National Transportation Safety Board: Observations on the Draft  
Business Plan for NTSB's Training Center (14-JUN-07,		 
GAO-07-886R).							 
                                                                 
The National Transportation Safety Board (NTSB) opened a training
center in 2003 to train its investigators and others from the	 
transportation community on accident investigation techniques. As
GAO reported last year, NTSB's training center is not		 
cost-effective, as its revenues, when combined with the external 
training costs NTSB staff avoid by using the center, do not cover
its costs. In fact, in fiscal year 2006, costs exceeded revenues 
by $2.7 million. We concluded that potential strategies to	 
increase revenues or decrease costs could increase the		 
cost-effectiveness of the training center; however, vacating the 
space may be the strategy that reduces costs the most. On	 
December 21, 2006, Congress passed Public Law 109-443, requiring 
NTSB to prepare a utilization plan for the training center that  
would, among other things, consider other revenue-generating	 
measures, such as subleasing the training center to another	 
entity; include a detailed financial statement covering current  
training center expenses and revenues and an analysis of the	 
projected expenses and revenues; and submit the plan to us for	 
review and comment within 90 days of passage of the act. NTSB	 
prepared a draft business plan for the training center and	 
provided the draft to us on March 28, 2007. We are mandated to	 
review and comment on the draft plan so that NTSB can submit a	 
final plan to Congress within 180 days of the enactment of Public
Law 109-443. In reviewing and commenting on the draft business	 
plan, we are addressing the following questions: (1) To what	 
extent are relevant marketing and financial data and assumptions 
included in the plan? (2) Based on the available information, is 
the plan likely to achieve its objective of self-sufficient	 
operation of the training center by the end of fiscal year 2010? 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-886R					        
    ACCNO:   A70767						        
  TITLE:     National Transportation Safety Board: Observations on the
Draft Business Plan for NTSB's Training Center			 
     DATE:   06/14/2007 
  SUBJECT:   Cost analysis					 
	     Education or training costs			 
	     Employee training					 
	     Procurement planning				 
	     Strategic planning 				 
	     Training utilization				 
	     Schedule slippages 				 
	     Financial analysis 				 
	     Business planning					 

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GAO-07-886R

June 14, 2007

The Honorable Daniel K. Inouye
Chairman
The Honorable Ted Stevens
Vice Chairman
Committee on Commerce, Science, and Transportation
United States Senate

The Honorable James L. Oberstar
Chairman
The Honorable John L. Mica
Ranking Republican Member
Committee on Transportation and Infrastructure
House of Representatives

Subject: National Transportation Safety Board: Observations on the Draft
Business Plan for NTSB's Training Center

The National Transportation Safety Board (NTSB) opened a training center
in 2003 to train its investigators and others from the transportation
community on accident investigation techniques. As we reported last year,1
NTSB's training center is not cost-effective, as its revenues, when
combined with the external training costs NTSB staff avoid by using the
center, do not cover its costs. In fact, in fiscal year 2006, costs
exceeded revenues by $2.7 million. We concluded that potential strategies
to increase revenues or decrease costs could increase the
cost-effectiveness of the training center; however, vacating the space may
be the strategy that reduces costs the most. As a result, we recommended
that NTSB (1) develop a business plan to increase the utilization of its
training center or vacate it and (2) submit the plan to Congress. On
December 21, 2006, Congress passed Public Law 109-443, requiring NTSB to
prepare a utilization plan for the training center that would, among other
things, consider other revenue-generating measures, such as subleasing the
training center to another entity; include a detailed financial statement
covering current training center expenses and revenues and an analysis of
the projected expenses and revenues; and submit the plan to us for review
and comment within 90 days of passage of the act.

1GAO, National Transportation Safety Board: Progress Made, Yet Management
Practices, Investigation Priorities, and Training Center Use Should Be
Improved, GAO-07-118 (Washington, D.C.: Nov. 22, 2006).

