications Infrastructure program, that are at risk of not 
achieving expected cost savings and benefits because of schedule slips.
    We are also concerned about further cost increases and schedule 
slips with the Airport Surface Detection Equipment Model-X (ASDE-X), 
which is an important program to reduce the risks of accidents on 
runways. It is planned to improve airport safety by operating in all-
weather and low-visibility conditions (e.g., fog, rain, and snow) when 
controllers cannot see activity on ramps, runways, and taxiways. ASDE-X 
was initially designed to provide a low-cost alternative to FAA's ASDE-
3 radar systems but has evolved into a different program. In September 
2005, FAA increased ASDE-X costs from $505.2 million to $549.8 million 
and extended the completion date from 2007 to 2011. In addition, the 
cost to acquire and install some key ASDE-X activities has increased by 
$94 million since the 2005 re-baseline. To stay within the revised 
baseline, FAA offset this cost by decreasing funds for seven program 
activities, such as construction for later deployment sites.
    As of March 2007, FAA had commissioned only 8 of the 35 ASDE-X 
sites. Of the seven sites planned for fiscal year 2006, FAA only 
commissioned four. Further, it is uncertain when key safety features 
will be delivered. For example, FAA has yet to commission an ASDE-X 
system that can alert controllers of potential collisions on 
intersecting runways or converging taxiways. Because of these issues, 
the program is at risk of not meeting its current cost and schedule 
plans to deliver all 35 ASDE-X systems by 2011. We are reviewing ASDE-X 
and will issue a report later this year.
    A central question in the debate about financing FAA is what it 
will cost to develop and implement NextGen. The most current estimates 
suggest that the Agency will require $15.4 billion for capital projects 
from fiscal year 2008 to fiscal year 2012. This includes $4.6 billion 
for NextGen initiatives ($4.3 billion from the capital account and $300 
million from the Research Engineering and Development account). 
However, we caution that there are still unknowns with respect to 
requirements for new software, intensive automation systems, and data 
communications. Further, considerable development will be required to 
refine these concepts and determine how systems can be certified as 
safe.
    We recently made a number of recommendations \2\ aimed at reducing 
risk with NextGen, a multibillion-dollar effort that will dominate 
FAA's capital account. We recommended that FAA provide Congress with 
costs along three vectors--research and development, adjustments to 
existing projects, and funds for new initiatives. This will help 
decision makers understand the magnitude of the effort and how 
additional funds will be used. Given the high-risk nature of NextGen, 
we also recommended that FAA articulate a strategy for how this 
extraordinarily complex effort will be managed (beyond conducting 
demonstration projects) and what expertise will be required to prevent 
past problems and successfully deliver new capabilities. FAA concurred 
with our recommendations.
---------------------------------------------------------------------------
    \2\ OIG Report Number AV-2007-031, ``Joint Planning and Development 
Office: Actions Needed To Reduce Risks With the Next Generation Air 
Transportation System,'' February 12, 2007. OIG reports and testimonies 
can be found on our website: www.oig.dot.gov.
---------------------------------------------------------------------------
    Addressing Attrition in FAA's Critical Workforces.--FAA is facing 
significant attrition issues within two of its most critical 
workforces--air traffic controllers and aviation safety inspectors. 
Ensuring that there are enough adequately trained and certified 
professionals in these two fields is critical to the safety and 
efficiency of the NAS and will remain a high priority for FAA and 
Congress over the next 10 years.
    Through 2016, FAA must hire and train over 15,000 new controllers 
as controllers hired after the 1981 strike begin retiring. In December 
2004, FAA developed a comprehensive workforce plan to address this 
challenge and issued the first in a series of annual reports to 
Congress. FAA issued its first update to the plan in June 2006 and its 
second update in March 2007.
    In February, we issued the results of our review of FAA's progress 
in implementing its controller workforce plan.\3\ Overall, we found 
that FAA continues to make progress in implementing a comprehensive 
staffing plan to address the surge in retirements. For example, we 
found that FAA has significantly improved its hiring process and has 
made progress in reducing the time and costs to train new controllers. 
However, further progress is still needed in key areas. Those include:
---------------------------------------------------------------------------
    \3\ OIG Report Number AV-2007-032, ``FAA Continues To Make Progress 
in Implementing Its Controller Workforce Plan, but Further Efforts Are 
Needed in Several Key Areas,'' February 9, 2007.
---------------------------------------------------------------------------
  --Completing validation of accurate facility-level staffing standards 
        (a critical component because FAA has over 300 air traffic 
        facilities with significant differences in air traffic levels 
        and complexity);
  --Continuing efforts to reduce the time and costs associated with on-
        the-job training (the longest and most expensive portion of new 
        controllers' training);
  --Establishing baseline metrics to measure the effectiveness of 
        controller productivity initiatives (FAA must ensure that 
        reductions in staffing are a result of increased productivity 
        and not simply fewer controllers controlling more traffic); and
  --Identifying the estimated total costs of the plan (which will 
        significantly impact FAA's operating cost requirements over the 
        next 10 years).
    We recommended that FAA include the progress made in validating 
facility staffing standards in the next update of the plan along with 
the plan's total estimated costs. FAA concurred with our 
recommendations and included interim staffing ranges for all facilities 
in its March 2007 update to the plan as well as the expected additional 
personnel and compensation costs that it will incur for new controllers 
in training each year through 2016. However, the actions needed to 
address this issue are ongoing and, in some cases, it may be years 
before they are fully implemented. We will continue to monitor and 
report on FAA's efforts in addressing this challenge.
    Like its controller workforce, FAA is facing significant attrition 
among its aviation safety inspectors. FAA currently has 3,865 
inspectors to oversee domestic and foreign aspects of the largest, most 
complex aviation system in the world. Over one-third of these 
inspectors (44 percent) will be eligible to retire by 2010.
    FAA will never have an inspection workforce that is large enough to 
oversee all aspects of aviation operations, but it is important for the 
agency to ensure that its inspectors are located where they are most 
needed. The National Research Council recently completed its study \4\ 
of FAA's current methods of allocating inspector resources and 
concluded that the Agency's current model is not effective. FAA must 
develop a reliable staffing model to ensure that it has the right 
number of inspectors at the right locations. FAA advised us that it 
intends to implement the Council's recommendations and has procured the 
services of an independent contractor to obtain the most effective 
staffing mechanism. However, completion of this process is likely years 
away.
---------------------------------------------------------------------------
    \4\ Study completed by the National Research Council of the 
National Academies, ``Staffing Standards for Aviation Safety 
Inspectors,'' September 20, 2006.
---------------------------------------------------------------------------
    Determining the Appropriate Amount of Airport Funding.--The Airport 
Improvement Fund (AIP) supports the airport system by providing funds 
to primarily enhance safety and security, maintain the infrastructure, 
increase capacity, and mitigate airport noise in surrounding 
communities. Over the last 2 years, FAA's budget requests for the AIP 
have been significantly less than authorized levels. However, Congress 
has provided FAA with close to the Vision 100 \5\ authorized amounts in 
fiscal year 2005 and fiscal year 2006.
---------------------------------------------------------------------------
    \5\ Vision 100--Century of Aviation Reauthorization Act, Pub. L. 
No. 108-176 (2003).
---------------------------------------------------------------------------
    In fiscal year 2007, the AIP is funded at the 2006 level of $3.5 
billion, which is a $200 million reduction from the fiscal year 2007 
authorized level. For fiscal year 2008, FAA has requested $2.75 billion 
for the AIP--$950 million less than the fiscal year 2007 Vision 100 
authorized level.
    With growing demands for airport improvement projects and 
potentially less AIP funding available, AIP funds must be directed to 
the Nation's highest priority projects while meeting the unique needs 
of small airports. Given the growth in projected passenger traffic and 
the Department's commitment to accelerate major airport infrastructure 
projects by giving priority treatment and resources to capacity 
projects, it may be time to re-examine AIP funding levels and the type 
of projects funded.
    For example, we found that under current AIP Military Airport 
Program set-aside requirements, low-priority projects could be funded 
at an airport that meets set-aside requirements while higher-priority 
projects at other airports could go unfunded. We will report on FAA's 
prioritization of AIP funds later this year.
    Another important funding mechanism for airports are passenger 
facility charges (PFC). PFCs have become an important funding mechanism 
for airports--between 1992 and 2006, FAA approved the collection of 
$57.3 billion in PFCs. Of this amount, airports have collected 
approximately $22 billion, with another $2.6 billion anticipated for 
2007. Currently, PFCs are capped at $4.50 per segment of flight (a 
maximum of $18.00 on a round trip). Over 75 percent (248 of 328 
airports) of the airports collecting a PFC charge the maximum amount. 
The current cap on PFCs has significant implications for major 
airports' capital expenditure plans because over 75 percent of the 
airports collecting PFCs are already charging the maximum amount, and 
some airports are anticipating an increased PFC as part of major 
capital improvement financing plans.
    I would now like to discuss FAA's fiscal year 2008 budget request 
and these three areas in greater detail. I will also provide our 
observations on FAA acquisition and contracting issues.

                     FAA'S FISCAL YEAR 2008 BUDGET

    FAA is requesting $14.1 billion for fiscal year 2008, a reduction 
of nearly $460 million from the fiscal year 2007 enacted levels, and 
$233 million from the fiscal year 2006 actual levels. FAA is presenting 
its budget request in a new format and structure that mirror its plans 
to shift from the current excise taxes to a structure that relies on, 
among other things, cost-based user fees. FAA anticipates that the new 
financing system will be implemented in fiscal year 2009.
    For fiscal year 2008, FAA has realigned its four accounts to better 
reflect its lines of business and proposed financing system. The budget 
request shows the Operations and Facilities & Equipment (F&E) accounts 
realigned into two new accounts. The first account combines the 
Agency's safety oversight, Commercial Space Transportation, and staff 
offices into a single account called Safety and Operations. The second 
account combines most of the Facilities and Equipment account with the 
Air Traffic maintenance and other Operations account functions into the 
Air Traffic Organization (ATO) account. The Airport Improvement Program 
and the Research, Engineering, and Development (RE&D) accounts remain 
the same. FAA's budget funds these four accounts as follows:
  --For the Safety and Operations account, FAA is requesting $1.88 
        billion (13 percent of FAA's total budget), an increase of $102 
        million over last year's enacted amount for comparable 
        functions. For safety-related functions, such as safety 
        inspectors and certification activities, FAA is requesting 
        $1.11 billion, an increase of $105 million from last year's 
        enacted amount.
  --For the ATO account, FAA is requesting $9.3 billion (66 percent of 
        FAA's total budget), an increase of $184 million over 
        comparable functions in the fiscal year 2007 enacted budget. 
        For the operation and maintenance of the air traffic control 
        system, the Agency is requesting $6.96 billion, an increase of 
        $225 million over last year's amount. FAA is also requesting 
        $2.34 billion in capital program funds for the ATO, a decrease 
        of $41 million from last year's enacted amount. Capital 
        projects associated with other functions, such as safety, are 
        now included in the Safety and Operations account.
  --For the AIP account, FAA is requesting $2.75 billion (20 percent of 
        FAA's total budget). This represents a $765 million decrease 
        from the amounts provided in fiscal year 2007. To put this 
        figure into context, since fiscal year 2001, the AIP account 
        has been authorized at $3.2 billion or higher each year.
  --Finally, FAA is requesting $140 million for the RE&D account (1 
        percent of FAA's total budget), an increase of $10 million from 
        the fiscal year 2007 enacted level.
    To demonstrate in terms of the old and new budget presentation, 
table 1 summarizes the fiscal year 2008 budget request in last year's 
four-account format.

     TABLE 1.--FAA BUDGETS FISCAL YEAR 2006 THROUGH FISCAL YEAR 2008
                        (In millions of dollars)
------------------------------------------------------------------------
                                                Fiscal Year  Fiscal Year
             Account               Fiscal Year      2007       2008 \1\
                                   2006 Actual    Enacted      Request
------------------------------------------------------------------------
Operations.......................        8,104        8,374        8,726
Facilities & Equipment...........        2,555        2,518        2,462
Airport Improvement Program......        3,515        3,515        2,750
Research, Engineering, and                 137          130          140
 Development.....................
                                  --------------------------------------
    Total........................       14,310       14,537       14,077
------------------------------------------------------------------------
\1\ We summarized FAA's fiscal year 2008 budget request using the
  previous format for comparative purposes.

Note: Figures may not add up exactly due to rounding.
Source: FAA's fiscal year 2008 budget request and FAA's Office of the
  Budget.

    The fiscal year 2008 budget would be financed by the two mechanisms 
currently used to fund FAA: excise taxes deposited into the Airport and 
Airway Trust Fund and a General Fund contribution. The Trust Fund, 
which was created in 1970, provides FAA with a dedicated revenue source 
for funding aviation programs.
    Initially envisioned as a means to fund the infrastructure and 
modernization needs of the NAS, the Trust Fund also pays for large 
portions of FAA's operating budget, the Essential Air Service Program, 
and one-time items (e.g., security funding after the September 11, 
2001, attacks). The General Fund is used to make up the difference 
between Trust Fund revenues and the unfunded portion of FAA's budget.
    For fiscal year 2008, FAA expects the Trust Fund to contribute 
$11.5 billion, or 81 percent, toward its total budget and the General 
Fund to contribute $2.6 billion, or 19 percent. These amounts are 
similar to what has been budgeted in the previous 4 years. Table 2 
shows the contribution from each of the funding sources toward FAA's 
proposed new accounts.

                                     TABLE 2.--FUNDING SOURCE CONTRIBUTIONS
                                              (Dollars in millions)
----------------------------------------------------------------------------------------------------------------
                                        Airport and Airway Trust Fund           General Fund
               Account                ----------------------------------------------------------------   Total
                                           Amount          Percent         Amount          Percent
----------------------------------------------------------------------------------------------------------------
Air Traffic Organization.............          $7,915              85          $1,393              15     $9,308
Safety and Operations................             672              36           1,208              64      1,879
Airport Improvement Program..........           2,750             100  ..............               0      2,750
Research, Engineering, and                        123              88              17              12        140
 Development.........................
                                      --------------------------------------------------------------------------
    Total............................          11,459              81           2,618              19     14,077
----------------------------------------------------------------------------------------------------------------
Note: Percentages in table are toward the total budget.
Note: Figures may not add up exactly due to rounding.
Source: FAA's fiscal year 2008 budget submission to Congress.

