Aviation Security: Preliminary Observations on TSA's Progress to 
Allow Airports to Use Private Passenger and Baggage Screening	 
Services (19-NOV-04, GAO-05-126).				 
                                                                 
Beginning on November 19, 2004, the Transportation Security	 
Administration (TSA) is required by law to begin allowing	 
commercial airports to apply to use private contractors to screen
passengers and checked baggage. A federal workforce has performed
this work since November 2002, in response to a congressional	 
mandate that the federal government take over screening services 
after the terrorist attacks of September 11, 2001. A 2-year pilot
program at five airports testing the effectiveness of private	 
sector screening in a post-September 11 environment concluded on 
November 18, 2004. This report contains GAO's preliminary	 
observations related to TSA's progress in developing a		 
private-sector screening program that allows airports to apply to
opt out of using federal screeners. GAO assessed: (1) the status 
of TSA's efforts to develop policies and procedures for the	 
opt-out program, including operational plans and guidelines for  
selecting airports and contractors that may participate; (2)	 
guidance about the opt-out program that TSA has provided to	 
airport operators and other stakeholders, or plans to develop,	 
and how the information is communicated; and (3) TSA's efforts to
develop performance measures for evaluating the opt-out program  
and contractor performance.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-126 					        
    ACCNO:   A13713						        
  TITLE:     Aviation Security: Preliminary Observations on TSA's     
Progress to Allow Airports to Use Private Passenger and Baggage  
Screening Services						 
     DATE:   11/19/2004 
  SUBJECT:   Airport security					 
	     Airports						 
	     Baggage (personal effects) 			 
	     Commercial aviation				 
	     Contractors					 
	     Performance measures				 
	     Program management 				 
	     Terrorism						 
	     Counterterrorism					 
	     Contract performance				 
	     Inspection 					 
	     National preparedness				 
	     Policies and procedures				 
	     TSA Screening Partnership Program			 

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GAO-05-126

United States Government Accountability Office

       GAO	Report to the Chairman, Subcommittee on Aviation, Committee on
          Transportation and Infrastructure, House of Representatives

November 2004

AVIATION SECURITY

  Preliminary Observations on TSA's Progress to Allow Airports to Use Private
                    Passenger and Baggage Screening Services

GAO-05-126

[IMG]

November 2004

AVIATION SECURITY

Preliminary Observations on TSA's Progress to Allow Airports to Use Private
Passenger and Baggage Screeners

  What GAO Found

As of November 2004, TSA has completed or is developing key policies and
procedures for the opt-out program. Specifically, TSA has completed and
released guidelines for determining how and when private screening
contractors will be evaluated and selected to participate in the opt-out
program. TSA also has released supplemental information for evaluating
potential contractors, such as their financial capabilities. TSA also has
prepared a draft technical statement of work for the private screening
contractors operating at the five airports that participated in the pilot
program, which is to serve as a basis for contractors seeking to serve
other airports. In addition, TSA has developed, or is currently
developing, internal guidance for managing the opt-out program, such as a
transition plan for helping airports to move from federal to private
screeners. TSA expects to complete the remaining policies and procedures
by mid-2005.

TSA is taking steps to communicate with stakeholders about the opt-out
program by developing informational guidance and soliciting information
and suggestions from them. For instance, since releasing initial summary
guidance about the program in June 2004, TSA has posted an opt-out program
application for airport operators that asks, among other things, the
primary reason for wanting to participate in the opt-out program and the
preferred timeline for transitioning to private screening operations. TSA
also has posted lists of frequently asked questions and answers on its Web
site, in response to questions from stakeholders about the airport
application and contracting process. However, some airport operators,
private screening contractors, and aviation industry representatives told
GAO that they need additional information about how much leeway airports
and contractors would have to manage the program, liability protection,
and costs related to participating in the opt-out program.

TSA is developing performance measures both to assess the screening
performance of airports that will participate in the opt-out program and
individual contractors performing the screening services, but specific
performance measures have not been finalized. TSA said measures for the
opt-out program will be based on measures already developed by an
independent consulting firm for the five airports that participated in the
opt-out pilot program. These measures include how well screeners detect
test threat objects, such as guns and knives, during screening operations.
TSA is also developing performance measures to evaluate how well private
screening contractors comply with the terms of their contracts, which will
become part of a quality assurance plan. TSA expects to implement
contractor-related performance measures in mid-2005, as contracts are
being awarded.

A draft of this report was provided to TSA. TSA officials generally agreed
with our findings and provided technical comments that have been
incorporated as appropriate.

                 United States Government Accountability Office

Contents

     Letter                                                                 1 
                                    Results in Brief                        3 
                                       Background                           5 
                   TSA Is Finalizing Policies and Procedures Governing the 
                                                                   Opt-Out 
                                        Program                             9 
                TSA Is Taking Steps to Communicate with Stakeholders about 
                                                                       the 
                Opt-Out Program, but Some Say Additional Information Is    
                                         Needed                            13 
                 TSA Is Developing Performance Measures for the Opt-Out    
                       Program, but More Work Remains To Be Done           18 
                           Agency Comments and Our Evaluation              19 
Appendix I                    Scope and Methodology                     

  Figure

Figure 1: Timeline for Implementation of Selected Steps in the Opt-Out
Program

Abbreviations

ATSA Aviation and Transportation Security Act
DHS Department of Homeland Security
FAQ frequently asked questions
FSD federal security director
TIP threat image projection
TSA Transportation Security Administration

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
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separately.

