[Senate Hearing 113-323]
[From the U.S. Government Publishing Office]
S. Hrg. 113-323
MANAGEMENT OF AIR TRAFFIC CONTROLLER TRAINING CONTRACTS
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HEARING
before the
SUBCOMMITTEE ON FINANCIAL AND CONTRACTING OVERSIGHT
of the
COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JANUARY 14, 2014
__________
Available via http://www.fdsys.gov
Printed for the use of the Committee on Homeland Security
and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri ROB PORTMAN, Ohio
JON TESTER, Montana RAND PAUL, Kentucky
MARK BEGICH, Alaska MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota
Richard J. Kessler, Staff Director
Keith B. Ashdown, Minority Staff Director
Laura W. Kilbride, Chief Clerk
Lauren M. Corcoran, Hearing Clerk
SUBCOMMITTEE ON FINANCIAL AND CONTRACTING OVERSIGHT
CLAIRE MCCASKILL, Chairman
CARL LEVIN, Michigan RON JOHNSON, Wisconsin
MARK L. PRYOR, Arkansas JOHN MCCAIN, Arizona
MARY L. LANDRIEU, Louisiana MICHAEL B. ENZI, Wyoming
MARK BEGICH, Alaska KELLY AYOTTE, New Hampshire
TAMMY BALDWIN, Wisconsin
Margaret Daum, Staff Director
Rachel Weaver, Minority Staff Director
Kelsey Stroud, Chief Clerk
C O N T E N T S
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Opening statement:
Page
Senator McCaskill............................................ 1
Senator Johnson.............................................. 3
WITNESSES
Tuesday, January 14, 2014
Mary Kay Langan-Feirson, Assistant Inspector General, Acquisition
and Procurement Audits, Office of Inspector General, U.S.
Department of Transporation.................................... 4
Patricia McNall, Deputy Assistant Administrator, Acquisitions and
Business Services, Federal Aviation Administration, U.S.
Department of Transportation................................... 6
Lynn Dugle, President, Intelligence, Information, and Services,
Raytheon Company............................................... 7
Alphabetical List of Witnesses
Dugle, Lynn:
Testimony.................................................... 7
Prepared statement........................................... 49
Langan-Feirson, Mary Kay:
Testimony.................................................... 4
Prepared statement........................................... 31
McNall, Patricia:
Testimony.................................................... 6
Prepared statement........................................... 41
APPENDIX
Responses to post-hearing questions for the Record:
Ms. McNall................................................... 55
Ms. Dugle.................................................... 69
MANAGEMENT OF AIR TRAFFIC CONTROLLER TRAINING CONTRACTS
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TUESDAY, JANUARY 14, 2014
U.S. Senate,
Subcommittee on Financial and Contracting Oversight
of the Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:34 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Claire
McCaskill, Chairman of the Subcommittee, presiding.
Present: Senators McCaskill and Johnson
OPENING STATEMENT OF SENATOR MCCASKILL
Senator McCaskill. Good afternoon. I apologize for being a
few minutes late. We just finished our weekly caucus, and as
usual, it was rainbows and unicorns. Just kidding. It was
contentious and difficult today, so we went over a little bit.
This hearing will now come to order. We are here today to
review the Federal Aviation Administration's (FAA) management
of the Air Traffic Control Optimum Training Solution (ATCOTS).
ATCOTS is an important contract because it supports the
training of this Nation's air traffic controllers, who, in
turn, manage the Nation's air traffic, a critical service. In
the next few years, we expect to see more and more retirements
from the generation of air traffic controllers that were hired
after the 1981 strike. At the time this contract was awarded in
2008, the FAA had a goal to hire and train 17,000 controllers
by 2015 in order to meet the expected demand. The FAA also
wanted to improve training to meet the needs of the new NextGen
air traffic control system.
In order to achieve this goal, the FAA awarded a contract
to Raytheon to provide training to facilities across the Unied
States in 2008. In 2010, 2 years into the contract, the
Department of Transportation Office of Inspector General (DOT
OIG) audited this contract and found significant problems. The
contract was premised on certain parameters, that there were
going to be 4,000 recruits to train and 159 sites to support.
But within just a few months, those numbers had increased
dramatically, to 5,620 recruits at 195 sites. The cost of the
contract had skyrocketed, and FAA was in danger of running out
of money under the contract.
The Inspector General (IG) had several recommendations for
the FAA. The most important one was that FAA needed to figure
out what training it needed and how much it was going to cost.
Unfortunately, FAA failed to take the IG's recommendation to
heart. Instead, FAA let the contract continue unchanged,
racking up at least $89 million in additional costs to the
taxpayer. Finally, as warned by the Inspector General, FAA ran
out of money a year early.
Again, FAA had the opportunity to follow the IG's common
sense recommendation to figure out what training it needed.
Instead, FAA decided the best course of action was to exercise
the contract's option period early.
I wrote to the then-Acting Administrator Huerta in 2012,
asking FAA to consider its plan carefully and to implement the
Inspector General's recommendations by updating cost estimates,
defining training requirements, and developing performance
measures for the contractor as opposed to the inappropriate
notion that the contractor provided their own performance
measures, all basic elements of good contracting. But, FAA did
not do this.
In 2013, the Inspector General released a second report
about the ATCOTS contract. The Inspector General found that
while there has been some improvement, FAA still has not
figured out its training needs. In addition, it appears that
FAA has managed to bring the costs of the contract under
control only by cutting the amount of training provided by the
contractor and instead relying on Certified Professional
Controllers to fill the gaps. FAA has been unable to tell the
Inspector General or this Subcommittee how much using these
highly paid government employees had added to the costs of
training new air traffic controllers.
In addition, more than 5 years and $512 million later, the
FAA has not achieved any of the three critical goals of the
original ATCOTS contract: Reduce training costs, reduce
training times, and bringing training innovations.
Today's hearing is about learning from the past mistakes,
fixing problems, and moving forward. I want to spend some time
having a discussion with the Office of Inspector General, the
FAA, and Raytheon in order to understand how these problems
came about and why they have not been addressed earlier. I want
to learn what both the FAA and Raytheon are doing right now to
get this contract back on track and what is being done to try
and achieve some of the initial goals of the contract.
I also want to understand what the FAA is doing to better
manage and oversee its contracts. This is especially important
because I understand that the FAA may start the acquisition
process on a new training contract later this year. I want this
Subcommittee to be satisfied that FAA has learned its lesson
and will not make these mistakes again. I want to know that the
FAA is taking concrete steps to address deficiencies, is
committing to making smart contracting decisions, and will
ensure that its own acquisition policies are actually followed.
I do not want to be here in a year's time having the exact same
hearing again.
Congress and the American public have entrusted the FAA
with taxpayer dollars and trust them to maintain the safety of
our airspace. Just this weekend in my State, a plane mistakenly
landed on the wrong airport in Missouri, coming dangerously
close to the end of a runway that was too short for the
aircraft in question. While there is no evidence of a
connection of what we are exploring here today and what
happened in Missouri, it is hard to understand how the air
traffic controllers allowed a Southwest Airline--and we are not
talking about a small general aviation aircraft, we are talking
about a domestic carrier of American citizens--how they allowed
them to land at the wrong airstrip, at the wrong airport, on
the wrong runway.
It is a timely reminder of the need to ensure that the
resources we spend on air traffic safety are spent effectively,
and that if we do not have enough in the contract to adequately
train our controllers, that we confront that rather than
continuing to renew contracts that have not been working or
have not had the oversight that common sense dictates.
I thank the witnesses for being here and I look forward to
their testimony.
Senator Johnson.
OPENING STATEMENT OF SENATOR JOHNSON
Senator Johnson. Thank you, Madam Chairman. You are
correct. This is a very timely hearing. I appreciate you
calling it.
I did read the Inspector General's report. It raised
probably more questions than it answered, so I will certainly
second your opening comment in terms of all the questions that
you would like to have answered during the hearing.
One of the things I certainly did in reviewing this and
getting ready for this hearing is just take a look at the
reasonableness of the cost per training. Since 2009, the
average cost--this is per the Raytheon contract--was about a
little under $20,000 per air traffic control trainee. It rose
to as high as $29,000, and in 2013 was about $26,000. That is
relatively high training costs. You can compare that to college
education. So, based on that information, I do not know if that
is appropriate or inappropriate in terms of the total expense.
I want to understand exactly how the training occurs, who is
doing it, how much is done by the FAA, how much is done by
Raytheon, what the breakdown is, how intensive this training
is. So, I just really want to understand the complete training
process.
I am certainly looking forward to the testimony. I am
hoping that is the kind of information I certainly get out of
this hearing. But, again, I certainly thank the witnesses for
coming here and being willing to testify and look forward to
your testimony.
Thank you, Madam Chairman.
Senator McCaskill. Let me introduce the witnesses today.
