National Airspace System:

Better Cost Data Could Improve FAA's Management of the Standard Terminal Automation Replacement System

GAO-03-343: Published: Jan 31, 2003. Publicly Released: Feb 4, 2003.

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To enhance the capacity and safety of the national airspace system, the Federal Aviation Administration (FAA), within the Department of Transportation, is acquiring 74 Standard Terminal Automation Replacement Systems (STARS). STARS will replace some outdated air traffic control equipment. Since 1996, when FAA initiated this major computer hardware and software acquisition, the scope and estimated costs of STARS have changed many times. FAA now estimates that STARS's remaining costs will total about $2.54 billion. GAO was asked to assess the reliability of FAA's life-cycle cost estimate for STARS, determine the impact of STARS's estimated costs on future FAA budgets, and identify any alternatives to STARS that FAA is considering. GAO based its analysis on published FAA cost data and the guidance FAA uses for managing major acquisitions.

The reliability of FAA's life cycle cost estimate for STARS is uncertain. This estimate includes estimates of the program's development, operation, and technology upgrade costs, shown for the next 6 fiscal years in the figure below. The development cost estimate is based on the contractor's projections, which FAA has not yet independently analyzed as its guidance directs. Furthermore, baseline data in cost performance reports that FAA obtains from the contractor are not accurate because the data do not reflect the current status of the contract. As a result, FAA is limited in its ability to manage the contract effectively. FAA plans to address these problems. In addition, the program's operation and technology upgrade cost estimates are based on limited experience with STARS and extend many years into the future. However, the estimates do not reflect these uncertainties. For fiscal years 2004 through 2007, the years for which FAA provided budget information, STARS's estimated costs should have a declining impact on FAA's budgets because the program's development is nearly over and its operations are still limited. For fiscal years 2008 through 2030, the impact of STARS's estimated costs on FAA's budgets is unknown because it is still too soon in the budget cycle for FAA to have developed detailed budgets for these years. After deploying STARS at the 74 terminal and support facilities included in the program, FAA could use STARS, another contractor's technology, or a combination of the two technologies for the nearly 100 remaining facilities. FAA is exploring the feasibility of combining the technologies and expects to announce its plans in April 2003.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The STARS program office has established and maintained a measurable program cost and schedule baseline, including reporting monthly Earned Value Management (EVM) cost and schedule variance status. At the contract level, the STARS program office has incorporated EVM reporting requirements and implemented Firmed Fixed Price with milestone based payments whenever possible for the prime vendor. Individual contract changes are now tracked and negotiated for incorporation into the contract baselines within 3 months.

    Recommendation: To improve FAA's management of STARS and of subsequent terminal modernization programs and to provide the Congress with more reliable information for overseeing these programs, the Secretary of Transportation should direct the FAA Administrator to follow the agency's guidance for managing major acquisition systems by establishing, maintaining, and controlling an accurate, valid, and current performance measurement baseline, which would include negotiating all authorized, unpriced work within 3 months.

    Agency Affected: Department of Transportation

  2. Status: Closed - Not Implemented

    Comments: FAA completed contract modification in January 2005. However, the agency determined that no integrated baseline review of the contract was needed (as GAO recommended and FAA had previously agreed with) because the contract was structured as mostly firm fixed price and time and materials.

    Recommendation: To improve FAA's management of STARS and of subsequent terminal modernization programs and to provide the Congress with more reliable information for overseeing these programs, the Secretary of Transportation should direct the FAA Administrator to follow the agency's guidance for managing major acquisition systems by conducting an integrated baseline review of any major contract modifications within 6 months.

    Agency Affected: Department of Transportation

  3. Status: Closed - Implemented

    Comments: FAA reported that independent cost estimates and risk assessments have been completed in support of the Terminal Automation Modernization Replacement JRC, which is scheduled for June 2005.

    Recommendation: To improve FAA's management of STARS and of subsequent terminal modernization programs and to provide the Congress with more reliable information for overseeing these programs, the Secretary of Transportation should direct the FAA Administrator to follow the agency's guidance for managing major acquisition systems by preparing a rigorous life-cycle cost estimate, including a risk assessment, in accordance with the Acquisition System Toolset's guidance and identifying the level of uncertainty inherent in the estimate.

    Agency Affected: Department of Transportation

 

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