Air Traffic Control: Status of FAA's Plans to Close and Contract Out
Low-Activity Towers (Letter Report, 09/12/94, GAO/RCED-94-265).

From fiscal year 1994 through fiscal year 1997, the Federal Aviation
Administration (FAA) plans to close low-activity air traffic control
towers that do not meet its benefit-cost criteria, contract out the
operations of all remaining towers, and relocate controllers from towers
that are closed or contracted out to other FAA facilities. FAA does not
believe that safety will be jeopardized by closing or contracting out
low-activity towers. FAA's benefit-cost criteria include an assessment
of safety and FAA has not experienced safety problems with towers that
are already run by contractors. This report (1) determines the
reasonableness of FAA's plans to close low-activity towers and contract
out the operations of others, (2) assesses the reasonableness of the
potential savings generated by such actions, (3) identifies factors that
could impede FAA's plans to close and contract out towers, and (4)
identifies steps that FAA can take to enhance its strategy for
reassigning controllers from closed-out and contracted-out towers.

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

 REPORTNUM:  RCED-94-265
     TITLE:  Air Traffic Control: Status of FAA's Plans to Close and 
             Contract Out Low-Activity Towers
      DATE:  09/12/94
   SUBJECT:  Air transportation operations
             Cost effectiveness analysis
             Air traffic controllers
             Federal agency reorganization
             Personnel management
             Labor unions
             Employee transfers
             Air traffic control systems
             Traffic regulation
             Contract administration
IDENTIFIER:  National Performance Review
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Transportation and Related
Agencies, Committee on Appropriations, House of Representatives

September 1994

AIR TRAFFIC CONTROL - STATUS OF
FAA'S PLANS TO CLOSE AND CONTRACT
OUT LOW-ACTIVITY TOWERS

GAO/RCED-94-265

Low-Activity Tower Program


Abbreviations
=============================================================== ABBREV

  FAA - Federal Aviation Administration
  GAO - General Accounting Office

Letter
=============================================================== LETTER


B-257854

September 12, 1994

The Honorable Bob Carr
Chairman, Subcommittee on
 Transportation and Related
 Agencies
Committee on Appropriations
House of Representatives

Dear Mr.  Chairman: 

The House and Senate Appropriations Committees' reports for the
Department of Transportation and Related Agencies Appropriations Act
for 1994 (P.L.  103-122) specify funding for the Federal Aviation
Administration (FAA) to (1) close level 1 (low-activity) air traffic
control towers that do not meet FAA's benefit-cost criteria and (2)
contract out for the operations of level 1 towers.\1 The reports also
specified funding to relocate, to other facilities, controllers
affected by the contracting out and closures. 

From fiscal year 1994 through fiscal year 1997, FAA plans to close
low-activity towers that do not meet its benefit-cost criteria,
contract out the operations of all remaining towers, and relocate
controllers from towers that are closed or contracted out to other
FAA facilities.\2 FAA does not believe that safety will be
jeopardized by closing or contracting out level 1 towers.  FAA's
benefit-cost criteria include an assessment of safety, and FAA has
not experienced safety problems with towers that are already operated
by contractors.  According to the Aircraft Owners and Pilots
Association, which represents the major users of airports with level
1 towers, its members have not experienced safety problems with
contracted out towers. 

Because of congressional interest in ensuring aviation safety in a
cost-effective manner, you asked us to (1) determine the
reasonableness of FAA's plans to close level 1 towers\3 and contract
out the operations of others, (2) assess the reasonableness of the
potential savings that could result from such actions, (3) identify
the factors that could impede FAA's plans to close and contract out
towers, and (4) identify steps that FAA can take to enhance its
strategy for reassigning controllers from closed or contracted out
level 1 towers. 


--------------------
\1 FAA delineates air traffic control towers into five levels
depending on the traffic's density and the complexity of
responsibilities.  Level 1 towers are those with the lowest activity
and are generally located in smaller cities that are served by
commuter airlines rather than major carriers. 

\2 FAA refers to low-activity towers that it operates as level 1
towers and those operated by a contractor as contract towers.  For
consistency, we refer to both FAA- and contractor-operated towers as
level 1 towers in this report. 

\3 If FAA closed a tower, federal funding would cease.  A tower could
remain open if a local airport authority or other entity funded the
operation, as is the case with about 40 towers in the United States. 
Since FAA does not fund their operations, we did not consider these
towers. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

FAA's plans to close or contract out all of its level 1 towers appear
reasonable.  Of the 151 level 1 towers, 36 do not meet FAA's
benefit-cost criteria for continued operations.  FAA is planning to
permanently close 23 of these towers within the next 3 years--11 that
have been temporarily closed since the air traffic controllers'
strike in 1981 and 12 that are operated by FAA.  FAA does not plan to
close one temporarily closed tower because the agency estimates that
the tower will soon meet the benefit-cost criteria.  FAA estimates
that it can save as much as $5 million annually by closing the 23
towers.  FAA plans to close the remaining 12 towers in the future,
thereby realizing additional savings of $3 million annually. 

