Performance and Accountability: Challenges Facing the Department of
Transportation (Testimony, 02/14/2001, GAO/GAO-01-443T).

The Department of Transportation (DOT) faces critical challenges in
achieving its goals of ensuring the safe and efficient movement of
people and goods and in making cost-effective investments in the
nation's transportation infrastructure. Many of the challenges GAO
identified at DOT are long-standing and will require sustained attention
by the new administration and Congress. While the Department has
initiatives under way to address the shortcomings of its programs, these
activities have not been fully implemented. Their success will depend on
a strong commitment from DOT's new leadership and a sustained effort to
identify and address critical human capital issues. Finally, as they
address the problems facing each of the individual components, given the
myriad of demands for new resources, the new administration and the
Congress must think and act so as to ensure that their transportation
decisions reflect an intermodal transportation strategy that addresses
the most pressing national needs in a cost-beneficial manner. This
testimony summarized the January report, GAO-01-253.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GAO-01-443T
     TITLE:  Performance and Accountability: Challenges Facing the
	     Department of Transportation
      DATE:  02/14/2001
   SUBJECT:  Risk management
	     Accountability
	     Internal controls
	     Safety standards
	     Transportation operations
	     Transportation safety
	     Air traffic control systems
	     Performance measures
	     Financial management
IDENTIFIER:  Coast Guard Deepwater Project
	     FAA Air Traffic Control Modernization Program
	     FAA Safer Skies Initiative

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GAO-01-443T

PERFORMANCE AND ACCOUNTABILITY

Challenges Facing the Department of Transportation Statement of John H.
Anderson, Jr., Managing Director, Physical Infrastructure

United States General Accounting Office

GAO Testimony Before the Subcommittee on Transportation, Committee

on Appropriations, U. S. Senate

For Release on Delivery Expected at 2 p. m. EST February 14, 2001

GAO- 01- 443T

1 Mr. Chairman and Members of the Subcommittee:

We are here today to discuss the critical challenges facing the Department
of Transportation (DOT). My testimony is based on reports we issued in
January as part of GAO's performance and accountability series on major
management challenges and program risks facing federal agencies and the
federal government as a whole. 1 With $58.5 billion in funding for fiscal
year 2001, the Department faces critical challenges in achieving its goals
of ensuring the safe and efficient movement of people and goods and in
making cost- effective investments in the nation's transportation
infrastructure.

The Department has achieved many successes in accomplishing its objectives
and improving its operations. For example, it successfully addressed the
Year 2000 computer challenge and improved the management of its transit
grant programs so that they no longer are at high risk of fraud, waste,
abuse, or mismanagement. However, major performance and management
challenges remain. These problems are systemic and long- standing, and their
resolution will require sustained attention by the Department. Therefore, it
is not surprising that many of the challenges I am discussing today were
also raised 2 years ago in our review of the Department's performance and
accountability. I will summarize the challenges for surface transportation,
aviation, the U. S. Coast Guard, and for the Department as a whole.
Ultimately, the new administration and the Congress will need to address
these issues in the broader context of an intermodal national transportation
strategy.

For surface transportation safety, DOT continues to face challenges in
improving the safety of highways and pipelines. For example, in 1999, about
5,400 people died in crashes involving large trucks. While the Department
appears to be making progress on some initiatives to reduce the number of
large truck crashes, it needs to obtain high- quality, timely data on the
causes of these crashes.

1 Major Management Challenges and Program Risks: Department of
Transportation (GAO- 01- 253, Jan. 2001), Major Management Challenges and
Program Risks: A Governmentwide Perspective (GAO- 01- 241, Jan. 2001) and
High- Risk Series: An Update (GAO- 01- 263, Jan. 2001).

2

For other surface transportation issues, DOT and the Congress face
challenges in improving the oversight of large- dollar highway and transit
projects, strengthening the financial condition of Amtrak, and enhancing
freight rail competition. While the Federal Transit Administration (FTA) and
Federal Highway Administration (FHWA) have improved their oversight of large
projects, additional challenges exist. For example, FTA may not have the
resources it needs after fiscal year 2001 to adequately oversee a
significant number of new transit projects, and we recommended that the
Department identify any funding shortfalls and take steps to address them.
In addition, it is likely that Amtrak will not eliminate its need for
federal operating subsidies by the end of 2002, as required by the Congress,
which will require that fundamental decisions be made by the Congress about
the continuation and scope of the nation's intercity passenger rail system.

