DOT's Budget: Safety, Management, and Other Issues Facing the Department
in Fiscal Year 1998 and Beyond (Testimony, 03/06/97,
GAO/T-RCED/AIMD-97-86).
GAO discussed the major safety and security, management, and other
issues facing the Department of Transportation (DOT).
GAO noted that: (1) GAO has reported on problems with the Federal
Aviation Administration's (FAA) oversight, including the need to target
limited inspection resources, improve safety data reliability and
inspector training, and address the security vulnerabilities of the air
transportation system; (2) key issues yet to be addressed are how much
more all the improvements will cost and how they will be funded; (3) FAA
needs a comprehensive strategy to guide the implementation of various
aviation studies' recommendations; (4) major opportunities exist to
improve the safety of the surface transportation system by reducing the
more than 40,000 fatalities each year on the nation's highways; (5)
GAO's ongoing work shows that, while the number of truck inspectors at
major southern border crossings has increased and two large permanent
inspection facilities have been opened, the results of increased
inspections do not show a clear trend that Mexican trucks are becoming
safer; (6) another primary role of DOT is to ensure that federal
transportation funds for aviation, highway, and transit programs are
spent effectively and efficiently so that the nation gets the most value
for its transportation dollars; (7) FAA needs to adopt a complete
systems architecture for its modernization program, improve its cost
estimating and cost accounting processes, apply more discipline in its
software acquisitions, and broaden its efforts to reform its
organizational culture to include stakeholders from across FAA; (8) the
Federal Highway Administration (FHwA) and the Federal Transit
Administration (FTA) can work with states and transit operators to
enhance their ability to more effectively manage the costs of and
acquire financing for large-dollar surface transportation projects; (9)
after 7 years and $1.3 billion in federal funding, DOT's vision for
widespread deployment of the Intelligent Transportation System has not
been realized due to a number of obstacles; (10) in its fiscal year 1998
budget, DOT is proposing to focus federal funds on deploying ITS,
however, before DOT can aggressively pursue widespread deployment, it
must help state and local officials overcome these obstacles; (11) DOT
could potentially save millions of dollars by taking advantage of
opportunities to consolidate and/or colocate its surface transportation
field structure, but DOT has done little to take advantage of these opp*
--------------------------- Indexing Terms -----------------------------
REPORTNUM: T-RCED/AIMD-97-86
TITLE: DOT's Budget: Safety, Management, and Other Issues Facing
the Department in Fiscal Year 1998 and Beyond
DATE: 03/06/97
SUBJECT: Transportation safety
Accident prevention
Federal aid for transportation
Air transportation operations
Ground transportation operations
Human resources training
Strategic planning
Cost effectiveness analysis
Railroad transportation operations
Drug trafficking
IDENTIFIER: Valujet Flight 592
TWA Flight 800
FAA Air Traffic Control Modernization Program
FAA Safety Performance Analysis System
New Hampshire
FHwA Motor Carrier Safety Assistance Program
FHwA Safetynet Information System
Texas
New Mexico
Arizona
California
North American Free Trade Agreement
Mexico
FAA Acquisition Management System
FAA National Airspace System Plan
FAA Automated Terminal Doppler Radar Warning System
FAA Airport Surveillance Radar Program
FAA Standard Terminal Automation Replacement System
FAA Wide Area Augmentation System
Central Artery/Tunnel Project (Boston, MA)
Massachusetts
San Francisco Bay Area Rapid Transit System (CA)
San Francisco International Airport (CA)
FTA New Starts Capital Discretionary Grant
Los Angeles Red Line Project (CA)
Los Angeles (CA)
Long Beach (CA)
Highway Trust Fund
FHwA Transportation Infrastructure Credit Program
Denver (CO)
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Cover
================================================================ COVER
Before the Subcommittee on Transportation, Committee on
Appropriations, House of Representatives
For Release
on Delivery
Expected at
10 a.m. EST
Thursday
March 6, 1997
DOT'S BUDGET - SAFETY, MANAGEMENT,
AND OTHER ISSUES FACING THE
DEPARTMENT IN FISCAL YEAR 1998 AND
BEYOND
Statement of John H. Anderson, Jr.,
Director, Transportation Issues,
Resources, Community, and Economic
Development Division
GAO/T-RCED/AIMD-97-86
GAO/RCED/AIMD-97-86T
(340644)
Abbreviations
=============================================================== ABBREV
ADAS -
ATM -
ATC -
AAS -
ASOS -
ADAS -
AWOS -
DOT -
GAO -
FAA -
FTA -
FRA -
BART -
DOD -
DCCR -
DSR -
DCC -
FHWA -
GPRA -
NHTSA -
ITS -
TATCA -
NAFTA -
NASA -
MCSAP -
SEI -
ILS -
TDLS -
STARS -
WAAS -
MTA -
ISTEA -
GPS -
LAAS -
TRDRE -
VSCS -
OAP -
OASIS -
ITWS -
TDWR -
============================================================ Chapter 0
Mr. Chairman and Members of the Subcommittee:
When we testified before you last year, we pointed out that the
Department of Transportation (DOT) faced tremendous challenges in
ensuring the safe and efficient movement of people and goods and a
cost-effective investment in the nation's transportation
infrastructure, including its highways and transit systems, airports,
airways, ports, and waterways. If anything, the obstacles to meeting
the challenges have increased primarily because efforts to improve
the safety and security of our aviation system will stretch limited
resources even further. At the same time, the demand for scarce
federal funds for other transportation programs and the continuing
pressures to reduce the federal budget have not abated. The $38
billion proposed in DOT's fiscal year 1998 budget represents about a
1-percent reduction from this year's enacted appropriation. Funding
constraints intensify the need for the Department to improve its
management and oversight processes to ensure that the American people
are getting the most out of their transportation investment dollars.
My testimony today, based on our recently completed and ongoing work,
will discuss the major safety and security, management, and other
issues facing the Department. In summary, we found the following:
SAFETY AND SECURITY
ISSUES
------------------------------------------------------ Chapter 0:0.0.1
-- Crashes of ValuJet Flight 592 and TWA Flight 800 have heightened
concerns about the safety and security of our aviation system.
Over the years, we have reported on problems with the Federal
Aviation Administration's (FAA) oversight, including the need to
(1) target limited inspection resources, (2) improve the
reliability of safety data, (3) improve inspector training, and
(4) address the security vulnerabilities of our air
transportation system. Our recent reports and testimonies on
new airlines and aviation security have reiterated the need for
improvements in these areas.
Recently completed aviation studies by a presidential commission and
FAA have also concluded that major problems need to be addressed to
improve the safety and security of the aviation system. The Congress
has also specified that FAA's primary role is safety and has
appropriated more funds to hire and train inspectors and procure
explosive detection systems for the nation's airports. However, key
issues that have yet to be addressed are how much more all the
improvements will cost and how they will be funded. In addition, FAA
needs a comprehensive strategy to guide the implementation of
recommendations made in the various aviation studies. This strategy
could serve as a mechanism to track progress and establish the basis
for determining funding trade-offs and priorities, but its successful
implementation will require strong, stable leadership at FAA and the
Department.
-- Major opportunities exist to improve the safety of our surface
transportation system by reducing the more than 40,000
fatalities each year on our nation's highways. The National
Highway Traffic Safety Administration (NHTSA) estimates that if
all vehicle occupants used seat belts, 10,000 lives and $20
billion could be saved each year, and injuries to 200,000 people
could be avoided. Recent concerns about the potential hazards
of air bags in certain situations intensify the importance of
using seat belts. Furthermore, from January through November
1996, federal and state officials carried out more than 20,000
inspections of trucks entering from Mexico resulting in about 45
percent of the vehicles being placed out of service for serious
safety violations. Our ongoing work shows that, while the
number of truck inspectors at major southern border crossings
has increased and two large permanent inspection facilities have
been opened, the results of increased inspections do not show a
clear trend that Mexican trucks are becoming safer. In
addition, we are reviewing other opportunities to improve large
truck and rail safety.
MANAGEMENT ISSUES
------------------------------------------------------ Chapter 0:0.0.2
-- Another primary role of DOT is to ensure that federal
transportation funds for aviation, highway, and transit programs
are spent effectively and efficiently so that the nation gets
the most value for its transportation dollars. To that end, our
work over the years has identified numerous ways in which FAA
can improve the management of its multibillion-dollar air
traffic control (ATC) modernization program. Most major
modernization projects have been plagued by cost overruns,
schedule delays, and shortfalls in performance. FAA needs to
adopt a complete systems architecture for its modernization
program, improve its cost estimating and cost accounting
processes, apply more discipline in its software acquisitions
for the program, and broaden its efforts to reform its
organizational culture to include stakeholders from across the
agency.
-- In addition, the Federal Highway Administration (FHWA) and the
Federal Transit Administration (FTA) can work with states and
transit operators to enhance their ability to more effectively
manage the costs of and acquire financing for large-dollar
surface transportation projects.\1 For example, while FHWA's
oversight of large-dollar projects is not intended to focus on
cost containment, we believe that the agency can do more to
share states' best practices in this area to promote more
effective and efficient use of limited federal and state highway
dollars and control cost growth that can adversely impact the
funding for other projects. Furthermore, financing large
transportation projects has become increasingly complicated as
the transportation community has become more active in seeking
financing through bonds, local contributions, and innovative
federal financing, such as loans. We found that costs on the
projects we reviewed continue to grow, and FHWA and FTA need to
help ensure that the projects are able to secure firm
commitments for all of the funding needed to finance them. If
not, the federal, state, and/or local stakeholders could be
asked to pay more for the projects or their timely completion
could be jeopardized.
-- The Intelligent Transportation System (ITS) is a collection of
computer and telecommunications systems intended to improve
surface transportation safety and efficiency. After 7 years and
$1.3 billion in federal funding, DOT's vision for widespread
deployment has not been realized. This is due to a number of
obstacles, including a lack of technical expertise and knowledge
about ITS among state and local officials, a lack of data
demonstrating the benefits of ITS technologies, and limited
funding available for ITS in light of other investment
priorities. In its fiscal year 1998 budget, DOT is proposing to
focus federal funds on deploying ITSs. However, before DOT can
aggressively pursue widespread deployment it must help state and
local officials overcome these obstacles.
-- In prior testimony before this Subcommittee, we stated that DOT
could potentially save millions of dollars by taking advantage
of opportunities to consolidate and/or "colocate" its surface
transportation field structure. Over 2 years have passed, and
DOT has done little to take advantage of these opportunities.
--------------------
\1 The surface transportation projects we discuss in this testimony
all cost over $1 billion, but defining large-dollar projects for an
individual state or transit operator is relative to their size and
resources.
OTHER MAJOR ISSUES
------------------------------------------------------ Chapter 0:0.0.3
-- Other major issues that DOT and the Congress must address
include the long-term financing of FAA, the continuing financial
problems of Amtrak, and the Coast Guard's ability to measure its
effectiveness in drug interdiction. FAA could face potential
funding shortfalls totaling several billion dollars over the
next 5 years. However, this shortfall could be mitigated to
some extent if FAA improves its productivity. The Congress has
recognized the funding problems confronting FAA, which are
exacerbated by the need to finance safety and security
improvements and air traffic control modernization. The
congressionally created National Civil Aviation Review
Commission is tasked with reporting to the Secretary of
Transportation later this year on how best to finance FAA.
-- Our recent work on Amtrak shows that the corporation is still in
a very precarious financial position and remains heavily
dependent on federal support to meet its operating and capital
needs. Amtrak's fiscal year 1997 operating losses could be as
high as $786 million. While the corporation's goal is to
eliminate the need for federal operating support by 2002, it is
likely that Amtrak will continue to require federal financial
support--both operating and capital--beyond that time.
-- In its fiscal year 1998 budget request, the Administration is
asking for $389 million related to the Coast Guard's drug
interdiction efforts, a $53 million increase over 1997 levels.
Identifying ways to measure the effectiveness of the Coast
Guard's operations in this area is inherently difficult. To
measure its effectiveness, the Coast Guard must separate the
impact of its actions from those taken by other drug enforcement
agencies. In order to accomplish this, the Coast Guard must
develop a way to compare the amount of drugs seized or deterred
against a measure of supply, which becomes problematic. The
Coast Guard has started to take actions to address these
difficulties and implement the requirements of the Government
Performance and Results Act, but it is too soon to determine
their effectiveness.
We will now discuss these issues in greater detail.