KEEPING EXISTING MODERNIZATION EFFORTS ON TRACK AND REDUCING RISKS WITH 
                                NEXTGEN

    FAA faces challenges in maintaining existing systems while 
developing and implementing new capabilities to meet the anticipated 
demand for air travel. For fiscal year 2008, FAA is requesting $2.46 
billion in capital funds, the majority of which ($2.3 billion) is for 
Air Traffic Organization (ATO) efforts to modernize the NAS. Over the 
last several years, increasing operating costs have crowded out funds 
for the capital account. Since fiscal year 2005, capital funding 
requests have leveled off, falling within the range of $2.4 billion to 
$2.5 billion, well below the levels authorized in the Vision 100 Act. 
Another trend has been FAA's decision to cancel, defer, and segment 
acquisitions while the capital budget stayed essentially flat. Further, 
only about 50 percent of FAA's capital budget goes to air traffic 
systems; the remainder goes to personnel, mission support, and 
facilities (i.e., sustainment). Although a large portion of FAA's 
capital funds will go toward sustainment, FAA is requesting additional 
funds for key technologies for NextGen. These include the following:
  --Automatic Dependent Surveillance-Broadcast (ADS-B) \6\ is a 
        satellite-based technology that allows aircraft to broadcast 
        their position to others. FAA requested $80 million in fiscal 
        year 2007 for this satellite-based technology. For fiscal year 
        2008, it is requesting $85.7 million. FAA expects to award a 
        contract for the installation and maintenance of the ADS-B 
        ground infrastructure in 2007. However, a number of challenges 
        must be addressed. These include conducting human factors work 
        and determining how air and ground elements will be certified 
        as safe. FAA may have to rely on a rulemaking initiative to 
        help speed ADS-B airspace user equipage. The current cost 
        estimate for ADS-B is approximately $1.2 billion, and FAA is 
        planning to re-baseline the ADS-B costs this summer.
---------------------------------------------------------------------------
    \6\ The first phase of ADS-B implementation, known as ADS-B out, is 
expected to replace many ground radars that currently provide aircraft 
surveillance with less costly ground-based transceivers. Aircraft would 
be equipped with ADS-B out, which broadcasts a signal to these 
transceivers. However, implementing ADS-B out is just the first step to 
achieving the larger benefits of ADS-B, which would be provided by ADS-
B in. ADS-B in would allow aircraft to receive signals from ground-
based transceivers or directly from other aircraft equipped with ADS-B. 
This could allow pilots to ``see'' nearby traffic and, consequently, 
transition some responsibility for maintaining safe separation from the 
air traffic controllers to the cockpit.
---------------------------------------------------------------------------
  --System Wide Information Management (SWIM) is a new information 
        architecture that will allow airspace users to securely and 
        seamlessly access a wide range of information on the status of 
        the NAS and weather conditions. It is analogous to an internet 
        system for all airspace users. FAA requested $24 million for 
        this program in fiscal year 2007. For fiscal year 2008, it is 
        requesting $21.3 million. The cost to fully implement SWIM is 
        unknown, and we note that SWIM is scheduled to be reviewed by 
        FAA's Joint Resources Council this June.
    In its fiscal year 2008 budget submission, FAA is requesting funds 
for new NextGen initiatives, such as NextGen Data Communication ($7.4 
million), NextGen Network Enabled Weather ($7 million), and a new 
National Airspace System Voice Switch ($3 million). FAA is also 
requesting $50 million for demonstration and infrastructure projects.
    We are tracking 18 programs with a combined acquisition cost of $17 
billion. Today, we will highlight (1) FAA's progress and problems with 
key modernization efforts and (2) FAA actions needed to reduce risk 
with NextGen.
FAA's Progress and Problems With Ongoing Modernization Projects
    We do not see the massive cost growth that we have in the past with 
FAA acquisitions. This is due to FAA's efforts to re-baseline programs 
and segment investment decisions. However, we found that several 
projects (totaling of $6 billion in capital investment costs) will 
require significant attention and oversight because of their size, 
diminishing benefits, potential cost and schedule problems, or 
importance to the NextGen transition. These are discussed below.
    En Route Automation Modernization (ERAM).--This program is intended 
to replace the ``Host'' computer network--the central nervous system 
for facilities that manage high-altitude traffic. FAA requested $375.7 
million for ERAM in fiscal year 2007. For fiscal year 2008, it is 
requesting $368.8 million. The first ERAM system is scheduled to be 
fielded by December 2009. While providing some enhancements, ERAM is 
essentially a one-for-one replacement for the existing ``Host'' 
computer system. As currently structured, ERAM will have two follow-on 
software releases (releases 2 and 3) valued at $83 million; these are 
still undefined. ERAM is expected to provide the basic platform for 
NextGen's automated capabilities.
    With an acquisition cost of $2.1 billion and a monthly expenditure 
or ``burn rate'' of $31 million, this program continues to be one of 
the most expensive and complex acquisitions in FAA's modernization 
portfolio. While currently on track, considerable testing and 
integration work lies ahead. The next major milestone is completion of 
Factory Acceptance Testing,\7\ which is planned for June 2007. Any ERAM 
cost increase or schedule slip will have an impact on other capital 
programs and could directly affect the pace of the overall transition 
to NextGen.
---------------------------------------------------------------------------
    \7\ Factory Acceptance Testing is defined by FAA as formal testing 
conducted by the contractor to verify that the production item conforms 
to all contract specifications, is free from manufacturing defects, and 
meets all system requirements.
---------------------------------------------------------------------------
    Federal Aviation Administration Telecommunications Infrastructure 
(FTI).--The FTI program is to replace seven FAA-owned and -leased 
telecommunications networks with a single network that will provide FAA 
with telecommunications services through 2017. FAA expects that FTI 
will significantly reduce its operating costs after the new network is 
completed. In fiscal year 2007, FAA requested $28 million for the FTI 
program. For fiscal year 2008, it is requesting $8.5 million. The vast 
majority of FTI, however, is funded out of the Operations Account as 
opposed to the Facilities and Equipment account, which funds most 
acquisitions. For fiscal year 2008, FAA estimates that it will need 
$210 million to support FTI operations. Additionally, FAA is planning 
to request another $91 million to maintain legacy network operations 
until the FTI transition is complete.
    In April 2006, we reported \8\ that FTI was a high-risk and 
schedule-driven effort that was unlikely to meet its December 2007 
completion date. We found that FAA needed to improve management 
controls over FTI by developing a realistic master schedule and an 
effective transition plan. Since our report, the Agency has extended 
the FTI completion date to December 2008; this represents a 1-year 
schedule delay. In May 2006, we began a follow-up review of FTI. To its 
credit, FAA is making significant progress in delivering FTI services. 
As of March 31, 2007, 10,973 of about 21,820 services were operating on 
FTI.
---------------------------------------------------------------------------
    \8\ OIG Report Number AV-2006-047, ``FAA Telecommunications 
Infrastructure Program: FAA Needs To Take Steps To Improve Management 
Controls and Reduce Schedule Risks,'' April 27, 2006.
---------------------------------------------------------------------------
    As a result of the delay, FAA's Joint Resources Council approved a 
new cost baseline for FTI in August 2006. FAA increased its acquisition 
costs to develop the FTI network by an additional $8.6 million (from 
$310.2 to $318.8 million) and increased its overall operations costs to 
support FTI network and legacy networks by about $100 million (from 
$3.0 to $3.1 billion).
    We also continue to see an erosion of expected FTI cost savings. 
For example, in October 2005, the Program Office reported a reduction 
in the benefit estimate from $820 million to $672 million. By the end 
of fiscal year 2006, we estimate that FTI cost savings decreased from 
$672 million to $442 million, including sunk costs. Moreover, since FAA 
has not yet validated the FTI cost and benefits estimates that were 
approved in August 2006--an action that we recommended and that FAA 
agreed to take--the true FTI costs and benefits remain unknown.
    FAA continues to face challenges in making the transition to FTI. 
For instance, FAA currently has a large backlog of FTI services 
(averaging about 1,800 services over the last 3 months) that need to be 
addressed. The backlog includes failed transitions, on-hold services, 
misconfigured [sic] equipment, and obsolete services. Additionally, the 
transition of digital services, such as critical radar and flight data, 
to FTI continues to be problematic. Some digital services were placed 
on ``national hold'' while engineering solutions could be developed.
    In addition, FAA needs to ensure that it has an effective strategy 
to address FTI reliability and customer service problems. For example, 
many FTI services are not meeting reliability standards and are not 
being restored to service within contractual timeframes after outages. 
These problems led to unscheduled outages of both primary and back-up 
services, which led to flight delays. For example, on January 9, 2007, 
the Salt Lake City en route center experienced a 3-hour outage that 
caused 90 departure delays due to an FTI maintenance contractor trying 
to upgrade operational FTI equipment.
    Overall, key watch items for FTI include addressing the backlog of 
services, improving FTI reliability and customer service, stopping the 
erosion of expected cost benefits, and validating costs. Recently, FAA 
completed negotiations with Verizon Business to extend LINCS \9\ (FAA's 
largest and costliest existing network to be replaced by FTI), which 
expired in April 2007. FAA has agreed to a $92 million ceiling price to 
extend LINCS until April 2008. We will be reporting on the FTI program 
later in the year.
---------------------------------------------------------------------------
    \9\ In March 2007, about 43 percent of LINCS A-nodes had been 
decommissioned.
---------------------------------------------------------------------------
    Airport Surface Detection Equipment-Model X (ASDE-X).--ASDE-X is an 
important safety initiative planned to reduce the risks of accidents on 
runways. In fiscal year 2007, FAA requested $63.6 million for the ASDE-
X program. For fiscal year 2008, it is requesting $37.9 million.
    ASDE-X is FAA's latest effort designed to provide controllers with 
positive identification of aircraft and vehicle positions on the 
airport surface. It is planned to improve airport safety by operating 
in all-weather and low-visibility conditions (e.g., fog, rain, and 
snow) when controllers cannot see surface movement on ramps, runways, 
and taxiways.
    ASDE-X was initially designed to provide a low-cost alternative to 
FAA's ASDE-3 radar systems for small- to medium-sized airports but has 
evolved into a different program. FAA made a significant change to the 
scope of the program in September 2005 and now intends to upgrade ASDE-
3 systems with ASDE-X capabilities at 25 large airports and install the 
system at 10 other airports that currently lack surface surveillance 
technology. In September 2005, FAA increased ASDE-X costs from $505.2 
million to $549.8 million and extended the completion date from 2007 to 
2011.
    We are concerned about further cost increases and schedule delays 
with this program since the cost to acquire and install some ASDE-X 
activities has increased by $94 million since the 2005 re-baseline. To 
stay within the revised baseline, FAA offset this cost by decreasing 
planned expenditures funds for seven other program activities, such as 
construction for later deployment sites.
    We are also concerned that the ASDE-X schedule is not realistic. As 
of March 2007, FAA had commissioned only 8 of the 35 ASDE-X sites. Of 
the seven sites planned for fiscal year 2006, FAA only commissioned 
four. Further, it is uncertain when key safety features will be 
delivered. For example, FAA has yet to commission an ASDE-X system that 
can alert controllers of potential collisions on intersecting runways 
or converging taxiways. Because of these issues, the program is at risk 
of not meeting its current cost and schedule plans to deliver all 35 
ASDE-X systems by 2011. We are reviewing ASDE-X and will issue a report 
later this year.
    Air Traffic Management (ATM).--ATM includes the Traffic Flow 
Management-Modernization (TFM-M) program and the Collaborative Air 
Traffic Management Technologies (CATMT) program. TFM-M modernizes the 
TFM system, which is the Nation's single source for capturing and 
disseminating air traffic information to reduce delays and make maximum 
use of system capacity. CATMT provides new decision support tools to 
deliver additional user benefits and increase effective NAS capacity. 
At a cost of $450 million, these are two key efforts for coordinating 
air traffic across the NAS and managing the adverse impacts of bad 
weather. In fiscal year 2007, FAA requested $79 million for ATM 
programs. For fiscal year 2008, it is requesting $91 million.
    Although the TFM-M effort has not experienced cost increases or 
schedule delays, we are concerned about risks and what will ultimately 
be delivered. Our concerns are based on the fact that FAA and the 
contractor significantly underestimated the size and complexity of TFM-
M software development. FAA was pursuing TFM-M through a cost-
reimbursable agreement, meaning that all risk for cost growth rested 
with the Government. FAA has modified the contract and adjusted the 
scope of work. The current risks for TFM-M focus on developing complex 
software, integrating TFM-M with other NAS systems, and stabilizing 
requirements.
    Terminal Modernization and Replacement of Aging Controller 
Displays.--FAA's fiscal year 2008 budget request calls for $40 million 
for efforts aimed at modernizing controller displays and related 
automation systems at terminal facilities. FAA's budget states that 
three-fourths of the fiscal year 2008 funds will be used for the 
Standard Terminal Automation Replacement System (STARS) ``technology 
refresh'' (i.e., replacing obsolete components) and software 
enhancements.
    FAA's past modernization efforts have focused exclusively on STARS. 
In 2004, faced with cost growth in excess of $2 billion for STARS, FAA 
rethought its terminal modernization approach and shifted to a phased 
process. FAA committed STARS to just 50 sites at an estimated cost of 
$1.46 billion as opposed to the original plan to deploy STARS at 172 
sites at a cost of $940 million.\10\
---------------------------------------------------------------------------
    \10\ OIG Report Number AV-2005-016, ``Terminal Modernization: FAA 
Needs To Address Its Small, Medium, and Large Sites Based on Cost, 
Time, and Capability,'' November 23, 2004.
---------------------------------------------------------------------------
    In 2005, FAA renamed this modernization effort the Terminal 
Automation Modernization-Replacement (TAMR) initiative and approved 
modernizing five additional small sites with STARS and replacing the 
aging displays at four large, complex facilities at a cost of $57 
million. This leaves over 100 sites that still need to be modernized. 
Although FAA has not decided on how it will modernize these 100 sites, 
its budget submission indicates that this effort could cost over $1 
billion.
    There is no current defined ``end state'' for terminal 
modernization, and past problems with developing and deploying STARS 
leave FAA in a difficult position to begin transitioning to NextGen 
capabilities. Future costs will be shaped by (1) NextGen requirements, 
(2) the extent of FAA's terminal facilities consolidation, and (3) the 
need to replace or sustain existing (or legacy) systems that have not 
yet been modernized.
    Without question, the most urgent concern facing terminal 
modernization is how quickly FAA can replace aging displays at the four 
large sites that are particularly critical to the NAS--Chicago, 
Illinois; Denver, Colorado; St. Louis, Missouri; and Minneapolis, 
Minnesota. FAA chose not to compete this work based on a joint proposal 
from two contractors and instead decided to modify the current STARS 
contract to include the work. This was expected to expedite replacement 
of the aging displays, but the time spent revising the contract to 
establish cost, schedule, and design parameters caused FAA to lose the 
time advantage from foregoing competition. As a result, the aging 
displays will not be replaced until 2008. We recommended action on this 
matter over 2 years ago in November 2004.
    Advanced Technology and Oceanic Procedures (ATOP).--FAA requested 
$31.4 million in fiscal year 2007. For fiscal year 2008, it is 
requesting $53.1 million. ATOP is FAA's $548 million effort to 
modernize how controllers manage oceanic flights. FAA now has ATOP in 
use at Oakland, California; New York, New York; and Anchorage, Alaska.
    Since September 2005, FAA controllers have experienced recurring 
failures (loss of data-link communication with aircraft and aircraft 
position jumps) with the new ATOP system at the Oakland site. These 
problems directly limit the potential capacity and productivity 
benefits from the new automation system. This could impact FAA's plans 
for using ATOP to demonstrate NextGen capabilities.
    According to controllers, these incidents represent potentially 
hazardous safety conditions that need to be resolved. The larger 
separation distances required between aircraft over the oceans than for 
those in domestic airspace have allowed controllers to manage these 
problems. However, benefits from the new automation system, such as 
reduced separation, have not been fully realized. Problems persist in 
ATOP, as evidenced by two operations bulletins (on aircraft altitude 
changes and detecting conflicts between aircraft) issued by the Oakland 
facility in April. FAA needs to resolve the problems that it has 
identified with communication service providers and aircraft avionics 
and adjust ATOP software as needed to realize expected benefits.
Perspectives on FAA's Metrics for Measuring Progress With Major 
        Acquisitions
    FAA reports in its fiscal year 2007 Flight Plan and the most recent 
Performance and Accountability Report that 100 percent of its critical 
acquisitions were within 10 percent of budget estimates and 97 percent 
were on schedule for 2006. FAA is currently tracking about 29 
acquisitions, such as the acquisition of new radars. FAA's cost and 
schedule metrics are worthwhile tools for Agency management and 
oversight of major acquisitions--a step we called for a number of years 
ago. However, these metrics have limitations that need to be understood 
by decision makers in order to properly assess the overall status of 
FAA's acquisition portfolio.
    First, FAA's cost and schedule metrics are snapshots in time. They 
are not designed to address changes in requirements, reductions in 
procured units, or shortfalls in performance that occur over time. 
Second, FAA's budget metrics involve comparisons of cost estimates 
taken during the fiscal year. These estimates involve the updated, 
``re-baselined'' cost figures--not estimates from the original 
baseline. This explains why the Wide Area Augmentation System (a 
satellite-based navigation system) is considered ``on budget'' even 
though costs have grown from $892 million to over $3 billion since 
1998. ``Re-baselining'' a project is important to get realistic cost 
and schedule parameters and is consistent with Office of Management and 
Budget (OMB) guidance and the Agency's own Acquisition Management 
System. The revised baselines are used for justifying budgets and 
making investment decisions, i.e., ensuring that major acquisitions are 
still cost beneficial. We note that OMB allows FAA to measure 
deviations from the new baselines once they have been approved. 
Nevertheless, such comparisons of revised program baselines--absent 
additional information--fail to provide an accurate picture of a 
program's true cost parameters.
    Finally, FAA's schedule metrics used for assessing progress with 
several programs in 2006 were generally reasonable, but focused on 
interim steps or the completion of tasks instead of whether systems met 
operational performance goals. For example, ASDE-X metrics focused on 
delivery of two systems. This metric does not relate to whether systems 
entered service or met operational performance expectations. We note 
that there are no written criteria for selecting or reporting the 
milestones. Table 3 provides information on some of the metrics used 
for measuring progress in acquisitions in fiscal year 2006.

                               TABLE 3.--METRICS USED TO MEASURE PROGRAMS IN 2006
----------------------------------------------------------------------------------------------------------------
               Program                         Metric                Planned Date              Actual Date
----------------------------------------------------------------------------------------------------------------
Airport Surface Detection Equipment   Deliver two systems....  February 2006...........  February 2006
 Model-X.
Standard Terminal Automation          Deliver to one site....  February 2006...........  January 2006
 Replacement System.
Air Traffic Management..............  Conduct Detailed Design  August 2006.............  March 2006
                                       Review.
Precision Runway Monitor............  Complete Factory         April 2006..............  April 2006
                                       Acceptance Testing for
                                       Atlanta.
Wide Area Augmentation System.......  Complete initial         September 2006..........  May 2006
                                       installation of two
                                       reference stations.
----------------------------------------------------------------------------------------------------------------
Source: FAA ATO-F Capital Expenditures Program Office.

    As FAA's former chief operating officer stated, simply measuring 
cost and schedule may not be sufficient in evaluating NextGen 
initiatives. We agree and believe it will be important to focus on the 
promised capability and benefits of new initiatives, particularly those 
associated with the goals of enhancing capacity, boosting productivity, 
and reducing Agency operating costs. Therefore, FAA should explore a 
wider range of metrics to measure--and report on--progress with NextGen 
efforts.
FAA Actions Needed To Reduce Risks With the Next Generation Air Traffic 
        Management System
    The transition to NextGen is an extraordinarily complex, high-risk 
effort involving billion-dollar investments by the Government and 
airspace users. We have made a series of recommendations specifically 
aimed at reducing risk and facilitating the shift from planning to 
implementation.
    FAA needs to develop realistic NextGen cost estimates, quantify 
expected benefits, and establish a road map for industry to follow.--A 
central question in the current debate on financing FAA is what the 
costs associated with developing and implementing NextGen will be. 
Figure 1 illustrates FAA's most recent cost estimates. 


    FAA estimates suggest that the agency will require $15.4 billion 
for capital projects from fiscal year 2008 to fiscal year 2012. This 
includes $4.6 billion for NextGen initiatives ($4.3 billion from the 
capital account and $300 million from the RE&D account).
    We note that the bulk of NextGen funds will be allocated to 
developmental efforts, including demonstration projects. There are 
unknowns with respect to performance requirements for new automation 
systems and data-link communications. The development of new automation 
systems is a particular concern given their complexity and the fact 
that almost flawless performance will be required. FAA will not have a 
firm grasp on costs until it has a mature enterprise architecture and a 
NextGen R&D plan that clearly indicates the contributions of other 
agencies.
    The costs for airspace users to equip with new avionics will be 
significant. The Joint Planning and Development Office's (JPDO) most 
recent progress report estimates the cost for airspace users to be 
between $14 billion and $20 billion for the long term. This underscores 
the need for FAA to have a clear understanding of complex transition 
issues and what will be required to get expected benefits. Another cost 
driver focuses on the extent to which FAA intends to consolidate 
facilities based on modern technology. We recommended that when FAA 
reports NextGen costs to Congress, it should do so along three 
vectors--research and development needed, adjustments to existing 
projects, and costs for new initiatives. FAA agreed and stated that it 
will build a comprehensive cost estimate this year.
    More work remains to set expectations, requirements, and 
milestones--or ``transition benchmarks''--for developing when new 
procedures, new ground systems, and aircraft need to be equipped to 
realize benefits. During an April 2006 workshop, industry participants 
asked FAA for a ``service roadmap'' that (1) specifies required 
aircraft equipage in specific time increments, (2) bundles capabilities 
with clearly defined benefits and needed investments, and (3) uses a 4- 
to 5-year equipage cycle that is coordinated with aircraft maintenance 
schedules. Once concepts and plans have matured, it will be important 
for FAA to provide this information to industry.
    FAA and the JPDO need to develop approaches for risk mitigation and 
systems integration.--FAA and the JPDO must articulate how they will do 
things differently to avoid problems that affected modernization 
efforts in the past (such as cost growth, schedule slips, and 
performance shortfalls). Developing and implementing NextGen will be an 
enormously complex undertaking. As the JPDO notes in its December 2004 
Integrated Plan,\11\ ``there has never been a transformation effort 
similar to this one with as many stakeholders and as broad in scope.'' 
The central issue is determining what will be done differently from 
past modernization efforts with NextGen initiatives (other than 
conducting demonstration projects) to ensure success and deliver much 
needed benefits to FAA and airspace users.
---------------------------------------------------------------------------
    \11\ JPDO ``Next Generation Air Transportation System--Integrated 
Plan,'' December 2004.
---------------------------------------------------------------------------
    FAA's decision to use the Operational Evolution Plan (the Agency's 
blueprint for capacity) to help implement NextGen is a good first step. 
Nevertheless, the transition to NextGen will pose complex software 
development and integration problems and will require synchronized 
investments between FAA and airspace users over a number of years.
    To maintain support for NextGen initiatives, we recommended that 
the JPDO and FAA articulate how problems that affected past 
modernization efforts will be mitigated and what specific skill sets 
with respect to software development and system integration will be 
required. This will help reduce cost and schedule problems with NextGen 
initiatives. FAA concurred with our recommendations and stated that it 
will form a panel of experts to examine the issues we raised.
    FAA is requesting $50 million in its fiscal year 2008 budget for 
demonstration projects, which are important opportunities to reduce 
risk. In the past, FAA has experienced problems with certifying systems 
as safe, which led to cost growth and schedule slips. Therefore, we 
recommended, and FAA agreed, that planned NextGen demonstration 
projects should develop sufficient data to establish a path for 
certifying new systems and identify the full range of adjustments to 
policies and procedures needed for success.
    FAA needs to review ongoing modernization projects and make 
necessary cost, schedule, and performance adjustments.--As FAA's budget 
request points out, 29 existing capital programs serve as ``platforms'' 
for NextGen. We recommended that FAA review ongoing modernization 
programs to determine what adjustments in cost, schedule, and 
performance will be required. This is critical because NextGen planning 
documents suggest that billions of dollars will be needed to adjust 
ongoing programs, like ERAM and TFM-M.
    During fiscal year 2007 through fiscal year 2008, over 25 critical 
decisions must be made about ongoing programs. These decisions will 
directly impact how quickly new capabilities can be deployed and will 
involve establishing requirements for future ERAM software releases, 
making investments to support existing radars, and incorporating 
weather information into SWIM.

