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at the Majority of TSA-Regulated Airports, but Could Strengthen Cost 
Estimates' which was released on April 27, 2012. 

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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

April 2012: 

Checked Baggage Screening: 

TSA Has Deployed Optimal Systems at the Majority of TSA-Regulated 
Airports, but Could Strengthen Cost Estimates: 

GAO-12-266: 

GAO Highlights: 

Highlights of GAO-12-266, a report to congressional requesters. 

Why GAO Did This Study: 

TSA’s EBSP, one of DHS’s largest acquisition programs, aims to improve 
security and lower program life cycle costs by optimizing checked 
baggage screening systems that best meet the needs of the nation’s 
airports. This includes, among other things, the integration of 
baggage screening equipment into baggage handling systems, referred to 
as in-line systems. Installing in-line systems typically requires 
airports to undertake costly facility modification projects, for which 
TSA will generally reimburse up to the applicable federal cost share. 
As requested, GAO examined (1) the status of TSA’s efforts to install 
optimal checked baggage screening systems in collaboration with 
airports, (2) how reducing the federal cost share for eligible airport 
modification projects from 90 percent to its previous level of 75 
percent would affect the amount that TSA pays for modifications, and 
(3) whether TSA’s methods for estimating and validating costs for the 
EBSP are consistent with best practices. GAO reviewed EBSP planning 
and status documents, compared TSA’s cost estimation approach against 
GAO best practices, and visited 10 airports selected in part based on 
the status of the EBSP optimization at these airports. Although the 
results from these visits are not generalizable, they provided 
insights into the program. 

What GAO Found: 

The Transportation Security Administration’s (TSA) Electronic Baggage 
Screening Program (EBSP) reports that 76 percent of the airports (337 
of 446) the agency regulates for security have a mix of in-line and 
stand-alone baggage screening configurations that best meet airport 
needs (i.e., optimal systems). However, only 36 percent (10 of 28) of 
the nation’s larger airports—based on factors such as the total number 
of takeoffs and landings annually—have complete optimal systems. This 
is because the larger airports generally need more complex in-line 
systems and often require a significant amount of airport 
infrastructure modification and construction. In August 2011, TSA 
shifted its focus from installing optimal baggage screening systems to 
replacing aging machines (recapitalization). However, TSA plans to 
continue to optimize systems during many of its recapitalization 
projects. 

Using TSA cost estimates, GAO estimates that reducing the portion of 
costs that TSA pays for facility modifications associated with the 
installation of optimal baggage screening systems, from 90 percent to 
75 percent, would lower the federal government’s cost for airport 
modification projects it supports by roughly $300 million from fiscal 
year 2012 through fiscal year 2030. Officials from all 10 airports 
with whom GAO spoke stated that airports benefit from the installation 
of integrated, in-line baggage screening systems. The primary benefit—
cited by representatives from 9 of the airports GAO visited—is that 
passenger congestion is reduced by removing stand-alone machines from 
lobbies or ticketing areas. Other benefits cited by airports included 
a reduction in lost baggage and increased screening and passenger 
throughput. However, for a variety of reasons, representatives from 8 
of 10 airports GAO visited opposed a reduction in the federal cost 
share for related airport modifications. 

TSA established cost estimates for the EBSP to help identify total 
program cost, recapitalization cost, and potential savings resulting 
from installing optimal systems, but its processes for developing 
these estimates do not fully comply with best practices. These 
include, among other things, ensuring that the estimates comprise all 
costs and are well documented. For example, TSA’s estimates were 
properly adjusted for inflation and were developed using relevant 
data, such as existing contracts for equipment purchases and 
maintenance costs. However, the estimates did not include all costs, 
for example, the costs associated with detecting all security threats, 
and many assumptions and methodologies underlying the cost model were 
not clearly documented. As highlighted in GAO’s past work, a high-
quality, reliable cost estimation process provides a sound basis for 
making accurate and well-informed decisions about resource investments 
and budgets and thus is critical to the success of a program. 
Developing accurate cost estimates would help ensure that the program 
does not experience unanticipated cost growth and program funding 
needs resulting from future recapitalization and facility modification 
activities. In addition, TSA is working with the Department of 
Homeland Security (DHS) to develop an approved acquisition program 
baseline, which according to DHS guidance is the contract between 
program and departmental oversight officials for what will be 
delivered, how it will perform, and what it will cost. TSA expects the 
baseline to be approved in May 2012. 

What GAO Recommends: 

GAO recommends that TSA ensure that its life cycle cost estimates 
conform to cost estimating best practices. DHS concurred with GAO’s 
recommendation. 

View [hyperlink, http://www.gao.gov/products/GAO-12-266]. For more 
information, contact Stephen M. Lord at (202) 512-4379 or 
lords@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

TSA Has Made Progress in Deploying Optimal Checked Baggage Screening: 

Reducing the Federal Cost Share for Eligible Airport Facility 
Modification Projects Could Reduce TSA's Costs: 

TSA's Cost Estimation Processes Do Not Fully Comply with Best 
Practices, and TSA and DHS Are Working Together to Establish an 
Acquisition Program Baseline: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Status of Implementation Efforts for TSA's EBSP: 

Appendix III: Our Evaluation of EBSP's Cost Estimate Process: 

Appendix IV: Comments from the Department of Homeland Security: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Funding Available for the EBSP for Fiscal Years 2006 to 2012: 

Table 2: GAO's Assessment of TSA's Method for Developing EBSP Life 
Cycle Cost Estimates: 

Table 3: Checked Baggage Configurations for TSA-Regulated Airports 
That Have Optimal Systems as of December 2011: 

Table 4: TSA-Regulated Airports with at Least One In-line System as of 
December 2011: 

Table 5: Numbers of In-line Systems and Stand-alone EDS and ETD 
Machines for TSA-Regulated Airports as of December 2011: 

Table 6: Summary Assessment of TSA's Electronic Baggage Screening 
Program Cost Estimate Compared to Best Practices: 

Figures: 

Figure 1: Transportation Security Officer Removes Checked Baggage from 
Stand-alone EDS Machine: 

Figure 2: An ETD Machine Being Used to Manually Resolve a Suspect Item: 

Figure 3: A Checked Baggage Inspection System That Includes a Baggage 
Handling System with Three In-line EDS Machines: 

Figure 4: A Diagram of a Checked Baggage Inspection System and Three 
Levels of Screening: 

Figure 5: Baggage Screening Configurations at the 337 Airports with 
Optimal Systems: 

Figure 6: Number of Airports with Optimal Baggage Screening Systems 
Compared to All TSA-Regulated Airports: 

Figure 7: Age and Number of Deployed EDS Machines as of December 2011: 

Abbreviations: 

AIP: Airport Improvement Program: 

ATSA: Aviation and Transportation Security Act: 

CBRA: Checked Baggage Resolution Area: 

DHS: Department of Homeland Security: 

EBSP: Electronic Baggage Screening Program: 

EDS: explosives detection system: 

ETD: explosives trace detection: 

FAA: Federal Aviation Administration: 

LCCE: Life Cycle Cost Estimate: 

LOI: letter of intent: 

OMB: Office of Management and Budget: 

OSR: On-Screen Resolution: 

OTA: other transaction agreements: 

TSA: Transportation Security Administration: 

[End of section] 

United States Government Accountability Office: 
Washington, DC 20548: 

April 27, 2012: 

The Honorable John D. Rockefeller IV: 
Chairman: 
The Honorable Kay Bailey Hutchison: 
Ranking Member: 
Committee on Commerce, Science, and Transportation: 
United States Senate: 

The Honorable Susan M. Collins: 
Ranking Member: 
Committee on Homeland Security and Governmental Affairs: 
United States Senate: 

The Honorable Jim DeMint: 
United States Senate: 

The Honorable Henry Johnson: 
House of Representatives: 

As demonstrated by the attempted attack of Northwest Airlines Flight 
253 from Amsterdam to Detroit on Christmas Day in 2009, commercial 
aviation continues to be a target of terrorist activity. The 1988 
bombing of a U.S. airliner over Lockerbie, Scotland, further 
demonstrates that explosive devices placed in checked baggage have 
long been an area of concern. The Aviation and Transportation Security 
Act (ATSA), enacted on November 19, 2001, created the Transportation 
Security Administration (TSA), now a component of the Department of 
Homeland Security (DHS), and mandated, among other things, that it 
provide for the screening of all checked baggage using explosive 
detection systems.[Footnote 1] To satisfy this mandate, TSA has 
deployed two types of screening equipment to airports in the United 
States where screening is required: (1) explosives detection systems 
(EDS), which use X-rays with computer-aided imaging to automatically 
recognize the characteristic signatures of threat explosives, and (2) 
explosives trace detection (ETD) machines, in which a human operator 
(baggage screener) uses chemical analysis to manually detect traces of 
explosive materials' vapors and residue. 

As amended, ATSA mandated that TSA provide for the screening of all 
checked baggage using EDS machines no later than December 31, 2003. 
[Footnote 2] To meet the 100 percent checked baggage screening 
requirement, TSA deployed screening equipment in a variety of 
temporary screening solutions, including EDS machines placed in stand-
alone configurations in airport terminal lobbies, and solutions that 
relied on ETD machines for primary screening. According to TSA, these 
initial stand-alone EDS machines have higher operating costs and can 
screen fewer bags per hour than EDS machines that are integrated into 
a single, coordinated "in-line" baggage handling system. To improve 
the efficiency and effectiveness of baggage screening at airports, 
TSA's Electronic Baggage Screening Program (EBSP) aims to, among other 
goals, (1) replace, reconfigure, and deploy equipment to increase 
throughput, system capacity, and effectiveness while reducing staffing 
requirements and airport lobby installations; (2) increase equipment 
reliability, reduce equipment downtime, and extend service life; and 
(3) achieve new capabilities to better detect changing terrorist 
threats. 

Pursuant to ATSA, providing for checked baggage screening is a federal 
responsibility, but airports must be capable of accommodating the 
screening systems to secure safe travel for the nation's passengers. 
TSA collaborates with airports and airlines to determine the most 
appropriate screening configuration and install the systems that best 
fit the airports' or airlines' needs. Such optimal baggage screening 
systems may have a mix of detection systems (EDS or ETD) and 
configurations (in-line or stand-alone systems), depending on the 
airport's needs, and may help streamline airport and TSA operations, 
reduce screening costs, and enhance security. However, in-line 
solutions may not be appropriate or cost effective in airports or 
terminals with fewer bags per week to screen. From fiscal years 2008 
through 2011, TSA reported that it obligated approximately $1.9 
billion to support airport facility modification projects required to 
install more efficient optimal baggage screening systems, and 
estimates that it will obligate an additional $1.15 billion for this 
purpose through fiscal year 2030.[Footnote 3] TSA has determined that 
manual ETD screening is an optimal configuration for the nation's 
smaller airports at which TSA performs or oversees screening. 

TSA has generally supplemented the costs of airport facility 
modification projects necessary to install such optimal baggage 
screening systems by entering into reimbursable agreements with 
airports.[Footnote 4] In general, an airport must be willing and 
financially capable of undertaking the facility modification project; 
TSA may not compel an airport to undertake such a project. Although 
TSA will procure and install the screening equipment, the airport, and 
not TSA, is ultimately responsible for any facility modification 
costs. Pursuant to a reimbursable agreement and subject to the 
availability of appropriations, however, TSA will generally reimburse 
an airport undertaking such a project at the applicable percentage of 
allowable project costs. According to TSA, since 2003, it has entered 
into 12 letter of intent (LOI) agreements at the statutorily 
established federal cost shares of 75 or 90 percent and at least 150 
other transaction agreements (OTA) at cost shares that have ranged 
from 50 to 100 percent.[Footnote 5] Currently, TSA enters into 
reimbursable agreements through which it generally funds 90 percent of 
the costs of modifying airports for the installation of an optimal 
system, with airports or airlines funding the remaining 10 percent of 
the projects' cost. 

A foundation for making informed budget decisions for acquisition 
programs at DHS is the acquisition program baseline, which according 
to DHS's guidance is its contract with a component, such as TSA, on a 
program's critical costs, schedule, and program performance goals. 
Establishing such a baseline at the program start is important for 
defining its scope, assessing whether all life cycle costs are 
properly calculated, and measuring how well the program is meeting its 
goals. By tracking and measuring actual program performance against 
this baseline, management can be alerted to potential problems, such 
as cost growth or changing requirements, and has the ability to take 
early corrective action. 