Of the remaining 127 towers, 32 are currently contracted out.  FAA
estimates that it could save as much as $120 million (in constant
1994 dollars) if it contracts out the operation of the remaining
level 1 towers by fiscal year 1997.\4 FAA will not realize immediate
savings primarily because of the short-term costs to relocate
controllers to other facilities. 

Several factors may affect FAA's efforts to close or contract out
level 1 towers quickly.  First, according to FAA program management
officials, the agency is receiving mixed signals from the Congress
regarding level 1 towers.  On the one hand, various congressional
committees have directed FAA to use benefit-cost criteria to
establish and discontinue tower operations.  On the other hand, FAA
program management officials told us that individual Members of
Congress have asked FAA to continue operating some towers that, in
FAA's determination, do not meet the agency's benefit-cost criteria. 
Second, FAA cannot contract out towers until the Department of Labor
completes its wage determinations for each tower location.\5 FAA
needs the wage determinations so that contractors can provide
accurate bid estimates. 

Currently, 142 air traffic control facilities other than level 1
towers are overstaffed, and 171 are understaffed.  For the 25 towers
to be contracted out in fiscal year 1994, FAA's agreement with the
controllers union allows for the reassignment of controllers to
overstaffed facilities.  However, FAA does not have a strategy for
reassigning controllers from towers to be closed or contracted out to
higher-level facilities after fiscal year 1994.  Also, a number of
controllers at level 1 towers could not, in the past, perform
required duties at other facilities.  Therefore, FAA could incur
significant costs in relocating controllers a second time if they do
not succeed at higher-level facilities. 


--------------------
\4 Savings represent the present discounted value in 1994 dollars. 
FAA discounts costs over a 15-year period at the Office of Management
and Budget's specified rate of 7 percent.  FAA based its February
1994 estimate on contracting out 95 towers. 

\5 The Service Contract Act of 1965 requires the Department of Labor
to perform wage determinations for service contracts to ensure that
contractors' employees receive the prevailing wage for similar types
of employees in the area, in this case, FAA controllers. 


   BACKGROUND
------------------------------------------------------------ Letter :2

FAA provides air traffic control services to the nation through a
system of about 460 towers categorized at levels 1 through 5.  Level
1 towers have the lowest activity and are the least complex.  For
example, the Charlottesville, Virginia, airport has a level 1 tower
that controls about 63,000 operations a year.  On the other hand,
Chicago O'Hare International Airport has a level 5 tower that
controls about 840,000 operations a year.  As of June 1994, FAA had
responsibility for 151 level 1 towers.  Figure 1 shows the
operational status of these towers. 

   Figure 1:  Operational Status
   of Level 1 Towers

   (See figure in printed
   edition.)

Note:  Includes one temporarily closed tower that FAA does not plan
to permanently close. 

Source:  FAA. 

The House and Senate Appropriations Committees directed that FAA use
$15.8 million to (1) close towers that do not meet its benefit-cost
criteria and contract out the operations of 25 level 1 towers by the
end of fiscal year 1994 ($7.3 million) and (2) relocate controllers
to other facilities ($8.5 million).  The Vice President's National
Performance Review also recommended that FAA contract out level 1
tower operations because the Review believed that contractors can
provide the same level of service at less cost to the government.  If
funding is available, FAA plans to contract out the operations of all
level 1 towers at a rate of about 25 per year for fiscal years 1994
through 1997.  FAA estimates that this could save about $120 million
(in constant 1994 dollars) during fiscal years 1994-97.  Figure 2
shows FAA's plans to contract out all level 1 towers through fiscal
year 1997, including 32 that are now operated by contractors. 

   Figure 2:  Planned Distribution
   of FAA-Operated and
   Contracted-out Level 1 Towers,
   Fiscal Years 1993-97

   (See figure in printed
   edition.)

Source:  FAA. 


   FAA'S PLANS FOR CLOSING AND
   CONTRACTING OUT
   LEVEL 1 TOWERS
------------------------------------------------------------ Letter :3

FAA's regulations establish benefit-cost criteria to determine when
towers should be established or closed.  To be established or to
continue in operation as an FAA- or contractor-operated tower, the
tower must have a benefit-cost ratio greater than 1--the point at
which benefits equal costs.  According to FAA's criteria, towers with
a benefit-cost ratio below 1 should be closed.  However, FAA's
guidance allows for keeping towers open if unique requirements exist. 
Such factors include unique weather, topography, and operational
conditions; potential use of the site to relieve capacity from and
help in the training for a hub airport; potential significant changes
in traffic activity; positive economic impacts for local commerce;
and national security.  FAA has determined that these impacts are
subjective, controversial, not easily quantifiable, and negligible in
comparison to safety and efficiency benefits and excludes them from
its benefit-cost criteria.  (App.  I summarizes the criteria.)

