    National Airspace System: Transformation will Require Cultural
    Change, Balanced Funding Priorities, and Use of All Available
    Management Tools (14-OCT-05, GAO-06-154).

    The National Airspace System (NAS) is a complex network of
    airports, aircraft, air traffic control (ATC) facilities,
    employees, and pilots. The aviation industry, which depends on
    the NAS, contributes about 9 percent to the gross domestic
    product. The Federal Aviation Administration (FAA), funded
    through a tax-financed trust fund and General Fund
    appropriations, is pursuing a multibillion-dollar modernization
    program. Persistent cost, schedule, and/or performance shortfalls
    have kept this program on GAO's list of high-risk programs since
    1995. GAO was asked to review the status of NAS modernization.
    This report addresses NAS status by identifying the challenges
    that FAA faces in managing (1) infrastructure, (2) human capital,
    and (3) financial resources.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-06-154
        ACCNO:   A39538
      TITLE:     National Airspace System: Transformation will Require
    Cultural Change, Balanced Funding Priorities, and Use of All
    Available Management Tools
         DATE:   10/14/2005
      SUBJECT:   Air traffic control systems
    	     Air traffic controllers
    	     Aircraft
    	     Airports
    	     Aviation
    	     Cost control
    	     Cost overruns
    	     Federal procurement
    	     Financial management
    	     Human capital management
    	     Human capital planning
    	     Internal controls
    	     Investments
    	     Performance management
    	     Performance measures
    	     Procurement planning
    	     Program evaluation
    	     Program management
    	     Schedule slippages
    	     Strategic planning
    	     Airport and Airway Trust Fund
    	     FAA Air Traffic Control System
    	     FAA National Airspace System Plan
    	     Next Generation Air Transportation
    	     System

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    GAO-06-154

         * Report to Congressional Requesters
              * October 2005
         * NATIONAL AIRSPACE SYSTEM
              * Transformation will Require Cultural Change, Balanced Funding
                Priorities, and Use of All Available Management Tools
         * Contents
         * Executive Summary
              * Purpose
              * Background
              * Results in Brief
              * Principal Findings
                   * FAA Has Made Changes to Improve Infrastructure Management,
                     but Acquisition, Security, and Capacity Challenges Remain
                   * Human Capital Management Challenges Include Hiring Air
                     Traffic Controllers and Transforming FAA's Organizational
                     Culture
                   * Rising Costs and Declining Revenues Pose Financial
                     Management Challenges
              * Recommendations for Executive Action
              * Agency Comments and GAO Evaluation
         * Introduction
              * FAA Manages the National Airspace System, a Complex Collection of
                Systems and Infrastructure
              * FAA Envisions a More Flexible and Efficient NAS
              * Numerous Reviews of FAA's Modernization Efforts Have Identified
                Problems and Proposed Solutions
              * Objectives, Scope, and Methodology
              * Agency Comments and Our Evaluation
         * FAA Has Made Changes to Improve Infrastructure Management, but
           Acquisition, Security, and Capacity Challenges Remain
              * FAA Met Its 2004 Acquisitions Performance Goal
              * FAA Is Addressing Key Factors That Contributed to Legacy Cost,
                Schedule, and/or Performance Problems, but More Work Remains
                   * Four Key Factors Contributed to Legacy Cost, Schedule,
                     and/or Performance Problems
                   * FAA Has Taken Steps to Improve Acquisition Management, but
                     Has Not Fully Implemented Some Recommendations
              * FAA Faces Challenges in Ensuring Information Security
              * FAA Faces Challenges in Expanding NAS Capacity to Meet Current
                and Future Needs
                   * More Travelers and Smaller Aircraft Could Strain NAS
                     Capacity
                   * New Runways Are Under Construction and More Are Planned to
                     Increase NAS Capacity
                   * FAA Is Redesigning Flight Paths to Create More Capacity
                   * Airspace Redesign Efforts Have Encountered Cost and Schedule
                     Challenges, and Airlines Are Hesitant to Invest in Advanced
                     Capabilities
              * Agency Comments
         * Human Capital Management Challenges Include Hiring Air Traffic
           Controllers and Transforming FAA's Organizational Culture
              * FAA Will Need to Hire and Train Thousands of Controllers in the
                Next Decade
                   * Impending Retirements Will Require Extensive Hiring and
                     Training
                   * FAA's Controller Staffing Plan Reflects Lessons Learned
                     Since 1981 Controller Strike
                   * FAA Plans Cost-Saving Initiatives to Mitigate the Expense of
                     the Controller Staffing Plan
              * FAA Has Made Progress in Implementing Human Capital Reforms, but
                Challenges Remain in Transforming Its Workforce Culture
                   * FAA Has Implemented Elements of Personnel Management Reform
                   * Developing a Results- Oriented Organizational Culture
                     Remains a Key Challenge
                        * FAA Recognizes the Importance of a Results-Oriented
                          Culture
                        * Past Cultural Change Efforts Met with Limited Success
                   * Some Recent FAA Survey Results Suggest Less Improvement in
                     Workforce Culture Than in Prior Years
                        * FAA's Survey Results Are Lower Than Those for Other
                          Organizations on Similar Culture and Climate Surveys
              * Conclusions
              * Recommendation for Executive Action
              * Agency Comments
         * Rising Costs and Declining Revenues Pose Financial Management
           Challenges
              * To Address Rising Costs and Declining Revenues, FAA Is Focusing
                on Cost Control
                   * FAA Projects a Multibillion- Dollar Gap
                   * FAA Cut Major Programs and the ATO Is Gathering and Tracking
                     Data to Control Costs
                   * Existing Cost Control Initiatives Will Not Close the
                     Projected Gap
              * To Fund Major System Acquisitions through Fiscal Year 2009, FAA
                Has Cut Funding for Planned Investments in Other Areas
                   * FAA Has Reduced Funding for New Technology That Could
                     Produce Future Benefits
                   * FAA Has Reduced Funding for Facilities
              * FAA Is Reviewing Potential Changes in Its Funding Mechanism
                   * The ATO, as Created, Implemented Only Part of the 1997
                     Commission's Recommendations
                   * Aviation Experts and Stakeholders Repeated Several Past
                     Recommendations
              * Conclusions
              * Recommendations for Executive Action
              * Agency Comments and Our Evaluation
         * Methodology for Workforce Culture Assessment
         * Major ATC System Acquisitions
              * Air Traffic Control Radar Beacon Interrogator- Replacement
                (ATCBI-6)
              * Advanced Technologies and Oceanic Procedures (ATOP)
              * Airport Surface Detection System- Model X (ASDE-X)
              * Airport Surveillance Radar Model-11 (ASR-11)
              * Controller-Pilot Data Link Communications (CPDLC)
              * En Route Automation Modernization (ERAM)
              * En Route Communications Gateway (ECG)
              * FAA Telecommunications Infrastructure (FTI)
              * Free Flight Phase 2 (FFP2)
              * Integrated Terminal Weather System (ITWS)
              * Local Area Augmentation System (LAAS)
              * NAS Infrastructure Management System- Phase 2 (NIMS-2)
              * Next Generation Air/Ground Communications (NEXCOM)
              * Operational and Supportability Implementation System (OASIS)
              * Standard Terminal Automation Replacement System (STARS)
              * Terminal Automation Replacement (TAMR)
              * Wide Area Augmentation System (WAAS)
         * Perceptions of Organizational Culture in FAA's Acquisition Workforce
           and in Other Organizations
         * Key Practices and Implementation Steps for Mergers and Organizational
           Transformations

                     United States Government Accountability Office

    Report to Congressional Requesters

    GAO

    October 2005

    NATIONAL AIRSPACE SYSTEM

     Transformation will Require Cultural Change, Balanced Funding Priorities, and
                         Use of All Available Management Tools

                                           a

    NATIONAL AIRSPACE SYSTEM

    Transformation will Require Cultural Change, Balanced Funding Priorities, and
    Use of All Available Management Tools

      What GAO Found

    GAO's recent reports indicate that FAA has made progress in managing its
    infrastructure-the systems, facilities, airports, and navigation aids that
    comprise the NAS-but acquisition, security, and capacity challenges
    remain. FAA met its fiscal year 2004 acquisitions performance goal. This
    goal was consistent with the President's Management Agenda and represents
    a positive step. However, FAA needs to continue addressing four key
    factors that, as GAO has reported, have historically contributed to
    acquisitions' missing their original cost, schedule, and performance
    targets: (1) actual funding less than planned, (2) increases in projects'
    scope, (3) underestimates of software complexity, and (4) insufficient
    stakeholder involvement. To address these factors, FAA has begun to
    prioritize its investments by considering their potential to reduce
    operational costs and by developing a blueprint for information technology
    investment; but FAA still needs to secure information technology systems
    and expand the NAS's capacity for an expected 25 percent increase in air
    travel by 2015.

    Human capital management challenges include hiring and training thousands
    of air traffic controllers to replace those expected to retire over the
    next decade and creating a results-oriented culture. FAA has developed a
    controller staffing plan, but has not estimated its cost, and therefore,
    cannot determine its impact on future budgets. Efforts to transform FAA's
    workforce culture address an impediment to ATC modernization that GAO has
    identified, but will require a sustained, multiyear commitment.

    Rising costs and shrinking revenues pose financial management challenges.
    To manage costs, FAA is using a new cost accounting system and emphasizing
    accountability. However, in view of current and anticipated funding
    reductions, FAA has eliminated initial research and development funding
    for new technologies that could support the next-generation air
    transportation system. Some stakeholders and FAA officials are discussing
    potential changes to FAA's funding mechanism. Some experts, and GAO's
    work, suggest that FAA pursue near-term options, such as contracting out
    more services. After establishing a sound financial management record, FAA
    could pursue options for greater financial management flexibility.

    Source: Photodisc, Getty Images.

                     United States Government Accountability Office

    Contents

    Letter

    3
    Executive Summary
    Purpose 3
    Background 5
    Results in Brief 6
    Principal Findings 9
    Recommendations for Executive Action 14
    Agency Comments and GAO Evaluation 14
    16
    FAA Envisions a More Flexible and Efficient NAS 23
    Numerous Reviews of FAA's Modernization Efforts Have Identified Problems
    and Proposed Solutions 26
    Objectives, Scope, and Methodology 28
    Agency Comments and Our Evaluation 30
    Chapter 2FAA Has Made Changes to Improve Infrastructure Management, but
    Acquisition, Security, and Capacity Challenges Remain
    31 FAA Is Addressing Key Factors That Contributed to Legacy Cost,
    Schedule, and/or Performance Problems, but More Work Remains
    FAA Met Its 2004 Acquisitions Performance Goal 31
    32
    FAA Faces Challenges in Ensuring Information Security 38
    FAA Faces Challenges in Expanding NAS Capacity to Meet Current and Future
    Needs 39
    Agency Comments 46
    Chapter 1
    [IMG] FAA Manages the National Airspace System, a Complex Collection of
    Systems and Infrastructure 16

                                        Contents

    Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
    Controllers and Transforming FAA's Organizational Culture

    47 FAA Will Need to Hire and Train Thousands of Controllers in the Next
    Decade 47 FAA Has Made Progress in Implementing Human Capital Reforms, but
    Challenges Remain in Transforming Its Workforce Culture 52 Conclusions 61
    Recommendation for Executive Action 62 Agency Comments 62

    Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
    Challenges

    63 To Address Rising Costs and Declining Revenues, FAA Is Focusing on Cost
    Control 63 To Fund Major System Acquisitions through Fiscal Year 2009, FAA
    Has Cut Funding for Planned Investments in Other Areas 71 FAA Is Reviewing
    Potential Changes in Its Funding Mechanism 76 Conclusions 80
    Recommendations for Executive Action 81 Agency Comments and Our Evaluation
    81

    Appendixes

                                           Appendix I: Appendix II: Appendix III:

    Appendix IV:

    Methodology for Workforce Culture Assessment 82 Major ATC System
    Acquisitions 87 Perceptions of Organizational Culture in FAA's Acquisition
    Workforce and in Other Organizations 91 Key Practices and Implementation
    Steps for Mergers and Organizational Transformations 97

    Table 1:

    Tables

    Table 2:

    Table 3: Table 4:

    NAS Overview 16 Four Key Interrelated Factors Contributing to Cost Growth,
    Schedule Extensions, and/or Performance Shortfalls for 12 ATC System
    Acquisitions 33 Common Themes and Number of Findings from ATO's
    Headquarters Activity Value Analysis 68 FAA Capital Funding Plans for
    Major ATC Modernization Acquisitions 72

                                        Contents

                                        Figures

    Contents

                                     Abbreviations

    NEXCOM Next Generation Air/Ground Communications STARS Standard Terminal
    Automation Replacement System SWIM System Wide Information Management
    System TAMR Terminal Automation Modernization Replacement WAAS Wide Area
    Augmentation System

    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
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
    copyright holder may be necessary if you wish to reproduce this material
    separately.

    A

    United States Government Accountability Office Washington, D.C. 20548

    October 14, 2005

    The Honorable Tom Davis Chairman The Honorable Henry A. Waxman Ranking
    Minority Member Committee on Government Reform House of Representatives

    The Honorable Don Young Chairman The Honorable James L. Oberstar Ranking
    Democratic Member Committee on Transportation and Infrastructure House of
    Representatives

    The Honorable John L. Mica Chairman The Honorable Jerry F. Costello
    Ranking Democratic Member Committee on Transportation and Infrastructure
    House of Representatives

    In response to your request, this report discusses the status of national
    airspace modernization and the challenges that the Federal Aviation
    Administration (FAA) faces in managing its infrastructure, human capital,
    and financial resources. The report contains recommendations to the
    Secretary of Transportation to ensure that FAA (1) follows through with
    its efforts to improve workforce culture; (2) balances current and
    long-term investment priorities; and (3) in the near term, fully uses all
    existing flexibilities to reduce costs and manage revenues, and, in the
    longer term, determines whether a business case exists to pursue more
    extensive changes, such as those requiring legislation.

    As agreed with your offices, unless you publicly announce the contents of
    this report earlier, we plan no further distribution of it until 30 days
    from the date of this letter. At that time, we will send copies of this
    report to interested congressional committees and the Secretary of
    Transportation. We will also make copies available to others upon request.
    In addition, this report will be available at no charge on the GAO Web
    site at http://www.gao.gov.

    If you or your staff have any questions about this report, please call me
    at (202) 512-2834 or dillinghamg@gao.gov. Contact points for our Offices
    of Congressional Relations and Public Affairs may be found on the last
    page of this report. Key contributors to this report are Tamara Dorland,
    Seth Dykes, Bess Eisenstadt, Brandon Haller, Maren McAvoy, Edmond Menoche,
    Beverly Norwood, and Mark Ramage.

    Gerald L. Dillingham Director, Physical Infrastructure Issues

    Executive Summary

    Since 1981, the Federal Aviation Administration (FAA) has been conducting

    Purpose

    a program to modernize the National Airspace System (NAS) at a cost of
    $43.5 billion, to date. In 2003, Congress passed legislation to create the
    Next Generation Air Transportation System Joint Planning and Development
    Office (JPDO) to transform the NAS to meet the potential air travel
    demands of 2025. The NAS's infrastructure includes the air traffic control
    (ATC) system, which relies on an extensive array of information technology
    systems, including radars, automated data processing, navigation and
    communications equipment, and ATC facilities. The NAS's infrastructure
    also includes over 215,000 commercial and recreational aircraft as well as
    more than 19,000 airports. The aviation industry is critical to the
    nation's economic health, contributing about 9 percent to the gross
    domestic product. However, the ability of the NAS to accommodate
    increasing volumes of air traffic is limited, in part, to airport
    capacity, as well as the efficiency with which aircraft utilize the finite
    amount of airspace available in the vicinity of airports and at cruising
    altitudes. The JPDO is beginning to plan a multiagency effort to create
    the Next Generation Air Transportation System (NGATS), intended to triple
    the capacity of the current NAS. The NAS's human capital includes FAA's
    50,000 employees-the air traffic controllers who guide aircraft as they
    take off, land, and fly between airports-and others who certify the safety
    of aircraft and equipment, manage ATC modernization projects, maintain NAS
    systems, and provide support services. Finally, the NAS's financial
    resources are vitally important to ensure that it continues to meet the
    nation's mobility needs. From fiscal years 2000 through 2004, FAA's annual
    budget increased from $10.9 billion to approximately $14 billion; however,
    in fiscal year 2005, FAA received substantially less in capital funding
    than in prior years. FAA anticipates lean capital budgets for the
    immediate future, which enhances the need for FAA to manage its resources
    effectively.

    Executive Summary

    In 1995, GAO designated the ATC modernization program-a major component of
    NAS modernization-as a high-risk information technology initiative because
    of its size, complexity, cost, and problem-plagued past.1 FAA also faces
    challenges in expanding NAS capacity to accommodate future increases in
    demand for air travel as well as in hiring and training thousands of air
    traffic controllers to replace those expected to retire in the next
    decade. Additionally, FAA has attempted to change its workforce culture to
    one that stresses mission focus, coordination, accountability, and
    adaptability, but the agency has not provided the sustained leadership
    needed for lasting cultural change.2

    Concerned about the challenges facing ATC modernization, the Chairman and
    Ranking Minority Member, House Committee on Government Reform, and the
    Chairmen and Ranking Democratic Members of the House Committee on
    Transportation and Infrastructure and its Subcommittee on Aviation asked
    GAO to provide an overall assessment of the status of NAS modernization.
    This report addresses the status of ATC modernization as well as other NAS
    components, by answering the following research question: What challenges
    does FAA face in managing three distinct areas:

    (1) infrastructure, (2) human capital, and (3) financial resources? This
    report is based on FAA documents and briefings as well as reviews and
    summaries of related GAO work. GAO also convened an international panel of
    experts to discuss the challenges of FAA's NAS modernization efforts and
    the prospects that the Air Traffic Organization (ATO)-a recently created
    subunit of FAA-holds for improving modernization management. In addition,
    GAO interviewed key stakeholders representing labor, commercial airlines,
    general aviation, and the Department of

    1GAO, High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: Jan. 1,
    2005). In August 2005, FAA submitted a plan to the Office of Management
    and Budget to remove ATC modernization from GAO's high-risk list. FAA
    submitted this plan in response to a request from the Office of Management
    and Budget, which had asked agencies with programs on GAO's high-risk list
    to identify their goals for reducing fraud, waste, or mismanagement.
    Although the request specified that the purpose of the plans was not to
    get agency programs off the high-risk list, FAA intends to use the
    activities described in the plan as means for doing so, according to a
    Department of Transportation official.

    2"Organizational culture" is the underlying assumptions, beliefs, values,
    attitudes, and expectations shared by an organization's members that
    affect their behavior and the behavior of the organization as a whole.

                                       Background

                                   Executive Summary

    Defense (DOD). This report discusses all aspects of the NAS except airline
    employees and FAA's aircraft and equipment safety assurance operations.3
    (See ch. 1 for additional information on GAO's objective, scope, and
    methodology).

    GAO has issued numerous reports on FAA's difficulty in meeting cost,
    schedule, and/or performance targets, as well as on FAA's management of
    information technology, which is at the heart of many modern ATC systems.
    GAO has also reported on FAA's efforts to expand NAS capacity and reduce
    delays, and on FAA's human capital challenges, such as the need to hire
    and train thousands of air traffic controllers in the coming decade to
    replace those becoming eligible to retire. Finally, GAO has pointed out
    that FAA's acquisitions were impaired because employees acted in ways that
    did not reflect a strong commitment to mission focus, accountability,
    coordination, and adaptability.4

    Congress and others have taken steps to address these issues. For example,
    Congress exempted FAA from federal personnel and acquisition regulations
    in 1995, after the 1993 National Performance Review found, and FAA
    asserted, that these regulations impeded its ability to properly manage
    the ATC modernization program. In 1997, the congressionally appointed
    National Civil Aviation Review Commission recommended that FAA's
    management become more performance-based and that changes be made in how
    FAA is funded. In December 2000, President Clinton signed an executive
    order, and Congress passed, supporting legislation that, together,
    provided FAA with the authority to create the performance-based ATO to
    control and improve FAA's management of the modernization effort. In
    February 2004, FAA reorganized, transferring 36,000 employees, most of
    whom worked work in air traffic services and research and acquisitions, to
    the ATO.

    3For reports on airline employees and aircraft and equipment safety
    assurance workforce and procedures, see, for example, GAO, Aviation
    Safety: FAA Needs to Update the Curriculum and Certification Requirements
    for Aviation Mechanics, GAO-03-317 (Washington, D.C.: Mar. 6, 2003); Human
    Factors: FAA's Guidance and Oversight of Pilot Crew Resource Management
    Training Can Be Improved, GAO/RCED-98-7 (Washington, D.C.: Nov. 24, 1997);
    and Aviation Safety: Safer Skies Initiative Has Taken Initial Steps to
    Reduce Accident Rates by 2007, GAO/RCED-00-111 (Washington, D.C.: June 28,
    2000).

    4GAO, Aviation Acquisition: A Comprehensive Strategy Is Needed for
    Cultural Change at FAA, GAO/RCED-96-159 (Washington, D.C.: Aug. 22, 1996).

                                    Results in Brief

                                   Executive Summary

    In 2003, Congress authorized creation of a Joint Planning and Development
    Office (JPDO) to create and carry out an integrated plan to develop the
    next generation air transportation system, capable of meeting potential
    air traffic demand by 2025. While NAS modernization has previously been
    mainly under the purview of FAA, with a 10-year planning horizon, the JPDO
    is charged with coordinating research activities of multiple agencies,
    including FAA, to coordinate a 20-year research and development program.

    As GAO reported, FAA has taken many positive steps to improve the
    management of its infrastructure, but it still faces significant
    challenges. FAA met its acquisition performance goal for 2004, which
    indicates a good start in addressing the factors that contributed to past
    system acquisition problems. However, FAA will need to continue addressing
    four key factors that, as GAO has reported, have historically contributed
    individually or collectively to acquisitions missing their original cost,
    schedule, and performance targets: (1) acquisitions receiving less funding
    than called for in agency planning documents, (2) adding requirements
    and/or unplanned work, (3) underestimating the complexity of software
    development, and (4) not sufficiently involving stakeholders throughout
    system development.5 To address these and other issues that GAO has
    identified, FAA has taken some actions, but in some cases, needs to do
    more. For example, to improve its acquisition of software-intensive ATC
    systems, FAA developed a process improvement model, but did not mandate
    the model's use throughout the organization. In response to GAO's
    recommendation that it do so, FAA has begun developing a requirement that
    projects have process improvement activities in place before seeking
    approval from the FAA investment review board. Moreover, GAO has reported
    that FAA's acquisition management system does not ensure the use of a
    knowledge-based approach found in the best practices for managing
    commercial product developments. Commercial best practices call for
    specific knowledge to be captured and used by corporate-level decision
    makers to determine whether an acquisition has reached a level of
    development (product maturity) sufficient to move forward in the
    acquisition process. Additionally, while FAA has begun to develop its NAS
    enterprise architecture-a blueprint to guide and constrain its information
    technology investments-the agency needs to do more to achieve the
    architecture's

    5GAO, The National Airspace System: FAA Has Made Progress but Continues to
    Face Challenges in Acquiring Major Air Traffic Control Systems, GAO-05-331
    (Washington, D.C.: June 10, 2005).