You asked us to assess the EBSP's current status, costs, and 
alternative cost sharing options. Accordingly, this report addresses 
the following questions: 

* What is the status of TSA's efforts to install optimal checked 
baggage screening systems in collaboration with airports? 

* How would reducing the current federal cost share for eligible 
airport modification projects from 90 percent to its previous level of 
75 percent affect the amount that TSA pays for these modifications, 
and what benefits, if any, do airports report receiving from in-line 
baggage screening systems? 

* To what extent are TSA's cost estimation procedures consistent with 
best practices and is TSA's acquisition baseline consistent with DHS 
guidance? 

To determine the status of TSA's efforts to install optimal checked 
baggage screening systems, we obtained the most current data available 
from TSA as of December 2011 and January 2012 for the following: 1) on 
the current number of airports with at least one in-line system, 2) 
the number of airports that have optimal checked baggage screening 
systems, 3) and the number of operational in-line systems and EDS and 
ETD machines deployed to TSA-regulated airports. We reviewed 
documentation from TSA's EBSP, including the EBSP strategic plans for 
fiscal years 2006, 2008, and 2009, and the 2011 EDS and ETD 
Recapitalization and Optimization Plan. 

To determine how reducing the current federal cost share for eligible 
airport facility modification projects may affect the amount that TSA 
pays for these modifications, we calculated estimates based on TSA's 
August 2011 projections of how much airport modifications will cost in 
the future. To estimate what cost shifts could occur in the future, we 
obtained TSA's projections of its airport modification costs as stated 
in its final August 2011 Life Cycle Cost Estimate (LCCE) 
report.[Footnote 6] We used TSA's LCCE projections of airport 
modification costs for each fiscal year, 2012 through 2030, and 
estimated the amount of expenditures for airport modifications that 
could be shifted from TSA to airports and airlines if the federal 
government's cost share were reduced from the current 90 percent to 
previous federal cost share of 75 percent. 

We assessed the reliability of the various data TSA provided about 
airports, including the number of TSA-regulated airports (by category) 
and the numbers of airports with the different configurations of 
baggage screening (in-line or stand-alone) systems, and the investment 
and budget expenditure dollar values in the LOIs and OTAs by 
questioning cognizant TSA officials and obtaining documentation about 
these various data.[Footnote 7] We found these data to be sufficiently 
reliable for the purposes of our report. 

To assess the extent to which TSA's cost estimation methods are 
consistent with best practices and how its acquisition program 
baseline efforts are consistent with DHS guidance, we analyzed the TSA 
August 2011 LCCE for EBSP. We used best practices in GAO's Cost 
Estimating and Assessment Guide to evaluate TSA's estimating 
methodologies, assumptions, and results to assess whether the official 
cost estimates were comprehensive (i.e., include all costs), accurate, 
well documented, and credible.[Footnote 8] We defined a characteristic 
of the LCCE as not met if the agency provided no evidence that 
satisfied any portion of the criterion, minimally met if the agency 
provided evidence that satisfied less than one-half of the criterion, 
partially met if the agency provided evidence that satisfied about one-
half of the criterion, substantially met if the agency provided 
evidence that satisfied more than one-half of the criterion, and met 
if the agency provided complete evidence that satisfied the entire 
criterion. Our analyses examined TSA's practices in developing its 
LCCE. Regarding the development of an acquisition program baseline, we 
examined the EBSP Acquisition Review Board decisions and relevant 
acquisition decision memos during the period 2005 through 2011, as 
well as other documentation related to DHS and TSA efforts to develop 
an acquisition program baseline.[Footnote 9] We also interviewed TSA 
and DHS officials, including officials in the TSA Chief Financial 
Officer's Office and DHS's Program Accountability and Risk Management 
Office, to identify what procedures they have put in place to approve 
the acquisition program baseline. 

To gain a better understanding of issues across all of our objectives, 
we conducted site visits to airports in California, New York, 
Massachusetts, Washington, D.C., and Florida to interview local 
airport officials, regional TSA officials, and airline 
representatives. To get a range of airports, we chose these airports 
based on the size of airport, type of checked baggage screening system 
installed, and whether the airport's checked baggage screening system 
had been optimized. Because we selected a nonprobability sample of 
airports, the information we obtained from these interviews and visits 
cannot be generalized to all airports. However, we believe that 
observations obtained from these visits provided us with a greater 
understanding of airport officials' perspectives on TSA's 
collaboration with airports that seek to have optimal baggage 
screening systems installed and allowable costs reimbursed, as well as 
the perspective of local TSA officials. In addition, we interviewed 
officials from the largest industry associations, which represent 
airport executives, airports, and airlines (the American Association 
of Airport Executives, the Airports Council International North 
America, and the Air Transport Association). We also interviewed an 
official from the Association for Airline Passenger Rights. These 
results cannot be generalized to the entire industry but provided 
industry perspectives. 

We conducted this performance audit from October 2010 through April 
2012 in accordance with generally accepted government auditing 
standards.[Footnote 10] Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to 
provide a reasonable basis for our findings and conclusions based on 
our audit objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objectives. 

Background: 

With the passage of ATSA in November 2001, TSA assumed from the 
Federal Aviation Administration (FAA) responsibility for securing the 
nation's civil aviation system. In accordance with ATSA, TSA is 
responsible for the procurement, installation, and maintenance of 
explosive detection systems, including EDS and ETD, used to screen 
checked baggage for explosives (see figs. 1 and 2) at TSA-regulated 
airports.[Footnote 11] EDS machines identify suspicious items or 
anomalies in checked baggage that could indicate the presence of 
explosives or detonation devices. At airports with EDS, EDS machines 
are generally employed for primary screening of checked baggage while 
ETD machines are used for secondary screening to help resolve 
questions raised by EDS screening. At airports without EDS, ETD 
machines are used as the primary method for screening checked baggage. 

Figure 1: Transportation Security Officer Removes Checked Baggage from 
Stand-alone EDS Machine: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

Figure 2: An ETD Machine Being Used to Manually Resolve a Suspect Item: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

TSA deploys EDS machines in stand-alone and in-line configurations. In 
a stand-alone configuration, checked baggage is manually loaded and 
unloaded by screeners (see figure 1).[Footnote 12] In contrast, an in-
line configuration integrates EDS machines with a baggage handling 
system--a conveyor system that transports and sorts baggage from the 
ticket counter through the baggage screening system. (See figure 3, 
which shows an in-line configuration with three EDS machines.) 

Figure 3: A Checked Baggage Inspection System That Includes a Baggage 
Handling System with Three In-line EDS Machines: 

[Refer to PDF for image: photograph] 

Source: GAO. 

[End of figure] 

Generally, an in-line checked baggage inspection system employs three 
levels of screening (see figure 4). EDS machines perform automated 
(Level 1) screening. If the EDS machine is unable to clear a bag, it 
sends an alarm to a screener who performs a secondary (Level 2) 
inspection known as On-Screen Resolution by reviewing an image of the 
contents of the bag via computer monitor. If the screener cannot 
resolve the alarm using on-screen resolution tools, the bag goes to 
the Checked Baggage Resolution Area (Level 3) where another screener 
will perform manual inspection of the bag assisted by an ETD machine. 

Figure 4: A Diagram of a Checked Baggage Inspection System and Three 
Levels of Screening: 

[Refer to PDF for image: illustration with 5 photographs] 

(A) Unscreened checked baggage travels on conveyor belts leading from 
the point of induction (e.g., ticket check-in counter) to Level 1 
screening.  

(B) Level 1: Checked baggage automatically screened by EDS machines 
for explosives. Bags that are not automatically cleared are alarmed.  

(C) Level 2: Screeners view EDS generated images for alarmed bags and 
try to clear such alarmed bags through On-Screen Resolution (OSR) 
tools.  

(D) Level 3: Alarmed bags not cleared by screeners through OSR process 
travel to Checked Baggage Resolution Area (CBRA) for manual inspection 
using ETD. 

(E) Cleared bags travel to baggage makeup and are then loaded onto 
airplanes.    

Source: TSA. 

[End of figure] 

TSA officials stated that deployment of an integrated, centralized in-
line system of EDS machines can enhance security, increase screening 
efficiencies, and lower screening costs by, among other things, 
reducing the number of screeners needed to conduct baggage screening 
and reducing work-related injuries caused by lifting heavy bags. 
Installing an in-line system can require modification of an airport 
terminal, including removal of the existing system, installation of a 
new baggage handling system and EDS machines, and the use of an 
interim solution to screen checked baggage while the in-line system is 
built. TSA estimates that depending on the size and complexity of an 
in-line project, installing an in-line system can take one to four 
years at larger (category X and I) airports. 

In 2005, we reported that although TSA made substantial progress in 
installing EDS machines, the agency had not conducted a systematic, 
prospective analysis to determine which airports could achieve long-
term savings and improve efficiencies and security by installing in-
line systems or, where in-line systems may not be economically 
justifiable, by making greater use of stand-alone EDS rather than 
relying on the labor-intensive and less efficient ETD screening 
processes.[Footnote 13] We recommended that TSA systematically 
evaluate baggage screening needs at airports, including identifying 
and prioritizing the airports where the benefits--such as cost savings 
of screening operations and improved security--of replacing stand-
alone baggage screening machines with in-line systems are likely to 
exceed the costs of the systems. TSA concurred and in response 
released its Strategic Planning Framework in February 2006, which 
identified and prioritized airports based on an analysis of several 
factors, including security risk and the amount of estimated cost 
savings. 

In March 2011, we reported that by continuing to replace or modify 
older baggage screening systems with more efficient solutions, 
including in-line screening systems, TSA could continue to eliminate 
baggage screener positions.[Footnote 14] TSA agreed that the 
deployment of more efficient systems offers potential personnel cost 
savings to the federal government. 

In July 2011, we reported on TSA's efforts to enhance explosives 
detection requirements for checked baggage screening technologies and 
efforts to ensure that newly acquired and currently deployed 
explosives detection technologies meet the enhanced 
requirements.[Footnote 15] We recommended that TSA, among other 
things, develop a plan to ensure that new machines, as well as those 
machines currently deployed in airports, will be operated at the 
levels in established requirements and we recommended that TSA develop 
a reliable schedule for the EBSP. DHS concurred with these 
recommendations and has initiated actions to implement them. 

In February 2012, we reported that we continue to believe that TSA 
might achieve savings in screening personnel costs by continuing to 
replace or modify older checked baggage screening systems with more 
efficient solutions, including in-line screening systems, to the 
extent possible.[Footnote 16] TSA reported that since the issuance of 
GAO's 2011 report, it had replaced 60 stand-alone checked baggage 
screening machines with more efficient in-line screening systems. 

Since fiscal year 2006, about $6.8 billion has been made available to 
TSA for activities related to checked baggage screening (see table 1), 
making the EBSP one of DHS's largest acquisition programs. 

Table 1: Funding Available for the EBSP for Fiscal Years 2006 to 2012: 

EBSP funding[A]; 
Year: FY 2006: $670 million; 
Year: FY 2007: $1.036 billion; 
Year: FY 2008: $771 million; 
Year: FY 2009: $1.542 billion; 
Year: FY 2010: $1.294 billion; 
Year: FY 2011: $781 million; 
Year: FY 2012: $732 million; 
Year: Total: $6.826 billion. 

Source: TSA. 

[A] Amounts available as reported by TSA for activities related to 
EBSP planning, procurement, installation (including facility 
modification), and maintenance and utilities. These amounts do not 
include other related costs, such as the cost of screening personnel. 
Each fiscal year includes $250 million from the Aviation Security 
Capital Fund (see 49 U.S.C. § 44923) as well as supplemental 
appropriations, including over $700 million made available to TSA in 
fiscal year 2009 through the American Recovery and Reinvestment Act of 
2009, Pub. L. No. 111-5, 123 Stat. at 163. Although TSA reports $732 
million in funding available for the EBSP in fiscal year 2012, the 
Department of Homeland Security Appropriations Act, 2012, appropriated 
approximately $543 million for explosive detection systems that with 
the $250 million from the Aviation Security Capital Fund, amounts to 
approximately $793 million made available in fiscal year 2012. See 
Pub. L. No. 112-74, Div. D, 125 Stat. 786, 950-51 (2011). 