First, we have Mary Kay Langan-Feirson, who is the
Assistant Inspector General for Acquisition and Procurement
Audits at the U.S. Department of Transportation, Office of
Inspector General. In this capacity, she oversees audits
relating to the Department of Transportation acquisition and
procurements, including direct contracts and contracts awarded
by grantees. Prior to joining the Office of Inspector General,
Ms. Langan-Feirson worked in the Department of Transportation's
Office of General Counsel for 30 years.
Patricia McNall is the Chief Acquisition Officer and Deputy
Assistant Administrator for Finance and Management at the
Federal Aviation Administration, and I will say with a sense of
a humor, obviously the person who got the short straw at the
FAA. I will say on the record, I am disappointed--not that I am
not thrilled to have you, Ms. McNall, but I think the person
who should be sitting there should be the person who has
oversight of this program. They declined to attend this and
sent you, and that--I will give you a chance to address that
when you testify, but I do not think you are in a position to
know as much about this as we need to know and it is
disappointing, but I will tell you candidly in this particular
area, I was not shocked when I heard that you were being sent
in terms of getting the short straw.
In your outstanding 30-year FAA Career, you have served in
various positions, including Acting Deputy Assistant
Administrator for Policy, Planning, and International Aviation,
and Deputy Assistant Chief Counsel for FAA's Technical Center.
Prior to assuming your current position, you were the FAA's
Assistant Chief Counsel for Acquisition and Commercial Law.
Lynn Dugle is a Vice President at Raytheon Company, and
President of Raytheon Intelligence, Information, and Services,
a position she has held since 2009. Before joining Raytheon in
2004, Ms. Dugle held officer-level positions with ADC
Telecommunications and began her career at Texas Instruments.
I thank all three of you for being here. It is the custom
of this Subcommittee to swear in all witnesses that appear
before us, so if you do not mind, I would ask you to stand and
take the following oath.
Do you swear that the testimony that you are about to give
before this Subcommittee will be the truth, the whole truth,
and nothing but the truth, so help you, God?
Ms. Langan-Feirson. I do.
Ms. McNall. I do.
Ms. Dugle. I do.
Senator McCaskill. Thank you all very much.
We will be using a timing system today. We are not
sticklers about that, but we will ask you to try to keep your
testimony to 5 minutes. Obviously, you are welcome to supplant
your oral testimony today with any other information you would
like to have us put in the record concerning our hearing topic.
And we will begin with you, Ms. Langan-Feirson.
TESTIMONY OF MARY KAY LANGAN-FEIRSON,\1\ ASSISTANT INSPECTOR
GENERAL, ACQUISITION AND PROCUREMENT AUDITS, OFFICE OF THE
INSPECTOR GENERAL, U.S. DEPARTMENT OF TRANSPORTATION
Ms. Langan-Feirson. Chairman McCaskill, Ranking Member
Johnson, thank you for inviting me here today to testify on
FAA's Air Traffic Control Optimum Training Solution contract.
The $859 million contract was intended to provide up to 10
years of support to train approximately 17,000 air traffic
controllers, most of whom FAA planned to hire over the next
decade.
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\1\ The prepared statement of Ms. Langan-Feirson appears in the
Appendix on page 31.
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In September 2010, we reported several contract weaknesses
that challenged FAA's efforts to effectively manage the ATCOTS
program. FAA has made progress in addressing many of the
weaknesses we identified. However, more than 3 years after that
report, FAA has yet to address our most important
recommendation, which is to clearly define controller training
requirements and determine whether they can be achieved within
the existing cost baseline of $859 million.
Specifically, we recommended that FAA update its training
requirements and develop criteria for determining whether the
agency should exercise contract options beyond the 5-year base
contract. Despite our recommendation, the ATCOTS program
experienced four consecutive years of cost overruns, totaling
about $89 million, due largely to FAA's lack of clearly defined
requirements. In the first 2 years alone, contract costs
exceeded negotiated values by $46 million, and the contractor
was required to provide far more training than FAA originally
estimated.
As a result, FAA ran out of money in the fourth year of the
base contract and was not prepared to make an informed decision
on how to best meet its controller training program needs.
Ultimately, FAA chose to exercise the contract's first option
period a year earlier than planned without first clearly
defining its training requirements or determining whether to
exercise the option or take a different acquisition approach.
In our most recent report, released last month, we know
that FAA has taken some steps to better assess its training
needs. For example, FAA reestablished its use of an annual
workplan to better identify training requirements. However, the
plan still does not capture all of FAA's training needs,
including training on new air traffic controller systems, such
as the En Route Automation Modernization (ERAM). If FAA does
not clarify and update its training requirements, the ATCOTS
program remains at risk of cost overruns in the future.
During our recent audit of ATCOTS, we also identified
contract management weaknesses that undermine FAA's ability to
achieve its training goals. For example, FAA has not used its
award fees or incentive fees to manage the contract
effectively. One of the FAA's key training goals is to reduce
training times, but the award fee performance measures have not
been adequately linked to this goal, an issue we first reported
in 2010. Between fiscal years 2009 and 2012, controller
training times actually increased by an average of 41 percent,
taking 9 months longer, on average, to certify each controller.
Over the life of the contract, FAA paid the contractor over $17
million in award fees for performance measures that did not
effectively motivate the contractor. FAA also paid $14 million
in incentive fees despite 4 years of cost overruns. This is
counterintuitive to the concept in use of award fees.
In its response to our 2013 report, FAA announced that its
goal is to award a new contract to replace ATCOTS as early as
fall of 2014. To avoid repeating the problems with ATCOTS, it
is crucial that FAA address our recommendation to clearly
define its training requirements and decide whether it needs to
rebaseline before awarding a new contract. We will continue to
monitor FAA's progress in implementing our recommendations and
provide this Committee, the Secretary, and FAA with future
updates on the program.
This concludes my prepared remarks. I would be happy to
answer any questions you may have.
Senator McCaskill. Thank you very much.
Ms. McNall.
TESTIMONY OF PATRICIA MCNALL,\1\ DEPUTY ASSISTANT
ADMINISTRATOR, ACQUISITIONS AND BUSINESS SERVICES, FEDERAL
AVIATION ADMINISTRATION, U.S. DEPARTMENT OF TRANSPORTATION
Ms. McNall. Good afternoon, Chairman McCaskill and Ranking
Member Johnson. I am Pat McNall, the FAA's Acquisition
Executive, and I am responsible for the agency's acquisitions.
I appreciate this opportunity to speak with you today about the
FAA's Air Traffic Controller Training Contract.
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\1\ The prepared statement of Ms. McNall appears in the Appendix on
page 41.
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The FAA's mission is to ensure the safest, most efficient
airspace system in the world, but we are also committed to cost
effectiveness. The taxpayer expects and deserves nothing less.
In 2005, the FAA projected the need to hire 17,000
controllers by 2015. This unprecedented level of hiring and
training was necessary to replace the large number of expected
retiring controllers and meet projected increases in air travel
demand. To manage this large training effort, the FAA proposed
replacing two existing level of effort contracts with a single
centrally managed performance-based contract. Simply put, this
means we were removing and transitioning from existing
contracts where we specified the number of instructors and the
method of providing the training to a new contract that would
specify the number controllers to be trained, plus or minus 10
percent, allow the contractor to determine the best means of
training these controllers, while we measure its effectiveness
and ability to do so according to pre-set metrics.
In September 2008, after running a full and open
competition, the FAA awarded the contracted titled the Air
Traffic Control Optimum Training Solution contract, to Raytheon
Technical Services Corporation with a ceiling value of $859
million. In the early years of the contract, however, we
encountered significant challenges and costs. We underestimated
the difficulty in transitioning from level of effort contracts
in place for over 20 years to the new performance-based ATCOTS
contract. We reverted to the methods we knew had been working
in the past. Our training needs, both in the number of students
and the technology for which we needed to provide the training,
accelerated faster than we anticipated. We incurred a
substantial cost, accordingly.
We have taken significant steps to improve our management
of the ATCOTS contract. I would like to highlight a few of
these steps. The FAA provided increased management attention
and requirements control by consolidating all training under
the FAA's Air Traffic Organization Vice President for Safety
and Technical Training. Additionally, we imposed an award fee
structure that motivates the contractor to control costs. We
implemented a new training planning tool to better define and
control our dynamic training needs. We developed guidelines to
monitor required performance standards and expected outcomes
for the contractor, and we hold our oversight staff accountable
for overseeing these standards. These changes are improving our
oversight, management, and administration of the ATCOTS
contract.
We appreciate the Office of Inspector General's audit of
the contract. We are confident that the measures we have taken,
which fall in line with their recommendations, will allow us to
stay on track for the remainder of this contract.
The FAA recently issued a market survey and request for
information as the first step to a possible replacement of the
ATCOTS contract. If we proceed with this procurement, we will
replace the contract before the end of this calendar year.
Whether we replace it or not, I am confident that we will
continue to provide quality air traffic control training.
The training of air traffic controllers will continue to be
a critical need for the agency. We estimate that we will need
to hire 11,700 controllers by the year 2022. In order to
maintain safety and handle the high volume of air traffic, we
need to maintain a steady hiring and training rate through this
time. Our ability to do that, however, has been challenged by
decreased funding, including the sequestration. All training
courses at the FAA Academy were canceled since sequestration
was implemented and have only resumed this month.