For aviation, the Federal Aviation Administration (FAA) continues to face
considerable challenges in managing its multibillion- dollar air traffic
control (ATC) modernization program, addressing shortcomings in its safety
and security programs, and resolving long- standing weaknesses in its
financial management. While the Department is making progress in addressing
some of these issues, more remains to be done. We continued to list FAA's
ATC modernization program as a high- risk information technology initiative
because of its size, complexity, cost, and problem- plagued past. Congestion
and record- level airline delays make it critical that FAA fully modernize
the system so that it can meet the growing demands for air service. We have
continued to designate FAA's financial management as a high- risk area
because of the serious and long- standing nature of those weaknesses. An
additional challenge is the lack of effective airline competition in certain
markets, which has contributed to high fares and poor service for some
communities. Possible further consolidation of the airline industry raises
additional concerns about the impact on consumers.

3

Improvements are needed in the Coast Guard's 20- year, $10 billion project
to replace or modernize its fleet of deepwater ships and aircraft. While the
agency has addressed many of our earlier recommendations about the project's
justification, attention needs to be focused on reducing the risks in its
contracting approach, fully developing its acquisition strategy, and
ensuring the project's affordability.

Finally, an overriding challenge facing DOT as well as the entire federal
government is the lack of attention to strategic human capital management.
In January 2001, we designated this as a governmentwide high- risk area.
Inadequate attention to human capital issues has been a root cause of some
of the performance challenges facing DOT, such as FAA's problems with its
ATC program.

Highway and Pipeline Safety Challenges

Of the more than 42,000 people who died on our nation's highways in 1999,
about 5,400 died in crashes involving large trucks, a figure largely
unchanged from a decade ago. 2 (See fig. 1.)

2 Large trucks are those with a gross weight of more than 10,000 pounds.

4

Figure 1: Number of Fatalities From Large Truck Crashes, 1989- 1999

Truck- related fatalities 0 500

1000 1500

2000 2500

3000 3500

4000 4500

5000 5500

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Source: DOT.

DOT has taken several steps to improve truck safety, including (1)
establishing, at the direction of the Congress, a new organization- the
Federal Motor Carrier Safety Administration- that is responsible for truck
safety and (2) developing an overall strategy- called the Safety Action
Plan- to improve the safety of commercial motor vehicles. Nonetheless, the
Department must overcome significant barriers to make measurable progress in
improving truck safety. For example, while the Department appears to be
making progress on some initiatives in its Safety Action Plan, it lacks
highquality, up- to- date information on the causes of large truck crashes.
Without such data, DOT cannot determine the degree to which its initiatives
will reduce truck- related fatalities. In addition, the Department is just
beginning to determine whether it will have the resources to complete the
activities in its plan.

In addition to highway safety challenges, major pipeline accidents have
claimed about 22 lives per year. 3 From 1989 through 1998, the number of
major pipeline accidents increased by about 4 percent annually (see fig. 2).

3 Major pipeline accidents are those that result in a fatality, an injury,
or property damage of $50,000 or more.

5

Figure 2: Pipeline Accidents Resulting in Fatalities, Injuries, or Property
Damage of $50,000 or More, 1989- 98

0 50

100 150

200 250

300 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Number of accidents

Source: GAO's analysis of data from the Office of Pipeline Safety.

DOT's Office of Pipeline Safety (OPS) has adopted several initiatives to
improve pipeline safety, including moving toward inspecting entire pipelines
rather than segments of pipelines to provide a more comprehensive assessment
of safety risks. We have concerns, however, about OPS' actions, such as
relying less on states to inspect those portions of interstate pipelines
within their borders. States' familiarity with the pipeline segments in
their jurisdictions could aid in identifying the very risks that OPS is
hoping to mitigate through its new approach. Furthermore, a combined federal
and state approach to overseeing pipeline safety could better leverage
federal resources. In addition, OPS has changed its approach to enforcing
compliance with its regulations by reducing its use of fines and, instead,
working with pipelines operators to identify and correct safety problems.
However, the office has not assessed whether its revised approach to
enforcement is resulting in greater rates of compliance. We recommended that
DOT determine whether the reduced use of fines has improved compliance with
pipeline safety regulations.