SAFETY AND SECURITY ISSUES
---------------------------------------------------------- Chapter 0:1
Improving the safety and security of our aviation and surface
transportation systems is of paramount importance, but budget
constraints will make this a tremendous challenge.
AVIATION SAFETY AND SECURITY
-------------------------------------------------------- Chapter 0:1.1
Over the years, we have issued numerous reports and testimonies that
identified shortcomings in FAA's aviation safety and security
programs.\2 These shortcomings include insufficient training of FAA
safety inspectors, inaccurate and incomplete aviation safety
databases, and vulnerabilities in our aviation security systems. We
have reported that targeting inspection resources is important
because of the magnitude of FAA's inspection responsibilities. For
example, as early as 1987, we identified the need for FAA to develop
criteria for targeting safety inspections to those areas that have
characteristics possibly indicating safety problems--especially new
entrant and commuter airlines and aging aircraft. FAA also needs to
improve its Safety Performance Analysis System, a system being
developed to integrate and analyze information within other
databases, so that it contains reliable information that can be used
by inspectors and managers to target the areas of greatest risk to
safety.
In the area of aviation security, we have highlighted a number of
vulnerabilities that exist within the nation's air transportation
system for checked and carry-on baggage, mail, and cargo. We have
also raised concerns about unauthorized individuals' gaining access
to critical parts of an airport and the potential use of
sophisticated weapons, such as surface-to-air missiles, against
commercial aircraft. We have stressed the need for a mix of
technology and procedures to improve security. FAA has agreed with
the majority of our recommendations and is taking action on many of
them.
As a result of the May 1996 crash of ValuJet Flight 592, in which 110
people were killed, the FAA Administrator, on June 18, 1996,
commissioned a 90-day study of the agency's safety programs. On
September 16, 1996, FAA issued its report, which contained six broad
and 31 specific recommendations.\3 The report calls for improvements
in a number of areas, including the certification of new airlines and
FAA's inspection activities. FAA developed a plan for implementing
these recommendations, including identifying the responsible person
and key milestones for these efforts. According to FAA, over
one-third of the key milestones have been met. The remaining
recommendations are to be implemented between now and 1999.
Moreover, on July 25, 1996, in the wake of the crash of TWA Flight
800, in which another 230 people perished, the President formed the
White House Commission on Aviation Safety and Security (the Gore
Commission) to study and develop a strategy for improving aviation
safety and security, including the ATC modernization. Its February
12, 1997, final report to the President contained over 50
recommendations on a wide variety of aviation issues, including
improving aviation safety, modernizing the ATC system, ensuring
security for travelers, and compassionately responding to families
who have been affected by aviation disasters.\4 In addition, the
Congress has eliminated FAA's role of promoting the aviation industry
and clarified that FAA's highest priority is safety. Furthermore,
the administration requested and the Congress appropriated
supplemental 1997 funds to improve aviation security by installing
explosives detection equipment and assigning bomb-sniffing dog teams
to a number of major airports. In its fiscal year 1998 budget
proposal, the administration is requesting additional funds to
further improve safety and security, including hiring more inspectors
and providing them with additional training.
For air safety, the Commission set a goal of cutting the airline
accident rate by 80 percent over the next 10 years. To help achieve
this goal, the President announced that the National Aeronautics and
Space Administration (NASA) will dedicate up to a half billion
dollars in its research and development budget over the next 5 years
to focus on aviation safety. One of the Commission's key
recommendations is that cost considerations alone should not be the
only, nor the primary, factor in making policy and rulemaking
decisions concerning aviation safety and security. It is important
to recognize, however, that this change could result in significant
cost increases for relatively modest increases in the safety margin.
Overall, we believe that the Commission's recommendations are a good
start toward an evolutionary process of reaching agreement on the
goals and objectives for improving our aviation safety and security
systems. However, the Commission's final report does not fully
address what the cost will be or who should pay for implementing the
recommendations. For example, in the security area, the Commission
recommended that the federal government devote $100 million annually
to meet security capital requirements--leaving the issue of how to
fund the remaining security costs to the National Civil Aviation
Review Commission. These remaining costs are estimated to be in the
billions of dollars.
To help ensure implementation of its recommendations, the Commission
recommended that the Secretary of Transportation report annually on
their status and that the President hold DOT and FAA leaders
accountable for implementing them. The same rigors should be applied
to ensure the implementation of other recommendations, such as those
contained in FAA's 90-day safety review. Reporting annually on the
progress of implementing all safety and security recommendations will
allow for comprehensive congressional oversight as well as a
mechanism for determining funding trade-offs and prioritization.
Keys to the successful implementation of these recommendations are
stable leadership at the Department and FAA and adequate funding. We
have expressed concern over the years about the instability and
uncertainty caused by the frequent turnover of FAA Administrators.
In addition, if FAA's funding issue is not resolved, resources may
not be available to implement improvements recommended by the various
studies.
On the basis of recommendations made in an initial report by the Gore
Commission (dated Sept. 1996), the Congress appropriated $144.2
million for FAA to purchase and install advanced explosives detection
equipment at U.S. airports and an additional $21 million for
explosives detection research. At your request, we are examining the
status of FAA's actions. To date, we have found that FAA has started
purchasing the equipment that the Secretary has directed be acquired
and deployed by December 1997. To expedite the process, FAA has been
awarding most contracts for equipment and related services on a
noncompetitive basis and plans to ask for a waiver from preparing a
number of planning documents required under the agency's procurement
system. In conjunction with airlines and airports, FAA has also
drafted a plan specifying which airlines and airports are to receive
the equipment.
--------------------
\2 See, for example, Aviation Safety: New Airlines Illustrate
Long-Standing Problems in FAA's Inspection Program (GAO/RCED-97-2,
Oct. 17, 1996); Aviation Safety: Data Problems Threaten FAA Strides
on Safety Analysis System (GAO/AIMD-95-27, Feb. 8, 1995); Aviation
Security: Additional Actions Needed to Meet Domestic and
International Challenges (GAO/RCED-94-38, Jan. 27, 1994); and
Aviation Security: Technology's Role in Addressing Vulnerabilities
(GAO/T-RCED/NSIAD-96-262, Sept. 19, 1996).
\3 FAA 90 Day Safety Review (Sept. 16, 1996).
\4 Final Report to President Clinton, White House Commission on
Aviation Safety and Security (Feb. 12, 1997).
SURFACE TRANSPORTATION
SAFETY
-------------------------------------------------------- Chapter 0:1.2
The use of seat belts, the safety of large trucks in general and,
more specifically, Mexican trucks coming into the United States; and
railroad safety are all important surface transportation safety
issues. We have completed or have under way a number of studies
concerning these issues.
REDUCING FATALITIES AND
INJURIES CAUSED BY
HIGHWAY TRAFFIC ACCIDENTS
------------------------------------------------------ Chapter 0:1.2.1
Traffic accidents annually result in over 40,000 deaths and over $130
billion in costs to society. Each year, about 20,000 of the people
who die and another 600,000 people who are injured were not using
safety belts. As we reported in January 1996, increasing the use of
safety belts is the most effective way to lower the nation's death
toll from highway accidents.\5 NHTSA estimates that 10,000 deaths,
200,000 injuries, and $20 billion in societal costs could be avoided
annually if all occupants of motor vehicles wore safety belts. To
date, every state except New Hampshire has enacted laws requiring the
use of safety belts; however, the coverage of these laws may not
include all vehicle occupants and may be limited to certain types of
vehicles.
According to NHTSA, in 1996 the use of safety belts among states
ranged from a low of 43 percent to a high of 87 percent. The most
successful states in increasing safety belt use generally have
comprehensive programs that include primary enforcement laws, visible
and aggressive enforcement, and active public information and
education programs. In particular, 11 states have primary
enforcement laws which permit officials to enforce safety belt
requirements independent of other traffic safety laws. In contrast,
under secondary enforcement laws enforcement of safety belt
requirements can only occur when other traffic safety laws are also
being enforced. Of the 10 states we reviewed for our 1996 report,
the 3 states with primary enforcement laws averaged rates of belt use
about 20 percent higher than the states with secondary enforcement
laws.
Much attention in recent months has been focused on the potential
danger surrounding the deployment of a car's air bags onto small
adult drivers and children riding in the front seat. While air bags
have saved more than 1,700 lives, NHTSA has attributed 61 deaths in
low-speed crashes to air bags. In response to this hazard, NHTSA
initiated a public information campaign aimed at having infants and
children ride in the rear. NHTSA has also undertaken a series of
regulatory initiatives to address the adverse side effects of
airbags. Among other things, NHTSA has issued a final rule regarding
improved labeling on new vehicles and child restraints, and a
proposed rule designed to ensure that vehicle manufacturers can
reduce the power at which airbags inflate. In addition, NHTSA is
conducting research into developing "smart" air bags that would use
sensors to automatically adjust the deployment speed to the size of
the occupant. In recent congressional hearings on how NHTSA can best
reduce the danger of air bags for children and small adults, safety
experts emphasized that the most effective way to reduce deaths and
serious injuries from traffic accidents is to increase the use of
safety belts by drivers and passengers.
--------------------
\5 Motor Vehicle Safety: Comprehensive State Programs Offer Best
Opportunity for Increasing Use of Safety Belts (GAO/RCED-96-24, Jan.
3, 1996).
NEED TO IMPROVE LARGE
TRUCK SAFETY
------------------------------------------------------ Chapter 0:1.2.2
Large trucks are vital for our nation's commerce, yet thousands of
people die each year in accidents involving trucks. Although the
rate of fatal accidents involving large trucks has decreased
substantially from 4.3 fatal accidents per 100 million miles in 1982
to 2.5 fatal accidents per 100 million miles in 1995, this change
primarily reflects the increase in the miles that trucks are driving.
In reality, the number of accidents and fatalities only slightly
declined from 4,650 fatal accidents involving trucks with 5,230
deaths in 1982 to 4,450 such accidents with 4,900 deaths in 1995.
State and industry officials have told us that much of the
improvement in truck safety can be attributed to FHWA's Motor Carrier
Safety Assistance Program (MCSAP), which provides matching grants for
states to conduct (1) roadside inspections of trucks and their
drivers, (2) compliance reviews of trucking firms' operations, and
(3) other truck safety enforcement programs. MCSAP also helps states
collect and report truck accident and enforcement data to FHWA's
SafetyNet database, which is essential for using performance-based
standards to assess a trucking firm's safety.\6 In MCSAP's early
years, FHWA used funding to shift responsibility for roadside
inspections of trucks to the states. As a result, the number of
roadside inspections increased from 33,000 in 1982 to almost 2
million in 1996.
We are currently examining FHWA's truck safety program to identify
cost-effective ways to further reduce fatal accidents involving
trucks. Our preliminary findings show that FHWA has the primary
responsibility for conducting compliance reviews, although states
performed about 40 percent of the compliance reviews in 1996. While
several states have developed active compliance review programs,
other states are only beginning to perform compliance reviews, and 13
states do not perform any. Opportunities may exist to use MCSAP
funding to encourage states to assume a larger role in performing
compliance reviews, as was the case for roadside inspections.
To improve its targeting of trucking firms for roadside inspections
and compliance reviews, FHWA is beginning to implement
performance-based standards. Truck accident and inspection data that
states provide to the SafetyNet database are essential for assessing
a carrier's performance. States have improved both the quality and
timeliness of their reporting. For example, they increased the
percentage of truck accidents reported to SafetyNet from 14 percent
in fiscal year 1992 to about 60 percent in fiscal year 1995.
Opportunities may exist to share information among states that would
enable some states to overcome institutional or procedural barriers
and further improve their reporting.
--------------------
\6 SafetyNet is an electronic database that incorporates truck
accident, roadside inspection, and other enforcement data that is
used by FHWA and the states to better identify trucking firms with
safety problems for compliance reviews and other enforcement actions.
SAFETY OF MEXICAN TRUCKS
------------------------------------------------------ Chapter 0:1.2.3
Currently, trucks from Mexico enter the U.S. through 4 border states
(i.e., Texas, New Mexico, Arizona, and California) and are limited to
operating in designated areas in the U.S. called commercial zones
(generally, areas between 3 and 20 miles from U.S. border towns'
northern limits). However, the North American Free Trade Agreement
(NAFTA) calls for allowing U.S. and Mexican trucks to eventually
operate throughout both countries. In February 1996, we reported
that many trucks from Mexico, operating in the U.S. commercial
zones, were not meeting U.S. safety standards and that the four U.S.
border states' readiness for enforcement varied significantly.\7 With
nearly 12,000 trucks from Mexico crossing daily into the border
states, we need to be assured that these trucks are safe. NAFTA's
timetable for international access called for U.S. and Mexican
trucks to be able to operate in each country's border states as of
December 18, 1995. But, on that date, the U.S. Secretary of
Transportation delayed this from happening, because of safety and
security concerns regarding Mexican trucks. The delay is still in
effect. The next milestone in NAFTA is the provision allowing full
access in both countries starting on January 1, 2000.