[End of table] 

Cost Share Option for Funding Airport Modifications: 

Following the terrorist attacks of September 11, 2001, and the 
enactment of ATSA, airports relied upon various sources of funding to 
support security-related capital improvement projects. For example, as 
enacted, ATSA authorized the use of Airport Improvement Program (AIP) 
funds for projects to support the installation of explosive detection 
systems.[Footnote 17] Subsequently enacted statutes, such as the 
Vision 100--Century of Aviation Reauthorization Act (Vision 100), 
however, either limited or precluded the use of AIP to fund projects 
related to the installation of in-line systems.[Footnote 18] TSA, 
which is solely responsible for procuring and deploying equipment to 
screen checked baggage for explosives, also provides funding in 
support of related facility modifications. The Consolidated 
Appropriations Resolution, 2003, first authorized the use of LOIs by 
TSA for airport facility modification projects related to the 
installation of in-line baggage screening systems.[Footnote 19] 
Although not a binding commitment of federal funding, LOIs are 
agreements providing that TSA will reimburse airports or airlines for 
a specified percentage of an eligible project's cost, subject to the 
availability of appropriations. This in turn enables an airport to 
proceed with a project because the airport and any investors are aware 
that the agreed-upon percentage of allowable costs will likely be 
reimbursed. The airport or airline is responsible for its share of the 
total funding needed to complete the project and generally must be 
capable of funding the project in its entirety. 

From fiscal years 2003 through 2007, TSA entered into 8 LOI agreements 
covering 9 airports.[Footnote 20] Pursuant to the law then in effect, 
these LOI agreements provided for a 75 percent federal cost share of 
allowable project costs.[Footnote 21] Beginning in fiscal year 2008 
and in accordance with Vision 100, any LOI entered into by TSA was to 
reflect a 90 percent federal cost share.[Footnote 22] Since 2008, TSA 
has entered into 4 more LOIs at a 90 percent federal cost share. As of 
December 13, 2011, TSA reported that its net cumulative obligations 
for all 12 LOIs were $1.46 billion. TSA also uses OTAs to support 
airport facility modification projects related to the installation of 
checked baggage screening equipment. TSA describes OTAs, which have 
become the primary administrative vehicles through which TSA 
financially supports such projects, generally as single-year 
reimbursable agreements (in contrast to the multiyear LOI agreements). 
According to TSA, OTAs take many forms and are generally not required 
to comply with federal laws and regulations that apply to contracts or 
cooperative agreements, such as the Federal Acquisitions Regulations, 
thus enabling the parties to negotiate provisions that are mutually 
agreeable. According to TSA, the federal cost share applied to OTAs 
may be negotiated, but since fiscal year 2008 TSA has generally 
followed the federal cost share applicable to LOIs. As of the end of 
fiscal year 2011, TSA had used at least 150 OTAs to support airport 
facility modifications related to the installation of in-line systems. 
According to TSA, these OTAs have reflected federal cost shares 
ranging from 50 to100 percent. As of December 13, 2011, TSA reported 
that its net cumulative obligations for all OTAs were $1.74 billion. 

TSA Has Made Progress in Deploying Optimal Checked Baggage Screening: 

TSA Has Collaborated with Airports to Install Optimal Baggage 
Screening Systems at 76 Percent of TSA-Regulated Airports: 

TSA reports that 337 of 446 airports (76 percent) the agency regulates 
for security have optimal baggage screening systems. The remaining 109 
of 446 airports (24 percent) do not yet have optimal baggage screening 
systems in all screening areas.[Footnote 23] To be considered an 
airport with an optimal baggage screening system, as TSA considers it 
and as we define it for purposes of this report, an airport must have 
completed installation and activation of the in-line or stand-alone 
systems that best fits the airport's screening needs without relying 
on temporary stand-alone systems.[Footnote 24] Thus, an airport with 
an optimal baggage screening system may have a mix of explosive 
detection systems (EDS or ETD) and configurations (in-line or stand-
alone systems), depending on the airport's needs. TSA officials told 
us that they plan to deploy equipment for an additional 201 in-line 
systems in the future, which will include the purchase of an estimated 
685 new EDS machines for installation at airports that are not 
screening with optimal configurations.[Footnote 25] 

TSA aims to complete its efforts to deploy optimal screening systems 
by using EDS machines as the primary means for screening checked 
baggage at all category X, I, II, and III airports while continuing to 
use ETD machines as the primary means at category IV airports. 
[Footnote 26] Additionally, TSA plans to deploy EDS machines in in-
line configurations at all category X and I airports and in-line or 
stand-alone configurations at category II and III airports. At each of 
the 10 airports we visited, we observed distinct checked baggage 
screening needs, based on an airport's terminal configuration and the 
number of passenger boardings. We discussed an airport's willingness 
and financial ability to pay for facility modifications required to 
install in-line systems. For each of these airports, officials and 
engineers provided documentation (for example, drawings and 
blueprints) on distinct facility modification projects to accommodate 
baggage screening system upgrades. According to airport officials, TSA 
and airport officials work together to determine the most appropriate 
baggage screening configuration based on an airport's needs. Of the 
337 airports where baggage screening systems are optimal and no longer 
using temporary solutions, 55 airports use EDS in-line systems 
exclusively for their primary checked baggage screening needs, while 
92 airports use EDS stand-alone machines only, and 167 use ETD systems 
exclusively. The remaining 23 airports have a mix of systems.[Footnote 
27] See figure 5 for additional details on airport screening 
configurations. Also, see appendix II for more details on the status 
of efforts to optimize checked baggage screening systems. 

Figure 5: Baggage Screening Configurations at the 337 Airports with 
Optimal Systems: 

[Refer to PDF for image: pie-chart] 

Primary ETD: 50%; 
EDS stand-alone only: 27%; 
In-line screening only: 16%; 
Mix of stand-alone EDS and primary EDS: 4%; 
Mix of EDS in-line and stand-alone: 2%. 

Source: GAO analysis of TSA data. 

Note: Percentages do not add to 100 percent because of rounding. 

[End of figure] 

Of the 337 airports with optimal baggage screening systems, larger 
airports were less likely to have completed optimal solutions than 
smaller airports.[Footnote 28] Specifically, 36 percent (10 of 28) of 
the category X airports and 49 percent (28 of 57) of the category I 
airports were considered to have optimal solutions, whereas 60 percent 
(46 of 77) of the category II airports, 76 percent (96 of 127) of the 
category III airports, and all of the 157 of the category IV airports 
were considered to be optimally configured, as shown in figure 6. 
[Footnote 29] According to TSA and airport officials, this is because 
the larger airports generally need to install more complex in-line 
systems, which are more time and resource intensive to install and 
often require a significant amount of airport infrastructure 
modification and construction, while the smaller airports, 
particularly the category IV airports that rely on the smaller ETD 
machines, require far less time and resources to install these 
systems. Moreover, TSA officials stated that the in-line systems that 
best meet the screening needs of larger airports take longer to plan 
and build because of the added complexity and scale of the upgrades 
and the coordination required among multiple stakeholders. 

Figure 6: Number of Airports with Optimal Baggage Screening Systems 
Compared to All TSA-Regulated Airports: 

[Refer to PDF for image: vertical bar graph] 

Number of Complete Airports Total Number of TSA Supervised Airports 
(by Category) 

Airport category: X; 
Airports with optimal checked baggage systems: 10 (36%); 
Total number of TSA regulated airports (by category): 28. 

Airport category: I; 
Airports with optimal checked baggage systems: 28 (49%); 
Total number of TSA regulated airports (by category): 57. 

Airport category: II; 
Airports with optimal checked baggage systems: 46 (60%); 
Total number of TSA regulated airports (by category): 77. 

Airport category: III; 
Airports with optimal checked baggage systems: 96 (76%); 
Total number of TSA regulated airports (by category): 127. 

Airport category: IV; 
Airports with optimal checked baggage systems: 157 (100%); 
Total number of TSA regulated airports (by category): 157. 

Airport category total: 
Airports with optimal checked baggage systems: 337 (76%);  
Total number of TSA regulated airports (by category): 446. 

Source: GAO analysis of TSA data. 

[End of figure] 

TSA Has Shifted Its Focus to Replacing Aging Machines: 

TSA anticipates that in the next 5 years about 60 percent (1,153 of 
1,933) of the EDS machines will reach the end of their useful life of 
about 10 years and will need to be replaced, as shown in figure 
7.[Footnote 30] As a result, to ensure that 100 percent of checked 
bags continue to be screened as required by ATSA, TSA revised its 
focus from replacing stand-alone EDS in airport lobbies with in-line 
systems to replacing its aging fleet of EDS and ETD machines, a 
process it calls recapitalization. However, TSA reported that it will 
continue to collaborate with airports or airlines to install optimal 
in-line systems if it coincides with efforts to recapitalize aging EDS 
machines or if the existing in-line systems do not meet current TSA 
standards. In August 2011, TSA issued its EDS and ETD Recapitalization 
and Optimization Plan, which establishes the method and criteria for 
prioritizing when and how EBSP recapitalization and optimization will 
occur. The plan notes that many in-line recapitalization projects will 
include an optimization component. For example, a number of early in-
line screening systems are likely to require optimization, among other 
things, to improve performance, increase efficiency, and reduce 
operating costs. At one airport we visited with an early in-line 
system, we observed a baggage handling system that needed to be 
replaced because it had sharp curves and steep grades that led to an 
excessive number of errors and jams.[Footnote 31] The airport was 
involved in TSA's recapitalization pilot program, and airport 
officials anticipated TSA supporting the optimization of this system 
as part of recapitalization. 

Figure 7: Age and Number of Deployed EDS Machines as of December 2011: 

[Refer to PDF for image: vertical bar graph] 

Age of EDS: 0 years; 
Number of Machines: 50. 

Age of EDS: 1 year; 
Number of Machines: 216. 

Age of EDS: 2 years; 
Number of Machines: 149. 

Age of EDS: 3 years; 
Number of Machines: 158. 

Age of EDS: 4 years; 
Number of Machines: 156. 

5 years until end of expected life. 

Age of EDS: 5 years; 
Number of Machines: 160. 

Age of EDS: 6 years; 
Number of Machines: 145. 

Age of EDS: 7 years; 
Number of Machines: 132. 

Age of EDS: 8 years; 
Number of Machines: 419. 

Age of EDS: 9 years; 
Number of Machines: 297. 

End of expected life: 60% of EDS machines will reach the end of their 
useful life in the next 5 years. 

Age of EDS: 10 years; 
Number of Machines: 9. 

Age of EDS: 11 years; 
Number of Machines: 9. 

Age of EDS: 12 years; 
Number of Machines: 20. 

Age of EDS: 13 years; 
Number of Machines: 13. 

Age of EDS: 14 years; 
Number of Machines: 10. 

Source: TSA. 

[End of figure] 

Reducing the Federal Cost Share for Eligible Airport Facility 
Modification Projects Could Reduce TSA's Costs: 

Reducing the Federal Cost Share: 

Consistent with current law, TSA enters into reimbursable agreements 
through which it generally funds 90 percent of the cost of an eligible 
airport facility modification project to support the installation of 
an optimal system, with an airport or airline funding the remaining 10 
percent of the project's cost.[Footnote 32] If the federal cost share 
for airport facility modification projects is reduced, TSA may be able 
to use available funding to install a greater number of optimal 
solutions than currently anticipated. From fiscal year 2003 through 
fiscal year 2007, in accordance with law then in effect, TSA entered 
into LOIs at a 75 percent federal cost share.[Footnote 33] Looking 
forward, we used TSA's projections of airport modification costs for 
each fiscal year, 2012 through 2030, as presented in its latest LCCE, 
and estimated the amount of expenditures for airport modifications 
that could be shifted from TSA to airports if the federal government's 
cost share were reduced from the current 90 percent to 75 percent. As 
discussed later in this report, we found that TSA's LCCE data are of 
questionable reliability for a precise estimate. However, the data can 
serve to provide a rough indication of how much TSA could save if the 
cost share were adjusted. Thus, we estimate that if the federal cost 
share for such projects returned to the 75 percent TSA applied to many 
of the reimbursable agreements it entered into prior to fiscal year 
2008, rather than the current federal share of 90 percent, TSA's 
anticipated expenditures for these modifications would be roughly $300 
million less through fiscal year 20[Footnote 34]30.: 

TSA had previously determined that assigning costs among industry 
stakeholders and the nation as a whole is difficult because 
operational improvements to the baggage handling systems and national 
security benefits are difficult to quantify. This, in turn, makes it 
difficult to develop a cost share formula that would allow TSA to 
allocate costs in proportion to benefits. Consistent with the 
Intelligence Reform and Terrorism Prevention Act of 2004, TSA 
commissioned the 2006 Baggage Screening Investment Study Working Group 
to prepare a report for the Aviation Security Advisory Committee, 
which examined what an appropriate federal government/airport cost 
share should be for the installation of checked baggage screening 
equipment.[Footnote 35] The working group, which consisted of over 60 
members representing, among others, TSA, FAA, airports, airlines, 
designers of baggage handling systems, and financial institutions, 
were unable to develop a consensus on an appropriate cost share 
formula, in large part because of the difficulties of measuring 
benefits, differing views on the federal responsibility for funding 
capital investments related to baggage screening, and the competing 
demands on the federal budget. As a result, potential cost share 
options were not submitted to the Congress as part of DHS's fiscal 
year 2006 budget submission. 