6

Challenges Facing Surface Transportation Projects and Passenger and Freight
Rail

Over the years, many large- dollar highway and transit projects have
incurred cost increases and schedule delays. Under the Transportation Equity
Act for the 21st Century (TEA- 21), at least $198 billion will be provided
for highway and transit projects from fiscal year 1998 through fiscal year
2003. Although FTA and FHWA have improved their oversight of large projects,
additional challenges exist. FTA may not have the necessary level of
resources after this fiscal year to adequately oversee a significant number
of new transit projects. In September 2000, we recommended that DOT identify
any funding shortfalls in its budget for fiscal year 2002 and proposed steps
to address them. This recommendation was reinforced during the last
appropriations process when the Congress directed DOT to develop a plan to
address expected shortfalls and to include this information in its fiscal
year 2002 budget submission. We also found that DOT is likely to exhaust its
commitment authority for the construction of new transit systems or the
extensions of existing systems before the end of the funding period for TEA-
21. Therefore, we recommended that DOT prioritize eligible transit projects
so that funds can be directed to those offering the best potential for cost-
effective transportation improvements.

Despite efforts to improve its overall financial condition, the National
Railroad Passenger Corporation (Amtrak) has made relatively little progress
in reducing its need for federal operating subsidies. Since 1971, the
federal government has provided Amtrak with over $23 billion in operating
and capital assistance. In 1994, at the request of the administration and
later at the direction of the Congress, Amtrak pledged to eliminate the need
for federal operating subsidies by the end of 2002. However, in fiscal year
2000, Amtrak reduced its need for operating subsidies by only $5 million-
substantially less than its planned reduction of $114 million. Over the last
6 years (1995- 2000), Amtrak reduced its need for operating subsidies by
only $83 million and must make $281 million in further reductions in 2001
and 2002 to become operationally selfsufficient. While revenues have
increased, so have costs. As a result, it is unlikely that Amtrak will
eliminate its need for federal operating subsidies as directed. If Amtrak

7 does not meet the goal, plans for restructuring intercity passenger rail
service and

liquidating Amtrak are to be submitted to the Congress. Even if Amtrak does
attain operational self- sufficiency, it will require substantially more
financial support to meet its capital needs. Amtrak estimates that it will
need an average of $1.5 billion a year in federal funds to meet its
identified capital needs over the next 20 years. Amtrak is also requesting
authority to issue $12 billion in tax- exempt bonds to meet its capital
needs. Bondholders would receive an income tax credit equal to the interest
they would otherwise receive.

Continued consolidation in the railroad industry has raised concerns about
poor service and high rates in certain markets. The Surface Transportation
Board, which approves rail mergers and consolidations, has taken a number of
actions to address rail rate, service, and merger issues. For example,
shippers are now allowed to receive expedited temporary relief from
inadequate rail service through service from an alternative carrier.
However, the Board's actions may not fully satisfy many shippers who believe
that increased competition in the rail industry is needed to improve
service. Because of the divergent views of railroads and shippers, resolving
service and competition issues will be difficult and may require
congressional action.

Aviation Challenges

Over the past 19 years, FAA's multibillion- dollar ATC modernization program
has experienced cost overruns, delays, and performance shortfalls of large
proportions. FAA is making progress in addressing some of the causes of
these problems, but its reforms are not complete, and major projects
continue to face challenges in all three areas. To date, the Congress has
appropriated over $32 billion for the program, and FAA estimates that the
program will need an additional $13 billion through 2005. Because of its
size, complexity, cost, and problem- plagued past, we first designated FAA's
ATC modernization program as a high- risk information technology initiative
in 1995. Since 1995, we have made over 30 recommendations to address the
root causes of the program's problems, which include an ineffective
investment management structure

8 and inadequate cost- estimating and cost- accounting practices. While FAA
has initiated

activities in response to our recommendations in many areas, more must be
done. For example, FAA has begun to improve its cost estimates, but it has
not yet fully instituted rigorous cost- estimating practices. With a
modernized ATC system, FAA will be in a better position to meet the growing
demands for air service. The congestion and record- level airline delays
facing the nation make it critical that FAA meet its challenge in this area.

In 1999, FAA did not meet any of the four performance goals it had
established for improving aviation safety. (See table 1.) We have identified
numerous shortcomings in FAA's safety and security programs. For example, we
recommended that FAA improve the effectiveness of its Safer Skies program- a
joint government and industry initiative to identify and address the root
causes of aviation accidents- by developing better evaluation procedures. We
also recommended that FAA clarify program guidance for and improve the
usefulness of its Air Transportation Oversight System for targeting
inspection resources more effectively.