We are conducting a follow-on review of the status of inspection and
enforcement activities of Mexican trucks in 3 of the border states.\8
While we have not completed our work, we would like to share our
preliminary findings with you. State and federal truck inspectors at
the border told us that trucks have become safer, based on data such
as fewer safety violations being given per truck. However these
views are anecdotal. After more than 1 year of intensified truck
inspections, it remains unclear as to whether trucks from Mexico are
becoming safer. From January through November 1996, federal and
state officials carried out more than 20,000 inspections of trucks
entering from Mexico, resulting in about 45 percent of the vehicles
being placed out of service for serious safety violations. The data
show no consistent trend, downward or otherwise. Moreover, 45
percent compares unfavorably to the 28 percent out-of-service rate
for U.S. trucks inspected across the United States. On the other
hand, state and federal truck inspectors we interviewed believe that
Mexican operators are upgrading their trucks to make them safer.
Also, according to industry experts, most Mexican trucks at the
border are involved in short-haul operations only and they believe
that newer and presumably safer trucks will be used for long-haul
operations further into the United States.
The three border states have more than doubled the number of truck
inspectors at the major border crossings and now have 83 inspectors,
compared to 39 a year ago. Also, DOT has approved the placement of
13 federal safety inspectors on the border for a two-year period.
California, with about 24 percent of the overall Mexican truck
traffic, has opened two large permanent inspection facilities, where
it tries to inspect every truck entering from Mexico at least once
every 3 months. However, neither Texas nor Arizona, which admit
about three-quarters of the overall Mexican truck traffic, has built
any permanent inspection facilities at border locations. State
officials told us that a lack of space at urban border crossings and
their view of NAFTA as a national issue that should be paid for with
federal funds are among the reasons they have not built any
inspection facilities.
DOT has a number of initiatives under way aimed at ensuring the
safety of Mexican trucks crossing the border. They include providing
some additional funds to border states for more truck inspections,
running educational campaigns on U.S. safety standards, and training
truck inspectors in Mexico. Enforcing safety standards for unsafe
Mexican trucks is hampered, however, because DOT's strategy does not
include helping border states develop results-oriented truck
inspection strategies. DOT has also not actively worked with other
federal and state agencies, such as the U.S. Customs Service, to
build truck inspection facilities on the border.
--------------------
\7 Commercial Trucking: Safety and Infrastructure Issues Under the
North American Free Trade Agreement (GAO/RCED-96-61, Feb. 29, 1996).
\8 Because Mexican trucks entering the border state of New Mexico
comprised about one percent of all northbound truck crossings, we did
not include New Mexico in our review.
RAIL SAFETY
------------------------------------------------------ Chapter 0:1.2.4
In the area of rail safety, we are currently examining whether new
initiatives within the Federal Railroad Administration (FRA) will
improve safety on the nation's rail lines. From 1976 through 1995,
the rail industry's accident rate per million train miles declined by
70 percent. Similarly, the industry's injury rate per million train
miles declined by about 74 percent during the same period. Although
these improvements are commendable, a continued focus on safety is
needed, since improvements in the accident rate have slowed
substantially since 1987, and over 1,000 people are still killed
annually at grade crossings or while trespassing on railroad
property. We are reviewing these trends in detail and assessing
FRA's initiatives to improving safety on the nation's rail lines.
Under these initiatives, FRA works with other federal agencies,
railroad management, labor, and the states to implement methods that
will reduce grade-crossing accidents, expedite the promulgation of
important safety regulations, and secure railroads' compliance with
existing safety rules.
MANAGEMENT ISSUES
---------------------------------------------------------- Chapter 0:2
Our work has shown that DOT needs to improve its management of
aviation, highway, and transit programs to ensure that limited funds
are effectively and efficiently used. We have identified some
underlying causes for the numerous cost, schedule, and performance
problems experienced by FAA's ATC modernization program. In
addition, major surface transportation projects, costing hundreds of
millions to billions of dollars each, are continuing to incur cost
increases, experience delays, and have difficulties acquiring needed
funding commitments. Consequently, the federal, state, and local
stakeholders could be asked to pay for more of these costs or the
projects' completion could be jeopardized.
AIR TRAFFIC CONTROL
MODERNIZATION PROBLEMS
-------------------------------------------------------- Chapter 0:2.1
FAA is in the midst of a multibillion dollar, mission-critical
capital investment program to modernize its aging ATC system. Begun
in 1981, this effort involves the acquisition of a vast network of
radars and automated data processing, navigation, and communications
equipment. FAA estimates that the cost of modernizing the system
will total $34 billion through 2003, of which $21 billion represents
software-intensive computer systems. The Congress has already
appropriated about $23 billion of the $34 billion investment.
Over the years, we have reported that ATC modernization projects have
experienced substantial cost overruns, lengthy delays, and
significant shortfalls in performance that have affected FAA's
ability to deliver systems as promised. We have identified numerous
causes for these problems, including technical difficulties,
management problems, and the lack of continuity in FAA's top
management. Because of the size, complexity, cost, and
problem-plagued past of the ATC modernization, we designated it as a
high-risk information technology initiative in 1995 and again in
1997.\9
The framework for effectively addressing the modernization's problems
is grounded in management practices followed by leading public sector
and private sector organizations and embodied in the Clinger-Cohen
Act of 1996 (P.L. 104-106). Among its provisions, the act
emphasizes the involvement of senior executives in decisions about
information management, the development and implementation of systems
architectures, and the institution of discipline in such areas as
investment management and system development and acquisition. FAA
views its new Acquisition Management System, established last year,
as a rational approach to acquisitions.
In addition, because ATC modernization is critical to aviation safety
and offers cost savings to users of the national airspace and FAA,
the Gore Commission recommended that FAA accelerate its program by 7
years or more so that the new ATC architecture is operational by
2005. However, we have some concerns about how realistic that goal
may be.
--------------------
\9 High-Risk Series: An Overview (GAO/HR-95-1, Feb. 1995); and
High-Risk Series: Information Management and Technology
(GAO/HR-97-9, Feb. 1997).
ATC MODERNIZATION LACKS A
COMPLETE SYSTEMS
ARCHITECTURE
------------------------------------------------------ Chapter 0:2.1.1
FAA's ATC modernization program consists of hundreds of interrelated,
interdependent systems that need to be defined as part of a complete
systems architecture. Simply stated, a systems architecture is a
blueprint to guide and constrain the development and evolution (i.e.,
maintenance) of a collection of related systems. It consists of two
principal components--a "logical" architecture and a "technical"
architecture. The logical architecture includes a high-level
description of the organization's mission, functional requirements,
information requirements, systems, information flows, and interfaces.
It is the means for ensuring that systems support business needs.
The technical architecture details the specific information
technology and communications standards and approaches that will be
used to build systems' hardware, software, communications, data
management, and security elements. It ensures that systems
interoperate effectively and efficiently.
FAA has been effective thus far in developing the logical component
of a systems architecture, commonly called the National Airspace
System architecture. However, FAA is missing the technical
component, and we do not see a coordinated effort under way to
produce one for the entire modernization program. Of course, just
having a complete systems architecture is not enough. To be
effective, the architecture must also be enforced consistently,
meaning that systems must comply with the architecture and that any
architectural deviations must be justified. At FAA, such
architectural enforcement is not occurring.
FAA's failure to define and enforce a complete ATC systems
architecture has permitted incompatibilities among existing systems
and will continue to do so for future systems. While this does not
mean that ATC systems cannot work together safely, it does mean that
working together costs more (for development and maintenance) than it
should and that overall efficiency is less than optimal. To fill
these voids, our February 1997 report recommends that FAA establish
an effective management structure for developing and enforcing a
complete systems architecture.\10
--------------------
\10 Air Traffic Control: Complete and Enforced Architecture Needed
for FAA Systems Modernization (GAO/AIMD-97-30, Feb. 3, 1997).
ATC MODERNIZATION LACKS
RELIABLE COST INFORMATION
------------------------------------------------------ Chapter 0:2.1.2
Effectively managing an investment portfolio requires reliable cost
information on each investment. Without reliable cost information,
the likelihood of poor investment decisions is increased appreciably
not only when a project is initiated but also throughout its life
cycle. Such a situation is unacceptable when making small
investments, but it is especially egregious when making multimillion-
or billion-dollar investments in mission-critical ATC systems.
We have no confidence that FAA's ATC projects' actual or estimated
costs are accurate. Our concerns with estimated costs are grounded
in FAA's weak processes for deriving these estimates. In fact, of
the six processes (e.g., data collection and feedback on actual
performance) that experts say should be institutionalized by
organizations that build or acquire software-intensive systems, FAA
only partially satisfies one and is completely lacking in the other
five. The result is cost estimates that are not analytically derived
and supported. Compounding these weaknesses is FAA's practice of
presenting estimates as precise, point estimates, rather than
presenting a cost range that explicitly describes the inherent
uncertainty and risk involved. Our concerns also extend to the
accumulation and reporting of ATC projects' actual costs, and to
FAA's lack of a cost accounting capability. In lieu of one, FAA
relies on an assortment of accounting and financial management
systems, but these systems do not capture all relevant costs, such as
those associated with FAA's internal project management. Our January
1997 report recommends that FAA take actions to correct these
problems.\11 As required by the Federal Aviation Reauthorization Act
of 1996, FAA is planning to implement a cost accounting system.
--------------------
\11 Air Traffic Control: Improved Cost Information Needed to Make
Billion-Dollar Modernization Investment Decisions (GAO/AIMD-97-20,
Jan. 22, 1997).
ATC MODERNIZATION'S
SOFTWARE ACQUISITION
CAPABILITY IS IMMATURE
------------------------------------------------------ Chapter 0:2.1.3
Software is the most expensive and complex component of today's
computer systems. It is also the component that is the source of
most system development problems. The quality of software is
determined largely by the quality of the processes involved in
developing or acquiring, and maintaining it. Carnegie Mellon
University's Software Engineering Institute (SEI), recognized for its
expertise in software processes, has developed models and methods
that define and determine the maturity of an organization's software
processes. Together, they provide a logical framework for
determining a baseline of an organization's strengths and weaknesses
and providing a structured plan for incremental improvement.
We are currently evaluating FAA's software acquisition processes and
the steps under way or planned to improve them. Our preliminary
results show some strengths but more weaknesses. In fact, FAA does
not fully satisfy any of the key areas necessary to achieve a
repeatable level of maturity in its processes, rendering them ad hoc,
and sometimes chaotic. On SEI's process maturity scale of 1 through
5, FAA is at the lowest level and is at great risk of not delivering
software on time and within budget that performs as intended.
Additionally, FAA lacks an effective management approach for
improving its software acquisition processes. In particular, it has
not assigned the responsibility for improvement to an organizational
entity that has budgetary or organizational authority over the
product teams that are acquiring software, and it does not yet have
an effective plan to properly focus and coordinate improvement
initiatives and measure progress. As a result, years of activity in
this area have yielded little in the way of improvements to
processes. We plan to make recommendations in these areas.
FAA'S ORGANIZATIONAL
CULTURE HINDERS
ACQUISITION
------------------------------------------------------ Chapter 0:2.1.4
In August 1996, we reported to this Subcommittee that an underlying
cause of FAA's ATC acquisition problems is its organizational
culture--the beliefs, values, and attitudes shared by an
organization's members, which affect their behavior and the behavior
of the organization as a whole.\12 We found that FAA's acquisitions
were impaired when employees acted in ways that did not reflect a
strong commitment to mission focus, accountability, coordination, and
adaptability. For example, we reported that installations of new
terminal Doppler weather and airport surveillance radars were delayed
when the project offices did not coordinate with field offices to
ensure that sites suitable for installing these systems had been
acquired. We recommended that FAA develop a comprehensive strategy
for cultural change that (1) addresses specific responsibilities and
performance measures for all stakeholders throughout FAA and (2)
provides the incentives needed to promote the desired behaviors and
achieve agencywide cultural change.