    Page 6 GAO-06-154 Status of NAS Modernization Executive Summary

    full benefits. Another challenge is protecting information technology
    systems-an issue that has been on GAO's high-risk list since 1997. GAO
    recently reported that FAA faces critical needs in protecting its
    information technology-intensive ATC systems from inadvertent or
    intentional disruption.6 Finally, FAA will be challenged to expand NAS
    capacity to accommodate anticipated increases in air travel. To this end,
    FAA is supporting the development of new runways and airports, and is
    redesigning flight patterns to make more efficient use of airspace as
    aircraft take off, cruise, and land.

    FAA's major human capital challenges include hiring and training thousands
    of air traffic controllers to replace those expected to retire, and
    transforming the agency's organizational culture. First, FAA will need to
    hire and train thousands of air traffic controllers in the next decade to
    replace those who were hired after the air traffic controllers' strike in
    1981. As GAO recommended in 2002,7 FAA developed a comprehensive plan for
    this hiring and training effort. The plan describes expected recruitment
    sources, planned revisions to ATC facility staffing standards, a screening
    process to eliminate potentially unsuccessful candidates, and proposed
    upgrades to controller training facilities. To mitigate the costs of the
    controller training and hiring program, FAA's plan includes a number of
    steps that the agency expects will reduce controller staffing requirements
    by 10 percent. However, FAA has not calculated the savings that each step
    will achieve or the total cost of hiring and training. As a result, FAA
    cannot estimate the impact of the hiring and training effort on future
    budgets. As of June 2005, FAA was studying a proposal that could save
    costs by allowing potential controllers, after graduating from
    aviation-related college programs, to bypass FAA's controller training
    academy and immediately start their on-the-job training at an ATC
    facility. Second, FAA's workforce culture remains a concern. Responding to
    GAO's 1996 finding that FAA's workforce culture impaired its acquisitions,
    the agency developed a strategy for cultural change, but did not sustain
    its efforts. FAA is now developing baseline data for measuring the
    progress of its cultural transformation. FAA's recent action is a good
    first step, but continued management focus and commitment will be needed
    for success in this area,

    6GAO, Information Security: Progress Made, but Federal Aviation
    Administration Needs to Improve Controls Over Air Traffic Control Systems,
    GAO-05-712 (Washington, D.C.: Aug. 26, 2005).

    7GAO, Air Traffic Control: FAA Needs to Better Prepare for Impending Wave
    of Controller Attrition, GAO-02-591 (Washington, D.C.: June 14, 2002).

    Page 7 GAO-06-154 Status of NAS Modernization Executive Summary

    since, as we have reported, at least 5 years is needed to achieve cultural
    change.8

    In managing its financial resources, FAA faces the dual challenges of
    rising costs and declining revenues that it projects will produce an $8.2
    billion gap between expected budget targets and expected spending
    requirements through fiscal year 2009.9 FAA is striving to live within its
    reduced means by focusing on cost control and prioritizing projects.
    However, these actions will not come close to eliminating the gap, and
    some actions, such as cutting funding for new technology, come at the
    expense of future goals. For example, FAA eliminated $1.4 billion planned
    for early research, which included research on two systems that FAA had
    described as "cornerstones" of the NAS of the future. These technologies
    could have supported the JPDO's vision for the next generation air
    transportation system. As the expiration for the Aviation and Airway Trust
    Fund (Trust Fund) and FAA's reauthorization-both scheduled for
    2007-approach, FAA officials, aviation experts, and stakeholders are
    discussing how to better align FAA's revenue structure with actual costs
    and changes in the aviation industry. Over half of the Trust Fund's income
    now comes from a ticket tax, which some stakeholders believe is not linked
    to FAA's costs. A congressionally appointed commission made a similar
    recommendation in 1997, that the FAA's revenue stream become more cost
    based. Some experts suggested that FAA work toward changes that would be
    possible within the existing federal structure, such as improving its
    process for prioritizing programs or exploring further options for
    contracting out services. Others maintained that the ATO's relationship
    with Congress must change to allow the ATO to manage its own finances. GAO
    has reported that to address the challenges of the 21st Century, the
    nation needs to fundamentally reexamine such governance issues. In GAO's
    view, FAA could adopt a two-staged approach to address its financial
    management challenges: In the near term, make changes that are possible
    within the federal structure and establish a record of sound financial
    management. Over the longer term, determine whether sufficient evidence
    exists to develop a business case for more fundamental changes that could
    permit greater financial management flexibility.

    8GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers
    and Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2,
    2003).

    9In this report, the term "budget targets" means the outyear budgets
    provided by the Office of Management and Budget.

    Page 8 GAO-06-154 Status of NAS Modernization

                                   Executive Summary

                                   Principal Findings

    FAA Has Made Changes to Improve Infrastructure Management, but
    Acquisition, Security, and Capacity Challenges Remain

    GAO's recent reports on FAA's management of its infrastructure indicate
    that FAA has responded to several past recommendations, but needs to do
    more work to address continuing challenges. For example, FAA met its
    acquisition performance goal for fiscal year 2004-to meet 80 percent of
    designated milestones and maintain 80 percent of critical program costs
    within 10 percent of the budget, as published in FAA's Capital Investment
    Plan. This represents a good start. However, because the goal uses cost or
    schedule milestones that are set for each fiscal year, it needs to be
    viewed in the context of FAA's long-term acquisition performance. For
    example, during 2005, FAA plans to make changes to three major system
    acquisitions, effectively resetting the program milestones and cost
    targets against which it measures annual performance. Hence, this
    performance goal does not provide a consistent benchmark-such as the cost
    and schedule targets set at an acquisition's inception-for assessing
    progress over time. These annual performance targets should continue to be
    viewed in the broader context of acquisitions' original and revised
    baselines, and the variance reports provided to the FAA administrator and
    to Congress.

    FAA still faces challenges in addressing four factors that GAO found to be
    the cause of acquisitions missing their original cost, schedule, and/or
    performance targets. These factors--funding shortfalls, requirements
    growth and/or unplanned work, insufficient stakeholder involvement, and
    underestimation of software complexity-individually or collectively
    contributed to these problems and often interacted. For example, when
    developing a satellite navigation system, FAA underestimated the
    complexity of the system's software as it compressed the development
    schedule. This underestimate then contributed to unplanned work, cost
    increases, and schedule delays.

    Executive Summary

    To address these four factors and improve its general management of system
    acquisitions, FAA has taken several steps, but in a number of cases, it
    needs to do more. For example, FAA has obtained substantial benefits by
    developing and using a process improvement model in a number of
    software-intensive system acquisitions. FAA has begun developing a
    requirement that projects have process improvement activities in place
    before seeking approval from the FAA investment review board, as GAO
    recommended.10 Also in response to a GAO recommendation, FAA officials
    reported that they have improved the agency's investment portfolio
    management through semiannual reviews of in-service systems.11 FAA also
    changed its format for justifying major technology investments to a format
    prescribed by the Office of Management and Budget. However, FAA's
    acquisition management system still lacks a knowledge-based approach
    consistent with commercial best practices. Knowledge-based approaches
    ensure that, as acquisitions progress, officials obtain knowledge at
    specific junctures of an acquisition cycle, or knowledge points, thereby
    decreasing the risk of cost growth and schedule delays. Finally, although
    FAA has begun to develop a NAS enterprise architecture, it has not
    completed the architecture that it needs to manage its information
    technology investments.12 GAO's experience with federal agencies has shown
    that making information technology investments without defining these
    investments in the context of an architecture often results in
    duplication, poor integration, and unnecessary costs.

    GAO's most recent report on FAA's efforts to provide security for its
    information technology-intensive ATC systems notes that FAA needs to take
    steps to do more to protect these systems from inadvertent or intentional
    disruption.13 While FAA has established an information security program,
    the agency has not fully implemented it. As a result, GAO found outdated
    security plans, a lack of security awareness training, limited incident
    detection capabilities, and shortcomings in service continuity

    10GAO, Air Traffic Control: System Management Capabilities Improved, but
    More Can Be Done to Institutionalize Improvements, GAO-04-901 (Washington,
    D.C.: Aug. 20, 2004).

    11GAO, Information Technology: FAA Has Many Investment Management
    Capabilities in Place, but More Oversight of Operational Systems Is
    Needed, GAO-04-822 (Washington, D.C.: Aug. 20, 2004).

    12GAO, Federal Aviation Administration: Stronger Architecture Program
    Needed to Guide Systems Modernization Efforts, GAO-05-266 (Washington,
    D.C.: Apr. 29, 2005).

    13GAO-05-712.

                                   Executive Summary

    Human Capital Management Challenges Include Hiring Air Traffic Controllers
    and Transforming FAA's Organizational Culture

    plans. GAO also found weaknesses that threaten the integrity,
    confidentiality, and availability of these systems, including weaknesses
    in controls over who can obtain access. Accordingly, GAO recommended
    several actions intended to improve FAA's information security program.
    FAA agreed to consider our recommendations, but expressed concern that we
    had overstated the system's vulnerability to disruption. We acknowledged
    that FAA may have other protections built into its overall system
    architecture. However, because these systems are interconnected, the
    weaknesses we identified in the systems that we reviewed may increase the
    risk to other systems.

    To accommodate an expected 25 percent increase in air travel, many
    airports are building new runways. FAA is leveraging the benefits of new
    and existing runways by redesigning flight procedures to allow properly
    equipped aircraft to take off, cruise, and land with reduced separation
    while maintaining safety.

    During the next decade, FAA will need to replace thousands of air traffic
    controllers who will become eligible for retirement. During the 1980s and
    early 1990s, FAA hired large numbers of controllers to replace those who
    were fired when they went on strike in 1981. As a result, most of the
    current workforce will become eligible for retirement over the next 10
    years. In December 2004, responding to GAO's recommendation,14 FAA issued
    a hiring and training plan. To mitigate the cost of the plan, FAA plans to
    rely on part-time employees and job-sharing arrangements. However, the
    plan does not disclose the cost of hiring and training controllers, and
    agency officials could not provide any analyses to support the plan's
    estimates of cost savings. Hence, the impact of this hiring and training
    program on future budgets is unclear. If FAA experiences shortages in
    controller staffing, the agency plans to maintain safety by slowing the
    traffic flow, which could result in delays. In June 2005, FAA began
    considering whether prospective controllers who graduate from
    aviation-related programs in certain colleges could bypass the currently
    required academy training and instead proceed directly to an ATC facility
    to begin on-the-job training. Such a change in the training program holds
    potential for cost savings and is endorsed by union officials and by one
    of the colleges that prepares graduates for careers in aviation.

    14GAO-02-591.

                                   Executive Summary

    Rising Costs and Declining Revenues Pose Financial Management Challenges

    FAA has implemented a number of human capital reforms in response to an
    exemption from federal personnel management regulations. FAA replaced the
    traditional civil service pay system with a series of pay bands and
    specific job categories that have minimum and maximum pay rates spanning
    two to five pay bands. FAA also established its own hiring program, a
    flexible system for adjusting the number of executive-level positions, and
    a new performance management system.

    FAA is taking steps to create a results-oriented culture, addressing a
    factor that we identified as an impediment to ATC modernization in 1996.
    Recognizing the importance of organizational culture in achieving results,
    FAA's human capital plan includes a goal to create a results-based
    performance culture. Furthermore, FAA is using the results of its most
    recent employee attitude survey as a baseline to assess the organization's
    progress in adopting five core values that the management team selected.
    The core values are (1) integrity and honesty, (2) accountability and
    responsibility, (3) commitment to excellence, (4) commitment to people,
    and (5) fiscal responsibility. FAA's actions are good first steps, but
    continuous management attention over the next several years will be
    crucial to achieving the cultural change that FAA is seeking. GAO's work
    has highlighted the importance of recognizing organizational culture as a
    step in implementing mergers and transformations and has found that
    achieving cultural change typically takes 5 to 7 years years or longer.15
    In the past, FAA's efforts at cultural change lacked follow-through and
    continuity. While there was some improvement in securing a more
    results-oriented culture, as measured by employee responses to surveys in
    1997 and 2000, progress leveled off between the 2000 and the 2003 surveys.

    FAA projects that rising costs and reduced budgets will create a
    cumulative gap of $8.2 billion between expected budget targets and
    expected spending requirements through fiscal year 2009. FAA's budget
    targets for capital for each year through fiscal year 2009 will be 17
    percent less, on average, than the annual appropriations it received in
    fiscal years 2002 through 2004. Additionally, recent trends in the Trust
    Fund, which provides most of FAA's funding, have raised concerns. Since
    2002, FAA has spent more than the Trust Fund has taken in, and the Trust
    Fund's uncommitted balance has declined by nearly 50 percent. Although
    revenues increased in 2004, FAA's

    15GAO-03-669.

    Executive Summary

    expenditures increased more. FAA is striving to live within its reduced
    means by cutting programs and focusing on cost control. For example, for
    fiscal year 2005, after an intensive review of its capital investment
    portfolio, FAA suspended the acquisition of a digital communications data
    link and a precision landing system augmented by satellites, and
    terminated a major component of a new digital communications system.
    Additionally, FAA has begun to implement a new cost accounting system, as
    GAO has long advocated. GAO had previously reported that FAA lacked the
    cost information necessary for decision making and for adequate accounts
    of its activities and major projects, such as the air traffic control
    modernization program. FAA also expects to save about $450 million over 5
    years through cost-reduction measures such as contracting out its flight
    service stations. However, FAA is not likely to meet its financial
    challenges through savings, given other pressing needs. FAA has had to
    significantly cut capital funding aimed at providing future benefits in
    order to remain within expected appropriations, while providing $4.2
    billion for 16 major system acquisitions through 2009. For example, in its
    2005 through 2009 capital investment plan, FAA eliminated the $1.4 billion
    that it had set aside for what it calls the "architecture segment," which
    would have supported initial research and development of new technologies,
    prior to initiating formal acquisition programs. This reduction comes at
    an inopportune time, as the JPDO begins its efforts to coordinate the
    research of FAA and other federal agencies to transform the NAS to meet
    potential capacity needs in 2025. FAA also cut nearly $790 million from
    its planned investments for facilities. While FAA has replaced many ATC
    facilities in the last 5 years, the funding reduction could delay progress
    on ATC facilities that are scheduled for repair or replacement in the
    future.

    In anticipation of the Trust Fund's expiration and FAA's reauthorization,
    both scheduled for 2007, FAA officials, aviation experts, and stakeholders
    are debating the appropriateness of the current revenue structure and are
    reiterating some of the recommendations made in the past, such as those
    that the National Civil Aviation Review Commission made in 1997. Many
    stakeholders and aviation experts, as well as Department of Transportation
    officials, have suggested in various forums that FAA's funding mechanism
    needs to be changed to one that is more closely aligned with FAA's costs.
    FAA's 2004 performance report notes that the current revenue structure is
    heavily reliant on the number of airline passengers in the NAS, while
    FAA's workload and costs are driven by the number of aircraft operating in
    the NAS. Some experts stated that to effectively manage its acquisitions,
    FAA needs multiyear funding, financed by debt if necessary, as the
    commission recommended. Others suggested that FAA take steps in the near
    term to

                                   Executive Summary

    reduce costs within the existing structure of congressional oversight and
    financial control, such as exploring additional opportunities to contract
    out night-time ATC services. Others went so far as to state that FAA
    cannot fully address legacy modernization problems without complete
    managerial and budgetary independence. GAO has reported that to address
    the challenges of the 21st Century, the nation needs to fundamentally
    reexamine what the government should do, how it should do business, and
    how it should be financed. GAO believes that in the near term, FAA must
    pursue currently available options, such as exploring additional
    opportunities for contracting out services and pursuing other cost-saving
    measures, and demonstrate improvement in its ability to manage its costs.
    After fully exploiting these options, and establishing a record of
    improved financial management, FAA could consider longer term changes by
    reexamining fundamental issues such as the appropriate government role in
    aviation and the funding mechanism that supports the ATC system.
    Ultimately, Congress and the President will decide these issues.

    GAO is recommending that FAA take the following four actions: (1) estimate
    the cost of its controller hiring and training plan and provide for these
    costs in future budget requests; (2) provide the long-term commitment to
    transforming the culture to become more results oriented so that the
    change takes root; (3) balance current and long-term investment
    priorities; and (4) use all available management tools and, after
    establishing a record of improved financial management, explore more
    fundamental changes that could provide greater financial management
    flexibility.

    Recommendations for Executive Action

    Agency Comments and GAO Evaluation

    GAO provided a draft of this report to the Department of Transportation
    for its review and comment. In response, ATO managers; FAA's Chief
    Information Officer; and the Acting Director, Office of Financial
    Controls, provided oral comments. ATO managers noted that GAO's
    recommendations on balancing current and long-term investment priorities
    and using all available financial management tools may not be necessary
    because FAA is taking actions consistent with these recommendations.
    According to FAA, the agency's balancing of current and long-term
    investment priorities will be reflected in its fiscal year 2007 budget
    request, which was being formulated in parallel with GAO's work. GAO is
    retaining this recommendation because it pertains not only to fiscal year
    2007, but to future years as well. FAA also commented that it is using all
    available management tools, including examining alternative funding
    mechanisms.

    Executive Summary

    GAO believes that FAA needs to pursue additional cost saving tools, such
    as exploring further opportunities to contract out services; consolidate
    major facilities; and accelerate decommissioning of ground-based
    navigation aids, as GAO has noted in this report. Therefore, GAO is
    retaining the recommendation to this effect. FAA did not comment on the
    other recommendations. FAA provided technical comments and clarifications
    throughout the report, which GAO incorporated as appropriate.

    Chapter 1

    Introduction

    FAA Manages the National Airspace System, a Complex Collection of Systems
    and Infrastructure

    The Federal Aviation Administration's (FAA) mission is to provide the
    safest, most efficient aerospace system in the world. This system, known
    as the National Airspace System (NAS), consists of (1) infrastructure
    (systems, procedures, facilities, airports and aircraft, communications
    equipment, satellite navigation aids, and radars); and (2) human capital
    (the people who make the NAS work-commercial, military, and general
    aviation pilots and airline dispatchers, and FAA employees, including
    equipment maintenance technicians and air traffic controllers who work in
    airport towers, and terminal area, en route, and oceanic air traffic
    control (ATC) centers. (See table 1.)

                                 Table 1: NAS Overview

    Source: FAA.

    aIncludes approximately 950 nondirectional beacons owned by local
    governments and other entities.

    The NAS covers every aspect of aviation in the United States, beginning
    with the aircraft itself. FAA certifies aircraft as safe to operate in the
    NAS, from the earliest stages of design to 30 years after entry into
    service. FAA also certifies the NAS's practices, personnel, and spare
    parts. Additionally, FAA sets standards for the construction and operation
    of the public and private airports located throughout the NAS.

    On a larger scale, the NAS is a highly technical system and includes some
    36,000 pieces of equipment operating in hundreds of locations throughout
    the United States. This equipment can range from a single navigation
    beacon in Brooke, Virginia, to an air route traffic control center, such
    as that in Oberlin, Ohio, that handles en route traffic. The mission of
    this

    Chapter 1 Introduction

    highly integrated system is to support all phases of flight for aircraft
    in the United States, from initial flight planning to successful takeoff,
    en route operations, and landing. (See fig. 1.)

                               Figure 1: Phases of Flight

    Source: FAA.

    Definitions of phases of flight:

    Preflight: The period before the aircraft starts to move. It includes an
    extended strategic planning period that precedes flights. During this
    period, air traffic controllers compare the amount of traffic in the NAS
    with available capacity and develop initial strategies to mitigate any
    imbalances.

    Airport surface: The periods from the terminal gate to takeoff and from
    touchdown to the terminal gate at the destination. Air traffic controllers
    in airport towers control aircraft during this phase.

    Terminal departure and terminal arrival: The periods immediately following
    takeoff, when the aircraft initially climbs from the origination airport,
    and toward the end of a flight, when the aircraft descends to the
    destination airport. Air traffic controllers in airport towers control
    aircraft during the initial moments after takeoff and prior to landing,
    when the aircraft is within 5 nautical miles of the airport and up to
    3,000 feet above the airport. Air traffic controllers at terminal approach
    control facilities, called TRACONS, control aircraft from the point where
    the airport tower's control ends to approximately 50 miles from the
    airport.

    En route: The phase that occurs between terminal areas, including the
    climb, cruise, and decent phases of the flight. Air traffic controllers at
    air route traffic control centers control aircraft during the en route
    phase of

    Chapter 1 Introduction

    flight, and in some areas of the country, also control aircraft during the
    arrival and departure phases.

    Oceanic: Analogous to the en route phase, except the aircraft is operating
    in oceanic air space, where there are fewer communication, navigation, and
    surveillance capabilities than are available over land.

    The ATC system, which is a principal component of the NAS, comprises a
    vast network of radars; automated data processing, navigation and
    communication equipment; and air traffic control facilities. About 15,000
    air traffic controllers control aircraft in the system and provide
    critical data throughout every stage. They work in the 162 terminal radar
    control facilities, the 21 air route traffic control centers that manage
    aircraft in the en route environment, and the 3 oceanic control centers.
    All of these control centers are linked and managed through the Air
    Traffic Control System Command Center in Herndon, Virginia. The NAS also
    includes thousands of navigational aids throughout the United States that
    provide critical location information to pilots at all stages of their
    operations.1

    The nation's 19,500 airports are key components of the NAS, as they serve
    as gateways to air travel. Several of the nation's largest airports, such
    as Chicago's O'Hare, New York's LaGuardia, and Atlanta's Hartsfield, are
    at capacity and need immediate improvements. Because the NAS functions as
    an interdependent network, delays at these airports can quickly create a
    "ripple" effect of delays that affects many airports across the country.
    For example, flights scheduled to take off from these airports may find
    themselves being held at the departing airport due to weather or limited
    airspace. Similarly, an aircraft late in leaving the airport where delays
    are occurring may be late in arriving at its destination, thus delaying
    the departure time for that aircraft's next flight.

    The current NAS continues to reflect its origins as a system in which
    aircraft flew directly between ground-based navigational aids along
    FAA-defined routes. The existing airspace structure and boundary
    restrictions strongly reflect the constraints that communication and
    computer systems imposed as the NAS developed over the past 80 years. The
    advanced information technology available today, such as satellite
    navigation systems onboard aircraft, digital communication, and computer
    decision

    1A navigation aid is any visual or electronic device, airborne or on the
    surface, that provides point-to-point guidance information or position
    data to aircraft in flight.