United States Government Accountability Office Washington, DC 20548

November 19, 2004

The Honorable John L. Mica
Chairman
Subcommittee on Aviation
Committee on Transportation and Infrastructure
House of Representatives

Dear Mr. Chairman:

In an effort to improve aviation security after the terrorist attacks of
September 11, 2001, the newly created Transportation Security
Administration (TSA) was charged by Congress with, among other things,
creating a federal workforce to assume the job of conducting passenger
and checked baggage screening at commercial airports-work that had
been performed by the private sector. The federalized workforce was to be
in place by November 2002. At the same time, TSA was required by Section
108 of the Aviation and Transportation Security Act (ATSA) to conduct a
2-year Private Screening Pilot program. The mission of the pilot, as
defined
by TSA, was to test the effectiveness of using private screening
contractors in a post-September 11 environment.1 The pilot concluded on
November 18, 2004.

Using the pilot program as a starting point, ATSA requires TSA to begin
allowing airports to apply to opt out of using federal screeners in favor
of
private contractors beginning on November 19, 2004. Consistent with
ATSA, TSA plans to begin receiving applications for this Screening
Partnership Program (known as the opt-out program) on that date. TSA
plans to begin selecting in early 2005 airports that can opt out, as well
as
selecting contractors that will conduct private passenger and checked
baggage screening. TSA plans to begin transitioning selected airports to
private screening operations later in 2005.

This report contains our preliminary observations related to TSA's
progress in developing the opt-out program. Specifically, we assessed
(1) the status of TSA's efforts to develop policies and procedures for the

1The term "private screening contractor" pertains to any company that
currently provides, or plans to provide, passenger and baggage screening
services.

opt-out program, including operational plans and guidelines for selecting
airports and contractors that may participate; (2) guidance about the
optout program that TSA has provided to stakeholders,2 or plans to
develop, and how the information is communicated; and (3) TSA's efforts to
develop performance measures for evaluating the opt-out program and
contractor performance.

We plan to continue our evaluation of the opt-out program as TSA further
develops and implements the program.

To address our objectives, we reviewed documentation related to TSA's
opt-out program and pilot program and interviewed various officials. We
analyzed TSA documents related to the opt-out program, including program
guidance developed for airports. We reviewed an independent consulting
study prepared for TSA that evaluated the pilot program. We interviewed
officials from two aviation associations-the American Association of
Airport Executives and the Airports Council International. We attended an
aviation security conference in September 2004, where TSA officials and
some airport operators discussed planning for the optout program, and we
reviewed staff notes from two congressional subcommittee-sponsored
roundtables on the program. We also reviewed ATSA provisions related to
the opt-out program and related GAO reports. In addition, we conducted
telephone interviews with the operators of randomly selected commercial
airports from each of the five security risk categories-X, I, II, III, and
IV.3 We interviewed the airport operators of 4 to 6 airports in each
category, for a total of 26 interviews (one official per airport). We also
conducted telephone interviews with officials from 6 private security
contractors that we were able to contact from a listing of 10 contractors.
The listing included private security contractors that expressed an
interest in providing passenger and checked baggage screening services.
Because of the small sample size, the results of our interviews with
airport operators and contractors cannot be generalized. TSA released
significant details on its opt-out program guidance after our interviews;
therefore, the interviewees' responses were based only on the

2Stakeholders for the opt-out program include airport operators and
private screening contractors, among others.

3TSA classifies the over 400 commercial airports in the United States into
one of five airport security categories (X, I, II, III, and IV) based on
various factors, such as the total number of take-offs and landings
annually, the extent to which passengers are screened at the airport, and
other special security considerations. In general, category X airports
have the largest number of passenger boardings and category IV airports
have the smallest.

  Results in Brief

information TSA had released at that point. Additional information on our
scope and methodology is contained in appendix I. We conducted our work
between September and November 2004 in accordance with generally accepted
government auditing standards.

As of November 2004, TSA has completed or is developing key policies and
procedures for the opt-out program. TSA has completed and released
guidelines for determining how and when private screening contractors will
be evaluated and selected to participate in the opt-out program. The
contractor selection process is to take place in three phases between
November 2004 and May 2005, which is when TSA expects to award contracts.
As part of Phase I, TSA has released a presolicitation notice in
accordance with standard government contracting practices, as well as
supplemental information on what is expected of potential contractors with
respect to financial capabilities and other areas. TSA also has prepared a
draft technical statement of work for the private screening contractors
that participated in the opt-out pilot program, which is to serve as a
basis for contractors seeking to serve other airports. In addition, TSA
has developed, or is currently developing, internal guidance for managing
the opt-out program, including an activity-based cost study that reviews
screening costs at privately and federally screened airports; a transition
plan; and a draft communications plan defining roles and responsibilities
of key stakeholders.

