Here is an interesting article on the FAA, an insiders view of its practices and inefficiencies. It will assistin understanding what is happening regarding how the agency manages itself and the various projects it is responsible for. It is lengthy, but, it will provide you with important information on why the FAA shouldn’t be adding user fees, but instead, start to become effective through streamlining and cuts.
FAA Budget: Agency Struggles To Manage Resources – Select executives inside the U.S.Federal Aviation Administration are pushing hard to impose user and special fees on general aviation as part of a strategy to bridge the gap between the agency’s expenditures and revenues from its traditional fees and taxes. This includes charging $1- to $2 million for air traffic control and other services at airshows. However, it appears the FAA could reap billions of dollars in cost savings simply by implementing better management and business practices. While the FAA has made some gains in this area since a 2011 management reorganization, it appears that more progress is attainable, according to analyses by the Department of Transportation and the Government Accountability Office.
Stressors on the $15 billion FAA budget include higher labor costs; the cost of implementing NextGen ATC technology; the cost of keeping its current (and largely antiquated) ATC technology functioning; and federal budget sequestration. The impact of sequestration was somewhat muted on the FAA when, in April, after a week of controller cutbacks that resulted in the shredding of airline schedules, Congress voted to allow the FAA to take $253 million from the Airports Improvement Program to help fund operational shortfalls. The AIP is not subject to budget sequester. However, the FAA must still trim $637 million from its operating budget by September 30 under the sequester.
FAA also has not realized potential efficiencies that would come from consolidating its current ATC facilities and modernizing its computing platforms. Currently, the agency operates more than 40 different computer systems. Numerous examples inside the U.S. Department of Transportation’s DOT own 2012 annual financial report portray the FAA as an entity that has a hard time containing costs, managing programs and meeting development schedules. Although recently reduced via sequestration, the agency’s budget increased by more than 40 percent over much of the last decade and the number of aircraft departures it handled decreased by 27 percent over pre-9/11 levels, according to an analysis by the libertarian Reason Foundation.
AIN asked FAA’s public affairs office to provide a budget expert to discuss these matters; however, an agency spokesman declined, pointing us instead to budget documents available on its website and later providing additional documentation.
Currently, $12.8 billion of the FAA’s $15 billion budget is derived from various taxes and fees, with $11.44 billion of that coming from passenger ticket and international departure taxes on airline passengers. The much touted aviation fuel tax contributes only $622.8 million, less than the $733 million the FAA derives from waybills and investment income. The FAA’s largest cost component is labor: $7.5 billion, most of which is related to the cost of staffing air traffic control, or about 71 percent of the FAA’s operating budget.
Those costs saw a significant increase, estimated at $669 million by the FAA, attributable to work-rule changes following implementation of a new controller labor contract in 2009. Some Members of Congress, including Rep. John Mica (R-Fla.), chairman of the House Government Operations subcommittee, are concerned that the FAA has significantly underestimated the financial impact of these rule changes, based on a similar increase after controllers received a new contract in 1998. A 2011 analysis of the 2009 agreement by the DOT inspector general’s office noted, “The 1998 agreement was the first one between the FAA and Natca (National Air Traffic Controllers’ Association union) that included pay and benefits; however, it far exceeded the FAA’s initial $200 million cost estimate, eventually requiring more than $1 billion in additional funds. The 2009 CBA (collective bargaining agreement) reinstates numerous provisions of the 1998 agreement.”
Airport Improvement Program Funding Expenditures related to the Airports Improvement Program (AIP), which makes grants to local airports for capital improvements from the Airport Airway Trust Fund (AATF), have held relatively steady since 2008, with the exception of 2009 and 2010, when the program benefited from temporary increases resulting from economic stimulus legislation. Last year it accounted for $3.14 billion. Revenues from the AATF come, in part, from passenger ticket taxes, aviation fuel taxes, cargo waybills and the 7.5-percent federal excise tax (FET) on commercial aviation passenger flights and the somewhat lower 6.25-percent FET on air freight. AATF funds both AIP FAA operations. AATF revenues historically have been inadequate to do both, and the gap is made up via appropriations from the Treasury’s general fund as approved by Congress.
AIP critics assert that the program could be eliminated, or significantly reduced, simply by raising passenger ticket taxes and allowing airports to keep a higher percentage of the taxes collected to fund their owndirectly.
AIP found that the program makes improper payments or is otherwise noncompliant on a small percentage of its expenditures, but the aggregate amount is significant. In 2010 the DOT’s inspector general randomly sampled $250 million of AIP expenditures and found that approximately 5 percent were improper. Using extrapolation, the DOT IG estimated that $160.7 million worth of total AIP payments in 2008 were improper due to inadequate documentation, duplicate payment, ineligible recipient or unapproved use. Inadequate documentation was estimated to be responsible for 53 percent of the improper payments.
Expenditures singled out by the IG inside and outside the sample included:
• The Memphis-Shelby County Airport Authority, Tenn., received more than $680,000 for performance bonuses, even though FAA egulations prohibit reimbursement of such bonuses.
• On seven occasions, the Illinois DOT Division of Aeronautics received payments for 100 percent of costs rather than the lower federal share stated in grant agreements.