Airport Officials Acknowledge Benefits from In-line Systems but Oppose 
Increasing Their Cost Share: 

Representatives of all 10 airports we visited told us that they 
benefit from the installation of integrated, in-line baggage screening 
systems. Specifically, 

* officials from 9 of the 10 airports cited the reduction of passenger 
congestion in airport terminals because stand-alone EDS machines were 
removed from the lobby or ticketing areas, 

* officials from half of the airports noted that in-line systems 
reduce the number of lost or stolen bags by creating a streamlined 
process for moving checked baggage directly from where baggage is 
checked by the passenger and airline to the aircraft, and: 

* officials from 3 of 10 airports noted that in-line systems 
facilitate airport growth. 

However, for various reasons, officials representing 8 of the 10 
airports opposed a reduction in the federal cost share that would 
increase airports' share of modifications costs.[Footnote 36] 
Specifically, officials from half of the airports stated the following 
four concerns: 

* Assuming a larger share of airport modification costs would pose 
hardships because of current fiscal or funding constraints. 

* Airports incur additional (that is, nonallowable) costs that are 
necessary to building an in-line system, but which TSA will not 
reimburse. Examples of the nonallowable costs the airports cited 
include the costs of designing an in-line system and constructing 
rooms in which screeners manually screen bags that have not previously 
been cleared.[Footnote 37] As a result, officials from 5 of the 10 
airports we spoke with told us that after necessary, but nonallowable, 
costs were included, the airports were already paying for more than 10 
percent of the modification costs associated with in-line systems. 
[Footnote 38] 

* Airports have a backlog of capital projects or would rather fund 
projects that will produce additional revenue, such as parking garages 
or larger areas for concessions, than projects that are related to 
TSA's security responsibilities. 

* TSA will be the primary beneficiary of in-line baggage screening 
systems because the integration and consolidation of these systems 
will enable TSA to reduce the number of baggage screeners and provide 
TSA with other operational efficiencies. 

TSA's Cost Estimation Processes Do Not Fully Comply with Best 
Practices, and TSA and DHS Are Working Together to Establish an 
Acquisition Program Baseline: 

TSA Estimates That the EBSP Will Cost Close to $50 Billion through 
2030: 

TSA's August 25, 2011, life cycle cost estimate identified a total 
program cost for EBSP of $49.2 billion through fiscal year 2030. 
[Footnote 39] The $49.2 billion includes $2.65 billion for EBSP 
program operation and management; $11.03 billion for capital costs, 
including, among other things, recapitalization and facility 
modifications for optimization; $14.89 billion for operations and 
maintenance of equipment; $18.42 billion for screener salaries; and 
$2.22 billion for research and development and other miscellaneous 
related costs.[Footnote 40] Additionally, TSA officials reported that 
the program is expected to provide life cycle cost savings of $537 
million.[Footnote 41] However, we found that the cost estimates are of 
questionable reliability for a precise estimate. TSA continues to 
revise its life cycle cost estimates. For example, its August 2011 
EBSP life cycle cost estimate report stated that new requirements, 
including recapitalization and upgrading the efficiency of early in-
line systems, will likely lead to a gap between anticipated program 
needs and anticipated funding during fiscal years 2012 to 2017, 
totaling up to $436 million. However, in December 2011 TSA officials 
told us the DHS Acquisition Review Board had requested that TSA revise 
the EBSP funding plans and projections to more accurately reflect 
current budget constraints and reduced funding available for the 
program.[Footnote 42] According to TSA officials, they plan to 
complete the revised EBSP planning estimates and funding projections 
to help eliminate the potential funding gap before the next 
Acquisition Review Board meeting in May 2012. EBSP senior program 
officials explained that TSA will address the potential funding gap by 
(1) controlling the costs associated with engineering initiatives and 
improvements in technology performance, (2) delaying funding of some 
new in-line systems and recapitalization projects, and (3) extending 
the useful life of equipment beyond 10 years in cases where 
replacement could be delayed. 

TSA's Life Cycle Cost Estimates Are Not Fully Consistent with Best 
Practices for Reliable and Credible Estimates: 

Although TSA's methods for developing its LCCE reflect features of 
best practices, its methods do not fully adhere to these practices. As 
highlighted in our past work, a high-quality, reliable cost estimation 
process provides a sound basis for making accurate and well-informed 
decisions about resource investments, budgets, assessments of 
progress, and accountability for results and thus is critical to the 
success of a program.[Footnote 43] According to the Office of 
Management and Budget (OMB), federal agencies must maintain current 
and well-documented estimates of program costs, and these estimates 
must encompass the program's full life cycle.[Footnote 44] Without 
such an estimate, agencies are at increased risk of making poorly 
informed investment decisions, securing insufficient resources to 
effectively execute defined program plans and schedules, and 
experiencing program cost and schedule overruns and performance 
shortfalls. As highlighted in our Cost Estimating and Assessment 
Guide, a reliable cost estimate has four characteristics--it is 
comprehensive, well documented, accurate, and credible. We reviewed 
TSA's cost estimation procedures for the EBSP and assessed the extent 
to which the agency met the four characteristics, as shown in table 2. 

Table 2: GAO's Assessment of TSA's Method for Developing EBSP Life 
Cycle Cost Estimates: 

Characteristic: Comprehensive; 
Description: A comprehensive cost estimate should include all 
government and contractor costs over the program's full life cycle, 
provide sufficient detail to ensure that the cost elements are neither 
omitted nor double counted, and document all cost-influencing ground 
rules and assumptions; 
Overall assessment[A]: Partially met. 

Characteristic: Well documented; 
Description: A well-documented cost estimate should capture in writing 
such things as the source and significance of the data used, the 
calculations performed and their results, and the rationale for 
choosing a particular estimating method or reference. A well-
documented estimate can be easily reconstructed by an outside source 
and should be reviewed and accepted by management; 
Overall assessment[A]: Partially met. 

Characteristic: Accurate; 
Description: An accurate cost estimate should be, among other things, 
based on historical data reflecting most likely costs, adjusted 
properly for inflation, and validated against an independent cost 
estimate. An accurate estimate should be updated regularly to reflect 
material changes in the program and actual cost experience on the 
program, and steps should be taken to minimize mathematical mistakes; 
Overall assessment[A]: Partially met. 

Characteristic: Credible; 
Description: A credible cost estimate should discuss any limitations 
in the analysis caused by uncertainty or biases surrounding the data 
and assumptions. Major assumptions should be varied and other outcomes 
computed to determine how sensitive the estimate is to changes in the 
assumptions. Risk and uncertainty inherent in the estimate should be 
assessed and disclosed; 
Overall assessment[A]: Minimally met. 

Source: GAO analysis based on the GAO Cost Estimating and Assessment 
Guide. 

[A] We defined a characteristic as not met if the agency provided no 
evidence that satisfied any portion of the criterion, minimally met if 
the agency provided evidence that satisfied less than one-half of the 
criterion, partially net if the agency provided evidence that 
satisfied about one-half of the criterion, substantially met if the 
agency provided evidence that satisfied more than one-half of the 
criterion, and met if the agency provided complete evidence that 
satisfied the entire criterion. 

[End of table] 

Our assessment showed that TSA's EBSP estimates partially met three 
characteristics and minimally met one characteristic of a reliable 
cost estimate. Specifically, TSA's cost estimate was as follows: 

* Partially comprehensive because the estimate defines the program, 
reflects the current schedule, is technically reasonable, includes 
assumptions identified by a team of personnel and engineers, and 
provides risks related to detection standards. However, the cost 
estimate is not considered fully comprehensive because it does not 
incorporate costs associated with all security threats, lacks a 
detailed product-oriented work breakdown structure that covers the 
entire scope of work, and lacks a single technical baseline. Without 
fully accounting for life cycle costs, management may have difficulty 
successfully planning program resource requirements and making wise 
decisions. Further, the program lacks a defined end date. A reasonable 
criterion is that the estimate capture at least 10 years of costs 
beyond the planned full operational capability date--the date at which 
optimal systems are fully deployed and operating at all locations. 
However, we cannot determine whether the time frame is sufficient 
because we have not received documentation to support the program's 
official, planned full operational capability date. According to TSA, 
the EBSP does not have a defined end date for procurement because 
maintaining compliance with the 100 percent screening mandate 
established by ATSA requires TSA to continuously procure and replace 
equipment as it reaches the end of its useful life. TSA also believes 
that it is following DHS acquisition guidance outlined under the 
acquisition decision memorandum dated January 13, 2005, for estimating 
threshold dates. Nevertheless, the EBSP still lacks a defined, 
official full operational capability date, without which we can 
neither determine whether the time frame used in the LCCE is 
sufficient nor verify that the life cycle cost estimate is fully 
comprehensive. 

* Partially documented because TSA used relevant data to help develop 
the estimate. For example, TSA's estimated price for the equipment is 
based on existing contracts for EBSP equipment purchases, maintenance 
costs, LOI agreements, and OTAs. TSA also provided narratives, 
briefings, and documents to describe the program requirements, 
purpose, technical characteristics, and acquisition strategy, and 
explained how calculations were performed. However, TSA did not 
adequately document many assumptions or methodologies underlying its 
cost model to the extent that would allow someone unfamiliar with the 
cost estimate, using only the available documentation, to easily re-
create the estimate. For example, equipment purchase and hardware 
upgrade costs were based in part on estimates from engineers and 
contract specialists rather than historical or analogous data. Unless 
ground rules and assumptions are clearly documented, the cost estimate 
will not have a basis for areas of potential risk to be resolved. In 
addition, TSA also provided little or no evidence that the assumptions 
and methodologies underlying the cost estimate were approved by 
management.[Footnote 45] TSA officials agreed that additional 
documentation could improve the outside reviewers' ability to evaluate 
the estimate. According to TSA, the EBSP plans to follow DHS guidance 
to implement software dedicated to the estimation, documentation, and 
reporting of costs during all phases of the EBSP program life cycle to 
help address documentation concerns. 

* Partially accurate because while the estimate is properly adjusted 
for inflation, differences between planned and actual costs are not 
fully documented, explained, or reviewed. In addition, we cannot 
determine whether the cost estimate is unbiased--that is, neither 
overly conservative nor overly optimistic--because the program did not 
perform an uncertainty analysis that meets best practices. While TSA 
agreed that costs should be documented, it could not explain why the 
differences between planned and actual costs were not being fully 
documented, explained, or reviewed. 

* Minimally credible because while TSA identified changes in cost for 
each scenario against the baseline and developed a limited risk 
analysis, TSA did not complete other relevant activities to ensure 
that the estimate accounts for bias and uncertainty. For example, the 
agency did not (1) document in detail the assumptions and parameters 
associated with its sensitivity analysis, such as detailed 
calculations on how each parameter was varied between its minimum and 
maximum values; (2) conduct a fully objective uncertainty analysis 
that derives the point estimate percentile rather than assumes it; (3) 
cross-check major cost elements to see whether results are similar; 
and (4) use an independent cost estimate to validate the cost 
estimate. Given the important role that an independent cost estimate 
provides in developing an objective and unbiased assessment of whether 
the program estimate can be achieved, developing and using an 
independent cost estimate would provide decision makers with insight 
into a program's potential costs and reduce the risk of underfunding a 
program. TSA officials told us they did not perform a complete 
uncertainty analysis because it was too costly and time consuming. TSA 
officials concurred that an independent cost estimate was not done for 
the EBSP and agreed that completing an independent estimate would be 
helpful. 