TSA is taking steps to communicate with stakeholders about the opt-out
program by developing informational guidance and soliciting information
and suggestions from them. For instance, since releasing initial summary
guidance about the program in June 2004, TSA posted an opt-out program
application for airport operators that asks, among other things, the
primary reason for wanting to participate in the opt-out program and the
preferred timeline for transitioning to private screening operations. TSA
also has posted lists of frequently asked questions and answers on its Web
site, in response to questions from stakeholders about the airport
application and contracting process. However, some airport operators,
private screening contractors, and aviation industry representatives told
us they still need additional information from TSA about operational
flexibilities (how much leeway airports and contractors would have to
manage the program), liability protection, and costs related to
participating in the opt-out program. For example, both airport operators
and private screening contractors cited the need for additional
information on whether and to what extent they would be liable in the
event that a

privately contracted screener should fail to detect a threat object that
leads to a terrorist incident.

TSA is developing performance measures to both assess the screening
performance of airports that will participate in the opt-out program and
individual contractors performing the screening services, but specific
performance measures have not been finalized. TSA said measures for the
opt-out program will be based on measures already developed by an
independent consulting firm for the five airports that participated in the
opt-out pilot program. These measures include how well screeners detect
test threat objects, such as guns and knives, during screening operations.
TSA is also developing performance measures to evaluate how well private
screening contractors comply with the terms of their contracts, which will
become part of a quality assurance plan. TSA expects to implement the
contractor-related performance measures in mid-2005, as contracts are
being awarded.

Figure 1 presents a timeline of TSA's key milestone for implementing the
opt-out program and awarding contracts to private screening contractors.

 Figure 1: Timeline for Implementation of Selected Steps in the Opt-Out Program

Source: GAO analysis of TSA data.

TSA received a draft of this report and generally agreed with our
findings. We incorporated TSA's technical comments where appropriate.

Background

    Opt-Out Provision of ATSA

Section 108 of ATSA (Pub. L. No. 107-71) required TSA to establish a
program permitting the more than 400 commercial airports using federal
passenger and checked baggage screeners to apply to use private, rather
than federal screeners. Beginning on November 19, 2004, all commercial
airports with federal security screening will be eligible to apply to
opt-out of using federal screeners. In addition to assessing airport
applications for using private screeners, TSA will select qualified
private screening contractors to conduct screening (including airports
that seek to apply to be private contractor screening companies), which
meets ATSA's and TSA's requirements. Nongovernmental employees, such as
airport directors or their representatives, would be able to participate
as advisors in the selection process, as long as the airport is not
participating as a qualified screening company. ATSA requires private
screeners selected to handle screening to meet the same hiring and
training qualifications as federal screeners. ATSA also mandated that the
private screeners' pay and benefit levels should be not less than their
federal counterparts. Furthermore, ATSA required that the contractor
companies be owned and controlled by U.S. citizens.

ATSA also required TSA to establish a 2-year pilot program using qualified
private contractors to screen passengers and checked baggage at not more
than one airport from each security category. TSA selected five airports
to participate in the pilot program. The private passenger and checked
baggage screening contractors selected for the pilot program had to comply
with federal passenger and checked baggage screening standard operating
procedures.

In order to obtain an objective evaluation of the pilot program, TSA
retained the services of an independent consulting firm. The consultants
were charged with developing an evaluation methodology; conducting
performance evaluations and comparisons between the five participating
pilot program airports and federally screened airports; and developing a
process to help TSA determine if a private screening company can meet
ATSA's performance standard for the opt-out program, which is to provide a
level of screening services and protection equal to or better than that
provided by federal screeners. The consultants found that, in general, the
private screening contractors met ATSA's performance standard. However,
the consultants cautioned that the findings must be viewed in light of
several key factors. For example, the consultants reported that the small
number of pilot airports seriously limited the program's usefulness

as a true scientific pilot and the ability of the findings to be
generalizable to apply to future privately screened airports.
Additionally, the performance data available for review and analysis were
limited, according to the consultants.

Outside of the pilot program, any commercial airport may apply to opt out
beginning on November 19, 2004. In accordance with ATSA, an airport
operator may submit to TSA an application to have the screening of
passengers and checked baggage at an airport be carried out by the
screening personnel of a qualified private screening company, under a
contract entered into with TSA. TSA will make the final approval of any
application submitted and reserves the right to consider airport-specific
threat intelligence and an airport's record of compliance with security
regulations and security requirements to determine the timing of the
transition to private screening. TSA may also impose a delay on when an
airport can transition to private screening based on such factors as peak
travel season and the total cost of providing screening services at an
airport. The five airports selected to participate in the pilot program
have decided to continue using private screeners and will not have to
apply for the opt-out program beginning in November 2004.

    Opt-Out Program Staffing and Budgeting

TSA created a program office in October 2004 to provide financial
oversight, ongoing operational support, communications, and transition
planning for airports that apply to opt out of using federal screeners.
This office was allocated 12 full-time-equivalent staff and, as of
November 4, 2004, had 10 full-time staff on board. TSA plans to fund the
opt-out program from the same budget line items as federal screening
operations in order to provide flexibility on the number of airports that
can participate in the program. The costs for contracts with private
screening companies are to be funded by the cost of the federal operations
that are being displaced. The conference report accompanying the fiscal
year 2005 Department of Homeland Security Appropriations Act (H.R. Conf.
Rep. No. 108-774) allocated appropriations of $2.424 billion to cover
personnel, compensation, and benefits for passenger and checked baggage
screeners and to cover screeners at the five pilot airports. This
allocation represents an increase of more than $200 million over the
fiscal year 2004 enacted level of $2.2 billion. According to TSA, this
increase is necessary to fully fund compensation and benefits at the
identified staffing levels. The requested level of funding will support
screener salaries and management at all commercial airports, whether
federalized or privatized. Also, the conference report allocated just
under $130 million for the five pilot airports, an increase from $119
million in fiscal year 2004. This

funding is based on an estimate of resources necessary to maintain
screening at the current five pilot airports.