FAA has determined that 36 level 1 towers do not meet its
benefit-cost criteria and cannot be justified on the basis of other
unique requirements.  In a June 1993 study provided to the
Subcommittee on Transportation and Related Agencies, House Committee
on Appropriations, FAA recommended closing 23 of the 36 towers--11
that have been temporarily closed since the air traffic controllers'
strike in 1981 and 12 that are operated by FAA.  As noted earlier,
FAA expects one temporarily closed tower to soon meet the
benefit-cost criteria.  FAA estimates that it can save as much as $5
million annually by closing the 23 towers.  FAA expects to dismantle
(decommission) the 11 temporarily closed towers by September 30,
1994.  According to FAA program management officials, the 12
FAA-operated towers have never met FAA's benefit-cost criteria and
are planned to be closed.  (App.  II lists the level 1 towers that do
not meet FAA's criteria.)

In addition to the 23 level 1 towers that FAA recommended closing, 12
other towers do not meet FAA's benefit-cost criteria and could be
closed.  According to FAA officials, the agency plans to close these
towers in the future, but because of the lack of funding and because
of congressional interest in their continued operations, FAA did not
recommend closing them immediately.  FAA's closing of the 12 towers
would save an additional $3 million annually. 

FAA implemented a policy on July 18, 1994, that would allow towers
that do not meet the benefit-cost criteria to operate for 2 full
fiscal years with the expectation that if a tower again did not meet
the criteria, FAA's funding would cease.  According to FAA officials,
the agency has not sent letters to airport officials informing them
of its new policy but plans to do so in the near future. 


      FAA HAS NOT ENTERED INTO NEW
      CONTRACTS
---------------------------------------------------------- Letter :3.1

FAA has yet to enter into contracts for the 25 level 1 towers that
were directed by the House and Senate Appropriations Committees to be
contracted out by the end of fiscal year 1994.  However, FAA expects
to award these contracts by the end of the fiscal year.  (App.  III
lists the 25 towers selected.)\6 As a result, FAA will use only $2.1
million of the $7.3 million appropriated for contract start-up costs
in fiscal year 1994.  According to FAA officials, the agency has
reprogrammed the balance ($5.2 million) for such other purposes as
locality pay. 

FAA announced its contract plans on March 8, 1994.  In accordance
with federal procurement requirements, FAA had to allow 30 days for
interested parties to respond to the announcement.  According to FAA
officials, about 90 companies or individuals expressed an interest in
FAA's plans to contract out level 1 towers.  FAA provided them with
its "request for technical proposal" on April 12, 1994.  FAA formed a
committee to review the responses and select those that will be given
an invitation to bid on the contracts.  FAA expects to award the
contracts by September 1994. 


--------------------
\6 On the basis of a survey sent to all level 1 tower employees, FAA,
in cooperation with the National Air Traffic Controllers Association
(an employee union), selected the first 25 towers to be contracted
out. 


   FAA WILL NOT REALIZE IMMEDIATE
   SAVINGS FROM CHANGING TOWER
   OPERATIONS
------------------------------------------------------------ Letter :4

FAA estimates that it could save as much as $120 million in operating
efficiencies (in constant 1994 dollars) without affecting safety if
it contracts out the operation of all level 1 towers by fiscal year
1997.  Greater savings could occur if additional towers were closed
rather than contracted out.  But FAA will not realize immediate
savings because it has to pay the costs of relocating controllers to
other FAA facilities. 

FAA stated that the average annual operating cost for a
contractor-operated level 1 tower is about $250,000, while the
operating cost for an FAA-operated tower is $450,000.  The
differences in operating costs occur because contractors are not
bound by Civil Service requirements and FAA and union work rules that
result in higher staffing levels at FAA-operated towers.  Savings
result from the following: 

  Contractors can perform level 1 tower functions with fewer staff
     than FAA.  For example, the contractor for the level 1 tower in
     Bellingham, Washington, uses seven controllers and a manager,
     who typically controls traffic.  If operated by FAA, the tower
     would be staffed by 13 controllers and 1 manager, who would not
     normally control traffic.  (App.  IV shows the staffing at
     contractor-operated level 1 towers compared with FAA's estimated
     staffing, which is based on FAA's standards.)

  Contractors have more flexibility:  They can use split shifts and
     part-time and seasonal staffing, thereby reducing the number of
     staff needed. 

According to an FAA official, Civil Service requirements and various
agreements with the National Air Traffic Controllers Association
prohibit FAA from requiring employees to work split shifts, although
employees could volunteer for such a work assignment.  In addition,
in determining its staffing standards, FAA must consider annual and
sick leave and have sufficient staff to cover such contingencies. 
Contractors, however, usually do not offer benefits that are
comparable to those provided to federal employees.  Furthermore,
contractors realize further savings because they generally hire
experienced controllers and do not incur initial training or
permanent change-of-station costs.\7

However, FAA will not realize any savings from contracting out towers
for 2 to 3 years primarily because the agency will incur costs to
relocate level 1 controllers to other facilities.  For example, FAA
will incur about $8.5 million in the first year to move about 250
controllers, an average cost of about $34,000 per employee.  Over the
4-year period that FAA plans to contract out level 1 towers, FAA
estimates that the cost to relocate about 1,000 level 1 controllers
will be about $34 million.  After that, FAA will not have to relocate
as many employees and will not have to hire and train controllers to
replace the approximately 250 attrited controllers each year. 