Regarding the credibility of TSA's estimates, our past work has shown 
that program cost estimates that are independently validated help 
improve the confidence that the estimate is credible, are needed for 
making timely and informed budget decisions, and help reduce the 
likelihood of unanticipated program cost growth.[Footnote 46] Our 
prior reviews of several DHS programs, including the EBSP, have also 
shown that if cost estimates are not validated in accordance with DHS 
acquisition management directive requirements at the start of an 
acquisition program, it is difficult to assess whether a program is 
being deployed within planned budgets.[Footnote 47] Further, DHS's 
Acquisition Management Directive requires major program cost estimates 
to be validated early in the decision-making process, before programs 
can receive authorization for acquisition contracts at the DHS 
Acquisition Review Board meeting.[Footnote 48] However, we found that 
since 2008 the DHS Acquisition Review Board allowed the EBSP to 
proceed with acquisition contracts before the LCCE was independently 
validated by DHS, which is inconsistent with DHS policy.[Footnote 49] 

In May 2010, the DHS Cost Analysis Division reviewed the EBSP life 
cycle cost estimate and found that it needed more comprehensive data 
and that its accuracy could not be determined. As of December 2011, 
the estimate had not been independently validated by DHS.[Footnote 50] 
According to TSA, DHS guidance that required validation of cost 
estimates was not in place until November 2008. The interim DHS 
directive for LCCEs and validation was established in November 2008, 
and the Cost Analysis Division was designated the authority 
responsible for independent cost estimates on January 24, 2010. 
However, the DHS Acquisition Review Board did not request a validated 
LCCE until February 25, 2011. TSA officials also stated that since the 
program's budget circumstances changed over time, the cost estimate 
needed to be revised to reflect a constrained budget for fiscal year 
2013 and other program changes. For example, TSA officials stated that 
new requirements for the EBSP, particularly the shift in focus to 
recapitalization of the aging EDS and ETD fleet and upgrades to in-
line baggage screening systems and threat detection levels, 
contributed to continued program cost growth and delayed efforts to 
validate the latest LCCEs. As a result, the federal government's 
portion of the cost estimates for the EBSP has increased from 
approximately $20.5 billion in fiscal year 2010 to $25.4 billion in 
fiscal year 2011--a 24 percent increase.[Footnote 51] TSA is currently 
working with DHS on the validation of the cost estimate for the next 
Acquisition Review Board meeting scheduled for May 2012. 

According to our 2009 Cost Estimating and Assessment Guide, endorsed 
by the OMB and DHS, cost estimates are integral to determining and 
communicating a realistic view of likely cost outcomes that can be 
used to plan the work necessary to develop, produce, and support a 
program.[Footnote 52] Taking steps to ensure that its cost estimates 
for the EBSP conform to cost estimating best practices will help 
provide TSA with a sound basis for understanding how the program can 
be sustained in future years. 

TSA and DHS Are Working to Develop an EBSP Acquisition Program 
Baseline: 

Another foundation for making informed budget decisions is the 
acquisition program baseline, which is to document a program's 
critical cost elements, including acquisition costs and life cycle 
costs. According to DHS's acquisition guidance, the program baseline 
is the contract between the program and departmental oversight 
officials and must be established at program start to document the 
program's expected cost, deployment schedule, and technical 
performance. Establishing such a baseline at program start is 
important for defining the program's scope, assessing whether all life 
cycle costs are properly calculated, and measuring how well the 
program is meeting its goals. As we have previously reported, 
establishing realistic original baseline estimates is important for 
minimizing the risks of poorly defined requirements and achieving 
better program outcomes.[Footnote 53] By tracking and measuring actual 
program performance against this formal baseline, management can be 
alerted to potential problems, such as cost growth or changing 
requirements, and has the ability to take early corrective action. 
[Footnote 54] 

However, since the inception of the program more than eight years ago, 
the EBSP has not had a DHS approved acquisition program baseline and 
DHS did not require TSA to complete an acquisition program baseline 
until November 2008. An approved baseline will provide DHS with 
additional assurances that TSA's approach is appropriate and that the 
capabilities being pursued are worth the expected costs. DHS officials 
told us that several reorganizations of DHS offices responsible for 
approving the baseline and a lack of functional expertise within the 
agency contributed to further delays in approving the EBSP acquisition 
program baseline. According to TSA officials, they have twice 
submitted an acquisition program baseline to DHS for approval. In 
November 2009 and February 2011, TSA requested approval of a program 
baseline, but according to DHS officials TSA did not have a fully 
developed life cycle cost estimate. In November 2011, DHS told TSA 
that it needed to revise the life cycle cost estimates as well as its 
procurement and deployment schedules to reflect budget constraints. 
DHS officials told us that they could not approve the acquisition 
program baseline as written because TSA's estimates were significantly 
over budget. TSA officials stated that TSA is currently working with 
DHS to amend the draft program baseline for approval. TSA officials 
stated that they plan to resubmit the revised acquisition program 
baseline before the next Acquisition Review Board meeting in May 2012. 
Establishing and approving a program baseline, as DHS and TSA 
currently plan to do for the EBSP, could help DHS assess the program's 
progress in meeting its goals and achieve better program outcomes. 

Conclusions: 

TSA's EBSP is aimed at increasing airport screening efficiencies and 
addressing the continuing threat of explosives concealed in checked 
baggage, at a total estimated cost to the federal government and the 
private sector of close to $50 billion through fiscal year 
2030.[Footnote 55] Given the size of the federal investment, it is 
vital that TSA ensures effective stewardship over these resources and 
conveys useful information to the Congress about the scope and cost of 
the program. However, the limitations we identified in TSA's EBSP cost 
estimates raise questions about their reliability. Taking steps to 
ensure that its cost estimates meet the four characteristics for high-
quality and reliable cost estimates would provide TSA with increased 
assurance about the reliability of the estimated total cost of the 
program and better position it to account for all resources and 
associated costs required to develop, implement, and sustain the EBSP. 

Recommendation for Executive Action: 

In order to strengthen the credibility, comprehensiveness, and 
reliability of TSA's cost estimates and related savings estimates for 
the EBSP, we recommend that the Administrator of TSA ensure that its 
life cycle cost estimates conform to cost estimating best practices. 

Agency Comments and Our Evaluation: 

On March 30, 2012, we provided a draft of this report to DHS for its 
review and comment. DHS provided written comments on April 19, 2012, 
which are reprinted in appendix IV. In its written comments, DHS 
concurred with our recommendation that TSA ensure that its life cycle 
cost estimates conform to cost estimating best practices and discussed 
efforts under way to address it. DHS further acknowledged the 
importance of producing life cycle cost estimates that are 
comprehensive, well documented, accurate, and credible so that they 
can be used to support DHS funding and budget decisions. DHS also 
noted that after conducting an internal review, TSA is implementing a 
management directive that applies DHS guidance and the best practices 
from the GAO Cost Estimating and Assessment Guide. As part of this 
effort, TSA is (1) establishing a working group and executive board to 
review program cost estimates to validate whether the estimates are 
credible and affordable, (2) requiring all life cycle cost estimates 
to be approved by DHS to ensure consistency and quality across TSA 
programs, (3) purchasing and training its employees on specialized 
cost estimating software, and (4) initiating hiring actions to hire 
additional cost estimating personnel. TSA believes that this will 
institutionalize cost estimating best practices within the 
organization and ultimately allow TSA and the Department to make 
better-informed investment decisions. These are positive steps; 
however, additional time will be needed to assess whether they have 
been fully and consistently implemented in accordance with GAO best 
practices. 

We are sending copies of this report to the Secretary of Homeland 
Security, the Assistant Secretary of the Transportation Security 
Administration, and appropriate congressional committees. In addition, 
this report is available at no charge on the GAO website at 
[hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-8777 or lords@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions 
to this report are listed in appendix V. 

Signed by: 

Stephen M. Lord: 
Director: 
Homeland Security and Justice Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

We examined the Department of Homeland Security's (DHS) Transportation 
Security Administration's (TSA) operation of the Electronic Baggage 
Screening Program (EBSP) to assess the program's current status, 
alternative cost sharing options, and cost estimates. Specifically, we 
addressed the following questions: 

* What is the status of TSA's efforts to install optimal checked 
baggage screening systems in collaboration with airports? 

* How would reducing the current federal cost share for eligible 
airport modification projects from 90 percent to its previous level of 
75 percent affect the amount that TSA pays for these modifications, 
and what benefits, if any, do airports report receiving from in-line 
baggage screening systems? 

* To what extent are TSA's cost estimation procedures consistent with 
best practices and is TSA's acquisition baseline consistent with DHS 
guidance? 

To determine the status of TSA's efforts to install optimal checked 
baggage screening systems, we obtained data as of December 2011 and 
January 2012 from TSA, such as the current number of airports with at 
least one in-line system, and the number of airports with optimal 
systems. We also obtained data on the number of airports configured 
exclusively with in-line screening, the number of airports configured 
with a mix in-line and stand-alone explosives detection systems (EDS), 
and the number of airports using only stand-alone EDS for the same 
time period. We also collected data on the overall number of 
operational in-line systems and EDS and explosives trace detection 
(ETD) machines as of December 2011. We reviewed documentation from 
TSA's EBSP, including the EBSP strategic plans for fiscal years 2006, 
2008, and 2009, and the 2011 EDS and ETD Recapitalization and 
Optimization Plan. 

We assessed the reliability of the various data TSA provided about 
airports, including the number of TSA-regulated airports (by category) 
and the numbers of airports with the different configurations of 
baggage screening systems (in-line or stand-alone), and the investment 
and budget expenditure dollar values in the letters of intent and 
other transaction agreements by questioning cognizant TSA officials 
and obtaining extensive documentation about these various data. We 
found these data to be sufficiently reliable for the purposes of our 
report. 

To determine how reducing the federal cost share from the current 90 
percent to the previous federal cost share of 75 percent for eligible 
airport modification projects may affect the amount that TSA pays for 
these modifications, we calculated estimates based on TSA's August 
2011 projections of how much airport modifications will cost in the 
future. These projections represent TSA's best estimate for how much 
it will spend on airport modifications for in-line systems each year 
from fiscal years 2012 through 2030. We also reviewed the reliability 
of the cost estimate by evaluating how well TSA followed best 
practices detailed in the GAO Cost Estimating and Assessment Guide 
(see below). While TSA's process for estimating costs only partially 
meets the characteristics of a reliable cost estimate, the data can 
serve to provide a rough indication of how much could be saved by 
reducing the federal cost share for optimization. To assess how the 
installation of in-line baggage handling systems may benefit the 
airports that receive them, we visited a nonrandom sample of 10 
airports. We chose these airports based on the size of airport, type 
of checked baggage screening systems installed, and status of airport 
facility modification completion. We discussed cost share with 
officials at each airport representing the airport authority, tenant 
airlines, and TSA's Federal Security Director. In addition, we 
interviewed officials from the largest industry associations that 
represent airport executives, airports and airlines (the American 
Association of Airport Executives, the Airports Council International 
North America, and the Air Transport Association). We also interviewed 
an official from of the Association for Airline Passenger Rights. In 
addition, we discussed potential benefits of optimization with 
aviation security experts. These results cannot be generalized to the 
entire industry, but did provide broader perspectives on the issues 
and costs associated with the EBSP. 