In line with our recommendation, FAA established the Office of
Business Management within the Office of the Associate Administrator
for Research and Acquisitions to broadly define the proper framework
for cultural reform. This office plans to develop a strategic vision
and business goals for FAA's acquisition efforts, create a planning
process, manage goal attainment, and develop performance measures to
gauge progress in implementing change. Also, FAA's Research and
Acquisitions unit is monitoring its progress in effecting cultural
change through staff surveys. The challenge facing FAA in changing
its culture is finding ways to broaden its efforts to include
stakeholders from across the agency.
--------------------
\12 Aviation Acquisition: A Comprehensive Strategy Is Needed for
Cultural Change at FAA (GAO/RCED-96-159, Aug. 22, 1996).
OBSERVATIONS ON GORE
COMMISSION'S PROPOSALS
FOR ACCELERATING ATC
MODERNIZATION
------------------------------------------------------ Chapter 0:2.1.5
The Gore Commission found that "it is critical to our global
leadership in civil aviation to finance an accelerated modernization"
of the ATC system. New technology such as satellite-based navigation
offers significant cost savings for users of the ATC system and for
FAA. The Gore Commission recommended that all elements of the
agency's planned ATC architecture should be fully operational by 2005
rather than 2012 and beyond, which is FAA's current timetable.
While it would provide tremendous benefits to move up the completion
of the modernization effort by 7 years, we have some concerns about
FAA's ability to achieve that goal. First, the challenges
encountered in acquiring new ATC technology have to be recognized.
Although the Gore Commission states that new ATC technology to meet
FAA's requirements is available "off the shelf," FAA has found that
significant development efforts have been needed for virtually all
major acquisitions over the past decade. As recently as this past
year, for example, new major contracts for two key components of the
modernization effort--the Standard Terminal Automation Replacement
System (STARS) and the Wide Area Augmentation System (WAAS)\13
--called for considerable development efforts that are not scheduled
for completion until after the year 2000. As noted in many of our
reports, FAA has frequently found it difficult to meet the technical
and managerial challenges associated with developing and fielding
modern ATC equipment. (Further information on the status of these
and other ATC acquisitions that are central to FAA's modernization
effort is provided in appendixes I, II and III.)
Second, modernizing the system at an accelerated rate could prove to
be inconsistent with the principles of its new acquisition management
system, established on April 1, 1996, in response to legislation
freeing the agency from most federal procurement laws and
regulations.\14 The system calls for the agency to go through a
disciplined process of defining its mission needs, analyzing
alternative technological and operational approaches to meeting those
needs, and selecting only the most cost-effective solutions. Until
FAA goes through that analytical and decisionmaking process, it is
premature to predict what new technology should be acquired. In
developing the ATC architecture, FAA made certain assumptions about
its future needs for technology upgrades and additional capabilities.
However, when looking 5 or more years into the future, it is
difficult for FAA to predict mission needs and the likely advances in
technology with any degree of certainty.
As discussed later in this testimony, there are also significant
funding implications associated with accelerating the modernization
program.
--------------------
\13 The wide area system will use commercial communications
satellites to augment GPS' signals in the airspace between and around
airports to aid civil aircraft in navigating air routes and landing.
\14 P.L. 104-50, section 348.
SURFACE TRANSPORTATION
PROGRAMS
-------------------------------------------------------- Chapter 0:2.2
Let me turn for a moment to DOT's management of major surface
transportation programs. Our work has focused on the need for
management attention in three areas: (1) cost control and committed
financing to cover all potential costs for large-dollar surface
transportation projects; (2) federal leadership that provides
incentives to assist states and localities to overcome barriers to
deploying the Intelligent Transportation System (ITS); and (3) an
organizational structure that balances improving programs' delivery
of services with ensuring the least cost to the taxpayer.
COST CONTROL OF
LARGE-DOLLAR HIGHWAY
PROJECTS COULD IMPROVE
------------------------------------------------------ Chapter 0:2.2.1
The nation's highways and bridges are vital to our economy and
national defense. It is essential that highway and bridge projects
be well managed because of limited resources available to build and
maintain them. Because large-dollar projects generally take longer
to build and usually have more significant environmental and
community impacts than the majority of federal-aid highway projects,
they have a greater potential to experience substantial cost
increases and lengthy construction delays. These cost increases can
potentially overwhelm other highway projects and erode the already
limited funds available to meet highway needs overall. Effective
project management to contain costs can help ensure that cost growth
resulting from delays and other factors is minimized and that
transportation investment dollars are spent wisely and efficiently.
As discussed in our recently issued report on managing the costs of
large-dollar highway projects, cost containment is not an explicit
statutory or regulatory goal of FHWA's oversight.\15 As such, FHWA
has done little to ensure cost containment is an integral part of the
states' project management. FHWA influences the cost-effectiveness
of projects by its review and approval of design and construction
plans and through daily interaction with state departments of
transportation. FHWA's project approval process consists of a series
of incremental actions that occur over the period of years required
to plan, design, and build a project. FHWA approves the estimated
cost of a large-dollar project in segments, when those project
segments are ready for construction, rather than agreeing to the
total cost of the project from the outset. So, by the time FHWA
approves the cost of a large-dollar project, a public investment
decision may have effectively been made because substantial funds
will have already been spent on designing the project and acquiring
property, and much of any increase in the project's estimated costs
will have already occurred.
While many factors can cause costs to increase, we found several that
worked together to increase costs beyond the initial estimates for
projects in the six states we describe in our February 1997 report:
(1) initial estimates are preliminary and not designed to be reliable
predictors of a project's cost, (2) initial estimates are modified to
reflect more detailed plans and specifications as a project is
designed, and (3) a project's costs are affected by, among other
things, inflation and changes in scope to accommodate economic
development that occurs over time as a project is designed and built.
Finding that some states were using good cost management practices,
we recommended that FHWA be proactive in evaluating and disseminating
states' best practices so that all states could benefit from their
use.
--------------------
\15 Transportation Infrastructure: Managing the Costs of
Large-Dollar Highway Projects (GAO/RCED-97-47, Feb. 28, 1997).
COST AND FINANCING
CONCERNS REMAIN FOR THE
CENTRAL ARTERY/TUNNEL
PROJECT
------------------------------------------------------ Chapter 0:2.2.2
The Central Artery/Tunnel project, in Boston, Massachusetts,
estimated to cost $10.4 billion, is one of the largest and most
expensive highway construction projects ever undertaken. It has
advanced further in the last year than at any other time in its
history. With the Ted Williams Tunnel open to traffic and
construction of the underground Central Artery well under way, the
project is about 85 percent designed and 25 percent constructed.
About $8 billion of the $10.4 billion in contracts are either
complete or awarded. The project's most recent finance plan was
issued in September 1996. This plan was followed in December 1996
with a report by consultants on the feasibility of various options
for financing the state's share of completing and operating the
project.
Massachusetts reports that the project's costs have stabilized, the
risk of further cost increases is minimal, and financing options are
available to meet funding shortfalls. The state has made progress in
the past year by putting strategies in place designed to meet the
aggressive cost containment goals for the design and construction
phases of the project and by moving forward with legislation to
implement the recommendations of the state's Secretary of
Transportation based on the financing strategies in the consultants'
feasibility study. However, on the basis of our ongoing work, we
remain concerned that (1) the project's costs have increased and
assumptions about cost savings to offset those increases and keep the
overall cost estimate at $10.4 billion may be optimistic, and (2)
while Massachusetts has begun taking action on the recommended
financing strategies, it may not be enough to meet funding
shortfalls.
The project's $10.4 billion cost estimate depends on a number of
assumptions, including meeting the cost containment goals established
for the project as well as the reasonableness of potential savings
used to offset cost increases. The project established an aggressive
overall goal in 1995 that construction contract changes would not
exceed 10.7 percent of the estimated value of the contracts.
However, our analysis shows that the project has not met that goal
for awarded contracts, as the forecast changes for these contracts
averaged 16 to 19 percent as of November 30, 1996. With 64
construction contracts awarded and 49 construction contracts still
unawarded, it may be difficult to keep changes down sufficiently to
meet the 10.7 percent goal. The September 1996 finance plan
describes other cost increases since the February 1996 finance plan,
including $80 million related to projectwide support and $25 million
for additional right-of-way costs. However, the finance plan also
shows cost savings to offset identified cost increases, such as a $15
million reduction in one of the project's tunnel designs, to maintain
the project cost at $10.4 billion.
The largest overall savings--$600 million--comes from the project's
Owner-Controlled Insurance Program consisting of six separate
insurance policies, including workers' compensation and general
liability. Since December 1994, the estimated cost of the insurance
program has decreased from $748 million to $148 million. These
savings assume a scenario below what is usually used by the industry,
justified, according to project officials, on the project's low
claims and accident rates for the last three years. However, the
project is beginning 6 years of underground tunneling in the
congested downtown area that will entail numerous and intricate
construction challenges. For example, the project will burrow close
to buildings and subway tunnels often with only a few feet to spare.
While the project cites an excellent safety record to date, with
these inherent construction risks, the insurance savings may not be
realized.
Our analysis of the state's feasibility study identifies two
shortfalls between the project's obligation requirements and the
funding sources identified to date: (1) an interim funding gap of
$1.7 billion to $2.3 billion during the fiscal year 1998 through 2002
period and (2) a total funding gap of $100 million to $700 million
between fiscal years 1998 and 2005. These two gaps differ because,
according to the study, the project's costs will outweigh identified
sources of funding each year between fiscal years 1998 and 2002;
conversely, financing will exceed costs in each of the last 3 years
of the project from fiscal year 2003 through 2005, resulting in a
$1.6 billion surplus during that period. The study proposes a
strategy of state borrowing to cover both funding shortfalls,
including (1) a contribution from the Massachusetts Turnpike
Authority, based on revenue bonds backed by toll increases, which the
state has recommended total $1 billion--$700 million in the short
term and $300 million upon completion of the Central Artery portion
of the project, and (2) issuance of short-term "grant anticipation
notes", to be repaid with future federal highway apportionments. We
have concerns that these financing strategies may not be sufficient
to meet the shortfalls. For example:
-- There may be an additional demand on the Massachusetts Turnpike
Authority. The project has already counted on funding from a
$400 million state contribution authorized in 1995, which the
state's 5-year capital plan identifies as a contribution from
the Authority. The Authority has not yet made this contribution
and it would be in addition to the recommended $1 billion
contribution.
-- While the financial markets will ultimately decide whether using
grant anticipation notes to leverage future federal funds is
feasible, a number of challenges need to be overcome. There is
limited precedent for borrowing funds in this manner,
particularly in the amount--$1 billion or more--suggested by the
state. Furthermore, since the feasibility study assumes only
$675 million in federal funds dedicated to the project during
the surplus fiscal years from 2003 through 2005, the state may
have to use federal funds to pay off the grant anticipation
notes beyond the project's scheduled completion in fiscal year
2005, and beyond the likely duration of the next highway
authorization bill.
-- The $1.6 billion "surplus" between fiscal years 2003 and 2005
may be smaller than reported. Nearly $1 billion of this surplus
is savings from the insurance program and "air rights"
revenues--proceeds the state expects to receive from the
development of property acquired for the project. The project
has reflected $722 million in insurance proceeds as a credit to
the cost of the project in fiscal year 2005. However, even if
its assumptions about the cost of the insurance program are
realized, the project does not expect to receive these proceeds
until the insurance program ends in 2018, and the amount of the
proceeds is based on accruing interest through that time. The
state will realize proceeds from development of air rights and,
by federal law, can use those proceeds for
transportation-related purposes. However, around half the
property expected to be available will not be ready for
development until late 2004. As such, Massachusetts may not
realize much of the financial benefits from the sale of air
rights until after 2005.
Funding shortfalls will grow if the costs of the project increase or
if federal funds under the next authorization are less than expected.
If shortfalls grow, or if surpluses are not available as expected,
the state will likely have to incur additional debt over a longer
period of time to meet the project's financing needs. This may
require Massachusetts to devote a substantial portion of its federal
and state transportation funds to the Central Artery/Tunnel project
for several years after the facility is completed and carrying
traffic.
BART: CRITICAL DECISIONS
STILL ON HOLD
------------------------------------------------------ Chapter 0:2.2.3
The Bay Area Rapid Transit District (BART) intends to spend over $1.1
billion, including $750 million in federal funds, to extend mass
transit service to the San Francisco International Airport. Since
last year, we and the Congress have voiced several concerns about the
financing of the project. As we reported in August 1996, BART has
taken a number of steps that have improved the project's financing,
including (1) escalating certain costs to better account for
inflation; (2) improving its borrowing program by identifying
secondary sources of collateral and gaining a needed change in state
law; and (3) identifying additional funds should they become
necessary to finance the project, including joint development
revenues, advertising, concessions, and parking fees.\16 In November
1996, the Federal Transit Administration (FTA) informed both the
House and Senate Appropriations Subcommittees that it was satisfied
with the project's financing and that a full-funding grant agreement
could be awarded. The grant agreement will establish a ceiling for
the federal government's commitment, subject to the annual
appropriations process.