--------------------
\7 According to FAA officials, experienced controllers that
contractors employ include former military and retired FAA
controllers.  In addition, contractors can employ controllers that
were fired as a result of the 1981 strike, about 4,800 of which are
interested in performing air traffic control duties again. 


   FAA FACES CHALLENGES IN
   CHANGING TOWER OPERATIONS
------------------------------------------------------------ Letter :5

Several factors may affect FAA's efforts to close or contract out
level 1 towers.  First, according to FAA program officials, the
agency is receiving mixed signals from the Congress.  On the one
hand, various congressional committees have directed FAA to use
benefit-cost criteria to establish and discontinue tower operations. 
On the other hand, individual Members of Congress have asked FAA to
establish or continue operating towers that do not meet the criteria
for continued operations.  To be effective, FAA will have to follow
through with its policy to discontinue funding towers that do not
meet its criteria at the end of the 2-year grace period. 

Second, FAA cannot award contracts for the operation of level 1
towers until the Department of Labor completes its wage
determinations for each potential contractor-operated tower location. 
In March 1994, FAA requested that the Department of Labor provide
wage determinations for all level 1 tower locations.  On July 29,
1994, the Department provided wage determinations for the first 25
towers to be contracted out. 


   FAA COULD IMPROVE ITS LEVEL 1
   TOWER PROGRAM
------------------------------------------------------------ Letter :6

FAA and the National Air Traffic Controllers Association entered into
an agreement on how to assign controllers from the 25 towers to be
contracted out in fiscal year 1994.  However, this agreement does not
provide a strategy for reassigning controllers from towers to be
closed or contracted out after fiscal year 1994.  Without such a
strategy, overstaffing at some facilities could be exacerbated
without resolving understaffing at others.  Also, since a number of
controllers at level 1 towers have not been able to perform required
duties at other facilities, FAA could incur significant
costs--averaging $34,000 for each employee--to relocate controllers a
second time if they do not succeed at higher-level facilities. 


      FAA'S AND LABOR UNION'S
      AGREEMENT PROVIDES ONLY
      LIMITED GUIDANCE FOR
      RELOCATING LEVEL 1
      CONTROLLERS
---------------------------------------------------------- Letter :6.1

As of May 1994, the workforce of about 17,590 controllers was over
the level prescribed by FAA's staffing standards by about 250
staff.\8 According to FAA's staffing standards, 142 facilities (above
level 1) were overstaffed by about 1,295 controllers, and 171
facilities (above level 1) were understaffed by about 810
controllers.\9

According to the agreement between FAA and the labor union for the 25
towers to be contracted out in fiscal year 1994, if a facility is
fully staffed or overstaffed, FAA will allow controllers to transfer
there as long as they receive meaningful work and training
opportunities.  The agreement also states that if a facility cannot
accept all applicants, FAA will give first priority to those with
hardships.  The agreement also states that consideration will be
given to controllers whose move will result in no cost to the
government.  However, the agreement does not specify how much
overstaffing will be allowed. 

FAA's initial decision on relocating staff at level 1 towers was
based on an employee placement application sent in May 1994 to about
170 controllers at the 25 towers selected to be contracted out in
1994.  The application asked controllers to select four facilities,
at least one of which must be within the region where they are
assigned.  According to FAA officials, the agency and union made
reassignment decisions on the basis of the employees' responses.  FAA
expects to relocate the 170 controllers to about 95 higher-level
facilities. 

According to our analysis of the employees' application results, FAA
will need to establish more definitive criteria to deal with existing
and potential overstaffing at certain facilities.  Of the 95
facilities where FAA plans to relocate controllers, 63 are
overstaffed or will be overstaffed when the controllers report there. 
For example, the level 3 tower in Sarasota, Florida, has one
controller more than the number suggested by FAA's staffing standard. 
Since FAA assigned three controllers to the Sarasota tower, that
tower will have four controllers more than the number suggested by
FAA's staffing standard.  Furthermore, a survey sent by FAA in
November 1993 to all level 1 controllers showed that an additional
seven controllers from the remaining towers to be contracted out also
selected Sarasota as their first choice for relocation.  If FAA also
allows these controllers to transfer to Sarasota, the tower would be
seriously overstaffed, and such action would not help to resolve
understaffing at other facilities. 

To ensure that relocated controllers are most effectively utilized,
the House Committee on Appropriations recommended, for fiscal year
1995, that FAA transfer level 1 controllers only to facilities that
are understaffed.\10 FAA's doing so, however, will depend on the
reliability of its staffing standards.  Although FAA officials
believe that the standards accurately reflect current needs, the
agency is reevaluating the assumptions and methodologies used to
develop the standards.  Also, according to FAA program management
officials, the agency will be negotiating new agreements with the
union for the towers to be contracted out after fiscal year 1994. 


--------------------
\8 We previously testified that FAA had identified some problems with
its staffing standards.  (FAA Work Forces:  Important Decisions
Affecting Staff Use and Management, GAO/T-RCED-93-59, June 30, 1993). 

\9 FAA develops staffing standards for trainees in the aggregate
rather than by facility.  As a result, these numbers do not include
trainees. 