• On one AIP payment request, Panama City overbilled the FAA by $122,000 and the agency disbursed the funds.
• Saipan International Airport was awarded $1.3 million for security enhancements without prior approval of a non-competitive contract.
• The City of Farmington, N.M., requested and received an electronic payment of $434,000 for eligible AIP costs. One week later, the City requested a manual payment for the same amount, which the FAA processed and paid. The duplicate payment went undetected for more than two months before the grantee informed FAA that the error had occurred.
Overall, the IG found that the “FAA’s risk-based approach to grant oversight is inadequate to effectively prevent or detect improper AIP payments. We found that a close relationship exists between the accuracy of a grantee’s risk rating and the potential for improper payments–more than 98 percent of the $13.1 million of improper payments identified were applicable to 11 grantees inaccurately categorized as low-risk” and that the “ FAA’s insufficient requirements and procedures contributed to improper payments.”
Resistance to Consolidation Proves Costly The amount of improper AIP expenditures pales next to what the FAA oses by failing to expeditiously consolidate its 20 centers and 187 terminal radar approach control facilities (Tracons), according to an April 2013 Reason Foundation study, “The Case for Air Traffic Control Facility Consolidation.” Reason estimated that the FAA would realize a one-time saving of $1.7 billion and an annual saving of $1.1 billion through consolidation. The FAA unveiled a Future Facilities Program 2010 to deal with consolidation, but has yet to move it beyond the concept stage, due partly to political opposition from some members of Congress who oppose the closure of FAA facilities in their districts.
Testifying before Congress last year, FAA COO David Grizzle warned against cuts in FAA planning funds used for consolidation and later noted, “The FAA’s ability to meet future needs of the aviation system, including the full implementation of NextGen technologies, fundamentally relies on the agency’s ability to optimize [its] facilities and workforce to serve the needs of those who use the National Airspace System.”
However, the road to consolidation and cost savings appears to be a long one with plenty of Congressional interference. Section 804 of the FAA Modernization and Reform Act of 2012 requires the agency to solicit widespread input from all affected stakeholders in making its consolidation decisions and this, in combination with FAA budget constraints, has slowed the process. The FAA now estimates that consolidation and reorganization will not be completed until 2034. The longer the process takes, the more the agency will need to spend on maintaining its portfolio of outdated existing facilities that will ultimately be abandoned, creating further budget stress.
Testifying before Congress last year, Lou Dixon, the DOT’s principal assistant inspector general for auditing and evaluation, noted, “While the FAA has suspended all but one of its terminal realignment and consolidation projects, it is moving ahead with plans to maintain or replace some of its older facilities. This work could overlap with projects included in its consolidation plan.” For example, the FAA is building a new Tracon in West Palm Beach and has system-wide plans to spend $1 billion between now and 2018 to replace displays and processors as part of its terminal automation modernization program. It is also transitioning to a new terminal automation system at 11 Tracons between now and 2017.
The current long-range plan calls for consolidating en route centers and Tracons into a handful of large integrated facilities and dividing the national airspace system into six geographic segments each supported by four or five facilities, a combination of integrated control facilities and high operations (high ops) facilities. The FAA estimates that construction of the first four facilities will cost $2.3 billion but does not have a firm grip on how it plans to pay for them, given current federal budget realities, or the politically prickly decisions of specifically where, within its regions, these facilities will be located. The FAA may well need to seek private-sector financing, either in whole or part, to pay for them. A decision on where to locate the first integrated facility, providing service to the New York-Philadelphia corridor, was due last year but was pushed out to later this year. These facilities will be massive, with about 1,000 FAA controllers, technicians and staff assigned to each.
Reason pointed out, “Without consolidating airspace and ATC facilities, NextGen is at risk of becoming merely a very costly upgrade of hardware and software, without the large productivity gains that should constitute a major portion of the business case for this transition. And without a timely commitment to large-scale facility consolidation, the Air Traffic Organization will be forced to spend billions in the coming decades refurbishing and rehabilitating aging and unneeded facilities.”
FAA Runs UpTab FAA’s management of new technology programs that collectively comprise the $22 billion NextGen effort has come under widespread criticism for years. Congressman Peter DeFazio (D-Ore.), who has served on the House Aviation Subcommittee for 27 years, is particularly blunt, stating last year, “There is only one agency worse at acquisition and other sorts of decisions than the Pentagon, and that would be the FAA.”
A 2012 study by the Government Accountability Office (GAO) found, “In a review of 30 major ATC acquisition programs, all of which will contribute to the transition to NextGen, GAO found that costs for 11 of the 30 programs have increased from their initial estimates by a total of $4.2 billion and 15 programs experienced delays. The 11 acquisitions that experienced cost increases account for more than 60 percent of the FAA’s total acquisition costs ($11 billion of $17.7 billion) for the 30 programs. The 15 acquisitions that experienced schedule delays, of which 10 also had cost increases, ranged from two months to more than 14 years and averaged 48 months.”
GAO blamed the cost overruns and delays on “longstanding challenges for the FAA,” including “additional or unanticipated system requirements, insufficient stakeholder involvement, underestimating the complexity of software development and unanticipated events, including funding shortfalls and work stoppages.”