    TSA's June 2004 Guidance Describes Program Requirements

ATSA Legislative Requirements

Program Planning Approach

Guidance on Key Issues

TSA issued its first written guidance for the opt-out program in June
2004, in an effort to provide airport operators and the aviation community
with information to gauge their level of interest in applying to
participate in the program. The guidance, posted on TSA's Web site and
distributed to airport associations, provides information in three broad
areas: legislative requirements, program planning approach, and guidance
on key issues. A summary of the guidance follows.

TSA's guidance addresses ATSA legislative requirements, including how
applications from qualified private screening contractors would be
approved by applying the statutory standards of ATSA, including the level
of screening services and protection provided at the airport, and that
private contractor companies be owned and controlled by U.S. citizens.
TSA's guidance also included information for airports on how TSA's
screening pilot program was conducted, how the pilot program was evaluated
by a private consulting organization, and suggested program improvements
made by the consultants.

The guidance discussed program structure, including costs. The guidance
notes, for instance, that federal and contract screeners would be funded
from the same pool of money and that costs for airports enrolled in the
program would be determined based on current federal screener operations
and TSA's activity-based cost studies that estimate costs of running an
airport's screening operations. TSA's guidance states that these cost
studies would ensure that proposed costs by potential contractors are in
line with federal estimates. The guidance also states that airport
security screeners do not have the right to strike, whether TSA or a
private contractor employs them.

ATSA directs TSA to receive applications from airports intending to apply
to opt out beginning November 19, 2004. The guidance states that TSA
intends to close the application period within 3 weeks of that time and
will re-open the application cycle in November 2005. The guidance states
that because ATSA does not identify specific criteria by which TSA is to
evaluate the airport application, TSA is currently developing and
reviewing potential specific criteria for determining which airports will
be approved and the sequence for their transition from federal to private
screeners. The guidance notes that TSA reserves the right to consider
participation in the program in light of an airport's record of compliance
on security regulations and requirements.

TSA outlines three steps related to selecting contractors to perform
screening services: (1) TSA submits requests for information to the
aviation industry requesting input on acquisition issues, qualification
criteria, and information contractors would need as part of a proposal
process; (2) TSA develops a qualified vendors list4 to facilitate the
vendor selection process; and (3) TSA selects a private contractor to
provide screening services in airports selected for the screening
partnership program.

The guidance describes the roles and responsibilities of all major
stakeholders, including airport directors and federal security directors
(FSDs).5 TSA envisions both FSDs and airport authority as having
"important roles" in the selection of the private contractor. The
technical aspects of each private contractor's screener contract will be
managed locally by the FSDs. TSA will set performance measurement
standards and each contractor will implement the standards. TSA seeks to
give private contractors "a significant amount" of operational control in
such areas as assessment and screener technical training, scheduling,
recurrent training, and administrative functions.6

TSA said it would take "necessary steps" to enable FSDs and private
contractors to implement operational flexibilities, including conducting
recruiting, assessment, and screener technical training at the local level
while ensuring that national standards are met and within TSA's
parameters.7 TSA is also in the process of developing a performance
measurement approach for the opt-out program and contractors. TSA is
considering several types of performance measures related to security
effectiveness, customer service, and cost. Specific measures and baselines
have not been finalized.

4TSA uses the term "vendor" here in lieu of "contractor," but both terms
refer to any private entity that undertakes passenger and baggage
screening. TSA uses the term "contractor" throughout its June 2004
guidance.

5FSDs are responsible for providing day-to-day operational direction for
federal security at airports. Additionally, FSDs are the ranking TSA
authority responsible for the leadership and coordination of TSA security
activities at airports.

6The assessment process for screener candidates consists of testing and
interviews, among other things.

7TSA's draft technical statement of work, issued after the June 2004
guidance, describes some operational flexibility, including screener
applicant assessment, credentialing, and training that will be provided to
private contractors in the pilot program.

  TSA Is Finalizing Policies and Procedures Governing the Opt-Out Program

    TSA Has Developed Criteria for Qualifying Private Contractors, with
    Additional Information under Development

In late October 2004, TSA finalized and publicly released guidelines
providing criteria for determining how and when private screening
contractors will be evaluated and selected to participate in the opt-out
program. Any contractor that meets TSA and ATSA criteria (such as owned
and controlled by U.S. citizens) may apply to the program. While TSA does
not require companies seeking to become screening contractors to have
prior experience in the business, such experience is preferred. Because
TSA does not know how many airports will apply to participate in the
opt-out program in 2004, the agency cannot yet determine how many private
contractors may be hired to perform screening services. The
contractor-selection process involves three phases, to be completed
between November 2004 and May 2005. The phases and key milestones included
in the guidelines are as follows:

Phase I: Develop qualified offeror list (November 2004-January 2005).

o  	Offerors seeking to be pre-qualified by TSA as potential contractors
must meet TSA and ATSA requirements (including owned and controlled by
U.S. citizens and ability to provide screening services at a level equal
to or greater than that provided by the federal government).

o  	Offerors must agree to provide compensation and benefits at a level
that is not less than that provided by the federal government to the
federal screener workforce.

o  	Offerors must agree to abide by TSA's workforce transition rules,
including compliance with priority employment rules for TSA's federal
employees displaced by privatization.

