The ATO was formed in February 2004 to, among  other things, improve the provision of air traffic services and accelerate  modernization efforts. FAA Has Had Difficulty Meeting Cost, Schedule, and/or Performance Targets for Major System Acquisitions, but Made Progress in Fiscal Year 2004

For more than two decades, FAA has experienced cost growth, schedule  extensions, and/or performance problems in acquiring major systems  under its ATC modernization program and has been on our list of high-risk  programs since 1995. For example, 13 of the 16 major system acquisitions  we reviewed in detail continue to experience cost, schedule, and/or  performance shortfalls when assessed against their original baselines. These major system acquisitions had total cost growth ranging from $1.1  million to about $1.5 billion over their original cost targets. (2) The system acquisition experienced requirements growth and/or  unplanned work. Three of the Major ATC System Acquisitions We Reviewed in Detail Currently Operate within Their Original Cost, Schedule, and Performance Targets, Despite Challenges

Three of the 16 major ATC system acquisitions we reviewed in detail are  currently operating within their original cost, schedule, and performance  targets; however they have experienced challenges, including symptoms of  one or more of the four factors cited earlier, such as requirements growth. In our opinion,  having and meeting such performance goals is commendable, but it is  important to note that these goals are updated program milestones and  cost targets, not those set at the program’s inception. Consequently, they  do not provide a consistent benchmark for assessing progress over time. Moreover, as indicators of annual progress, they cannot be used in isolation  to measure progress in meeting cost and schedule targets over the life of an  acquisition. FAA Has Taken Some Positive Steps to Address Key Legacy Challenges, but Additional Steps Are Warranted to Reduce Risk and Strengthen Oversight

FAA has taken a number of positive steps, primarily through the ATO, to  address key legacy challenges in acquiring major systems under its ATC  modernization program; however, we have identified additional steps that  are warranted to reduce risk and strengthen oversight. The ATO is  currently reviewing all of its capital projects to reassess priorities. However, ATO did not mandate the use  of the process improvement model for all software-intensive acquisition  projects. For example, while AMS provides some discipline for acquiring  major ATC systems, it does not use a knowledge-based approach to  acquisitions, characteristic of best commercial and DOD practices. This type of  information can be used to improve future estimates of cost for these  acquisitions. To fund its major system acquisitions while remaining within the  administration’s budget targets, the ATO has eliminated planned funding to  start new projects and substantially reduced planned funding for other  areas. As part of our research, we sought the perspective of an international  group of experts, who also suggested that the ATO should provide the  administration and Congress with detailed information in its budget  submissions about the impact of reduced budgets on both ATC and NAS  modernization. Recommendation for Executive Action

To help ensure that key administration and congressional decision-makers  have more complete information to assess the potential impact of annual  budget submissions on individual ATC system acquisitions, the overall ATC  modernization program, and related larger-scale NAS modernization  activities funded through the facilities and equipment budget, we  recommend that the Secretary of Transportation direct FAA to identify  which activities under the ATC modernization program have had funding  deferred, reduced, or eliminated and to provide detailed information about  the impact of those decisions on FAA’s ability to modernize the ATC system  and related components of the NAS in the near, mid, and longer term. Objectives, Scope, and Methodology

We examined (1) FAA’s experience in meeting cost, schedule, and/or  performance targets for major system acquisitions under its ATC  modernization program, (2) the steps FAA has taken to address long- standing challenges with the ATC modernization program and additional  steps that are needed, and (3) the potential effects of the constrained  budget environment on FAA’s ability to modernize the ATC system.
Why GAO Did This Study

The Federal Aviation Administration's (FAA) multibillion-dollar effort to modernize the nation's air traffic control (ATC) system has suffered from cost, schedule, and/or performance shortfalls in its system acquisitions for more than two decades and has been on our list of high risk programs since 1995. FAA's performance-based Air Traffic Organization (ATO) was created in February 2004, in part, to address these legacy challenges. In this report, GAO examined (1) FAA's experience in meeting cost, schedule, and performance targets for major ATC system acquisitions; (2) steps taken to address legacy problems with the program and additional steps needed; and (3) the potential impact of the constrained federal budget on this program.

What GAO Found

The ATO met its acquisition goal for fiscal year 2004. However, prior to the establishment of the ATO, FAA had experienced more than two decades of cost, schedule, and/or performance shortfalls in acquiring major systems under its ATC modernization program. For example, 13 of the 16 major system acquisitions that we reviewed in detail have experienced cost, schedule, and/or performance shortfalls when assessed against their original milestones. These 13 system acquisitions experienced total cost growth from $1.1 million to about $1.5 billion; schedule extensions ranging from 1 to 13 years; and performance shortfalls, including safety problems. We found that one or more of four factors--funding, requirements growth and/or unplanned work, stakeholder involvement, and software complexity--have contributed to these legacy challenges. While FAA met its recent acquisition goal, it is important to note that this goal is based on updated program milestones and cost targets for system acquisitions, not those set at their inception. Consequently, they do not provide a consistent benchmark for assessing progress over time. Also, as indicators of annual progress, they cannot be used in isolation to measure progress over the life of an acquisition. Although additional steps are warranted, FAA has taken some positive steps to address key legacy challenges it has had with acquiring major systems under the modernization program. For example, the ATO has cut funding for some major systems that were not meeting their goals and is reassessing all capital investments to help ensure that priority systems receive needed funding. The ATO has improved its management of software-intensive acquisitions and information technology investments and begun to more actively involve stakeholders. As we recommended, the ATO plans to establish an overall policy to apply its process improvement model to all software-intensive acquisitions. However, additional steps could be taken to improve its management of system acquisitions. For example, the ATO could use a knowledge-based approach to managing system acquisitions, characteristic of best commercial practices, to help avoid cost, schedule, and performance problems. The ATO will also be challenged to modernize the ATC system under constrained budget targets, which would provide FAA with about $2 billion less than it planned to spend through 2009. To fund its major system acquisitions and remain within these targets, the ATO has eliminated planned funding to start new projects and substantially reduced planned funding for other areas. However, when forwarding its budget submission for review by senior officials at FAA, DOT, the Office of Management and Budget, and Congress, the ATO provides no detail on the impact of the planned funding reductions on ATC modernization and related activities to modernize the NAS. Our work shows that the ATO should provide these decision-makers with detailed information in its budget submissions about the impact of funding decisions on modernization efforts. Without this type of information, decision-makers lack important details when considering FAA's annual budget submissions.