           ADDRESSING ATTRITION IN FAA'S CRITICAL WORKFORCES

    Controlling operating cost growth will remain a significant 
challenge for FAA as it faces several workforce challenges in the 
coming year. Our office has an extensive body of work regarding cost 
control and financial issues within FAA. For example, in 1999, we 
reported \12\ that persistent cost growth in the agency's operating 
account (primarily salary-driven) was ``crowding out'' critical capital 
investments in the agency's modernization account. This is still a 
challenge today. As FAA focuses on increasing workforce productivity 
and decreasing costs, it must also continue to address the expected 
increase in air traffic controller and safety inspector retirements and 
ensure that it has the right number of controllers and inspectors at 
the right locations.
---------------------------------------------------------------------------
    \12\ OIG Report Number AV-1999-066, ``Federal Aviation 
Administration's Financing and Cost Control,'' March 22, 1999.
---------------------------------------------------------------------------
FAA Continues To Make Progress in Implementing Its Controller Workforce 
        Plan, but Further Efforts Are Needed in Several Key Areas
    In December 2004, FAA issued the first in a planned series of 
congressionally directed annual reports that outline the agency's plans 
for hiring new controllers to replace those expected to leave over the 
next 10 years. The 2004 plan also outlined various initiatives for 
increasing controller productivity and for decreasing on-the-job 
training (OJT) time and costs. FAA updated the 2004 plan in June 2006 
and again in March 2007.
    In February 2007, we reported on the results of our review of FAA's 
progress in implementing key initiatives of its controller workforce 
plan. Overall, we found that FAA continues to make progress in 
implementing a comprehensive and complex staffing plan. For example, we 
found that FAA made significant improvements by centralizing many 
aspects of its hiring process. We also found that FAA made progress in 
reducing the time and costs to train new controllers, primarily through 
greater use of simulator training at the FAA Training Academy, and 
implemented a new national database to track on-the-job training 
statistics. Further progress is needed, however, in several key areas.
    First, FAA is still in the process of validating facility-level 
staffing standards, which are a foremost necessity in effectively 
placing newly hired controllers where they are most needed. Planning by 
location is critical because FAA has over 300 terminal and en route air 
traffic control facilities with significant differences in the types of 
users served, the complexity of airspace managed, and the levels of air 
traffic handled. Without accurate facility-level planning, FAA runs the 
risk of placing too many or too few controllers at these locations.
    FAA is aware of this concern and is validating its facility 
staffing standards down to the sector and position level for each 
location in order to develop accurate staffing ranges for all of its 
facilities. FAA expects to complete this assessment for its 21 en route 
centers (its largest facilities) by the end of this year. However, FAA 
does not expect to complete the entire project, including terminal 
facilities, until late 2008. In the interim, FAA established staffing 
ranges by facility, which take into account the existing staffing 
standard models but also include facility manager input and expected 
productivity improvements. Although these ranges are a step toward more 
accurate controller levels, they are not a replacement for a facility-
level staffing range based on validated staffing standard models.
    We recommended that FAA report the progress made in validating 
facility staffing standards in its next annual update to the workforce 
plan, including the number of facilities completed, the staffing ranges 
established for each location, and the estimated completion date for 
all remaining facilities. FAA concurred with our recommendation and 
included the interim staffing ranges for all facilities in its March 
2007 update.
    Second, FAA reached its goal of reducing controller staffing by 3 
percent relative to its national staffing standard for fiscal year 
2005, but it is unknown whether the initiatives established in the 2004 
plan were effective in helping achieve that reduction. FAA introduced 
several initiatives in the 2004 plan intended to improve workforce 
efficiency and controller productivity. Those initiatives include 
efficiencies such as reducing the use of sick leave by 8 percent, 
ensuring appropriate use of workers' compensation benefits, and 
increasing scheduling efficiencies.
    FAA achieved a 3-percent productivity gain in fiscal year 2005 by 
decreasing total controller staffing by 3 percent relative to its 
national staffing standard, a goal established in the 2004 plan. 
However, it is unclear what, if any, additional impact FAA's 
productivity initiatives had on controller productivity because FAA did 
not establish baseline metrics for measuring their effectiveness. We 
recommended that FAA establish baseline metrics for the initiatives and 
update the plan annually to reflect actual progress in achieving each 
initiative and, ultimately, in accomplishing its goal to reduce 
controller staffing by 10 percent. FAA agreed to continue providing 
status updates for the initiatives but stated that estimating the 
contribution of each initiative would be labor intensive and costly and 
would divert resources.
    We believe that FAA should reconsider its position. FAA runs the 
risk of simply having fewer controllers controlling more traffic 
without the benefit of metrics to determine if the productivity 
initiatives are driving the reductions in staffing. This is important 
given that the agency is still validating its staffing needs at the 
facility level. FAA's 2007 update did not include an update on its 
productivity goals.
    We also recommended that FAA identify the annual and total costs 
for hiring, training, and certifying new controllers to meet future 
requirements. The cost of hiring and training over 15,000 new 
controllers will be substantial, particularly since it currently takes 
2 to 5 years for new controllers to become fully certified. During that 
time, FAA incurs the cost of the trainee's salary and benefits as well 
as the cost of the salaries and benefits of the certified controllers 
who instruct trainees individually. FAA concurred with our 
recommendation and included estimates for the salary and benefit costs 
of newly hired controllers each year through 2016 in its March 2007 
update to the plan.
An Evolving Aviation System Requires That FAA Maintain a Sufficient 
        Number of Safety Inspectors Positioned in the Right Locations
    Safety is and must remain FAA's highest priority. Although 
accidents have occurred in recent years, the United States continues to 
maintain the safest aviation system in the world. While much credit is 
due to safety systems that air carriers have built into their 
operations, FAA regulations and inspectors play an important role in 
providing an added layer of safety oversight. As shown in table 4, this 
oversight covers a vast network of operators and functions, which make 
up the largest, most complex aviation system in the world.

                    TABLE 4.--FAA INSPECTORS' WORKLOAD
------------------------------------------------------------------------

------------------------------------------------------------------------
Commercial Air Carriers....................................          123
Flight Instructors.........................................       90,555
Repair Stations............................................        4,927
FAA Designee Representatives...............................       11,000
Active Pilots..............................................      744,803
Aircraft...................................................      347,326
Approved Manufacturers.....................................        1,738
FAA-Licensed Mechanics.....................................      320,293
------------------------------------------------------------------------
Source: FAA.

    FAA's 3,865 inspectors must oversee both domestic and foreign 
aspects of these operations--a task made more difficult by the rapidly 
changing aviation environment. To ensure that the system remains safe, 
FAA must maintain a sufficient number of inspectors.
    FAA needs effective oversight systems to maximize inspector 
resources.--FAA will never have an inspection workforce that is large 
enough to oversee every aspect of aviation operations. As a result, FAA 
is working toward using risk-based safety oversight systems--that is, 
systems that target inspection resources to areas of greatest risk.
    Without question, risk-based oversight is the best approach; 
however, our past reports have identified a wide range of areas in 
which FAA should strengthen its inspector oversight. For example, air 
carriers continue to increase their use of external maintenance 
facilities, but FAA still needs to implement better processes to 
determine where air carriers send their critical maintenance. In 
December 2005, we reported \13\ that FAA must understand the full 
extent and type of work that is being performed by non-certificated 
repair facilities. These facilities are not licensed or routinely 
visited by FAA inspectors but perform critical maintenance, such as 
engine replacements. FAA has yet to develop a process to determine 
which non-certificated repair facilities perform this type of 
maintenance for air carriers. Until FAA knows where critical 
maintenance is performed, it cannot ensure that it has focused its 
inspection resources to areas of greatest risk.
---------------------------------------------------------------------------
    \13\ OIG Report Number AV-2006-031, ``Review of Air Carriers' Use 
of Non-Certificated Repair Facilities,'' December 15, 2005.
---------------------------------------------------------------------------
    FAA developed a risk-based oversight system for FAA-certified 
repair stations; however, it only recently completed full 
implementation of the system. If used effectively, the new repair 
station oversight system should significantly improve FAA's ability to 
target resources to areas of higher risk in this growing segment of the 
aviation industry.
    A changing aviation environment requires strategic inspector 
placement.--The pace at which changes are occurring in today's aviation 
environment makes it imperative that FAA place sufficient resources in 
areas where they are most needed. FAA has made at least two attempts to 
develop a staffing model to determine the number of inspectors needed 
and the best locations for placement. Neither model, however, provided 
FAA with an effective approach to allocate inspector resources. In 
September 2006, the National Research Council completed a study of 
FAA's current methods for allocating inspector resources. This study 
validated a concern that we have also reported--that FAA's current 
method of allocating inspectors is antiquated and must be redesigned to 
effectively target inspectors to those areas of higher risk.
    In particular, the Council reported that the changing U.S. and 
global aviation environments have important implications that will be 
key drivers of future inspector staffing needs. For example, airlines' 
outsourcing of aircraft maintenance, FAA's shift to a system safety 
oversight approach, and safety inspectors' attrition and retirement are 
all important changes that must be considered in determining staffing 
needs. This year, 28 percent (1,085 of the 3,865) of the current 
inspector workforce will be eligible to retire. By 2010, 44 percent of 
the workforce will be eligible to retire.
    Unless FAA develops an effective staffing model, however, it will 
not be able to make effective use of the resources that it obtains. 
Further, the Council stressed that FAA must ensure that its safety 
inspectors are sophisticated database users, with knowledge of system 
safety principles and an analytical approach to their work. In 
addition, inspectors must maintain their capabilities to conduct 
thorough on-site inspections of air carrier, aircraft maintenance, and 
aircraft manufacturer operations.
    At the same time, FAA must prepare for emerging safety issues, such 
as very light jets and unmanned aerial vehicles. For example, by 2017, 
approximately 5,000 new aircraft known as very light jets will be an 
integral part of the U.S. aviation system. These aircraft will be flown 
by a new class of pilots with mixed levels of expertise and will vie 
for airspace with commercial jets. Three models of very light jets were 
certified in 2006 for operation. As these become operational, FAA 
inspectors will face new oversight challenges in every aspect of FAA's 
operations, including inspector oversight of pilot training and 
aircraft maintenance and air traffic control.
         determining the appropriate amount of airport funding
    In the months following the release of FAA's reauthorization 
proposal, Congress, FAA, and aviation stakeholders have been discussing 
important questions about how to fund airport improvement projects. Key 
issues for the reauthorization debate will be the fiscal year 2008 AIP 
and PFC funding levels, project priorities, and project eligibility.
Airport Improvement Program
    FAA is requesting $2.75 billion for the AIP in fiscal year 2008. 
Since the current authorization, Vision 100, expires in fiscal year 
2007, no AIP authorization target exists for fiscal year 2008. However, 
the fiscal year 2008 request is a substantial reduction over the fiscal 
year 2007 authorized level in Vision 100.
    The AIP supports the airport system by providing funds to primarily 
enhance safety and security, maintain the infrastructure, increase 
capacity, and mitigate airport noise in surrounding communities. AIP 
authorized funding has steadily increased over the last 9 years. As 
shown in figure 2, authorized funding increased by approximately 54 
percent from 1999 to 2007. Since 2001, the AIP has been authorized at 
$3.2 billion or higher in funding each year.



    As shown in table 5 below, 2 of the last 3 years' budget requests 
have been significantly less than authorized levels. The fiscal year 
2007 budget request for AIP funding of $2.75 billion was nearly $1 
billion less than authorized under Vision 100 for fiscal year 2007.

                     TABLE 5.--AIP AUTHORIZED AND BUDGET REQUEST FUNDING LEVELS 2005 TO 2007
                                            (In millions of dollars)
----------------------------------------------------------------------------------------------------------------
                           Fiscal Year                              Authorized    Budget Request   Funding Level
----------------------------------------------------------------------------------------------------------------
2005 (Vision 100)...............................................           3,500           3,500           3,500
2006 (Vision 100)...............................................           3,600           3,000           3,500
2007 (Vision 100)...............................................           3,700           2,750          3,500
----------------------------------------------------------------------------------------------------------------
Source: FAA budget submissions from fiscal year 2005 through fiscal year 2007.

    However, Congress has provided FAA with close to the Vision 100 
authorized amounts in fiscal year 2005 and fiscal year 2006. For fiscal 
year 2007, the AIP is funded at $3.5 billion, which is only a $200 
million reduction from the fiscal year 2007 authorized level, not the 
nearly $1 billion reduction requested in FAA's fiscal year 2007 budget.
    With the potential decrease in available AIP funds, FAA must take a 
more proactive role in managing and overseeing airport grants. Since 
the early 1990s, we have identified hundreds of millions of dollars in 
airport revenue diversions--revenues that should have been used for the 
capital or operating cost of an airport but were instead used for non-
airport purposes. In the last 4 years, we reported on revenue 
diversions of more than $50 million at seven large airports, including 
one airport whose sponsor--a local government agency--diverted about 
$40 million to other projects not related to the airport.
    FAA is now taking a more active role to identify airport revenue 
diversions, but airports must do their part to ensure that airport 
revenues are not used for non-airport purposes. Similarly, as we 
testified last year,\14\ ensuring that airports dispose of land 
acquired for noise mitigation purposes when the land is no longer 
needed for noise compatibility purposes or airport development would 
also provide additional funds for airport projects. Our review \15\ in 
2005 of 11 airports identified approximately $242 million that could be 
used for other noise mitigation projects at the respective airports or 
returned to the Trust Fund.
---------------------------------------------------------------------------
    \14\ OIG Report Number CC-2006-027, ``Perspectives on FAA's fiscal 
year 2007 Budget Request and the Aviation Trust Fund,'' March 28, 2006.
    \15\ OIG Report Number AV-2005-078, ``Audit of the Management of 
Land Acquired Under the Noise Compatibility Program,'' September 30, 
2005.
---------------------------------------------------------------------------
    With growing demands for airport improvement projects and 
potentially less AIP funding available, AIP funds must be directed to 
the Nation's highest priority projects while meeting the unique needs 
of small airports. During our current review of the AIP, we found that 
FAA policies and procedures, for the most part, ensure that these high-
priority projects are funded with AIP funds. We also found, however, 
that the AIP Military Airport Program set-aside \16\ (MAP) can result 
in low-priority projects being funded at an airport that meets set-
aside program requirements while higher-priority projects at other 
airports could go unfunded.
---------------------------------------------------------------------------
    \16\ Under Vision 100, the AIP discretionary fund is subject to 
three statutory set-aside programs that benefit (1) noise compatibility 
planning to mitigate airport noise in surrounding communities, (2) the 
Military Airport Program to convert former military fields to civilian 
airfields, and (3) certain reliever airports.
---------------------------------------------------------------------------
    In order to meet the required level of MAP set-aside funding of 
approximately $34 million per year, the majority of projects being 
funded are comprised of lower-priority projects as rated under FAA's 
numerical rating system. FAA ranks projects on a scale of 0 to 100. 
Projects rated at 40 or above are generally funded by FAA. However, in 
fiscal year 2006, 17 of 25 (68 percent) MAP projects with ratings 
ranging from 17 to 36 were funded at an estimated cost of $31 million, 
as a result of the MAP set-aside funding requirements. For example, one 
project with a rating of 19 was funded at a cost of more than $2.2 
million to rehabilitate a parking lot.
    Given the growth in projected passenger traffic and the 
Department's commitment to accelerate major airport infrastructure 
projects by giving priority treatment and resources to capacity 
projects, it may be time to re-examine AIP set-aside funding levels and 
the type of projects funded. We will report on FAA's prioritization of 
AIP funds later this year.
Passenger Facility Charges
    In addition to AIP funds, PFCs have become an important funding 
mechanism for airports. For instance, between 1992 and 2006, FAA 
approved the collection of $57.3 billion in PFCs. Of this amount, 
airports have collected approximately $22 billion, with another $2.6 
billion anticipated for 2007. In comparison, airports received about 
$35.2 billion in AIP grants between 1992 and 2006, with FAA requesting 
another $2.75 billion for 2007. Overall, airports anticipate using 34.7 
percent of PFC collections to finance landside projects (e.g., 
terminals, security, and land), another 31.5 percent for bond interest 
payments, 16.7 percent for airside projects (e.g., runways, taxiways, 
and equipment), 6.8 percent for access roadways, 4.8 percent for noise 
abatement, and 5.5 percent for the Denver International Airport (see 
figure 3).\17\
---------------------------------------------------------------------------
    \17\ FAA tracks Denver's PFC separately due to its large size and 
because it was used to fund the new airport, not specific projects.



    Currently, PFCs are capped at $4.50 per segment of flight (a 
maximum of $18.00 on a round trip). The current cap on PFCs is an 
important matter for this Committee and has significant implications 
for major airports' capital expenditure plans. Over 75 percent (248 of 
328 airports) of the airports collecting a PFC charge the maximum 
amount. The current cap has led some airports to collect PFCs for 
extremely long periods of time in order to cover the cost of their 
projects, including: Clarksburg, West Virginia (50 years); Miami, 
Florida (34 years); Detroit, Michigan (25 years); and Denver, Colorado 
(25 years). Overall, 45 percent of airports collecting a PFC have set 
collection periods longer than 10 years. Other airports such as Chicago 
O'Hare International, are anticipating future increases in the cap as 
part of their financing plans. The funding of future airports projects 
and the level of AIP funding and PFC charges will be important issues 
as Congress decides how best to finance FAA.
    An important issue regarding PFCs is FAA's reliance on airport 
sponsors for PFC oversight. Unlike AIP grants, DOT and FAA officials 
have concluded that the agency lacks clear authority to prevent 
airports from contracting with suspended or debarred companies for 
projects funded by PFCs. This is significant because, of the 838 
projects that FAA approved in fiscal year 2006 to receive PFC funding, 
194 are to be funded solely by PFCs. Ninety-three others will be funded 
via PFCs and other non-AIP funding sources. Moreover, of the associated 
$2.7 billion in approved PFC collections, an estimated $1.8 billion (67 
percent) will go for projects funded solely by PFCs or a combination of 
PFC and other non-AIP funding sources. According to FAA, however, 
companies suspended or debarred for committing fraud on other 
Government contracts cannot be excluded from projects funded solely 
with PFCs. Congress should consider legislation to address this risk 
area.