\10 H.  Rep.  No.  103-543, p.  45. 


      FAA HAS SEVERAL OPTIONS FOR
      "TRAINING FAILURES"
---------------------------------------------------------- Letter :6.2

Another factor that FAA needs to consider is that many level 1
controllers have previously worked at higher-level facilities but
were unable to perform the requisite duties.  Although FAA could not
provide us with data showing the number of level 1 controllers that
fall into this category, union officials estimated that about 60
percent of the almost 1,000 level 1 controllers did not effectively
perform at higher-level facilities and are considered by FAA to be
"training failures." Labor union officials are concerned that
reassigned controllers will not be able to perform the duties
required at the new facilities.  FAA officials said that they, in
agreement with the union, plan to allow controllers a chance to
perform at higher-level facilities.  If they cannot, FAA, in
accordance with its agreement with the union, will relocate them
again if funding is available or allow them to relocate at their own
expense. 

FAA officials maintain that the training failure issue is mitigated
because FAA's approach to training is much different than it was a
few years ago and that the new "train to succeed" philosophy will
enhance controllers' ability to perform at higher-level facilities. 
Under this philosophy, FAA focuses on identifying and developing
specific skills that need to be enhanced.  If the efforts to enhance
specific skills do not succeed, FAA will determine if further
training is needed or whether the employee should be assigned to some
other job function that does not involve separating aircraft. 

Of the 13 controllers at two level 1 towers that we visited, 10 had
transferred there because they could not perform the required duties
at higher-level towers.  The controllers expressed mixed views about
relocating.  Some feared failing again; others viewed this as an
opportunity for advancement.  Union officials were concerned that FAA
will not have funds to relocate controllers a second time, which will
cause the controllers to pay for their own moves. 


   CONCLUSIONS
------------------------------------------------------------ Letter :7

We recognize that safety is paramount in deciding whether to close or
contract out towers.  According to FAA officials, safety will not be
jeopardized by closing or contracting out tower operations.  Although
FAA can justify opening or closing towers on the basis of unique
requirements that are not included in the benefit-cost criteria, the
agency has been slow in closing towers when they do not meet unique
circumstances or the benefit-cost criteria.  As a result, FAA spends
millions of dollars to operate towers whose continued operations have
not been justified.  Nevertheless, FAA's new policy to provide a
2-year grace period for towers to meet the benefit-cost criteria and
to discontinue funding those towers that do not meet the criteria
seems to be a reasonable approach. 

Contracting out low-activity towers provides budgetary savings and
provides FAA with a means to infuse controllers into other
geographical areas where the need for them exists.  But the infusion
could cause overstaffing at some towers if it is not part of an
integrated strategy that is compatible with FAA's priorities for its
workforce.  Furthermore, labor union officials are concerned that
reassigned controllers will not be able to perform the duties
required at the new facilities.  Although FAA believes that
controllers' success rate will be better under its new "train to
succeed" philosophy, we believe that controllers' prior performance
capability at higher-level facilities is a legitimate concern that
could have a negative impact on FAA's strategy for reassigning
controllers. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :8

We recommend that the Secretary of Transportation direct the
Administrator, FAA, to

  establish procedures to ensure that FAA's new policy to close
     towers that do not meet benefit-cost criteria for a 2-year
     period is effectively implemented and

  develop a strategy for reassigning controllers from
     contractor-operated towers to understaffed facilities and for
     minimizing overstaffing at other towers to be contracted out
     after fiscal year 1994. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :9

We discussed the report's findings and recommendations with the
Manager and Acting Assistant Division Manager, System Plans and
Programs Division, Air Traffic Plans and Requirements Service; Acting
Manager, Resource Management Program, Office of Air Traffic Program
Management; and other FAA officials.  FAA officials generally agreed
with the findings and recommendations contained in the report. 

The officials said that FAA had identified towers that did not meet
benefit-cost criteria in a staff study provided last year to the
Subcommittee on Transportation and Related Agencies, House Committee
on Appropriations.  However, FAA did not recommend closing all of
these towers because language in various committee reports directed
that they be established or remain open.  FAA implemented a policy on
July 18, 1994, to provide a 2-year grace period before closing any
towers.  The officials said that all towers not meeting benefit-cost
criteria will be included under FAA's new policy. 

FAA officials also said that they were reevaluating the
qualifications of those interested in submitting bids for performing
tower operations under contract.  However, FAA has not received wage
determinations from the Department of Labor for all contract
locations.  As a result, contractors cannot develop precise bid
estimates, and FAA cannot award contracts.  The officials said that
the Department of Labor provided wage determinations on July 29,
1994, for the 25 locations to be contracted out in fiscal year 1994
but as of August 1, 1994, had not yet provided estimates for the
remainder.  FAA officials said that getting estimates for the
remaining locations will help them ensure that contracts are awarded
by the end of fiscal year 1994. 

