Transportation Security Administration:

Oversight of Explosive Detection Systems Maintenance Contracts Can Be Strengthened

GAO-06-795: Published: Jul 31, 2006. Publicly Released: Jul 31, 2006.

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Mandated to screen all checked baggage by using explosive detection systems at airports by December 31, 2003, the Transportation Security Administration (TSA) has deployed two types of screening equipment: explosive detection systems (EDS), which use computer-aided tomography X-rays to recognize explosives, and explosive trace detection (ETD) systems, which use chemical analysis to detect explosive residues. This report discusses (1) EDS and ETD maintenance costs, (2) factors that played a role in these costs, and (3) the extent to which TSA conducts oversight of maintenance contracts. GAO reviewed TSA's contract files and processes for reviewing contractor cost and performance data.

TSA obligated almost $470 million from fiscal years 2002 through 2005 for EDS and ETD maintenance, according to TSA budget documents. In fiscal year 2006, TSA estimates it will spend $199 million and has projected it will spend $234 million in fiscal year 2007. TSA was not able to provide GAO with data on the maintenance cost per machine before fiscal year 2005 because, according to TSA officials, its previous contract with Boeing to install and maintain EDS and ETD machines was not structured to capture these data. Several factors have played a role in EDS and ETD maintenance costs. According to a September 2004 Department of Homeland Security's Office of Inspector General report, TSA did not follow sound contracting practices in administering the contract with Boeing, and TSA paid provisional award fees totaling $44 million through December 2003 without any evaluation of Boeing's performance. TSA agreed to recover any excessive award fees paid to Boeing if TSA determined that such fees were not warranted. In responding to our draft report, DHS told us that TSA and Boeing had reached an agreement in principle on this matter and that documentation was in the approval process with closure anticipated in July 2006. Moreover, TSA did not develop life-cycle cost models before any of the maintenance contracts were executed and, as a result, TSA does not have a sound estimate of maintenance costs for all the years the machines are expected to be in operation. DHS also stated in its comments on our draft report that a TSA contractor expected to complete a prototype life-cycle cost model by September 2006 and that TSA anticipated that the EDS model would be completed 12 months after the prototype was approved. Without such an analysis, TSA may not be identifying cost efficiencies and making informed procurement decisions on future purchases of EDS and ETD machines and maintenance contracts. TSA has taken actions to control costs, such as entering into firm-fixed-price contracts for maintenance starting in March 2005, which have advantages to the government because price certainty is guaranteed. Further, TSA incorporated standard performance requirements in the contracts including metrics related to machine reliability and monthly performance reviews. For EDS contractors, TSA has specified that the full agreed price would be paid only if mean downtime (i.e., the number of hours a machine is out of service in a month divided by the number of times that machine is out of service per month) requirements are met. Although TSA has policies for monitoring contracts, TSA officials provided no evidence that they are reviewing required contractor-submitted performance data, such as mean downtime data. TSA officials told GAO that they perform such reviews, but do not document their activities because there are no TSA policies and procedures requiring them to do so. As a result, without adequate documentation, TSA does not have reasonable assurance that contractors are performing as required and that full payment is justified based on meeting mean downtime requirements.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In fiscal year 2006, we reviewed and reported on reasons for cost increases in maintaining the Transportation Security Administration's (TSA) explosive detection systems (EDS) and explosive trace detection (ETD) machines, including TSA's related contracting practices. We reported, among other things, that in order to improve TSA's management of EDS and ETD maintenance costs and strengthen oversight of contract performance, TSA should establish a timeline to complete its evaluation and close out the Boeing contract and report to congressional appropriations committees on its actions, including any necessary analysis, to address the Department of Homeland Security Office of Inspector General's recommendation to recover any excessive fees awarded to Boeing Service Company. In response to this recommendation, TSA reviewed the level of the fees awarded to Boeing under this contract. TSA obtained competition and evaluated the proposed award fee structure prior to awarding the contract. The award fee structure was determined reasonable based on the competition. TSA conducted award fee evaluations in accordance with the terms of the contract. TSA also conducted significant reviews of the contract and Boeing's performance, and determined that TSA did not pay excessive fees and that there were no unreasonable fees to recoup. TSA executed the modification that reflects the Government's evaluation of cost and fees on this contract. This information was reported to Congressional Appropriations committees in March 2007.