    Page 18 GAO-06-154 Status of NAS Modernization Chapter 1 Introduction

    support systems, holds potential for increasing airspace capacity,
    improving aviation safety, and providing efficiencies to aircraft
    operators and service providers.2 FAA is working to harness this new
    technology by transitioning the NAS from a ground-based system to a hybrid
    that uses both ground-based and airborne systems, thereby allowing pilots
    to be the primary decision makers as they navigate their aircraft, while
    controllers intervene only by exception. Making this transition requires
    that procedures, roles, responsibilities, equipment, and automation
    functions evolve into a structure that gives users greater flexibility in
    planning and conducting flights.

    Such an evolution is a key component of the Joint Planning and Development
    Office's (JPDO) vision for the Next Generation Air Transportation System.
    In 2003, Congress directed the Secretary of Transportation to establish
    the JPDO to create, among other things, an integrated plan to ensure that
    the future air transportation system meets safety, security, mobility,
    efficiency, and capacity needs of the year 2025.3 The JPDO is expected to
    operate in conjunction with relevant programs in the National Aeronautics
    and Space Administration; the Departments of Defense, Commerce, and
    Homeland Security; and other agencies as needed. The JPDO published a
    report in December 2004 that describes the need for change in the NAS over
    the next 20 years.4

    FAA receives most of its funding from the Airport and Airway Trust Fund
    (Trust Fund), which was established by the Airport and Airway Revenue Act
    of 19705 to help fund the development of a nationwide airport and airway
    system as well as investments in air traffic control facilities. The Trust
    Fund receives most of its income from a number of taxes paid by passengers
    or airlines. (See fig. 2.) It funds the Airport Improvement Program, which
    provides grants that airports use in combination with other funding
    sources to finance construction and safety projects; capital

    2The term "service provider" refers to anyone who furnishes NAS users with
    separation assurance, traffic management, infrastructure management,
    aviation information, navigation, landing, airspace management, search and
    rescue, or aviation assistance services.

    3P.L. 108-176, December 12, 2003.

    4Joint Planning and Development Office, Next Generation Air Transportation
    System: Integrated Plan (Washington, D.C.: Dec. 12, 2004).

    5P.L. 91-258.

    Chapter 1 Introduction

    expenditures; and the Research, Engineering, and Development account. (See
    fig. 3.) The General Fund provided 40 percent of FAA's operating funds and
    22 percent of FAA's total budget in fiscal year 2004.

    Figure 2: Trust Fund Revenue Sources, Fiscal Year 2004

    3%

    Aviation fuel other than gasoline (non-commercial)

    Aviation fuel - commercial

    Interest on investments

    Transportation of property

    Use of international air facilities

    Transportation of persons

    Source: GAO analysis of FAA data.

    Note: Transportation of persons includes domestic passenger ticket taxes,
    domestic flight segment fees, rural airports ticket taxes, and frequent
    flyer taxes. In the past, FAA had reported estimates of each of these
    taxes based on an internal allocation formula. Under that formula,
    passenger ticket taxes contributed about half of the Trust Fund's
    revenues. The Trust Fund also receives tax revenue from the sale of
    noncommercial aviation gasoline. In fiscal year 2004, this tax contributed
    0.3 percent of Trust Fund revenues.

    Chapter 1 Introduction

    Figure 3: Trust Fund Expenditures by Category, Fiscal Year 2004

    1%

    Research, Engineering, and Development

    Capital

    Airport Improvements

    Operations

    Source: GAO analysis of FAA data.

    To organize its efforts to manage the NAS, FAA has developed a variety of
    plans, which it links to the President's Management Agenda.6 (See fig. 4.)
    FAA's strategic plan, titled the Flight Plan, provides a 5-year view of
    the agency's goals and performance measures. Each of the agency's major
    organizational units, called lines of business, develops a plan that
    supports the Flight Plan. The Operational Evolution Plan monitors how NAS
    capacity will change over a rolling 10-year planning horizon depending on
    numerous variables, such as the demand for air travel, the completion of
    new runways; and the availability of new ATC systems. Ultimately, FAA
    plans to link the Operational Evolution Plan and the 20-year plan of the
    JPDO.

    6The President's Management Agenda was issued in fiscal year 2002 as a
    strategy for improving the performance and management of the federal
    government.

    Page 21 GAO-06-154 Status of NAS Modernization

                                 Chapter 1 Introduction

        Figure 4: Relationship of FAA's Plans to Department-Level and Executive
                                   Branch-Level Plans

                                      Source: FAA.

                                 Chapter 1 Introduction

    FAA Envisions a More Flexible and Efficient NAS

    Satellite-based ATC systems and new digital communications systems are key
    elements of FAA's vision for NAS modernization. Under this vision, pilots
    would use performance-based navigation, which makes optimum use of an
    aircraft's capabilities, combined with new satellite and ground-based
    navigation systems and digital communications systems to use the NAS more
    efficiently. Properly equipped aircraft would navigate using satellite
    signals from the global positioning system (GPS). Because GPS alone does
    not produce a signal that matches the performance of existing ground-based
    navigation aids, FAA has deployed a Wide Area Augmentation System (WAAS),
    consisting of many widely spaced wide area reference stations, that
    provide information necessary to transmit the WAAS signal to users. (See
    fig. 5.) GPS and WAAS provide precise navigation and landing guidance at
    all airports, including the thousands that have no ground-based landing
    capacity. Consequently, WAAS significantly enhances navigation
    capabilities at these U.S. airports.

                        Figure 5: Wide Area Augmentation System

                             Source: Photo courtesy of FAA.

    Chapter 1 Introduction

    FAA is developing a similar system, called the Local Area Augmentation
    System (LAAS). (See fig. 6.) LAAS would also use GPS signals to provide
    more precise landing guidance at airports, but coverage would be
    airport-specific rather than nationwide, like WAAS's coverage. LAAS, as
    envisioned, would exceed the capabilities of current instrument landing
    systems and increase NAS capacity by providing more precise approach paths
    and reducing required separation between incoming aircraft in all weather
    conditions, as well as shorter and more flexible curved approaches to
    airports. WAAS and LAAS could eventually allow FAA to eliminate about half
    of the current ground-based system of navigational aids and instrument
    landing systems.

                        Figure 6: Local Area Augmentation System

    Source: Photo courtesy of FAA.

    However, WAAS and LAAS cannot fully replace ground-based navigational
    technologies because GPS signals are susceptible to disruptions from
    atmospheric effects, signal blockage from buildings, and interference from
    communications equipment, as well as from deliberate acts. Without a
    backup system, such as that provided by ground-based navigational aids,
    commercial operations, which are essential to the nation's economic
    vitality, could be interrupted. Therefore, FAA and the Department of

    Chapter 1 Introduction

    Defense (DOD) plan to maintain a number of ground-based navigational aids
    and instrument landing systems as a backup system. These aids and systems
    would also serve general aviation aircraft that are not equipped with
    satellite navigation systems. The backup system could further aid in
    reestablishing surveillance of an aircraft that loses satellite contact.

    FAA's vision for NAS modernization also includes digital communications
    systems, such as that envisioned under the Controller-Pilot Data Link
    Communications (CPDLC) program. CPDLC would improve the efficiency of
    routine communications by sending structured sets of phrases between
    controllers and pilots in suitably equipped aircraft to eliminate the need
    for voice communications, thereby reducing air traffic controller workload
    and allowing better use of voice frequencies. The Next Generation
    Air-to-Ground Communication System (NEXCOM) would replace existing analog
    controller-pilot communication systems with a new state-of-the-art digital
    system. This would improve ATC communications capabilities and security by
    requiring a digital form of authentication, thus preventing the
    possibility of "phantom controllers" gaining access to the communications
    system.

    Collecting weather data and forecasting weather conditions are joint
    efforts of the Department of Commerce, FAA, and DOD. Weather information
    is critical for NAS operators-those who control aircraft and provide
    flight service information to pilots, as well as NAS users-the pilots,
    airline dispatchers, and airport operators, among others, who use it in
    every facet of their operations. Weather information systems range from
    the automated weather data systems at airports to sophisticated forecasts
    of en route conditions. For example, the Alaskan Flight Services
    Automation System will integrate real-time weather graphics with weather
    and aeronautical information.7 The overall network of weather data
    collection sites, computer systems, and communications covers the entire
    United States.

    7FAA has an ongoing ATC modernization effort in Alaska. This modernization
    effort includes software improvements for pilots' weather briefings and
    infrastructure improvements for flight service facilities.

    Page 25 GAO-06-154 Status of NAS Modernization

                                 Chapter 1 Introduction

    Numerous Reviews of FAA's Modernization Efforts Have Identified Problems
    and Proposed Solutions

    We have reported on the cost, schedule, and/or performance problems that
    FAA has encountered in NAS modernization and Congress has passed
    legislation to address these problems. We have issued numerous reports and
    made over 30 recommendations to improve FAA's ATC modernization efforts.
    These reports focused on many aspects of the NAS, including

         o the management of modernization projects, including the use of project
           reviews, milestones, and baselines, and the development of
           cost-accounting information;
         o the management of the information technology that is at the heart of
           many modern ATC systems, many of which could directly or indirectly
           increase NAS capacity;
         o the challenges FAA faces in increasing NAS capacity and reducing
           delays;
         o human capital challenges, such as the need to hire thousands of air
           traffic controllers in the coming decade to replace those becoming
           eligible to retire; and
         o a workforce culture that lacked the mission focus, accountability,
           coordination, and adaptability needed for FAA to meet its cost,
           schedule, and performance targets for system acquisitions.

    FAA has implemented many of these recommendations to varying degrees.

    In September 1993, the National Performance Review concluded that, among
    other things, federal personnel rules prevented FAA from reacting quickly
    to the agency's needs for attracting and hiring staff. Subsequently,
    Congress directed the Secretary of Transportation to study the management,
    regulatory, and legislative reforms that would enable FAA to provide
    better ATC services. The Secretary of Transportation argued strongly that
    the agency needed flexibility to pay people what the job required and to
    move them where the work was needed, without the restrictions of standard
    government personnel procedures. FAA also maintained that it needed
    flexibility to deviate from the Federal Acquisition Regulations to allow
    it to better manage its ATC modernization program.

    Chapter 1 Introduction

    Congress exempted FAA from most personnel and procurement regulations in
    legislation passed in late 1995.8

    In 1994, to provide more stability in FAA leadership, Congress established
    a 5-year term for the administrator. The first administrator to complete
    this 5year term served from 1997 to 2002. In contrast, during the first 10
    years of the ATC modernization effort, FAA had seven administrators and
    acting administrators, whose average tenure was less than 2 years.

    In 1996, Congress established the National Civil Aviation Review
    Commission to develop, among other things, specific recommendations on how
    the administration could reduce costs, raise additional revenue for the
    support of agency operations, and accelerate modernization efforts. In
    1997, the commission offered the following recommendations:

         o FAA's management must become more performance based,
         o FAA must control its operating costs and increase capital investments,
         o airport capital needs must be met,
         o FAA's revenue stream must become more cost based, and
         o FAA's budget treatment must change.

    In December 2000, President Clinton issued an executive order and Congress
    passed supporting legislation, which together gave FAA the authority to
    create the performance-based Air Traffic Organization (ATO) to control and
    improve FAA's management of the modernization effort.9 The executive order
    envisioned that the ATO would be better able to exercise the procurement
    and personnel authorities granted by Congress. The order directed the ATO
    to incorporate FAA's Research and Acquisitions and Air Traffic Services
    organizations-essentially those that develop and acquire systems, and
    those that operate them, respectively. FAA hired a chief operating officer
    in August 2003 to head the ATO. In February 2004,

    8P.L. 104-50, Fiscal Year 1996 Department of Transportation Appropriations
    Act.

    9Executive Order 13180, which created the ATO, was amended by Executive
    Order 13264 in June 4, 2002, which removed the caveat that air traffic
    services are an "inherently governmental function."

    Page 27 GAO-06-154 Status of NAS Modernization

                                 Chapter 1 Introduction

    FAA reorganized, transferring 36,000 employees, most of whom worked in air
      traffic services and in research and acquisitions, to the ATO. (See fig. 7.)

    Figure 7: Prior and Current Structure of Research and Acquisitions, Air
    Traffic Services, and Free Flight Organizations Before ATO realignment
    After ATO realignment

    Objectives, Scope, and Methodology

                                      Source: FAA.

    We assessed the status of FAA's efforts to modernize several key
    components of the NAS's infrastructure: ATC systems-a major component of
    the NAS; information security; and NAS capacity expansion through airspace
    redesign and runway construction. We also addressed FAA's human capital
    and financial management challenges, including rising

    Page 28 GAO-06-154 Status of NAS Modernization Chapter 1 Introduction

    costs and uncertain future revenues. We conducted our work from June 2004
    through June 2005, in accordance with generally accepted government
    auditing standards.

    Our methodology included summarizing recently completed work on all
    aspects of NAS modernization, and where necessary, updating that work and
    performing new evaluation work. We reviewed FAA reports on its plans for
    the NAS, including its Flight Plan, Operational Evolution Plan, Roadmap
    for Performance-Based Navigation, and Controller Staffing Plan, and
    reports by the Department of Transportation's Office of the Inspector
    General. We also reviewed relevant legislation and committee reports and
    drew heavily from our completed work on air traffic congestion, runway
    construction, acquisitions management, acquisition of software-intensive
    ATC systems, information technology investment management, controller
    staffing, acquisition workforce culture, and human capital reforms.

    To broaden our perspective on NAS modernization, we assembled an
    international panel of experts for a day-long symposium and asked them to
    address the following questions:

         o What factors have affected the schedule, cost, and performance of
           FAA's ATC modernization program, and what steps could the ATO take in
           the short term to address these factors?
         o How have federal budget constraints affected ATC modernization, and
           what steps could the ATO take in the short term to address these
           constraints?
         o What steps could FAA take in the longer term to improve the
           modernization program's chances of success and help the ATO achieve
           its mission?

    We also interviewed a number of aviation stakeholders including officials
    at the Radio Technical Commission for Aeronautics (RTCA), DOD, the
    American Association of Airport Executives, the Aircraft Owner and Pilots
    Association, FAA's Avionics Systems Branch, the Air Transport Association,
    and the National Air Traffic Controllers Association.

    To update previous work and obtain a clearer understanding of FAA's
    procedures, we met with FAA's administrator and assistant administrator
    for human resources management and obtained information from officials in
    FAA's Airports Organization. Within the ATO, we met with the chief

                                 Chapter 1 Introduction

    Agency Comments and Our Evaluation

    operating officer, the vice president for acquisitions and business
    services, the vice president for finance, and the JPDO director and deputy
    director.

    As part of our effort to evaluate FAA's progress in addressing human
    capital management challenges, we analyzed FAA employees' responses to
    items on workforce culture issues that FAA included in employee attitude
    surveys conducted in 1997, 2000, and 2003. We selected these items with
    expert assistance and compared the responses to those for similar items
    contained in a research database on workforce culture. Appendix I contains
    detailed information on our methodology for analyzing and comparing survey
    data.

    We provided a draft of this report to the Department of Transportation for
    its review and comment. In response, ATO managers; FAA's Chief Information
    Officer; and the Acting Director, Office of Financial Controls, provided
    oral comments. FAA commented that its fiscal year 2007 budget request will
    reflect its balancing of current and future funding priorities, and,
    therefore, our recommendation to this effect may be unnecessary. We are
    retaining this recommendation because it applies not only to fiscal year
    2007, but to future years as well. Likewise, FAA managers commented that
    the agency is already utilizing all available financial management tools,
    including looking at alternative financing mechanisms. Our draft report
    discussed FAA's consideration of alternative financing mechanisms at
    length. We continue to believe that FAA should explore further
    opportunities to contract out its services; consolidate major facilities;
    and accelerate decommissioning of ground-based navigation aids, as we have
    noted in this report. Therefore, we are also retaining this
    recommendation. FAA did not comment on the remaining recommendations.

    FAA also provided a number of technical comments and clarifications
    throughout the report, which we included as appropriate.

    Chapter 2

    FAA Has Made Changes to Improve Infrastructure Management, but
    Acquisition, Security, and Capacity Challenges Remain

    FAA Met Its 2004 Acquisitions Performance Goal

    We recently reported on FAA's system acquisition, security, and capacity
    challenges. We reported that FAA got off to a good start in 2004 by
    meeting its acquisitions performance goal and has recently taken several
    steps to address the factors that contributed to acquisition problems in
    the past. However, it still faces challenges in some areas. Our recent
    report on information security highlights the need for FAA to ensure that
    key information technology systems are protected from willful acts of
    sabotage. Finally, we reported on the challenges that FAA faces in
    expanding the NAS's capacity to accommodate current and anticipated
    increases in air travel.

    As we recently reported, FAA met its acquisitions performance goal for
    fiscal year 2004: to meet 80 percent of the designated milestones and
    maintain 80 percent of the critical program costs within 10 percent of the
    budget, as published in FAA's Capital Investment Plan. Having such a goal
    is consistent with the President's Management Agenda, which calls for a
    commitment to achieve immediate, concrete, and measurable results in the
    near term and meeting this goal indicates a good start for the ATO. While
    meeting this 1-year goal is a positive step toward better acquisition
    management, evaluating it in the context of overall acquisition
    achievements provides a more comprehensive assessment.1 For example, 3 of
    the 16 major system acquisitions that we reviewed in detail were being
    revised to reflect cost and/or schedule changes during 2005. These revised
    cost and schedule changes would become the new milestones for the fiscal
    year 2006 performance goal. While revising targets that are no longer
    valid is an appropriate management action, using revised targets, rather
    than the original targets, as a basis for overall performance measurement,
    does not provide a consistent benchmark for measuring acquisition
    performance over time. Annual performance targets should continue to be
    viewed in the broader context of acquisitions' original and revised
    baselines, and in the variance reports provided to the FAA administrator
    and to Congress.

    1Our statements about cost, schedule, and/or performance in this and past
    reports are based on the original targets that FAA established and
    approved for each acquisition program. FAA noted that it tracks
    acquisition performance against original baselines and reports variances
    that exceed predefined thresholds to the administrator and Congress as
    required.

    Page 31 GAO-06-154 Status of NAS Modernization

        Chapter 2 FAA Has Made Changes to Improve Infrastructure Management, but
                 Acquisition, Security, and Capacity Challenges Remain

    FAA Is Addressing Key Factors That Contributed to Legacy Cost, Schedule,
    and/or Performance Problems, but More Work Remains

    We recently reported that, historically, four factors individually or
    collectively contributed to system acquisitions' missing cost, schedule,
    and/or performance targets.2 FAA is taking steps to address some of these
    factors, but needs to do more.

    Four Key Factors Contributed to Legacy Cost, Schedule, and/or Performance
    Problems

    One or more of four factors-(1) funding acquisitions at lower levels than
    called for in agency planning documents, (2) adding requirements and/or
    unplanned work, (3) underestimating the complexity of software
    development, and (4) not sufficiently involving stakeholders throughout
    system development-contributed to 12 of 16 major acquisitions' missing
    targets.3 (See table 2.) Appendix II provides each system's full name and
    purpose.

    2 GAO-05-331.

    3See GAO-05-331 . We reviewed the 16 ATC system acquisitions with the
    largest life-cycle costs that met the following criteria: each system had
    cost, schedule, and/or performance targets; each system was discussed in
    prior GAO and Department of Transportation Inspector General reports, had
    not been fully implemented or deployed by 2004, and received funding in
    2004. We reviewed this list with FAA officials to ensure that we did not
    exclude any significant system. In fiscal year 2005, these 16 major ATC
    system acquisitions account for about 36 percent of FAA's capital budget.

        Chapter 2 FAA Has Made Changes to Improve Infrastructure Management, but
                 Acquisition, Security, and Capacity Challenges Remain

    Table 2: Four Key Interrelated Factors Contributing to Cost Growth,
    Schedule Extensions, and/or Performance Shortfalls for 12 ATC System
    Acquisitions

                                       STARS X X

                                       WAAS X XX

    Source: GAO analysis of FAA data.

    Notes:

    Blank spaces in the chart denote that the specific factor was not a key
    contributor to a program's inability to meet cost, schedule, or
    performance targets.

    FAA's Telecommunications Infrastructure, another of the 16 system
    acquisitions that we reviewed, also experienced cost growth, but for a
    reason not shown above. The original planning document that was prepared
    for this acquisition contained estimated costs for some of the system's
    requirements. When the planning document was updated, it included actual
    contract costs, which were greater than originally estimated.

    aAdditional factors are listed, beyond those previously reported, based on
    updated information provided by FAA.

    A discussion of each factor follows:

    o  Funding acquisitions at lower levels than called for in agency planning
    documents: When FAA initiates a major system acquisition, it estimates,
    and its top management approves, the funding plans for each year. However,
    when budget constraints do not allow all system acquisitions to be fully
    funded at the previously approved levels, FAA must decide which programs
    to fund and which to cut, according to its priorities. When a system
    acquisition does not receive the annual funding called for in its planning
    documents, the acquisition may fall behind schedule. This may also
    postpone the benefits of the new system

    Chapter 2 FAA Has Made Changes to Improve Infrastructure Management, but
    Acquisition, Security, and Capacity Challenges Remain

    for the NAS, and can require FAA to continue operating and maintaining the
    older equipment that the acquisition is intended to replace.

         o Adding requirements and/or unplanned work: Inadequate or poorly
           defined requirements may contribute to the inability of system
           acquisitions to meet their original cost, schedule, and/or performance
           targets, since developing or redefining requirements as an acquisition
           progresses takes time and can be costly. In addition, unplanned
           development work may occur when the agency misjudges the extent to
           which a commercial-off-the-shelf or nondevelopmental item,4 such as
           one procured by another agency, will meet FAA's needs.
         o Underestimating the complexity of software development: When FAA
           underestimates the complexity of software development or misjudges the
           difficulty of modifying available software to fulfill its mission
           needs, acquisitions may take longer and cost more than expected.5
         o Not sufficiently involving stakeholders throughout system development:
           Not involving relevant stakeholders, such as air traffic controllers
           and maintenance technicians, early and throughout a system's
           development and approval may lead to costly changes in requirements
           and unplanned work late in the development process.