Phase II: Develop qualified vendor list (February 2005).

o  	TSA issues request for proposal to contractors pre-qualified under
Phase I.

o  TSA will develop a qualified vendor list based on this population.

o  Offerors will be required to present technical and cost capabilities.

o  	Qualified offerors will be selected based on ability to provide
service in a given geographical region.

o  	Contractor proposals will not be evaluated until TSA determines how
many airports have applied to the opt-out program.

Phase III: TSA awards contracts to private screening contractors (May
2005).

TSA will award competitive task orders, or contracts, based on cost/price
analysis, among other things. TSA reserves the right to proceed with other
alternatives for contractor selection as appropriate.

TSA initiated Phase I on November 5, 2004, by posting a presolicitation
notice on www.fedbizopps.gov, in accordance with standard government
contracting practices. Contractors have until November 29, 2004, to
provide the information, such as financial capabilities, requested in the
presolicitation.8 Concurrently, TSA publicly released a presolicitation
synopsis for the opt-out program that supplements the October guidelines
on contractor criteria. This document provides additional evaluation
criteria on screener compensation and benefits, hiring preferences for
displaced government employees, financial capabilities of contractors, and
other areas.

Five of six private screening contractors we interviewed prior to TSA's
release of the presolicitation synopsis identified that they wanted more
information on workforce transition rules, which govern how federal
screeners displaced by private screening contractors should be dealt with.
The October guidelines also identified that contractors must abide by
TSA's workforce transition rules-but do not specify what the rules are.
The presolicitation synopsis states that federal screeners must be given
hiring preference, but no additional information is provided. All six
private screening contractors said that they did not know how TSA will
make its determination about whether the level of screening services and
protection provided at the airport under the contract will be equal to or
greater than the level that would be provided at the airport by the
federal

8TSA will not accept questions from contractors about the solicitation
after November 15 and indicated it may modify the solicitation based on
questions raised by contractors.

government. TSA officials said they would use the information provided by
contractors in response to the presolicitation notice to make this
determination.

In addition to the guidelines on criteria and the presolicitation
synopsis, TSA prepared a draft statement of work for the contractors that
participated in the opt-out pilot program and are continuing to provide
screening services. This document describes technical requirements that
private screening contractors must meet for performing screening
operations, support, and administration.9 According to TSA, the draft
statement of work is meant to give potential private contractors an idea
of the service requirements in the private screening pilot program, which
are likely to be similar to those for the opt-out program. TSA posted the
document on its opt-out Web site in early November 2004.

The contractors we interviewed also sought information on whether
contractors will be able to use the same companies TSA has relied on to
assess screener candidates and conduct initial screener training. The
draft statement of work prepared for contractors that participated in the
pilot program addresses this issue and has been posted on TSA's Web site
for all interested parties to review.

Finally, private screening contractors told us they do not have an
industry trade association through which TSA can channel information about
its program activities. Five of six private screening contractors we
interviewed cited a need for a more direct line of communication between
TSA and their organizations beyond TSA's Web site. For example, some
contractors suggested that TSA sponsor a forum specifically to address
contractors' issues about the opt-out program. In addition, it was
suggested that TSA appoint a liaison, or point of contact, to help ensure
that information is communicated to contractors in a timely fashion.

9The statement of work includes five task areas covering the scope of
services to be provided by the contractor, including human resources
support services, training for screeners, screening services, management
support and miscellaneous requirements, such as standards of conduct,
uniforms, and maintenance, use and inventory of equipment, property and
materials.

    TSA's Internal Policies and Procedures for the Opt-Out Program Are under
    Development

TSA developed draft procedures to document how opt-out program
applications will be processed. These draft procedures-for internal use
only-describe opt-out program parameters, a descriptive narrative of the
application process, a matrix for each step in the process, an application
template, sample notification letter template, an application checklist,
and an application processing system template. TSA officials said that
this approach is under review and expects the application procedures to be
finalized in November 2004.

TSA developed a draft activity-based cost study, which is also an internal
document, not intended for public release. TSA plans to use the results of
the study to explain how TSA will determine the unit cost of screening
passengers in terms of the activities performed, review screening costs at
both privately screened and federally screened airports in order to
identify key cost drivers and best practices, and develop an efficient and
repeatable data collection method for future studies. This study is
currently under review within TSA. TSA expects to finalize this study
later in November 2004.

In addition, TSA developed a draft transition plan, which will serve as
internal guidance for the agency and is not intended for public release.
This is to be an operations plan designed to support TSA's efforts to
transition airports from federal to private screeners. The plan is to
address, for example, TSA's approach to giving federal screeners priority
for employment with private screening contractors. In addition, this plan
is to describe the roles and responsibilities of the TSA opt-out program
office, FSD staff, and private screening contractors. Activities to be
addressed in the plan include human resources, training, communication,
logistics, performance measurement, and field support. TSA expects to
refine the draft guide in December 2004 and plans to revise the plan on an
ongoing basis as it gains more experience with the transition to private
screening.