Table 1: DOT's Fiscal Year 1999 Performance Measures and Goals for Aviation
Safety Performance measure Fiscal year 1999 goal

Fiscal year 1999 performance

Goal achieved?

Number of fatal aviation accidents for U. S. commercial air carriers per
100,000 flight hours

0.034 accidents per 100,000 flight hours

0.04 accidents per 100,000 flight hours

No Number of dangerous incidents on airport runways (runway incursions)

270 incidents 322 incidents No Number of errors in maintaining safe
separation between aircraft per 100,000 activities a

0.496 errors per 100,000 activities

0.57 errors per 100,000 activities

No Number of deviations- i. e. when an aircraft enters airspace without
prior coordination- per 100,000 activities

0.099 deviations per 100,000 activities

0.18 deviations per 100,000 activities

No a ”Activities” are total FAA facility activities, as defined
in Aviation System Indicators 1997 Annual Report. An example of an activity
is an air traffic controller providing guidance to a pilot who needs to make
an instrument landing.

Source: DOT.

Further improvements are needed in hiring and training personnel who operate
security checkpoints at airports to screen passengers and carry- on baggage
for dangerous

9 objects. For instance, we have found that several factors continue to
reduce airport

screeners' effectiveness in detecting dangerous objects, most notably (1)
the rapid turnover of screener personnel- often above 100 percent a year at
large airports (see table 2)- and (2) the human factors associated with
screening that have for years affected screeners' hiring, training, and
working environment. Although FAA is pursuing efforts to improve the hiring,
training, and testing of airport screeners, most of these efforts are behind
schedule.

Table 2: Turnover Rates for Screeners at 19 Large Airports, May 1998- April
1999 City (airport) Annual turnover rate (percent)

St. Louis (Lambert St. Louis International) 416 Atlanta (Hartsfield Atlanta
International) 375 Houston (Houston Intercontinental) 237 Boston (Logan
International) 207 Chicago (Chicago- O'Hare International) 200 Denver
(Denver International) 193 Dallas- Ft. Worth (Dallas/ Ft. Worth
International) 156 Baltimore (Baltimore- Washington International) 155
Seattle (Seattle- Tacoma International) 140 San Francisco (San Francisco
International) 110 Orlando (Orlando International) 100 Washington
(Washington- Dulles International) 90 Los Angeles (Los Angeles
International) 88 Detroit (Detroit Metro Wayne County) 79 San Juan (Luis
Munoz Marin International) 70 Miami (Miami International) 64 New York (John
F. Kennedy International) 53 Washington (Ronald Reagan Washington National)
47 Honolulu (Honolulu International) 37

Average turnover rate 126

Source: FAA.

We also identified actions necessary to secure FAA's ATC computer systems to
reduce the possibility of intrusions or attacks. We made 22 recommendations
through May 2000 to address these problems. For example, we recommended that
FAA tighten controls over contract employees by ensuring that appropriate
background investigations are performed. While FAA has responded to these
recommendations, progress in some areas has been slow. We made an additional
17 recommendations in December 2000 to address the continuing weaknesses.

10 We have reported that a lack of effective airline competition in certain
markets has

contributed to high airfares and reduced service in some communities. A
number of communities have not benefited from increased aviation
competition, largely because barriers inhibit the entry of new airlines and,
as a result, pockets of high fares and poor service exist. These barriers
include limited access to gates at certain airports and “slot”
controls that limit the number of takeoffs and landings at certain congested
airports. The Congress has begun to address some of these barriers,
including requiring the phaseout of “slot” rules. However, the
proposed merger between United Airlines and US Airways and American
Airlines' proposed purchase of Trans World Airlines have raised questions
about how such consolidation within the airline industry could affect
competition in general and consumers in particular. If both proposals are
approved, United would have the largest market share of any U. S. airline-
over 27 percent- and American would have a 22.6 percent share. (See fig. 3.)

11

Figure 3: Percentage of Total U. S. Domestic and International Passengers
Carried by Major U. S. Airlines

? ?

?

? ?

?

?

? Northwest Airlines

Continental Airlines Other carriers

Delta Air Lines Southwest Airlines

United Airlines US Airways American Airlines

Trans World Airlines

12.3% 22.6%

9.7% 4.9% 17.0% 6.3% 20.3% 6.8%

18.3% 4.2%

}

27.2% }

Note: Percentages may not total because of rounding. Source: GAO's analysis
of data from DOT for the 12 months ending June 30, 2000.