The FAA was also unable to hire any new air traffic
controllers and will have to now accelerate hiring, budget
permitting, to ensure that we have a sufficient number of
controllers. This increased rate of hiring will bring with it
increased training requirements beyond what we predicted for
this coming year.
Whenever we face uncertainty about hiring and funding, we
face uncertainty about our training requirements. This makes it
very difficult to predict, cost, and plan for the best and most
effective cost effective contract we can have, but we remain
committed to ensuring the safety of the National Airspace
System and will not ever compromise safety, even in these
uncertain times.
Ms. Chairman, this concludes my statement and I would be
happy to take questions at this time.
Senator McCaskill. Thank you very much.
Ms. Dugle.
TESTIMONY OF LYNN DUGLE,\1\ PRESIDENT, INTELLIGENCE,
INFORMATION, AND SERVICES, RAYTHEON COMPANY
Ms. Dugle. Good afternoon, Chairman McCaskill and Ranking
Member Johnson. I am Lynn Dugle, President of the Intelligence,
Information and Services business of the Raytheon Company, the
business which is the prime contractor for the ATCOTS program.
Thank you for the opportunity to address the Subcommittee on
Raytheon's management of the program, our ongoing efforts to
reduce cost, and the new training innovations we can bring to
the program.
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\1\ The prepared statement of Ms. Dugle appears in the Appendix on
page 49.
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Before I do so, let me provide some relevant context on
Raytheon and our training. We are one of the world's leading
providers of mission critical training solutions. We train more
than two million people a year whose missions include national
defense, U.S. intelligence operations, cybersecurity, and, of
course, national airspace management. In addition, our training
solutions extend to critical needs in the commercial sector.
Raytheon is also one of the world's largest providers of
air traffic management systems. Our systems control more than
two-thirds of the world's airspace and our company is an active
participant in the FAA's Next Generation program.
By way of starting, let me say that Raytheon agrees with
the general conclusion of the IG report that progress has been
made, yet much more work remains. Raytheon and the FAA have
built a partnership that has addressed the agency's very
dynamic training needs for more than 5 years. During the last
year, we have accelerated those improvements, and now, we have
a solid foundation to get future gains.
Let me now share my thoughts on the three topics that the
Committee requested Raytheon to cover, management of the
contract, cost reductions, and new training innovations or
transformation.
The management of this contract was challenged from the
start by those unexpected increases in cost and scope that were
identified after the contract began. This included a hiring
surge that resulted in a 40 percent increase in year one. There
were also new training requirements for 700 of these new
trainees. There were new air traffic control system
modernization requirements, the ERAM that you mentioned, and
new tower simulation needs.
Nevertheless, Raytheon responded to those challenges by
training 20 percent more individuals over the 4-year period. We
lowered the cost per student on Raytheon-delivered training by
6 percent, lowered the cost--decreased the controller failure
rate by 12 percent. We shortened class durations at the Academy
by 10 percent. And we achieved a 23 percent increase in the
utilization of the complex and expensive tower simulators.
On the topic of cost reduction, Raytheon and the FAA are
working together to maximize the training that can be
delivered, can be accomplished, within the budget given. Let me
cover some of the changes we have already made.
For the first time, FAA's field managers, onsite managers,
are involved in deciding local training priorities, which will
lead to more effective and more efficient training across the
system. Their involvement was enabled by a new planning and
execution tool developed by Raytheon at our own expense to
assist with that planning. In partnership with the FAA, we have
also implemented new workforce practices and scheduling
efficiencies at the Academy that will reduce the fiscal year
(FY) 2014 costs by an additional 5 percent. We have also
reduced our Program Management Office by 20 percent, after
working with the FAA to streamline contractual reporting
requirements. This reduction will result in $2 million of
annual savings.
Let us shift to the topic of new training innovations. I,
again, agree with the IG report that significant opportunities
exist to further modernize training and reduce our cost. With
support and approval from the FAA, we can implement innovations
that will allow us to deliver high-quality training at a much
lower cost.
Raytheon has provided numerous proposals and white papers
outlining potential areas for important innovations. The
biggest opportunity now before us is the implementation of the
ATCOTS Curriculum Architecture Project. This project created a
blueprint for the systematic modernization and transformation
of air traffic controller training by identifying the best
training mechanisms, methodologies, and then how to best
sequence the training to avoid any duplication. We have also
presented and shared other opportunities with the FAA, such as
Virtual Classroom Training and the implementation of remote
training for the Air Traffic Basics Course, both of which I
discussed in more detail in my written testimony.
I would like to conclude by emphasizing that significant
progress has been made over the past year in a very complex,
challenging, and critically important program. Raytheon and the
FAA have established a solid foundation for future performance
gains and future cost reductions. I believe Raytheon has the
program knowledge, the transformational training capabilities,
and the larger air traffic management domain experience to
continue to collectively support the FAA and meet the training
needs of our air traffic control professionals.
Thank you very much for the opportunity. I look forward to
answering any questions you may have.
Senator McCaskill. Thank you, and once again, I appreciate
all of you being here.
I would ask each of you before we begin questioning, if you
would, to try to assign a grade to the management and oversight
of the ATCOTS contract. Ms. Langan-Feirson, what grade would
you give it?
Ms. Langan-Feirson. An incomplete.
Senator McCaskill. Ms. McNall. That was kind. Ms. McNall.
Ms. McNall. I am inclined to agree. Actually, I would also
point out, I think the grade has changed over time, all right,
so I would say we started off with a C, at best, and then it
progressed to a B.
Senator McCaskill. OK. And Ms. Dugle.
Ms. Dugle. I think on the management of the program and
meeting our budget constraints, none of us would be pleased
with our grade. I think on the quality of the training
delivered, I would give us a much higher grade. I also would
warmly embrace the idea that we have improved through time,
improving more and more as each year has progressed.
Senator McCaskill. I know that the FAA has implemented some
of the recommendations from the initial audit, though. I think
the thing that is hardest for me is, as was mentioned in Ms.
Langan-Feirson's testimony, it did not implement the most
critical recommendation, which is to assess your training needs
and figure out what you want. That is the most important thing
in contracting in government, is to know what you want. You
cannot get a bargain if you do not know what you want. You
cannot, frankly, adequately oversee a contract unless you know
what it is you are actually acquiring, what you want, and how
much it is going to cost. And it is still unresolved. Can you
address that, Ms. McNall? Why is this so hard to figure out
what you want and what it is going to cost?
Ms. McNall. Yes, ma'am. Actually, let me explain a little
bit about the training process. It is a very dynamic situation.
The piece that is actually in many ways the easiest, and if I
do a new contract it is easy enough that I am even thinking
maybe we can fix price to work, is when we hire controllers, we
bring them to the Academy and they provide a very basic FAA air
traffic controller training, all right. That is the first step
of the training process. That, at least I know I am hiring X-
number of people. They are going to come into a class and the
class is going to be conducted roughly like this, absent any
training innovations.
From there, they go to an air traffic control facility, all
right, and they are going to get some additional training at
that facility. This is where it becomes a very dynamic
situation. Although we know we have a bow wave of retirements
coming, because we have a mandatory age cap by which
controllers must retire, and as you know, we had to hire a
great number of controllers all at one particular point in
time, which means they are more or less going to be retiring at
the same time--because of that, we know we need to hire a lot.
We know we have to train a lot.
But I do not know ahead of time which specific controller
is going to retire at which specific facility and what position
that controller is on. For the FAA air traffic controller
training, it has to be, when you get to the facility level,
unique not only to that facility, but unique to that particular
position that the controller is on. We predict as best we can,
and we have developed a training tool with Raytheon that we
have implemented with our field that now involves a rolling
process that we know with a fairly good place, at least 30 days
ahead, 60 days ahead, and 90 days ahead, what we think that
training will be that we can then pinpoint and identify.
Once the controller candidate, so to speak, graduates and
changes that applies not only to new trainees, that applies to
existing controllers who may need to be trained. If they are
going to change positions, they need to be trained for the new
position to which they are going to move. If they are going to
change facilities, they need training for that new facility as
well as the new position on which they are going to be.
At that point, the FAA takes over the training and we use
our professional air traffic controllers to provide on-the-job
training. On-the-job training accounts for about 75 percent of
the total amount of training that our controllers go through.
In fact, that is the majority of the cost of our training
program.
Senator McCaskill. And how much is that training costing
you?
Ms. McNall. We provided some figures for the Committee and
I can look it up again, but total cost is around $250,000 per
controller, approximately. That is total cost of both our
contractor training and our own employee training.
Senator McCaskill. So, 75 percent of that is your
employees?
Ms. McNall. Or more, yes.
Senator McCaskill. OK. So, you are saying that 75 percent
of $250,000 is being done by your folks.
Ms. McNall. In fact, I can provide that for the record, if
you like. I do have some figures with me I can go through with
you, if you like, on what our labor costs are for our employees
to train you.
