Aviation Infrastructure: Feasibility of Using Alternate Means to Satisfy
Requirements of Alaska National Airspace System Interfacility
Communications System (ANICS) Phase II (Correspondence, 09/06/2000,
GAO/RCED-00-110R).

Pursuant to a congressional request, GAO reviewed the Federal Aviation
Administration's (FAA) report to Congress recommending that it award a
contract to an alternate contractor for the development of its Alaska
National Airspace System Interfacility Communications System, focusing
on whether the findings were properly supported. FAA's report compared
the alternate contractor's costs to the costs of two other commercial
telecommunications providers.

GAO noted that: (1) given FAA's assumptions and the circumstances of the
study, the agency's findings and conclusions were supported by the
information available; (2) FAA's analysis were consistently applied to
each of the alternatives and performed in accordance with standard
economic and engineering methods of calculation; and (3) however, the
findings and conclusion of its study could have been strengthened if FAA
had held more-in-depth discussions with AT&T and General Communication,
Inc., about the assumptions and the adjustments it made to the data the
vendors provided, since the results were influenced by these
assumptions.

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

 REPORTNUM:  RCED-00-110R
     TITLE:  Aviation Infrastructure: Feasibility of Using Alternate
	     Means to Satisfy Requirements of Alaska National
	     Airspace System Interfacility Communications System
	     (ANICS) Phase II
      DATE:  09/06/2000
   SUBJECT:  Communication satellites
	     Air traffic control systems
	     Contract costs
	     Computer services contracts
	     Comparative analysis
	     Cost control
IDENTIFIER:  FAA Alaska National Airspace System Interfacility
	     Communications System

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GAO/RCED-00-110R

Review of ANICS Phase II

B- 284396 September 6, 2000 The Honorable Richard C. Shelby Chairman,
Subcommittee on Transportation

and Related Agencies Committee on Appropriations United States Senate

Subject: Aviation Infrastructure: Feasibility of Using Alternate Means to
Satisfy Requirements of Alaska National Airspace System Interfacility
Communications System (ANICS) Phase II

Dear Mr. Chairman: In the early 1990s, the Congress authorized a satellite-
based communications network, now known as ANICS, to conduct voice and data
transmissions for the Federal Aviation Administration's (FAA) air traffic
control operations in Alaska. ANICS supports critical, essential, and
routine services, including terminal and en route air traffic control,
navigation, flight service, and weather operations. In July 1993, FAA
competitively awarded a $140 million contract to the Harris Corporation. The
ANICS contract was split into two distinct phases:

ï¿½ In Phase I, 52 dual satellite- earth stations (also referred to as sites)
were constructed throughout Alaska. These stations provide critical and
essential services with 99.99 percent availability- an equivalent downtime
of about 52 minutes per site per year.

ï¿½ Phase II is to build additional single satellite- earth stations. These
stations are designed to provide essential and routine services with 99.9
percent availability- an equivalent downtime of about 9 hours per site per
year.

The Conference Report on the Department of Transportation Appropriations Act
for Fiscal Year 1999 (H. Rpt. 105- 825) directed FAA to look at alternatives
to its current contract to satisfy the requirements of Phase II. No funding
would be made available until FAA had reported on alternatives to provide
these services. FAA compared the cost estimates and other information for
the needed services it received from AT& T Alascom (AT& T) and General
Communications, Inc. (GCI)- two commercial telecommunications service
providers- to the cost of ordering additional sites from the Harris
Corporation. In an April 1999 report to the Congress, FAA concluded that

Resources, Community, and Economic Development Division United States
General Accounting Office Washington, DC 20548

B- 284396 2 GAO/ RCED- 00- 110R Review of ANICS Phase II

the Harris Corporation could provide the needed telecommunications services
at less cost than obtaining the same services from AT& T or GCI and
recommended that the agency be authorized to order ANICS Phase II sites from
Harris. You expressed concern that FAA's report may contain numerous factual
errors and that it may lack supporting data or analyses. You therefore asked
that we examine the report to determine if FAA's findings were properly
supported.