The proposals raise a number of questions- such as how a consolidated
industry might affect service to small communities and new airlines' ability
to compete. The Congress, DOT, and the Department of Justice must closely
evaluate these proposals to assess their impact.

In addition, major improvements are still needed in FAA's financial
management systems. In January 1999, we designated FAA's financial
management as a high- risk area because of serious and long- standing
accounting and financial management weaknesses. FAA received its first- ever
unqualified opinion on its fiscal year 1999 financial statements, but it did
so only through herculean efforts. FAA has not yet proven it can sustain
this outcome. Because FAA lacks an adequate system to account for its
physical assets on an ongoing basis, the agency used labor- intensive
methods to establish baseline and cost information for the financial
statements. In addition, FAA

12 lacks a cost- accounting system or an alternative means to meaningfully
accumulate and

report its costs. FAA has made significant progress in its long- term plan
to remedy its financial management weaknesses. For example, it is developing
a cost- accounting capability that is expected to provide detailed
information about the costs of services that it provides to the public. In
addition, it has begun implementing new systems to remedy its physical
assets deficiencies. However, its core cost- accounting system is not
expected to be fully in place until the end of fiscal year 2002 and its
physical assets system will not be fully operational until fiscal year 2003.
Until FAA has financial management systems and related procedures and
controls that provide reliable information, it will continue to be at high
risk of waste, fraud, abuse, and mismanagement.

Coast Guard Challenges

Improvements are needed in the Coast Guard's Deepwater Project- a 20- year,
$10 billion project to replace or modernize its fleet of deepwater ships and
aircraft and communications and radar equipment. The Coast Guard needs to
focus attention on reducing the risks associated with its contracting
approach, fully developing its acquisition strategy, and ensuring the
project's affordability. Although the agency has addressed many of our
earlier recommendations about the project's justification, numerous
uncertainties still exist. For example, the Coast Guard does not expect to
finish planning the Deepwater Project until July 2001, but we understand
that DOT is planning to request $350 million for the project this spring.
Asking for funds prior to completing the planning process and fully
addressing the risks associated with this project raises uncertainties about
whether the funds will be used effectively. A major risk is the Coast
Guard's contracting approach- awarding a series of contracts to one system
integrator for potentially 20 or more years. Such an approach has never been
used on a procurement of this size or complexity. Because of the uniqueness
of this approach, the large dollars involved, and the importance of the
approach in shaping the future of the Coast Guard, the agency's planned
contracting strategy requires a carefully thought- out and well- documented
acquisition plan. We are currently reviewing the

13 Coast Guard's efforts in this area and have been providing real- time
advice to help

mitigate the major risks associated with the program. We plan to report our
results in time for the appropriations committees' deliberations on this
year's funding requests for the project.

Departmentwide Human Capital Challenges

This year, GAO designated human capital management as a new governmentwide
highrisk area. Federal programs rely for their success on the performance of
the federal government's people- its human capital. Workforce and succession
planning are central elements of successful human capital management. These
elements pose both short- and long- term challenges for DOT. According to
the Office of Personnel Management's data, approximately 41 percent of DOT's
fiscal year 1998 civilian workforce of 63,781 will be eligible to retire by
the end of fiscal year 2006- however, actual retirements may not be that
high. Responding to this human capital challenge, DOT's strategic plan for
2000- 2005 envisions expanded workforce and succession planning for
retirements in the next 10 years. According to a DOT official, as of
December 2000, DOT offices had initiated pilot programs to identify future
workforce needs for key occupations and DOT had drafted a Human Resources
Action Plan to meet overall human capital planning needs.

Clearly, human capital challenges have contributed to the performance
problems of some DOT programs. For example, a "stovepiped" culture at FAA
has been one of several underlying causes of acquisition problems in the
agency's ATC modernization program. As we have learned, organizational
cultures can be barriers to high performance and make management improvement
efforts more difficult.

- - - - In summary, many of the challenges we identified at DOT are long-
standing and will require sustained attention by the new administration and
the Congress. While the Department has initiatives under way to address the
shortcomings in some of its

14 programs, these activities have not been fully implemented. Their success
will depend

on a strong commitment from DOT's new leadership and a sustained effort to
identify and address critical human capital issues. Finally, as they address
the problems facing each of the individual components, given the myriad of
demands for new resources, the new administration and the Congress must
think and act so as to ensure that their transportation decisions reflect an
intermodal transportation strategy that addresses the most pressing national
needs in a cost- beneficial manner.

This concludes my prepared statement. I would be glad to answer any
questions.

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