                   ACQUISITION AND CONTRACTING ISSUES

    Providing increased attention to ensure that procurement and 
acquisition activities are conducted in an efficient and effective 
manner and that taxpayer dollars are protected from fraud and abuse is 
a Government-wide priority, and we have focused significantly more 
audit and investigative resources on procurement and acquisition 
issues. In our testimony today, we would like to highlight two specific 
watch areas for FAA: support services contracts and the transition of 
flight services to contract operations.
Support Services Contracts
    FAA faces challenges for each phase of the acquisition cycle, 
including planning, awarding, and administering support services 
contracts. In fiscal year 2006, FAA obligated about $930 million for 
support services using numerous contracts and three multiple-award 
``umbrella'' procurement programs.
    In September 2006, we issued a report \18\ on our review of the 
RESULTS program (one of the three multiple-award programs), for which 
FAA has awarded about $543 million since program inception. We found 
that the program was not properly established or managed. Continued use 
of this program would cost FAA tens of millions of dollars in higher 
costs. FAA terminated this procurement program in 2006 and started 
strengthening oversight of all support service contracts. FAA needs to 
pay special attention to the following.
---------------------------------------------------------------------------
    \18\ OIG Report Number FI-2006-072, ``Audit of the Federal Aviation 
Administration's RESULTS National Contracting Service,'' September 21, 
2006.
---------------------------------------------------------------------------
    Verification of Labor Qualification and Rates.--Labor costs 
generally account for the largest portion of support service contract 
costs. Our RESULTS audit and FAA's own review identified incidents when 
contractor staff did not meet the expected qualifications for positions 
billed. For example, we found that an employee on a contract was 
originally billed as an administrative assistant at an hourly rate of 
$35. Four months later, the same employee was billed as an analyst at 
an hourly rate of $71 without any proof of additional qualifications. 
Verifying contract labor qualification for the rates billed could 
potentially save FAA millions of dollars for support services.
    Based on our RESULTS audit, and as part of an agency-wide 
initiative announced by the FAA Administrator to strengthen internal 
controls over procurements, FAA reviewed one of its other multiple-
award programs, BITS II, and found similar problems. For example, FAA 
found evidence that multiple contractors had extensively billed FAA for 
employees at labor rates that were higher than their actual education 
and experience warranted, as specified by terms of the contract.
    FAA referred this matter to us for investigation. In one case, we 
found that a contractor invoiced FAA for the services of an employee in 
the labor category of ``Senior Management Analyst'' at a rate of $100 
per hour, instead of the proper rate of $40 per hour based on the 
employee's qualifications. Specifically, the ``Senior Management 
Analyst'' category required an individual with 12 years of direct 
experience, yet the employee in question had only 2 years of 
experience. As a result of our investigation to date, 12 of 13 
contractors have agreed to repay a total of $7.9 million in inflated 
billings under administrative settlements with FAA.
    Review of Contractor-Proposed Prices.--Our audit found that FAA 
awarded contracts without sufficient competition and price analyses. 
FAA now requires that the Deputy Administrator approve all new 
contracts valued over $1 million that are awarded on a sole-source 
basis. While this is a step in the right direction, FAA still needs to 
strengthen its review of contractor-proposed prices. When facing 
inadequate competition from bidding contractors, FAA's contracting 
officers are required to perform a price analysis to assess the 
fairness of contractor-proposed prices. We found that this control was 
not working in many incidents. For example, we found a case where the 
Independent Government Cost Estimate was prepared by the contractor to 
whom the contract was awarded. We plan to follow up on FAA's use of 
price and cost analysis techniques to ensure the reasonableness of 
prices in contract proposals.
Controls Over the Conversion of Flight Service Stations to Contract 
        Operations
    On February 1, 2005, FAA awarded a 5-year, fixed-price incentive 
contract (with 5 additional option years) to Lockheed Martin to operate 
the Agency's 58 flight service stations in the continental United 
States, Puerto Rico, and Hawaii. The contract, worth about $1.8 
billion, represents one of the largest non-defense outsourcing of 
services in the Federal Government.
    FAA anticipates that by contracting out flight service facilities, 
it will save $2.2 billion over the 10-year life of the agreement. On 
October 4, 2005, Lockheed Martin took over operations at the 58 flight 
service stations. We are currently conducting a review of FAA's 
controls over the conversion of flight service stations to contract 
operations. We plan on issuing our interim report later this month.
    Overall, we found that FAA has implemented effective controls over 
the initial transition of flight service stations to contract 
operations. These controls include contractual performance measures 
that require the contractor to achieve acceptable levels of operational 
performance and service and internal mechanisms that oversee the 
operational and financial aspects of the program.
    We also found that the agency uses these controls to monitor 
contract flight service stations and, in some cases, penalizes the 
contractor for poor performance. To date, FAA has imposed approximately 
$9 million in financial penalties against the contractor for failing 
several contractual performance measures. FAA is requiring the 
contractor to submit corrective action plans to resolve the deficient 
performance measures. In addition, FAA and the contractor are now 
entering the next and most critical phase of the transition.
    In February, the contractor began efforts to complete, test, and 
implement a new software operating system for flight service stations 
and consolidate the existing 58 sites into 3 hub and 16 refurbished 
locations--all by the end of July.\19\ Any slips in that schedule could 
have significant implications to the costs and anticipated savings of 
the transition.
---------------------------------------------------------------------------
    \19\ One facility, which was originally planned to be refurbished, 
will now remain open until the end of the year; it will then be 
consolidated into the Leesburg hub.
---------------------------------------------------------------------------
    In addition, FAA could be facing further reductions to savings as 
Lockheed Martin is requesting nearly $177 million in equitable 
adjustments to the contract. Most of that adjustment ($147 million) is 
based on the contractor's claim that it was not provided the correct 
labor rates when it submitted its bid.
    In April, FAA provided us with the first of its planned annual 
variance reports comparing estimated and actual first-year costs. This 
is an important tool in that it will allow FAA to identify cost 
overruns, determine the reasons for the overruns, and allow for 
adjustments to ensure that savings are realized. We are currently 
reviewing the completed variance report and assessing the contractor's 
progress in executing the next phase of the transition.
    That concludes my statement, Madam Chairman. I would be happy to 
address any questions you or other members of the subcommittee may 
have.

                     RE-BASELINING CAPITAL PROJECTS

    Senator Bond. Thank you very much, Mr. Scovel. First, to 
both of you, it appears the FAA has implemented a system of re-
baselining, as we've discussed, and it's very difficult to 
examine adequately programs as to projected cost savings and 
implementation dates.
    But now, it shows everything's on schedule, on time, on 
performance. Please let me know how these programs have 
changed, and how do we determine the true savings of a program, 
the true cost, and whether a program is on time per the initial 
implementation, if the goal post changed when the team loses 10 
yards instead of gains 10 yards. Madam Administrator?
    Ms. Blakey. I'd be happy to, because there seems to be some 
real energy around something we believe is a good practice. In 
fact, I've worked closely with Congress, and have been 
instructed to do so by both the Department of Transportation 
and OMB.
    We are trying to be more accountable and transparent, for 
when circumstances do change on these major capital programs, 
which they do. As you can appreciate, that happens in business, 
that happens anywhere where you're making major technology 
investments over a long period of time.
    Now, I think it's important to understand, when we say that 
we have our major capital programs on schedule and on budget, 
we track them very carefully. There are 37 programs that we're 
tracking in the Flight Plan, and 27 of those are what we 
consider to be major, and that has to do with size and scope.
    At this point, this year, 100 percent are on schedule when 
we have re-baselined, and there were seven that I can count 
that are major programs since 2004, so there's not very many 
we're talking about here that we have in fact re-baselined.
    We do have reasons in each case for that. One that I would 
particularly point out is the WAAS program. The WAAS program is 
turning out to be a tremendous success. I'm not talking about 
just in this country. I'm talking about worldwide, that it is 
being adopted all around the globe as a GPS basis for 
navigation, that it is getting close to Cat 1, in terms of ILS 
capability, in terms of its performance.
    What has happened with the WAAS program is that we re-
baselined because several years ago--and I believe this 
probably was 2004--we had a shortage of funds in our operations 
account, because of the lease of the satellites and the lease 
of some of the connectivity were all coming out of operations.
    In consultation with both Congress and OMB, we moved those 
costs into our capital investment line. Absolutely, that caused 
a bump in the F&E account.
    But I think that was sound business. It was the right thing 
to do, because we were having severe constraints in the cost of 
our operations at that point. So that is one example.
    Senator Bond. Let me just ask you about that. In other 
words, you included operational cost, not in the cost of the 
program, not in the capital cost of the program, but in 
operations, and when you had a shortfall in operations, then it 
was an accounting move, just to charge those operating costs to 
the program, whereas you had not done so before. Is that what I 
understand?
    Ms. Blakey. Essentially. Essentially, that is correct. In 
other words, where should you count the lease of the 
satellites? We felt that this was an appropriate way to deal 
with budget shortfalls.
    There has been some cost growth in the WAAS program over 
time, but it was determined to be a capital lease by OMB, not 
by FAA.
    Again, I think everyone was comfortable with that at the 
time, in terms of that shift. So yes, the taxpayer would've 
paid for it one way or the other.
    Senator Bond. Mr. Scovel? Do you have a comment on that?
    Mr. Scovel. Yes. Thank you, Senator Bond. Many members of 
the subcommittee this morning have mentioned their reservations 
about FAA's use of budget and schedule metrics.
    We share the committee's reservations, but we commend FAA 
and other agencies in government for following OMB's directions 
and using cost and schedule metrics as worthwhile tools for 
management.
    We think that there's always the rest of the story to be 
told. We believe that, first of all, a statement such as 100 
percent of projects are on time or on budget simply represents 
a snapshot in time, rather than a videotape.
    That is important, because, as Administrator Blakey just 
described, the evolution of the WAAS program, program events, 
in terms of capabilities and performance requirements, will 
change over time.
    A simple statement that it is on time and on budget doesn't 
capture that evolution, and certainly, the taxpayer and the 
Congress will be interested in that entire story, rather than 
just the sound bite.
    The budget metrics should be--I wish to emphasize represent 
a snapshot largely of the current fiscal year picture. In other 
words, it represents a variation from the most recent baseline 
figure, which has been reset essentially to zero. So it doesn't 
capture cost events that occurred before the re-baselining 
event. Again, that is part of the rest of the story.
    This is done in response to OMB's directions. We fully 
acknowledge that, what happened with the WAAS program. We 
commended Administrator Blakey this morning for explaining very 
cogently what happened with that program, but if we look simply 
at a statement, on time, on budget, it doesn't convey what the 
true parameters of that particular program's events were.
    Finally, when it comes to schedule metrics, sir, we would 
ask that there be greater specificity on the part of FAA in 
choosing which metrics it wishes to highlight in its reports to 
the public and to Congress.
    Here, we would draw a distinction between a simple task 
completion, such as delivery of units to a site for 
installation, and a metric that would capture movement toward 
full operational capability.
    Some of the metrics that FAA has chosen highlight the 
latter, much to their credit. Others, for example, simply, as I 
mentioned, delivery to a site for installation, it doesn't give 
you or the public a good idea of how far along a program may 
truly be to becoming full mission capable.

                    AIR TRAFFIC CONTROLLER STAFFING

    Senator Bond. Thank you, Mr. Scovel. Senator Lautenberg?
    Senator Lautenberg [presiding]. Thanks, Senator Bond. 
Administrator Blakey, it's become abundantly clear to me that 
FAA doesn't really know how many air traffic controllers are 
needed at the Newark Tower. Last year, you said that 35 were 
needed. This year, if I understand your statement correctly, 
you say between 30 and 36.
    Well, as we discussed before, there are only 29 certified 
controllers there, and that, despite an increase in movements 
at the airport, it is my understanding that in the last 3 
years, staffing levels at Newark have dropped 20 percent, and 
operational errors have increased 700 percent.
    Now, for one of the most complex jobs in the country, when 
will we have fully-trained, certified controllers at Newark to 
assure public safety? It's understood that more are needed, and 
more will be placed there.
    Ms. Blakey. All right. The numbers currently--and as you 
know, these are always fluid, depending upon some other time on 
a given day, or some change occurring; someone gets promoted 
into supervisory ranks. But currently, at Newark Tower, we have 
27 fully certified controllers on board.
    We also have three who have been fully certified 
controllers, veteran controllers from other facilities who are 
learning the specific sectors there, and are partially 
certified. Again, we consider them, since they are veterans and 
have been working in other towers in complex airspace, that 
they are fairly new for Newark. We also have what we call 
developmentals, and those are true trainees, and there are two.
    Right now, that therefore brings us to 32. The authorized 
staffing for the Newark Tower is between 30 and 36. As you 
know, we work with a range. And at this point, we have brought 
in those two new developmentals.
    We are scheduled before the end of the fiscal year to have 
an additional seven coming in. So that will be planned to 
increase, and when you add seven more, you're up there close to 
39, unless we have additional retirements.
    Senator Lautenberg. What you're saying is that we really 
haven't met the schedule thus far. Mr. Scovel, in your opinion, 
is FAA fully aware of how many controllers are needed in each 
of these facilities to run this system in a safe and efficient 
manner?
    Mr. Scovel. Thank you, Senator Lautenberg. I'm not prepared 
at this point to comment specifically on the New York TRACON. I 
know that is a specific concern of yours. If you'd like, I can 
get back to you with perhaps a more detailed analysis.
    Our effort, my staff's effort, has concentrated rather 
truly systemwide. FAA's 2004 Controller Workforce Plan 
indicated to us that it didn't have a good grasp of how many 
controllers would be needed at that time in order to replace 
what we expected to be a sizable number of retirements of 
controllers hired immediately after the 1981 strike.
    We recommended a workforce study in order to validate at a 
facility level what would be needed, and, to its credit, FAA 
has undertaken that, and the Mitre Corporation currently has 
that underway this year, with respect to en route centers, and 
they expect to complete their study of en route center staffing 
in 2007.
    It's our understanding that it won't be until later in 2008 
that other facilities, to include TRACONs and the New York 
TRACON, might be completed.
    FAA's most recent update to its workforce plan, which was 
just issued in March of this year, has facility-level targets 
or numbers, and those are updates of their own internal 
numbers, with management input and some analysis over 
productivity achievements and so forth. My understanding is 
that is the most recent number that the agency is working from.
    Senator Lautenberg. So let's be sure, Madam Administrator. 
Even using your controller staffing range estimates, how many 
facilities would you say are below the minimum range needed?
    Ms. Blakey. Very, very few. I can get you a number. That's 
actually not really an issue in the system. We have a handful 
of facilities where at this point, we are below the authorized 
staffing range, and we're working very quickly to bring 
controllers into them.

                    AIR TRAFFIC CONTROLLER STAFFING

    For the most part, there was a period where we had several 
centers that we were particularly concerned about. We've done a 
great deal of center hiring, and right now, we have a few 
smaller facilities. But let me be clear, Senator Lautenberg. 
The Newark Tower is within the staffing range. We are not below 
the staffing range.
    Senator Lautenberg. Well, if you want to add these new 
people, the transfers who aren't really qualified under the 
usual definition, and you talked about two trainees. That is 
not what we discussed in last year, Madam Administrator.
    I think that we ought not to try to bypass what was the 
standard established by your own statement, and now talk about 
how we're going to be doing by the end of the year.
    We're late on these things, no matter how you slice it. As 
a consequence, we see the increase in operational errors there. 
According to the information I have, there are 164 facilities 
that are below the minimum range, and even if you count the 
trainees, we're 61 down.
    Do you dispute those figures?
    Ms. Blakey. They don't sound correct, but I'm looking back 
there. I'm hoping staff can give me the specifics. I think we 
have them for you. I'll certainly submit them for the record.
    [The information follows:]

                          Controller Staffing

    The following table shows the number of facilities below their 
corresponding authorized staffing range minimums as of April 28 and 
August 18 (i.e., based on end of pay period data).

                NUMBER OF FACILITIES BELOW STAFFING RANGE
------------------------------------------------------------------------
                                                                All
                                         All controllers    Controllers
                                               \1\           excluding
                                                          developmentals
------------------------------------------------------------------------
April 28, 2007.........................               17              81
August 28, 2007........................               17             107
------------------------------------------------------------------------
\1\ All controllers include CPC, CPC-IT, and developmentals.

    CPC-IT is a certified professional controller at one facility but 
in training for certification at a new facility.

    Senator Bond. Thank you very much, Senator Lautenberg.
    Senator Lautenberg. Mr. Chairman, what----
    Senator Bond. Well, we have been--I cut off my questions 
after five minutes to give you an opportunity. I just wanted to 
mention--are you finishing up now, because I have some 
questions.
    Senator Lautenberg. Well, I would like to, but I think 
we're in kind of a funny situation, where traditionally, I 
thought the majority party exceeds to the chairmanship of a 
subcommittee or committee. But in fairness, if you have 
questions you want to interrupt for, please do.
    Senator Bond. I just thought we ought to trade back and 
forth for 5 minutes, but please, finish up your questions.
    Senator Lautenberg. Well, I just wanted the Inspector 
General's verification. Are you satisfied with the answer that 
we have about the number of facilities that are understaffed, 
using the parameters that we do?
    Mr. Scovel. Senator, I would ask permission to do some 
quick research on that and get back to you with an answer for 
the record, better information.
    [The information follows:]

    Whether a facility is understaffed compared to the staffing ranges 
established by FAA depends on which types of controllers are included 
in the comparison. Non-supervisory bargaining unit controllers assigned 
to a particular facility fall into three categories:
    Certified Professional Controllers (CPCs).--Those controllers fully 
certified to control air traffic at their assigned facility;
    Certified Professional Controllers-In Training (CPC-IT).--Those 
controllers that were fully certified at a previous facility, have 
transferred to a new facility, and are currently training on the new 
airspace at their assigned facility; and
    Developmental Controllers.--Newly hired controllers that have not 
been fully certified to control air traffic at their assigned facility.
    According to FAA, the staffing ranges developed for air traffic 
control facilities and published in the 2007 Controller Workforce Plan 
update were based on the number of CPCs and CPC-ITs required to control 
air traffic at a specific location. The staffing ranges developed by 
FAA do not include developmental controllers. Therefore, when we 
analyzed facility staffing reported by FAA, we compared the facility 
staffing ranges to the number of CPCs and CPC-ITs actually on-board at 
each location--we did not include the number of developmental 
controllers on-board at each facility.
    The results of our analysis shows that as of April 2007, there were 
84 facilities that had actual controller staffing levels (CPCs and CPC-
ITs) below the minimum staffing range for that location. As of August 
2007, the number of facilities that had actual controller staffing 
levels (CPCs and CPC-ITs) below the minimum staffing range for the 
location had increased to 107.
    As of August 2007, the Newark tower had 26 CPCs and 3 CPC-ITs (29 
controllers) on board. The staffing range established for Newark tower 
is between 30 and 36 controllers.
    We are currently conducting an audit of FAA's facility training 
program. As part of that review, we are recommending that FAA report on 
the actual number of CPCs, CPC-ITs, and developmental controllers at 
each location in its next update of the Controller Workforce Plan. We 
plan on issuing our report during the second quarter of fiscal year 
2008.

