Reporting to Congress on the state of the FAA, DOT inspector general Kenneth Mead–the department’s program and fiscal watchdog– didn’t mince words in his assessment of the FAA’s equipment procurement and cost-accounting practices. The agency must, he stated flatly, “reexamine how it does business.”

In 1996 the FAA was allowed to drop standard government procurement processes to become a performance-based organization similar to those in private industry. It was also directed to establish a cost-accounting system so that it would know “where it was spending money and for what.” Mead testified that the FAA thus far has been unsuccessful on both counts.

WAAS topped Mead’s list of major capital projects managed under the FAA’s new strategy. It was tops because its costs have risen 227 percent, from $892 million to close to $3 billion, while its schedule has slipped five years. Next was the Standard Terminal Automation Replacement System (STARS), now three years late, where most of the $940 million budgeted for development and production has already been swallowed up in development alone, and where a further $750 million will be required to actually build the equipment. Mead pointed out that these two projects, along with three other smaller ones, had together exceeded their budgets by more than $3 billion and their schedules had slipped by between three and five years.

Other important programs also have indeterminate futures. Of Cat I LAAS, scheduled for introduction in 2004, Mead stated, “This milestone cannot be met, because of additional development work, evolving requirements and unresolved issues regarding how the system will be certified as safe for pilots to use.” He described Cat II and III LAAS as “a research and development effort with an uncertain end state.” Similarly, the nationwide deployment of 38 integrated terminal weather systems (ITWS) has been set back indefinitely, after it was discovered that the estimated production cost has tripled from $360,000 to $1.1 million per system.

Why has this happened? Mead pointed to original program conception and subsequent management. “We have consistently found a lack of basic contract administration at every stage of contract management, from contract award to contract closeout,” he stated. “For example, we found that government cost estimates were prepared by FAA engineers and then ignored; prepared using unreliable resource and cost data; prepared by the contractor (a direct conflict of interest); or not prepared at all.”

As for the FAA’s performance-based cost-accounting system launch- ed in 1996, Mead reported that after spending $38 million on its development, it is still not in place, although agency officials now forecast its completion by September.

The FAA budgets $3 billion per year for capital equipment, causing Mead to note, “With schedule slips and cost overruns in major acquisitions, the FAA is not getting as much for its $3 billion annual capital investment as it originally expected.”