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
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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 [email protected]. 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.

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    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.

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    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
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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
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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
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     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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