    In some cases, FAA missed cost, schedule, and/or performance targets
    because of two or more of the factors discussed above. For example, FAA
    underestimated the complexity of the software that would be needed to
    support WAAS when the agency reduced, by 3 years, its plans to develop,
    test, and commission the system. FAA then tried to accomplish these tasks
    in 28 months, even though the software development alone was originally
    expected to take from 24 to 28 months. FAA's efforts to resolve this issue
    resulted in unplanned work, which then contributed to cost increases and

    4FAA defines a commercial-off-the-shelf item as a product or service that
    has been developed for sale, lease, or license to the general public. The
    product is currently available at a fair market value. FAA defines a
    nondevelopmental item as an item that was previously developed for use by
    a government (federal, state, local, or foreign) and that requires limited
    further development. For example, an Army radio is the core of FAA's
    NEXCOM radio, and the software that FAA selected for its new oceanic ATC
    system was a nondevelopmental item from New Zealand's air system.

    5For purposes of this report, the underestimation of software complexity
    refers to poor estimation of the level of effort that would be required to
    modify software to meet requirements (e.g., commercial-off-the-shelf or
    nondevelopmental items).

        Chapter 2 FAA Has Made Changes to Improve Infrastructure Management, but
                 Acquisition, Security, and Capacity Challenges Remain

    FAA Has Taken Steps to Improve Acquisition Management, but Has Not Fully
    Implemented Some Recommendations

    schedule delays. For STARS, not adequately including stakeholders during
    the development phase contributed to unplanned work, which in turn,
    contributed to cost growth, schedule delays, and eventually a reduction in
    the number of systems to be deployed.

    The remaining three systems that we reviewed-En Route Automation
    Modernization System (ERAM), Advanced Technologies and Oceanic Procedures
    (ATOP), and En Route Communications Gateway (ECG)-are meeting cost,
    schedule, and performance targets, but warrant close attention. ERAM, the
    new computer system to help run FAA's en route ATC operations, is a
    high-risk effort, in part because it requires over 1 million lines of
    code. While ERAM's contractor has completed the first three of four
    software deliveries ahead of schedule, "bugs" could be discovered through
    further testing and integration, which could require additional software
    development, according to a senior program official. In the past, FAA has
    had difficulty developing systems with such a high volume of code. Also,
    FAA assumed responsibility after February 2005 for the cost of resolving
    any additional software problems that it identifies with ATOP, its new
    oceanic ATC system. A fixed-price contract previously governed the
    acquisition. FAA also anticipates adding requirements costing about
    $500,000 to ECG, a communications interface.

    FAA has announced plans to implement recommendations we made to improve
    software-intensive acquisitions and investment management practices.6
    However, FAA has not yet adopted a knowledge-based approach for system
    acquisitions or fully implemented our recommendations to improve its
    enterprise architecture development.

    To reduce the risk of requirements growth and/or unplanned work, as well
    as the risks associated with acquiring software-intensive systems, FAA has
    developed and applied a process improvement model to a number of
    acquisition projects. This model is used to assess the maturity of FAA's
    software and systems capabilities. As we reported, this approach has
    resulted in enhanced productivity, higher quality, greater ability to
    predict

    6As required by 31 U.S.C. 720, the Department of Transportation submitted
    a written statement of the actions taken on our recommendations to the
    Senate Committee on Homeland Security and Governmental Affairs and to the
    House Committee on Government Reform. We have not yet evaluated whether
    these actions fully address our recommendations.

    Page 35 GAO-06-154 Status of NAS Modernization Chapter 2 FAA Has Made
    Changes to Improve Infrastructure Management, but Acquisition, Security,
    and Capacity Challenges Remain

    schedules and resources, better morale, and improved communication and
    teamwork.7 However, because FAA did not mandate the use of the model
    throughout the organization, we recommended that it do so. In response,
    FAA has begun developing a requirement that projects have process
    improvement activities in place before seeking approval from the FAA
    investment review board.

    FAA told us in December 2004 that it is taking actions that respond to our
    recommendations for improvements to its Acquisition Management System.8
    For example, FAA reports that when reviewing acquisitions, it now focuses
    on the acquisition's impact on customer service and contribution to
    achieving the agency's strategic and performance goals, including
    expanding NAS capacity, rather than on the approval and management of
    individual acquisition programs. FAA has also informed us that it has
    established basic investment management capabilities, including many
    practices for selecting and controlling its mission-critical information
    technology investments. Our previous work showed that FAA was not
    regularly reviewing investments that are more than 2 years into their
    operations. As a result, FAA was limited in its ability to oversee, as a
    total package of competing investment options, more than $1 billion of its
    information technology investments, and to pursue only those that best
    meet its goals.9 In its response to our recommendation, FAA stated that it
    had changed its acquisition review process to a semiannual "service level
    review" process that encompasses systems that are in service.
    Additionally, FAA has changed its format for justifying major technology
    investments to that prescribed by the Office of Management and Budget.
    According to FAA, this change provides more comprehensive information than
    the previous format and provides efficiencies by avoiding the need to
    later translate the information into the Office of Management and Budget's
    prescribed format. We have not yet assessed these actions.

    Additionally, further improvements to FAA's Acquisition Management System
    are warranted. We recently reported that while the system provides some
    discipline for acquiring major ATC systems, it does not apply a

    7 GAO-04-901.

    8GAO, Air Traffic Control: FAA's Acquisition Management Has Improved, but
    Policies and Oversight Need Strengthening to Help Ensure Results,
    GAO-05-23 (Washington, D.C.: Nov. 12, 2004).

    9 GAO-04-822.

    Page 36 GAO-06-154 Status of NAS Modernization Chapter 2 FAA Has Made
    Changes to Improve Infrastructure Management, but Acquisition, Security,
    and Capacity Challenges Remain

    knowledge-based approach to acquisitions that is characteristic of
    commercial best practices. Such practices call for specific knowledge to
    be captured and used by corporate-level decision-makers to determine
    whether a product has reached a level of development (product maturity)
    sufficient to demonstrate its readiness to move forward in the acquisition
    process. Knowledge is captured at specific junctures, or knowledge points,
    in the acquisition cycle, which developers use to determine whether they
    have attained the knowledge they need to move to the next phase or
    activity in the acquisition process. Such developers also conduct
    corporate executive-level reviews to ensure that they obtain the insights
    and perspectives of stakeholders throughout their organization. If the
    knowledge attained does not meet the criteria for advancement or if the
    executive reviewers determine that further development is inconsistent
    with their priorities, the acquisition does not move forward.

    Experience with these best practices has shown that to the extent that the
    level of knowledge called for at each knowledge point is not attained,
    organizations take on risks in the form of unknowns that will persist into
    the later stages of development, where they will take more time and money
    to resolve if they become problems. Such problems lead to cost increases
    and schedule delays. Accordingly, we recommended that FAA (1) develop
    explicit written criteria for the key decision points called for under
    best practices, including the capture of specific design and manufacturing
    knowledge, and (2) require corporate executive-level decisions at these
    key decision points (before an acquisition moves from integration to
    demonstration and, again, before it moves to production).10

    We also reported that FAA has taken some initial steps to develop a NAS
    enterprise architecture, but further steps are needed.11 An enterprise
    architecture serves as a blueprint to guide and constrain investments in a
    consistent, coordinated, and integrated fashion. It should provide a clear
    and comprehensive picture of an organization, including snapshots of the
    current "as is" environment as well as the target "to be" environment, and
    a roadmap for transition. FAA has committed resources to this effort,
    established a project office, designated a chief architect, and issued the
    latest version of its architecture. However, FAA has not taken some key
    steps, such as designating a committee or group representing the

    10GAO-05-23. 11GAO-05-266.

    Page 37 GAO-06-154 Status of NAS Modernization

        Chapter 2 FAA Has Made Changes to Improve Infrastructure Management, but
                 Acquisition, Security, and Capacity Challenges Remain

    FAA Faces Challenges in Ensuring Information Security

    enterprise to direct, oversee, or approve the architecture; establishing a
    policy for developing, maintaining, and implementing the architecture; or
    fully developing architecture products that meet contemporary guidance and
    describe both the "as is" and the "to be" environments and developed a
    sequencing plan for transitioning between the two. Our experience with
    federal agencies has shown that making information technology investments
    without defining these investments in the context of an architecture often
    results in systems that are duplicative, not well integrated, and
    unnecessarily costly to maintain and interface.

    Because ATC systems rely heavily on information technology, protecting
    them from inadvertent or intentional disruption is critically important.
    The risks to information systems include the escalating threat of computer
    security incidents, the ease of obtaining and using hacking tools, the
    steady advance in the sophistication and effectiveness of attack
    technology, and the emergence of new and more destructive attacks.
    Inadequately protected systems are at risk of intrusion by individuals or
    groups with malicious intent, who could use their unauthorized access to
    obtain sensitive information, disrupt operations, or launch attacks
    against other computer systems and networks. A prolonged disruption in ATC
    systems and communications, accidental or intentional, could disrupt air
    traffic, cause significant economic losses, and subject travelers to
    delays and inconvenience. Federal information security has been on GAO's
    list of high-risk areas since 1997; in 2003, GAO expanded this high-risk
    area to include the protection of cyber-critical infrastructure.12

    Recently, we reported that FAA had established, but not fully implemented,
    an information security program for its ATC information systems.13 For
    example, some of the agency's security plans were outdated; security
    awareness training requirements were not fully met; system testing and
    evaluation programs were inadequate; security incident detection
    capabilities were limited; and shortcomings existed in providing service
    continuity to protect against disruptions in operations. Furthermore, we
    identified security weaknesses that threaten the integrity,
    confidentiality, and availability of the three critical systems we
    reviewed, including weaknesses in controls designed to manage access to
    these systems.

    12GAO-05-207. 13GAO-05-712.

    Page 38 GAO-06-154 Status of NAS Modernization

        Chapter 2 FAA Has Made Changes to Improve Infrastructure Management, but
                 Acquisition, Security, and Capacity Challenges Remain

    FAA Faces Challenges in Expanding NAS Capacity to Meet Current and Future
    Needs

    Weaknesses in physical security increase the risk that unauthorized
    individuals could gain access to sensitive computing resources and data
    and could inadvertently or deliberately misuse or destroy them. In
    response to weaknesses that we had identified, FAA officials told us they
    recognized that more work was needed to continue to improve their
    information security program and that they had already corrected many of
    their electronic access control weaknesses.

    We recommended several actions intended to improve FAA's information
    security program. FAA agreed to consider our recommendations, but
    emphasized that, because our review focused on only three systems, it does
    not indicate that the entire NAS is vulnerable. Additionally, FAA
    maintains that vulnerabilities are mitigated by redundancies and separate
    access controls. Consequently, FAA concluded that the public may infer
    from our review that security risks are higher than they actually may be.
    In our report, we acknowledged that FAA may have other protections built
    into its overall system architecture. However, as noted in the report, the
    complex air traffic control system relies on several interconnected
    systems. As a result, the weaknesses we identified may increase the risk
    to other systems. For example, FAA did not consistently configure network
    services and devices securely to prevent unauthorized access to and ensure
    the integrity of computer systems operating on its networks.

    The current level of air travel, combined with airlines' use of smaller
    aircraft, is straining NAS capacity and further increases in air travel
    are forecast. FAA has developed a rolling 10-year plan for capacity
    improvements at the nation's 35 busiest airports, and airports are
    building new runways. However, many congested airports are not building or
    cannot build new runways, and delays at these airports can have ripple
    effects throughout the NAS. FAA is considering administrative and
    market-based options to ease congestion at the most delay-prone airports.
    The agency is also redesigning flight procedures in specific locations to
    improve the efficiency with which aircraft use crowded airspace. However,
    FAA has encountered difficulties in establishing reliable costs and
    schedules for its airspace redesign efforts, and airlines have been
    reluctant to equip their aircraft because of uncertainty about FAA's
    future plans for airspace redesign.

        Chapter 2 FAA Has Made Changes to Improve Infrastructure Management, but
                 Acquisition, Security, and Capacity Challenges Remain

    More Travelers and Smaller Aircraft Could Strain NAS Capacity

    In 2004, passengers returned to air travel, following a lull that resulted
    from a series of largely unforeseen events, including global recessions,
    the terrorist attacks of September 11, and the Severe Acute Respiratory
    Syndrome (SARS) scare, the war in Iraq, and associated security concerns.
    Enplanements in 2004 exceeded those in 2000 by 5 percent. The high level
    of traffic in the summer of 2000 produced the worst record of delays up to
    that time; however, nearly as many delays occurred in 2004, but the delays
    were longer, on average, mainly because of bad weather, according to FAA
    officials. FAA forecasts a 25-percent increase in air traffic by 2015, and
    the JPDO is developing plans to transform the NAS to accommodate a
    tripling of capacity by 2025.

    The airlines' increasing use of smaller aircraft is likely to enhance the
    need for capacity. In 2001, we reported that the growing number of
    regional jets, which generally seat fewer than 100 passengers, was
    contributing to congestion in our national airspace.14 The industry
    experts we interviewed repeatedly expressed concern about the impact of
    additional aircraft on airspace whose capacity was already strained.
    Because hundreds of new aircraft have been added to already congested
    airspace while comparatively few aircraft have been taken out of service,
    many experts believe that increasing congestion and delays are inevitable.
    Moreover, the experts noted that with many more regional jets on order,
    congestion and delays are not likely to diminish in the near future. In
    2003, Boeing forecast that regional jets would account for 16 percent of
    the world aircraft fleet by 2022. In June 2004, the Chairman and Chief
    Executive Officer of AirTran Airways noted that the ATC system could have
    difficulty absorbing the hundreds of regional jets then on order.15 Recent
    data validate those concerns. Although passenger travel between 2000 and
    2004 increased by 5 percent, the number of aircraft operating in the NAS,
    as indicated by domestic aircraft departures, increased by 36 percent
    during that time period.

    Additionally, air taxis, which carry about four passengers each, could
    begin operations within the NAS. FAA officials told us that they have been
    briefed

    14GAO, Aviation Competition: Regional Jet Service Yet to Reach Many Small
    Communities, GAO-01-344 (Washington, D.C.: Feb. 14, 2001).

    15Testimony of Joseph Leonard, Chairman and Chief Executive Officer of
    AirTran Airways before the Subcommittee on Aviation, House Committee on
    Transportation and Infrastructure, June 3, 2004.

    Page 40 GAO-06-154 Status of NAS Modernization

        Chapter 2 FAA Has Made Changes to Improve Infrastructure Management, but
                 Acquisition, Security, and Capacity Challenges Remain

    New Runways Are Under Construction and More Are Planned to Increase NAS
    Capacity

    on proposals for using air taxis in selected metropolitan areas to relieve
    heavy traffic congestion on roadways. Air taxis could add to air
    congestion, as well as increase the workload of air traffic controllers in
    metropolitan areas where air traffic is already likely to be heavy.
    Potential increases in general aviation could further increase air
    congestion and controllers' workload.16

    According to FAA, building new runways is the most direct approach to
    increasing NAS capacity. FAA estimates that a new runway increases an
    airport's capacity by between 30 and 60 percent. FAA's plans for capacity
    enhancement at the nation's 35 busiest airports are laid out in the
    agency's rolling 10-year Operational Evolution Plan. Since 1999, 8 of the
    nation's 35 busiest airports-Phoenix, Detroit, Denver, Miami, Cleveland,
    Houston, Philadelphia, and Orlando-have each opened a new runway.
    Collectively, these runways have provided these airports with the
    potential to accommodate about 1 million more annual operations (takeoffs
    and landings). Six more runways, one runway extension, and one airfield
    reconfiguration are scheduled to open by the end of 2008 at the nation's
    35 busiest airports. These runways are expected to provide those airports
    with the potential to accommodate 830,000 more annual operations. (see
    fig. 8). In addition to the runways scheduled for the 35 busiest airports,
    nine more capacity-enhancing projects are in the planning or environmental
    review stages, including one new runway, three runway extensions, three
    new airports and two airfield reconfigurations in major metropolitan
    areas.

    16General aviation includes a wide variety of aircraft, ranging from
    corporate jets to small piston-engine aircraft as well as helicopters,
    gliders, and aircraft used in operations such as firefighting and
    agricultural spraying.

    Page 41 GAO-06-154 Status of NAS Modernization Chapter 2 FAA Has Made
    Changes to Improve Infrastructure Management, but Acquisition, Security,
    and Capacity Challenges Remain

    Figure 8: Commissioned and Planned Runways, December 1999 to November 2008

    Source: GAO analysis of FAA data, and Map Art.

    Note: Included in the planned runways is one runway extension project at
    Philadelphia.

    Several of the nation's largest airports are among those most in need of
    capacity improvements. In a recent study, FAA reported that the Atlanta,
    Newark, New York LaGuardia, Chicago O'Hare, and Philadelphia airports
    needed immediate capacity improvements to meet existing demand. The study
    identified 15 airports that would need capacity improvements by 2013.

        Chapter 2 FAA Has Made Changes to Improve Infrastructure Management, but
                 Acquisition, Security, and Capacity Challenges Remain

    FAA Is Redesigning Flight Paths to Create More Capacity

    However, building new runways is not an option at all airports with
    pressing needs for more capacity. Some airports are not able to build even
    one more runway, either because they lack the space or would face intense
    opposition from adjacent communities. Only 3 of the 9 most delay-prone
    airports will receive new runways, and delays at these airports can have a
    ripple effect throughout the NAS, notwithstanding capacity improvements
    made elsewhere. For example, in 2000, Phoenix Sky Harbor International
    Airport put an additional runway into service, and the airport had
    sufficient capacity to allow flights to take off on time. However, the
    airport ranked among the top 15 in the United States for flight delays.
    According to airport officials, most of the delays in Phoenix were the
    result of delays and cancellations at other airports-circumstances
    unrelated to the capacity at Phoenix. To reduce flight delays at some of
    the delay-prone airports, such as New York LaGuardia and Chicago O'Hare,
    FAA is exploring administrative and market-based options. For example, FAA
    is considering auctioning off landing and takeoff rights at New York
    LaGuardia and is currently limiting the number of scheduled arrivals
    during peak periods at New York LaGuardia and Chicago O'Hare.

    FAA is redesigning how aircraft utilize airspace during the takeoff,
    landing, and en route phases of flight. Currently, most aircraft must
    follow established routes over designated navigation aids and maintain
    wide separation from other aircraft. Wide separation has been necessary to
    provide a margin of error against inaccuracies in older navigation
    systems. However, many aircraft in use today carry navigation equipment
    that is not dependent on ground-based navigation aids and would enable
    aircraft to safely operate in a less restrictive manner, allowing more
    efficient use of airspace and increased NAS capacity.17 Moreover, this
    equipment provides aircrews with precise information on the location of
    their aircraft and that of nearby aircraft, allowing them to fly more
    directly to their destinations, thereby saving time and fuel, and reducing
    congestion. Advanced

    17FAA has established "Area Navigation," commonly known as RNAV, which
    allows properly equipped aircraft to navigate using onboard systems in
    conjunction with satellites or ground-based navigation aids to fly desired
    flight paths without requiring direct flight over ground-based navigation
    aids. RNAV provides for more direct routing, avoiding suboptimal routes
    prescribed by conventional "highways in the sky" that are defined by
    point-to-point flying over ground-based navigation aids. The RNAV concept
    and a major new method for exploiting it, called required navigation
    performance (RNP), permit flight in any airspace as long as aircraft have
    been certified to meet the required accuracy level for navigation
    performance.

    Chapter 2 FAA Has Made Changes to Improve Infrastructure Management, but
    Acquisition, Security, and Capacity Challenges Remain

    navigation capabilities also reduce the adverse impact of bad weather on
    NAS efficiency by allowing pilots to land in weather conditions that they
    otherwise would have to avoid.

    In 2005, FAA increased airspace capacity by reducing the required minimum
    vertical separation from 2,000 feet to 1,000 feet for properly equipped
    aircraft at altitudes between 29,000 and 41,000 feet, essentially doubling
    capacity at those altitudes. FAA anticipates that this change will allow
    aircraft to safely fly the most efficient routes, increase airspace
    capacity, and save airlines about $400 million in fuel costs during the
    first year.

    FAA reports that airspace redesign can provide benefits at a number of
    airports. For example, at Dulles International Airport, suitably equipped
    aircraft could simultaneously depart on parallel routes in bad weather,
    which would not otherwise be possible. Dallas-Fort Worth International
    Airport could increase capacity by 20 percent by allowing aircraft with
    the appropriate capabilities to depart more quickly from multiple points
    at the airport, thereby reducing the taxi time between terminal and
    departure, as well as ground congestion. According to FAA, allowing
    aircraft with appropriate equipment to use parallel runways during periods
    of marginal visibility could increase arrival rates by 10 to 24 percent at
    airports with closely spaced runways, such as those in Boston, Cleveland,
    Newark, Portland, Philadelphia, Seattle, and San Francisco.18 An FAA
    official told us that these procedures could leverage the future benefits
    of ATC systems currently in the acquisitions pipeline if planned and
    implemented in coordination with the systems' acquisition schedules.

    Redesign is a complex process that requires the development of specific
    navigation procedures tailored to each location, taking into account
    numerous factors. According to FAA, the following factors pose challenges
    for redesign efforts:

         o costly environmental reviews required by the National Environmental
           Policy Act,
         o the logistics of coordinating meetings with controllers and operators
           to discuss how to design the procedures,

      18Marginal weather conditions occur between 5 and 20 percent of the time at
                                    these airports.

    Page 44 GAO-06-154 Status of NAS Modernization Chapter 2 FAA Has Made Changes to
    Improve Infrastructure Management, but Acquisition, Security, and Capacity
                                   Challenges Remain

    Airspace Redesign Efforts Have Encountered Cost and Schedule Challenges,
    and Airlines Are Hesitant to Invest in Advanced Capabilities

         o aircrew training,
         o the modeling and testing of procedures, and
         o the development of written navigation and air traffic control
           procedures.

    Consequently, FAA focuses its efforts on airports that are the best
    candidates to benefit from airspace redesign, such as those that have
    frequent bad weather, parallel runways that cannot be used for parallel
    approaches in bad weather, nearby mountains or tall buildings, or aircraft
    noise that adversely affects nearby communities. Also, having an airline
    that has a significant presence at an airport and is willing to take the
    lead in airspace redesign facilitates its implementation.

    The Department of Transportation's Office of the Inspector General has
    testified that FAA is experiencing significant problems in its airspace
    redesign efforts. The office reported that FAA lacks reliable information
    on costs and schedules for 42 airspace redesign efforts and found that
    FAA's process for controlling costs, mitigating risks, and coordinating
    these efforts was fragmented and diffuse.

    Expanding efforts to redesign airspace also depends on the willingness of
    NAS users to equip their aircraft with advanced capabilities-a willingness
    that is based, in part, on the belief that FAA will continue with its
    redesign plans. Some stakeholders we interviewed expressed concern that
    FAA may not follow through with its airspace redesign efforts. For
    example, a DOD official said that in response to budget constraints, FAA
    might curtail its airspace redesign efforts after DOD had equipped its
    aircraft with advanced capabilities, resulting in a waste of DOD
    resources. The official cited FAA's actions to suspend certain acquisition
    programs such as LAAS, NEXCOM, and long-range radar. An official of the
    Airline Owners and Pilots Association, which represents general aviation
    pilots, cited similar concerns with WAAS and another system (Automatic
    Dependent Surveillance - Broadcast) in onboard navigation systems.
    Consequently, general aviation pilots are hesitant to invest in systems
    for their aircraft unless they are sure that FAA will continue to redesign
    airspace and implement procedures that will make use of this equipment.
    According to one expert, some aircraft have been retired without ever
    having their advanced capabilities used.