Generally, our review indicated that, given FAA's assumptions and the
circumstances of the study, the agency's findings and conclusions were
supported by the information available. FAA's analyses were consistently
applied to each of the alternatives and performed in accordance with
standard economic and engineering methods of calculation. However, the
findings and conclusions of its study could have been strengthened if FAA
had held more in- depth discussions with AT& T and GCI about the assumptions
and the adjustments it made to the data the vendors provided, since the
results were influenced by these assumptions. We briefed your staff, and
this letter summarizes the information discussed with them. (See encl. I.)

---- In conducting our review, we discussed with and obtained information
from FAA officials in headquarters and the Alaska regional office; ANICS
contract administration officials of the Defense Information Technology
Contracting Organization, Alaska field office; AT& T local representatives;
and officials from GCI, the Harris Corporation, and New Horizons Telecom,
Inc. (another Harris Corporation subcontractor working on ANICS). FAA
identified AT& T and GCI as the only other commercial contractors in Alaska
potentially capable of fulfilling FAA's requirements for ANICS Phase II. In
addition, we requested that FAA perform additional economic analysis beyond
what it had initially done; this analysis came to conclusions similar to
those of FAA's initial analysis. We did not validate the pricing information
provided by AT& T and GCI or the resulting adjustments FAA made to this
information; however, we reviewed in detail FAA's analysis of this
information. We performed our work from November 1999 through August 2000 in
accordance with generally accepted government auditing standards.

We provided a draft of this report to the Department of Transportation, AT&
T, the Harris Corporation, and GCI. The Department of Transportation and AT&
T generally agreed with the facts presented and provided us with technical
and clarifying comments, which we included in the report as appropriate.
Harris Corporation did not provide comments.

GCI disagreed with our conclusion. We stand by our conclusion that, FAA's
evaluation, in general, was objective and reasonable for the cost and system
requirements of the ANICS Phase II alternatives. This conclusion is based on
our review of FAA's original economic analysis as well as additional
analysis that FAA conducted at our request. GCI also asserted that, during
the course of FAA's and our review, it was not provided with an opportunity
to validate or substantiate the information on the system's cost or
availability that it had provided to FAA. Our report notes that FAA did not
hold in- depth discussions with AT& T and GCI about

B- 284396 3 GAO/ RCED- 00- 110R Review of ANICS Phase II

the accuracy of the assumptions and the technical basis FAA had used to
adjust and interpret the information the vendors provided. As a result,
FAA's final evaluation did not benefit from the feedback, clarification, and
greater accuracy that could have been obtained from better communications.
However, during the course of our review, we held discussions with GCI
officials about the information that they provided to FAA and also provided
them with a statement of facts for review. GCI officials provided comments
on our statement of facts, which we incorporated into the draft as
appropriate.

We are sending copies of this letter to the Honorable Rodney Slater,
Secretary of Transportation, and the Honorable Jane F. Garvey,
Administrator, Federal Aviation Administration. We also will make copies
available to other interested parties upon request.

If you or your staff have questions about this report, please contact me at
(202) 512- 2834. Major contributors to this report were Charles Bausell,
Sandra Cantler, Sharon Dyer, David Hooper, Richard Hung, Ralph Lamoreaux,
and Belva Martin.

Sincerely yours, Gerald L. Dillingham, Ph. D. Associate Director,
Transportation Issues

Enclosure

Enclosure I 4 GAO/ RCED- 00- 110R Review of ANICS Phase II

Resources, Community, and Economic Development Division

Feasibility of Using Alternate Means to Satisfy Requirements of Alaska
National Airspace System

Interfacility Communications System (ANICS) Phase II

Enclosure I 5 GAO/ RCED- 00- 110R Review of ANICS Phase II

Background

ï¿½ In the early 1990s, the Congress authorized a satellite- based
communications network (ANICS) to conduct voice and data transmissions for
FAA's air traffic control operations in the Alaska region.