Senator McCaskill. OK. I will come back to this on the
second round because I need to talk to my staff, because we
discussed this and this is the first I have heard this number
and I want to go through it with them while Mr. Johnson is
questioning you.
Ms. McNall. Mm-hmm.
Senator McCaskill. Why in the world would you go from 4,000
to 5,620 in the first year? How could the contract be that far
off that soon, that close to the beginning of the contract?
Ms. McNall. Yes, ma'am. Actually, we do not agree with that
5,600 number. I understand exactly where the number came from,
or at least we think we do, but we cannot match it with our own
records. The contract provided that the controller would, for
each year, need to train about 4,000 controllers, and it said,
plus or minus 10 percent.
Senator McCaskill. Right.
Ms. McNall. We do agree the number was higher, and by our
calculations was around 4,500 to 4,600. I think, and doing it
wrong. It is different data systems that collect the data that
I think is helping lead to why there is a bit of a difference--
--
Senator McCaskill. OK. Wait. Let us back up here.
Ms. McNall. Mm-hmm.
Senator McCaskill. So, you are telling me that you are
paying for training for these people and you are not even sure
and cannot articulate why the IG would say there was 5,620 and
you are saying there was 4,500?
Ms. McNall. No, I can definitely articulate that. The 5,600
was Raytheon's number, which we believe includes all people
initially put into the class, whether or not they graduated
from the class or washed out. It includes training that we
would otherwise not necessarily have counted, all right. So----
Senator McCaskill. Well, why did you pay them for it, then?
Ms. McNall. Oh, one thing, it is a cost reimbursement
contract and we treated it like a level of effort contract, and
the way we should have is basically a performance-based
contract. But they were successful in training this number of
personnel, and we do agree--they did put in a request for
equitable adjustment and at the end, we agreed they did train
more than we expected. So, if you take the plus 10 or minus 10
percent, that makes 4,400 at the op side. We do agree they
trained at least 4,500 to 4,600.
In addition, they had to do different kinds of training.
There is a separate requirement which says that we can only
vary by 3 percent the different categories of training and we
varied more than that. So, some of the technology training was
increased. Some of the training for controllers that are
already trained but now need to be trained for new positions,
that was higher than we anticipated, as well.
Senator McCaskill. OK. So, you thought the most you were
going to pay for was 4,500. You paid for 5,600, correct?
Ms. McNall. I would----
Senator McCaskill. Is that correct, Ms. Langan-Feirson,
that they paid for 5,600 the first year?
Ms. Langan-Feirson. The numbers that we have are that FAA
underestimated the number of controllers by 41 percent. There
were 5,620 developmentals rather than 4,000 that was in the
solicitation.
Senator McCaskill. OK. So, here is the problem. You are
paying a thousand over. Forty percent is the figure that they
are using.
Ms. McNall. Right.
Senator McCaskill. And what happened when that occurred?
Were there alarm bells that rang? Did everybody get together
and say, we have to look at this contract, we have to change
some things and we have to figure out what our number is for
next year, and so the next year, it got better?
Ms. McNall. Yes, ma'am, we did----
Senator McCaskill. No, it did not. You still had major cost
overruns the next year.
Ms. McNall. Yes, we did, but the cost runs were less, not
nearly--do not get me wrong, the cost overruns were still
present and they were present for the third year, as well, and
I am horrified by that, as well, all right. But, we started a
positive trend, all right. We got our controls. I will tell
you, honestly, the first 3 years of the contract, management in
particular were very troubling. The fourth year, we got better.
That is why I am saying we succeeded in our most important
goal, which is getting air traffic controllers trained as
needed and providing the quality of training that was needed.
The problem was the cost control----
Senator McCaskill. Well, I think, there, the issue is
that--even in this testimony today, there does not seem to be a
clear explanation that can be articulated between the
difference in what you contracted for and what you paid for,
and it does not even appear that you agree that they were
training--that they should have been training all the people
they were training, based on the testimony you have just given,
that they were doing training you did not even anticipate them
doing.
And so you say it was a lot different in the second year,
but my recollection is the first year, it was $40 million
over--or $20 million over?
Ms. McNall. No, 20 over.
Senator McCaskill. The first year 20 over, and then the
second year, was it not 20 over again?
Ms. McNall. Not quite.
Senator McCaskill. It was $29 million the first year and
$31 million the second year.
Ms. McNall. I will be happy to double-check those numbers
for you, with you and confirm back. The issue we had that was--
keep in mind, the difference between a level of effort contract
or our contract where I am paying per controller, which was an
idea we originally contemplated, but the IG appropriately
pointed out to us would not be appropriate, it is a
performance-based contract. So, we are not training per
controller. We are training the volume of controls, whatever
that amount might be, so long as it is within 10 percent of
4,000, right. Above that, we recognize, yes, where the contract
is entitled to an equitable adjustment, as well as if the mix
changes of controllers beyond what we anticipated, and we
agreed, that mix also did change. It did entitle the contractor
to an equitable adjustment.
One of the things we did that first year, for example, on
the incentive fee, they only got their minimum fee. They got
nothing more than that.
Senator McCaskill. OK. All right. Let me let Senator
Johnson ask, and then I will come back and followup.
Ms. McNall. Mm-hmm.
Senator Johnson. Let me use a little accounting lingo here.
You have a price variance and you have a----
Ms. McNall. Yes.
Senator Johnson [continuing]. A volume variance. It sounds
to me like the problem with the contract was a volume variance.
You had to train more air traffic controllers, is that
accurate?
Ms. McNall. That is largely accurate, and the only reason
why I am hesitating at all is one of the things the FAA did was
require this contractor to mirror the level of services being
provided by the prior contractor without first evaluating, were
all of those services the prior contractor had providing
needed. We just told the contractor, go out, every facility at
which our prior contractor was at, provide at least that amount
of staffing. While we were running the procurement, which in
this case was a little bit longer process than normal, that
prior contractor was continuing to expand the sites at which
they were present and providing training. In fact, that grew,
although it was known within the agency----
Senator Johnson. So, you had training overlap between two
contractors, which----
Ms. McNall. Yes.
Senator Johnson. OK.
Ms. McNall. Three contractors, in fact, since we were
replacing----
Senator Johnson. Let us just back up----
Ms. McNall. Right.
Senator Johnson [continuing]. Because, I mean, I am new to
this whole issue. Can you give me a little bit of history of
training in the air traffic control system? For example, after
the professional air traffic controllers organization (PATCO)
strike, we had to hire a lot of people. We had to train a lot
of people.
Ms. McNall. That, we did.
Senator Johnson. Was that done internally, on-the-job
training? Was that done with an outside contractor?
Ms. McNall. It was done with the help of an outside
contractor, just as it is today. For approximately 20 years
before this contract, all right, we started off with training
at our Academy in Oklahoma City. The Academy in Oklahoma City
contracts, and at that point, they were contracting with
Oklahoma University to provide training at the Academy. So,
that was the starting point. That was the same up until we
competed and Raytheon won the contract.
Senator Johnson. So, prior to that, you were actually
contracting with a university to do the training?
Ms. McNall. Yes, at FAA's facilities. So, it is not like we
were sending them to college or university.
Senator Johnson. Who would be the other potential
competitors for this contract, other universities? Other
private sector businesses?
Ms. McNall. Yes to both, because Oklahoma University was
only providing Academy training, which was sort of the initial
basics course at this one facility. We hired potential air
traffic controllers. They take a test so we can determine, are
they likely to be good air traffic controller candidates. If
they pass that test, we hire them. We send them to the Academy
to begin their training.
From there, we send them to the facilities where we think
we are going to need the personnel, all right. Again, that is
an estimate, because we do not know exactly who is going to
retire when. But, based on statistics and historical patterns--
--
Senator Johnson. OK.
Ms. McNall [continuing]. We do our best guess. At the
field, a private sector contractor takes over, historically, a
separate contractor. It was a small business company,
Washington Consulting Group, held that contract for many years.
Senator Johnson. How many different air traffic control
positions are there? I mean, how many different classifications
of air traffic controllers are you training for, approximately?
Ms. McNall. I----
Senator Johnson. I mean, is there just one kind of air
traffic controller, or----
Ms. McNall. No.
Senator Johnson [continuing]. Are there 10? Are there 30?
Ms. McNall. No. The reason I am hesitating--I will promise
I will get back to you for the record with a better answer. I
can tell you that we have over 15 levels of facilities, so that
is----
Senator Johnson. That was my next question.
Ms. McNall. OK.
Senator Johnson. OK. So you have 15 different types of
facilities.
Ms. McNall. No, 15 levels. OK. I will back up a little bit
further.
Senator Johnson. Because, then I was going to say,
different types of equipment configurations. I am trying to
get----
Ms. McNall. Right.
Senator Johnson [continuing]. My arms around the complexity
of the training situation.
Ms. McNall. Yes. Absolutely.
Senator Johnson. You have different sized airports----
Ms. McNall. Different sizes of facility.