        Chapter 2 FAA Has Made Changes to Improve Infrastructure Management, but
                 Acquisition, Security, and Capacity Challenges Remain

    Overcoming these challenges is a productive area of focus for FAA. Our
    panel of experts noted that exploiting airspace redesign is a "quick hit"
    that would produce good value for the investment, and airlines are anxious
    to see more airspace redesign efforts. The experts also noted that the
    private sector has the capacity to develop new flight procedures as part
    of airspace redesign, and a precedent exists in another country. However,
    the experts said that in the past, FAA has resisted outside parties'
    efforts to design new flight procedures for FAA's approval, and they
    suggested that FAA could be more flexible in this area.

    FAA provided technical comments, which we included as appropriate.

    Agency Comments

    Chapter 3

    Human Capital Management Challenges Include Hiring Air Traffic Controllers
    and Transforming FAA's Organizational Culture

    FAA Will Need to Hire and Train Thousands of Controllers in the Next
    Decade

    During the coming decade, FAA will need to hire and train thousands of air
    traffic controllers to replace those who will retire. FAA has implemented
    a number of human capital reforms but still faces the challenge of
    transforming its workforce to a more results-oriented culture.

    In 2002 and 2004, we reported that FAA would need to hire and train
    thousands of air traffic controllers during the next decade, and we
    recommended in 2002 that FAA develop a comprehensive workforce plan that
    includes strategies to ensure that FAA would have adequate human resources
    and training facilities to meet its hiring needs while maintaining
    safety.1 Additionally, we recently reported that succession planning and
    management are critical steps that federal agencies need to take to meet
    the challenges of the 21st Century.2 In 2004, FAA published a controller
    staffing plan that includes several of the strategies that we recommended.
    Recognizing that the plan would be costly, FAA planned to obtain savings
    from a number of human capital management initiatives, some of which will
    require union negotiation.

    Impending Retirements Will Require Extensive Hiring and Training

    FAA's controller staffing plan indicates that the agency expects to lose
    about 11,000 air traffic controllers, or about 73 percent of the
    controller workforce, to retirements and other factors.3 This high
    percentage of retirements is attributable to the 1981 controller strike,
    when President Ronald Reagan fired over 10,000 air traffic controllers,
    and the consequent need to quickly rebuild the controller workforce. From
    1982 through 1991, FAA hired an average of 2,655 controllers per year.
    These controllers will become eligible for retirement during the next
    decade. (See fig. 9.)

    1 GAO-02-591; GAO, Federal Aviation Administration: Plan Still Needed to
    Meet Challenges to Effectively Manage Air Traffic Controller Workforce,
    GAO-04-887T (Washington, D.C.: June 15, 2004).

    2GAO, Human Capital: Selected Agencies Have Opportunities to Enhance
    Existing Succession Planning and Management Efforts, GAO-05-585
    (Washington, D.C.: June 30, 2005); and 21st Century Challenges:
    Reexamining the Base of the Federal Government, GAO-05-325SP (Washington,
    D.C.: February 2005).

    3FAA, A Plan for the Future: The Federal Aviation Administration's 10-Year
    Strategy for the Air Traffic Control Workforce (Dec. 21, 2004).

        Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
               Controllers and Transforming FAA's Organizational Culture

    FAA's Controller Staffing Plan Reflects Lessons Learned Since 1981
    Controller Strike

    Figure 9: Projected Controller Retirements, Fiscal Years 2005 - 2014

    Number of retirees 1,500 1,200

    900

    600

    300

    0

    2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Fiscal years

    Source: FAA.

    To replace the controllers who will retire, as well as those who will
    leave for other reasons, and to accommodate forecasted increases in air
    traffic, FAA plans to hire a total of 12,500 new controllers over the next
    10 years, or 1,250 per year, on average. Because of training facility
    limitations and the need to minimize the impact on operational facilities
    of on-the-job training for new controllers, FAA plans to hire relatively
    equal numbers of controllers each year.

    To manage the air traffic control workforce over the next decade, the
    controller staffing plan that lays out a 10-year strategy for recruiting,
    hiring, and training new controllers to replace those that retire. This
    plan, which we recommended in a 2002 report and Congress mandated in 2003,
    reflects recruiting and training lessons learned since the 1981 air
    traffic controllers' strike, endeavors to benefit from the expertise of
    today's experienced controllers, and addresses staffing and equipment
    needs at FAA's training academy.

    According to the controller staffing plan, FAA has established a
    facility-by-facility retirement loss model that FAA will use to determine
    annual hiring

    Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
    Controllers and Transforming FAA's Organizational Culture

    targets for each facility. The plan also lays out a strategy to develop
    new staffing standards for each ATC facility, starting in fiscal year
    2005. Additionally, the plan describes a revised hiring policy, which
    recognizes the need to hire replacement controllers well in advance of
    expected retirements, rather than waiting until after each controller
    leaves.

    FAA's plan lays out new recruitment sources designed to identify and
    retain viable candidates. Through this approach, FAA expects to achieve
    greater success than it did in the 1980s, when it last hired large numbers
    of controllers but had problems with retention. At that time, FAA
    officials told us, most of the candidates were recruited "off the street,"
    with no prior background in air traffic control. According to the plan,
    over 40 percent of the candidates failed training, resulting in wasted
    training funds. This time, FAA plans to hire new controllers from a
    variety of sources, including some that can provide candidates with
    training or experience in aviation. A primary source will be the Air
    Traffic Collegiate Training Initiative, which FAA established in January
    1991 and has since expanded.4 Under this initiative, participating schools
    produce candidates with college degrees and a broad knowledge of the
    aviation industry. These candidates have at least a basic level of
    training in air traffic control and have demonstrated their interest in
    the field by the investment they have made in their own training. Other
    potential recruits include former and retired military personnel, former
    Professional Air Traffic Controllers Organization controllers, and the
    general public.

    FAA is also evaluating the effectiveness of a tool to screen potential
    controllers. Between 1981 and 1992, FAA screened out unsuccessful
    candidates over a period of 9 weeks as they attended a formal training
    program. Fewer than 60 percent of the candidates passed the screen.
    Recognizing that this was a costly process, FAA dismantled the 9-week
    screening process in 1992 and implemented an 8-hour computer-based Air
    Traffic Selection and Training exam to screen candidates, reducing the
    screening cost from $10,000 per candidate to $800 per candidate. The
    screening exam evaluates many aptitudes, including prioritization and
    problem solving, decisiveness, and composure. The controller staffing plan
    indicates that FAA's Civil Aerospace Medical Institute is evaluating the
    effectiveness of this new screening tool, as we recommended.

    4Because FAA's intake of new controllers was very low from 1994 until
    recently, the agency did not need to seek candidates from other sources.

    Page 49 GAO-06-154 Status of NAS Modernization

        Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
               Controllers and Transforming FAA's Organizational Culture

    FAA Plans Cost-Saving Initiatives to Mitigate the Expense of the
    Controller Staffing Plan

    FAA believes that allowing some controllers to continue working beyond the
    current age limitation could help alleviate staffing shortages in targeted
    locations. Under legislation enacted in 1971,5 most controllers are
    required to stop handling live traffic when they reach age 56. FAA has
    reviewed the safety implications of waiving this requirement under certain
    circumstances. Specifically, its Civil Aerospace Medical Institute
    reviewed the scientific basis for the law and concluded that the
    scientific literature did not provide a firm foundation for either
    retaining the age 56 limit or seeking a legislative change. A supplemental
    study found that the likelihood of an en route operational error declined
    with age as a function of experience. According to the controller staffing
    plan, FAA believes that waivers to the age 56 rule may be of value for
    targeted locations where there may be a critical staffing shortage. FAA
    estimates that 5 to 10 percent of current controllers might be granted
    such waivers.

    The controller staffing plan describes FAA's plans to address staffing and
    equipment needs at the training academy. FAA plans to meet the need for
    more instructors by working with its contractor to ensure that training
    needs are met. FAA has also upgraded equipment at the training academy. We
    reported in 2002 that equipment used at the academy to train en route
    controllers did not match equipment used in the field. We also reported
    that tower simulators were often broken or outdated, and lacked the
    necessary capacity to train large numbers of new hires. FAA has since
    acquired four new tower simulators, and in the spring of 2005, it opened a
    laboratory for en route training at the academy, several months ahead of
    schedule.

    Recognizing the immense cost of recruiting and training enough controllers
    to replace those who are retiring, FAA plans to implement efficiencies
    that would reduce training costs and allow a 10 percent reduction in the
    controller workforce over the next decade. FAA plans to provide more
    intensive training so that controllers can be certified in 2 to 3 years,
    rather than 4 to 5 years as in the past. Some of these initiatives will
    require union consent which FAA will have to negotiate when it renews its
    contract with the controllers. For example, FAA plans to rely on part-time
    employees and job-sharing arrangements, as well as implement split shifts,
    where all controllers work during peak periods, but some leave during
    slack periods and return to complete their shifts later. FAA also plans to
    improve its

    5P.L. 92-297.

    Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
    Controllers and Transforming FAA's Organizational Culture

    management of overtime by using the optimal mix of increased staffing and
    overtime hours to meet workload demands. In addition, FAA plans to oversee
    the use of sick leave more aggressively and to manage workers'
    compensation cases to bring employees back to duty as quickly as possible.
    Other steps include reducing the number of hours controllers spend on
    union-related duties and in workgroups, conferences, and meetings; and
    employing efficiencies made possible by implementing technological
    advances, consolidating facilities, and expanding the contract tower
    program.

    FAA has neither determined the total cost of the controller staffing plan,
    nor developed any basis for the cost savings planned for many of the
    initiatives described in the plan. For example, FAA officials told us that
    they have not determined

         o the costs of hiring and training controllers from different sources;
         o the amount of productivity savings from various sources, including
           implementing new technology and adjusting staffing according to
           traffic levels; or
         o the savings from the improved training success rate.

    Therefore, the impact of this plan on future funding needs is unclear. FAA
    officials indicated that they view the plan as fluid, and will make yearly
    updates and changes as they move forward with its implementation. However,
    without supportable estimates of the hiring and training program's cost
    and potential savings, FAA lacks key information needed to plan for future
    funding needs. The plan states that if FAA does not receive sufficient
    funds to hire adequate numbers of controllers, FAA will maintain safety
    before addressing delays. According to the plan, FAA would slow air
    traffic to a level that the available controllers could handle safely, an
    action that could create significant delays in the NAS.

    FAA has also begun considering whether graduates of its Air Traffic
    Collegiate Training Initiative can bypass the currently required training
    at the FAA Academy-a change that could produce savings. Currently,
    graduates must attend the academy for 37 days if they are training to be
    terminal controllers or 57 days if they are training to be en route
    controllers, before they can report to an ATC facility to begin on-the-job
    training. The National Air Traffic Controllers Association and one of the
    colleges that participates in the Air Traffic Collegiate Training
    Initiative

        Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
               Controllers and Transforming FAA's Organizational Culture

    believe that graduates could bypass the training academy and report
    directly to an ATC facility to begin on-the-job training. In June 2005,
    FAA initiated a review to determine whether graduates could bypass the
    academy training.

    Since receiving an exemption from many federal personnel management
    regulations in 1995, FAA has implemented a number of compensation, hiring,
    and performance management reforms. Additionally, FAA is taking steps
    toward developing a results-oriented culture, but needs to ensure
    continuity and follow-through for these efforts to have a lasting effect.

    FAA Has Made Progress in Implementing Human Capital Reforms, but
    Challenges Remain in Transforming Its Workforce Culture

    FAA Has Implemented Elements of Personnel Management Reform

    After being exempted from most federal personnel regulations in 1995, FAA
    initiated a broad set of changes in compensation, performance management,
    and workforce management. FAA replaced the general schedule system of 15
    pay grades-each with 10 within-grade pay steps- with a series of pay bands
    and specific job categories with minimum and maximum pay rates spanning
    two to five pay bands. Since 2003, when we last reported on the status of
    FAA's human capital reforms, FAA has increased the percentage of the
    workforce covered by the new pay system from about 75 percent to 82
    percent.6

    Additionally, FAA established its own hiring policies and began hiring
    applicants directly, rather than going through the Office of Personnel
    Management. It also established a flexible system for adjusting the number
    of executive positions in response to shifting agency priorities and set
    up flexible policies for determining whether and how much to reimburse
    employees' relocation expenses.

    Finally, FAA established a new performance management system, which it
    uses for 45 percent of its employees. The new system requires that

    6GAO, Human Capital Management: FAA's Reform Effort Requires a More
    Strategic Approach, GAO-03-156 (Washington, D.C.: Feb. 3, 2003).

    Page 52 GAO-06-154 Status of NAS Modernization

        Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
               Controllers and Transforming FAA's Organizational Culture

    Developing a Results-Oriented Organizational Culture Remains a Key
    Challenge

    employees have performance plans that identify specific work expectations
    and outcomes and are linked to agency and organizational goals. The new
    system changed performance assessment from a once-a-year process to one
    that focuses on interim feedback discussions between employees and
    supervisors to address performance issues when they arise, and identify
    opportunities for improving performance and meeting developmental needs.
    The performance management system also determines whether an employee is
    eligible for agencywide performance-based bonuses. FAA has not yet
    included most of its bargaining unit employees under the new performance
    management system, but plans to negotiate this issue during contract
    negotiations, which began in the spring of 2005.

    While we have not evaluated the merits of the new performance management
    system or that used to manage the performance of bargaining unit
    employees, linking work expectations and outcomes to organizational goals,
    as FAA has done in its new performance management system, is a positive
    first step. We have reported that effective performance management systems
    are not merely used for once or twice-yearly individual expectation
    setting and rating processes, but are tools to help the organization
    manage on a day-to-day basis. These systems are used to achieve results,
    accelerate change, and facilitate two-way communication throughout the
    year so that discussions about individual and organizational performance
    are integrated and ongoing.7

    Recognizing the importance of cultural change in achieving results, FAA is
    moving forward on actions consistent with those that we have identified as
    important for cultural transformation. In 1996, we reported that FAA's
    acquisition workforce culture lacked a commitment to mission focus,
    accountability, adaptability, and coordination, which impeded its ATC
    modernization efforts. While FAA took a number of actions over the past
    several years to change the culture of its acquisition workforce, these
    actions lacked continued management commitment. Our work shows that
    successfully implementing cultural change requires continued management
    attention over several years.

    7GAO, Results-Oriented Cultures: Creating a Clear Linkage between
    Individual Performance and Organizational Success, GAO-03-488 (Washington,
    D.C.: Mar. 14, 2003).

    Page 53 GAO-06-154 Status of NAS Modernization

        Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
               Controllers and Transforming FAA's Organizational Culture

    FAA Recognizes the Importance of a Results-Oriented Culture

    FAA has established a goal to create a results-oriented culture and is
    developing baseline data for tracking progress. FAA's Human Capital Plan
    includes a goal to create a results-based performance culture and
    strategies for implementing performance management and compensation
    systems that focus on achieving results, providing training and briefings
    on the agency's new performance management system, and implementing a
    communication plan for performance management responsibilities.
    Additionally, FAA's performance-based compensation system provides most
    employees with a bonus when the agency meets its performance goals.

    FAA's emphasis on performance management is an important step toward
    creating a results-oriented culture in the acquisition workforce. Our work
    has highlighted the importance of organizational culture in implementing
    mergers and transformations. Using a performance management system to
    define responsibility and ensure accountability for change is a key
    practice that can help agencies transform their cultures so that they can
    be more results oriented, customer focused, and collaborative.8 (See fig
    10.)

                                      Source: GAO.

    8GAO, 21st Century Challenges: Transforming Government to Meet Current and
    Emerging Challenges, GAO-05-830T (Washington, D.C.: July 13, 2005).

    Page 54 GAO-06-154 Status of NAS Modernization Chapter 3 Human Capital
    Management Challenges Include Hiring Air Traffic Controllers and
    Transforming FAA's Organizational Culture

    The chief operating officer, who heads the ATO, has also recognized that
    cultural factors can play a critical role in an organization's success and
    is aiming to make a transformation similar to that shown above. For
    example, he has observed that FAA's management culture has been "intensely
    hierarchical, risk averse," and "reactionary," and aims to develop a
    viable, stable, and sustainable organization that can make fact-based
    decisions that transcend changes in leadership. He said that FAA is giving
    high priority to changing its leadership model by linking top management
    more closely to operations in the field and by replacing command and
    control with communication across organizational levels.

    To further support cultural change, FAA is emphasizing accountability and
    other core values. For example, it is holding managers accountable for
    managing their budgets. Additionally, FAA has chosen five core values and
    plans to use employees' responses to selected questions in the most recent
    employee attitude survey9 to set a baseline for cultural improvement. The
    five core values are (1) integrity and honesty, (2) accountability and
    responsibility, (3) commitment to excellence, (4) commitment to people,
    and (5) fiscal responsibility. FAA's Civil Aerospace Medical Institute
    analyzed the survey results by grouping three to seven survey items under
    each of these areas. For example, FAA placed the survey item "We are
    encouraged to express our concerns openly" along with four other items
    under the integrity and honesty core value. For many items, across all
    core values, fewer than 40 percent of ATO employees indicated agreement or
    strong agreement, indicating that FAA still has work to do to create a
    culture where these core values are readily evident to the majority of its
    employees. FAA is addressing these items by developing its own action
    plan, and documenting best practices for items where positive response
    rates-the total percentage of agree and strongly agree-are above 55
    percent.

    The FAA's recognition of the importance of creating a results-oriented
    culture is an important step, particularly within the ATO, which is
    composed of formerly separate organizations. We have reported that many
    mergers or transformations fail because the cultures of the originating
    components are not fully understood or considered.10 Thus, identifying

    9Although this survey was administered in September 2003, before the ATO
    was formed, FAA organized the responses according to the former
    suborganizations that became part of the ATO.

    10GAO-03-669.

    Page 55 GAO-06-154 Status of NAS Modernization

        Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
               Controllers and Transforming FAA's Organizational Culture

    Past Cultural Change Efforts Met with Limited Success

    cultural features of the originating components, prior to, or early on, in
    the merger and transformation process, can help leadership gain a better
    understanding of their beliefs and values. Organizationwide surveys,
    employee focus groups, and individual interviews can be used to assess
    culture in order to provide a better understanding of how work gets done
    and what values are important to employees.

    Since we identified the acquisition workforce culture as an underlying
    cause of FAA's chronic system acquisition problems in 1996,11 FAA has
    taken a number of steps to change its culture, but long-term management
    attention and focus have been lacking. Our 1996 report showed that FAA's
    acquisitions were impaired because the employees and managers acted in
    ways that did not reflect a strong commitment to mission focus,
    accountability, adaptability, and coordination-the key factors that we
    identified at that time as being associated with a constructive culture.
    These factors are similar to the characteristics of the results-oriented
    culture that FAA is seeking to develop. A results-oriented culture is also
    an organizational element that we have identified as key in transforming
    the government to meet the management challenges of the 21st Century.

    In 1996 we reported that agency officials performed little or no mission
    needs analysis, made unrealistic cost and schedule estimates, and
    proceeded into the production phase of systems before completing their
    systems' development. We also reported that accountability was not well
    defined or enforced for decisions on requirements and oversight of
    contracts. Additionally, ineffective coordination that resulted from,
    among other things, stovepipe lines of authority, impaired communications
    between organizations that needed to coordinate, particularly between the
    acquisition and operations sides of FAA. Finally, we reported that FAA's
    culture of conservatism and conformity discouraged innovation and,
    instead, rewarded employees for simply following the rules.

    FAA responded to our 1996 report in several ways. As we recommended, FAA
    developed a strategy to implement cultural change. While the strategy
    called for, among other things, a report on the primary impediments to
    cultural change and a detailed action plan, the strategy was not
    implemented exactly as FAA anticipated. For example, FAA laid out a series
    of tasks over the course of a year, including developing a communications
    plan, conducting focus groups, and encouraging

    11GAO/RCED-96-159.

        Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
               Controllers and Transforming FAA's Organizational Culture

    Some Recent FAA Survey Results Suggest Less Improvement in Workforce
    Culture Than in Prior Years

    workforce participation. However, according to FAA, the communications
    plan was never implemented because of a shift in senior leadership and
    organizational dynamics.

    Rather than implementing the strategy for cultural change, FAA took a
    number of alternative actions aimed at changing the culture. For example,
    FAA developed an intellectual capital investment plan that outlined
    corporate investment priorities for workforce development. FAA also
    implemented a results-based individual performance management program that
    showed the relationship between individual performance plans and the
    agency's goals. Finally, FAA hired consultants to assess the acquisition
    workforce culture in 1998 and 2000 and developed action plans to address
    the issues that the assessments identified. According to an FAA official,
    FAA started implementing these action plans, but suspended them when the
    ATO was established. Additionally, although FAA strongly emphasized
    cultural change in the annual performance plans developed in the late
    1990s, the emphasis tapered off from 2000 through 2002.

    Improvements in some culture-related responses in FAA's employee attitude
    survey have tapered off, compared with prior years. Since 1984, FAA has
    periodically conducted employee attitude surveys, most recently in 1997,
    2000, and 2003.12 The survey gathers information on employees' attitudes,
    perceptions, and opinions about a broad variety of organizational issues.
    Many of the survey items relate to mission focus, accountability,
    coordination, and adaptability-the four characteristics of a constructive
    culture that we identified in 1996.

    According to our analysis of employee responses to survey items, FAA made
    some initial progress between 1997 and 2000, but progress leveled off for
    many items thereafter.13 (See fig. 11.)

    12See appendix I for additional information on these surveys.

    13The surveys elicited information in a variety of ways. For example, in
    some cases, questions were asked and the response choices ranged from "to
    a limited extent" to "a great extent." In other cases statements were
    presented and response choices ranged from "strongly disagree" to
    "strongly agree." On a five-point scale, the most negative response is
    scored "1" and the most positive response is scored "5." Mean scores were
    developed by summing the responses to each question and dividing by the
    number of respondents. For example, a mean score of 3 for a particular
    question would indicate that the average response was "neither agree nor
    disagree," while a mean score of 4 would indicate the average response was
    "agree."

        Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
    Controllers and Transforming FAA's Organizational Culture Chapter 3 Human
        Capital Management Challenges Include Hiring Air Traffic Controllers and
                       Transforming FAA's Organizational Culture

    Coordination: involving other employees in decisions affecting them,
    resolving Adaptability: accepting new approaches and responding positively
    to demands differences collaboratively, and cooperating across
    organizational lines and opportunities posed from within and outside of
    the organization

     what extent has FAA done a good job creating an
           environment where all rather than avoided or worked around. employees
           get the chance to fully contribute to organization's mission?
       innovations and changes might affect you?
            nt confidence level.

    aThis question is negatively worded, such that "strongly agree," would be
    a negative response. For consistency, we reversed the scoring for this
    question, so that a "strongly agree" response would be scored 1, and a
    "strongly disagree" response would be scored 5. The practice of reverse
    scoring negatively worded items is a commonly accepted professional
    practice in survey research methodology.

    bNot asked in the 1997 survey.

    Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
    Controllers and Transforming FAA's Organizational Culture

    14See appendix II for additional information on our methodology for
    assessing FAA's workforce culture.

    15In November 2003, GAO hosted a forum to discuss the characteristics of
    high-performing organizations. The forum participants agreed that the key
    characteristics and capabilities of high-performing organizations can be
    grouped into four themes: (1) a clear, well-articulated, and compelling
    mission; (2) focus on needs of clients and customers; (3) strategic
    management of people; and (4) strategic use of partnerships. See GAO,
    High-Performing Organizations: Metrics, Means, and Mechanisms for
    Achieving High Performance in the 21st Century Public Management
    Environment, GAO-04-343SP (Washington, D.C.: February 2004).

        Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
               Controllers and Transforming FAA's Organizational Culture

    oriented culture by creating a goal to create such a culture in its Human
    Capital Plan. The chief operating officer has also observed the need to
    change the culture of the ATO's 36,000 employees.

    Transforming organizational cultures requires substantial management
    attention. The experiences of successful transformations and change
    management initiatives in large public and private organizations suggest
    that it can take 5 to 7 years or more until such initiatives are fully
    implemented and cultures are transformed in a sustainable manner. Such
    changes require focused, full-time attention from senior leadership and a
    dedicated team. The team must have vested authority and resources from top
    management to set priorities, make timely decisions, and move quickly to
    implement decisions. Such a team provides a visible signal that the
    transition is being undertaken with the utmost seriousness and commitment.
    Having a dedicated transition team is just one of several practices that
    we have identified, such as setting implementation goals and a timeline
    and establishing a communication strategy, that are key to successful
    mergers and organizational transformations. (See app. IV for a complete
    list.)

    FAA has addressed a number of the challenges it faces in hiring and

    Conclusions

    training thousands of air traffic controllers over the coming decade.
    However, FAA's lack of information on the cost of this program is of
    particular concern as the agency enters a period of anticipated lean
    budgets, as discussed in the next chapter. A shortage of funds that
    results in hiring fewer controllers than needed could lead to additional
    delays in air travel, beyond those caused by infrastructure constraints.

    Successful organizational transformations and cultural changes require
    several years of focused attention from senior leadership. In the past,
    FAA set, but did not sustain, a fact-based course for creating a
    constructive organizational culture. Promising initiatives, such as
    detailed action plans, were developed but not implemented or sustained,
    and without continued attention to cultural change from the top,
    improvements leveled off, and FAA now appears to lag behind other
    organizations on cultural measures. FAA's current effort to establish a
    baseline for measuring cultural change represents an important first step,
    but additional steps and sustained management attention will be needed to
    achieve and maintain progress. Unless FAA succeeds in transforming itself
    into an organization that is more mission focused, accountable,
    cooperative, and adaptable, it could have difficulty establishing the
    results-oriented culture that it seeks.

        Chapter 3 Human Capital Management Challenges Include Hiring Air Traffic
               Controllers and Transforming FAA's Organizational Culture

    Recommendation for Executive Action

    To provide Congress with accurate information on the resources needed to
    hire and train thousands of air traffic controllers over the next decade,
    we recommend that the Secretary of Transportation direct the FAA
    Administrator to estimate the cost of FAA's controller hiring and training
    plan and incorporate these estimates into future budget requests.

    To ensure that FAA provides the long-term focus needed for an effective
    cultural transformation, we recommend that the Secretary of Transportation
    direct the FAA Administrator to provide sustained oversight of efforts to
    transform FAA's workforce culture to one that is more results-oriented,
    including periodically monitoring the agency's progress against baseline
    data.

    FAA did not comment these recommendations, but provided technical

    Agency Comments

    comments which we included as appropriate.

    Chapter 4

    Rising Costs and Declining Revenues Pose Financial Management Challenges

    FAA faces the dual challenge of rising costs and declining revenues,
    culminating in a projected multibillion-dollar gap between its expected
    budget targets and expected spending requirements through fiscal year
    2009. To attempt to live within its means, FAA is cutting programs and
    controlling costs, but these steps will not come close to closing the gap.
    FAA officials and some experts and stakeholders believe a key element in
    addressing the agency's financial management challenges is changing FAA's
    revenue structure from the present ticket-tax-based structure to one more
    closely tied to FAA's cost of providing services. Collectively, aviation
    experts and stakeholders suggested that FAA could address its financial
    management challenges through a two-pronged approach: in the near term,
    consider options that are readily available, such as contracting out more
    of its services and pursuing other cost-saving measures; and over the
    longer term, determine whether a business case could be developed to
    support more extensive changes that would require presidential and/or
    congressional action to implement, such as providing the ATO with more
    financial management flexibility.

    FAA is concerned about the impact of rising costs and reduced budget

    To Address Rising

    targets through fiscal year 2009, combined with uncertainty over future
    balances in the Trust Fund.1 FAA is attempting to live within its reduced
    Revenues, FAA Is means by controlling its costs.

    Focusing on Cost

    Control

    FAA Projects a Multibillion-Dollar Gap

    FAA projects an $8.2 billion gap between its expected budget targets and
    expected spending requirements through fiscal year 2009. Under existing
    budget targets set through fiscal year 2009, FAA would receive about 17
    percent less each year in capital funding than it received in fiscal years
    2002, 2003, and 2004. For fiscal year 2005, FAA received an appropriation
    of $2.5 billion for capital expenditures, and capital budget targets for
    fiscal

    1The Office of Management and Budget reviews each executive branch
    agency's input to the budget that the President submits to Congress each
    February. The budget includes the most recently completed year, the
    current year, the budget year, and at least the four following years,
    called outyears. The Office of Management and Budget informs agencies of
    its decisions on the budget through its "passback." In this report we
    refer to the outyear budgets shown in the passback as budget targets.

    Page 63 GAO-06-154 Status of NAS Modernization Chapter 4 Rising Costs and
    Declining Revenues Pose Financial Management Challenges

    years 2006 through 2009 are just under $2.5 billion. In contrast, for
    fiscal years 2002 through 2004, FAA received annual capital appropriations
    of nearly $3 billion. (See fig. 12.)

    Figure 12: Actual Capital Appropriations, Fiscal Years 2002 - 2005, and
    Budget Targets, Fiscal Years 2006 - 2009

    Dollars in billions

    Fiscal year

    Actual appropriations

    Expected appropriations Source: GAO analysis of FAA data.

    Compounding FAA's financial concerns is ongoing uncertainty over revenue
    forecasts for the Trust Fund. From fiscal years 2002 through 2004, FAA's
    expenditures declined at a steeper rate than the Trust Fund revenues, but
    the expenditures nonetheless remained higher. (See fig. 13.) Although
    revenues increased from fiscal years 2003 through 2004, expenditures
    increased more rapidly.

    Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
    Challenges

    Figure 13: Aviation and Airway Trust Fund Expenditures and Revenues,
    Fiscal Years 2002 - 2004

    Dollars in billions

    6

    3

    0 2002 2003 2004

    Expenditures Revenue Source: GAO analysis of FAA data.

    The combined effect of the higher expenditures and the lower revenues is a
    reduction in the Trust Fund's uncommitted balance of nearly 50 percent
    from fiscal years 2002 through 2004. (See fig. 14.)

        Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
                                       Challenges

    FAA Cut Major Programs and the ATO Is Gathering and Tracking Data to
    Control Costs

    Figure 14: Aviation and Airway Trust Fund Uncommitted Balances, Fiscal
    Years 2002 - 2004 Dollars in billions 5 4 3 2 1 0

    2002 2003 2004 Fiscal year

    Source: GAO analysis of FAA data.

    We recently testified that in 4 out of the last 5 years, actual trust fund
    revenues fell short of forecasts. Our analysis indicated that if revenues
    fall 10 percent short of forecasts for fiscal years 2005 through 2007, the
    fund could be bankrupt by 2006.2

    FAA cut funding for three major programs. For fiscal year 2005, the
    appropriation for FAA's facilities and equipment budget, which funds ATC
    system acquisitions, was $393 million less than the agency had planned to
    spend. FAA conducted an intensive review of its capital investment
    portfolio and absorbed the $393 million reduction largely by suspending
    the funding for CPDLC, an e-mail-like messaging system for communications
    between air traffic controllers and pilots; eliminating a major component
    of NEXCOM, an air-to-ground digital communications system; and returning
    LAAS, a precision landing system augmented by satellites, to research and
    development to resolve a key performance shortfall.

    The ATO plans to manage its services on the basis of costs. Key to this
    effort is FAA's implementation of a cost accounting system. Until
    recently,

    2GAO, Airport and Airway Trust Fund: Preliminary Observations on Past,
    Present, and Future, GAO-05-657T (Washington, D.C.: May 4, 2005).

    Page 66 GAO-06-154 Status of NAS Modernization Chapter 4 Rising Costs and
    Declining Revenues Pose Financial Management Challenges

    FAA had no cost accounting system and could not accurately determine the
    cost of its activities. When fully implemented in 2006, the cost
    accounting system should address our long-standing concern that FAA lacked
    the cost information necessary for decision making as well as to
    adequately account for its activities and major projects, such as the air
    traffic control modernization program. Additionally, the ATO intends to
    use the cost accounting system to provide more credible and transparent
    analyses of the costs and benefits of alternative plans of action. For
    example, ATO officials said the system will enhance their ability to
    accurately determine the costs of providing specific services or products,
    and to compare those costs with the value provided to the organization's
    customers. This information will be valuable in prioritizing activities
    and weighing the costs and benefits of various courses of action when
    developing and supporting proposed budgets.

    The ATO also plans to hold its managers accountable for cost control. The
    ATO has decentralized cost accountability to service delivery points-the
    units that actually provide services-such as air traffic control
    facilities. Each manager of a service delivery point will develop an
    operating budget. According to the ATO's plans, each manager will be held
    accountable for holding costs within specific targets. Managers will track
    their costs using reports that show expenditures for operations,
    facilities and equipment, and overhead, as well as cost per service. For
    example, managers will receive reports indicating the cost per takeoff and
    landing, or cost per flight hour, depending on the organizational unit's
    purpose. ATO officials stressed that training key executives and managers
    to understand the general ledger and cost accounting system is a key
    element in controlling costs. The ATO plans incorporate cost control into
    the performance rating and bonus system in fiscal year 2006.

    FAA has also begun to base funding decisions for system acquisitions on
    their contribution to reducing the agency's operating costs, among other
    things. Currently, FAA's Telecommunications Infrastructure-one of the 16
    major system acquisitions that we reviewed in detail-is the only one of
    the 55 system acquisitions in FAA's ATC modernization program that helps
    reduce the agency's operating costs. However, FAA does not expect to
    realize most of these benefits until after 2009.

    The ATO is conducting activity value analysis as another method to reduce
    costs. Through activity value analysis, the ATO determines (1) the costs
    of the products and services provided, (2) the factors that affect the
    costs, and

    (3) the value of these products and services, as perceived by the ATO's

    Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
    Challenges

    internal customers. Through activity value analysis, officials are asking
    the internal organizations that use the ATO's products and services to
    categorize their value as high, medium, or low, while ATO officials
    categorize the cost of performing each activity as high, medium, or low.
    ATO officials expect the process to help them eliminate activities with
    low customer value and determine ways to reduce the costs of activities
    with high customer value.

    The ATO first focused the activity value analysis on headquarters units,
    and plans to do so later at field units. The results of the headquarters
    analysis indicated that internal customers rated only 5 out of 73 reviewed
    products or services as low value, and all of these were also low cost.
    Officials judgmentally selected 11 activities for a more in-depth analysis
    to determine areas for potential improvement. The activity value analysis
    resulted in 39 discrete findings and recommendations with common themes.
    (See table 3.)

    Table 3: Common Themes and Number of Findings from ATO's Headquarters
    Activity Value Analysis

    Source: FAA.

        Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
                                       Challenges

    Existing Cost Control Initiatives Will Not Close the Projected Gap

    FAA, through the ATO, has a number of cost control initiatives under way.
    For example, the ATO is evaluating whether some of its services can be
    provided for less cost by contracting out. In February 2005, FAA awarded a
    contract for the operation of its flight service stations. Under this
    arrangement, which FAA termed the largest competitive sourcing activity,
    at that time, in the federal government, the agency expects significant
    savings. According to FAA's estimate, the agency will save $441 million in
    capital costs because it will not continue to procure modernized equipment
    for the flight service stations. Additionally, FAA expects to save $1.2
    billion in operating costs. However, the projected operating cost savings
    would not occur until fiscal year 2011 or later; only about $241 million
    savings in operating costs would be realized through fiscal year 2010.3
    For fiscal years 2005 through 2010, FAA also projects savings of $212
    million in operating costs from a variety of other actions, including
    improvements in procurement for office supplies, office equipment, mail,
    printing and information technology hardware and software; improving cell
    phone contracting; and cutting night shift operations at selected ATC
    towers.

    These cost control efforts are not likely to close the projected gap. In
    total, the estimated operating cost savings that the agency could realize
    from current cost-reduction actions is $454 million through fiscal year
    2010-far short of the projected gap. However, additional options for cost
    savings exist. Some will require FAA to address organizational barriers
    and receive strong political support for implementation. Frequently cited
    cost control strategies are described below.

    3FAA also saved $494 million in operating costs through staff attrition
    that occurred in advance of contracting out. FAA did not fill these
    vacancies because it was planning to contract out the flight service
    stations.

    Page 69 GAO-06-154 Status of NAS Modernization Chapter 4 Rising Costs and
    Declining Revenues Pose Financial Management Challenges

         o Consolidate major air traffic control facilities. A 1997 Coopers &
           Lybrand report concluded that the number of these centers could be
           reduced without a negative impact on air safety, but that such an
           initiative was considered unfeasible without strong political support
           for cost control.4 Some stakeholders told us that six or fewer
           facilities could be sufficient. FAA officials said they have no plans
           to consolidate centers because the concept would require strong
           political support that is not yet evident and they have no current
           financial estimate of potential savings. In addition, FAA's Management
           Advisory Council5 recently recommended that FAA develop a plan for
           reducing the number of terminal radar approach control facilities from
           their current level of 150 aging and inefficient facilities to around
           50 to 60 newer, upgraded facilities using more capable and efficient
           automation.
         o Consolidate regional offices. According to the Coopers & Lybrand and
           the National Civil Aviation Review Commission reports, FAA could
           achieve savings by consolidating its nine regional offices. Both
           reports said that FAA had studied the issue numerous times but had
           never acted on the results of its own studies. According to the
           commission's report, consolidating nine FAA regional offices into
           three could save $400 million over a 5-year period. Several
           stakeholders told us this is an initiative that FAA should pursue.
         o Expand the Contract Tower Program. Although FAA employees staff
           control towers at most of the nation's busiest airports, FAA contracts
           for outside staff to work at over 200 airports with lower traffic
           levels. Both the Coopers & Lybrand study and the commission report
           recommended expanding the contract tower program to achieve savings of
           $20 million to $30 million per year. More recently, the Department of
           Transportation's Office of the Inspector General reported that each
           contract tower costs FAA nearly $900,000 less per year than comparable
           FAA towers, without compromising flight safety.

    4Coopers & Lybrand, L.L.P., Federal Aviation Administration Independent
    Financial Assessment (Feb. 28, 1997).

    5In 1996, Congress authorized the Administrator of the FAA to establish
    the Management Advisory Council. The council reviews, comments, and makes
    recommendations on FAA management, policy, spending, funding, and
    regulatory matters affecting the aviation industry. On May 12, 2005, the
    council issued a report that included suggestions for reducing FAA's
    costs.

        Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
                                       Challenges

    o  Decommission infrastructure. Aviation stakeholders noted that savings
    could be achieved by decommissioning ground-based navigational aids, but
    FAA has been slow to take action. As of May 2005, approximately 2,200
    ground-based navigation aids were in operation. At the same time, FAA is
    fielding costly satellite navigation systems such as WAAS, but has made
    little progress in decommissioning the ground-based infrastructure. Its
    current plan calls for modest equipment retirements over the next 5 years
    and more substantial decommissioning over the next 10 to 15 years.
    According to one estimate, these actions could save $150 million per year.
    FAA maintains that a long decommissioning process is required because
    general aviation users will continue to rely on some of these systems
    until their aircraft are upgraded to use satellite-based navigation.
    Several stakeholders commented that responding to the general aviation
    community on this issue has long been a roadblock to decommissioning
    obsolete equipment, and the ATO cannot afford to maintain these systems
    indefinitely.

    FAA plans to spend $4.2 billion on 16 major system acquisitions in fiscal

    To Fund Major System

    years 2005 through 2009. (See table 4.)

    Fiscal Year 2009, FAA Has Cut Funding for Planned Investments in Other
    Areas

    Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
    Challenges

      Table 4: FAA Capital Funding Plans for Major ATC Modernization Acquisitions

    Source: GAO analysis of FAA data.

    Note: Amounts shown in the table for NEXCOM, LAAS, and CPDLC reflect cuts
    previously described in this chapter.

    aFunding includes the remaining STARS acquisitions for fiscal years 2006
    and 2007 and $256.5 million for the Terminal Automation Modernization
    Replacement (TAMR) program. In 2004, FAA decided to end the STARS
    acquisition in fiscal year 2007 and began TAMR. FAA plans to continue
    terminal modernization incrementally under TAMR, but has not formally
    approved its funding. For purposes of this table, we are treating STARS
    and TAMR as a single acquisition.

    As table 4 shows, ERAM is a major component of FAA's system acquisitions.
    This system will replace the software and hardware in the current en route
    host computers at 20 of FAA's air route traffic control centers.6 This
    acquisition is still in its early stages, but will consume 35 percent of
    FAA's total estimated funding planned through 2009 for the 16 systems
    listed in table 4.

    6ERAM will not be installed at the Anchorage, Alaska, air route traffic
    control center.

        Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
                                       Challenges

    To provide the $4.2 billion for its major system acquisitions in fiscal
    years 2005 through 2009 while remaining within its budget targets, FAA has
    reduced funding planned for new technology, facilities, and airport
    improvements, among other things. (See fig. 15.)

    Figure 15: Percentage Reductions in Capital Investment Plans as of January
    2005, Compared with January 2003 Percentage 0

    -20

    -40

    -60

    -80

                                          -100

                                     unications el

                                    veillanceilities

                                     vigationtherrt

                                         ation

                                     itecture sonn

                                      ion suppoea

                                          omc

                                           W

                                           Fa

                                          Per

                                           a

                                           h

                                          Aut

                                          SurN

                                           c

                                           m

                                           Ar

                                          iss

                                           om

                                           M

                                           C

    Category

                         Source: GAO presentation of FAA data.

    FAA Has Reduced Funding for New Technology That Could Produce Future
    Benefits

    For fiscal years 2005 through 2009, FAA eliminated the $1.4 billion that
    it had set aside for what it calls the "architecture segment." These funds
    would have been used to perform about 2 years' worth of early research on
    new programs that have not been officially approved as part of an
    acquisition decision by FAA management. According to FAA officials, these
    new programs will be postponed until they are affordable.

    Architecture segment funds would have funded some technology developments
    intended to serve as cornerstones of FAA's planned evolution

    Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
    Challenges

    from a controller-based ATC system to one that relies more on
    collaboration between pilots and controllers and on better use of the
    technology on board an aircraft for safe navigation. For example,
    architecture segment funds would have been used to develop, among other
    things, the System Wide Information Management network (SWIM). SWIM would
    help transition the NAS to network-centric operations by providing the
    infrastructure and associated policies and standards to enable information
    sharing among all authorized NAS users, such as the airlines, other
    government agencies, and the military.

    The architecture segment would also have funded the initial development of
    Automatic Dependent Surveillance-Broadcast (ADS-B), which FAA describes as
    another cornerstone of its long-term plans. ADS-B is a surveillance
    technology that transmits an aircraft's identity, position, velocity, and
    intent to other aircraft and to ATC systems on the ground, thereby
    enabling pilots and controllers to have a common picture of airspace and
    traffic. By providing pilots with a display that shows the location of
    nearby aircraft, the system enables pilots to collaborate in decision
    making with controllers, safely allowing reduced aircraft separation and
    thereby increasing NAS capacity.

    Eliminating the architecture segment comes at an inopportune time, as the
    JPDO begins its congressionally mandated efforts to coordinate the
    research efforts of FAA and other federal agencies to create the Next
    Generation Air Transportation System that would provide capacity to meet
    the air transportation needs of 2025. The JPDO issued a report in 2004
    outlining its plans to triple NAS capacity by 2025 and proclaimed that it
    can reach this goal only by completely transforming the way air traffic is
    managed. Network-centric operations and improved surveillance technology,
    such as SWIM and ADS-B might provide, are key elements of this
    transformation. A senior JPDO official told us that the JPDO's planning is
    still at an early stage, and therefore, the JPDO is not certain whether
    SWIM or ADS-B, as currently configured, would address NAS needs for 2025.
    However, he said that further development work is needed on these and
    other new technologies, and consequently, the JPDO hopes to see some
    funding for early technology development restored in FAA's capital
    investment plans as FAA's fiscal year 2007 budget request moves forward.

    According to FAA, the program requirements for new technologies included
    in the JPDO's plans for the future were not mature enough, and business
    cases were not validated at that time, to justify inclusion within

        Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
                                       Challenges

    FAA Has Reduced Funding for Facilities

    FAA's constrained capital investment plan. FAA stated that it plans to
    work with the Department of Transportation, the Office of Management and
    Budget, and congressional appropriations committees to introduce new
    technologies associated with the JPDO's future plans. We believe that FAA
    needs to give continuing priority to developing business cases for new
    technologies such as ASD-B and SWIM. Such actions will help FAA and the
    JPDO transition the current NAS to the next generation air transportation
    system.

    FAA cut nearly $790 million from its planned investments for facilities-an
    action that could delay actions on facilities scheduled for repair or
    replacement. Much of FAA's infrastructure-the buildings and towers that
    house ATC employees and costly systems-is aging. (See table 5.) For
    example, the Casper, Wyoming, air traffic control tower was built in 1937;
    the tower in Binghamton, New York, was built in 1951; and FAA's newest air
    route traffic center was occupied in 1963. The average age of air traffic
    control towers at airports is 30 years. FAA's chief operating officer told
    us that the Houston traffic control center floods during heavy rains. Fire
    suppression systems are another concern, he said. While FAA has replaced
    more than 30 air traffic control towers and terminal radar approach
    control facilities in the last 5 years, the funding reduction could delay
    progress on ATC facilities that are scheduled for repair or replacement in
    the future.