FAA officials also said that the method used to reassign FAA
controllers from the 25 level 1 towers to be contracted out in fiscal
year 1994 to higher-level facilities was based on an agreement with
the National Air Traffic Controllers Association.  Regarding the
issue of training failures, FAA officials said that the agreement
stipulates that if funding is available, FAA will relocate the
controllers.  However, if funding is not available, the controllers
will be allowed to relocate at their own expense.  The officials said
that FAA does not plan to terminate controllers who cannot perform
duties at higher-level facilities and that FAA will be negotiating a
new agreement with the union for towers to be contracted out after
fiscal year 1994.  As requested, we did not obtain written agency
comments on a draft of this report. 


---------------------------------------------------------- Letter :9.1

We conducted our work between August 1993 and July 1994 in accordance
with generally accepted government auditing standards.  Our
objectives, scope, and methodology are discussed in appendix V. 

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 30 days after the date of this
letter.  At that time, we will send copies to the Secretary of
Transportation; the Administrator, FAA; and the Director, Office of
Management and Budget.  We will make copies available to others upon
request. 

Please contact me at (202) 512-2834 if you or your staff have any
questions.  Major contributors to this report are listed in appendix
VI. 

Sincerely yours,

Kenneth M.  Mead
Director, Transportation Issues


FAA'S PROCESS FOR DETERMINING WHEN
TOWERS SHOULD BE ESTABLISHED OR
CLOSED
=========================================================== Appendix I

The Federal Aviation Administration's (FAA) process for determining
when to establish or close air traffic control towers is based on an
economic analysis of the benefits and costs of operating a tower.  A
brief description of the benefit and cost factors that FAA uses in
the analysis follows. 


   ASSESSMENT OF BENEFITS
--------------------------------------------------------- Appendix I:1

FAA assesses both the safety and efficiency benefits of towers. 
However, the primary emphasis is on safety; that is, preventing or
reducing (1) collisions between aircraft (such as midair or
air-to-ground collisions) and (2) other such accidents as wheels-up
landings or collisions with field obstructions.  Under this scenario,
lives are saved and fewer aircraft become damaged.  To determine the
effectiveness of towers in reducing the risk of collisions between
aircraft, FAA analyzes the National Transportation Safety Board's
data and estimates the expected number and type of aircraft that
would be involved in an accident.  FAA then determines the number and
type of aircraft that would use the tower; estimates benefits by
determining the avoided fatalities, serious and minor injuries, and
aircraft damage; and assigns explicit values to these avoided losses. 

For example, the value for a fatality and a serious injury is $2.6
million and $673,000, respectively.\11 The values assigned to
aircraft damage vary by severity depending on the aircraft's type and
whether the aircraft was destroyed or sustained substantial or minor
damage.  FAA uses a similar analysis in determining the benefits
derived from preventing other types of accidents.  However, because
of the differences between the physical and operational environments
of airports, FAA limits the analysis to those types of accidents that
a tower can prevent.  This includes wheels-up landings, aircraft
collisions with objects other than another aircraft, landing on the
wrong runways, and overshooting or undershooting a runway during
takeoff or landing. 

Efficiency benefits derive primarily from reduced flying time.  By
reducing flying time, airlines save on the costs of operating
aircraft and passengers save time when flight paths are shortened. 
Other nonquantifiable benefits may be associated with tower services. 
For example, tower controllers may save lost pilots or report bad
weather conditions that will cause a pilot to cancel a flight that
could have resulted in an accident. 


--------------------
\11 Placing a monetary value on injury and loss of life represents a
standard practice in analyzing potential safety benefits.  In
adopting these values, a trade-off must be made between the cost of
enhancing safety and the benefit that will be derived from that
enhancement. 


   ASSESSMENT OF COSTS
--------------------------------------------------------- Appendix I:2

An airport's tower costs fall into two categories--investment and
annual costs.  Investment costs are one-time expenditures for
facilities, equipment, and operational start-up.  Annual costs are
those associated with staff, maintaining facilities and equipment,
and procuring supplies and leased services. 

On average, the primary investment cost in establishing a tower are
the facilities and equipment costs and the one-time expense of
relocating experienced controllers from various other facilities and
training their replacements.  The costs for one replacement
controller include the cost of providing the basic course for
controllers at the FAA Academy, associated travel costs, and the
controller's salary during the training period. 

In estimating annual costs for a level 1 tower, FAA uses the average
number and salary grade level of staff required to operate the tower
for 12 hours.  FAA determined that the average level 1 tower consists
of one Air Traffic Manager (GS-11, step 5) and five controllers
(GS-10, step 5).\12 FAA calculates the costs of staff using annual
salary data plus 29.65 percent to account for retirement, health, and
other benefits as well as relocation costs.  FAA's experience
suggests that one controller relocates from a level 1 tower about
once every 2 years.  Therefore, relocation costs comprise one-half of
the annual average.  FAA uses annual fixed costs for any leased
communications equipment.  FAA determines the costs for supplies,
rent, utilities, contracted services, and related administration by
using an approximate percentage--for example, 3.7 percent--of
controllers' salaries. 

In deciding whether to close and dismantle (decommission) a tower,
FAA considers the same annual operating costs as those for
establishing a tower and the one-time cost of shutting it down. 
Shutdown costs include expenditures for relocating controllers and
dismantling and moving equipment. 


