A report by the Transportation Department’s inspector general determined that the three-year 2009 collective bargaining agreement (CBA) between the FAA and the National Air Traffic Controllers Association (Natca) will cost the FAA $669 million more than it would have cost to extend an earlier agreement that was signed in 2006.

The Office of the Inspector General (OIG) found that while the FAA’s approach to developing this estimate appears to be reasonable, it includes several provisions that could escalate costs beyond the already high projection.

Similar provisions in the 1998 FAA/Natca agreement led to significant additional costs. The FAA’s initial cost estimate for the 1998 agreement was $200 million, but the agreement eventually required more than $1 billion in additional funds.

These overruns spurred House Transportation and Infrastructure Committee chairman John Mica (R-Fla.) to request that the OIG review the costs associated with the three-year 2009 agreement to ensure they will be controlled and remain within the FAA’s estimates.

Preventing Cost Overruns

According to the OIG, the objectives of its audit were to evaluate the accuracy and completeness of the FAA’s cost estimate of the new contract, identify contract provisions that could escalate costs and determine if the agency has sufficient controls in place to prevent cost escalations.

“I requested that the DOT issue this report so that we can avoid repeating past mistakes that led to the outrageous costs associated with the 1998 collective bargaining agreement,” said Mica. “With this report, the FAA has been given fair warning that it must closely oversee the use of taxpayer money and put controls in place to avoid another $1 billion bill that we can ill afford. It is crucial that we do all we can to protect the American taxpayer and ensure that those cost overruns are not repeated with the current agreement.”

Also included in the IG’s report are recommendations to the FAA to update the cost estimate of the 2009 CBA annually to reflect any changes in the underlying assumptions and incorporate it into its annual budget request. The OIG included this recommendation because the FAA’s personnel costs under the 2009 contract were $14 million higher than the agency initially estimated for the first year of the pact.

“The 2009 CBA is the first successfully negotiated CBA since a five-year agreement ratified in 1998, which was associated with significant cost overruns,” the report summarized. “The FAA estimates the 2009 agreement will cost $669 million more than extending the controller work rules that were in place before the 2009 agreement.”

The OIG found that while the FAA’s methodology for developing this estimate appears to be reasonable, it includes several assumptions that might increase total costs, such as the rate at which veteran controllers retire.

“There are also some provisions in the 2009 CBA that could escalate costs beyond the FAA’s estimate, including negotiated memoranda of understanding (MOU),” the auditors determined. “While the FAA established controls in 2003 to prevent additional costs with MOUs, we found that those controls are insufficient and that agency personnel do not consistently adhere to them.”

The report made four recommendations to help the FAA ensure its internal control policies are sufficient to prevent cost escalations. “The FAA concurred with or met the intent of our recommendations, and we consider them resolved pending completion of planned actions,” the DOT IG said.