ï¿½ In July 1993, the $140 million ANICS contract was competitively awarded to
the Harris Corporation. The 5- year contract, plus five 1- year options, is
due to expire in 2003. A decision to proceed with the 8th year, or third 1-
year option, was made in May 2000.

Enclosure I 6 GAO/ RCED- 00- 110R Review of ANICS Phase II

Background

ï¿½ The ANICS contract involves two types of earth stations:

ï¿½ Phase I dual satellite- earth stations were established at 52 locations to
provide critical and essential services with 99. 99 percent availability--
an equivalent downtime of about 52 minutes per site per year.

ï¿½ Phase II single satellite- earth stations are to provide essential and
routine services with 99.9 percent availability-- an equivalent downtime of
about 9 hours per site per year.

ï¿½ The Conference Report on the Department of Transportation Appropriations
Act for Fiscal Year 1999 (H. Rpt. 105- 825) directed FAA to report by March
31, 1999, on alternatives to the current contract for meeting ANICS Phase II
requirements.

Enclosure I 7 GAO/ RCED- 00- 110R Review of ANICS Phase II

Background In April 1999, FAA reported to the Congress that neither AT& T

Alascom (AT& T) nor General Communications, Inc. (GCI)-- the commercial
telecommunications service providers in Alaska from which FAA had requested
information-- met the performance capabilities and availability level
required for ANICS Phase II.

FAA also reported that in order to obtain the required level of availability
from commercially leased telecommunications vendors (outside the framework
of the existing contract), it would have to invest considerable money to
upgrade AT& T's and GCI's equipment and sites.

FAA recommended that it be authorized to proceed with ANICS Phase II at 29
sites. According to FAA, this authorization would enable it to provide
significantly safer, more reliable telecommunications services at lower risk
than would be possible by leasing and upgrading services from commercial
vendors.

Enclosure I 8 GAO/ RCED- 00- 110R Review of ANICS Phase II

Research Questions What information did FAA provide to AT& T and GCI, and
was

that information sufficient to develop approaches for satisfying the
requirements?

What information did AT& T and GCI provide to FAA, and did FAA properly
compare this information?

How did FAA adjust AT& T's and GCI's proposed pricing, and were those
adjustments justified and reasonable?

To what extent was FAA's evaluation objective and reasonable with regard to
cost, requirements, and responsiveness?

Overall, to what extent was FAA's conclusion-- to continue its contract with
the Harris Corporation-- supported by the available information?

Enclosure I 9 GAO/ RCED- 00- 110R Review of ANICS Phase II

Methods Spoke with and obtained relevant documentation from officials

in FAA's headquarters and its Alaska field office, Defense Information
Technology Contracting Organization, AT& T, and GCI.

Examined FAA's decision- making process and its underlying analyses.

Requested and obtained additional economic analysis from FAA.

Did not validate FAA's cost data or the cost data provided to FAA by AT& T
and GCI.

Enclosure I 10 GAO/ RCED- 00- 110R Review of ANICS Phase II

Methods Interviewed officials of the Harris Corporation and New

Horizons (a Harris Corporation subcontractor); both companies are
responsible for constructing ANICS' earth stations.

Conducted our work from November 1999 through August 2000 in accordance with
generally accepted government auditing standards.

Enclosure I 11 GAO/ RCED- 00- 110R Review of ANICS Phase II

What information did FAA provide to AT& T and GCI, and was that information
sufficient to develop approaches for satisfying the requirements?

The lack of documentation and divergent recollections among the principals
precludes a definitive assessment of the sufficiency of the information
provided for developing approaches to satisfy the requirements. Therefore,
we had to rely on oral statements.

According to FAA, the information it provided included the following: a
statement that the agency was responding to a

congressional request for information about alternative means of providing
the Phase II capabilities of the ANICS program, 67 proposed ANICS Phase II
locations,* a stipulation that the availability level must be 99. 9 percent,

and a request that the vendor provide an estimate of “rough”
costs

incurred to meet the required 99.9 percent requirement.

