1). offers potential personnel cost savings to the federal government. 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. 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. 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. The plan notes that many in-line recapitalization projects will  include an optimization component. 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. 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. 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. 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. 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. Partially accurate because while the estimate is properly adjusted for  inflation, differences between planned and actual costs are not fully  documented, explained, or reviewed. 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. TSA officials stated that  TSA is currently working with DHS to amend the draft program baseline  for approval. 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. GAO staff who made major contributions to this report are  listed in appendix V.

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. 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 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. 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 chose these airports based on the size of airport, type of  checked baggage screening systems installed, and status of airport  facility modification completion. 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.
Why GAO Did This Study

TSAs EBSP, one of DHSs 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 nations 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 TSAs 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 TSAs methods for estimating and validating costs for the EBSP are consistent with best practices. GAO reviewed EBSP planning and status documents, compared TSAs 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 Administrations (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 nations larger airportsbased on factors such as the total number of takeoffs and landings annuallyhave 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 governments 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 benefitcited by representatives from 9 of the airports GAO visitedis 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, TSAs 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 GAOs 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 GAOs recommendation.