                             Table 5: Age of NAS Facilities

    Average Facility age

      Air route traffic control facilities (that house en route ATC operations) 43
                                         years

        Air traffic control towers (that house airport ATC operations) 29 years

    Terminal radar control facilities (that house ATC approach and departure
    25 years operations)

    Source: FAA.

    The capital spending reductions that FAA has planned for fiscal years 2005
    through 2009 reflect the end result of difficult decisions about which
    programs to fund and which to cut in order to remain within budget
    targets. However, as we recently reported, FAA does not provide sufficient
    information to senior agency, department, Office of Management and

        Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
                                       Challenges

    Budget, and congressional decision-makers of how it has arrived at its
    spending plans.7 Specifically, FAA does not identify the impact of these
    decisions on ATC and NAS modernization. Such information would make clear
    how constrained budgets will affect NAS modernization and how FAA is
    working to live within its means. Accordingly, we recommended that FAA
    begin providing such information with its budget submissions to Congress.
    FAA informed us that it intends to better inform Congress in the future by
    adding a section to its annual capital investment plan that will summarize
    major changes from the preceding year.

    With the various taxes that accrue to the Trust Fund scheduled to expire
    in 2007, and FAA's reauthorization, also scheduled for 2007, many aviation
    experts, as well as top Department of Transportation and FAA officials,
    are revisiting the way FAA receives its funding and are repeating
    recommendations made in the past, such as those of the National Civil
    Aviation Review Commission in 1997. Aviation experts and stakeholders
    agree that the incomplete implementation of these recommendations and
    additional factors could limit FAA's ability to fully address
    long-standing NAS modernization problems.

    FAA Is Reviewing Potential Changes in Its Funding Mechanism

    The ATO, as Created, Implemented Only Part of the 1997 Commission's
    Recommendations

    The 2000 executive order and related legislation that laid the foundation
    leading to FAA's creation of the ATO did not implement all of the
    recommendations of the National Civil Aviation Review Commission. The
    report stressed that the recommendations composed an integrated and
    comprehensive funding package and that the commissioners' agreement on the
    recommendations was contingent on their implementation as a total package.
    The report stated that implementing the recommendations in total could put
    FAA and aviation stakeholders in a position to take advantage of industry
    growth and technological change. The commission recommended the following:

    o  FAA's budget treatment must change. The commission recommended that
    FAA's funding and financing system receive a federal budget treatment
    ensuring that revenues from aviation users and spending on aviation
    services are directly linked and shielded from discretionary

    7 GAO-05-331.

    Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
    Challenges

    budget caps. This linkage would ensure that FAA's expenditures are driven
    by aviation demand.

         o FAA's management must become performance based. The commission
           recommended that services related to the air traffic system be placed
           in a performance-based organization, managed by a chief operating
           officer, and overseen by a board of public interest directors. In
           addition, FAA should institute a cost accounting system and be given
           authority to implement innovative programs involving leasing and
           borrowing authority. The commission further stated that the safety and
           security functions of FAA, which are separate from the
           performance-based organization, should also adopt a performance-based
           management philosophy so that the quality of these programs can be
           improved.
         o FAA's revenue stream must become more cost based. The commission
           recommended that FAA adopt a cost-based revenue stream to support its
           air traffic system activities including capital investments. At the
           same time, funding for aviation security, safety, and government use
           of the air traffic system should be provided by the federal
           government's general fund.
         o FAA must control its operating costs and increase capital investments.
           The commission reviewed FAA's forecasted budget needs and assumed the
           agency's budget projections to be reasonable in a status quo
           environment. However, the commission noted that FAA's operating costs
           could be better managed and controlled and that investments in ATC
           modernization should be increased.
         o Airport capital needs must be met. The report noted that the federal
           requirements of airport capital development exceeded the amount of
           revenue that was available to finance these requirements through the
           Airport Improvement Program. The commissioners believed that the
           Airport Improvement Program is the linchpin of airport financial
           planning and stated that the program should be funded at a minimum of
           $2 billion annually over the next 5 years.

        Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
                                       Challenges

    Aviation Experts and Stakeholders Repeated Several Past Recommendations

    While we do not necessarily agree with all of the commission's
    recommendations, we note that they were not implemented as a complete
    package, as the commission intended. Indeed, the ATO has been created as a
    legislatively mandated performance-based organization, headed by a chief
    operating officer, and focused on cost control, as the commission
    recommended. However, creating the ATO did not change its funding
    mechanism-a topic currently under discussion as the Trust Fund and FAA's
    reauthorizations are about to expire. Additionally, FAA's spending
    remained subject to congressional appropriations and the ATO was not given
    authority to implement innovative programs involving leasing and
    borrowing. Furthermore, the Trust Fund continues as a partial funding
    source for aviation security and safety.8

    With the Trust Fund's scheduled 2007 expiration, and FAA's reauthorization
    drawing near, stakeholders, aviation experts, and Department of
    Transportation officials are discussing whether or how the Trust Fund
    should be changed to better meet FAA's needs. Potential changes echo those
    made by the commission in 1997. For example, FAA's 2004 performance report
    notes that the FAA's funding mechanism does not link revenues with FAA's
    cost of providing ATC services.9 The report states that Trust Fund
    revenues are affected primarily by the number of passengers in the NAS,
    while FAA's workload and costs are based on the number of aircraft
    operating in the NAS, regardless of the number of passengers on each
    aircraft. Given the same number of passengers, the Trust Fund's revenues
    would remain constant, even though the passengers may be traveling on
    more, smaller aircraft. Under this scenario, FAA's workload and costs
    would increase but FAA's income would remain the same. The FAA
    Administrator noted that a tax on airline fares paid by passengers, which
    is the Trust Fund's primary source of revenue, is not related to FAA's
    actual cost of providing ATC services, and is not responsive to changes in
    the aviation industry. According to the Administrator, the United States
    is in a select minority of countries-all of them small, third world
    nations- that do not charge for the actual cost of air traffic control.
    She added that the current structure provides little incentive for FAA's
    customers to look at

    8Security fees, collected as a fee imposed on airline passengers, also
    help pay for aviation security.

    9FAA is funded through the Trust Fund and the General Fund. In fiscal year
    2004, the General Fund provided 22 percent of FAA's total budget.

    Page 78 GAO-06-154 Status of NAS Modernization Chapter 4 Rising Costs and
    Declining Revenues Pose Financial Management Challenges

    what things cost and help FAA to focus its resources where they matter the
    most. Under this system, she observed, "everyone wants everything and in a
    political environment, it becomes difficult ... often impossible ... to do
    things differently and undertake real reform."

    Some aviation experts also noted that FAA's funding stream needs to be
    linked to the cost of its services and FAA needs multiyear funding,
    financed by debt if necessary, to effectively manage its acquisitions, as
    the commission recommended.10 FAA's chief operating officer said that
    multiyear funding would provide needed stability, and a senior Department
    of Transportation official stated that 50 percent of acquisition cost
    overruns resulted from an unstable funding stream. One stakeholder
    concluded that, at the present time, a window of opportunity may exist to
    seriously reexamine past recommendations that have been repeated over
    time, such as those of the commission. However, not all stakeholders agree
    that significant changes are needed. The National Air Traffic Controllers'
    Association, the labor union representing air traffic controllers,
    testified that the Trust Fund is a stable and strong source of revenue and
    structural changes should not be taken lightly.

    Some aviation experts and our work suggests steps that FAA could take in
    the short term to improve its performance-based characteristics within the
    existing structure of congressional oversight and financial control. For
    example, one expert suggested that FAA has room for improvement in
    prioritizing how it commits to programs that require future investments,
    keeping in mind realistic funding assumptions. Another noted that FAA's
    anticipated high retirement rate over the next few years provides an
    opportunity to cut costs by redistributing and trimming the workforce.
    Finally, some experts suggested that if contracting for flight service
    stations proved to be effective, FAA could consider contracting for other
    functions, such as oceanic or en route ATC, or nighttime operations. Under
    this option, experts noted that ongoing government oversight could ensure
    the safety of contracted operations, and a "staged outsourcing" of the
    NAS's functions might build confidence in the private sector's ability to
    provide air traffic services safely and efficiently. As previously
    discussed,

    10As part of our research, we sought the perspective of an international
    group of experts. We asked these experts to address, among other things,
    short-term steps that the ATO could take to address funding constraints
    and longer term steps that FAA could take to help the ATO achieve its
    mission. The options presented were identified by one or more members of
    our expert panel or others that we interviewed and do not necessarily
    reflect the views of GAO or of all aviation experts.

    Page 79 GAO-06-154 Status of NAS Modernization

        Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
                                       Challenges

    our work has also pointed out cost-saving options that FAA could pursue,
    such as consolidating ATC facilities and regional offices, decommissioning
    ground-based navigational aids, and expanding the contract tower program.

    Other experts went so far as to state that FAA, through the ATO, cannot
    fully address legacy modernization problems unless the ATO receives
    managerial and budgetary independence. To this end, some stated that the
    ATO's basic relationship with Congress must be changed so that ATO has the
    authority to manage its own finances, as the private sector does. Experts
    noted that, in contrast to the independence, flexibility, and tools
    available to private business executives, the business decisions made by
    the ATO's executives are subject to review by the FAA Administrator, the
    Secretary of Transportation, the Office of Management and Budget, and
    Congress. Increasing the ATO's autonomy would entail fundamental
    structural changes to the how the ATO receives and spends funding.

    Considering such fundamental changes is consistent with our work on the
    challenges facing this nation in the 21st Century. Addressing these
    challenges requires a fundamental reexamination of government policies,
    programs, and functions to determine what the federal government should do
    and how it should be financed in the future. Concerning transportation,
    federal decision makers need to ask whether existing program constructs
    and financing mechanisms are relevant to the challenges of the 21st
    Century.

    The current tight budget environment has forced FAA to make some tough

    Conclusions

    decisions, the implications of which may not be apparent to executive
    branch and congressional decision makers. Including information in its
    budget submissions on the impact of these decisions, as we previously
    recommended, will enable FAA to provide decision makers with a better
    understanding of the funding trade-offs it is proposing. FAA's current
    capital investment plan sacrifices funding for the early development of
    new technologies-included in the JPDO's plans for the NAS of the future-to
    make funding available for ongoing modernization projects. Although many
    of these ongoing projects are supportive of the JPDO's vision, eliminating
    the funding for research and development for new technologies runs counter
    to the JPDO's objectives. Balancing the needs of ongoing and future
    projects is essential to provide for transforming the NAS, both in the
    near term and by 2025.

        Chapter 4 Rising Costs and Declining Revenues Pose Financial Management
                                       Challenges

    The costs of hiring and training thousands of controllers annually for the
    next decade, as discussed in chapter 3, add to FAA's financial challenges.
    It is important that FAA estimate these costs now, so that it can
    incorporate them in future budget requests. These cost estimates will
    affect the amounts of funding FAA will have available for modernization as
    well as operations.

    The observations of aviation experts and stakeholders, as well as our work
    on the nation's 21st Century challenges, suggest a two-staged approach to
    addressing FAA's financial management challenges. First, FAA needs to
    pursue those options available under the existing federal oversight and
    appropriations process, such as exploring opportunities for contracting
    out more of its services, and consolidating facilities. Once FAA has fully
    exploited those options, and has established a record of improved
    financial management, it could consider developing a business case to
    reexamine fundamental issues such as the appropriate government role in
    aviation and the funding mechanism that support the ATC system.
    Ultimately, Congress and the President decide these issues.

    To position FAA to best meet NAS needs in both the near term, and the
    longer term, we are making the following two recommendations to the
    Secretary of Transportation. The Secretary should direct the FAA
    Administrator to (1) balance current and long-term investment priorities;
    and (2) use all available management tools and, after establishing a
    record of improved financial management, explore more fundamental changes
    that could provide greater financial management flexibility.

    Recommendations for Executive Action

    Agency Comments and Our Evaluation

    FAA commented that its fiscal year 2007 budget request will reflect its
    balancing of current and future funding priorities, and, therefore, our
    recommendation to this effect may be unnecessary. We are retaining this
    recommendation because it pertains not only to fiscal year 2007, but to
    future years as well. Likewise, FAA commented that it is already utilizing
    all available financial management tools, including looking at alternative
    financing mechanisms. We continue to believe that FAA should explore
    further uses of available management tools such as opportunities to
    contract out its services; consolidate major facilities; and accelerate
    decommissioning of ground-based navigation aids, as we have noted in this
    report. Therefore, we are also retaining this recommendation. FAA also
    provided technical comments, which we included as appropriate.

    Appendix I

    Methodology for Workforce Culture Assessment

    Because we identified the acquisition workforce culture as an underlying
    cause of air traffic control (ATC) modernization problems in 1996 and had
    not revisited this area since the Federal Aviation Administration (FAA)
    published its strategy for cultural change in 1997, we reassessed the
    status of FAA's efforts in this area. We obtained documents that showed
    evidence of the steps that FAA took to improve the acquisition workforce
    culture between 1997 and 2005. To benchmark the acquisition workforce
    against organizations with constructive cultures, we employed the services
    of a consultant with extensive experience in analyzing organizational
    culture and used a research database of responses to the Organizational
    Culture Inventory(R) and Organizational Effectiveness Inventory(TM). These
    instruments have been administered over a period of 20 years to nearly
    1,000 organizations selected to maximize the number and diversity of the
    organizations represented in the database.

    The research database does not contain client data-that is, data obtained
    from organizations that contracted for an organizational assessment. Such
    data would be subject to self-selection biases because the factors
    prompting the use of culture and climate surveys by such organizations
    almost ensure that the results will be skewed and somewhat negative.
    Additionally, the types of organizations (typically large, for-profit
    corporations) that undertake, and can afford, such surveys are not
    necessarily representative of the larger population of organizations.
    Instead, the organizations, whose responses are in the research database,
    were strategically selected and invited to use the surveys on a research
    basis.1 Additionally, priority was placed on gaining entree into a number
    of highly effective organizations, including some that initially turned
    down the invitation on the grounds that their cultures represented a
    competitive advantage and were proprietary. Thus, though not collected
    from a random sample of organizations, the research data are less subject
    to systematic biases than are client-based data.

    The research database provides both "historical averages" and
    "constructive benchmarks" against which organizations can compare their
    results. The historical averages, for the purposes of this study, are the
    mean scores for all respondents across the organizational units surveyed.
    The

    1The research database includes responses from government agencies,
    not-for-profit organizations, public and private schools, libraries and
    museums, sports teams and athletic organizations, professional groups, and
    small businesses. Approximately 10 percent of the respondents in the
    research database are from public agencies, a rate that is significantly
    higher than would be the case for a client database.

    Page 82 GAO-06-154 Status of NAS Modernization Appendix I Methodology for
    Workforce Culture Assessment

    constructive benchmark scores are the averages for up to 172 highly
    effective units-defined as those with predominately positive and adaptive
    cultures. These scores provide a target toward which organizations can
    work to redirect their cultures and enhance their performance.

    We compared the results in the research database with those that FAA
    obtained through its periodic employee attitude survey. Specifically, we
    used 1997, 2000, and 2003 survey results for the acquisition workforce,
    the same segment of the organization that we focused on in 1996. In each
    of these years, FAA mailed surveys to the entire acquisition workforce and
    received completed surveys from approximately half of the worforce, as
    summarized in table 6.

    Table 6: Number of Surveys That FAA Mailed to the Acquisition Workforce
    and Completed Surveys Received in 1997, 2000, and 2003

    Source: GAO representation of FAA data.

    The results derived from these completed surveys could differ if a
    different subset of the workforce responded. Consequently, we treat the
    completed surveys as a random sample of the workforce to acknowledge the
    sampling error that would be expected for a probability sample of this
    size. This treatment assumes that response is random and that the
    completed surveys constitute a simple random sample of the acquisition
    workforce. If this assumption is not correct, for example, if employees
    with positive attitudes were more (or less) likely to respond than
    employees with negative attitudes, then the scores developed from the
    survey results could overstate (or understate) the scores for the
    workforce overall.

    Appendix I Methodology for Workforce Culture Assessment

    Mean scores were developed from the survey data by assigning values of 1
    through 5 to the five-point extent scales for each question, and then
    using these score values to estimate an average score based on all
    responses for that question.2 We express our confidence in the precision
    of these score estimates at 95 percent confidence intervals. This is the
    interval that would contain the actual population value for 95 percent of
    the samples we could have drawn. As a result, we are 95 percent confident
    that each of the confidence intervals in this report will include the true
    values in the study population. For the estimated acquisition workforce
    scores in this report, the 95 percent confidence intervals are within plus
    or minus .06 points of the score estimate. For example, if the estimated
    score is 3.21, then the 95 percent confidence interval would run from 3.15
    to 3.27.

    With our expert's assistance, we selected items from FAA's employee
    attitude survey that addressed cultural issues and matched them with
    similar survey items used to assemble the research database. Each of our
    comparisons addressed a common aspect of organizational culture or
    climate. For example, FAA's survey asks for agreement or disagreement with
    the following statement: "In my organization, there are service goals
    aimed at meeting customer expectations." We compared FAA's responses to
    the following item used in the comparison group survey: "Are you
    encouraged to emphasize the perspective and needs of customers when making
    decisions?" Appendix III shows a complete list of FAA survey items and
    comparison group survey items that we used for comparison, and the
    respective scores.

    It is important to note that comparisons of the responses to questions
    whose wording is similar, but not identical, are difficult because even
    subtle changes in a question's wording can result in different outcomes.
    We present the two sets of survey results here because they are measuring
    similar enough concepts that we think a general comparison is warranted.
    Additionally, we used the results of our comparisons as part of a body of
    evidence that also includes our past work on FAA's culture, and FAA's more
    recent recognition of the importance of a results-oriented culture.

    2Responses to questions range over a five-point scale. For example, the
    possible responses might be: strongly disagree, disagree, neither agree
    nor disagree, agree, strongly agree. In this case, if "strongly agree"
    were the most positive response for the question, it would be scored a
    "5," "neither agree nor disagree" would score a "3," and "strongly
    disagree" would score a "1."

    Page 84 GAO-06-154 Status of NAS Modernization Appendix I Methodology for
    Workforce Culture Assessment

    We believe that the research database is sufficiently authoritative,
    appropriate, and reliable for us to use it as a basis for comparing FAA's
    workforce culture with other organizations' cultures. The survey that was
    used to create the database has been completed by over 2,500,000
    respondents since its publication in prototype form in 1983. It has been
    administered in thousands of organizations throughout the world, including
    the Department of the Navy, the Coast Guard, the Defense Logistics Agency,
    major retailing organizations, international pharmaceutical companies,
    financial services corporations, newspapers, high tech firms, universities
    and hospitals, not-for-profit organizations, and numerous manufacturing
    firms. These organizations have variously used the results to diagnose
    their cultures and initiate change programs, to identify the "ideal"
    culture for maximizing their effectiveness, and to monitor the impact of
    organizational development efforts. More specialized applications have
    included programs focusing on diversity within organizations, mergers and
    acquisitions, and union-management relations.

    Additionally, the survey is referenced in various textbooks and has been
    adopted for instructional purposes by leading universities. It has been
    used in research projects on topics ranging from organizational
    reliability and effectiveness to member socialization and citizenship
    behavior. These projects include a Department of Defense study of the
    culture of highly effective units during the Desert Shield buildup; a
    comparative study of 150 supermarkets sponsored by the Coca-Cola
    Retailers' Research Council; the Readership Institute's (Northwestern
    University) national survey of 100 newspapers; and various projects
    focusing on organizations carrying out critical activities (e.g., nuclear
    power plants, nuclear aircraft carriers, critical care units). The survey
    has also been used in international cross-cultural projects, including one
    by the International Association of Economic and Management Students
    focusing on management cultures in over 40 different countries. The survey
    has been published in Bulgarian, Chinese (traditional and simplified),
    Dutch, Finnish, French (European and Canadian), German, Icelandic,
    Japanese, Korean, Portuguese, Romanian, Russian, Spanish (Castilian and
    Latin American), and Swedish, and preliminary translation keys have been
    developed in Afrikaans, Hindi, Polish and other languages. Results of
    research supporting the scientific reliability and validity of the survey
    have been published in Psychological Reports, Group and Organization
    Studies, Human Relations, and the Handbook of Organizational Climate and
    Culture.

    Similarly, we believe FAA's employee attitude survey is sufficiently
    authoritative, appropriate, and reliable for us to use it as a basis for

    Appendix I Methodology for Workforce Culture Assessment

    comparing FAA's workforce culture over time. FAA has administered the
    employee attitude survey to its employees nine times since 1984. The
    survey was designed to gather information on employees' attitudes,
    perceptions, and opinions about a broad variety of organizational issues.
    Although elements of the survey have changed over time, items thought to
    represent core areas of interest have remained relatively unchanged. For
    our analysis, we used FAA's data showing the acquisition workforce's
    responses for surveys conducted in 1997, 2000, and 2003. The acquisition
    workforce's response rate for these years was, respectively, 49 percent,
    53 percent, and 51 percent.

    Appendix II

                             Major ATC System Acquisitions

    Air Traffic Control Radar ATCBI-6 is a replacement radar capable of
    determining both range and direction to and from the aircraft. It can also
    forward this information to

    Beacon Interrogator-

    Replacement (ATCBI-6) the appropriate air route traffic control centers.
    It will replace radars that have exceeded their life expectancy and have
    proved extremely vulnerable to outages and critical-parts shortages.

    Advanced Technologies and ATOP is an integrated system of new controller
    workstations, data-processing equipment, and software that will enhance
    the control and flow

    Oceanic Procedures (ATOP)

    of oceanic air traffic to and from the United States. ATOP is planned for
    the three sites that control oceanic air traffic: Anchorage, Alaska; New
    York, New York; and Oakland, California.

    Airport Surface Detection ASDE-X is an airport surveillance system that
    enables air traffic controllers

    System-Model X (ASDE-X) to track the surface movement of aircraft and
    vehicles. The detection system automatically predicts potential conflicts
    and seamlessly covers airport runways, taxiways, and other areas.

    Airport Surveillance Radar ASR-11 is a digital radar that replaces aging
    analog radars, such as ASR-7 and ASR-8, as well as collocated ATCBI-4 and
    ATCBI-5 secondary radars,

    Model-11 (ASR-11)

    with a single, integrated digital radar system. ASR-11 reduces operational
    costs, improves safety, and can accommodate future capacity increases.