A detailed analysis of four NextGen programs by the GAO found that the “FAA is not consistently following the characteristics of high-quality cost estimates and scheduling best practices” and that FAA program estimates were “not credible” because they lacked independent cost estimates and also “lacked accuracy” because they were not updated regularly or measured against comparable programs. The “FAA is unable to predict, with any degree of confidence, if the estimated completion dates are realistic,” the GA noted, concluding the “ FAA cannot provide reasonable assurance to Congress and other stakeholders that NextGen and other ATC programs will avoid additional cost increases and schedule delays.”
A 2013 follow-on GAO report credited the FAA for making some progress in applying better management to NextGen, but continued to be critical of its implementation overall. An FAA spokeswoman told AIN that the agency is working on a formal response to the GAO critique, but it was not ready at press time.
DOT was equally candid about select NextGen initiatives in its 2012 annual report.
The Obama administration budget requested $1.24 billion to fund NextGen programs in FY 2014.
The recent surge in reported controller operational errors underscores the need for new and improved ATC technology and its effective implementation. According to the DOT, “Reported operational errors increased by 53 percent (to 1,887 from 1,234) between Fiscal Years 2009 and 2010. This number remained relatively unchanged between Fiscal Years 2010 and 2011 (rising to 1,895), but the most serious reported errors continued to increase. The FAA reports these rose by 49 percent from Fiscal Year 2009 to Fiscal Year 2011 (to 55 from 37).” Air Route Traffic Control Centers (ARTCC) “had a 39-percent spike in operational errors during that time.” The FAA maintains the increase is due to better reporting, but the DOT expressed some skepticism, noting, “These centers have had an automated system in place for years to detect and investigate each reported error, which suggests that at least a portion of the increase is likely due to actual errors occurring.”
Last year the FAA implemented new policies for collecting, investigating and reporting “separation losses,” but the DOT said “their effectiveness is limited by incomplete data and implementation challenges.”
DOT Notes Problems In its 2012 annual report the DOT noted a number of problems plaguing the NextGen initiatives:
Delays in the metroplex program. A seven-year effort begun in 2009 to improve traffic flow and efficiency in 13 major metropolitan areas is already 15 months behind schedule and is being criticized by some industry stakeholders for focusing on “limited airspace and procedure improvements, rather than maximizing new technologies and advanced procedures.” The DOT went on to note, “Nearly half of all active commercial aircraft are currently equipped to fly advanced procedures, and representatives from air carriers who are equipped stated that the FAA’s approach offers little operational or financial benefit to airlines. In addition, the FAA has not yet integrated efforts from other related initiatives, such as better managing airport surface operations, into the metroplex initiative. As a result, airspace users are concerned about the pace and execution of the metroplex efforts, as well as the lack of clearly defined expected benefits, and remain reluctant to equip with new avionics.”
In a statement prepared for the NextGen Advisory Committee on June 4 this year,FAA Administrator Huerta blamed some of the Metroplex’s delay on the impact of the federal budget sequester and noted that Congress’s recent vote to allow the FAA to tap AIP funds for operations allowed the agency to “restart the Metroplex work that had been put on hold.” Long-term, Huerta said that the sequester will not adversely affect NextGen implementation, provided the FAA has “the operations funds to maintain our active workforce participation in key activities like the procedures design, onsite testing and training. If we are not able to keep the workforce engagement, we simply will not be able to meet all of our current commitments and associated timelines,” he said.
Delays in the En Route Automation Modernization (Eram) program. Originally scheduled for completion in 2010, Eram is a $2.1 billion hardware and software modernization program designed to reduce delays and maximize airspace capacity. Software problems have delayed implementation until at least 2014 and added $330 million to the program. The delay could stretch into 2016 and cost overruns are then predicted to top $500 million. The DOT warned, “Prolonged delays with Eram will directly impact the overall cost and pace of NextGen. Without Eram, the benefits of several other programs, such as a new satellite-based surveillance system and data communications for controllers and pilots (ADS-B), will not be possible.”
Murky overall management of NextGen. The DOT noted, “Many of the FAA’s difficulties with implementing NextGen stem from underlying management challenges, such as assigning responsibility, accountability and authority.” The FAA has established a new program management office to better manage the associated NextGen activities, a move that has the potential to improve efficiency, but its short-term solution, according to the DOT, has been to “approve these programs in shorter, discrete segments to minimize risk in the short term. However, as requirements continue to evolve, programs are left with no clear end-state, and decision makers lack sufficient information to assess progress.” In part, this is because the FAA “has not established total program costs, schedules or performance baselines for any of the NextGen six transitiona programs.”
DOT notes that the FAA has awarded service engineering contracts with a combined potential value of $7.3 billion in support of NextGen–the largest award in FAA history–but that the contracts did not contain requirements for ensuring “fair and reasonable labor rates.” The DOT also notes that the “FAA also included 18 million more labor hours than needed in the contracts’ ceilings.”
DOTidentified “ensuring the Next Generation Air Transportation System advances safety and air travel” as its top management challenge in 2013.