A draft communications plan is also under development and remains in draft
form. The purpose of this internal document is to reflect a strategy for
communicating key program events and developments to both internal and
external stakeholders. TSA told us the plan will contain information on
roles and responsibilities of key stakeholders, among other things. The
draft is undergoing final review within TSA. TSA has not set a date for
finalizing this plan.

  TSA Is Taking Steps to Communicate with Stakeholders about the Opt-Out
  Program, but Some Say Additional Information Is Needed

    Stakeholders Seek Additional Information from TSA on Operational
    Flexibilities, Liability, and Cost Issues

In addition to the June 2004 initial guidance, statement of work for the
pilot program contractors, and presolicitation synopsis, TSA has finalized
other informational guidance for airport operators and private screening
contractors. In October 2004, TSA posted the final version of its opt-out
application form for airports seeking to apply. TSA will use the
application to collect information on potential airports' intentions
regarding opting out. For instance, in addition to asking airports to
provide basic information, such as point of contact, TSA seeks to learn
whether airports want to be the qualifying contractor performing the
screening services. TSA also asks airport officials to provide information
on the airport authority's primary reason for wanting to participate in
the opt-out program, whether the airport has a preferred timeline for when
the transition to private screening should occur, and to list scheduled
activities that could interfere with the transition, such as peak travel
season and major construction.

TSA originally set a 3-week application window, from November 19, 2004, to
December 10, 2004, for accepting application from airports interested in
opting out of using federal screeners. However, based on input from
stakeholders, TSA decided less than 1 month before the application cycle
was to begin to extend the application deadline. As of November 15, 2004,
TSA had not established a final deadline.

Also, in October, TSA created an e-mail address to enable interested
parties to submit questions and request additional information about how
the opt-out program would be implemented. The goal of this effort was to
provide supplemental guidance for stakeholders that reflected issues they
wanted to know more about. A TSA official said the agency received
approximately 100 e-mails between late August and early November. Based in
part on these e-mails, in early September 2004, TSA developed

                            Operational Flexibility

and posted on its Web site an initial list of responses to frequently
asked questions (FAQ). In early November 2004, TSA updated the FAQs to
reflect three separate topics: questions for the overall program,
questions about the airport application process, and questions about the
contracting process. TSA plans to continue to update these lists as
needed. Some of the information contained in the FAQs is new-that is, it
is not addressed in the June 2004 written guidance. Some of TSA's FAQ
responses, however, restate the information in the written guidance,
without additional elaboration.

While these guidance documents have provided airport operators with
information on the basic parameters and legislative requirements of the
opt-out program, some airport operators, private screening contractors,
and airport industry representatives told us TSA has not yet addressed all
of their questions and concerns.10 The information that stakeholders told
TSA and us that they needed falls into three categories: operational
flexibility with respect to how much leeway airports and private screening
contractors would have to manage the program; liability protection in the
event that a screener fails to detect a threat object; and costs related
to participating in the opt-out program.

Eight of the 20 airport operators we interviewed who said they would not
apply to opt out of using federal screeners in 2004 said that they needed
additional information about the range of flexibility private screening
contractors would be provided in terms of, for instance, their ability to
deploy screeners where they are needed most at a given airport. Some
airport industry representatives we spoke with raised operational
flexibility as a concern as well. All of the private screening contractors
we interviewed also said that they needed additional information on
operational flexibilities, including

o  	whether contractors could collaborate with airport management without
having to involve TSA directly;

10Of the airport operators we interviewed, 20 of 26 said their airport
would not apply to opt out this year, 5 were uncertain whether to apply
for the 2004 cycle, and 1 said his airport planned to apply, but only for
its international passenger terminal. Among the 20, 16 said they were
satisfied with federal screeners or saw no benefit to opting out. Six of
the airport operators we interviewed had not reviewed the initial June
guidance.

                              Liability Insurance

o  	whether they would have the flexibility to determine appropriate
screener staffing levels at their airports and to assess screener
candidates and hire screeners on an as needed basis;11 and

o  whether they could develop and/or deliver screener training.

Among the questions e-mailed to TSA directly, some address operational
flexibilities, such as screener staffing levels. For example, one of the
questions pertained to whether an airport would be provided the same
number of contract screeners as are currently authorized under the federal
screener program. TSA responded in its FAQs that a qualified private
contractor will determine the number of contract screeners needed and that
TSA will provide guidelines for the contractors. TSA further noted that it
is seeking to provide flexibility to the contractors to manage the
operations as efficiently as possible and will look to them to identify
possible efficiencies in areas such as scheduling and use of part-time
employees as appropriate for the local airport.

The independent consulting firm under contract to TSA suggested that TSA
allow contractors serving the opt-out pilot program airports to assess
screener candidates and conduct screener training as a means of allowing
greater operational flexibilities. The consultants stated that greater
operational flexibilities would enable a more robust comparison of private
and federal screening operations. TSA officials said that they would
permit pilot program airports to pursue both options beginning in November
2004.