Senator Johnson [continuing]. Different sized towers,
different equipment configuration, you have different----
Ms. McNall. And not just towers, sir, if I may,
respectfully.
Senator Johnson. OK.
Ms. McNall. Right. We have towers. Then we have what are
called Terminal Radar Control Facilities. They may or may not
be located where the tower is. And then we have 22 route
facilities across the country that handle air traffic. They
basically handle different volumes of air traffic.
So, not only do we have the difference in facility size and
the difference in equipment, the layout, et cetera, we also
have different positions in that facility. So, one controller,
for example, will only handle arriving air traffic. Another
controller will handle only departing air traffic. Another
controller will be watching, generally, out for field----
Senator Johnson. OK. So, let us go back. A number of
different types of towers.
Ms. McNall. Yes.
Senator Johnson. Are they all the same, or are there
different configurations of that?
Ms. McNall. They are all----
Senator Johnson. Pardon?
Ms. McNall. They have very different configurations.
Senator Johnson. So, how many different configurations,
approximately? I mean, are you talking about 100 different
configurations? I mean, is each one----
Ms. McNall. Each----
Senator Johnson [continuing]. Totally separate, totally
unique?
Ms. McNall. We have tried to standard the physical layout
of the towers, but the physical layout of each airport tends to
be a little bit different, which means there are changes for
each airport, accordingly, right. If there is a mountain here,
if there is a cliff there, right, that is going to alter the
procedure. The air routes that the controllers have to guide
the pilots along, those vary, as well.
Senator Johnson. OK.
Ms. McNall. And, in fact, we have a variety of different
air routes that go into any one facility. In fact, and then
what air route can be used depends on the equipage of the
aircraft, and the controller has to know and visualize within
their mind not only where is that aircraft, but which route can
I give this aircraft based on the training of the pilot from
that aircraft as well as the equipage onboard the aircraft.
Senator Johnson. OK. So, the bottom line here, without
getting----
Ms. McNall. Mm-hmm.
Senator Johnson [continuing]. Spend a lot of time on the
detail, which I----
Ms. McNall. Sorry.
Senator Johnson [continuing]. Would be glad to get into at
some point in time, but the bottom line is there is a great
deal of complexity----
Ms. McNall. Yes.
Senator Johnson [continuing]. In trying to anticipate over
a 10-year contract what those training requirements are going
to be.
Ms. McNall. Exactly.
Senator Johnson. Is that at the core? And I will ask all
three of you to comment, because, to me, just writing down,
well, you have to define the training requirements, well, yes,
of course.
Ms. McNall. Right.
Senator Johnson. But then, all of a sudden, you realize,
defining the training requirements is unbelievably complex and
it is very hard to anticipate. I mean, is that-----
Ms. McNall. You are absolutely right, Senator.
Senator Johnson. Does anybody want to disagree with that?
Ms. Langan-Feirson. I would say----
Senator Johnson. Or chime in?
Ms. Langan-Feirson. I would agree. It is a very complex
task. I would also say that the FAA has been training
controllers for a very long time and it is a very important
task.
Senator Johnson. Ms. Dugle.
Ms. Dugle. And all I would answer is that one of the steps
that we have taken is to actually create a very simple tool,
but a very powerful tool, that takes that complexity,
decomposes it, puts it into an automated spreadsheet where all
of our then-onsite trainers--we talked about coming from
headquarters predicting and scheduling training out onto the
site. We then take that each month, analyze 30 days of history,
we look at our current 30 days, and then we do the forward
planning that----
Senator Johnson. So, Raytheon does its 10 to 25 percent--I
am looking at 25,000 versus 250 and I am saying that is 10----
Ms. Dugle. Yes----
Senator Johnson [continuing]. But somewhere in that 10 to
25 percent of the training, you do that on the very front end
and then----
Ms. Dugle. We do that now on a continuous basis.
Senator Johnson. But, I mean, in terms of the cycle of an
air traffic controller. I mean, are you primarily handling the
first year of training of an individual, and then it gets
turned over to on-the-job training with FAA personnel?
Ms. Dugle. It would be approximately a year. So, we do the
Academy training. We then do the onsite training and then we
transition to the FAA for the actual on-the-job training. So,
we handle two of the three components.
Senator Johnson. So, we can criticize the FAA for not
having defined this training requirement. How critical are you
of that? I mean, are you actually pretty sympathetic with the
complexity of it, or do you think there could be just a far
better job, even within the complexity, that we can always do a
better job, but----
Ms. Dugle. I think we can always do a better job. What I
will say, this program came under my responsibility in April
and I became a student of air traffic control training. I never
had any appreciation for the level of complexity. So, you have
the individual component----
Senator Johnson. Are you asking for reassignment yet, or--
--
Ms. Dugle. Yes, that is right. [Laughter.]
Ms. Dugle. I do not think I could pass the training, quite
frankly. But when you put the variables--and I am from an
engineering background, right, so to get a consistent answer, I
have to have so many known variables in an equation. When I put
in the personal talents, we screen candidates coming in, but
this is a very complicated job. Not everyone can do it. Then we
have all the factors that Pat talked about. So, I am----
Senator Johnson. Let me go over time just a little bit,
just because this ties in. How much remedial training are you
on the front end having to do just because the applicants
coming in, yes, they have a degree, but there are just
deficiencies and you have to bring people up to speed in terms
of whatever our education system should have done?
Ms. Dugle. So, probably the best factual indicator of that
is our fallout rate. When we assumed responsibility for
training, that failure rate was 29.5. Over the time period, we
have reduced that to 17 percent. I think in this kind of
training, you would always run in some level of double-digits
because you just absolutely cannot screen all the temporal and
visual talent.
Senator Johnson. So, the reduction really is better
screening, better application process, better hiring
procedures, and that would be----
Ms. Dugle. Well, and----
Senator Johnson [continuing]. On your part or on FAA's
part?
Ms. Dugle. And on our ownership, constantly improving that
training, right, modernizing the techniques so that people are
better able to digest and retain knowledge.
Senator Johnson. OK. Thank you. Sorry for going over.
Senator McCaskill. No, it is no problem.
Ms. McNall, the $250,000 figure that you cited in your
testimony a few minutes ago, that is the first we have ever
heard that number.
Ms. McNall. I apologize.
Senator McCaskill. Well, you know, we have been at this
since 2010.
Ms. McNall. Yes.
Senator McCaskill. I have been writing letters. We have
been trying to communicate with you and your agency. Now, we
got some spreadsheets, finally, on Friday----
Ms. McNall. Yes.
Senator McCaskill. and Ms. Langan-Feirson, I am not even
sure if you have seen these, but we have on Friday, you finally
gave us some information that says your Air Traffic Training
Detail for fiscal year 2012 is $359 million, is that correct?
Ms. McNall. I believe that would be for the--if that is the
sheet that shows the cost of FAA providing the training, I do
not believe that sheet necessarily includes the contractor
training.
Senator McCaskill. You do not know whether it does or does
not?
Ms. McNall. I hate to put it this way. I am trying to--from
that sheet, that would be FAA cost only.
Senator McCaskill. This is FAA costs only?
Ms. McNall. Yes.
Senator McCaskill. OK. And is there a reason why this was
unavailable to us for years and we got it the Friday before the
hearing? Would you not have this available?
Ms. McNall. We do have that available. We have had that
information available. I am sorry I did not know, at least
personally. I, too, only joined this job fairly--well, 2011.
Anyway, I did not know that you wanted that data, but, of
course, we will be happy to provide that data-----
Senator McCaskill. Well, let me just explain what we are
trying to do here.
Ms. McNall. Yes.
Senator McCaskill. We are trying to figure out if you know
what this costs.
Ms. McNall. Yes, ma'am.
Senator McCaskill. And we are trying to figure out if you
know what it is you are buying.
Ms. McNall. Yes.
Senator McCaskill. I get that what you are doing is
complicated.
Ms. McNall. Yes.
Senator McCaskill. But, at the end of the day, acquisition
is about the people who know what they need buying it and
having some idea what it costs.
Ms. McNall. Absolutely.
Senator McCaskill. So, you understand my concern that we
would have two IG reports and we would have a lot of criticism
about cost overruns, and for the first time at this hearing, we
finally hear a figure about what you think it costs to train
someone to be a functioning, well-informed, well-trained air
controller, and the Friday before the hearing, we finally get
numbers--do you have these numbers, Ms. Langan-Feirson?
Ms. Langan-Feirson. No, I do not.
Senator McCaskill. Have you tried to get these numbers?
Ms. Langan-Feirson. In our report, we have--those--I do not
know what those numbers are, but in our report, basically, one
of the findings that we have is that the FAA is responsible for
the on-the-job training. Raytheon is responsible for the
Academy training and the developmental training, and then they
get handed off for on-the-job.
Senator McCaskill. Right.
Ms. Langan-Feirson. The point is that the contract costs
are under the contract and there are other costs that the FAA
incurs to train an air traffic controller. You need to put
those two together to get the total cost.