While BART has improved the project's financing overall, its November
1996 finance plan still includes optimistic assumptions about the
annual level of federal funding to be received under FTA's New Starts
Program. The November plan specifies federal funding of $110 million
in fiscal year 2000, $160 million in fiscal year 2001, $150 million
in fiscal year 2002, and $108 million in fiscal year 2003. These
compare to annual funding levels of between $110 million to $120
million that BART had included in previous finance plans and that FTA
had criticized as optimistic. BART's request for funding of $160
million in fiscal year 2001 would, for example, represent 20 percent
of the $760 million in FTA's current annual budget for the New Starts
Program. A slower rate of annual federal funding than assumed would
have the effect of increasing BART's financing costs, which BART
currently estimates to be $40 million.
In addition, your subcommittee expressed other concerns about the
project's financing in your January 7, 1997, letter to FTA and FAA.
Among your key concerns were whether (1) BART's use of a surcharge at
the airport station constituted an improper diversion of airport
funds and (2) BART is required to pay the airport rent for using a
station built with airport revenues. On February 11, 1997, the
agencies responded to you. The response states that DOT will ensure
that any implemented surcharge will comply with applicable laws but
does not definitively conclude whether the proposed airport station
surcharge constitutes revenue diversion. Because this surcharge is
part of the project's overall finance plan, it is important that DOT
make a decision on whether it is a revenue diversion. Concerning the
second issue, FAA has not yet determined the appropriateness of the
airport's plan for BART's free use of airport property. FAA has
issued for comment a proposed policy statement addressing, among
other things, whether airports may charge transit agencies less than
commercial rates for the use of airport property for public transit
facilities. In the proposed policy statement, FAA takes the view
that airports may charge publicly owned transit systems below market
rates for the use of airport property for facilities necessary for
the transportation of passengers, visitors, and employees to and from
the airport, given the significant benefits that can be achieved
through such public transit. FAA also specifically requested
comments on whether some compensation from the use of airport
property should be required. The comment period for this policy
statement closed on February 18, 1997.
DOT's response concluded that the project is at a critical juncture
and that BART's construction needs to proceed in parallel with the
airport's ongoing construction of its light rail system because the
two systems will share the same structure. The airport's light rail
system is designed to move passengers throughout the airport.
According to the airport's Director of Finance, the airport plans to
award the initial construction contracts for the BART station in
March 1997 and all such contracts by the end of June 1997. He said
that without a full-funding grant agreement, there is no guarantee
that BART will come into the airport. If it does not, he stated, the
airport will have to decide whether to incorporate BART into the
light rail system or build a less expensive structure for light rail
only. He noted that building a structure solely for light rail could
have the effect of designing BART out of the airport altogether. The
airport has not yet made a decision on how to proceed if there is no
full-funding grant agreement.
--------------------
\16 BART Airport Extension Update (GAO/RCED-96-246R, Aug. 30, 1996).
LOS ANGELES RED LINE'S
COSTS AND SCHEDULE STILL
INCREASING
------------------------------------------------------ Chapter 0:2.2.4
The Los Angeles Red Line Project, a 23.4-mile heavy rail subway
system, is facing cost increases as well as financing uncertainties
associated with funding shortfalls and the long-term financial
capacity of the Los Angeles County Metropolitan Transit Authority
(MTA), the project manager. The project currently consists of three
segments, two of which are complete or near completion. The third
segment involves the design and construction of three extensions to
North Hollywood, East Side, and Mid City.
According to January 1997 estimates by MTA, the Red Line project will
cost $6.1 billion, or about 12 percent ($651 million) above the $5.5
billion estimated in grant agreements. The $6.1 billion includes
$192 million to reconfigure a portion of the tunnel planned for the
Mid City extension needed to avoid concentrations of hydrogen sulfide
gas in the tunnel. Because the $192 million estimate represents one
of three options being considered to address the problem, costs could
increase on the basis of MTA's final decision, due in August 1997.\17
The project's costs could increase further based on the outcome of
pending lawsuits against MTA filed by retailers affected by ground
settlement along Hollywood Boulevard and from the construction
contractor that was fired by MTA for inadequate construction
techniques.
MTA currently plans to fund $3.4 billion of the $6.1 billion with
federal funds. The federal funds anticipated, which are subject to
annual appropriations, include $2.8 billion from three full-funding
grant agreements, $500 million from other federal programs, and $100
million that MTA plans to request above the current federal
commitment for segment three as part of the reauthorization of ISTEA.
However, the additional $100 million federal contribution will not be
sufficient to address the project's funding shortfall. The project
currently has an estimated shortfall of $335 million resulting from
federal, state, and local commitments that may not be realized:
-- In fiscal years 1995, 1996, and 1997, the Congress did not
provide for the annual commitments identified in the grant
agreements, resulting in a funding shortfall of $184 million.
MTA officials told us that if they continue to receive half or
less of the yearly commitment in the grant agreements, the
federal shortfall could reach $580 million or more by 2002.
-- As we reported in May 1996, the California state legislature
diverted $50 million in funds slated for MTA's bus
operations.\18 Because the legislature specified that the
shortfall could not affect the bus program, MTA transferred $50
million to bus operations that had been committed to the Red
Line project.
-- Some of MTA's local revenue commitments may also not be
realized. While the City of Los Angeles plans to honor its
commitment to fund $200 million toward the completion of segment
three, MTA will no longer require the City to fund $65 million
of the cost increase on segment two resulting from the collapse
of Hollywood Boulevard into the subway tunnel. Furthermore, MTA
does not expect to receive $36 million of the $75 million in
estimated revenues from assessments levied on retail properties
adjacent to planned stations because some retail property owners
oppose the assessment.
Additional problems could further impact MTA's ability to finance the
Red Line and other transportation projects. First, projected local
sales tax revenues have declined, resulting in $400 million less in
revenues than expected through 2010. Second, in October 1996, the
bus riders union (and others) and MTA entered into an agreement that
requires MTA to--among other things--expand its bus service.\19 MTA
has estimated that implementing the agreement will cost $480 million
through 2010. Finally, if MTA realizes its projected federal
shortfall of $580 million, MTA's overall funding shortfall could
reach $1.5 billion for all of its projects, which may affect its
funding commitments to both the Red Line and the Alameda Corridor
Project, which I will discuss in the next section. MTA is
reevaluating its existing funding commitments and plans to report to
its Board of Directors in June 1997 on a revised financial plan,
which would include recommendations on how to meet its commitments.
On January 6, 1997, FTA took a number of steps to address MTA's
funding shortfall, including requiring MTA to develop a recovery plan
and hiring a financial management consultant to review and report on
MTA's financial capacity.\20 MTA's recovery plan, which impacts only
segment three, assumes annual federal funding of $100 million and
proposes a transfer of $300 million in flexible federal funds from
the high-occupancy-vehicle program to the rail program.
Additionally, the plan proposes a 2-year delay and $69.3 million
increase for the East Side extension and a 10-year delay and $192
million increase for Mid City.
The increased budgets and delayed schedules outlined in MTA's
recovery plan would require that FTA and MTA renegotiate the
full-funding grant agreement for segment three. MTA's recovery plan
assumes that the $261 million budget increase for segment three will
be paid from local funds, as we mentioned earlier. MTA officials
have subsequently told us that they plan to seek $100 million in
additional federal funding for segment three in the reauthorization
of ISTEA.\21 According to MTA officials, the delays to Mid City are
due to technical problems that could justify additional federal
funding. However, FTA officials told us that they will use their
analysis of MTA's recovery plan, along with the financial management
consultant's report, to assist them in assessing MTA's financial
capacity to fund the Red Line Project.
--------------------
\17 The three alignment options being considered range in cost from
$167 million to $279 million.
\18 Los Angeles Red Line: Financing Decisions Could Affect This and
Other Los Angeles County Rail Capital Projects (GAO/RCED-96-147, May
14, 1996).
\19 The agreement also requires MTA to freeze the general base fare
at $1.35 and offer an $11 weekly bus pass, both for 2 years, and add
102 more buses and 50 more limited-service vehicles to the street
over the next 2 years.
\20 The financial management consultant must submit his report to FTA
no later than March 31, 1997.
\21 MTA also plans to request $100 million for further extensions to
the current project.
FINANCING ISSUES
UNRESOLVED FOR THE
ALAMEDA CORRIDOR PROJECT
------------------------------------------------------ Chapter 0:2.2.5
Financing uncertainties could also be an issue for the Alameda
Corridor intermodal project, a 20-mile freight rail corridor that the
cities of Los Angeles and Long Beach plan to construct from their
respective ports to central rail yards near downtown Los Angeles.
When completed in 2001, the project will consolidate all rail traffic
into a new rail corridor, increase trains' average speed from 10 to
about 40 mph, and reduce much of the existing congestion in the
corridor caused by nearly 200 grade crossings. These upgrades are
also intended to accommodate the continued growth in commercial trade
flowing into the ports from Pacific Rim nations.
As of February 1997, about 5 percent of the project had been
constructed, and the total estimated cost is expected to be about $2
billion. The project will be paid for using federal, state, and
local funds, as well as revenue bonds issued by the Alameda Corridor
Transportation Authority. Over $850 million in funding for the
project has been secured: $407 million from the ports to purchase
the right-of-way for the new rail line, $400 million from the federal
government in the form of a direct loan, and an additional $47
million in federal grants. As for the remaining funds, about $711
million is to come from revenue bonds that will be issued in 1998 by
the Alameda Corridor Transportation Authority; about $347 million
from the Los Angeles County MTA; and about $60.5 million, from the
state. Although the state funds appear to be secure, it is unclear
if the project will receive the full-funding commitment from MTA or
be able to raise the $711 million in revenue bonds.
Project officials state that MTA's ability to meet its funding
commitment is uncertain. Although MTA has identified a bond, secured
by a local sales tax, as the potential source for funding its
commitment to the project, these tax revenues are projected to
decline. In addition, a bond rating agency stated that the Alameda
Corridor Transportation Authority's bond would likely be investment
grade, but the agency cited several factors that could affect the
project's ability to secure the $711 million needed. First, the
project has asked the Internal Revenue Service to allow it to issue
tax-exempt revenue bonds--a ruling that would make the bonds more
attractive in bond markets and reduce the project's overall level of
debt. Project officials estimated that without this tax-exempt
status, they would have to issue more than $800 million in bonds to
meet the same level of debt financing. Second, a bond rating agency
stated that its assessment of the risk associated with the project's
ability to repay the bonds will affect the project's credit rating
and the interest rate of the bonds, influencing their attractiveness
to investors. Current risk factors include the capacity of the prime
contractors to complete a complex construction project within the
estimated costs; the potential diversion of funds from the ports to
the cities of Los Angeles and Long Beach; and the potential for
further litigation by two smaller cities that will be affected by the
project's construction.
The potential diversion of funds is important because between 1992
and 1994, the state allowed Los Angeles and Long Beach to divert $90
million from their ports to the cities' general funds, causing a bond
rating company to lower the bond rating of the Port of Long Beach.
The ports are required to repay 40 percent of the principal and
interest associated with the revenue bonds as well as the federal
loan. (The railroads are responsible for the remaining 60 percent.)
According to a project official, the project will use the $400
million federal loan to pay for engineering, design, and initial
construction costs. Federal officials stated that the federal loan
will improve the project's credit rating both by decreasing the
revenue bonds needed and serving as a general sign of federal
commitment to the project. The federal loan is subordinate to the
revenue bonds, which means the revenue bonds will be paid off first
if funding is limited, thus increasing the attractiveness of the
revenue bonds to investors but posing a greater risk to the federal
government.
FHWA officials have cited the Alameda Corridor's federal loan as a
precedent for future financing efforts. Officials noted that FHWA
used the project as a model in the agency's effort this year to
create the new $100 million Transportation Infrastructure Credit
Program. The program is intended to leverage federal funds and
provide credit to assist nationally significant projects,
particularly large multimodal, revenue-generating projects. However,
since the Alameda Corridor project is in its early stages, there are
a number of unanswered questions concerning the risk to the federal
government if other funding sources are not realized and the success
of this type of federal loan at leveraging other funding.