--------------------
\12 GS = general schedule pay rate for the federal government. 


   HOW FAA APPLIES THE
   BENEFIT-COST CRITERIA
--------------------------------------------------------- Appendix I:3

The benefit-cost criteria compare the present value of a tower's
benefits with costs over a 15-year period.  In making the comparison,
FAA uses a 7-percent discount rate as directed by the Office of
Management and Budget.  If the tower is a candidate for being
contracted out, FAA will substitute the contractor's proposed costs
in lieu of FAA's costs in the benefit-cost analysis computations. 
Regardless of whether the tower is to be operated by FAA or a
contractor, FAA seeks to establish towers that have a benefit-cost
ratio greater than or equal to 1 and close towers when the
benefit-cost ratio is less than 1. 

However, such unique factors as weather, topography, and operational
conditions; potential use of the site to provide capacity and
training relief for a hub airport; potential significant changes in
traffic activity; and national security may override the results of
FAA's benefit-cost analysis.  For example, FAA's tower in American
Samoa--with a .99 benefit-cost ratio--does not meet FAA's criteria,
but the tower provides service to both international and national
carriers (unique operational requirement).  FAA acknowledges that
other positive and negative economic impacts accrue to a community
through the presence of a tower, such as benefits to local commerce
and the potential increase in noise and aircraft engine emissions. 
However, FAA does not consider these factors in its benefit-cost
analysis because it has determined that these impacts are subjective,
controversial, not easily quantifiable, and negligible in comparison
to safety and efficiency benefits. 


LEVEL 1 TOWERS THAT DO NOT MEET
FAA'S BENEFIT-COST CRITERIA
========================================================== Appendix II



                          Table II.1
           
            Temporarily Closed Towers That Do Not
           Meet FAA's Criteria and Were Recommended
                      for Closure by FAA

City and state                            Benefit-cost ratio
----------------------------------------  ------------------
Ponce, P.R.                                              .08
Plainview, Tex.                                          .19
Pine Bluff, Ark.                                         .21
Merced, Calif.                                           .23
Mayaguez, P.R.                                           .30
Akron, Ohio                                              .31
Spartanburg, S.C.                                        .34
Hickory, N.C.                                            .34
Benton Harbor, Mich.                                     .36
New Bern, N.C.                                           .41
Hot Springs, Ark.                                        .48
------------------------------------------------------------
Note:  Benefit-cost ratios are as of June 1993.  In addition, the
temporarily closed tower in Knoxville, Tennessee, did not meet FAA's
benefit-cost criteria, but FAA did not recommend that it be
permanently closed because the agency estimates that the tower will
soon meet the criteria. 



                          Table II.2
           
           Operating Towers That Do Not Meet FAA's
                           Criteria

City and state                            Benefit-cost ratio
----------------------------------------  ------------------
Bloomington, Ind.                                        .34
Jackson, Tenn.\a                                         .36
Cape Girardeau, Mo.\a                                    .39
Marion, Ill.\a                                           .39
Lewisburg, W.Va.\a                                       .46
Hobbs, N.M.\a                                            .47
Wheeling, W.Va.                                          .52
Williamsport, Pa.                                        .52
Pendleton, Oreg.\a                                       .53
Valdosta, Ga.\a                                          .57
Muncie, Ind.\a                                           .62
Greenville, Miss.                                        .70
Walla Walla, Wash.                                       .70
Lake Tahoe, Calif.\a                                     .71
Columbia, Mo.                                            .73
Grand Island, Nebr.                                      .74
Joplin, Mo.                                              .78
Olympia, Wash.                                           .86
Shreveport, La.                                          .86
Ardmore, Okla.\a                                         .87
Gary, Ind.\a                                             .88
Fayetteville, Ark.                                       .89
St. Joseph, Mo.                                          .92
Twin Falls City, Idaho\a                                 .98
------------------------------------------------------------
Note:  As of June 23, 1994. 

\a Not recommended for immediate closure by FAA. 


FIRST 25 LEVEL 1 TOWERS TO BE
CONTRACTED OUT
========================================================= Appendix III

City and state
------------------------------------------------------------
Charlottesville, Va.

Detroit City, Mich.

Westfield, Mass.

Hartford, Conn.

Lewiston, Idaho

San Juan (Isla Grande), P.R.

San Antonio (Stinson), Tex.

Alexandria, La.

Kaunakakai, Hawaii

Salina, Kans.

Palmdale, Calif.

Salinas, Calif.

Meridian, Miss.

Texarkana, Ark.

Cincinnati (Lunken), Ohio

Alton, Ill.

New Haven, Conn.

Tuscalusa, Ala.

Groton, Conn.

Salem, Oreg.

Greenville, S.C.

Panama City, Fla.

Brownsville, Tex.

Pocatello, Idaho

Hagerstown, Md.
------------------------------------------------------------
Note:  Towers are listed in the order in which FAA selected them to
be contracted out in fiscal year 1994. 