Senator McCaskill. Absolutely.
Ms. Langan-Feirson. And when we went into the field and we
interviewed people in the field, we asked them whether they
were capturing the costs for kind of the off-loading of the
courses that Raytheon could not train because they ran up
against the cost ceilings, were those being captured, those
costs that the controllers were basically----
Senator McCaskill. Absorbing.
Ms. Langan-Feirson. They were self-performing and
absorbing.
Senator McCaskill. Right.
Ms. Langan-Feirson. And we do not think that they are. We
know that the FAA is basically capturing what they call OJT
costs, which those probably are, but we did not see accounting
codes that would then differentiate and kind of pull out those
costs that were being self-performed that should have been
performed our would have previously been performed under the
Raytheon contract.
Senator McCaskill. So, the issue here is this. Complicated
training, but this is to try to simplify the problem we have.
They cannot train, under the contract they have been given, do
as much work as they need to be doing. You ran out of money.
You had to start the option early, because you guys ran out of
money, and you have cut staff by, what, 30 percent, that are
doing the training?
Ms. Dugle. At various points in the contract.
Senator McCaskill. Yes. Well, you have had to cut staff
because there is not enough money. So, that means that the
agency is absorbing the costs of doing some of the training
that Raytheon is not doing now. So, if you are going to
recompete this contract, you cannot do it unless you figure out
what everything costs----
Ms. McNall. Right.
Senator McCaskill [continuing]. And have any hope that the
amount you are paying for the contract is the right number.
That is my sense of urgency here. I am very respectful that
this is hard. But if you are not even attempting to capture
your costs that you are absorbing because the contract amount
is clearly not correct, then all we are going to have is more
of this ad nauseam in the future until you figure that out.
So, is the $250,000 number one I can bank on at this
hearing? Is that the number it costs to adequately train air
controllers in the FAA?
Ms. McNall. That is our best calculation. It is an average
figure. Keep in mind, individual controllers----
Senator McCaskill. And that includes both Raytheon money
and the money that the agency is spending?
Ms. McNall. Yes. In addition, if I may, one of the points,
as the Inspector General pointed out, was the importance of us
tracking costs that our controllers are incurring, particularly
if they are going to pick up training that Raytheon otherwise
could have performed, right. That sheet that we provided you
has different categories of training put on it. One of those
categories is on-the-job training, which is the type of
training that the FAA controllers have always done. That is
work that Raytheon has never done, and, frankly, it is our
anticipation no contractor would be doing, right.
Senator McCaskill. Right.
Ms. McNall. That is the last step, right.
Senator McCaskill. Of course.
Ms. McNall. You will also see a category in there called
``Proficiency Training.'' That is a type of training that
Raytheon has historically performed. That is a type of training
that we have moved in-house, and there are a number of very
good reasons that I will be happy to go into if you like, but
you will see that we are tracking that cost.
Another cost is called ``Training, Other.'' It is under a
``Training, Other'' category that we track the time our
controllers spend providing training that otherwise would have
been done by Raytheon, all right. So, we are tracking all those
types of costs.
The other item that the Inspector General quite rightly
brought up was the potential of overtime. We are continuing to
track overtime to see if there is any increase or decrease.
And, in fact, our overtime cost had been, overall, decreasing,
and it is less than 1.7 percent currently.
So, yes, I fully agree with the Chairman. It is very
critical that we have a good understanding of our cost and what
is the right mix to be using between our--when we use a
contractor or when we are using our own personnel, along with
what is the right capability and skills that are involved. So,
that is engaged. We are keenly watching that.
One of the processes that we have changed since the ATCOTS
contract was originally awarded was starting to bring the types
of tools--and I apologize for going on--but beginning with the
types of tools that we have historically used when making
capital investments or information technology acquisitions to
our service contracts so that we can do that by alternatives
analysis.
Senator McCaskill. Well, that would be--yes, and here is
the thing. My colleague, who I have a great respect for because
I think that he would agree with me, it would be a good idea if
every member of the Senate has had to make a payroll, it would
be a great requirement for this job, because I guarantee you,
if you were a private business, you would have figured out
these costs before you had cost overruns of $89 million over a
period of just a few years. You would have figured it out. You
would have figured out whether or not it was cheaper or more
expensive to have Raytheon be doing this and asking for
increased contract amounts or whether it is more expensive for
the government to be doing it.
To be honest, Ms. McNall, I think you are just now getting
your arms around that. I think you went years thinking it was
not that big of deal, and I think that is why we are here,
because I think if you thought it was that big of deal, you
would not have had this same major finding in an audit 2 years
after the first one, and that is what brought us here today. I
did not know how else to get your attention, because it felt
like, to me, that you guys thought we were just bothering you,
and if you just held on long enough, we would go away.
I can assure you, I am not going away. We are going to get
this fixed. And when you recompete this contract, I am going to
be on it like a rabid dog, watching how this works, whether or
not you have finally figured out what you need and what it
should cost, and whether it is more cost effective to do some
of it in-house and more of it through Raytheon or another
contractor, whether you have the right mix, most of all, if you
understand what each different potential would cost, and that
is what I think really has been lacking.
I have a few more followups, but I have gone over and I
want to turn it over to Mr. Johnson.
Senator Johnson. Apparently, we have a vote called, so I
will keep this pretty short, but just really second what the
Chairman has said. It is about information. It is about being
able to have the tools and being able to make that evaluation
as to whether or not it is better to do it in-house versus hire
an outside contractor and who the different contractors are.
Ms. McNall. Right.
Senator Johnson. And this is going to just get more complex
as you move on to more technology. From my standpoint, I would
think moving forward with technology, particularly in an area
like air traffic control--I mean, I have watched my son do in-
flight simulators, amazed at the technology there. So, I would
think, being a real supporter of the private sector and the
innovation of the private sector, I would think the private
sector would probably be a little more nimble and be able to
bring some real technological advancements to the training
process to actually improve quality, which, by the way, that
has got to be the first consideration--quality, safety. That is
the first. I am concerned about cost, but, boy, we do not want
to compromise quality and safety at all.
But really taking a look at technology, and only with the
information, really understanding what the true internal costs
are in it, and I recognize that can sometimes be difficult to
ascertain, but it all depends on how complex it is in terms of
the use of personnel.
So, let me quickly ask that question. Do you have full-time
trainers within the FAA? Is that their entire task? Or is this
also where people have split duties, where they are air traffic
controllers at some point in time and--I mean, is just
gathering that information also complex, or is it just that
there has not really been the desire within the agency to
really make a real push on getting the information?
Ms. McNall. So, within the agency, we track the time of all
of our personnel, including our air traffic controllers, which
is then allocated to a particular cost code. That is one of the
things the Inspector General----
Senator Johnson. So, you should really have very accurate
information in terms of really what the training costs would be
internally.
Ms. McNall. And that is the information we have now
provided to the Committee.
Senator Johnson. OK. And, again, so you are saying it is
about $250,000, add to that about $25,000----
Ms. McNall. The $25,000 includes the contractor cost as
well as the FAA employee cost.
Senator Johnson. OK. So, it is $225,000 plus about $25,000.
Ms. McNall. Right.
Senator Johnson. I mean----
Ms. McNall. Keep in mind, it, generally speaking, takes
about 2\1/2\ years to train a controller.
Senator Johnson. Right.
Ms. McNall. That will include the training cost of the
controller who is being trained. Their salaries are also in
that----
Senator Johnson. So, to me, the metric--but even then, what
is the differentiation between full training of a raw recruit
versus refresher? Do you have some sort of sense of that
breakout?
Ms. McNall. Mm-hmm.
Senator Johnson. I mean, how much are your training costs
in your annual budget, if it is $360,000--$360 million, how
much of that is refresher versus brand new?
Ms. McNall. So, that is a very shifting number. In fact,
that was one of the changes, again, that we had not--I hate to
go back, but if we go back to the length of time to train and
why that did not improve, the year 2009 was an anomaly, and one
of the reasons that was an anomaly is because the proportion of
that training mix was fewer raw recruits and more training of
actual controllers in place, which is a shorter period of time,
so----
Senator Johnson. OK. So, are you tracking it--as long as we
have this----
Ms. McNall. But we track it all.
Senator Johnson [continuing]. The tracking code----
Ms. McNall. Yes.
Senator Johnson [continuing]. So you should be able to say,
this training was done for refresher. This training was done on
new recruits----
Ms. McNall. Exactly.
Senator Johnson. OK. So, my bottom line, and we have to go
to a vote, is the development of better information, not just
for the sake of getting information, but actually targeted, and
then working with the contractor to actually hone in on what--
because it may be a more lucrative contract to Raytheon but
save the government money. The total value proposition here is
what we are after.
Ms. McNall. Yes.
Senator Johnson. But, you need the information. So, again,
I just want to second what the Chairman was talking about, is
the desire and the need for accurate information--because,
again, reading through the Inspector General's report, I just
had a lot of questions, and there should not be. I mean, we
should really have in a management information system the kind
of detailed information that would just really point us in the
direction of how we should manage this training----
Ms. McNall. Absolutely.