To assess the extent to which TSA's methods for estimating costs for 
EBSP are consistent with best practices and its acquisition program 
baseline is consistent with DHS guidance, we analyzed TSA's most 
recent life cycle cost estimate and recapitalization report finalized 
in August 2011. Specifically, we used best practices in the GAO Cost 
Estimating and Assessment Guide to evaluate TSA's estimating 
methodologies, assumptions, and results to assess whether the official 
cost estimates were comprehensive (i.e., includes all costs), 
accurate, well documented, and credible.[Footnote 56] Our Cost 
Estimating and Assessment Guide considers an estimate to be: 

* comprehensive if its level of detail ensures that all pertinent 
costs are included and no costs are double counted; 

* accurate if it is not overly conservative, is based on an assessment 
of the most likely costs, and is adjusted properly for inflation; 

* well documented if the estimate can be easily repeated or updated 
and can be traced to original sources through auditing; and: 

* credible if the estimate has been cross-checked with an independent 
cost estimate and a level of uncertainty associated with the estimate 
has been identified. 

We also interviewed the TSA EBSP office's cost estimating team and its 
consultants to obtain a detailed understanding of their methodology, 
the cost model, and data. In doing so, we interviewed cognizant 
program officials, including the Program Manager and cost analysis 
team, regarding their respective roles, responsibilities, and actions 
in developing the cost estimate, reviewing it, or both. 

We examined data reliability of the cost estimate by doing the 
following: 

* Obtaining cost estimates and reviewing how each major element was 
calculated with an emphasis on the basis for the estimate and strength 
and quality of the supporting documentation. 

* Verifying that the parameters used to create each estimate were 
valid and applicable by comparing to available cost estimating 
references, posing questions to the cost estimators for clarification, 
and relying on other technical sources for cross-checking. 

* Verifying that calculations were correct for each major element. 

* Verifying that escalation was properly applied and elements rolled 
up accurately to the overall program cost estimate. 

We reviewed TSA's EBSP cost estimates to determine whether the 
characteristic was (1) not met if the agency provided no evidence that 
satisfied any portion of the criterion, (2) minimally met if the 
agency provided evidence that satisfied less than one-half of the 
criterion, (3) partially met if the agency provided evidence that 
satisfied about one-half of the criterion, (4) substantially met if 
the agency provided evidence that satisfied more than one-half of the 
criterion, and (5) met if the agency provided complete evidence that 
satisfied the entire criterion. One analyst assigned a value ranging 
from 1 to 5 indicating the extent to which the agencies met each best 
practice and averaged the values for the practices that were 
associated with each characteristic. A second analyst independently 
verified the results. We also interviewed program officials from TSA 
and DHS responsible for each cost estimate about the estimate's 
derivation. In doing so, we independently assessed the cost estimates 
for the current EBSP, as provided to us in August 2011, against our 
best practices. 

To understand how TSA is working to make better informed budget 
decisions and complying with DHS guidance to develop an acquisition 
program baseline, we reviewed DHS guidance on acquisitions and 
documents related to TSA's efforts to coordinate with DHS on 
developing an acquisition program baseline for EBSP, which DHS 
considers the contract between the program and departmental oversight 
officials to document the program's expected cost, deployment 
schedule, and technical performance. We also reviewed EBSP Acquisition 
Review Board decisions and relevant acquisition decision memos during 
the period 2005 through 2011. Additionally, we interviewed TSA and DHS 
officials, including officials in the TSA Chief Financial Officer's 
office and DHS's Program Accountability and Risk Management Office to 
identify what procedures have been put in place to approve the 
acquisition program baseline. 

To gain a better understanding of issues across all of our objectives, 
including the development of optimal systems, status of 
implementation, funding challenges, impact of a change in the cost 
share formula at the airport level, and cost estimation, we conducted 
site visits to California, New York, Massachusetts, Washington, D.C., 
and Florida to interview local airport officials, regional TSA 
officials, and airline representatives.[Footnote 57] To get a range of 
airports for our site visits, we made our selections based on the size 
of airport, type of checked baggage screening systems installed, and 
status of airport facility modification completion. We also considered 
recommendations from TSA and industry association officials about 
which airports to visit. Because we selected a nonprobability sample 
of airports, the information we obtained from these interviews and 
visits cannot be generalized to all airports. However, we believe that 
observations obtained from these visits provided us with a greater 
understanding of the airport officials' perspectives. On these site 
visits, we interviewed airport, airline, and TSA officials responsible 
for financing, operating, and installing the checked baggage systems 
within their respective airports. 

We conducted this performance audit from October 2010 through April 
2012 in accordance with generally accepted government auditing 
standards.[Footnote 58] Those standards require that we plan and 
perform the audit to obtain sufficient, appropriate evidence to 
provide a reasonable basis for our findings and conclusions based on 
our audit objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objectives. 

[End of section] 

Appendix II: Status of Implementation Efforts for TSA's EBSP: 

TSA, through its EBSP, has deployed EDS and ETD machines in a variety 
of in-line and stand-alone configurations at airports to streamline 
airports and TSA operations, reduce screening costs, and enhance 
security. The following three tables provide information on the status 
of checked baggage screening systems. Table 3 highlights the different 
system configurations for airports that have optimal checked baggage 
systems by airport category. Table 4 shows the number of TSA-regulated 
airports with at least one in-line system. Table 5 provides the 
numbers of in-line systems and stand-alone EDS and ETD machines at TSA-
regulated airports. 

Table 3: Checked Baggage Configurations for TSA-Regulated Airports 
That Have Optimal Systems as of December 2011: 

Types of checked baggage configurations: In-line screening only; 
Number of airports (by airport category): 
X: 8; 
I: 25; 
II: 12; 
III: 9; 
IV: 1; 
Total: 55. 

Types of checked baggage configurations: Mix of EDS in-line and stand-
alone; 
Number of airports (by airport category): 
X: 2; 
I: 3; 
II: 3; 
III: 0; 
IV: 0; 
Total: 8. 

Types of checked baggage configurations: EDS stand-alone only; 
Number of airports (by airport category): 
X: 0; 
I: 0; 
II: 31; 
III: 56; 
IV: 5; 
Total: 92. 

Types of checked baggage configurations: Mix of stand-alone EDS and 
primary ETD; 
Number of airports (by airport category): 
X: 0; 
I: 0; 
II: 0; 
III: 1; 
IV: 14; 
Total: 15. 

Types of checked baggage configurations: Primary ETD; 
Number of airports (by airport category): 
X: 0; 
I: 0; 
II: 0; 
III: 30; 
IV: 137; 
Total: 167. 

Types of checked baggage configurations: Total; 
Number of airports (by airport category): 
X: 10; 
I: 28; 
II: 46; 
III: 96; 
IV: 157; 
Total: 337. 

[End of table] 

Source: TSA. 

Table 4: TSA-Regulated Airports with at Least One In-line System as of 
December 2011: 

Number of TSA-regulated airports; 
Number of airports (by airport category): 
X: 28; 
I: 57; 
II: 77; 
III: 127; 
IV: 157; 
Total: 446. 

Number of TSA-regulated airports with at least one in-line system; 
Number of airports (by airport category): 
X: 23; 
I: 38; 
II: 18; 
III: 12; 
IV: 1; 
Total: 92. 

Source: TSA. 

[End of table] 

Table 5: Numbers of In-line Systems and Stand-alone EDS and ETD 
Machines for TSA-Regulated Airports as of December 2011: 

Types of baggage screening configurations: In-line systems[A]; 
Number of baggage screening configurations (by airport category): 
X: 133; 
I: 88; 
II: 27; 
III: 12; 
IV: 1; 
Total: 261. 

Types of baggage screening configurations: In-line EDS; 
Number of baggage screening configurations (by airport category): 
X: 694; 
I: 284; 
II: 60; 
III: 27; 
IV: 2; 
Total: 1,067. 

Types of baggage screening configurations: Stand-alone EDS; 
Number of baggage screening configurations (by airport category): 
X: 383; 
I: 172; 
II: 202; 
III: 91; 
IV: 18; 
Total: 866. 

Types of baggage screening configurations: ETD machines; 
Number of baggage screening configurations (by airport category): 
X: 2,195; 
I: 1,324; 
II: 592; 
III: 405; 
IV: 304; 
Total: 4,820. 

Source: TSA. 

[A] One in-line system may include one or more EDS machines. 

[End of table] 

[End of section] 

Appendix III: Our Evaluation of EBSP's Cost Estimate Process: 

In determining that TSA's processes for developing EBSP cost estimates 
do not fully comply with best practices, we evaluated TSA's cost 
estimation methods against our 2009 Cost Estimating and Assessment 
Guide. (See table 6.) We applied the following scale across the four 
categories of best practices: 

* Not met: TSA provided no evidence that satisfies any portion of the 
criterion. 

* Minimally met: TSA provided evidence that satisfies less than one-
half of the criterion. 

* Partially met: TSA provided evidence that satisfies about one-half 
of the criterion. 

* Substantially met: TSA provided evidence that satisfies more than 
one-half of the criterion. 

* Met: TSA provided complete evidence that satisfies the entire 
criterion. 

Table 6: Summary Assessment of TSA's Electronic Baggage Screening 
Program Cost Estimate Compared to Best Practices: 

Characteristic: Comprehensive; 
Overall assessment: Partially met; 

Best practice: The cost estimate includes all life cycle costs; 
Individual assessment: Partially met. 

Best practice: The cost estimate completely defines the program, 
reflects the current schedule, and is technically reasonable; 
Individual assessment: Partially met. 

Best practice: The cost estimate work breakdown structure is product 
oriented, traceable to the statement of work/objective, and at an 
appropriate level of detail to ensure that cost elements are neither 
omitted nor double counted; 
Individual assessment: Partially met. 

Best practice: The estimate documents all cost-influencing ground 
rules and assumptions; 
Individual assessment: Partially met. 

Characteristic: Well documented; 
Overall assessment: Partially met; 

Best practice: The documentation should capture the source data used, 
the reliability of the data, and how the data were normalized; 
Individual assessment: Partially met. 

Best practice: The documentation describes in sufficient detail the 
calculations performed and the estimating methodology used to derive 
each element's cost; 
Individual assessment: Partially met. 

Best practice: The documentation describes step-by-step how the 
estimate was developed so that a cost analyst unfamiliar with the 
program could understand what was done and replicate it; 
Individual assessment: Partially met. 

Best practice: The documentation discusses the technical baseline 
description, and the data in the baseline are consistent with the 
estimate; 
Individual assessment: Substantially met. 

Best practice: The documentation provides evidence that the cost 
estimate was reviewed and accepted by management; 
Individual assessment: Minimally met. 

Characteristic: Accurate; 
Overall assessment: Partially met; 

Best practice: The cost estimate results are unbiased, not overly 
conservative or optimistic and based on an assessment of most likely 
costs; 
Individual assessment: Partially met. 

Best practice: The estimate has been adjusted properly for inflation; 
Individual assessment: Met. 

Best practice: The estimate contains few, if any, minor mistakes; 
Individual assessment: Partially met. 

Best practice: The cost estimate is regularly updated to reflect 
significant changes in the program so that it is always reflecting 
current status; 
Individual assessment: Partially met. 

Best practice: Minimally met: Variances between planned and actual 
costs are documented, explained, and reviewed; 
Individual assessment: Minimally met: Not met. 

Best practice: The estimate is based on a historical record of cost 
estimating and actual experiences from other comparable programs; 
Individual assessment: 
Partially met. 

Characteristic: Credible; 
Overall assessment: Minimally met; 
Best practice: The cost estimate includes a sensitivity analysis that 
identifies a range of possible costs based on varying major 
assumptions, parameters, and data inputs; 
Individual assessment: Partially met. 

Best practice: A risk and uncertainty analysis was conducted that 
quantified the imperfectly understood risks and identified the effects 
of changing key cost driver assumptions and factors; 
Individual assessment: Partially met. 

Best practice: Major cost elements were cross-checked to see whether 
results were similar; 
Individual assessment: Not met. 

Best practice: An independent cost estimate was conducted by a group 
outside the acquiring organization to determine whether other 
estimating methods produce similar results; 
Individual assessment: Not met. 

Source: GAO analysis of TSA's data. 

[End of table] 

Appendix IV: Comments from the Department of Homeland Security: 

U.S. Department of Homeland Security: 
Washington, DC 20528: 

April 19, 2012: 

Stephen M. Lord: 
Director, Homeland Security and Justice: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Re: Draft Report GAO-12-266, "Checked Baggage Screening: TSA Has 
Deployed Optimal Systems at the Majority of TSA-Regulated Airports, 
but Could Strengthen Cost Estimates" 

Dear Mr. Lord: 

Thank you for the opportunity to review and comment on this draft 
report. The U.S. Department of Homeland Security (DHS) appreciates the 
U.S. Government Accountability Office's (GAO) work in planning and 
conducting its review and issuing this report. 