    Recommendation: To help improve TSA's management of EDS and ETD maintenance costs and strengthen oversight of contract performance, the Secretary of Homeland Security should instruct the Assistant Secretary, Transportation Security Administration, to establish a timeline to complete its evaluation and close out the Boeing contract and report to congressional appropriations committees on its actions, including any necessary analysis, to address the Department of Homeland Security Office of Inspector General's recommendation to recover any excessive fees awarded to Boeing Service Company.

    Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security

  2. Status: Closed - Implemented

    Comments: In fiscal year 2006, we reviewed and reported on reasons for cost increases in maintaining the Transportation Security Administration's (TSA) explosive detection systems (EDS) and explosive trace detection (ETD) machines, including TSA's related contracting practices. We reported, among other things, that in order to improve TSA's management of EDS and ETD maintenance costs and strengthen oversight of contract performance, TSA should establish a timeline for completing the lifecycle cost model for EDS, which TSA recently began. In response to this recommendation, TSA completed the life cycle prototype at the end of fiscal year 2006 with evaluation beginning immediately. Full implementation of the lifecycle cost model was completed in June 2007. This model, called the Integrated Deployment Model (IDM), is used to determine the life cycle costs of the entire EDS program, specifically the costs of deploying, operating and maintaining checked baggage screening solutions to all CAT X-III airports. The inputs will be validated and updated annually to determine the impact of new technologies and updated cost information. The most recent update occurred through the Baggage Screening Investment Study effort. The IDM output guides business case development and investment decisions.

    Recommendation: To help improve TSA's management of EDS and ETD maintenance costs and strengthen oversight of contract performance, the Secretary of Homeland Security should instruct the Assistant Secretary, Transportation Security Administration, to establish a timeline for completing life-cycle cost models for EDS, which TSA recently began.

    Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security

  3. Status: Closed - Implemented

    Comments: In fiscal year 2006, we reviewed and reported on reasons for cost increases in maintaining the Transportation Security Administration's (TSA) explosive detection systems (EDS) and explosive trace detection (ETD) machines, including TSA's related contracting practices. We reported, among other things, that in order to improve TSA's management of EDS and ETD maintenance costs and strengthen oversight of contract performance, TSA should revise policies and procedures to require documentation of the monitoring of EDS and ETD maintenance contracts to provide reasonable assurance that (1) contractor maintenance cost data and performance data are recorded and reported in accordance with TSA contractual requirements, and (2) self-reported contractor mean downtime data are valid, reliable, and justify the full payment of the contract amount. In response to these concerns, TSA's Contracting Officer received, reviewed, and analyzed the Contract Data List Requirements (CDRLs) for maintenance cost data since the GAO audit of last year. In addition, the TSA contracted with a firm to conduct independent verification and validation (IV & V) of the self-reported maintenance data (e.g., Mean Down Time (MDT)). The IV&V contract completed its review of the Siemens maintenance contract MDT performance for FY2006 earlier this year, and validated the self-reported MDT data provided by Siemens. IV&V is ongoing for the L-3 and GE EDS maintenance contracts.

    Recommendation: To help improve TSA's management of EDS and ETD maintenance costs and strengthen oversight of contract performance, the Secretary of Homeland Security should instruct the Assistant Secretary, Transportation Security Administration, to revise policies and procedures to require documentation of the monitoring of EDS and ETD maintenance contracts to provide reasonable assurance that contractor maintenance cost data and performance data are recorded and reported in accordance with TSA contractual requirements and self-reported contractor mean downtime data are valid, reliable, and justify the full payment of the contract amount.

    Agency Affected: Department of Homeland Security: Directorate of Border and Transportation Security

 

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