Senator Johnson [continuing]. Because it is crucial.
But, with that, I will finish my questioning remarks. Thank
you.
Senator McCaskill. And we have votes.
Senator Johnson. Yes. We have time here.
Senator McCaskill. So, I have a little bit more. I would
ask your forbearance. I am going to run over, vote, and come
back. I want to talk about the award fees. It is a thing that I
care about. I have done this, and by the way, you should talk
to the folks at DOD on award fees and performance fees--
Raytheon knows I have been on this--about how we do this and
whether or not we are using them as the tools they should be
used, and a few other questions. So I am going to run, vote,
and come back. It should be 10 to 15 minutes at the max. Thank
you.
Senator Johnson. She is letting you off the hook. Thank you
all. [Recess.]
Senator McCaskill. I am so sorry. I will tell you, though,
it is not lost on me that I sit up here and rail against
government agencies for being inefficient and ineffective and I
am a member of the U.S. Congress. I just want you to know, I
get the joke. [Laughter.]
This is one of those days that I feel that in a painful
way, that this is an ineffective and inefficient Congress.
Let me go through just a few more things I want to make
sure we get on the record before we close today, and I do not
have--we have covered most of it. Who would you say is in
charge of this program?
Ms. McNall. So, the person----
Senator McCaskill. You need to turn your microphone on.
Ms. McNall. So, we have a program manager who works within
the Air Traffic Organization who is in charge of the program.
That person reports directly to the Air Traffic Vice President
for Safety and Technical Training.
Senator McCaskill. Is there an Air Traffic President?
Ms. McNall. There is an Air Traffic Chief Operating
Officer.
Senator McCaskill. But then there is a Vice President?
Ms. McNall. There are several Vice Presidents.
Senator McCaskill. Weird.
Ms. McNall. We are a little bit of a different agency.
Senator McCaskill. That is weird. We do not have Vice
Presidents in government unless his name is Biden. [Laughter.]
We have it in private companies, but we do not have it
typically in agencies. So, you would say that the Vice
President is the person who ultimately has the responsibility
for the effective operation of this program and the effective
use of contracts in support of this function?
Ms. McNall. He is the one responsible for seeing that air
traffic controller training is done effectively and
efficiently. I am the one who is responsible for seeing that
the contracts he needs to accomplish that are done
appropriately.
Senator McCaskill. OK. Who do both of you report to, in
common?
Ms. McNall. The Administrator.
Senator McCaskill. So, the boss of this program is really
Huerta----
Ms. McNall. Always.
Senator McCaskill [continuing]. Because you have one on the
programming side, one on the acquisition side, and the only
time the two of you meet is at the very top.
Ms. McNall. From an organizational perspective. Now, of
course, I meet with the Vice President at least monthly, and
then I have a variety of oversight processes----
Senator McCaskill. But you do not work for him.
Ms. McNall. No, I do not.
Senator McCaskill. And he does not work for you.
Ms. McNall. Correct.
Senator McCaskill. So, I am trying--I have learned----
Ms. McNall. You are right.
Senator McCaskill. I have learned the hard way that if you
do not figure out who is in charge, the chances of you getting
something fixed go down exponentially. So, you are telling me
that, ultimately, if he is not doing his job or you are not
doing your job, the only person who can make you accountable
is, in fact, Administrator Huerta.
Ms. McNall. That would be correct.
Senator McCaskill. OK. Let us talk about award and
incentive fees. What is your understanding of what the
contractor had to do to get what I think most Americans would
call bonuses?
Ms. McNall. Yes. What the contractors had to do to achieve
both its incentive fee and its award fee has varied over the
period of the contract.
Senator McCaskill. What was the first bonus and incentive
fee they got?
Ms. McNall. Right. So, in the first year of the contract,
we established a target cost, right. The share ratio on that
target was 50/50. So, for each dollar that the contractor
incurred above that target cost, reduced his fee by 50 percent.
Each dollar below that target cost reduced that fee by 50
percent. That first year, because of the cost overruns--up to a
min and max in each case. So, at some point, the fee that he
can add to that target is limited, and the same thing at the
top. As cost growth, he gets a minimum fee.
The first year, the contractor ended up with the minimum
fee. The same----
Senator McCaskill. Wait a minute.
Ms. McNall. Mm-hmm.
Senator McCaskill. So, he did get the fee that was supposed
to be incentivizing costs?
Ms. McNall. He got the smallest amount of fee possible
under the----
Senator McCaskill. And how much was that?
Ms. McNall [continuing]. Contract. Roughly $1.5 million.
Senator McCaskill. OK. So, he got $1.5 million in a year
that the cost overruns were $31 million.
Ms. McNall. Yes.
Senator McCaskill. Why did he get anything?
Ms. McNall. When we bid the contract, and this is one thing
that is always done when you are bidding a cost plus incentive
fee contract, is--at least in best practices--you allow the
companies to propose back to the government what that target
ratio should be, and then what the minimum and maximum fees
should be, and that--you then pick on what you think is the
best value for the government. In this----
Senator McCaskill. Well, how can it be a value for the
government if the cost overruns are $31 million and we still
give them money for doing a good job on cost? Do you understand
that sounds weird?
Ms. McNall. I absolutely understand that sounds weird. It
was a very small fee for the amount of work done, and the
contractor was successful in performing the contract. I fully
understand, right, this was not a controlled cost. I have other
contracts where the contractor will bid and we will agree and
write into the contract, there is no minimum fee, but that was
not this contract.
Senator McCaskill. OK. The FAA's award fee contracting
guideline----
Ms. McNall. Yes.
Senator McCaskill [continuing]. Says no performance element
should be incentivized more than once.
Ms. McNall. Correct.
Senator McCaskill. That is exactly what you did when you
offered Raytheon an incentive fee and an award fee for
containing costs. Why did that happen?
Ms. McNall. In all honestly, I was not in this job at the
time that happened, in their first years of the contract, so I
cannot tell you exactly what that happened, other than the fact
that the agency at that point was very interested in
controlling cost. As you pointed out, we were incurring cost
growth and we wanted to bring it under control.
Senator McCaskill. So, there were $14 million in the first
4 years of the contract in incentive and award fees. Is that a
correct figure?
Ms. McNall. Excuse me just a moment. [Pause.]
Seventeen million in incentive fee and--but more than that
in the award fee.
Senator McCaskill. Can you help----
Ms. McNall. Of course, that is going through the first 5
years.
Senator McCaskill. That is 5 years.
Ms. McNall. We will be happy to get back to you.
Ms. Langan-Feirson. During the base period, there were $14
million in cost incentives and approximately $17 million in
award fees----
Ms. McNall. Yes.
Ms. Langan-Feirson [continuing]. For a total of $31
million.
Senator McCaskill. OK. Thirty-one million. And during that
same period of time, what were the cost overruns?
Ms. Langan-Feirson. The cost overruns were $89 million.
Senator McCaskill. OK. So, we had cost overruns of $89
million and we had two fees that were supposed to be
incentivizing costs--two incentive and award fees incentivizing
costs and they got $31 million.
Ms. McNall. That is correct. The award fee incentivized
more than simply cost control.
Senator McCaskill. What else did it incentivize?
Ms. McNall. It incentivized, basically, performance of the
contract. It successfully trained the controllers that we
needed to have trained.
Senator McCaskill. And what were the metrics on that?
Ms. McNall. So, that is where the metrics varied for each
performance period.
Senator McCaskill. Who decided what the metrics were?
Ms. McNall. So, the FAA did.
Senator McCaskill. Well, I thought that Raytheon developed
the performance metrics early in this contract, that the FAA
did not do the performance metrics but, rather, they were drawn
up by Raytheon.
Ms. McNall. As part of the contract bidding process, each
company bid metrics, proposed metrics, for the award fees. One
of the reasons why we asked for them to bid the proposed
metrics for the award fee was to see how well they understood
what the contract was aiming for and how good they were at
metrics development, which would give us a clue as to how good
they might be at actually achieving those metrics. So, Raytheon
bid proposed metrics. The FAA changed those metrics before we
awarded the contract. But we did accept some of them, the basic
underlying premise of them.
Senator McCaskill. OK. So, you had a set of metrics before
this contract was--before you had the competition on this
contract, you had a set of metrics developed within FAA that
you were going to measure a contractor by.
Ms. McNall. In all honestly, again, I was not here at the
time, so I do not know that we had those metrics prepared. I
can tell you, I guess, that we did allow the offerors to bid
proposed metrics to us, and that in this case, before we
awarded the contract to Raytheon, we accepted some of their
metrics and we changed others and that is what went into the
contract for the first award fee period. Thereafter, the agency
established the award fee criteria.
Senator McCaskill. All right. Do you believe that she has
characterized this accurately, Ms. Langan-Feirson?
Ms. Langan-Feirson. Senator, we had a great deal of
difficulty going through the performance measures, because the
performance measures on this contract varied from period to
period. In the beginning, in our first report, it was reported
that some of the performance measures, Raytheon was assisting
with the development of the measure.