The Department is pleased to note GAO's positive acknowledgment of the 
progress the
Transportation Security Administration (TSA) has made deploying 
optimal checked baggage screening systems at airports across the 
Nation. This includes recognition of TSA's efforts to replace aging 
machines that have or will soon reach the end of their useful life, 
and that many of these projects include an optimization component to 
improve performance, increase efficiency, and reduce operating costs. 
We also appreciate comments in the report about DHS responsiveness to 
prior GAO recommendations related to checked baggage screening. 

The draft report contained one recommendation with which the 
Department concurs. 

Specifically, GAO recommended that the TSA Administrator: 

Recommendation: Ensure that its life-cycle cost estimates conform to 
cost estimating best practices. 

Response: Concur. TSA acknowledges the importance of producing life-
cycle cost estimates (LCCEs) that are comprehensive, well-documented, 
accurate, and credible. In addition, TSA understands that LCCEs are 
used to support DHS portfolio funding decisions, to develop budget 
requests, to evaluate resource requirements at key acquisition 
decision events, and to develop performance measurement baselines. TSA 
is initiating a layered approach to institutionalize cost estimating 
with the express purpose of improving the quality, fidelity, and 
uniformity of LCCEs to further its objective of establishing an 
internal cost estimating capability. 

Specifically, after conducting an internal review, TSA is implementing 
a Management Directive specific to preparing and approving LCCEs that 
follow the process steps and guidelines documented in DHS Acquisition 
Directive 102, as well as best practices from the GAO Cost Estimating 
and Assessment Guide. Moreover, to help satisfy DHS Cost Center of 
Excellence expectations that TSA LCCEs will comply with the 
aforementioned guidance, TSA's Acquisition Management Functional 
Division personnel are: 

* establishing a working group and executive board to review program 
cost estimates with the purpose of validating whether the estimate is 
credible and affordable, 

* requiring all life-cycle cost estimates to be approved by the 
Component Acquisition
Executive to ensure consistency and quality across TSA Programs, 

* purchasing and training its employees on specialized cost-estimating 
software, and; 

* initiating hiring actions to hire additional cost-estimating 
personnel. 

We anticipate that these actions will be completed by December 31, 
2012. 

Again, thank you for the opportunity to review and comment on this 
draft report. Technical and sensitivity comments for the report were 
previously provided under separate cover. Please feel free to contact 
me if you have any questions. We look forward to working with you on 
future Homeland Security issues. 

Sincerely, 

Signed by: 

Jim H. Crumpacker: 
Director: 
Departmental GAO-OIG Liaison Office: 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Stephen M. Lord, (202) 512-4379 or lords@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Glenn Davis, Assistant 
Director, and Daniel Rodriguez, Analyst-in-Charge, managed this 
assignment. Wendy Dye, Daren Sweeney, and Yee Wong made major 
contributions to the planning and all other aspects of the work. David 
Alexander and Richard Hung assisted with design, methodology, and data 
reliability. Chuck Bausell and Jack Wang assisted with economic 
analysis. Jason Lee, Stacey Steele, and Karen Richey assisted with 
life cycle cost estimate analysis. Nathan Tranquilli assisted with 
acquisition and contracting issues. Linda Miller provided assistance 
in report preparation. Thomas Lombardi provided legal support. 

[End of section] 

Footnotes: 

[1] See Pub. L. No. 107-71, §§ 101(a), 110(b), 115 Stat. 597, 597-604, 
614-16 (2001) (codified as amended at 49 U.S.C. §§ 114(a), 44901(d)). 
Pursuant to the Homeland Security Act of 2002, enacted on November 25, 
2002, TSA transferred from the Department of Transportation to the 
newly formed DHS. See Pub. L. No. 107-296, §§ 101, 403(2), 425, 116 
Stat. 2135, 2142, 78, 85-86 (2002). 

[2] See 49 U.S.C. § 44901(d). ATSA further provides that TSA must take 
all necessary action to ensure that all explosive detection systems 
deployed are fully utilized, and that if explosive detection equipment 
at an airport is unavailable, all checked baggage is screened by an 
alternative means authorized under the statute, see § 44901(d)-(e) 
(authorizing a bag match program, a manual search, search by canine 
explosive detection units in combination with other means, or other 
means or technology approved by the TSA Administrator, as alternative 
means to using explosive detection equipment). 

[3] The $1.9 billion includes over $700 million made available to TSA 
in fiscal year 2009 through the American Recovery and Reinvestment Act 
of 2009, see Pub. L. No. 111-5, 123 Stat. 115, 163 (2009). 

[4] According to TSA's Planning Guidelines and Design Standards for 
Checked Baggage Inspections Systems, version 4.1, September 15, 2011, 
the project sponsor is assumed to be an airport owner/operator or an 
airline (if the system is for an airline-owned terminal). Some of the 
key responsibilities of the project sponsor include initiation and 
execution of planning and design, application for TSA funding, 
initiation and execution of construction, as well as testing and 
commissioning of the checked baggage inspection system and operation 
and maintenance of the baggage handling system portion of the overall 
checked baggage inspection system. TSA is responsible for, among other 
things, developing the planning guidelines and design standards, 
working with airports and airlines to develop and review designs, 
providing the EDS and ETD screening equipment, and final approval of 
the checked baggage system. 

[5] Pursuant to an LOI, TSA may commit to obligate from future budget 
authority an amount not to exceed the federal government's share of a 
project's cost for the purpose of reimbursing an airport or other 
responsible party that has undertaken an eligible airport facility 
improvement project. See, e.g., 49 U.S.C. § 44923(d). An LOI is 
subject to the availability of appropriations and does not constitute 
a binding commitment of federal funding. According to TSA, OTAs are 
administrative vehicles used by the agency to fund airport 
modification projects without undertaking a long-term commitment. OTAs 
take many forms and are generally not required to comply with federal 
laws and regulations that apply to contracts, grants, or cooperative 
agreements, and they enable the federal government and others entering 
into these agreements to freely negotiate provisions that are mutually 
agreeable. 

[6] Life cycle costs are to be comprehensive, which includes all 
resources and associated cost elements required to develop, produce, 
deploy, and sustain a particular program from initial concept through 
operations, support, and disposal. Acquisition costs include costs for 
all supplies and services for a designated investment. 

[7] TSA classifies the over 400 commercial airports in the United 
States into one of five airport security categories (X, I, II, III, 
and IV) based on various factors, such as the total number of takeoffs 
and landings annually, the extent to which passengers are screened at 
the airport, and other special security considerations. In general, 
category X airports have the largest number of passenger boardings and 
category IV airports have the smallest. 

[8] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Capital Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009). 

[9] DHS established the Acquisition Review Board as the department's 
highest review body and charged it with reviewing and approving all 
programs at key milestone decision points that are above $300 million 
in life cycle costs. The Acquisition Review Board reviews provide an 
opportunity to determine a program's readiness to proceed to the next 
life cycle phase. DHS's Acquisition Management Directive 102-01 of 
January 2010 superseded similar interim directives, and requires the 
Acquisition Review Board chairperson to approve key acquisition 
documents critical to establishing the program, operational 
requirements, acquisition baseline, testing, and support. 

[10] We issued preliminary results for this work in 2011 and 2012 as 
part of GAO's effort to identify opportunities that federal agencies 
or the Congress could consider for reducing the cost of government 
operations or enhancing revenue collections for the Treasury. See GAO, 
Opportunities to Reduce Potential Duplication in Government Programs, 
Save Tax Dollars, and Enhance Revenue, [hyperlink, 
http://www.gao.gov/products/GAO-11-318SP] (Washington, D.C.: Mar. 1, 
2011), and 2012 Annual Report: Opportunities to Reduce Duplication, 
Overlap and Fragmentation, Achieve Savings, and Enhance Revenue, 
[hyperlink, http://www.gao.gov/products/GAO-12-342SP] (Washington 
D.C.: Feb. 28, 2012). 

[11] "TSA-regulated airports" refers to all airports that implement 
TSA-approved security programs pursuant to 49 C.F.R. part 1542, which 
includes airports regularly serving air carrier operations regulated 
pursuant to 49 C.F.R. §§ 1544.101 and 1546.101 (what may be 
characterized as U.S and foreign-flagged commercial air carriers), and 
at which TSA performs or oversees the performance of screening 
activities. 

[12] The term screeners refers to both transportation security 
officers, who are TSA employees, and to private sector screeners 
employed by companies under contract to TSA and who carry out the 
screening function with TSA oversight at airports participating in 
TSA's Screening Partnership Program. See 49 U.S.C. §§ 44901(a), 44920. 

[13] GAO, Aviation Security: Systematic Planning Needed to Optimize 
the Deployment of Checked Baggage Screening Systems, [hyperlink, 
http://www.gao.gov/products/GAO-05-365] (Washington, D.C.: Mar. 15, 
2005). 

[14] [hyperlink, http://www.gao.gov/products/GAO-11-318SP]. 

[15] GAO, Aviation Security: TSA Has Enhanced Its Explosives Detection 
Requirements for Checked Baggage, but Additional Screening Actions Are 
Needed, [hyperlink, http://www.gao.gov/products/GAO-11-740] 
(Washington, D.C.: July 11, 2011). 

[16] GAO, Follow-up on 2011 Report: Status of Actions Taken to Reduce 
Duplication, Overlap, and Fragmentation, Save Tax Dollars, and Enhance 
Revenue, [hyperlink, http://www.gao.gov/products/GAO-12-453SP] 
(Washington, D.C.: Feb. 28, 2012). 

[17] See Pub. L. No. 107-71, § 119(a)(1), 115 Stat. at 628 (amending 
49 U.S.C. § 47102(3)) to authorize use of AIP funding for any required 
security-related activities after September 11, 2001). During fiscal 
years 2002 and 2003, six airports used AIP grants to fund facility 
modification projects related to installing in-line EDS screening 
processes. 

[18] See Pub. L. No. 108-176, §§ 142, 159(b), 117 Stat. 2490, 2503, 
2510-11 (2003) (amending 49 U.S.C. § 47102(3) to limit the 
availability of AIP funds for security-related projects). Subsequent 
prohibitions on the use of AIP funds for projects related to the 
installation of in-line EDS machines may be found in FAA's annual 
appropriations statutes beginning in fiscal year 2004. See, e.g., Pub. 
L. No. 108-199, 118 Stat. 3, 283; Pub. L. No. 108-447, 118 Stat. 2809, 
3203 (2004); and Pub. L. No. 112-55, 125 Stat. 552, 648 (2011). 

[19] See Pub. L. No. 108-7, § 367, 117 Stat. 11, 423-24 (2003) 
(authorizing TSA to enter into LOIs to replace baggage conveyor 
systems or to reconfigure terminal baggage areas to install explosive 
detection systems if the project would increase security or improve 
airport efficiencies without lessening security). 

[20] TSA entered into one LOI agreement that covered Los Angeles 
International Airport and Ontario International Airport, both of which 
are operated by Los Angeles World Airports. 

[21] The 75 percent federal cost share only applied to projects at 
medium and large hub airports; a 90 percent federal cost share applied 
to projects at any other airport. See Pub. L. No. 108-7, § 367(e), 117 
Stat. at 424. A "medium hub airport" is a commercial service airport 
with at least 0.25 percent but less than 1.0 percent of passenger 
boardings based on the prior calendar year, while a "large hub 
airport" is a commercial service airport with at least 1.0 percent of 
passenger boardings. 49 U.S.C. § 47102(10), (12). Small and non-hub 
airports are commercial service airports with at least .05 percent but 
less than 0.25 percent, and less than 0.05 percent of passenger 
boardings, respectively. § 47102 (13), (23). A "commercial service 
airport" is a public airport in a state that the Secretary of 
Transportation determines has at least 2,500 passenger boardings each 
year and is receiving scheduled passenger aircraft service. See § 
47102(7). 

[22] See 49 U.S.C. § 44923(e) (providing that the federal share for 
projects at medium or large hub airports would be 90 percent and 95 
percent for projects at any other airports). Notwithstanding Vision 
100, which was enacted in December 2003, the fiscal years 2005 through 
2007 DHS appropriations acts maintained the 75 percent federal cost 
share for projects under any LOI. See, e.g., Pub. L. No. 109-295, 120 
Stat. 1355, 1362-63 (2006). 