FEDERAL COMMITMENT TO
TRANSIT CAPITAL FUNDING
IS MORTGAGING FUTURE "NEW
STARTS" FUNDS
------------------------------------------------------ Chapter 0:2.2.6
As of February 1997, FTA had signed full-funding grant agreements
with 13 projects, and two additional projects, including BART's
airport extension, had agreements pending. The outstanding
commitments on these 15 projects totaled about $3.75 billion. These
projects are generally in the final design or the construction phase
when they request federal funding commitments through a full-funding
grant agreement under FTA's New Starts Program.
Although the authorization period for FTA's New Starts Program ends
in October 1997, FTA is allowed to make contingent commitments to
projects with full-funding grant agreements beyond the authorization
period. The ceiling for these commitments is determined by combining
the remaining unobligated authorization under ISTEA--$1.7 billion as
of October 1, 1996--with one-half of the estimated remaining
unobligated balance in the mass transit account of the Highway Trust
Fund at the end of the authorization period--$2.8 billion as of
October 1, 1996.\22 This provided FTA with sufficient authority to
cover commitments made or planned for the 15 projects with or
projected to have full-funding grant agreements.
By using this commitment authority, the FTA has essentially mortgaged
future federal New Starts funds because it will take until 2003 to
fulfill existing and pending full- funding grant agreements if the
Congress continues to fund these projects at about the same level
provided over the last few years--about $800 million. Assuming no
increase, it is unlikely that new projects would be able to compete
for federal New Starts funds until that time; at the beginning of the
fiscal year, there were 11 projects that were nearing the stage in
the investment cycle at which projects request such federal
funding.\23 This also raises a number of questions regarding existing
commitments. For example, will other full-funding grant agreements,
like the one for the Los Angeles Red Line project, be subject to
renegotiation for increased costs or delays? It appears that
increased funding, if requested, for ongoing projects may not be
possible given existing commitments. Furthermore, extending the
deadline for existing projects commits federal funds for those
projects further into the future, narrowing the possibility that new
projects will be funded. Given that funds may not be available under
the New Starts Program, it may be a signal to state and local
governments that they need to look for less costly alternatives to
meet their transportation needs or build them without federal capital
assistance.
--------------------
\22 In addition, ISTEA specified that commitments to BART's airport
extension program be made from the entire unobligated balance of the
mass transit account.
\23 FTA has requested $634 million for fiscal year 1998. If
appropriated at this level, it could exacerbate the situation.
ISSUES CONCERNING ITS'
DEPLOYMENT
-------------------------------------------------------- Chapter 0:2.3
Established by ISTEA in 1991, DOT's ITS program has received federal
funding totaling $1.3 billion to advance the use of computer and
telecommunications technology that will enhance the safety and
efficiency of surface transportation. We reported to this
Subcommittee last week on the progress states and localities had made
in deploying ITS and identified options the federal government could
consider to facilitate deployment.\24
Although the program envisioned widespread deployment of an
integrated multimodal ITS, this vision has not been realized for
several reasons. First, the ITS national architecture was not
completed until July 1996, and a 5-year effort to develop technical
standards is planned for completion in 2001. The ITS architecture
and technical standards, which define ITS components and how they
will work together, are prerequisites to large-scale integrated
deployment of ITSs. In addition, the lack of knowledge of systems
integration among state and local officials, insufficient data
documenting the cost-effectiveness of ITS in solving transportation
problems, and competing priorities for limited transportation dollars
will further constrain widespread deployment of ITS.
DOT's fiscal year 1998 budget includes $250 million for ITS and
proposes to focus the federal funds on deploying it. However, our
review has shown that federal leadership in providing nonfinancial
and financial incentives to overcome barriers may be needed to
facilitate further deployment. The nonfinancial incentives that the
federal government can offer include providing technical assistance
and training to state and local officials, disseminating information
on the costs and benefits of ITS efforts, and completing the
development of technical standards in a timely manner.
Our interviews with transportation officials in 10 of the nation's
largest urban areas revealed a wide variety of opinions on the
appropriate federal role for funding ITS' deployment. Officials in
six urban areas stated that federal funding of $1 billion each year
would be needed to achieve widespread deployment of ITS technologies.
They added that in light of other pressing transportation priorities,
additional investments in ITS might not occur without substantial
federal financial assistance. In contrast, officials from four other
urban areas opposed a large-scale federal-aid program because they do
not want additional federal funding categories. Some of these
officials also said that such a program could drive unnecessary
investments in ITS, as decisionmakers chased ITS capital money, even
though another solution might have been more cost-effective. In the
absence of a large federal program, officials from 5 of the 10 urban
areas supported a smaller-scale federal seed program. They said that
such a program could be used to fund experimental ITS applications,
promote better working relationships among key agencies, or support
information systems for travellers. The current limitations to
deploying ITS in urban areas, as well as budgetary constraints, are
considerations for this Subcommittee as you consider DOT's fiscal
year 1998 request for the ITS program.
--------------------
\24 Urban Transportation: Challenges to Widespread Deployment of
Intelligent Transportation Systems (GAO/RCED-97-74, Feb. 27, 1997).
FEW BUDGETARY SAVINGS HAVE
OCCURRED THROUGH SURFACE
FIELD OFFICE
CONSOLIDATION/COLOCATION
-------------------------------------------------------- Chapter 0:2.4
In testimony before this Subcommittee in February 1995, we stated
that opportunities existed for budgetary savings from the proposed
consolidation of DOT's five surface operating administrations into
one by, among other things, consolidating the extensive field office
structure--161 offices at that time.\25 We also suggested that if the
departmental reorganization did not occur, there still might be
opportunities to streamline the field structure through colocation.
We noted that colocation can reduce such administrative costs as
reception, printing, mailing, and copying. We cited Denver,
Colorado, as an example of an opportunity for colocation because
DOT's modal agencies have seven field offices in the metropolitan
area.
Since that time, the overall departmental reorganization is no longer
on the table, and DOT is not currently examining options for
consolidating its surface field office structure. However, DOT has
established a Colocation Task Force to identify opportunities for its
modal agencies, including FAA and the Coast Guard, to colocate field
offices within a metropolitan area to improve the delivery of
services by providing "one-stop shopping" for customers and reduce
overhead costs. The task force has initially identified 160 field
offices that could be colocated into 60 locations. The results of
its initial evaluation of these offices is due this summer and will
be reviewed by the Secretary's Management Council.
The task force is using lease expiration dates for existing office
space or the date of completion of new office space as a trigger for
its assessment of specific locations. Decisions will be made on the
actual extent of colocation based on these specific assessments. One
colocation occurred recently when the NHTSA office in Hanover,
Maryland, moved in with FHWA's regional office in Baltimore. Another
colocation under consideration is in Kansas City, Missouri, because
the new FAA regional center is scheduled to open there in 1998. DOT
is currently assessing the costs and benefits of housing all DOT
field staff in that area in the new regional center. Issues of
concern include lease costs in downtown office buildings that are
higher than those currently paid in suburban locations and the
possibility that customers of FHWA, FRA, FTA, and NHTSA may not all
be located nearby.
DOT officials told us that their efforts are currently focused on
service delivery and customer satisfaction and that this focus may
result in increasing the costs of the field structure. For example,
recently established metropolitan field offices established to better
serve urban customers in New York, Philadelphia, Chicago, and Los
Angeles will cost more money rather than save it because FHWA, in
particular, does not have field offices in these cities, and the new
offices will be in addition to existing FHWA field offices. However,
while their focus has been on improved service delivery, DOT
officials have taken actions to reduce costs. For example, they
explained that they have closed seven small FRA inspection offices
and 5 Inspector General locations because staff, while still located
in each of these areas, are using either telecommuting centers or
their residences as a base of operations. Furthermore, FHWA has
consolidated financial, personnel, and data processing support among
its nine regions rather than have that support in each region.
--------------------
\25 Surface Transportation: Reorganization, Program Restructuring,
and Budget Issues (GAO/T-RCED-95-103, Feb. 13, 1995).
OTHER MAJOR ISSUES
---------------------------------------------------------- Chapter 0:3
In addition to the safety and security and management issues facing
DOT, there are three other areas we would like to discuss--financing
FAA, Amtrak's financial condition, and the effectiveness of the Coast
Guard's drug interdiction efforts.
FINANCING FAA
-------------------------------------------------------- Chapter 0:3.1
One of the most critical issues confronting DOT and the Congress is
how to adequately fund FAA to meet its mission over the long term.
The Congress has recognized the seriousness of FAA's long-term
financing problems and directed that, among other things, an
independent assessment of FAA's financial requirements be completed
and that the National Civil Aviation Review Commission be created to
recommend to the Secretary of Transportation by August 1997 how best
to finance the agency in light of, among other things, the
independent assessment.\26 Additionally, the Congress required that
we assess (1) how ATC costs are allocated between FAA and DOD and (2)
airport capital needs, and that we report to the Congress by April
1997. We are also required to report to the Commission so it can use
the results of our work in its assessment.
It will take some time for the Commission to complete its work and
the Congress and the administration to assess it. Until then, we
will not know the full extent of FAA's financing problems and how
they could be addressed. However, FAA has included some estimates of
the magnitude of the problem in its fiscal year 1998 budget
submission. FAA projects about a $9 billion shortfall between its
existing requirements and projected funding levels through 2002, as
illustrated in the following table.
Table 1
FAA's Projected Budget Shortfall, 1998-
2002
(Dollars in billions)
FAA's
estimated FAA's
requirements projected FAA's budget
Fiscal year \a budget\b shortfall
---------------------------- ------------ ------------ ------------
1998 $ 8.46 $ 8.46 $ 0
1999 10.82 8.68 2.14
2000 11.22 8.91 2.31
2001 11.32 9.15 2.17
2002 11.50 9.39 2.11
======================================================================
Total $ 53.32 $ 44.59 $ 8.73
----------------------------------------------------------------------
Source: FAA and the President's 1998 budget.
\a Requirements for fiscal year 1998 are requested budget authority
in the President's 1998 budget. Requirements for fiscal years
1999-2002 are FAA's estimates.
\b Budget estimates for fiscal years 1998-2002 come from the
President's 1998 budget.
A significant amount of the $9 billion shortfall would occur in FAA's
operations account. The shortfall in this account is primarily
attributable to increases in safety staffing, including new
controllers, flight standards inspectors, certification personnel,
and field maintenance technicians. Higher employee salaries and
health care expenses also contribute to FAA's estimated gap in
funding. The remainder is primarily due to increased facility and
equipment requirements needed to transition to free flight (a system
of air traffic control where pilots choose their own routes, rather
than having it specified by FAA) and improve airport security. The
growth in FAA's requirements for facilities and equipment translates
to a 38-percent increase in 1999 over the 1998 requested level.
FAA officials estimate that this $9 billion potential shortfall could
increase by an additional $4 billion as the agency tries to address
the Gore Commission recommendations to accelerate modernization of
the National Airspace System. This increase will be reflected in the
facilities and equipment account. FAA expects to have a complete
estimate of these costs later this year.
While we do not disagree that FAA faces significant financial
problems, we cannot quantify how severe the problems will be. We do
know that FAA's analysis presumes that the agency will not realize
any productivity gains--through technological advances, new
operational concepts, or other initiatives--that will enable it to
reduce its controller or noncontroller workforces or prevent
operating costs from growing at the projected rate of 7 percent
annually.
--------------------
\26 Under the Federal Aviation Reauthorization Act of 1996, after
receiving the national commission's report, the Secretary of
Transportation is required to consult with the Secretary of Treasury
and report to the Congress by October 1997 on the Secretary's
recommendations for funding the aviation system through the year
2002.
AMTRAK'S FINANCIAL CONDITION
-------------------------------------------------------- Chapter 0:3.2
Over the last several years, we have issued a number of reports and
testified several times on Amtrak's financial condition, and we
continue to monitor Amtrak's efforts to address its financial
problems.\27 Amtrak's passenger rail service has never been
profitable and, through fiscal year 1997, the federal government has
provided Amtrak over $19 billion for operating and capital expenses.
In response to continually growing losses and a widening gap between
operating deficits and federal subsidies, Amtrak developed strategic
business plans in 1995.\28 These plans, which have been revised
several times, were designed to increase revenues and control cost
growth and, at the same time, eliminate Amtrak's need for federal
operating subsidies by 2002.