    Senator Lautenberg. Senator Bond?

                      AIRPORT IMPROVEMENT PROGRAM

    Senator Bond. Thank you, Senator Lautenberg. The Airport 
Improvement Program is far below previously appropriated 
levels. Considering your own estimates about a growing need, 
how can your request for 2008 not be justified, when it doesn't 
come close to meeting the expanding need for our airport 
capacity?
    Ms. Blakey. We believe that you have to look at the 
entirety of our request to have a good picture of the support 
we're providing for airports. As you know, under a separate 
bill, of course, our reauthorization bill, we are requesting an 
increase in the amount of passenger facility charges from $4.50 
to $6.
    This enables very, very substantial revenue to be raised by 
airports around the country for the specific needs they have, 
and is something that they are able to do targeted to the exact 
projects that they need to fund at the time they need to fund 
them.
    What that also enables is it takes some pressure off the 
AIP funding, which, of course, comes in through our Trust Fund, 
so that we're able to provide significant funding for medium 
and smaller size airports.
    We would transition the very large airports that are 
eligible for PFCs from the discretionary AIP funded, and allow 
more funding for medium and smaller airports.
    Now, we believe that this is a good system. Certainly, 
Congress has looked at the AIP program differently over time, 
and allocated more funding coming from AIP. But we believe that 
the kind of streamlining we're proposing in the program will be 
a great asset.
    Senator Bond. Again, that depends upon the new structure, 
which is a triumph perhaps of hope over reality, in our 
experience. The fiscal year 2008 budget request proposed 
reorganizing the account structure even if Congress does not 
authorize a new financing system before the 2008 appropriations 
bill is enacted.
    What advantages would there be in changing the 
appropriations structure, absent a user fee system and the 
other proposed financial changes?

                       FAA ACCOUNT RESTRUCTURING

    Ms. Blakey. I think the new account structure reflects a 
more holistic understanding of the FAA's work. When you're 
looking at this, not many people in the public or in the large 
aviation community think in terms of F&E or R&D. They think in 
terms of what we're doing for safety, what we're doing for air 
traffic control, and capacity enhancements.
    So I think that it really does help, in terms of people 
understanding the large investments they were making on big 
areas that track to what people know are the key elements in 
the system. I would offer that as good rationale, but 
certainly, this does support a different kind of financing 
mechanism.

                           DELAYS IN THE NAS

    Senator Bond. A major question I raised with you earlier, 
there have been lots of horror stories this winter about severe 
delays due to weather and other unfortunate circumstances. You 
can't change the weather, but there are certain things that I 
think can be changed.
    As I believe I mentioned to you, I was the one who had the 
good fortune of sitting on a runway at National on an incoming 
plane. There were at least four full planes sitting there for 
2\1/2\ hours, and we were told that the FAA would not let the 
airplanes be brought in to the gate to unload the incoming 
passengers, because of some rule or regulation.
    The question I guess I would have for both you and Mr. 
Scovel is what can the FAA do? You can't manage the weather, 
you can't control what the carriers do necessarily, but what 
can you and the system do to alleviate the problems for 
passengers in these terrible weather delays?
    Ms. Blakey. Well, it's an excellent question, Senator Bond, 
and I wish I had the entirety of the solution here, because 
you're right. A tremendous amount of it is the God-given 
weather we have, and we have tremendous delays in the system. 
About 70 percent of the delays in the system are weather-
related.
    That said, they're also related to capacity, and we make no 
bones about the fact that we cannot get, particularly in the 
congested corridors on the east coast, where you are flying, 
all the airplanes up there on a given day into that very 
congested airspace, and back down often, again, into airports 
like Newark and Washington, and New York out of Washington.
    I don't know the specifics, obviously, on that flight, 
although I might be able to trace it back with a little 
information and just see. But what I do find is that it's not 
infrequent to hear on the PA system in the cabin that FAA says, 
when it really does not go to FAA regulations.
    It is always the pilot's prerogative and responsibility to 
determine when an aircraft is going to get out of line and go 
back to the gate when they have been too long in queue, and 
that is something we rely on the airlines for. I know the 
Inspector General has been looking at those practices rather 
closely, so I would defer to him. But short of every gate at 
National being full, or some other problem having to do with 
the weather conditions, it is the responsibility of the pilot 
to make that determination.
    Mr. Scovel. Thank you, Senator Bond. Some members of my 
staff have spent the past 5 or 6 years, in fact, on so-called 
airline customer service issues. The Administrator mentioned 
the rule--and you did, as well, in recounting your history with 
landing recently at National--an FAA rule that an arriving 
flight would be prohibited from going to a gate, even if a gate 
were available.
    I'm not familiar with that rule. A rule that I am familiar 
with, however, is FAA's practice and rule for departing flights 
when they're in queue waiting for weather to clear, that if 
they leave the queue to return to a gate to offload passengers 
for their convenience, if they can get back in line, it's at 
the end of the line.
    We have suggested to FAA and to both Houses of Congress in 
testimony on customer service questions that that rule be 
examined as part of a way to increase airline customer service. 
We've also recommended to the airlines that they look at their 
contingency plans to provide for specific deadlines when 
customers may be offloaded for convenience or other reasons.
    We have also asked for airports and the FAA to assist in 
that, especially when it comes to getting the airlines together 
in order to share facilities, which would necessarily limit it 
at most airports, so that gates can be made available, even if 
they're not customarily assigned to a particular airline.
    Senator Bond. Thank you, Madam Administrator and Mr. 
Inspector General. I'll ask unanimous consent that the rest of 
my questions, and questions from Senator Specter, be submitted 
for the record. Thank you.

                              LABOR ISSUES

    Senator Lautenberg. Madam Administrator, regarding working 
conditions, and with the air traffic controller workforce, 
there isn't--there hasn't been a negotiated agreement with 
their representatives and as a consequence, is it fair to say 
that there might have been higher than predicted retirements?
    Ms. Blakey. I think the effect of the work rules and pay 
that we put into place in September did cause an uptick in 
retirements last fall. We saw about a 25 percent increase. I 
think it was a negative reaction on the part of some of the 
controllers. We have, of course, stepped up our hiring plan as 
a result.
    The conditions in the facilities, we continue to keep a 
very sharp eye on, and address issues as they arise at the 
local level. I think we are being very effective in doing that.
    Senator Lautenberg. I just want to correct--there was a 
transposition in the number that I had, and the internal memo 
that we had an opportunity to review said there were 146, not 
164, facilities that are below the minimum range with their 
controller staffing.
    I wanted to ask, as mentioned when there was a failure to 
negotiate a new contract with the NATCA over employee 
compensation, working conditions, and even the dress code; 
however, you decided what you thought was appropriate and 
imposed your views.
    Now, given the difficulty among controllers, how can you 
work with NATCA to address the important safety issues, like 
controller fatigue? As you know, the National Transportation 
Safety Board recommended that this be done after the commuter 
jet crash in Lexington, Kentucky last year. So I would 
appreciate your view, Administrator Blakey.
    Ms. Blakey. Thank you, Senator Lautenberg, and let me be 
clear. The work rules that were put in place in this contract 
were not my view at all. They were over 2 years in the making 
on the part of a large team of managers who all came together 
to discuss better ways to have heightened safety and 
productivity in our facilities.
    All of those managers, of course, as you know, came up 
through the ranks of being controllers themselves. So we're 
relying on expert views and advice in terms of work rules. Let 
me mention that the dress code is simply asking that people 
wear pants, a collared shirt, and shoes.
    It is nothing more than that. There is no tie. There is 
nothing that anyone would consider in the workplace to be 
anything other than simply neat and casual. That is what we're 
looking for, rather than flip-flops, tank tops, et cetera.
    Now, on the issue of controller fatigue----
    Senator Lautenberg. After negotiating with them, I can't 
intercede here, because I don't know what--I understand why a 
dress code might be necessary to preserve an atmosphere of 
dignity, but negotiate that, please, with your group, and don't 
just impose it, because I think that then starts to stiffen the 
backs of people on both sides.
    Ms. Blakey. Senator Lautenberg, some of these things are 
surprising there would be that much energy and concern, about 
something that I think is considered to be just simple 
professionalism.
    That said, I would talk to you for a moment about fatigue, 
since you've raised that, because we are very concerned that we 
use the best practices possible, in terms of our staffing.
    The scheduling practices that the FAA has, in terms of 
shifts, and how those work, particularly on what we call the 
midnight shifts and the later shifts, are ones that were 
developed over the years, again, with NATCA, with the 
controller workforce, and much of the schedule as we have it 
right now is very much preferred.
    That said, I think we do have to look at the question of 
whether or not we should permit that kind of rolling and back-
to-back scheduling. Perhaps we should insist that we run 
schedules that are consistent over a period of time for the 
same shift.
    Therefore, we would pay more attention to circadian rhythms 
and the latest research on fatigue. We're opening that question 
right now, at the urging of the NTSB.
    Senator Lautenberg. Again, negotiating with NATCA, I think, 
can facilitate a better working relationship, which I think has 
been slightly somewhat damaged by a relatively heavy hand on 
some things. I would urge you to negotiate these things with 
them, schedules, as you do other things.
    I want to ask you this. Controllers at the Newark Tower 
have tried to get FAA's attention for years about a potentially 
dangerous practice that FAA has endorsed there, that involves 
allowing two planes to land at the same time on intersecting 
runways. Is that a problem?

                   NEWARK LIBERTY AIRPORT PROCEDURES

    Ms. Blakey. The procedures that we have in place for 
allowing approaches using intersecting runways are well 
developed all around the country. As you know, many of the 
Nation's airports are old military airports, and they use 
intersecting runways a great deal, allowing simultaneous or 
offset approaches into those is something we have worked with 
and worked effectively.
    I'm not aware there's a real issue at Newark, but I'll be 
happy to take a look at that and see if there is something we 
need to address there.
    I will tell you this. We have just changed practices, for 
example, in Memphis, and we're always looking at better safety 
measures that we should take. So if there is an issue at 
Newark, I'd be happy to take it under advisement.
    Senator Lautenberg. Because last year, the agency renewed 
this program and found it to be a problem, and I quote 
``requiring immediate attention.'' So I would urge you to take 
a look there.
    Before I surrender the chair here, I'm going to ask you a 
question about a proposed redesign of the airspace above New 
Jersey that is going to cause hundreds of thousands of 
residents in my State to face the increased noise from 
aircraft.
    Now, I've heard from many of them, in no uncertain terms, 
that they're concerned about this and feel it would be an 
inappropriate change. Now, I've heard from many constituents, 
and I've written to you twice now, asking for more public 
hearings in New Jersey on this issue.
    At a recent public hearing in Philadelphia, people were 
actually turned away at the door and did not get to see the 
maps and projections of how their lives would be affected under 
the FAA's plan.
    Now, I'll ask you now, will you hold another hearing in New 
Jersey on this issue, to accommodate, and at least let the 
people in the area know that their voices and their views 
count?

                           AIRSPACE REDESIGN

    Ms. Blakey. Senator, as you know, we have held multiple 
hearings over a period of time. This has been in the works for 
9 years. I can't tell you the numbers we have held, but we have 
held a lot in New Jersey itself.
    At this point, we have our very best information up on the 
Web site, and I would urge that any of the constituents that 
you have that need further information about the maps, the 
approach patterns, or the way the preferred alternative works, 
to go there. And if they want to send in questions via e-mail, 
we're very happy to respond.
    I think that's the most efficient way, given the years this 
has all evolved and the numbers of public hearings we've had. 
We do have a number of Members of Congress who would like to 
have public hearings. If we were to do that, I don't think 
there would ever be an end to it. After 9 years, I think we're 
there.
    Senator Lautenberg. I hope that you will find that in your 
schedule, you can do it. This is a major change. We have 
reviewed and rejected many changes of this type, trying to 
crowd up the airspace, and I would urge that you turn an ear to 
these people, and at least let them know that we're concerned 
about it.
    I think that is not an uncommon practice, and that is to 
have public disclosure or public review of these things.
    Ms. Blakey. It is important, Senator, to know that the 
airspace redesign that we're proposing actually results in a 
dramatic reduction in the number of people who are exposed to 
noise in the area.
    It also is essential to being able to continue to avoid the 
kind of delays that you have been so concerned about at Newark 
and at the New York and Philadelphia airports. We really do 
have to undertake changes in the very, very old way we sector 
the airspace.
    Senator Lautenberg. Please explain it to the people in New 
Jersey directly, that their fears are imagined and not real. 
Thank you. Thanks, Madam Chairman.

                                 ASDE-X

    Senator Murray [presiding]. Thank you, Senator Lautenberg, 
for filling in. I really appreciate it. Thank you. I apologize 
for having to be gone, and appreciate your patience.
    Administrator Blakey, you heard my concerns with my opening 
remarks about the ASDE-X program during--that I spoke about.
    Costs have grown by almost $100 million since you re-
baselined the program, and are likely to grow even more, and 
you've fallen further behind schedule while serving fewer 
airports.
    And the systems are not performing as promised, especially 
as I talked about, when the weather's bad and the risk of 
runway incursions is really heightened.
    Your technological solution isn't performing very well, in 
fact, at SeaTac Tower. I wanted to ask you why you still 
promote this program as one that is on schedule and on budget.
    Ms. Blakey. I think it's important to understand what we're 
saying when we talk about programs being on schedule and on 
budget. If you want to look at programs from their very 
inception--some of the ones you mentioned are more than a 
decade old. AAS is really sort of the Dark Ages in terms of the 
FAA's history.
    It is like saying you never can consider that a team is 
winning this year, because way, way back, they had their losing 
season.
    We do believe that the re-baselining periodically is the 
right way to tackle changes in complex technological programs. 
Sometimes, slips are because of shortfalls in appropriations; 
sometimes, they're because of shortfalls from the standpoint of 
the technology itself. We're acknowledging that. But what we do 
say when we are on schedule and on budget is we take it within 
a fiscal year, and we look at it then. That's the way we can 
measure performance and hold people accountable.
    If we say that they're accountable for things that happened 
5 years ago, it's a defeating approach.
    Senator Murray. But this was re-baselined 18 months ago.
    Ms. Blakey. ASDE-X was re-baselined for several different 
reasons. It's important to know that we did incorporate some of 
the technical refresh that we would have done further down the 
road. As you know, you always do technical refresh on major 
software programs.
    It also combined the sites that we were going to place 
ASDE-X in. ASDE-X is an interesting program, because it was not 
originally designed for the way we are approaching it now. 
It's, in a sense, outperformed what we expected.
    It started as a program for small airports. It started as 
one that we would address runway problems in a less complex 
atmosphere.
    Because it has proven to be excellent technology, we are 
now deploying it at some of the airports with the most complex 
runway patterns, and frankly, the biggest problems with runway 
incursions. It has moved to the larger airports. When you do 
that, there are costs involved, and I think that has to be 
taken into account, as well. But on the whole, we believe that 
ASDE-X is one of the best safety programs we have got.
    At Seattle, we just installed some changes, and we think 
they're going to help address the problem. Seattle seems to 
have pretty complex challenges because of the weather 
conditions. The precip, and some fairly unique factors, that, 
make it more challenging than some other airports.
    Senator Murray. Well, rain and fog occur in a number of our 
airports around the country: San Francisco, Seattle, Alaska.
    Ms. Blakey. I would tell you, as I say, Seattle has proven 
to be a challenge, and we're spending a lot of time and money 
trying to address it.
    Senator Murray. Let me ask you, are you satisfied with the 
pace at which this equipment is being installed?
    Ms. Blakey. I would like for it to be faster. It takes us 
about 3 years to put an ASDE-X system in place. Because it is a 
critical safety program that has a significant effect on 
aircraft and vehicles on the airport surface, you have a lot of 
requirements that go into it--from site selection to the 
installation to operational testing.
    We also spent, at the beginning of ASDE-X a lot of time on 
the software and a lot of time on the initial requirements. So 
I think that the pace is going to pick up considerably, in 
terms of the deployment and actual commissioning.
    That is the reason we're less concerned than the IG is 
about the overall schedule.
    Senator Murray. Is it ever going to be able to perform in 
rainy weather?
    Ms. Blakey. Yes, absolutely. I can't tell you that we have 
all of the technical challenges completely solved, but we are 
addressing them, and I think we will.
    The issue of using radar, which depends on reflectivity off 
of surfaces, and at times, we found that sleet and certain 
forms of precip reflect. So we're trying to make sure that we 
go at this whenever we find that there's an issue. The same 
thing has been true, as you know, on the STARS system.
    Senator Murray. General Scovel, would you like to comment 
on any of this?
    Mr. Scovel. Thank you, Senator Murray. I would concur with 
Administrator Blakey that ASDE-X is a technology that has 
outperformed, and indeed, it has tremendous safety potential. 
It's unique in that it can use radar transponders and ADS-B 
data to generate target information and avoid potential 
collisions.
    You covered the history of the program in your opening 
statement. If I can add one data point to that, and that was, 
as originally conceived, ASDE-X, together with the AMAS and 
ASDE-3 systems, were designed to be in place at a total of 59 
airports. And if that had happened, then it was calculated that 
95 percent of the risk of fatal collisions could have been 
addressed.
    As the program currently stands, we won't hit 59 airports. 
My understanding is that 44 airports total will now have some 
sort of surface detection technology. I think that if the other 
15 airports are left uncovered, certainly, that should be 
worrisome.
    We mentioned cost and safety issues. My statement, for the 
record, indicated that 64 percent of the planned funding had 
been obligated to date, but only 8 of 35 systems had been 
placed in operational use. In other words, we're almost two-
thirds of the way through the funding stream, and less than 
one-fourth of the systems have been installed.
    We have a gap. It doesn't appear that we will be able to 
get there from here without additional re-baselining and, of 
course, additional funding.
    When it comes to scheduling issues, we've mentioned as well 
that in fiscal 2006, four of seven planned systems were 
commissioned for use. It should also be noted that the agency 
has determined that the ASDE-X system for Chicago should be 
advanced on the schedule.
    We certainly don't quarrel with that decision, but it 
should be--Chicago had some unique ground safety challenges. 
But it should be noted that when a system is advanced on the 
schedule like that, it may well have a domino affect on other 
ASDE-X systems further down on the line.
    To address safety, just in passing, there's been talk of 
the dangers of intersecting runways and converging taxiways. We 
note that the agency has a modification to ASDE-X which is 
currently being tested in Louisville. I'm sure the committee 
and we have great hopes for that system, but it still remains 
unproven.
    When it comes to the unique weather challenges that you've 
talked about with regard to Seattle, specifically, it's our 
understanding that the agency has another modification to ASDE-
X that is being tested at Orlando. Again, we have great hopes 
for that, but it still remains untested.
    NTSB's recommendation, longstanding now, that there be an 
alert system in the cockpit to alert flight crews of impending 
collisions on the ground, may be able to be addressed by 
incorporating ADS-B features into ASDE-X, but again, 
unaddressed, and we would hope that would be focused on in the 
future, and hopefully incorporated into the system.
    One final point regarding safety, Madam Chairman, and that 
is there's been recent press attention to the problem of ground 
vehicles at airports. That brings up the question of radio 
frequencies and funding to equip those vehicles with 
transponders.
    FAA has responded to that attention by promising to work 
with FCC to obtain radio frequencies. The question of funding 
for vehicles we think is up in the air. The agency certainly 
has a valid question when it asks why should it be responsible 
for funding of vehicles instead of airports, but that's a 
question that needs to be addressed, again, because it's 
certainly a very real danger of collision between aircraft and 
vehicles.
    Senator Murray. I appreciate that. And, General, while 
you're talking, you have in the past criticized the contracting 
mechanism the FAA used for the ASDE-X program. Why, in your 
view, did the FAA continue to use a cost-plus contract with 
undefined requirements for that technology?
    Mr. Scovel. You know, I'd better continue----
    Senator Murray. Maybe you could explain why the costs have 
grown by about $100 million in the last 18 months.
    Mr. Scovel. We've recently sent a management advisory to 
FAA about the ASDE-X contract. What we identified were what we 
believed to be prohibited contract administration practices, 
including the lack of contract terms and conditions.
    Specifically, we advised FAA of our reservations concerning 
increased contractor fees, based on a cost incurred instead of 
a negotiated fixed fee dollar amount.
    Second, we believe that the agency had made payments to the 
contractor before work had been completed in some instances. 
And third, we believe that the agency hadn't documented 
contract changes.
    The agency responded to us in August 2006 by addressing our 
first point, that they disagreed with our legal analysis and 
believed the statute did permit them to increase cost--
contractor fees, based on a cost-incurred basis.
    They agreed with us on the latter two points, and they are 
addressing those.
    Senator Murray. Administrator Blakey, do you want to 
comment on that?
    Ms. Blakey. We're working with the IG, and whenever they 
point out that there are issues--and this goes back even more 
than a year now. We have looked at cost-plus contracts, and 
they make a great deal of sense in many cases. But as you also 
know, we use fixed-price. We try to use those appropriately.
    A program like ASDE-X has tremendously benefited by the 
fact that it has evolved. I think you all, from the committee's 
standpoint, would want it to. The idea that you keep something 
absolutely frozen, with only a specific set of requirements, 
even though you know that it has greater applicability, and 
frankly, will have more benefit at different airports is the 
question.
    Chicago is a great example. I think it was the right thing 
to do, because we were seeing operational errors at Chicago 
that we knew ASDE-X could help fix. That is an evolving airport 
with tremendous pressure on it.
    Senator Murray. So it's impossible to kind of tell us what 
the final cost of this is going to be?
    Ms. Blakey. Five hundred and fifty million dollars is what 
we're projecting right now for ASDE-X. If there turns out to be 
additional requirements and evolutions that we think are 
sensible, we will certainly consult with a committee.
    Senator Murray. Inspector General, will we be able to keep 
to 550?
    Mr. Scovel. We don't think so. As I alluded to before--as I 
specifically addressed before, with the number of systems 
currently being installed, and the funds obligated being 
expended at the rate they are, we don't think that we can even 
get to the 35 systems, much less modify them to incorporate, 
for instance, technology to address the rainy weather situation 
or the intersecting and converging runway situation.
    Ms. Blakey. Madam Chairman, I would simply point out the 
obligation rate is not necessarily an indicator of what the 
final cost will be. Because you obligate a great deal of money 
up front before you get to the stage of operational 
commissioning.
    So we do think that this is going to be something that is 
doable, but as I say, if it should be that we looked at 
improvements or we looked at shortfalls, we will consult with 
you all about it. Our best belief at this point, because we 
work on ASDE-X a great deal, is that we will be able to work 
within that parameter.

