FAA Has Improved Its Financial Management, although the Soundness of Its Cost Allocation Methodology is Uncertain

Sound financial management, including sound cost accounting and cost  allocation systems, is important for the current operation of FAA and lays  the foundation for the transformation to NextGen and proposed changes  to the agency’s funding system laid out in the administration’s  reauthorization proposal. FAA is working to address the problem. While the reauthorization proposal may  address some of the equity and efficiency concerns that FAA has raised  with the current funding structure, we have reported that it is not yet clear  if FAA has developed a sound cost allocation methodology from which to  derive the new cost-based funding. However, in recent years, FAA has made significant  progress toward improving its acquisition management. To its credit, FAA has taken a number of actions to improve its acquisition  management. Although FAA Is Now Focusing on NextGen, It Must Continue to Manage and Sustain the Current System

While the acquisition and deployment of NextGen technology are key  issues facing the agency, it will be critical for FAA to continue to maintain  existing systems and phase out existing systems using a risk-based  approach. Key Issues Remain in the Transition From Planning to Implementing NextGen

Several key issues will need to be addressed to help ensure a successful  transition to NextGen as FAA moves from the conceptualization and  planning of NextGen, handled largely through the interagency  collaborative efforts of FAA’s JPDO, to the implementation of NextGen  technologies and systems. Those issues include (1) continuing to focus on  the coordination between ATO and JPDO and stakeholder involvement;  (2) determining which entities will fund the necessary research,  development, and demonstration projects for NextGen; and (3)  determining whether FAA has the technical and contract management  expertise necessary to oversee the complex implementation of NextGen. This is a step in the right direction. The OEP is being  expanded to apply to all of FAA and is intended to become a  comprehensive description of how the agency will implement NextGen,  including the required technologies, procedures, and resources. JPDO believes the total  federal cost for NextGen infrastructure through 2025 will range between  $15 billion and $22 billion. Aviation Safety Record Remains High, but Some Areas Need to be Addressed for Current and Future Safety as FAA Transitions to NextGen

As FAA works to develop the policies and systems to transition to  NextGen, it will be important for the agency to also ensure that its safety  programs are aligned with these changes. FAA’s ability to deal with current safety issues  and the transition to NextGen would be enhanced by (1) acquiring and  deploying new safety enhancing technologies; (2) establishing appropriate  regulatory approaches for current airspace users and emerging sectors; (3)  improving the accuracy and completeness of its safety data; and (4)  addressing human capital issues associated with hiring, training, and  deploying its skilled workforce of air traffic controllers, safety inspectors,  engineers, and technicians. It will be important for  FAA to establish the appropriate regulatory approach for current users  and new users such as the emerging space tourism industry and unmanned  aircraft systems. FAA Needs Improved Data and Analysis for Current Safety Oversight and for the Transition to NextGen

FAA cannot rely on its current oversight approach, which focuses on  labor-intensive inspections to maintain and expand the margin of safety,  especially if substantial growth in air traffic materializes. FAA Faces Human Capital Challenges

FAA’s ability to ensure safety in NextGen will also be affected by its ability  to manage its human capital, including air traffic controllers, safety  inspectors, engineers, and technicians. Next Generation Air Transportation System: Progress and Challenges  Associated with the Transformation of the National Airspace System. FAA’s Proposed Plan for Implementing a Reliability Centered  Maintenance Process for Air Traffic Control Equipment. Federal Aviation Administration: Stronger Architecture Program  Needed to Guide Systems Modernization Efforts. Air Traffic Control: System Management Capabilities Improved, but  More can be Done to Institutionalize Improvements.
Why GAO Did This Study

The Federal Aviation Administration (FAA) operates one of the safest air transportation systems in the world. It is, however, a system under strain. The skies are becoming more crowded every day, with an estimated 1 billion passengers per year expected by 2015. The current aviation system cannot be expanded to meet this growth. The reauthorization of FAA is an opportunity to examine how the agency is managing the operation and safety of the air transportation system as it leads the transition to the Next Generation Air Transportation System (NextGen)--a major redesign of the current system. GAO's testimony focuses on key issues related to FAA's reauthorization, including (1) FAA's progress in implementing initiatives that could provide a solid foundation for NextGen, (2) issues that need to be addressed to help ensure a successful transition to NextGen, and (3) safety areas that are important for the continued safe operation of the current and future system. This statement is based on recent GAO reports and ongoing work on some management and safety initiatives.

What GAO Found

FAA has made significant progress in moving to more businesslike and cost-effective operations and modernizing the air traffic control system. This progress should better position the agency for the complex implementation of NextGen. However, further work remains to fully address past problems in the modernization effort while at the same time finding new leadership--due to losses of key leaders at FAA and its Air Traffic Organization--that can continue an agencywide commitment to transformation. While FAA has improved its financial management capability, including implementing a new cost accounting system and developing a cost allocation methodology, it is not yet clear if that methodology provides a sound basis from which to derive the administration's proposed new cost-based funding structure for FAA. In addition, improved acquisition processes, such as establishing guidance on using Earned Value Management, are positive steps, but they need to be fully implemented across all critical acquisitions. As FAA works toward acquiring and deploying NextGen technology, it will also be important to phase out existing air traffic control equipment using a risk-based approach and continue to maintain existing systems. Key issues that FAA needs to address as it begins implementing NextGen include continued focus on coordination with the Joint Planning and Development Office (JPDO). FAA, in coordination with JPDO, is developing an implementation plan for NextGen that is expected to include details of the required technologies, procedures, and resources. This is a step in the right direction. While FAA estimates that its cost for NextGen programs may range between $15 billion and $22 billion, it will be important to determine which entities will fund and conduct the necessary developmental research. Also, GAO has recommended that FAA assess its capacity to handle the technical and contract management expertise to determine if it has the capabilities required to oversee the implementation of NextGen. FAA is considering action that would respond to this recommendation. To deal with current safety issues and the transition to NextGen, it will be important for FAA to address safety in the airport environment, where forecasted traffic growth could lead to increased ground congestion and safety hazards. FAA also needs to establish the appropriate regulatory approach for certain current airspace users, such as air ambulances, and new users, such as the emerging space tourism industry. In addition, to maintain and expand the margin of safety, especially if substantial growth in air traffic materializes, FAA will need to rely more on data than on labor-intensive inspections. GAO has recommended that FAA improve its safety data. FAA has taken some action to improve its data, but more work remains. FAA's ability to ensure a safe system will also be affected by its ability to hire, train, and deploy its workforce of air traffic controllers, inspectors, and technicians.