A second issue raised by stakeholders, including airport industry
representatives, pertained to liability-whether and to what extent
airports and private screening contractors would be liable in the event
that a privately contracted screener should fail to detect a threat object
that leads to a terrorist incident or use of a weapon, or threat object,
on board. Thirteen airport operators we interviewed cited concerns about
liability. In addition, all of the private screening contractors we
interviewed cited the need for additional guidance on liability
protection. To address airport and industry officials' questions about
liability issues, FAQs directs site visitors to a Department of Homeland
Security (DHS) Web site for

11Since the fiscal year 2004 DHS Appropriations Act (Pub. L. No.108-90),
Congress has instituted a screener cap of 45,000 full-time equivalent
screeners. One full-time equivalent is equal to 1 work year or 2,080
non-overtime hours.

                             Costs of Participation

information on how to apply for liability protection under the SAFETY Act
of 2002.12 The Web site, however, does not provide information on whether
the SAFETY Act would cover private screening contractors that apply to the
opt-out program. According to DHS officials, DHS has determined that the
SAFETY Act will apply to private screening contractors in the opt-out
program. DHS's Office of SAFETY Act Implementation has been working with
TSA to develop an expedited review process for SAFETY Act applications
from private screening contractors and plans to post specific instructions
for applicants on the SAFETY Act Web site. As of November 15, 2004, this
information had not been posted. Five of the screening contractors we
interviewed said the issue of whether they would receive liability
protection was important and would greatly affect whether they would
participate in the program, if selected as a qualified contractor. Two of
the contractors said that without liability protection, they would not
participate in the program because it would be too risky, exposing them to
potential lawsuits. TSA officials said that commercially available
insurance is available and that under the current screening pilot program,
each of the contract screening companies had procured some amount of
liability insurance for terrorist activities.

A third issue pertained to the costs of participating in the program. Ten
of the 20 airport officials we spoke with that have decided not to apply
to opt out in 2004 cited questions about costs of participating in the
program, and in at least one case said they did not have enough
cost-related information. Representatives from two airport industry
associations also mentioned this issue. The FAQs address cost issues in
the context of budgets for federal and private screeners. For example, one
question asks whether, if federal budget appropriations are not made in a
timely manner, TSA will still be able to fund the private screening
contractor during that period of time. TSA's response identified that it
would fund screeners through a continuing budget resolution passed by
Congress. In response to a question about whether budget limitations will
apply to either federal or contracted screeners, TSA's response reiterates
what is already stated in the written guidance-that all funding for the
opt-out program will come

12The Support Anti-terrorism by Fostering Effective Technologies (SAFETY)
Act of 2002 (Pub. L. No. 107-296) encourages the development and
deployment of anti-terrorism technologies that will substantially enhance
the protection of the nation. Specifically, the SAFETY Act creates certain
liability limitations for "claims arising out of, relating to, or
resulting from an act of terrorism" where qualified anti-terrorism
technologies have been deployed. The Act extends certain liability
protections to equipment, services, and other elements involved in
preventing or deterring acts of terrorism.

from the same budget line items as federal screening operations. No
additional information is provided.

Three private screening contractors we interviewed also cited a need for
additional information on the requirement to provide at least equivalent
compensation and benefits to screeners transitioning from federal to
private screening contractors, as required by ATSA. The contractors said
they did not know whether they would be required to offer dollar-fordollar
parity for salaries and benefits or whether contractors must offer the
same health care and other benefits that federal screeners receive. FAQs
address this question in general terms, noting that private contractors
will have "some flexibility in fashioning their compensation and benefits
packages," but do not elaborate further. TSA's presolicitation includes a
compensation and benefits certification form that private screening
contractors applying to be on the qualified offeror list must complete.
The applicant has to certify that it will propose and pay at least the
minimum labor rate that is paid to screeners for every $1 of direct labor
and that benefits will be not less than 44.75 percent-the current fringe
benefits percentage as computed by TSA.13

In addition, TSA has interpreted ATSA to require qualified private
screening companies to provide pay and benefits at a loaded cost (direct
hour plus percentage cost of fringe benefits) that equals or exceeds the
loaded cost of the pay and benefits provided to the federal government.
According to TSA, this approach provides the contractor with flexibility
to trade additional pay against other benefits, or to enhance certain
benefits and reduce others; enables the contractor to determine and
provide the best package necessary for the recruitment and retention of
quality screeners; and increases flexibility while permitting recruitment
and retention of quality screeners.

13If the applicant's benefits are less than 44.75 percent, the applicant
must certify that it will propose and pay at least the minimum labor rate
that is paid to screeners and that adjustments will be made to the
compensation and/or benefits prior to award so that the total compensation
and other benefits will not be less than the compensation and other
benefits provided to federal government personnel. The applicant must also
explain how these adjustments will be made.