Our preliminary assessment of Amtrak's financial condition is that,
despite some gains, the corporation is still in a very precarious
position. It remains heavily dependent on federal support to meet
its operating and capital needs. Although actions taken by Amtrak
through its business plans have helped reduce its net losses, the
corporation has struggled to reach operating loss targets. As a
result, greater than expected losses have made it difficult for
Amtrak to continue its path toward eliminating federal operating
support. While Amtrak narrowed the gap between its operating deficit
and the federal operating subsidy in fiscal year 1995, this gap grew
again in fiscal year 1996. In fiscal year 1996, the net loss was
$764 million, and the gap between the operating deficit and federal
operating support was $82 million.
In part to make up the operating and capital shortfalls, Amtrak has
borrowed heavily since 1993. From fiscal years 1993 to 1996,
Amtrak's debt and capital lease obligations nearly doubled--from
about $527 million to about $987 million (in 1996 dollars). These
debt levels do not include an additional $1 billion expected to be
incurred beginning in 1999 to finance 18 high-speed train sets and
related maintenance facilities for the Northeast Corridor and the
acquisition of new locomotives.
It is important to note that Amtrak's increased debt levels could
limit the use of federal operating support to cover future operating
deficits. In fact, over the last 4 years, interest expenses have
tripled--from $20.6 million in fiscal year 1993 to $60.2 million in
fiscal year 1996. Since Amtrak pays interest from federal operating
assistance and principal from federal capital grants, this increase
has also absorbed more of the federal operating subsidy each year.
Between fiscal years 1993 and 1996, the percentage of federal
operating subsidies accounted for by interest payments has increased
from 6 percent to 21 percent. As Amtrak assumes more debt to acquire
equipment, the interest payments are likely to continue to consume an
increasing portion of federal operating subsidies.
Implementation of its strategic business plans, including reducing
some routes and services, cutting management positions, and raising
fares, appears to have helped improve Amtrak's financial condition.
However, planned net loss targets have frequently been missed. To
illustrate, Amtrak's plans for fiscal years 1995 and 1996 included
actions to reduce the net losses by $195 million--from about $834
million in fiscal year 1994 to $639 million in fiscal year 1996.
However, actual net losses for this period were about $127 million
more than Amtrak had planned. Amtrak's fiscal year 1997 net losses
are expected to be even higher than those for fiscal year 1996.
Largely as a result of increased costs from postponed route and
service actions, Amtrak's planned year-end net loss has been revised
upward to $762 million from the originally projected $726 million.
Furthermore, Amtrak projects that its net loss could be as high as
$786 million if unanticipated expenses and revenue shortfalls should
occur.
Amtrak's goal of eliminating federal operating subsidies by 2002 is
heavily dependent on capital investment. Such investment--the
modernizing of property, plant, and equipment--will not only help
Amtrak to retain revenues by improving the quality of service but
will potentially increase revenues by attracting new riders.
Amtrak's capital investment needs are great, both to replace and
modernize the current physical assets and to complete new projects
such as high-speed rail service in the Northeast Corridor. For
example, in May 1996, FRA and Amtrak estimated that about $2 billion
would be needed over the next 3 to 5 years to recapitalize the south
end of the corridor and preserve its ability to operate in the
near-term at existing service levels. FRA and Amtrak estimate that
up to $6.7 billion may be needed over the next 20 years to
recapitalize the entire corridor and make improvements targeted to
respond to high-priority opportunities for growth. Finally, Amtrak
estimates an additional $1.4 billion will be needed to complete the
high-speed rail project.
Our ongoing work indicates that Amtrak has made some progress in
addressing capital needs, but the going has been slow, and in some
cases, Amtrak may be facing significant future costs. For example,
in October 1996 about 53 percent of Amtrak's active fleet of 1,600
cars averaged 20 years old or more and were at or approaching the end
of their useful life. It is safe to assume that as this equipment
continues to age, it will be subject to more frequent failure and
require more expensive repairs.
Finally, Amtrak will continue to find it difficult to take those
actions necessary to further reduce its costs. For example, Amtrak
has been unsuccessful in negotiating productivity improvements with
labor. Such improvements were expected to save about $26 million in
fiscal year 1995 and another $79 million in fiscal year 1996.
According to an Amtrak official, over the last 2 years Amtrak has not
aggressively pursued negotiations with labor unions over productivity
improvements. And Amtrak's ability to make route and service
adjustments remains an outstanding issue.
Amtrak's financial future has been staked on its ability to eliminate
federal operating support by 2002 by increasing revenues, controlling
costs, and providing customers with high-quality service. Although
its strategic plans have helped reduce operating losses, Amtrak
continues to face significant challenges in accomplishing this goal,
and it is likely that Amtrak will continue to require federal
financial support--both operating and capital--beyond that time
frame.
--------------------
\27 Amtrak's Strategic Business Plan: Progress to Date
(GAO/RCED-96-187, July 24, 1996); Northeast Rail Corridor:
Information on Users, Funding Sources, and Expenditures
(GAO/RCED-96-144, June 27, 1996); Amtrak: Early Progress Made in
Implementing Strategic Business Plan, but Obstacles Remain
(GAO/T-RCED-95-227, June 16, 1995); Intercity Passenger Rail:
Financial and Operating Conditions Threaten Amtrak's Long-Term
Viability (GAO/RCED-95-71, Feb. 6, 1995).
\28 Net loss is defined as total revenues minus total expenses.
Operating deficit is the same as net loss, except non-cash items
(such as depreciation) are excluded from total expenses.
COAST GUARD'S ANTIDRUG
EFFORTS
-------------------------------------------------------- Chapter 0:3.3
In its fiscal year 1998 budget request, the administration is asking
for $389 million for operations related to the Coast Guard's drug
interdiction efforts, a $53 million increase over 1997 levels. Mr.
Chairman, late last year, you and Representative Porter asked us to
assess the Coast Guard's progress in developing an approach to drug
interdiction that conforms with the principles of the Government
Performance and Results Act (GPRA).\29 We plan to report to you later
this month, but we would like to share our preliminary findings.
GPRA calls for federal agencies to pay more attention to the results
of their programs, a departure from focusing on such measures as
staffing and activity levels. GPRA requires agencies to (1) develop
results-oriented performance goals, (2) identify ways to achieve
them, and (3) disclose key factors that could keep them from meeting
their goals. The Coast Guard has made a start at meeting these
requirements for its drug interdiction efforts, but Coast Guard
officials acknowledge they must overcome obstacles in all three areas
if they are to be in compliance by 1999, when the act's requirements
become fully effective.\30
Thus far, the Coast Guard has defined its performance goal as
"reducing the amount of illegal drugs entering the country through
maritime routes by 25 percent over five years." The preliminary goal
represents a start toward conformance with GPRA in that it covers the
required time (5 years) and is results-oriented. It remains to be
seen, however, whether this goal can be effectively measured. Simply
reporting the amount of drugs seized or deterred is not enough.
Gauging effectiveness means comparing such information against a
measure of supply--how much smugglers tried to ship or how much still
got through. The Coast Guard's approach calls for making such
comparisons, but the illegal nature of drug trafficking makes
obtaining reliable estimates of supply difficult. An interagency
effort sponsored by the Office of National Drug Control Policy has
made some progress in developing estimates on the amount of cocaine
entering the United States. According to Coast Guard officials, a
similar effort is under way for estimating heroin traffic.
A related obstacle is the difficulty of separating the impact of the
many agencies involved in drug control. For example, a decrease in
the amount of drugs entering the United States through maritime
routes could also be the result of greater efforts to control drugs
in the source country, better intelligence from other U.S. agencies,
or lower domestic demand due to agencies' efforts to reduce it.
Coast Guard officials indicated that reducing the amount of illegal
drugs entering the United States via maritime routes largely depends
on resources. They expect that additional resources will allow a
higher "contact rate" with ships and planes in targeted areas, which
in turn will provide greater deterrence.\31 In the complex world of
drug control efforts, however, a key obstacle for the Coast Guard is
establishing a clear case that spending these additional resources
can effectively contribute to the Office of National Drug Control
Policy's mission of reducing drug use and its consequences. In this
regard, a recent study conducted by the Office sounded a cautionary
note. The study concluded that the effect of greater expenditures in
the "transit zone" where the Coast Guard's efforts are currently
concentrated does not seem significant enough to affect U.S. drug
use.\32 It suggested considering whether the investment of a similar
level of resources elsewhere in the drug strategy might produce more
benefits. However, the study is hardly the last word on the issue.
It has a number of methodological limitations, and Coast Guard
officials point out that a small investment in the transit zone
(about 1.6 percent of the total federal budget at the time of the
study) would produce an 11-percent reduction (90 metric tons) in drug
traffic.
Coast Guard officials acknowledge that factors other than funding
affect their success in stopping maritime drug smuggling. One factor
is the large geographic area that must be covered. Unlike in the
Caribbean, where specific paths for smuggling have been identified,
in the eastern Pacific Ocean, the large area makes deterrence and
interdiction more difficult. Another factor is smugglers' increasing
technological sophistication. For example, by using global
positioning system technology to set airdrop coordinates prior to
departure, smugglers can reduce radio communications, making it
harder for the Coast Guard to detect them. To comply with GPRA, the
Coast Guard may need to identify such factors.
--------------------
\29 P.L. 103-62.
\30 GPRA requires agencies to develop a strategic plan by the end of
fiscal year 1997 and a performance plan by the end of fiscal year
1999. The strategic plan identifies long-term goals and describes
how the agency intends to meet them; the performance plan provides
the linkage between the strategic goals and what managers and
employees do day-to-day, including specific performance goals and
performance measures.
\31 The Coast Guard defines "contact rate" as the frequency of
contact with maritime traffic in targeted areas. According to Coast
Guard officials, the agency currently has a contact rate of 12
percent, which they believe deters or interdicts 29 percent of the
smugglers using maritime routes. They believe that a contact rate of
40 percent will deter or stop smugglers in 90 percent of the cases in
high-risk areas. The amount of resources needed to raise the contact
rate to 40 percent is unknown.
\32 The National Drug Control Strategy, 1996: Program, Resources,
and Evaluation, Office of National Drug Control Policy (Washington,
D. C.: Apr. 1996), pp. 48-51. The transit zone where the Coast
Guard's efforts are concentrated includes the Caribbean Sea, the Gulf
of Mexico, Central America, Mexico, and the Eastern Pacific.
-------------------------------------------------------- Chapter 0:3.4
This concludes our prepared statement. We will be happy to respond
to any questions that you or other Members of the Subcommittee may
have.
ONGOING AIR TRAFFIC CONTROL
MODERNIZATION PROJECTS: STATUS
AND ISSUES
=========================================================== Appendix I
For several major modernization projects, the Federal Aviation
Administration (FAA) has made progress in fielding equipment. For
example, about 6 months ago we reported on FAA's effectiveness in
acquiring an interim replacement for its Display Complex Channel
(DCC), an aging system that was the subject of much media attention
because of outages at a Chicago air traffic control (ATC) facility.\1
At that time, we concluded that FAA was on course to deliver this
system, known as DCC Rehost, or DCCR, on time and within its budget.
Since then, FAA has installed and is operating DCCR at the first site
(Chicago) ahead of schedule, and it has reported that DCCR is $3
million under its budget.
We see several reasons why this acquisition has enjoyed so much
success when others have been so problematic. First, this
acquisition was relatively small, involving comparatively little in
the way of new software development, and equipment delivery was
relatively quick. Second, it was well defined. That is, most of its
requirements were embedded in the existing DCC and thus were well
understood and primarily involved transferring these functions to new
hardware. Third, the project management team instilled discipline
into its acquisition strategy. For example, it defined and followed
structured risk management and quality assurance programs, both of
which are invaluable in systems development and acquisition. As
such, it was a sharp departure from past ATC projects, like the
Advanced Automation System (AAS), which were very large, scheduled
for delivery years in the future, characterized by poorly understood
and poorly controlled requirements, and managed without discipline.
In addition, since we testified last March, FAA has commissioned 11
Terminal Doppler Weather Radars, bringing the total commissioned to
22 of the 45 systems planned. Of the 23 remaining systems, 18 are
expected to be commissioned by the end of July 1997, and 5 are
designated for storage until the agency resolves problems acquiring
needed parcels of land. After 8 years of delays, in early 1996 FAA
commissioned the first of 40 planned long-range radars--called Air
Route Surveillance Radar-4s. Since last year, FAA has commissioned
12 additional radars. According to the current plans, all but seven
of the remaining radars will be commissioned by February 1998, though
the dates have yet to be determined because FAA needs to resolve
environmental concerns at one site and scheduling issues at six
others. Since last year, FAA has commissioned 13 additional Voice
Switching and Control Systems, completing the commissioning of all 21
systems.