    Controller-Pilot Data Link CPDLC is a communication system that will allow
    pilots and controllers to transmit data messages directly between FAA
    automated ground

    Communications (CPDLC)

    computers and aircraft.

    En Route Automation ERAM will replace software and hardware in the host
    computers at FAA's 20 en route air traffic control centers, which provide
    separation, routing,

    Modernization (ERAM)

    and advisory information. It provides a flexible and expandable base to
    facilitate further National Airspace System (NAS) modernization
    initiatives.

                       Appendix II Major ATC System Acquisitions

    En Route Communications A precursor to ERAM, ECG provides a communications
    interface between radar sites and en route centers. The system has an open
    and expandable

    Gateway (ECG)

    platform that allows for new connectivity and functionality as the NAS
    evolves. It replaces the interim Peripheral Adapter Module Replacement
    Item that has been operating for 10 years and has exceeded its life
    expectancy.

    FAA Telecommunications FTI is FAA's new telecommunications system. It will
    replace costly networks of separately managed systems and services-both
    leased and

    Infrastructure (FTI)

    owned-by integrating advanced telecommunications services within FAA's NAS
    and non-NAS infrastructures.

                               Free Flight Phase 2 (FFP2)

    FFP2 is a suite of air traffic control tools and subsystems that allows
    air traffic controllers to move gradually from a highly structured system,
    based on elaborate rules and procedures, to a more flexible system wherein
    pilots, within limits, can change their route, speed, and altitude while
    keeping air traffic controllers informed of such changes. It includes the
    Traffic Management Advisor, Collaborative Decision Making, and the User
    Request Evaluation Tool.

    Integrated Terminal Weather System (ITWS)

    ITWS is a weather information system that furnishes air traffic
    controllers and supervisors with full-color graphic displays of weather
    conditions that need no meteorological interpretation. It provides a
    comprehensive representation of the current weather situation and precise
    forecasts of weather conditions for the next 20 minutes (to be increased
    to 60 minutes in 2006) of convective weather conditions.

    Local Area Augmentation LAAS is a landing guidance system that would use
    global positioning satellites and would be installed at airports to allow
    aircraft to execute

    System (LAAS)

    precision instrument approaches and landings in all weather conditions.
    LAAS would eliminate the need for multiple instrument landing systems at
    airports where it is installed.

                       Appendix II Major ATC System Acquisitions

    NAS Infrastructure Management System- Phase 2 (NIMS-2)

    NIMS is a centralized system to help manage and schedule maintenance on
    the NAS infrastructure, including its facilities, systems, and equipment.
    NIMS will decrease the number of en route delays by reducing the time
    required to restore systems to full operation following maintenance. NIMS
    Phase 1, already complete, provides initial Operational Control Center
    capability, along with remote monitoring and control functionality, to
    3,700 NAS facilities and 5,800 deployed maintenance data terminals.1 Phase
    2 will fully implement resource management and enterprise management
    software and focus on increasing workers' productivity in receiving orders
    and managing resources.

    Next Generation Air/Ground Communications (NEXCOM)

    NEXCOM is a digital communications system, consisting of multimodal
    digital radios, avionics, and ground stations, that will improve ATC
    communications by replacing old analog communication systems. Segment 1A
    will replace 30- to 40-year-old radios, deploying 6,000 new radio sets
    that use both analog and digital communications with aircraft. Segment 1B
    will create ground stations to communicate with aircraft equipped with
    digital capability.

    Operational and Supportability Implementation System (OASIS)

    OASIS is a system used at flight service stations to assist general
    aviation pilots with flight planning. The system provides up-to-the-minute
    weather graphics by integrating real-time weather and flight planning data
    with overlays of flight routes. It replaces the Flight Services Automation
    system for which FAA has had difficulty obtaining spare parts and hardware
    support.

    Standard Terminal Automation Replacement System (STARS)

    STARS is a workstation to allow civilian and military air traffic
    controllers to direct aircraft near major U.S. airports and will replace
    aging workstations at certain facilities. It has an open and expandable
    terminal automation platform that can accommodate air traffic growth, as
    well as new hardware and software that is designed to promote safety,
    maximize operational efficiency, and improve controllers' productivity.
    FAA will

    1Operational Control Center capability, established in 2001, was a
    standard set of tools and procedures needed to open the control centers.
    The tools provide the initial enterprise management and resource
    management technical capabilities needed at Operational Control Centers.

    Page 89 GAO-06-154 Status of NAS Modernization

                       Appendix II Major ATC System Acquisitions

                         Terminal Automation Replacement (TAMR)

    terminate STARS after replacing 47 older systems by the end of fiscal year
    2007.

    TAMR is a modernization program to resolve existing safety, capacity, and
    obsolescence concerns in terminal automation systems at approximately 115
    terminal radar approach control facilities and their associated towers.
    FAA initiated TAMR in 2004, concurrent with its decision to end STARS
    acquisitions by the end of fiscal year 2007. According to FAA, TAMR will
    incrementally continue the modernization and replacement actions.

    Wide Area Augmentation WAAS is a navigation and landing guidance system
    that uses global positioning satellites to provide precise navigation and
    landing guidance at

    System (WAAS)

    all U.S. airports, including thousands that have no ground-based
    instrument landing capability.

    Appendix III

    Perceptions of Organizational Culture in FAA's Acquisition Workforce and
    in Other Organizations

    This appendix provides the results of surveys conducted at FAA and at a
    variety of other organizations (comparison group). FAA has conducted
    employee attitude surveys periodically since 1984, and most recently in
    1997, 2000, and 2003. At the other organizations, Human Synergistics,
    International, has surveyed employees over a 20-year period to develop a
    database for research on organizational culture and climate, as discussed
    in appendix II, using its Organizational Culture Inventory(R) and its
    Organizational Effectiveness Inventory(TM) (see app. II for more detail
    about these inventories). Human Synergistics also identified a subset of
    these organizations as highly effective organizations with constructive
    cultures.

    To compare the perceptions of FAA's acquisition workforce with the
    perceptions of employees at other organizations, including those
    organizations with constructive cultures, we compared the mean responses
    of FAA and other employees to similar items in their respective surveys.
    We selected four survey items to compare for each of four key factors
    associated with a constructive organizational culture-mission focus,
    accountability, adaptability, and coordination. In this appendix, we refer
    to the mean responses of the FAA and other employees as the mean scores
    for the survey items. Additionally, we refer to the mean responses of the
    constructive organizations' employees as the benchmark scores for the
    items.

    Figure 16 presents the mean and benchmark scores for the four survey items
    associated with each of the four factors we considered. For FAA's
    acquisition workforce, we provide the mean scores, as calculated by FAA,
    for each item from the agency's 1997, 2000, and 2003 surveys. For the
    employees of the other and the highly effective organizations, we provide
    the mean and the benchmark score for each item that we obtained from the
    research database. We display these scores in consecutive charts whose
    juxtaposition shows how the perceptions of FAA acquisition employees
    compare at three points in time with the perceptions of employees at other
    organizations generally and at organizations with constructive cultures.

        Appendix III Perceptions of Organizational Culture in FAA's Acquisition
                          Workforce and in Other Organizations

    : Acquisition Workforce's Mean Responses to Selected Items from FAA's
    1997, 2000, and 2003 Employee Attitude
    Surveys and Comparison Group's Mean and Benchmark Scores for Similar Items
    : pursuing goals that define the best course of action for an organization
    In my organization, there are service goals aimed at meeting customer
    expectations.
    1997
    FAA survey
    2000
    2003

    Are you encouraged to emphasize the perspective and needs of customers
    when making decisions?

    Mean score

    Comparison

    group

    Mean response 0 1 2 3 4 Benchmark score 5
    Some employees may be hesitant to speak up for fear of retaliation.a
    1997
    FAA survey
    2000
    2003

    Information that employees send upward to people in higher-level positions
    is..."whatever needs to be said" versus "only what they want to hear."

    Comparison Mean score

    group

    Benchmark score Mean response 0 1 2 3 4 5
    I am clear about how "good performance" is defined in my organization.
    1997
    FAA survey
    2000
    2003

    Are the goals that you work toward on your job "unclear and ambiguous" vs.
    "clear and specific?"

    Comparison Mean score

    group

    Benchmark score Mean response 0 1 2 3 4 5

    My organization has clearly communicated the connection between my
    individual performance goals and my organization's performance goals.

    b

    1997
    FAA survey
    2000
    2003

    The objectives and priorities of this organization are clear and well
    understood by all members.

    Comparison Mean score

    group

    Benchmark score Mean response 0 1 2 3 4 5

    Appendix III Perceptions of Organizational Culture in FAA's Acquisition
    Workforce and in Other Organizations

    : empowering employees and holding them responsible for their decisions
    and actions
    I am able to contribute to decisionmaking that affects my job.
    1997
    FAA survey
    2000
    2003

    It is basically my responsibility to decide how my job gets done.

    Mean score

    Comparison

    group

    Mean response 0 1 2 3 4 Benchmark score 5
    I have the authority to make decisions required by my day-to-day work
    problems.
    1997
    FAA survey
    2000
    2003

    I have the authority and influence needed to carry out my
    responsibilities.

    Comparison Mean score

    group

    Benchmark score Mean response 0 1 2 3 4 5
    To what extent have you received the training you need to perform
    effectively in your job.
    1997
    FAA survey
    2000
    2003

    I am asked to perform only those tasks for which I am properly trained and
    qualified.

    Comparison Mean score

    group

    Benchmark score Mean response 0 1 2 3 4 5
    To what extent do you have the tools needed to do your job efficiently
    (computers, test equipment, communication devices, etc.)?
    1997
    FAA survey
    2000
    2003

     I am expected to do things without the necessary resources (such as equipment,
                            information and/or assistance).

    Mean score

    Comparison

    group

    Benchmark score Mean response 0 1 2 3 4 5

    Appendix III Perceptions of Organizational Culture in FAA's Acquisition
    Workforce and in Other Organizations

    Coordination: involving other employees in decisions affecting them,
    resolving differences collaboratively, and cooperating across
    organizational lines

        Appendix III Perceptions of Organizational Culture in FAA's Acquisition
                          Workforce and in Other Organizations

    : accepting new approaches and responding positively to demands and
    opportunities posed from within and outside of the
    organization
    To what extent has FAA done a good job creating an environment where all
    employees get the chance to contribute fully to meeting their
    organization's mission?
    1997
    FAA survey
    2000
    2003

    Employees here are actively involved in improving the organization and
    increasing its productivity.

    Mean score

    Comparison

    group

    Mean response 0 1 2 3 4 Benchmark score 5
    To what extent do you receive sufficient information from FAA to
    understand how major innovations and changes might affect you?
    1997
    FAA survey
    2000
    2003

    Information employees receive about the organization (e.g., its policies,
    new strategies, changes in procedures) is... "in-depth" versus
    "superficial"

    Mean score

    Comparison

    group

    Benchmark score Mean response 0 1 2 3 4 5
    My supervisor is effective in providing periodic coaching to improve my
    performance.
    1997
    FAA survey
    2000
    2003

    Your supervisor shows you how to improve your work.

    Mean score

    Comparison

    group

    Benchmark score Mean response 0 1 2 3 4 5

    To what extent has FAA done a good job creating an environment where all
    employees have the opportunity to participate in developmental activities
    (e.g., details, training, task forces, special assignments)?

    b

    1997
    FAA survey
    2000
    2003

    Opportunities for training and advancement are fair and equitable.

    Mean score group

    Comparison

    Benchmark score Mean response 0 1 2 3 4 5

    Table 5: Age of NAS Facilities                                          75
    Table 6: Number of Surveys That FAA Mailed to the Acquisition
                    Workforce and Completed Surveys Received in 1997, 2000,
                  and 2003                                                     83
    Figure 1:  Phases of Flight                                             17
    Figure 2:  Trust Fund Revenue Sources, Fiscal Year 2004                 20
    Figure 3:  Trust Fund Expenditures by Category, Fiscal Year
                  2004                                                         21
    Figure 4:  Relationship of FAA's Plans to Department-Level and
                  Executive Branch-Level Plans                                 22
    Figure 5:  Wide Area Augmentation System                                23
    Figure 6:  Local Area Augmentation System                               24
    Figure 7:  Prior and Current Structure of Research and Acquisitions,
                  Air Traffic Services, and Free Flight Organizations          28
    Figure 8:  Commissioned and Planned Runways, December 1999 to
                  November 2008                                                42
    Figure 9:  Projected Controller Retirements, Fiscal Years 2005 -
                  2014                                                         48
    Figure 10: Cultural Changes and Key Practices Necessary for
    Successful Transformation                                               54
    Figure 11: Changes in Mean Response Scores for Selected Items on
                    FAA's Employee Attitude Surveys, 1997 to 2000, and 2000
    to 2003, for the Acquisition Workforce                                  58
    Figure 12: Actual Capital Appropriations, Fiscal Years 2002 - 2005,
                   and Budget Targets, Fiscal Years 2006 - 2009                64
    Figure 13: Aviation and Airway Trust Fund Expenditures and
    Revenues, Fiscal Years 2002 - 2004                                      65
    Figure 14: Aviation and Airway Trust Fund Uncommitted Balances,
    Fiscal Years 2002 - 2004                                                66
    Figure 15: Percentage Reductions in Capital Investment Plans as of
                     January 2005, Compared with January 2003                  73
    Figure 16: Acquisition Workforce's Mean Responses to Selected
                    Items from FAA's 1997, 2000, and 2003 Employee Attitude
                          Surveys and Comparison Group's Mean and Benchmark
    Scores for Similar Items                                                92

    ADS-B            Automatic Dependent Surveillance - Broadcast
    ATC              air traffic control
    ATO              Air Traffic Organization
    ATOP             Advanced Technologies and Oceanic Procedures
    CPDLC            Controller-Pilot Data Link Communications
    DOD              Department of Defense
    ECG              En Route Communications Gateway
    ERAM             En Route Automation Modernization System
    FAA              Federal Aviation Administration
    FTI              Federal Telecommunications Infrastructure
    GPS              Global Positioning System
    JPDO             Joint Planning and Development Office
    LAAS             Local Area Augmentation System
    NAS              National Airspace System

    Infrastructure                                          Approximate number
    Airports                                                            19,500
    Aircraft (large, regional, and general aviation)                   215,000
    En route control centers                                                21
    Oceanic control centers                                                  3
    Terminal radar approach facilities                                     162
    Ground-based navigational aids                                      2,200a
    Human capital
    FAA's Air Traffic Controllers                                       15,000
    Other FAA employees                                                 35,000
    Pilots                                                             600,000

    Preflight Airport       Terminal       En route/   Terminal     Airport
                 surface       departure      oceanic     arrival      surface

                                          FAA
                                     Administrator
                                       FAA Deputy
                                     Administrator
    Research and                      Air Traffic                  Free Flight
    Acquisition                       Services
    Air Traffic Systems               Air Traffic System
    Development                       Requirements
    Communications Navigation          Airway Facilities Service
    and Surveillance
                                         System Capacity
    System Architecture and
    Investment Analysis               Independent Operational Test
    Business Management               Runway Safety
    Competitive Sourcing Acquisition     Terminal Business Unit
    William J. Hughes Technical        Operational Evolution Plan
    Center
    Operational Evolution Plan

         The funding level The system acquisition
         received was less experienced            The complexity of  Stakeholders
                           requirements                                      were
           than the agency growth and/or          software                    not
                           unplanned              development        sufficiently
    Name of    planning          work          was                 involved
    system    documents                        underestimated
    ASDE-Xa      X                X                    X
    ASR-11       X                X
    ATCBI-6      X
    CPDLC                         X
    FFP2         X
    ITWS         X                X                    X

    LAAS                                    X              X                 X
    NEXCOM                   X              X
    NIMS-2                   X              X
    OASIS                    X              X                                X

    FAA's Survey Results Are Lower   Surveys of organizational culture in
    Than Those for Other             other organizations, conducted over the
                                        past 20 years (comparison group), show
                                        higher mean scores than those
    Organizations on Similar Culture for FAA's acquisition workforce. To
    and Climate Surveys              determine how FAA's culture compares with
                                        that of other organizations, we
                                        contracted with an expert in
                                        organizational culture. With this
                                        expert's assistance, we compared FAA's
                                        scores for the survey items listed in
                                        figure 10 with the comparison group's
                                        responses to similar items.14 While an
                                        exact match in the wording of survey
                                        items was not possible, we found that the
                                        mean scores for FAA's acquisition
                                        workforce were lower than those of the
                                        comparison group for 14 out of 16
                                        items that we compared. The exceptions
                                        were for items that addressed the
                                        adequacy of training provided to perform
                                        one's job and the sufficiency of
                                        tools and equipment needed to do one's
                                        job efficiently. Appendix III lists
                                        the 16 items that we compared and the
                                        respective mean scores of FAA's
                                        acquisition workforce and of the
                                        comparison group. Appendix III also
                                        shows the mean scores for organizations
                                        with highly effective cultures,
                                        which could be used as a target towards
                                        which other organizations, such as
                                        FAA, could work to redirect their
                                        cultures and improve their performance.15
                                        It is important to note that comparisons
                                        of the responses to questions,
                                        whose wording is similar, but not
                                        identical, are difficult because even
                                        subtle changes in a question's wording
                                        can result in different outcomes.
                                        Our expert commented that FAA's survey
                                        results are more indicative of an
                                        organization's climate, rather than
                                        culture. The expert noted, however, that
                                        research shows that climate is strongly
                                        related to culture. Therefore, we
                                        present the two sets of survey results
                                        here because the concepts that they
                                        are measuring are, in our opinion,
                                        similar enough to warrant a general
                                        comparison. Additionally, we noted in
                                        1996 that the culture of FAA's 2,000-
                                        employee acquisition workforce needed
                                        improvement, and that the rate of
                                        initial improvement has not been
                                        sustained. Additionally, as previously
                                        stated, FAA has demonstrated its
                                        recognition of the need for a results

                                                                        Number of
    Common theme                                                      findings
    Accountability or metrics is needed                                     19
    Tools and systems lack standardization                                  18
    Approach across service units is inconsistent                           15
    Process is too complex or disparate                                      9
    Function or organization is too spread out                               9
    Process is sound, but not enforced; may require minor adjustments        3
    Product or service is an afterthought                                    3

    Dollars in millions
                                                   Funds planned for fiscal years
    Major system                                                     2005-2009
    ERAM                                                              $1,531.8
    STARSa                                                               614.9
    WAAS                                                                 570.8
    FFP2                                                                 235.3
    ASR-11                                                               230.8
    NEXCOM                                                               212.8
    ATOP                                                                 197.7
    FTI                                                                  163.4
    ASDE-X                                                               107.9
    NIMS-2                                                               104.2
    ITWS                                                                  77.7
    ECG                                                                   74.3
    ATCBI                                                                 73.7
    OASIS                                                                 31.7
    LAAS                                                                   9.9
    CPDLC                                                                  2.9
    Total                                                             $4,239.8

    Year                            Surveys mailed  Completed surveys returned
    1997                                     2,051                       1,004
    2000                                     1,983                       1,057
    2003                                     1,825                         928

    Conflicts and differences in my organization are brought out and managed
    rather than avoided or worked around.
    FAA survey 1997
                  2000
                  2003
                  To what extent are people expected (or implicitly required) to
                  resolve conflicts constructively?
    Comparison       Mean score
            group Benchmark score
                  0Mean response                1          2       3      4     5
                  Overall, how satisfied are you with your workgroup?
    FAA survey 1997
                  2000
                  2003
                  The people you work with are helpful to you in getting your
                  job done.
    Comparison       Mean score
            group Benchmark score
                  Mean response 0               1          2       3      4     5
                  In my organization, we are encouraged to share information
                  to get the job done. b
    FAA survey 1997
                  2000
                  2003
                  To what extent are people expected (or implicitly required)
                  to communicate ideas?
    Comparison          Mean score
            group Benchmark score
                  Mean response 0                  1       2       3      4     5
                  I trust my coworkers. b
    FAA survey 1997
                  2000
                  2003
                  You can count on your co-workers when teamwork is needed.
    Comparison       Mean score
            group Benchmark score
                  Mean response 0               1          2       3      4     5

    Source: GAO analysis of FAA data and research database compiled and used
    with permission of Human Synergistics, International.

    Note: FAA score estimates have 95 percent confidence intervals of plus or
    minus 0.06 or less. Differences in scores of 0.08 or more are significant
    at the 95 percent confidence level.

    Page 95 GAO-06-154 Status of NAS Modernization Appendix III Perceptions of
    Organizational Culture in FAA's Acquisition Workforce and in Other
    Organizations

    aThis question is negatively worded, such that "strongly agree," would be
    a negative response. For consistency, we reversed the scoring for this
    question, so that a "strongly agree" response would be scored 1, and a
    "strongly disagree" response would be scored 5. The practice of reverse
    scoring negatively worded items is a commonly accepted professional
    practice in survey research methodology.

    bNot asked on the 1997 survey.

    Appendix IV

         Key Practices and Implementation Steps for Mergers and Organizational
                                    Transformations

                             Practice Implementation steps

    Ensure top leadership drives the transformation.  o  Define and articulate
    a succinct and compelling reason for change.

    o  Balance continued delivery of services with merger and transformation
    activities.

    Establish a coherent mission and integrated strategic goals to  o  Adopt
    leading practices for results-oriented strategic planning and guide the
    transformation. reporting.

    Focus on a key set of principles and priorities at the outset of the  o
    Embed core values in every aspect of the organization to reinforce
    transformation. the new culture.

    Set implementation goals and a time line to build momentum and  o  Make
    public implementation goals and time line.

    show progress from day one.  o  Seek and monitor employee attitudes and
    take appropriate follow-up actions.

         o Identify cultural features of merging organizations to increase
           understanding of former work environments.
         o Attract and retain key talent.
         o Establish an organizationwide knowledge and skills inventory to allow
           knowledge exchange among merging organizations.

    Dedicate an implementation team to manage the transformation  o  Establish
    networks to support the implementation team. process.  o  Select
    high-performing team members.

    Use the performance management system to define  o  Adopt leading
    practices to implement effective performance responsibility and ensure
    accountability for change. management systems with adequate safeguards.

    Establish a communication strategy to create shared expectations  o
    Communicate early and often to build trust. and report related progress.
    o  Ensure consistency of message.

         o Encourage two-way communication.
         o Provide information to meet specific needs of employees.

    Involve employees to obtain their ideas and gain ownership for  o  Use
    employee teams.

    the transformation.  o  Involve employees in planning and sharing
    performance information.

         o Incorporate employee feedback into new policies and procedures.
         o Delegate authority to appropriate organizational levels.

        Build a world-class organization.  o  Adopt leading practices to build a
                               world-class organization.

    Source: GAO, Results-Oriented Cultures: Implementation Steps to Assist
    Mergers and Organizational Transformations, GAO-03-669 (Washington, D.C.:
    July 2, 2003).

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