  TSA Is Developing Performance Measures for the Opt-Out Program, but More Work
  Remains To Be Done

TSA is developing measures to assess the screening performance of airports
that will participate in the opt-out program and individual contractors
performing the screening services, but specific performance measures have
not been finalized. In June 2004, TSA developed a draft of the performance
measurement principles and actual measures that TSA is considering to
measure the performance of the entire opt-out program and private
screening operations. For example, TSA plans to measure the results of
annual screener proficiency reviews, customer satisfaction and complaints,
and screening costs. TSA may also evaluate the program in terms of how
well screeners perform using the threat image projection (TIP) system to
detect threat objects.14 (TIP projects images of threat

objects on an x-ray screen during actual operations and records whether
screeners identify threat objects.)15 These measures will be similar to
those

used by the independent consulting firm to compare the performance of
private screening contractors operating at the five pilot program airports
against federal screening services. TSA expects to complete a preliminary
draft of a performance measurement plan later this month and to finalize
this plan by February 2005.

In addition to assessing how the performance of federal and private
screening services compare, TSA is working to develop performance measures
for evaluating how well private screening contractors comply with the
terms of their contracts. TSA officials said that the opt-out program
office is in the process of determining whether quantifiable measures are
available, how to collect relevant data, and the best way to establish
baseline measures. TSA expects to complete its data collection plan later
this month and to complete the final plan by February 2005.

The contractor-related performance measures TSA plans to develop are to be
included in a quality assurance plan. This plan is an element in TSA's
draft statement of work specifically for the five airports that
participated in the pilot program, which are continuing to use private
screeners. The plan includes general information on how TSA will measure
and assess their performance and how TSA will use the performance data to
make decisions on performance awards, extension of contracts, and
termination of contracts. Contractors may, for example, be evaluated-and
their

14TIP scores may be used to measure the performance of private contract
screeners at optout airports compared to their federally screened
counterparts.

15Once prompted, TIP identifies to the screener whether the threat is real
and then records the screener's performance in a database that could be
analyzed for performance trends.

contracts extended-based on their screeners' performance on TIP scores.
TSA officials said that the measures included in the draft statement of
work are not as sophisticated or rigorous as those that TSA will adopt in
the future. TSA expects to implement these measures in mid-2005, as
contracts are being awarded.

We plan to continue to collect and analyze TSA documentation on the optout
program and to follow-up with airports and private security contractors on
their views of TSA's development and implementation of the program.

We provided a draft of this report to the Department of Homeland Security
and the Transportation Security Administration for review and comment. The
agencies generally agreed with our findings, and we incorporated their
technical comments where appropriate.

                                Agency Comments

                               and Our Evaluation

We are sending copies of this report to the Secretary of the Department of
Homeland Security and interested congressional committees. We will also
make copies available to others upon request. In addition, the report will
be available at no charge on GAO's Web site at http://www.gao.gov.

If you have any questions about this report, or wish to discuss it
further,
please contact me at (202) 512-8777 or by e-mail at [email protected]. Key
contributors to this report were David Alexander, Amy Bernstein, Lisa
Brown, Elizabeth Curda, Thomas Lombardi, Jobenia Odum, Lisa Shibata,
Maria Strudwick, Nicole Volchko, and Nicolas Zitelli.

Sincerely yours,

Cathleen A. Berrick
Director, Homeland Security and Justice Issues

                       Appendix I: Scope and Methodology

Our preliminary observations are based on our review of documentation
related to the Transportation Security Administration's (TSA) Screening
Partnership Program (opt-out program) and contract screening pilot program
and interviews with various officials. We reviewed documents including:

o  all guidance-related materials TSA had developed to date for airports;

o  	reports from an independent consulting study prepared for TSA that
evaluated the contract screening pilot program and made suggested
improvements to the program;

o  	information from two congressional committee-sponsored roundtables on
the program;

o  testimony at congressional hearings on the program;

o  provisions of the Aviation and Transportation Security Act;

o  	our prior reports that addressed issues related to the opt-out
program, including the performance of airport passenger and checked
baggage screeners.

In addition, we interviewed TSA headquarters officials, officials from two
aviation associations-the American Association of Airport Executives and
the Airports Council International and TSA's private contractor that is
assisting TSA in its development of the opt-out program. We conducted
semistructured telephone interviews with the operators of 26 randomly
selected commercial airports nationwide. The 26 airports were selected
randomly from all airports in each of the five airport categories-X, I,
II, III, and IV. Category X airports generally have the largest number of
enplanements, and category IV airports have the smallest number. We
interviewed one official at each of 4 to 6 airports in each category.
Although the airports were selected randomly, because of the small sample
size in each category the results of these interviews may not be
generalized to other airports. We conducted telephone interviews with
officials from 6 of 10 private security contractors selected from a
listing of private security contractors that had expressed interest in the
opt-out program. The listing of private security contractors that
expressed interest in the opt-out program is included in Airport Security
Report, (Potomac, MD: Air Safety Week), September 22, 2004, Volume 11,
Number 19. The views and opinions of these contractors may not be
representative of those of other contractors and, therefore, should not be
generalized. TSA

Appendix I: Scope and Methodology

released significant details on its opt-out program guidance after our
interviews; therefore, the interviewees' responses (airport operators' and
contractors') were based only on the information TSA had released at that
point. We conducted our work from September to November 2004 in accordance
with generally accepted government auditing standards. Because our review
is still ongoing, the results presented in this report are preliminary.

To complete our work, we plan to continue to collect and analyze TSA
documentation related to each of our three objectives and to follow-up
with airports and private security contractors on their views of TSA's
development and implementation of the opt-out program.

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