                           SAFETY INSPECTORS

    Senator Murray. I appreciate the comments from both of you. 
We'll keep moving forward and trying to get to a good number on 
this. Let me move to the topic of safety inspectors.
    Administrator Blakey, for the past 3 out of 6 years, this 
committee has given you more funding for safety inspectors than 
you requested.
    For the current fiscal year, we added $16 million that you 
did not request to hire additional inspection certification 
personnel. But despite our efforts, we have seen staffing 
levels drop in this critical function. Your on-board strength, 
as of 3 weeks ago, showed that the number of inspectors in 
flight standards was almost 150 below the level of last year, 
and you're also below last year's level in aircraft 
certification.
    When we are giving you additional funding to increase the 
number of critical safety inspectors, why are we still seeing 
the number of these inspectors decline?
    Ms. Blakey. We expect to be able to hit the end of the year 
numbers that your $16 million additional allowed us to 
undertake. At this point, we do not see that there's going to 
be difficulty doing that.
    What we think there will be difficulty doing is to be able 
to sustain those next year, because the President's budget 
request was predicated on an ongoing CR--a full-year CR.
    When it turned out that the committee was able to help us 
with the additional funding, that was not the base that we 
looked at.
    When you annualize those salaries for the additional 
inspectors we are hiring this year, plus the ones that we had 
intended to hire under the 2008 budget, there is a gap there. I 
think that is the thing I would simply call to your attention. 
I do not have the exact numbers that you are referring to. I 
would be happy to check them and submit them for the record.
    [The information follows:]

                           INSPECTOR STAFFING
------------------------------------------------------------------------
                                                       On Board Staffing
                                                        as of 5/30/2007
------------------------------------------------------------------------
Flight Standards....................................               4,728
Aircraft Certification..............................               1,146
------------------------------------------------------------------------

                    FUNDING THE INSPECTOR WORKFORCE

    Senator Murray. I appreciate that. Can you assure us the 
full $16 million will be used to exclusively raise the number 
of inspectors?
    Ms. Blakey. Yes
    Senator Murray. Inspector Scovel, do you think--are you 
satisfied with the FAA's overall efforts?
    Ms. Blakey. Madam Chairman, can I put one little caveat? We 
do need to support the work of those inspectors, obviously. 
There are attendant costs to bringing them on board. Let me be 
dead sure I'm speaking correctly, it would all go to their 
ability to be hired and deployed.
    Senator Murray. Inspector General, are you satisfied with 
the FAA's efforts to hire and deploy safety inspectors?
    Mr. Scovel. Senator, we believe the agency is making a good 
faith effort to hire, train, and deploy inspectors.
    We would note for the committee's attention, however, that 
until the staffing study is complete--and it's our 
understanding that FAA recently contracted with 
PriceWaterhouseCoopers in order to complete a staffing study 
workforce-wide to determine number and location of aviation 
safety inspectors. Until that's done, we're really dealing with 
a moving target.
    We would also note further--one further point on that, it's 
our understanding, as well, that staffing study won't be 
completed until 2009, so there is some gap yet.
    While we commend the Congress for giving the FAA funding in 
order to hire inspectors, we just won't know whether it's 
enough or whether they're in the right places until that 
staffing study is done.
    We would note one other item briefly for the record, and 
that is that our statistics show that 50 percent of aviation 
safety inspectors will be eligible for retirement--in fact, 
they are currently eligible for retirement. And given that kind 
of uncertainty, that may well lead to further attrition.
    Senator Murray. Administrator Blakey, can you tell me how 
much more funding you do need for fiscal year 2008 to afford 
the inspector staff that you're going to be hiring this year? 
Do you have a number?
    Ms. Blakey. Madam Chairman, I was afraid you were going to 
ask me that and I don't have that exact figure. I will get it 
for you. Let me also tell you this, that I think the Inspector 
General has very good concerns on this issue of a staffing 
model for our safety staff.
    [The information follows:]

                   Fiscal Year 2008 Inspector Funding

    The fiscal year 2008 budget requires an additional $16 million 
above requested funding in order to maintain the inspector staff hired 
in fiscal year 2007.

                           INSPECTOR STAFFING

    Ms. Blakey. We do have one, but it goes back some time. I 
think advances in terms of industrial engineering, plus the 
kind of very specific work that we can do, right down to each 
facility, with an eye to the very changing face of the airline 
industry--because, as you know, things have changes a great 
deal there--I think will allow us to have a much better sense 
of that. We have two contracts in response to the Inspector 
General's recommendations to develop that, and we're going to 
be hard at work at it, so I do want you to know we will have it 
underway.
    Because it's complex, it's hard to do, it will probably 
take us the better part of 2 years to complete it, but we will 
learn from it as we go. We intend to, on an ongoing basis, have 
that refine the way we are assigning our workforce.
    And retirements, I'm really happy to say this. As you know, 
we get our safety inspectors very significantly from people 
who've already spent a lot of their career as aerospace 
engineers with the airlines, military, et cetera. They seem to 
be very much willing to stay with the FAA, and we have a very, 
very low rate of retirement in that workforce.

                OUTSOURCING TO NON-CERTIFIED FACILITIES

    Senator Murray. Well, one of the areas I'm very concerned 
about is the change in the airline industry, where we're seeing 
an outsource of the repair work being conducted by firms that 
aren't certified by the FAA.
    Ms. Blakely, you don't allow airlines to use airplane parts 
that aren't FAA certified, correct?
    Ms. Blakey. They have to meet FAA standards; that's 
correct.
    Senator Murray. Well, how can we allow airlines to use 
repair stations that are not certified by you?
    Ms. Blakey. The issue of certified repair stations, as you 
know, we have a very large network of those in this country. In 
addition to that, there also are repairs, modifications, et 
cetera that are done by non-certificated entities out there.
    A lot of this goes to things that are generic in their 
nature; for example, welding. The best places to do welding may 
not be solely confined to aerospace, and they may not be 
facilities that, in fact, we should try to directly oversee or 
to directly certificate.
    What we do believe is ultimately, that the FAA's 
regulations are extremely clear, and that the airlines 
themselves have to apply the quality control and the oversight 
to be responsible, that they do meet the aspects, that they do 
meet the certification requirements, and that they are living 
up to the finest level of detail.
    The requirements that the FAA places is what we really do 
rely on, in addition to the fact that we have, of course, a now 
better and more robust inspector team out there. We are 
requiring that everyone adhere to the safety management systems 
that apply issues of risk appropriately to where you then 
target what you are specifically watching day in and day out.
    But there's a great deal to this that I think under girds 
the system of having some companies out there that are 
providing service to the airlines that are not directly 
certified by the FAA.
    Senator Murray. Inspector General, are you satisfied with 
this program?
    Mr. Scovel. Senator, my office has undertaken a number of 
studies of air carrier outsourced maintenance. What we've 
concluded is that we're not concerned so much with where 
maintenance may be performed, whether it's by certificated 
facilities, or facilities in this country or overseas.
    What we are concerned about is the level of oversight by 
FAA and its aviation safety inspector workforce. We think that 
there's generally a continuum of concern. Many air carriers 
maintain their own in-house maintenance facilities, and they do 
very well, and there's very close and detailed oversight by FAA 
aviation safety inspectors.
    There are certificated repair facilities in this country 
and overseas that, likewise, receive much more aviation safety 
inspector oversight. When you talk about non-certificated 
facilities, both in this country and especially overseas, then 
the level of oversight, the degree of attention necessarily 
declines.
    A concern that we have is that we don't believe the agency 
has a firm grasp on the type of maintenance that some of these 
non-certificated facilities are indeed performing. It may be 
generic, in the nature of welding.
    On the other hand, we know that it also includes such items 
as engine replacements and landing gear maintenance. Those are 
critical items of maintenance in any analysis of aircraft 
maintenance.
    We have asked that the agency get a firm handle on what 
type of maintenance is being performed and where, so that it 
can address it, both with its inspector workforce and using its 
risk-based safety oversight systems.
    Ms. Blakey. And we have said that we will require that the 
airlines inventory all of this. So we are specifically aware 
when they are using non-certificated companies out there for 
various kinds of work.
    Senator Murray. So is that an ongoing basis, or do you have 
a deadline for them to come back to you?
    Ms. Blakey. I'll have to check about deadline. This is 
something we've been responding to the IG on very recently, so 
I'll find out exactly what period of time we expect to have 
that fully in place.
    [The information follows]

               Use of Non-certificated Repair Facilities

    By regulation title 14 Code of Federal Regulations part 121.369, an 
air carrier is required to maintain a list of contract maintenance 
providers, both certificated and non-certificated, and a description of 
the services they provide.
    In response to the Department of Transportation's Office of 
Inspector General (OIG) report number AV-2006-031, Air Carriers' Use of 
Non-certificated Repair Facilities, dated December 15, 2005, the FAA 
issued Notice N 8000.362 on April 23, 2007. This notice addresses all 
the OIG concerns and tasks the FAA with reviewing air carrier 
procedures for qualifying and authorizing all contract maintenance 
providers used by air carriers, whether certificated or not. Any 
discrepancies noted by the FAA in the subject areas would need to be 
corrected by the air carrier.
    Adding to N 8000.362, Flight Standards will publish two notices of 
national policy and guidance to its inspector workforce. The notices 
are: (a) Notice 8000.D91 Revised Operations Specification D091, 
Substantial Maintenance Providers (SMP) and All Other Outsource 
Maintenance Providers (OMP) for part 121 Operations and (b) New 
Operations Specification D491, The Quarterly Utilization Report (QUR), 
for part 121 Operators. Regarding the deadline for the first notice, 
the compliance date of the notice is 30 days after its publication, 
meaning prior to December 2007; for the second notice, air carriers 
must submit the data quarterly for the months of months of March, June, 
September, and December.
    These notices further respond to the OIG report number mentioned 
above. During this audit, the OIG made recommendations to the FAA 
concerning oversight of a part 121 certificate holder's contract 
maintenance practices. The notices address the OIG report and provide 
inspectors with guidance for continued oversight of air carriers using 
contract maintenance providers, specifically, requiring regular 
surveillance to ensure compliance and that air carriers produce a QUR 
that details their use of contract maintenance providers.
    Additionally, the FAA plans to publish a Notice of Proposed 
Rulemaking (NPRM) in June 2008 that propose to amend the current 
regulation (see above, part 121.369) to require air carriers to include 
requirements specific to outsourced maintenance in their maintenance 
manuals to ensure that all maintenance is performed in accordance with 
the provisions of the air carriers' maintenance programs and to require 
air carriers to provide the FAA with a QUR.

                        FLIGHT SERVICE STATIONS

    Senator Murray. Thank you. Let me move on and ask about 
another issue. Back in 2006, your agency asked us to fund a 
large and expensive initiative to transition the operations of 
your flight service stations to a private vendor.
    Fiscal year 2007 was the first year where you had the 
flexibility to spend your capital budget without the 
limitations of a project by project amount stipulated in the 
appropriations act.
    To our surprise, you used that flexibility to augment the 
funding for your flight service stations by another $9 million 
in order to address the needs associated with the downsizing of 
a number of those facilities.
    Can you tell us why those costs were never included when 
you presented the costs of the transition back in 2006?
    Ms. Blakey. My understanding of this is that--as you know 
$9 million, while it's big to us as taxpayers, it's a 
relatively small amount of money in the overall scope of that 
endeavor.
    The transition period was one in which there was some shift 
in terms of timetable and responsibilities, and ultimately, we 
felt this was within the appropriate use of those funds. We 
were not aware that the committee would see it differently. If 
that's the case, that's instructive for the future.
    Senator Murray. Well, in order to ease the impact of that 
transition on your employees, you required the competing 
vendors for the effort to hire, at least temporarily, all the 
FAA personnel that were operating those flight service 
stations.
    The winning vendor, Lockheed-Martin Corporation, is now 
claiming the FAA misstated the wage rates of the employees they 
were required to hire, and they're now asking that you pay them 
an additional $147 million to make up for that mistake.
    Can you tell us, did your agency understate the wage rate 
for those workers?
    Ms. Blakey. Madam Chairman, I'll tell you, this is a matter 
of much dispute between us and Lockheed at the moment. It's 
very different from the amount we just were talking about, and 
we take this very seriously.
    The situation is one in which, as we were making the 
necessary changes and working with the then union, NAT, that 
was representing the employees. We agreed that we would have 
the Department of Labor review the wage rates, because we felt 
that that was a request of the union that we could accommodate.
    So that was in play when Lockheed put their contract into 
bid, and we ultimately selected--put their bid forward. We did 
stipulate in a number of places in our request for proposals 
that that was the case, and that was among risk factors that 
companies needed to take into account.
    I will tell you, this is in dispute with Lockheed at this 
point. We also are challenging the Department of Labor's wage 
rate that they have put forward, because we do not believe the 
comparable professions that they chose to benchmark against are 
the correct ones, and we would see that the amount of money 
that would be involved in this, under any circumstances, would 
be dramatically lower than that $140-plus million figure you 
mentioned, but that is what currently is in discussion and 
dispute.
    Senator Murray. Is the likely result we'll need that 
additional $147 million, or is it too soon to tell?
    Ms. Blakey. I don't believe so, but it is too soon to tell. 
This, as I say, is something we are actively addressing right 
now.