ACTUAL STAFFING COMPARED WITH
FAA-ESTIMATED STAFFING FOR ALL
CONTRACTOR-OPERATED TOWERS
========================================================== Appendix IV

                                                      Number
                                         Number of    of FAA
Location of facility              contractor staff   staff\a
--------------------------------  ----------------  --------
Ardmore, Okla.                                   3         6
Athens, Ga.\                                     4        \b
Bellingham, Wash.                                8        14
Cape Girardau, Mo.                               4         5
Cleveland (Cuyahoga County),                     6         8
 Ohio
Eagle, Col.\                                     4        \b
Enid (Woodring), Okla.                           4         7
Farmington, N.M.                                 4         9
Flagstaff, Ariz.                                 4         6
Gary, Ind.\\                                     5        \b
Hailey, Idaho                                    4         7
Hobbs (Lea County), N.M.                         3         7
Lakeland, Fla.                                   7         9
Laredo, Tex.                                     5         7
Lewisburg/Greenbrier, W.Va.                      3         6
Marion (Williamson County), Ill.                 5         6
Martha's Vineyard, Mass.\                        5        \b
Mobile, Ala.\                                    7        \b
Mosinee, Wisc.                                   6         6
Nashua, N.H.                                     5         8
New Iberia, La.                                  4         8
Newburgh, N.Y.\                                  7        \b
Norman, Okla.\                                   4        \b
North Myrtle Beach, S.C.                         7         8
Owensboro (Davies County), Ky.                   5         7
Pacoima/Whiteman, Calif.                         5         8
Paducah (Barkley),                               5         8
 Ky.
Pendleton, Oreg.                                 4         7
Smyrna, Tenn.                                    4         8
Topeka (Phillip Ballard), Kan.                   3         7
Valdosta, Ga.                                    6         6
Waukegan, Ill.                                   6         9
------------------------------------------------------------
\a FAA staff are those that would be assigned to the contractor
locations on the basis of FAA's staffing standards. 

\b FAA could not provide staffing information for these towers either
because activity data were not available to estimate staffing needs
or the tower was established subsequent to our request for data. 


OBJECTIVES, SCOPE, AND METHODOLOGY
=========================================================== Appendix V

The Chairman, Subcommittee on Transportation and Related Agencies,
House Committee on Appropriations, asked us to (1) determine the
reasonableness of FAA's plans to close level 1 towers and contract
out the operations of others, (2) assess the reasonableness of the
potential savings that could result from such actions, (3) identify
the factors that could impede FAA's plans to decommission and
contract out towers, and (4) identify steps that FAA can take to
enhance its strategy for reassigning controllers from contracted out
level 1 towers. 

We reviewed FAA's criteria for establishing, closing, and contracting
out level 1 air traffic control towers and discussed them with FAA
officials.  However, we did not evaluate or verify the data that FAA
uses in applying the benefit-cost criteria.  We collected data from
FAA showing the number of level 1 towers that do not meet these
criteria and discussed reasons why FAA established or has not closed
them.  We also discussed with FAA officials their plans to relocate
staff from towers that will be contracted out from fiscal year 1994
through fiscal year 1997 and discussed with FAA and National Air
Traffic Controller's Association officials the process they used to
select the 25 towers to be contracted out in fiscal year 1994.  We
obtained their views on the contracting out program and potential
impact on the controller workforce. 

We collected, reviewed, and analyzed FAA's survey instrument that
included information on where controllers wanted to transfer when
their tower was converted to contractor operations.  We aggregated
data from the survey showing the air traffic facilities where
employees wanted to relocate and compared these data with locations
that are close to becoming or are already overstaffed in accordance
with FAA's staffing standards.  We also reviewed, analyzed, and
discussed with officials FAA's guidance on relocating controllers
from their facility.  We visited FAA-staffed level 1 towers in
Charlottesville, Virginia, and Hagerstown, Maryland--two towers
selected to be contracted out in fiscal year 1994.  We discussed the
impact of contracting out these facilities with the tower manager and
available controllers.  We also discussed relocation preferences and
prior work experiences at other FAA facilities and why they
previously left those facilities. 

We also discussed with FAA program management and contracting
officials the status of the contract for the level 1 towers and
determined how the contract was developed.  We discussed FAA's
procedures for announcing the contract and developing the request for
a technical proposal and determined reasons for any delay.  We
visited one tower in Smyrna, Tennessee, that is currently operated by
a contractor and discussed operational procedures and staffing with
the tower manager and controllers.  We also visited two
contractors--Barton ATC, Inc., in Murfreesboro, Tennessee, and NYMA
in Greenbelt, Maryland--and spoke with Aircraft Owners and Pilots
Association officials to discuss their experience with level 1 tower
operations.  We also discussed with FAA officials their progress in
obtaining wage determinations from the Department of Labor and how
the Department's delay may affect awarding the contract before the
end of fiscal year 1994 and discussed with a Department of Labor
official the process used in making such determinations. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix VI

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C. 

Allen Li, Associate Director
Mary Ann Kruslicky, Assistant Director
Roy K.  Judy, Assignment Manager
Steven J.  Schamberger, Evaluator-in-Charge