FAA continues to work on the Display System Replacement (DSR)
project, which will provide controllers in en route ATC facilities\2
with new work stations. According to FAA, the cost remains at about
$1 billion, and the schedule still calls for making the system
operational at the first site by October 1998. DSR work stations are
in full production, and all equipment needed for operations at the
first site--Seattle--was delivered 8 months early. FAA's testing of
the system software is scheduled to be completed in mid-March 1997.
Currently, FAA foresees no major problems with software.
For the major acquisitions we track, however, most will not be
completely fielded until the year 2000 and beyond (see app. II). In
addition, costs for 8 projects increased, resulting in a total of
$194 million in additional costs. Details on certain key
acquisitions are provided in appendix III.
--------------------
\1 Air Traffic Control: Good Progress on Interim Replacement for
Outage-Plagued System, but Risks Can Be Further Reduced
(GAO/AIMD-97-2, Oct. 17, 1996).
\2 The primary role of the en route centers is to direct traffic in
air routes outside of terminals' airspace and throughout the national
airspace.
STANDARD TERMINAL AUTOMATION
REPLACEMENT SYSTEM
--------------------------------------------------------- Appendix I:1
In September 1996, FAA contracted with Raytheon Corporation to
develop, produce, and implement the Standard Terminal Automation
Replacement System (STARS). This project is designed to replace 15-
to 25-year-old computers, controller work stations, and related
equipment at about 170 FAA terminal ATC facilities between December
1998 and February 2005. FAA currently estimates that STARS will cost
about $2.2 billion, including $940 million for facilities and
equipment and about $1.3 billion to operate and maintain the system
over its life.
FAA's cost estimate for STARS has the potential to grow by as much as
$500 million, according to a September 1996 analysis that projected
future operations and maintenance costs. On the basis of more
current information, project officials told us that there may be some
minor cost growth but they could not provide us with an updated
estimate or detailed support for their views. FAA will also incur
costs to make STARS operational. FAA expects to spend at least $18
million to get about 50 facilities ready to accept STARS equipment.
This estimate is expected to grow as FAA develops cost estimates for
site preparation of the 120 remaining facilities.
Regarding the STARS schedule, we found that it is attainable only if
FAA successfully mitigates certain risks. For example, FAA has yet
to secure all stakeholders' commitment to the schedule. The schedule
anticipates that the contractor will install and deploy most STARS
equipment with support and oversight provided by FAA's Airway
Facilities Service. However, the Airway Facilities Service at the
regional level has not agreed to the installation plan because it is
still uncertain of its role. Furthermore, the workforce's union has
not been briefed on the plan and is concerned about its effect on
their members' job security. Also, FAA must resolve scheduling
conflicts between STARS and other modernization efforts. For
example, the original schedule for deploying STARS at the first 45
sites presented 12 potential conflicts where equipment was due to be
delivered during facility renovation or replacement.
Additionally, if FAA and its contractor experience difficulties in
software development, STARS' implementation--particularly at the
three facilities targeted for operating it before fiscal year
2000--will likely be delayed. FAA and Raytheon expect to use
commercial off-the-shelf computer hardware and some previously
developed software for STARS. However, a software development effort
is still required. FAA does not expect to complete testing of the
initial STARS' software until September, 1998, and the full software
until July, 1999. As recently as December 1996, FAA and Raytheon
were discussing how the system would provide specific functions and
what functions would be needed. These discussions resulted in
agreement on 28 outstanding issues. Overall, FAA estimates that some
140,000 lines of new code will need to be written. For example, some
2,000 lines of new code are needed to fulfill safety requirements
such as warning controllers when aircraft are not maintaining proper
separation or minimum safe altitudes.
FAA is aware that these risks must be mitigated and has begun several
initiatives. While such actions are encouraging, it is too early to
tell how effective they will be.
THE GLOBAL POSITIONING SYSTEM
--------------------------------------------------------- Appendix I:2
FAA faces important planning, technical, and funding issues in
augmenting the Global Positioning System (GPS)\3 for civil aviation
purposes. Within the past year, FAA has established a team and
developed a road map for managing the development and implementation
of the agency's Wide Area Augmentation System (WAAS). The agency
also addressed problems with contractor performance by terminating
the original contract for procurement of the WAAS and immediately
signing another.
For the Local Area Augmentation System (LAAS), which will enable GPS
to be used for the most demanding precision approaches, FAA has
signed two contracts for system development activities.\4 It has not,
however, completed schedule and cost estimates for the LAAS, as we
recommended in 1995, because the agency has not decided whether it
will fully fund the development, procurement, and maintenance of this
system.\5 The agency may turn these responsibilities over to
individual airports. FAA expects to complete an investment analysis
by mid-1997 to determine how LAAS should be financed.
FAA's plans for LAAS need to be definitive as soon as possible for
two major reasons. First, as emphasized by the Air Transport
Association at a congressional hearing on November 30, 1995, the
timing of the agency's efforts will impact the production of GPS
avionics and the retrofitting of aircraft. Second, these plans will
also clarify when FAA could expect to begin decommissioning its
instrument landing systems (ILS), for which FAA spends substantial
resources for operation and maintenance. We reported last year that
some 120 ILSs are over 20 years old and experience twice the number
of outages as expected under current design standards.\6 If FAA
shifts to airports the responsibility for acquiring LAAS, FAA will be
in the position of maintaining the existing ILSs until the airports
decide to install LAAS.
Recent events have confirmed our long-standing concerns about
technical issues that put FAA's schedule for augmenting GPS at risk.
In 1994, in response to recommendations from government and industry
groups, FAA accelerated its schedule from 2000 to 1997 for civil
aircraft to be able to use the augmented GPS domestically as a
"primary means" of navigation--in other words, not relying on other
navigation aids. In 1995, we reported that FAA would probably not
meet the 1997 milestone. Delays were realized this past year when
FAA announced that the WAAS would not provide this primary means
capability until late 1998 at the earliest. The delays occurred
because (1) FAA underestimated the technical challenges involved in
achieving the performance requirements for the system's availability,
accuracy, and integrity and (2) the initial contract for WAAS was
terminated when FAA became convinced that the contractor could not
achieve cost, schedule, and performance goals.
Funding has also become a significant issue for both WAAS and LAAS.
In 1995, we reported that FAA had not yet developed information on
the funding required to implement the WAAS. In early 1996, FAA
approved a cost baseline for WAAS: $556 million in facility and
equipment costs and $9 million in operations and maintenance costs.
However, by mid-1996 FAA officials began expressing concern about the
agency's ability to keep costs within those baselines. Recent
interviews with agency officials and internal documents point to the
potential for substantial increases in cost estimates. FAA is now
reevaluating its cost baselines and expects to issue a revised
baseline this spring. Regarding LAAS, funding concerns have been the
primary reason why FAA has considered turning over the responsibility
for acquisitions and maintenance to individual airports. As noted
above, FAA expects to make a decision on LAAS' financing later this
year.
--------------------
\3 GPS satellites transmit radio signals that allow properly equipped
air, land, and sea users to calculate the time and their position and
speed anywhere above the earth's surface and in any condition.
\4 The local system will use ground-based communications equipment to
augment the signals in the airspace around airports so that aircraft
can land in the worst weather conditions.
\5 National Airspace System: Comprehensive FAA Plan for Global
Positioning System Is Needed (GAO/RCED-95-26, May 10, 1995).
\6 Global Positioning System Augmentations (GAO/RCED-96-74R, Feb. 6,
1996).
STATUS OF FAA'S MAJOR
MODERNIZATION PROJECTS
========================================================== Appendix II
Last-site implementation Number of operational systems
---------------------------------- ----------------------------------
Year Planned Commissioned
---------------------- ---------- ----------------------
Major Original 1997 Years Since Current
projects estimate estimate delayed 2/96 total
-------- ---------- ---------- ---------- ---------- ---------- ----------
Aeronaut 1998 TBD N/A 20 DLAPs/ 3 57
ical 57 TDLS\a
Data
Link
(ADL)
Air 1991 \b \b 40 radars 13 13
Route
Surveil
lance
Radar-
4
(ARSR-
4)
Airport 1990 1999 9 38 radars 6 26
Surface
Detecti
on
Equipme
nt-3
(ASDE-
3)
Airport 1992 1998 6 120 radars 9 111
Surveil
lance
Radar-
9 (ASR-
9)
Automate 1997 2001 4 574 units 87 133
d
Surface
Observi
ng
System
(ASOS)\
c
Enroute 2000\d 2000 N/A 21 systems 0 0
Automat
ion--
Display
System
Replace
ment
(DSR)
Integrat 2000 2003 3 34 systems 0 0
ed
Termina
l
Weather
System
(ITWS)
Mode 1993 1999 6 144 34 71
Select systems\e
Oceanic \f 2000 N/A 3 systems 0 0
Automat
ion
Program
(OAP)
Operatio \f 2001 N/A 61 systems 0 0
nal
Support
ability
and
Impleme
ntation
System
(OASIS)
Terminal \f \g N/A\g N/A N/A N/A
Air
Traffic
Control
Automat
ion
(TATCA)
Terminal 2003 2005\h 2 171 0 0
Automat systems
ion--
STARS
Terminal 1998 \\f N/A 45 radars 11 22
Doppler
Weather
Radar
(TDWR)
Terminal N/A 2004 N/A 112 0 0
Radar radars\i
Digitiz
e,
Replace
and
Establi
sh
(TRDRE)
Tower 2000 \j N/A TBD N/A N/A
Automat
ion
Program
Voice 1992 1997 5 21 units\k 13 21
Switchi
ng and
Control
System
(VSCS)\
Weather N/A\l 2000 N/A 21 units 0 0
and
Radar
Process
or
(WARP)
Wide 2001 2001\m N/A 1 system 0 0
Area
Augment
ation
System
(WAAS)
--------------------------------------------------------------------------------
Legend
N/A = Not applicable.
TBD = To be determined.
\a TDLS is the Tower Data Link Services. TDLS I (Predeparture
Clearance/Flight Data Input Output) has been commissioned at all 57
sites. TDLS II (Digital-Automatic Terminal Information Service) has
been installed at 42 sites and commissioned at 23 additional sites.
DLAP is the data link applications processor, which will interface
between the National Airspace Data Interchange Network II and Host
Interface Device/NAS Local Area Network.
\b The delay of the last-site implementation date is currently 6
years. The last-site implementation date has not been determined
because of environmental issues at Ajo, Ariz.
\c ASOS is one of three systems under the Automated Weather Observing
System (AWOS) project, which also includes the Data Acquisition
System (ADAS). AWOS achieved first-site implementation in 1989, and
FAA has since commissioned 198 of the 200 AWOSs ordered.
\d The date reflects the current estimate for the DSR project,
initiated as part of the June 1994 restructuring of the Advanced
Automation System into three distinct areas--en route, terminal, and
tower automation.
\e Included in the total are the 11 additional Mode-S units that have
been purchased under the Interim Support Plan.
\f The last-site implementation date is indefinite.
\g This project has been integrated into Air Traffic Management (ATM)
which contains multisegmented projects. TATCA's functionality is
contained within the Traffic Flow Management Functionality
Development/Deployment project and the ATC Functionality
Development/Deployment project.
\h The date reflects the revised baselined schedule for STARS.
\i The ASR-11 procurement, as part of the TRDRE program, provides 46
operational systems and 2 preproduction units to replace ASR-7s and
equipment used at sites taken over from the Department of Defense.
Future procurement requirements to either replace or upgrade the
ASR-8s and provide for new establishments may increase the quantity
from 48 to 112 systems but are still being evaluated and are pending
approval.
\j The project is currently under review.
\k The schedule reflects the first phase of the project, when systems
are scheduled to be installed in existing en route controller work
stations. The last-site implementation date for the second phase of
the project, when the system will interface with the DSR, is
estimated in 2000.
\l The project has been restructured into three stages since we
reported on it in 1994.
\m The date reflects the final stage or end-state of WAAS (E-WAAS),
when it is scheduled to serve as a sole system for air navigation and
landing guidance. Initial WAAS (I-WAAS) is scheduled to allow civil
aircraft to use GPS domestically as a primary means of navigation in
late 1998.
SUMMARY OF COSTS AND SCHEDULES FOR
FAA'S MAJOR MODERNIZATION PROJECTS
========================================================= Appendix III
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
*** End of document. ***