                                  FTI

    Senator Murray. Let me switch to another area. The NextCom 
program is expected to provide the FAA with a system for 
providing air to ground communications. That's going to be 
essential to any Next Generation Traffic Control System.
    However, NextCom is now experiencing the same problems with 
many of the other capital programs as the FAA. At the end of 
2005, the FAA delayed the program's full implementation by 2 
years.
    Your own program managers told our staff that this delay 
was due largely to the fact that too much of the NextCom 
workforce had to work on fixing problems at the 
Telecommunications Infrastructure Program, or FTI, so they 
could not focus on their original assignment.
    Can you tell us why the agency has been unable to address 
the problems at FTI, while still effectively managing this 
NextCom program?
    Ms. Blakey. FTI has been a challenging program because, as 
you know, it is one that is, on the surface, not a technology 
challenge like a lot of the NextGen systems, but one in which 
we're trying to convert the service to a unified single service 
from one that developed over many, many years, in sort of a 
growing like topseed with a lot of patchwork to it.
    So what seemed to be a more straightforward enterprise 
turned out to have a lot of, if you will, just operational 
glitches to getting it done. We also had the situation of a 
disappointed bidder for the contract who was required to help 
make this transition to the new successful bidder.
    All of that is by way of background on FTI, but I have 
compared it in the past to stacking bricks. It is not one where 
you don't know how to get there; it's just how well and how 
fast can you get these cutovers done?
    The good news on FTI is that despite the fact that we were 
required to re-baseline that program by the requirements that 
are stipulated by OMB, we actually are now running ahead of 
schedule against the new re-baselined schedule.
    As you know, it's a fixed-price contract, so it's not 
changing, in terms of money, but it is certainly one in which 
the speed at which we can make those cutovers affects how much 
savings the taxpayer will experience. At this point, we are 
ahead of schedule, and are fairly optimistic we will do better 
than December 2008.
    The issue of NextCom staff against the FTI contract, 
certainly, some of those are the same people, and we did put 
tremendous focus on that, because it is the here and now. It is 
immediate. But that in no way lessens our commitment to the 
NextGen communication capabilities that we expect to put 
forward.
    Senator Murray. Well, that program was touted as a great 
opportunity for the FAA to enjoy huge savings in its operating 
costs, but now, it looks like the program won't save as much as 
anticipated.
    The initiative was originally scheduled to save $444 
million over the life of the program. Now, it's expected to be 
about $320 million.
    Part of that savings--or lost savings is attributable to 
the fact that the FAA had to extend at least one full year the 
cost of keeping the old phone lines operational, costing us $65 
million. That's all because of the delays in getting the system 
up and running.
    I just have to ask how many additional safety inspectors 
could we have bought with that money?
    Ms. Blakey. I will have to simply tell you we are working 
as fast and hard as we can to achieve those savings, and we are 
catching up, Madam Chairman. I mean, that is what's important 
here, when you hit a problem, if you focus on it and address 
it, you very often can recover.
    Not entirely, and we do use different figures. I think it 
depends over what period of time you're talking about, about 
savings. How do we see our savings dropping from somewhere 
close to $800 million to somewhere close to $600 million? Still 
big numbers. And the faster we can go at making the cutovers to 
the new service, the more we will be able to save.
    So I think that's important to see. Beyond that, all I can 
suggest to you is that we also have a tremendous amount of 
interest in using our resources as best as possible, and that's 
one of the reasons why we aggressively moved to the FTI 
contract, as opposed to leaving in place the old system.
    Senator Murray. General Scovel, do you want to comment on 
the FTI program at all?
    Mr. Scovel. Yes, just in general. Thank you, Madam 
Chairman. You've talked about the erosion of expected cost 
savings, and our study--and, in fact, I will note that we've 
had an ongoing study on FTI that we reported on in depth last 
year, and we have a follow-up study that's underway currently, 
so we have good information on this.
    The savings that were expected initially in the program, in 
2002, were $820 million. By 2005, those had eroded to $672 
million. Our estimate is that in late 2006, including some 
costs, the estimated cost savings now were at about $442 
million. So it has declined dramatically.
    There have been performance questions, as well. The 
Administrator is entirely correct when she says that they've 
made great progress on those in reducing the backlog in so-
called cutovers that is moving telecommunication services from 
the old system to the new one, but they still have an ongoing 
backlog rate, if you will, of about 1,800 services per month.
    They're about halfway through the anticipated 21,000 or so 
services that need to be transitioned from the old system to 
the new. That's a watch item, however, for us, is how fast they 
can move in the overall number, and also, how fast they can 
move to reduce the backlog.
    I've talked about the expected cost savings erosion. We 
would also note that there have been, if you will, customer 
service problems, and that is with the FTI contractors 
performing upgrades on FTI equipment at various airports, and 
inadvertently, certainly, bringing the equipment down to the 
point that it's resulted in operational delays, at some 
airports, of several hours, and many dozens of flights that 
were affected and had to be delayed.
    It's not our belief this amounts to a safety risk, and I 
want to be entirely clear on that, but it is an operational 
risk, in terms of flight delay.
    Ms. Blakey. Madam Chairman, if I could, I really would tell 
you though that we are actively contesting the IG's figures on 
the area of FTI.
    The savings we projected were $790 million. This has 
dropped to $596. As I've said, it was about a $200 million 
drop. But we will substantiate that with the IG's office, 
because there seems to be some confusion of the figures.
    [The information follows:]
                                  FTI
    In then-year dollars, the FTI program savings were projected to be 
$790.5 million prior to baselining. The new baseline savings figure 
established in September 2006 is $596.4 million--a difference of $194.1 
million. The program, however, is overachieving against the 2006 
baseline by a significant measure. We therefore expect the eventual 
erosion of cost savings to be less than $194.1 million.

                             SWIM AND ADS-B

    Senator Murray. And we'd like to see the results of that. 
Better information. Let me just ask a few more questions. 
You've both been very patient with the committee this morning. 
I appreciate it.
    Last year, Administrator Blakey, I commended you for 
including funds for the SWIM and ADS-B programs in your budget 
request for 2007, and I'm really glad to see that you're 
continuing to request them in 2008.
    This committee started funding those initiatives without 
the benefit of a request prior to last year, and these programs 
are going to build, I think, a strong foundation for the next 
generation of air transportation systems.
    Can you tell us what your target dates are for implementing 
those two programs?
    Ms. Blakey. I certainly can tell you what we are doing with 
regard to ADS-B, and I think also probably with regard to SWIM. 
I'm very encouraged by how well SWIM is performing.
    The NEO demonstration that we had just done, I think 
substantiates why this kind of data interconnectivity--our 
Internet for aviation is critical.
    ADS-B is a program that we are moving on very aggressively. 
We expect to have the contract this summer for the ground 
stations. We would expect to have the initial phase of those in 
place by 2009 and move out to about 2011. I want to double-
check that in terms of our national network. But we're moving 
very fast on that.
    As you know, part of the initial deployment is on a 
regional basis. The Gulf of Mexico, the Ohio River Valley, 
Philadelphia, in addition to the aspects that, as Senator 
Stevens referred to earlier, where we have pioneered in the 
Alaskan area.
    So the program is well underway. I think the questions, of 
course, on ADS-B are also how fast the airlines and the general 
aviation community will be able to equip, and I will turn your 
attention to the fact we're going to put a rule out this fall, 
which will propose a timetable.
    It is under discussion now, but we will propose that 
timetable, and then we will see if the comments that we receive 
support that.
    Senator Murray. The timetable on requiring all the airlines 
to install this?
    Ms. Blakey. Exactly.
    Senator Murray. So you are looking to require everybody to 
do it?
    Ms. Blakey. As a mandate, that is correct. Ultimately, it 
will be essential for the system to require relatively 
universal equipment. There will always be exceptions for GA 
below certain altitudes, but as a matter of operating the NAS, 
yes.
    Senator Murray. Inspector General, do you agree that 
requirement will be necessary to make it work?
    Mr. Scovel. We do, and thank you. In order for ADS-B to 
achieve its full potential, it needs to be aboard the large 
majority of major carriers' aircraft.
    In order to permit reduced separation and achieve the 
capacity and safety advantages represented by ADS-B, to get a 
handle on all those benefits, it needs to be installed really 
across the entire system.
    If there is a point regarding that that I would like to 
make further, it has to do with the human factors issue. For 
ADS-B, again, to achieve its full potential, it has significant 
workforce challenges when it comes to the performance of both 
controllers, whose role will change under ADS-B, and with 
regard to pilots and flight crew.
    Their role will change, as well, and significant attention 
should be paid to those human factor issues, with regard to 
both workforces.
    Ms. Blakey. Let me also correct what I said, because the 
initial phase is 2009-2011 timeframe, but we will have the full 
national build-out on ADS-B by 2013.

                          BORROWING AUTHORITY

    Senator Murray. Very good. Let me just ask you two other 
questions. Earlier this year, Secretary Peters came before us 
and testified that the FAA's proposal for reauthorizing the 
aviation programs would not include any mandatory spending 
outside of this committee's control, but the administration's 
proposal is now in front of us, and it includes $5 billion in 
what is called direct borrowing authority from the Treasury.
    I wanted to ask you, Administrator Blakey, what do you see 
this committee's role in overseeing and determining the 
programs that will be funded using those dollars with this new 
borrowing authority?
    Ms. Blakey. I don't see the committee's role changing at 
all. We see that all the funds that are extended will be 
subject to appropriations.
    What we do think, though, is that the potential to have 
borrowing as an additional tool to spread out the period of 
time in which those investments are covered, in terms of the 
cost to the users, could be a very valuable asset, but it 
really does not change the role of the committee.
    We'll still see those projects as being ones that the 
committee has to sign off on.
    Senator Murray. Inspector General, I wanted to ask you, the 
FAA proposed replacing the current system of aviation taxes 
with a new user fee system. That really represents a dramatic 
change in the way aviation programs are funded.
    Do you think it is necessary to completely restructure how 
the aviation programs are financed, in order to fund the FAA 
over the next 5 years?
    Mr. Scovel. Senator, I think that's a significant policy 
question. If I can help inform the debate along those lines, 
our conclusion after running the numbers is that the current 
financing system will be sufficient to sustain FAA to include 
its NextGen costs--estimated costs of $4.6 billion between 2008 
and 2012.
    Senator Murray. Okay. Thank you very much to both of you. I 
wanted to just mention as we are closing, we recently learned 
that this subcommittee is going to be losing a very valuable 
asset.
    Cheh Kim has been a steady and valuable staff member of 
this subcommittee now for over 8 years, and his wise counsel 
and intellect have provided some significant results that have 
increased the quality of life for all Americans.
    We're going to miss him, and wish him the best in his new 
position. I understand you're going over to Treasury, and we 
wish you the absolute best.

                     ADDITIONAL COMMITTEE QUESTIONS

    Thank you very much. Any additional questions will be 
submitted to you for your response.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

             Questions Submitted by Senator Byron L. Dorgan

               AIRPORT IMPROVEMENT PROGRAM (AIP) FUNDING

    Question. I was disappointed that the President has proposed to cut 
the Airport Improvement Program (AIP) from $3.5 billion in fical year 
2007 to $2.75 billion in fiscal year 2008. The airports hurt hardest by 
your fiscal year 2008 proposal would be the smaller general aviation 
airports in our smallest communities. The North Dakota Aeronautics 
Commission estimated that the State's 45 general aviation airports 
would see their AIP dollars cut on average 58 percent in fiscal year 
2008.
    Can you explain why you are targeting our smallest airports and 
communities that are already at a transportation disadvantage?
    Answer. The administration believes that $2.75 billion in Airport 
Improvement Program (AIP) funding is sufficient to support the critical 
safety, security, and capacity projects scheduled for fiscal year 2008. 
The proposal also targets funding to the smallest airports, while 
allowing larger airports to fund capital projects through other means.
    The administration's FAA reauthorization proposal includes 
significant programmatic changes to both the AIP and the Passenger 
Facility Charge (PFC) program to refocus AIP on the projects and 
airports with the greatest need. Additionally, the proposal gives the 
largest airports flexibility to use the PFC program to meet their 
ongoing capital needs, retains the ability of large airports to apply 
for AIP grants, and eliminates the burden on the AIP program of 
providing an entitlement to the largest airports. With these changes, 
AIP would be targeted to the smaller airports.
    Additionally, the Administration's proposal:
  --Retains entitlements for small airports at current levels and 
        eliminates the risk that they will be cut in half or terminated 
        if AIP falls below $3.2 billion.
  --Enhances the general aviation airport entitlement by moving from a 
        flat $150,000 maximum entitlement for all GA airports to a 
        tiered system giving the largest and most complex GA airports 
        $400,000 per year.
  --Increases the minimum discretionary fund and establishes a minimum 
        State apportionment to make sure that FAA and the States have 
        the funds they need to help airports build major capacity and 
        safety projects, such as runway safety area improvements.
  --Increases the maximum PFC from $4.50 to $6.00, permitting airports 
        to generate an additional $1.5 billion annually in PFC revenue.
    Question. Have you assessed the impact a 58 percent cut in AIP 
dollars will have on small airports that already struggle to make 
needed improvements? If so, will you share it with our committee?
    Answer. The administration's proposal contained formula changes 
directly for Airport Improvement Program (AIP) funding to the smaller 
airports. Small airports are most dependent on AIP to provide the funds 
they need to finance their most critical safety and capacity projects. 
The administration proposal does that by:
  --First, the proposal ensures that smaller airports can rely on a 
        stable AIP funding stream by preserving passenger entitlements 
        at all levels of AIP.
    --Under current law, if AIP falls below $3.2 billion, the smallest 
            primary airports currently getting $1 million will lose 
            $450,000. Larger airports would have their entitlements cut 
            in half. Our proposal eliminates these reductions.
  --We preserve the non-primary entitlement at all levels of AIP. Under 
        current law, this entitlement funding would disappear if AIP 
        falls below $3.2 billion.
  --We move from a flat non-primary entitlement to a more strategic 
        investment program, which recognizes that GA airports play 
        different roles in the system and have different capital 
        requirements. Our proposal does this by moving from a flat 
        $150,000 non-primary entitlement to a four-tier system.
  --Over 900 small airports will see their non-primary entitlement 
        increase under our proposal.
  --The proposal provides a higher guaranteed level of State 
        apportionments, which States can direct to high priority 
        projects at their rural airports.
  --Making common-sense eligibility changes to AIP eligibility rules to 
        fund Federal mandates.
  --Expanding the eligibility of airports to build revenue-producing 
        facilities.

            SMALL COMMUNITY AIR SERVICE DEVELOPMENT PROGRAM

    Question. The Small Air Service Community Development Program was 
established by Congress in 2000 to provide grants to help address their 
local air service problems, such as high fares and insufficient levels 
of service. Several communities in my State, including Grand Forks, 
Jamestown, Devils Lake and Fargo, have received small community air 
service development program grants to improve air service. Minot, North 
Dakota has submitted a grant application in fiscal year 2007. 
Unfortunately, the President has proposed to eliminate this program in 
his fiscal year 2008 budget.
    In testimony before a House panel last month, Michael Reynolds, 
Deputy Secretary for Aviation and International Affairs at the U.S. 
Department of Transportation, said DOT is monitoring the progress of 
the communities who have received past awards but that ``it is 
difficult to draw any firm conclusions as to the effectiveness of the 
Small Community Program in helping small communities address their 
service issues'' because ``. . . the majority of the projects involve 
activities over a 2- to 4-year period'' and ``many grant projects are 
still in process.'' Does the FAA routinely eliminate programs before 
they've ever been properly evaluated?
    Answer. There are a number of recent and ongoing efforts to 
evaluate the Small Community Air Service Development Program (SCASDP). 
In 2005, the Government Accounting Office (GAO) assessed the program 
and found that certain types of grant awards worked better than others. 
As the GAO indicated in conducting its review, it is impossible to get 
a comprehensive understanding of the effectiveness of the program with 
a very limited sample of completed grants. Of the over 200 grants 
currently being administered, the GAO reviewed a little over 20 grant 
projects. GAO recommended the Department follow up with a later 
analysis of the program and the Department's Office of the Inspector 
General (OIG) is currently undertaking such a review. The emphasis of 
the OIG review is to evaluate the effectiveness of past grants on the 
ability of small communities to acquire and/or maintain air service. 
The OIG was able to include about 40 grants in its assessment.
    Question. What is the FAA's justification for eliminating this 
program?
    Answer. The administration has determined that the cost of 
continuing to fund the program cannot be justified in light of the many 
other budget priorities that are competing for limited funding 
resources. DOT and FAA are fully committed to ensuring that grants 
already awarded are effectively administered.
    Question. Did the FAA or DOT conduct any comprehensive review of 
the Small Air Service Development Program before it put the program on 
the cutting block for fiscal year 2008?
    Answer. GAO recommended the Department follow up with a later 
analysis of the program and the Department's Office of the Inspector 
General (OIG) is currently undertaking such a review. The emphasis of 
the OIG review is to evaluate the effectiveness of past grants on the 
ability of small communities to acquire and/or maintain air service. 
The OIG was able to include about 40 grants in its assessment.

      AIR TRAFFIC CONTROLLER OFF-THE-STREET HIRING--IMPACTS ON UND

    Question. Administrator Blakey, you face a daunting challenge in 
hiring and training 15,000 air traffic controllers in 10 years to 
replace the retiring controllers. We all agree that air traffic 
controllers are an integral part of the National Airspace System and we 
support efforts to meet the 15,000 controllers in 10 years goal. Your 
10-year plan identifies three pools of potential candidates: (1) 
previous controllers; (2) Collegiate Training Initiative program 
students; and (3) general public.
    How many new controllers has the FAA hired in the past 3 fiscal 
years?
    Answer.
  --Fiscal year 2005--519
  --Fiscal year 2006--1,116
  --Fiscal year 2007--1,815
    Note: Includes 81 transfers from the Flight Service Station 
operation.
    Question. Of that total, how many controllers were from Category 1 
(previous controller)? From Category 2 (Collegiate Training Initiative 
program students)? From Category 3 (general public):
    Answer.

----------------------------------------------------------------------------------------------------------------
                                                                    Fiscal Year     Fiscal Year     Fiscal Year
                            Category                                2005 Total      2006 Total      2007 Total
----------------------------------------------------------------------------------------------------------------
CATEGORY 1 (Previous Controllers) \1\...........................             210             516             666
CATEGORY 2 (Collegiate Training Initiative).....................             296             544           1,019
CATEGORY 3 (General Public).....................................              13              56             130
    TOTAL.......................................................             519           1,116           1,815
----------------------------------------------------------------------------------------------------------------
\1\ Includes Veterans Readjustment Act hires, and 81 transfers from the Flight Service Station operation.