But, I will tell you, in the second report, we did look at
Award Fee Periods 5, 6, and 7 of the base contract and there
were essentially four performance measures, two of them
associated with cost, that were totally ineffective because the
costs kept changing, and there was one associated with quality
assurance which was relatively effective, and then there was
the one about staffing efficiency that we put in the report----
Senator McCaskill. Right.
Ms. Langan-Feirson [continuing]. Which we did not find
effective. So, we did not find that the award fee performance
measures were very effective on the contract.
Senator McCaskill. And the new fee structure, the new award
fee structure after the exercise of the option, it is my
understanding, Ms. Langan-Feirson, that your report--in looking
at your report, you saw some conflict there. Could you talk
about that?
Ms. Langan-Feirson. There were five performance measures in
the first period. We were only able to audit what is called
Award Fee Period 8, which is the first performance period in
the option, and there were basically five performance measures.
It is the first one that was the most troubling to us, which
basically required that Raytheon deliver the performance work
State and the annual workplan requirements, but also stay
within the cost target. If they did not do one or the other,
they would fail. If they had an unsatisfactory, they would fail
all of the other performance measures. So, while there might
have been other performance measures that would have
incentivized the contractor, those all went out the window if
you achieved an unsatisfactory on either one.
We also felt it was very troubling, because if you met the
target cost, what essentially happened was you were not
delivering enough training, and vice-versa. If you delivered
enough training, you might not have been under the target cost.
We did not think this was a very effective performance measure.
Senator McCaskill. And that has got to be really hard for
Raytheon, because you cannot do both. That is impossible with
this contract, correct?
Ms. Dugle. It is correct. What we are trying to do is
optimize the value of every training dollar, but at some point,
we are capped on the amount of training that we can deliver due
to the constraints of the budget.
If I may, Senator, I just wanted to clarify or expand upon
one point that you made. It is obviously factual that Raytheon
received approximately $31 million in fee over the time period.
Senator McCaskill. In addition to cost-plus.
Ms. Dugle. Well, that is the entire fee that we earned, and
that is what I wanted to clarify, is that it was not a bonus on
top of any kind of normal fee. It was simply those were the
dollars that we earned on the work that we did. And I would
make the point that, yes, the budget, we expended more than was
budgeted, but we trained between 40 percent more students in
year one and in net over the 4-year, 20 percent more students.
And so it is a bit counterintuitive to say the contract was
overrun and you are being paid fee, but you have to equate it
back to the volume of students. Otherwise, it would be an
unfair burden on a company.
Since year one of this contract, each year, we sat down
with the FAA. We target the amount trained and the dollars. And
since that time, since year one and the 1.5 percent fee that
Ms. McNall referenced, in years two, three, and four, we have
hit our targets and we have delivered to those numbers. I bring
that forward because we are improving progressively as we go
and I just wanted to go on record that incentive and award fee
is the only monies earned. It is not in addition to any other
kind of base beyond the program.
Senator McCaskill. OK; I am confused. So, I thought this
was a cost-plus contract.
Ms. Dugle. It is.
Senator McCaskill. So, you get your costs plus a margin of
profit.
Ms. Dugle. We get our costs plus an incentive fee award and
an award fee. Those comprise our fee.
Senator McCaskill. So, both the incentive fee and the award
fee are the only things that you are getting above your costs?
Ms. Dugle. Yes, ma'am.
Senator McCaskill. So, this is not a cost-plus-award
contract. This is just a cost plus incentive fee or award
program.
Ms. McNall. Yes.
Ms. Dugle. Yes.
Senator McCaskill. Oh, OK. Well, that makes a difference.
Well, you guys need to redo this. This is a mess, because it is
too hard--all of it is counterintuitive. You all are being
asked to train X-amount of people on not enough money to do
that. You all are absorbing all the costs that they cannot do
without really having a handle on what that is costing you
every year. And, meanwhile, the only way they make any profit
on them is giving them award and incentive fees for holding
down costs when you have paid them more than the contract was
worth most of the years they have had the contract. And you
wonder why people shake their head. I mean, we have to do
better at this.
So, are you ready with performance metrics for the rebid?
Ms. McNall. We have not yet decided whether or not we will
use performance metrics for the rebid. One of the concerns we
have is exactly what you have raised. We have had a great deal
of difficulty of establishing good award fee criteria and a
question of--incentive fee works absolutely wonderful if we can
hold the target cost accurately, right, so there are no changes
to the contract.
Senator McCaskill. Right.
Ms. McNall. If I cannot do those two things, then I have to
question whether or not I should do either an award or
incentive fee.
Senator McCaskill. So, what is wrong with price certain?
You know the different kinds of training, right? You may not
know how much you are going to do in each category, but you are
going to have just as much luck predicting that as you have had
predicting everything through this whole contract. What is
wrong with a price certain?
Ms. McNall. So, what we are considering is a combination of
firm fixed price, for example, possibly for the Academy
training--this is not to say we have made any decisions, and,
of course, I do not want to give any--too much advance
information that I have not otherwise released to----
Senator McCaskill. Well, I think people, if you are in this
hearing room----
Ms. McNall. Yes.
Senator McCaskill [continuing]. They know I like price
certain a lot better than cost-plus.
Ms. McNall. And I fully agree with you. So, mixed with a
time and material contract is what we are looking at.
Senator McCaskill. So, do you think that you all are
prepared on the innovation front? Do you think it is realistic
that you can get real innovation with 2 percent? I think $16.7
million of the $859 million that has been spent was spent on
innovation. Do you think that is a realistic percentage to
actually achieve innovation?
Ms. McNall. No, I do not. The reality is the agency does
not currently have the budget we would need to do the
innovation that we know we need to do. Long-term with the
innovation, it will save the agency money.
Senator McCaskill. Right.
Ms. McNall. We also know that. It is short-term funding
that I am struggling to find.
Senator McCaskill. What was going on internally, after the
IG made the recommendation to assess the long-term outlook of
the ATCOTS program, prior to exercising the option? Why was
that recommendation ignored before you exercised the option?
What was going on internally that caused that particular
recommendation to be set aside?
Ms. McNall. With the greatest respect, actually, we took
the recommendation very seriously. So, before we exercised the
option on the contract, we asked ourselves the following
questions. Do we now have enough basis to understand what our
training requirement is? Do we understand it well enough that
we can establish a target cost? And can we now manage this
contract like a performance-based contract rather than the
level of effort contract, which, in all honesty, for the first
few years of the contract, we treated it much more like a level
of effort contract than performance-based.
At the same time, our No. 1 priority is always safety and
efficiency, so the one thing we knew we could not let drop is
that steady rate of training. We need that rate of training to
continue without interruption. So that was No. 1.
Then it became a question of, well, what is the best
vehicle? What is my best acquisition vehicle to get to the spot
I need to be right now, right, as we are using money, and then
where do I want to go in the longer term?
Senator McCaskill. Could you speak to what you think, Ms.
Langan-Feirson, in terms of the exercising the option? It
appears from the outside that it looked like that they just
decided to ignore it, but you have spent a lot more time inside
this agency than, obviously, I have. I want to get your take on
what you think occurred.
Ms. Langan-Feirson. I think the most troubling thing for us
was that in our first report, we basically recommended that
FAA, after the first couple of years of the overruns, get their
arms around this. So, we gave them forewarning. Three years
later, OK, they were backed up against the wall in contract
year four. Eight months in, they were almost at 80 percent of
the contract ceiling and they did not have very much time. They
basically briefed a business case up the chain and the business
case was, we are out of time, OK. They did not have many
options left. This was due to lack of advanced planning, plain
and simple. That is what was going on.
Senator McCaskill. I have other questions, but you have
waited. I have had you here for a long time, especially in
light of the fact that I had to leave and do votes. Do you feel
like that--you have been there since when, Ms. McNall?
Ms. McNall. 2011.
Senator McCaskill. And what part of 2011?
Ms. McNall. January.
Senator McCaskill. OK. So, you now have three full years.
Ms. McNall. Yes.
Senator McCaskill. Do you have the adequate resources and
the expertise available to you that you can plan for this next
competition in a way that the recommendations that have been
made in two different IG reports will be fully embraced?
Ms. McNall. Yes.
Senator McCaskill. OK. That is the answer I wanted. That
means we have had success. I thank you.
I thank all three of you. I think you are all strong,
competent, smart women that are working hard at the task you
have been given and I hope that you understand that I am weird.
I like contract oversight, and this is, as you know, I do this
in many agencies.
Somebody said something, because I have been on the FAA
about electronic devices, somebody tweeted me today, ``What's
up with you and the FAA?'' I said, well, I just love the FAA.
[Laughter.]
I hope I have as much success with the rebidding of this
contract next year as I had with finally allowing us all to use
our electronic devices when we take off and land.
So, thank you very much, and we will get you more questions
for the record.
Ms. Dugle. Thank you, Senator.
Ms. McNall. Thank you.
[Whereupon, at 4:36 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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