NTSB prepared a draft business plan for the training center and provided
the draft to us on March 28, 2007. We are mandated to review and comment
on the draft plan so that NTSB can submit a final plan to Congress within
180 days of the enactment of Public Law 109-443. The draft plan provides
an overall strategy to outsource to a vendor (1) the management and
operations of the training center and (2) development of new courses. The
vendor would be responsible for managing the facility and courses, and
renting out unused space under a revenue-sharing arrangement with NTSB.2
The plan projects yearly increases in the percentage of operating expenses
(excluding rental costs) covered by revenue, with 100 percent coverage by
the end of fiscal year 2010. The plan relies on marketing and financial
data and assumptions to realize this objective. To fulfill this plan, NTSB
solicited vendors through a request for proposal issued on April 18, 2007.
NTSB expects to award the contract in August 2007 and the vendor to be
operating at the training center within 30 days of the award of the
contract.

In reviewing and commenting on the draft business plan, we are addressing
the following questions: (1) To what extent are relevant marketing and
financial data and assumptions included in the plan? (2) Based on the
available information, is the plan likely to achieve its objective of
self-sufficient operation of the training center by the end of fiscal year
2010? In addition, we assessed how the business plan could be improved and
provide a list of suggested improvements in appendix II of enclosure I. To
address these questions, we assessed NTSB's draft business plan and
request for proposal using the opinions of internal GAO experts on
financial management, contracting, training, and legal issues and two
external experts on business plans and marketing. We also identified GAO
reports and other literature for leading practices relevant to business
plans and interviewed NTSB officials for further clarification and
documentation of information contained in the plan and request for
proposal. (See app. I of enclosure I for additional information on our
methods.) We conducted our work from April 2007 through June 2007 in
accordance with generally accepted government auditing standards.

On June 5, 2007, we provided information to NTSB on the results of this
work. This report summarizes the information provided and officially
transmits the slides used to provide the information to NTSB.

Summary

The business plan provides little rationale for its relevant marketing and
financial data and assumptions. For example, the business plan includes
certain marketing information but expects the market analysis and data to
be provided by the vendor. In addition, the business plan presents some
historical and projected financial data and calls for a revenue-sharing
strategy with a vendor for the length of the contract but lacks
explanations of important assumptions, such as a 10 percent growth in
revenues. The plan also does not provide significant information about
historical or
projected revenues and expenses of the training center, such as whether
(1) expenses are presented as full cost, (2) salaries and benefits of NTSB
staff used for teaching or developing courses are included in expenses,
and (3) revenue includes an amount representing fees that NTSB staff
attending the training center would pay if they were charged.

2The vendor would be paid for course development under a fee-for-services
arrangement.

The business plan lacks sufficient data or analysis to determine whether
it is likely to achieve its goal of recovering 100 percent of the training
center's operating expenses by the end of fiscal year 2010. In addition,
the time frame for receiving proposals from interested vendors has already
been extended once, indicating that the ambitious time frames contained in
the plan are questionable. Furthermore, even if the business plan achieves
its goal of self-sufficient operations by the end of fiscal year 2010,
substantial expenses, amounting to over $2 million each year, will have to
be covered by annual appropriations because the plan's definition of
self-sufficiency excludes lease payments from expenses.

We conclude that the overall strategy presented in the business plan--to
hire a vendor to operate the training center--is reasonable. However, the
plan provided too little rationale for its marketing and financial
assumptions for us to assess the viability of this strategy. Since the
success of the plan relies on marketing and financial analyses that will
be developed by the potential vendor, it will be important for NTSB to
have staff in-house who are capable of assessing the reasonableness of
that information or to hire outside expertise to do so.

Agency Comments

We provided copies of a draft of this report to NTSB for their review and
comment. The agency provided written comments (see enclosure II). NTSB
agreed with our suggestions for improving the plan. In addition, the
agency provided technical clarifications, which we incorporated into the
report as appropriate.

                    ________________________________________

We are sending copies of this report to the Chairman of the National
Transportation Safety Board and other interested parties. In addition, the
report will be available at no charge on the GAO Web site at
http://www.gao.gov.

If you or your staffs have any questions about this report, please contact
me at

(202) 512-2834 or [1][email protected] . Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. Major contributors to this report were Teresa Spisak,
Maren McAvoy, Sharon Dyer, David Hooper, and John Warner.

Gerald L. Dillingham, Ph.D.
Director, Physical Infrastructure Issues

Enclosures

                    Enclosure I: Information Provided to the
                      National Transportation Safety Board

      Enclosure II: Comments from the National Transportation Safety Board

(540152)

References

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