* FAA's original analysis was based on 67 proposed sites. In subsequent
analysis, FAA reduced the number of sites to 60.

Enclosure I 12 GAO/ RCED- 00- 110R Review of ANICS Phase II

What information did FAA provide to AT& T and GCI, and was that information
sufficient to develop approaches for satisfying the requirements?( cont.)

According to AT& T, FAA requested an estimate of costs from AT& T but did
not give availability specifications or a complete site listing. FAA's
request was only for the cost between specific ANICS sites and not the costs
for tail circuits and other miscellaneous items.

GCI officials told us that they sought clarification from FAA on several
issues, including the availability specifications.

FAA officials told us that they did not hear of any concerns regarding the
sufficiency of the information they provided to either AT& T or GCI.

Enclosure I 13 GAO/ RCED- 00- 110R Review of ANICS Phase II

What information did AT& T and GCI provide to FAA, and did FAA properly
compare this information?

AT& T did not prepare a formal written response to FAA's inquiry. Instead,
AT& T's local representatives gave information to FAA and referred FAA to
the company's public list of charges, known as its tariff, for satellite
communications services.

GCI's written response included cost estimates for

ï¿½ 27 sites where it would use existing earth stations in its network,

ï¿½ 36 sites where it would construct earth stations, and

ï¿½ 4 sites where it would use earth stations to interface with satellites to
send date to remote areas.

GCI assured FAA that its design would meet the 99. 9 percent availability
requirement.

Enclosure I 14 GAO/ RCED- 00- 110R Review of ANICS Phase II

What information did AT& T and GCI provide to FAA, and did FAA properly
compare this information?( cont.)

AT& T's local representatives said that they were not familiar with the
assumptions FAA had used and therefore could not judge the reasonableness of
FAA's adjustments to the information provided by its tariff.

GCI officials told us that FAA improperly interpreted the information they
had provided. They claim that FAA evaluated GCI's submission and
capabilities as they currently existed rather than looking at GCI's future
ability to meet the needed system's requirements.

Enclosure I 15 GAO/ RCED- 00- 110R Review of ANICS Phase II

What information did AT& T and GCI provide to FAA and did FAA properly
compare this information?( cont.)

ï¿½ On the basis of our evaluation, we believe that FAA made the appropriate
comparisons.

FAA's comparative analysis included

ï¿½ the cost estimates and other information received from AT& T and GCI,

ï¿½ the existing costs of leasing commercial communications services at the
proposed ANICS Phase II sites, and

ï¿½ the costs of constructing ANICS Phase II earth stations under the current
ANICS contract.

FAA said that the submission and information it received were evaluated at
face value. AT& T, in essence, proposed “current” capabilities.
GCI's response demonstrated the “feasibility of providing an industry
solution.”

Enclosure I 16 GAO/ RCED- 00- 110R Review of ANICS Phase II

How did FAA adjust AT& T's and GCI's proposed pricing, and were those
adjustments justified and reasonable? FAA adjusted AT& T's costs-- on the
basis of historical costs

incurred with the ANICS Phase I contract and other cost data-- by $200,000
per site. This is the amount FAA expected to incur to upgrade existing
equipment or add redundant equipment at AT& T earth stations in order to
meet the 99.9 percent availability requirement.

At GAO's request, AT& T provided a budgetary cost estimate to provide 99. 9
percent availability, which was based on a survey of 23 ANICS sites, 2 of
which did not require any additional equipment. AT& T's cost estimates were
$64,000 less per station than FAA had estimated.

According to FAA, the adjustment of $200, 000 per site is an estimate and is
not based on detailed costs for specific equipment at each of the vendors'
sites.

Enclosure I 17 GAO/ RCED- 00- 110R Review of ANICS Phase II

How did FAA adjust AT& T's and GCI's proposed pricing, and were those
adjustments justified and reasonable?( cont.)