[23] Airports that do not have optimal solutions in place include 
those with in-line systems under construction and that are not yet 
screening checked baggage, and those that, for example, continue to 
rely on temporary stand-alone technology in the lobby. According to 
TSA, all TSA-regulated airports, regardless of whether they have an 
optimal solution, remain capable of screening 100 percent of checked 
baggage for explosives using EDS or ETD machines. 

[24] According to TSA officials, although an airport will not be 
considered as having an optimal baggage screening system if it relies 
on temporary stand-alone systems for screening checked baggage, some 
exceptions exist. For example, temporary stand-alone systems could be 
installed at airports for testing, special events, or other needs, 
without affecting the airport's status related to having an optimal 
baggage screening system. 

[25] Data are based on the most current numbers available as of 
December 2011. TSA officials told us that the accuracy of this 
estimate at any given time depends on an airport's willingness and 
financial readiness. Additionally, TSA officials stated that this 
estimate is based on several assumptions and constraints that may 
affect the number of new in-line systems deployed in the future, 
including (1) number of new terminals, terminal renovations, or other 
capital projects at airports; (2) changing cost assumptions; and (3) 
if an airport is added to, removed from, or changed on the list of TSA-
regulated airports. As of December 2011, TSA had installed 1,933 stand-
alone EDS machines, 4,819 ETD machines, and 261 in-line systems among 
the 446 TSA-regulated airports (see appendix II for further details). 

[26] TSA has a goal of deploying EDS machines for primary screening at 
all category X, I, II, and III airports with a minimum peak throughput 
of 1,500 bags per week. Where this throughput requirement is not met, 
primary ETD screening is more cost effective and will be allowed. 
Currently, as shown in appendix II, table 4, 30 category III airports 
have ETD machines for their primary baggage screening, while 20 
category IV airports have some form of EDS screening. 

[27] Data are based on the most current numbers available as of 
December 2011. Airports that use EDS machines also use ETD machines to 
assist in resolving alarmed bags. 

[28] Data are based on the most current numbers available as of 
December 2011. TSA also tracks airports that have begun installing 
optimal systems but whose systems are not yet complete. 

[29] In addition to the 10 category X airports with optimal systems in 
all screening areas, TSA reports that 15 others have optimal systems 
in some screening areas. 

[30] Data are based on the most current numbers available as of 
December 2011. In addition to age, TSA considers a variety of factors 
to decide which machines to replace first, such as repair rate and 
downtime. 

[31] TSA is also replacing and modernizing aging ETD machines at all 
TSA-regulated airports. TSA's EDS and ETD Recapitalization and 
Optimization Plan notes that because of the significant number of ETDs 
deployed during the initial TSA rollout in 2002 and 2003, many of 
those units have reached or will exceed the 8 years of service in 
fiscal years 2010 and 2011 and are now due to be recapitalized. 
According to the recapitalization plan, because of the high volume, it 
was not possible to recapitalize all the ETDs at the 8-year mark in 
2010 and 2011. As necessary, TSA will focus on replacing poorly 
performing units first. 

[32] TSA uses LOIs and OTAs to support facility modification projects 
related to checked baggage screening. In general, LOIs are multiyear 
but nonbinding agreements through which TSA agrees, subject to the 
availability of appropriations, to reimburse an airport or other 
responsible party for a percentage of allowable airport facility 
modification costs. See 49 U.S.C. § 44923(d). OTAs, as described by 
TSA, are generally single-year reimbursable agreements used by TSA to 
fund airport facility modification projects without the long-term 
commitment associated with LOIs. 

[33] TSA has used OTAs more regularly than LOIs to fund such projects. 
TSA is able to negotiate OTA cost shares, and has used cost shares as 
low as 50 percent and as high as 100 percent. TSA began implementing a 
business practice in fiscal year 2008 that applies the same cost share 
rates to OTAs as are statutorily required for LOIs. 

[34] Based on the level of modification costs currently projected in 
TSA's LCCE estimate, we calculated that TSA could save $339 million 
through fiscal year 2030. To estimate the decrease in TSA's payments 
for airport modification costs (and the corresponding increase in 
those costs paid by airports and, in a few cases, airlines), we 
totaled the airport modification costs for the life of the program, 
fiscal years 2012 through 2030, as identified in TSA's LCCE. We then 
estimated what TSA's expenditures would be if it pays 75 percent of 
these costs. All estimates are in 2011 dollars, based on the discount 
rate (3.9 percent) that TSA applied in its September 2011 analysis of 
alternatives submission to the Office of Management and Budget (OMB). 

[35] See Pub. L. No. 108-458, § 4019(d), 118 Stat. 3638, 3722 (2004). 
The Aviation Security Advisory Committee is composed of private sector 
organizations representing key constituencies affected by aviation 
security requirements, including, among others, law enforcement, 
aviation consumer groups, airport operators, airline management, 
airline labor, and airline security equipment manufacturers. Its 
mission is to examine areas of civil aviation security as tasked by 
TSA with the aim of developing recommendations for improving civil 
aviation security methods, equipment, and procedures. 

[36] Two airports had no comments. 

[37] TSA's guidance to project sponsors has been evolving. As 
explained in TSA's Planning Guidelines and Design Standards for 
Checked Baggage Inspection Systems, v. 4.1, appendix F, TSA will 
provide reimbursement for up to the agreed-upon percentage of 
allowable costs; the document also lists the reimbursable and 
nonreimbursable costs. For example, TSA does not reimburse costs 
associated with the building shell or exterior enclosure. TSA does not 
reimburse the cost of construction of terminal expansions, whether 
necessary to support TSA operations or for other purposes. TSA also 
does not support costs related to the construction of new or 
replacement terminal buildings and infrastructure unless such 
construction is proven to be cost-beneficial to TSA. 

[38] TSA officials told us that provided a design OTA is in place 
between TSA and the airport when design commences, TSA does pay for 
allowable costs. However, TSA agreed that an airport's cost share for 
the overall project may be higher if the design includes unallowable 
costs or if the airport began design activities prior to having an OTA 
in place with TSA. 

[39] Costs are in then-year dollars and include costs to the federal 
government, airports, and airlines. 

[40] An LCCE encompasses all past (or sunk), present, and future costs 
for every aspect of the program, regardless of funding source. TSA 
officials noted that some of these costs, such as screener salaries, 
are EBSP related but are not paid for by the EBSP. 

[41] This total is based on life cycle cost savings as submitted in 
OMB Exhibit 300 for EBSP. TSA's EBSP net cost savings estimate is in 
present value dollars and based on the DHS alternative analysis 
presented in Exhibit 300, which was completed in August 2011 and 
submitted to OMB. The preferred alternative--a combination of 
upgrading and recapitalizing checked baggage screening equipment--was 
estimated to cost $537 million less than the baseline option--an 
approach where no additional investment is made in optimized systems 
and equipment is recapitalized as needed. 

[42] The Acquisition Review Board reviews provide an opportunity to 
determine a program's readiness to proceed to the next life cycle 
phase. The directive also requires the Acquisition Review Board 
chairperson to approve key acquisition documents critical to 
establishing the program, operational requirements, acquisition 
baseline, and document testing and support plans. 

[43] See [hyperlink, http://www.gao.gov/products/GAO-09-3SP]. 

[44] OMB Circular No. A-11, Preparation, Submission, and Execution of 
the Budget; (August 2011); OMB Circular No. A-130 Revised, Management 
of Federal Information Resources (August 2000); and OMB, Capital 
Programming Guide: Supplement to Office of Management and Budget 
Circular A-11: Planning, Budgeting, and Acquisition of Capital Assets 
(Washington, D.C.: August 2011). 

[45] Among other things, TSA presented no evidence that a formal 
overview of the program's technical foundation, time-phased life cycle 
cost estimate, ground rules and assumptions, estimating methodology, 
sensitivity analysis, or risk and uncertainty analysis were presented 
to and reviewed by management. 

[46] An independent cost estimate is a comparison with the program 
estimate to determine whether it is accurate and realistic. According 
to our best practices, independent cost estimates that are validated 
are generally conducted by an organization outside the acquisition 
chain, using the same detailed technical information as the program 
estimate. See [hyperlink, http://www.gao.gov/products/GAO-09-3SP]. 

[47] In addition, we previously reported that the EBSP faced recurring 
programwide costs in excess of the budget, and that program costs 
could grow significantly as cost estimates are revised to include new 
requirements. [hyperlink, http://www.gao.gov/products/GAO-10-588SP]. 

[48] DHS Acquisition Management Directive 102-01, and DHS Acquisition 
Instruction/Guidebook, 102-01-001 (2008). Specifically, according to 
DHS guidance, cycle cost estimates are required to be validated before 
programs are approved for acquisition. 

[49] According to DHS, the Director, Cost Analysis Division, located 
in the Office of the Chief Procurement Officer, serves as the focal 
point within DHS for cost analysis and estimating policy, process, and 
procedure. In November 2011, DHS officials stated that the Cost 
Analysis Division was reorganized and split into the Program Support 
and Risk Analysis Division. According to DHS officials, the process 
for the future oversight of cost estimates is unclear and is likely to 
be performed by the newly established Risk Analysis Division, which 
will include some key Cost Analysis Division staff. While DHS 
officials supported the former Cost Analysis Division's positive 
assessment of the EBSP life cycle cost estimates, they also stated 
that DHS never completed a comprehensive independent cost estimate for 
the EBSP. 

[50] The DHS guidance uses information in our GAO Cost Estimating and 
Assessment Guide as criteria to define a valid estimate as one that is 
well documented, comprehensive, accurate, and credible. DHS policy 
explains that cost estimates should be validated to ensure that the 
single best estimate is provided for all resources required to 
develop, acquire, field, sustain, and dispose of required capability 
over the program's life cycle. According to DHS officials, a validated 
LCCE is one that is approved and reviewed by the former DHS Cost 
Analysis Division. 

[51] This amount is in then-year dollars in billions. These estimates 
are based on annual submissions to OMB (DHS Exhibit 300). These cost 
estimates represent only the historical and projected life cycle costs 
to the federal government for the EBSP, whereas the complete life 
cycle cost estimate of $49.2 billion includes significant additional 
costs for screener salaries, as well as the costs to industry. 

[52] [hyperlink, http://www.gao.gov/products/GAO-09-3SP]. 

[53] [hyperlink, http://www.gao.gov/products/GAO-10-588SP]. 

[54] According to DHS Acquisition Management Directive 102-01, the 
baseline requirements must also include a threshold value that is the 
minimum acceptable value that in the user's judgment, is necessary to 
satisfy the need. Failure to achieve a threshold would require 
creating a new baseline or termination of the program. For more 
information, see [hyperlink, http://www.gao.gov/products/GAO-10-588SP]. 

[55] This includes $2.65 billion for EBSP operation and management; 
$11.03 billion for capital costs, including, among other things, 
recapitalization and facility modifications for optimization; $14.89 
billion for operations and maintenance of equipment; $18.42 billion 
for screener salaries; and $2.22 billion for miscellaneous related 
costs. 

[56] GAO, Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009). 

[57] We visited the following airports: Ronald Reagan Washington 
National, Washington Dulles International, General Edward Lawrence 
Logan International, John F. Kennedy International, Miami 
International, Monterrey Peninsula, Mineta San Jose International, San 
Francisco International, Southwest Florida International, and 
Westchester County. 

[58] We issued preliminary results for this work in 2011 and 2012 as 
part of GAO's effort to identify opportunities that federal agencies 
or the Congress could consider for reducing the cost of government 
operations or enhancing revenue collections for the Treasury. See GAO, 
Opportunities to Reduce Potential Duplication in Government Programs, 
Save Tax Dollars, and Enhance Revenue, [hyperlink, 
http://www.gao.gov/products/GAO-11-318SP] (Washington, D.C.: Mar. 1, 
2011), and 2012 Annual Report: Opportunities to Reduce Duplication, 
Overlap and Fragmentation, Achieve Savings, and Enhance Revenue, 
[hyperlink, http://www.gao.gov/products/GAO-12-342SP] (Washington, 
D.C.: Feb. 28, 2012). 

[End of section] 

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