    Question. The media has reported that the FAA plans to launch an 
aggressive new general public, off-the-street recruiting campaign 
called ``Destination FAA.''
    Can you describe your Destination FAA initiative, including what it 
is, its timeframe, cost, goals and objectives?
    Answer. ``DESTINATIONFAA'' is a slogan utilized under our corporate 
recruitment branding campaign. ``Land the Perfect Job,'' ``Reach Your 
Destination,'' and ``Watch Your Career Take Off,'' are a few of several 
tag-lines used in marketing career opportunities at FAA. The slogan and 
tag-lines are used when participating in career fair activities, on 
recruitment materials, and in advertisements.
    FAA's DESTINATIONFAA campaign was designed to market the agency as 
an employer of choice in an effort to attract highly qualified talent 
to the agency by educating the public on careers in aviation with 
emphasis on our mission critical occupations (i.e., air traffic 
controller, aviation safety inspector, engineers, airway transportation 
systems specialists, computer specialist and computer scientist). Our 
recruitment and marketing campaign are collaborative efforts developed 
by the Office of Human Resource Management and the lines of businesses. 
Our campaign encompasses a broad based outreach approach to attracting 
active as well as passive job seekers in all communities throughout the 
United States.
    For fiscal year 2008, our recruitment and marketing strategy is 
estimated to cost approximately $720,000. The recruitment plan utilizes 
the following activities:
  --Military Job Fairs
  --Internet advertising, recruitment tools and direct mass e-mailings
  --Newspaper (majority and minority publications) advertisements
  --Periodicals (majority and minority publications) advertisements
  --Transportation Outlets Advertisements
  --Radio and Television
  --Career Fairs
  --College, University and Technical School Outreach
    If the plan is fully funded and implemented, we anticipate reaching 
over 4,000,000 employment contacts.
    Question. Does this initiative represent a policy change or have 
you always allowed people with no experience to be considered for 
controller jobs?
    Answer. We believe this question refers to applicants from the 
general public. Those applicants are not required to have prior 
experience or training in air traffic control to be considered for 
jobs. Utilizing this source of applicants is not a change in policy. On 
page 28 of the fiscal year 2007 update to the Controller Workforce 
Plan, FAA stated that it planned to open vacancy announcements for the 
general public in the second quarter of fiscal year 2007. Vacancy 
announcements were opened from March through August 2007.
    Previously, applications from the general public were accepted in 
limited fashion through job fairs. This was done on an as-needed basis. 
In fiscal year 2007, FAA began recruiting from the general public more 
extensively than in the past few years. The objective is to maintain a 
large pool of readily available applicants. It should be noted that the 
FAA has also expanded the number of Air Traffic Collegiate Training 
Initiative schools, in part to assist in meeting the same objective.
    Question. I'm told that the FAA plans to advertise air traffic 
controller job announcements on popular Internet sites, such as 
diversity hire.com, Craig's List, and Career Builder. An April 19, 2007 
Craig's List posting states the ``FAA does all the training, so you 
don't have to know anything about air traffic control to be 
considered.'' The University of North Dakota (UND) in Grand Forks is 
one of the FAA approved Air Traffic Collegiate Training Initiative (AT-
TCI) programs. The UND program has graduated more than 500 students 
since 1993. However, UND has seen a reduction in the number of transfer 
students entering into its Air Traffic Control program. The school 
directly attributes this transfer student reduction to the FAA's off-
the-street initiative.
    Aren't you undercutting the need for a four year degree from an 
FAA-approved program when you are aggressively advertising that 
applicants need no experience to become an air traffic controller?
    Answer. Only those occupational series that have a ``positive 
educational requirement'' in the qualifications standards set by the 
Office of Personnel Management require a 4 year degree. Those 
occupations with positive educational requirements are rare and they 
also include specific courses taken or credits earned in a particular 
course of study. For most occupational series positions, including the 
Air Traffic Controller series, ATCS 2152 occupation, the qualifications 
are less restrictive in that they allow for either a full 4-year course 
of study leading to a bachelor's degree or 3 years of progressively 
responsible work experience or an equivalent combination of work 
experience and college credits. Applicants would also meet the 
qualification requirement upon the successful completion of an FAA 
approved Air Traffic-Collegiate Training Initiative (AT-CTI) program.
    The University of North Dakota has been a valued AT-CTI participant 
since the early development of the AT-CTI program. The approved AT-CTI 
programs vary between 4-year, 2-year, and certificate programs. All 
approved programs that meet the agency's requirements are acceptable to 
FAA. It is possible that the 4-year bachelor level programs may benefit 
applicants who may later transition into management and throughout 
their careers.
    This summer FAA re-evaluated all existing AT-CTI schools, and 
opened the program for new schools to apply. The FAA also evaluated and 
completed site visits at newly applied schools. As a result, the 
program accepted 9 new schools for a total of 23 current AT-CTI 
schools.
    The FAA is tapping into multiple hiring sources to keep up with the 
agency's staffing needs and projected attrition. The AT-CTI schools are 
a significant source of applicants for FAA. We speculate that this will 
become a more significant source for FAA in the coming years as our 
hiring needs continue to grow. For this reason, the agency has opened 
the AT-CTI program to new schools.
    Question. Is the FAA turning its back on the FAA-approved 
controller college programs?
    Answer. No. The FAA is in full support of the Air Traffic 
Collegiate Training Initiative (AT-CTI) program. The AT-CTI is a 
growing and significant hiring source for FAA. This hiring source will 
be critical to our meeting controller staffing needs in the next 
several years and we speculate the need for this source to grow.
    In fact, this summer FAA re-evaluated all existing AT-CTI schools, 
and opened the program for new schools to apply. The FAA also evaluated 
and completed site visits at newly applied schools. As a result, the 
program accepted nine new schools for a total of 23 current AT-CTI 
schools. We will continue to support and develop our partnership with 
all of the approved AT-CTI schools.
    Question. Do AT-CTI program graduates receive preference over a so-
called off-the-street applicant with no experience?
    Answer. The FAA strives to consider all qualified applicants 
equally regardless of which hiring pool they apply from. In addition, 
FAA considers all qualified applicants regardless of political 
affiliation, race, color, religion, national origin, sex, sexual 
orientation, marital status, age, disability, or other non-merit 
factors.
    Air Traffic Collegiate Training Initiative (AT-CTI) graduates are a 
valued hiring source for FAA and will continue to be.
    Question. Does the time and cost of training increase for off-the-
street applicants versus applicants who have graduated from an FAA-
approved AT-CTI program?
    Answer. Yes. General public announcement applicants must attend a 5 
week basics training course at the FAA Academy in Oklahoma City, 
Oklahoma. Since the Air Traffic Collegiate Training Initiative (AT-CTI) 
graduates bypass this requirement, the Agency incurs this additional 
time and cost for general public applicants.
    Question. Does a student from an AT-CTI program come to the FAA 
better prepared to succeed as an air traffic controller?
    Answer. The FAA believes that applicants who meet the agency's 
qualification requirements are prepared for success as an air traffic 
controller regardless of the hiring source and does not take a position 
on whether some hiring sources are better qualified than others.

                  UAS ACCESS TO THE NATIONAL AIRSPACE

    Question. The University of North Dakota Odegard School has a 
proposal pending at the FAA for the development of an unmanned aircraft 
system (UAS) test range in North Dakota that is controlled by a 
``Ganged Phased Array Radar System.'' This is a mitigation strategy for 
emerging onboard ``Sense and Avoid'' technology that would allow the 
test flights and certification of UASs without creating Restricted 
Airspace.
    Please provide me with your assessment of the UND proposal.
    Answer. The Department of Defense (DOD) is funding the project plan 
submitted by the University of North Dakota (UND). Although UND 
approached FAA with its proposal, FAA has made it clear that DOD must 
approve the project and that FAA could benefit by seeing the test plan. 
To date, no request for a test range has been filed with FAA, either 
from UND or DOD, for this test.
    FAA currently does not have enough data to determine whether the 
phased array radar system proposed for this test will serve as a 
potential mitigation strategy for detect, sense and avoid technology 
requirements in the NAS. DOD testing may provide additional data to 
conduct a better assessment of the technology. FAA looks forward to 
working closely with UND in the development of this project.
                                 ______
                                 
              Questions Submitted by Senator Arlen Specter

                       AIRSPACE REDESIGN PROJECT

    Question. How did you arrive at 5.09 minute average departure delay 
reduction benefit at Philadelphia under the three departure heading 
proposal as compared to one departure heading for west flow departures 
on Runway 27L? Local elected officials in Delaware County have 
concluded that the benefit is much lower by dividing the FAA's 
estimated 290,000 annual minutes in delay reduction at Philadelphia 
under the Preferred Alternative by the airport's 255,000 annual 
departures.
    Answer. An airspace design that works perfectly well on an average 
day may have serious flaws that are only evident under heavy traffic 
loads. Operational efficiency of a set of airspace designs is assessed 
by comparing systems on a day of heavy traffic. Environmental analysis 
is concerned with long-term influences, so it is done based on annual 
averages. The 290,000-minute figure is a product of the outcomes of the 
two analyses producing an annual total of an efficiency metric that was 
generated in response to a special request from Federal Aviation 
Administration leadership. It is not part of the usual analysis 
methodology.
    Delay is nonlinear. It grows faster as demand approaches the 
capacity of the system, so a day with 710 departures will have far more 
delay than a day with 700. Airlines anticipate a certain amount of 
delay; the delay on the average day does not disrupt passengers' travel 
plans. As a result, dividing the annual delays by the annual number of 
operations will tell you nothing about the delays on heavy traffic 
days, which are the days when delay affects operations. The 5.09-minute 
figure is obtained from a 90 percentile day spent entirely in the 
highest capacity configuration and is not weighted to account for the 
times when the airport is not in that configuration or demand is 
different. The 290,000-minutes per year figure includes weekends, low 
demand days, and less important airport configurations.
    Question. Section 17.5 of the operational analysis notes that 
because benefits analyses for airspace redesign projects must be 
referred to a large common denominator, airspace redesign benefits are 
often on the order of a few minutes. Further, section 17.5 notes that 
while these numbers appear small, a change of a few minutes per flight, 
over a large set of aircraft, ``can have enormous economic consequences 
for the aviation industry and the flying public.'' Is section 17.5 
implying that because the analyses included every flight in the study 
area, some of which are unaffected by the project, that the estimated 
benefit statistics are diluted? Would the benefits appear greater if 
unaffected flights were removed from the common denominator? Further, 
please expound on the ``enormous economic consequences'' which could be 
realized by a minute or two delay reduction.
    Answer. Certainly, the benefits would appear greater if the 
unaffected flights were removed from the common denominator. That would 
make it impossible to decide whether a change to Philadelphia was 
better for overall system performance than a change to Newark.
    ``Enormous economic consequences'' are described in section 17.2 of 
the Operational Analysis of Mitigation document. The most relevant part 
is excerpted here:
    A nationwide study conducted by Logistics Management Institute in 
1999 found that air traffic congestion nationwide could cost $46 
billion to the Nation's economy in 2010 because of increased travel 
time. The nationwide change in travel time that was anticipated for 
2010, converted to its equivalent in terms of the metrics used for this 
study, is approximately three minutes per flight. This includes costs 
to airlines, loss of service to people who wish to travel, and over 
200,000 lost jobs in aviation and other industries. The New York/New 
Jersey/Philadelphia airspace will handle 15-20 percent of all the air 
traffic in the Nation in 2011, so this airspace redesign is concerned 
with removing inefficiencies that could yield benefits to airlines, 
passengers, and businesses of $7 to $9 billion in 2011. This is a crude 
estimate; congestion on the east coast is worse than average in the 
United States and airlines' high-revenue flights are concentrated here, 
so benefits in this area may be worth more than this simple average.
    Question. What was the air traffic volume in the study area when 
the airspace system was originally designed in the 1960s and what is 
the current air traffic volume in the study area?
    Answer. Based on data that have been collected over more than 40 
years, it indicates approximately a doubling of the number of aircraft 
that transition the airspace on a daily basis. Because of larger 
aircraft being used, the number of passengers has increased almost six 
fold.
    Question. What is the estimated average noise exposure range for 
Delaware County in 2011 if no action were taken compared to the 
estimated average noise exposure range for Delaware County in 2011 
under the Preferred Alternative with mitigation?
    Answer. Under the Preferred Alternative, the distribution of noise 
is changing, but there are no significant increases. The census block 
with the highest noise exposure sees a higher day/night noise level 
(DNL). The noise exposure of the median census block decreases, but 
again not by a significant amount. The following table is a total of 
all Delaware County census tracts taken from our noise exposure tables 
provided on our project Web site.

                                   DNL
------------------------------------------------------------------------
                                                           Integrated
                                           Future No      Airspace with
                                            Action         Mitigation
------------------------------------------------------------------------
Highest noise exposure................            66.1              67.3
    99 percent of residents experience            57.8              57.4
     noise below......................
    90 percent of residents experience            49.3              51
     noise below......................
    50 percent of residents experience            43.8              43.2
     noise below......................
------------------------------------------------------------------------

    Question. It was noted at the public meeting that air traffic 
controllers at Philadelphia have not been briefed on this project. It 
would seem that consulting with the air traffic controllers who would 
be directly affected by this project would be in the public interest. 
Does the agency have plans to brief the air traffic controllers at 
Philadelphia or other facilities in the study area?
    Answer. Representatives of the air traffic controllers' union 
formed the core of the design team that created all the alternatives in 
the Draft Environmental Impact Statement. As the parts of the redesign 
affecting Philadelphia were developed, Philadelphia controllers became 
involved. The air traffic controllers' union later withdrew from 
participating in the plan. Philadelphia managers and supervisors were 
present at the public meetings to explain the proposal. Before 
implementation, all facility personnel will be trained on the changes.

                   PHL AIR TRAFFIC CONTROLLER ISSUES

    Question. Is the FAA considering a separation of the air traffic 
control tower and TRACON room at Philadelphia International? If so, 
what impacts will this have on Philadelphia's facility rating and air 
traffic controller salaries?
    Answer. The FAA is considering separating the tower and TRACON 
functions at several facilities across the country, including 
Philadelphia International. No decisions have been made at this time
    Question. In recent years, Philadelphia has consistently ranked at 
or near the bottom of major commercial airports in terms of on-time 
performance for both arrivals and departures. The latest statistics 
(Year-to-date through March 2007) place Philadelphia 28 out of 31 major 
airports in terms of on-time arrivals and 28 out of 31 in terms of on-
time departures. Only 64.9 percent of flights arrive to Philadelphia 
on-time, and only 67.24 percent depart on-time. Has the FAA considered 
hiring more air traffic controllers at Philadelphia as a way to address 
the air traffic volume that leads to these chronic delays?
    Answer. Yes, FAA is hiring more controllers for Philadelphia, but 
that will not solve the facility's delay issue. Most delays are a 
result of limited airport capacity, airline over-scheduling, and/or 
weather issues. Hiring more controllers will not fix any of those 
problems. Philadelphia's on-time performance rate is an indication of 
the need to modernize the air traffic control system.
                                 ______
                                 
            Questions Submitted by Senator Pete V. Domenici

                        TAOS, NEW MEXICO AIRPORT

    Question. Administrator Blakey, I have a local concern that needs 
your attention. I often hear from constituents in Taos, NM both opposed 
and in support of proposals to improve the airport. I recently met with 
the Town of Taos officials about the need for a new runway to improve 
safe access at the Taos Airport, and my staff recently met with leaders 
from the Taos Pueblo on the same issue. This is not a new issue, and I 
know it is also not a simple one. I understand that the FAA has 
released and received comments on a draft Environmental Impact 
Statement regarding the Taos Airport runway and the related expansion. 
The review process languished for several years, but now seems to be 
moving forward.
    Would you please provide me with an update on the status of the 
Environmental Impact Statement and the public process associated with 
the study, so I can update my constituents in New Mexico?
    Answer. A Draft Environmental Impact Statement (EIS) for the 
proposed new runway was issued in October 2006. A public hearing was 
held on November 14, 2006, in Taos. The public and agency comment 
period on the Draft EIS was scheduled to end November 26, 2006, but at 
the request of the Taos Pueblo, the comment period was extended to 
January 10, 2007.
    Extensive comments on the Draft EIS have been received from the 
Taos Pueblo, the National Park Service, the Advisory Council on 
Historic Preservation, the County of Taos, and the Taos Coalition.
    In order to address Pueblo concerns regarding potential audio and 
visual impacts of aircraft operations to and from the new runway, FAA 
proposed a flyover demonstration. After two attempts to schedule the 
flyover, it was held on June 26, 2007. A general aviation aircraft 
representative of the largest and noisiest type of aircraft currently 
using the airport performed the flyover. Current and future flight 
tracks associated with the new runway were flown, as were the flight 
tracks for one of the Pueblo's recommended alternative alignments for 
the new runway. An over flight of the Pueblo was also conducted at 
their request.
    A meeting was held in Taos, NM, on October 19, 2007, with 
representatives of the Taos Pueblo, the Town of Taos, the National Park 
Service, the Advisory Council on Historic Preservation, the State 
Historic Preservation Officer, and other interested parties. The 
purpose of the meeting was to entertain recommendations from all 
parties on means to mitigate the adverse impacts the project will have 
on the Taos Pueblo and other identified cultural and historic 
resources.
    The FAA is finalizing detailed responses to comments received on 
the Draft EIS. In addition, the FAA is nearing completion of its 
evaluation of the feasibility of a list of over 20 recommended measures 
to mitigate the projects forecasted impacts to cultural and historic 
resources. Once both of these efforts have been completed the FAA will 
coordinate a draft Final EIS with the Taos Pueblo and other consulting 
parties. At that time the FAA will also issue a draft Memorandum of 
Agreement for execution by the Pueblo and consulting parties in 
accordance with section 106 of the Historic Preservation Act. The 
agreement will address the adverse impacts to cultural and historic 
resources and proposed measures to lessen or mitigate those impacts. 
The estimated date for issuance of a Final EIS is by September 2008.
    Question. I understand that the Pueblo of Taos has submitted 
recommendations to you regarding their concerns, and the FAA is 
currently evaluating those recommendations and the costs associated 
with them. Would you also update me on your work regarding the concerns 
of the Taos Pueblo?
    Answer. The Taos Pueblo has provided very comprehensive comments on 
the Federal Aviation Administration (FAA's) Draft Environmental Impact 
Statement (EIS). Several comments, especially with regard to the 
feasibility of certain Pueblo recommended runway alignment 
alternatives, have required FAA to reexamine our earlier analysis and 
findings in the Draft EIS. Responses to those comments will be fully 
addressed as part of the Final EIS. A draft version of the Final EIS 
will be coordinated with the Pueblo for their review and comment before 
the FAA issues the Final EIS. The FAA proposes to provide the draft 
Final EIS to the Pueblo and other consulting and cooperating parties by 
February 2008.
    As a result of our meeting with representatives of the Taos Pueblo 
and other parties in Taos, NM on October 19, 2007, we are examining the 
feasibility of a number of measures recommended by the Taos Pueblo and 
others for reducing or mitigating the adverse impacts of the proposed 
new runway on the Taos Pueblo and other identified cultural and 
historic resources. At the October 19, meeting, FAA encouraged the 
attending parties to engage in an open discussion on ways to address 
the adverse effects of this proposed project. As stated in the meeting, 
FAA is open to any and all recommendations; nothing is off the table at 
this point.
    The FAA and the Taos Pueblo, along with the other interested 
parties, agreed to institute regular telephone meetings to discuss the 
status of FAA's work to address their mitigation recommendations as 
well as comments made on the Draft EIS. Telephone meetings were held on 
November 27, 2007, January 16, 2008, and February 22, 2008. A December 
2007 meetings was not possible due to individual schedules and the 
holidays. The next meeting date has not been set since the Taos Pueblo 
is in a quiet period which we understand will end around the end of 
March or early April 2008. The next meeting is expected be an on site 
meeting in Taos either in late April or May 2008 depending on 
participant's availability. Minutes of each meeting are prepared and 
sent to all participants.

                      ROSWELL, NEW MEXICO AIRPORT

    Question. Administrator Blakey, a group of public and private 
entities in southeast New Mexico has worked together for over 2 years 
to arrange for nonstop regional jet service between Dallas, TX and 
Roswell, NM. One of the requirements to make regional jet service a 
reality is an upgrade of the Roswell Airport from a Class 2 to a Class 
1 facility.
    I believe that the FAA has received the application from Roswell 
officials for Class 1 certification. Would you please provide me with 
an update on Roswell Airport's review process and notify me if there is 
anything I can do to help you with regard to the Class 1 certification?
    Answer. FAA issued Roswell a Class 1 certificate on May 4, 2007.
    Question. When communities like Roswell determine that a class 
certification upgrade is needed to accommodate 44 or 50-passenger 
regional service, what tools or technical assistance is available 
through the FAA to help these communities comply with FAA requirements?
    Answer. The FAA's Office of Airport Safety and Standards publishes 
a full series of Advisory Circulars that provide guidance on methods 
and procedures acceptable to the Administrator in meeting the 
requirements of 14 CFR part 139, Certification of Airports. In 
addition, personnel in FAA's Airports Regional and District Offices are 
available to help guide airport sponsors.
    Finally, airport development necessary to meet the higher standards 
(e.g. airport rescue and fire fighting vehicles, runway safety areas) 
is generally eligible for funding under the Airport Improvement Program 
or Passenger Facility Charge Program.

                         CONCLUSION OF HEARINGS

    Senator Murray. With that, the subcommittee stands in 
recess, subject to the call of the Chair.
    [Whereupon, at 11:32 a.m., Thursday, May 10, the hearings 
were concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]
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