AT& T's local representatives said that they were not familiar with the
assumptions FAA had used and therefore could not judge the reasonableness of
FAA's adjustments to the information provided by AT& T's tariff. However,
they believed that there might have been internal FAA costs and other costs
that were added by FAA to AT& T's tariff information that they were not
familiar with.

For GCI's proposed pricing, FAA added $200, 000 per site to GCI's cost
estimate to upgrade each AT& T earth station. It took this action because it
determined that GCI relied on AT& T earth stations at 20 proposed ANICS
Phase II locations that did not meet the 99. 9 percent requirement.

Enclosure I 18 GAO/ RCED- 00- 110R Review of ANICS Phase II

How did FAA adjust AT& T's and GCI's proposed pricing, and were those
adjustments justified and reasonable?( cont.)

According to GCI officials, the cost adjustments FAA made were unjustified
because FAA discounted GCI's submission that the upgraded facilities would
meet availability requirements and adjusted the pricing upward to compensate
for an unsubstantiated deficiency.

According to FAA officials, neither AT& T nor GCI was informed of the amount
of the adjustments for upgrading sites to meet the 99.9 percent requirement.

Enclosure I 19 GAO/ RCED- 00- 110R Review of ANICS Phase II

How did FAA adjust AT& T's and GCI's proposed pricing, and were those
adjustments justified and reasonable?( cont.)

Our review of FAA's economic analysis, which included the present value of
cost, indicated that, given the values that FAA expected for major cost
parameters, ANICS Phase II (as now under contract with the Harris
Corporation) was the least costly option among the following four options
that were considered: leasing communications services as was currently being
done; Phase II, as it was to be constructed under the ANICS contract; AT& T;
and GCI.

FAA appeared to have a reasonable basis for its adjustments to the pricing
information and the values applied to the various options. The adjustments
appeared to us to have been made fairly and consistently.

Enclosure I 20 GAO/ RCED- 00- 110R Review of ANICS Phase II

To what extent was FAA's evaluation objective and reasonable with regard to
cost, requirements, and responsiveness?

ï¿½ Generally, FAA's evaluation was objective and reasonable for the cost and
the requirements of the ANICS Phase II alternatives. FAA did not request,
nor did AT& T and GCI provide, information on responsiveness (i. e.,
restoration of services).

ï¿½ FAA-- through its own research-- determined that neither company could
meet the 99.9 percent availability requirement. FAA made certain adjustments
to the costs submitted by both AT& T and GCI for the facilities, equipment,
and other upgrades that it thought would be necessary to ensure that the
99.9 percent requirement was met during ANICS Phase II.

Enclosure I 21 GAO/ RCED- 00- 110R Review of ANICS Phase II

To what extent was FAA's evaluation objective and reasonable with regard to
cost, requirements, and responsiveness?( cont.)

However, FAA did not discuss with AT& T or GCI how it determined that
neither company met the 99. 9 percent availability requirement; nor did it
discuss the way it adjusted the cost to meet the availability requirements
in its comparative or net present value analyses.

Consequently, FAA's final evaluation did not benefit from the feedback,
clarification, and greater accuracy that could have been obtained from
better communication with AT& T and GCI.

Enclosure I 22 GAO/ RCED- 00- 110R Review of ANICS Phase II

(348200)

Overall, to what extent was FAA's conclusion-- to continue its contract with
the Harris Corporation supported by available information? Given FAA's set
of assumptions and the circumstances of its study,

FAA's conclusions were supported by the available information. It
consistently applied its analytical framework to each of the alternatives
and conducted its analyses in accordance with standard economic and
engineering methods of calculation.

However, FAA's findings and conclusions could have been strengthened with
more in- depth discussions with vendors. Because the results of FAA's
analyses depend heavily on assumed values for key cost parameters, FAA could
have benefited from discussions with AT& T and GCI about the accuracy of key
assumptions and the technical basis it used to adjust and interpret the
information the vendors provided.
*** End of document ***