oversight

DOT's Budget: Safety, Management, and Other Issues Facing the Department in Fiscal Year 1998 and Beyond

Published by the Government Accountability Office on 1997-03-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                        United States General Accounting Office

GAO                     Testimony
                        Before the Subcommittee on Transportation, Committee
                        on Appropriations, House of Representatives




For Release
on Delivery
Expected at
                        DOT’S BUDGET
10 a.m. EST
Thursday
March 6, 1997
                        Safety, Management, and
                        Other Issues Facing the
                        Department in Fiscal Year
                        1998 and Beyond
                        Statement of John H. Anderson, Jr.,
                        Director, Transportation Issues,
                        Resources, Community, and Economic
                        Development Division




GAO/T-RCED/AIMD-97-86
                                 Mr. Chairman and Members of the Subcommittee:

                                 When we testified before you last year, we pointed out that the
                                 Department of Transportation (DOT) faced tremendous challenges in
                                 ensuring the safe and efficient movement of people and goods and a
                                 cost-effective investment in the nation’s transportation infrastructure,
                                 including its highways and transit systems, airports, airways, ports, and
                                 waterways. If anything, the obstacles to meeting the challenges have
                                 increased primarily because efforts to improve the safety and security of
                                 our aviation system will stretch limited resources even further. At the
                                 same time, the demand for scarce federal funds for other transportation
                                 programs and the continuing pressures to reduce the federal budget have
                                 not abated. The $38 billion proposed in DOT’s fiscal year 1998 budget
                                 represents about a 1-percent reduction from this year’s enacted
                                 appropriation. Funding constraints intensify the need for the Department
                                 to improve its management and oversight processes to ensure that the
                                 American people are getting the most out of their transportation
                                 investment dollars.

                                 My testimony today, based on our recently completed and ongoing work,
                                 will discuss the major safety and security, management, and other issues
                                 facing the Department. In summary, we found the following:

Safety and Security Issues   •   Crashes of ValuJet Flight 592 and TWA Flight 800 have heightened
                                 concerns about the safety and security of our aviation system. Over the
                                 years, we have reported on problems with the Federal Aviation
                                 Administration’s (FAA) oversight, including the need to (1) target limited
                                 inspection resources, (2) improve the reliability of safety data, (3) improve
                                 inspector training, and (4) address the security vulnerabilities of our air
                                 transportation system. Our recent reports and testimonies on new airlines
                                 and aviation security have reiterated the need for improvements in these
                                 areas.

                                 Recently completed aviation studies by a presidential commission and FAA
                                 have also concluded that major problems need to be addressed to improve
                                 the safety and security of the aviation system. The Congress has also
                                 specified that FAA’s primary role is safety and has appropriated more funds
                                 to hire and train inspectors and procure explosive detection systems for
                                 the nation’s airports. However, key issues that have yet to be addressed
                                 are how much more all the improvements will cost and how they will be
                                 funded. In addition, FAA needs a comprehensive strategy to guide the
                                 implementation of recommendations made in the various aviation studies.



                                 Page 1                                                 GAO/T-RCED/AIMD-97-86
                        This strategy could serve as a mechanism to track progress and establish
                        the basis for determining funding trade-offs and priorities, but its
                        successful implementation will require strong, stable leadership at FAA and
                        the Department.

                    •   Major opportunities exist to improve the safety of our surface
                        transportation system by reducing the more than 40,000 fatalities each
                        year on our nation’s highways. The National Highway Traffic Safety
                        Administration (NHTSA) estimates that if all vehicle occupants used seat
                        belts, 10,000 lives and $20 billion could be saved each year, and injuries to
                        200,000 people could be avoided. Recent concerns about the potential
                        hazards of air bags in certain situations intensify the importance of using
                        seat belts. Furthermore, from January through November 1996, federal and
                        state officials carried out more than 20,000 inspections of trucks entering
                        from Mexico resulting in about 45 percent of the vehicles being placed out
                        of service for serious safety violations. Our ongoing work shows that,
                        while the number of truck inspectors at major southern border crossings
                        has increased and two large permanent inspection facilities have been
                        opened, the results of increased inspections do not show a clear trend that
                        Mexican trucks are becoming safer. In addition, we are reviewing other
                        opportunities to improve large truck and rail safety.

Management Issues   •   Another primary role of DOT is to ensure that federal transportation funds
                        for aviation, highway, and transit programs are spent effectively and
                        efficiently so that the nation gets the most value for its transportation
                        dollars. To that end, our work over the years has identified numerous
                        ways in which FAA can improve the management of its multibillion-dollar
                        air traffic control (ATC) modernization program. Most major modernization
                        projects have been plagued by cost overruns, schedule delays, and
                        shortfalls in performance. FAA needs to adopt a complete systems
                        architecture for its modernization program, improve its cost estimating
                        and cost accounting processes, apply more discipline in its software
                        acquisitions for the program, and broaden its efforts to reform its
                        organizational culture to include stakeholders from across the agency.

                    •   In addition, the Federal Highway Administration (FHWA) and the Federal
                        Transit Administration (FTA) can work with states and transit operators to
                        enhance their ability to more effectively manage the costs of and acquire
                        financing for large-dollar surface transportation projects.1 For example,
                        while FHWA’s oversight of large-dollar projects is not intended to focus on

                        1
                         The surface transportation projects we discuss in this testimony all cost over $1 billion, but defining
                        large-dollar projects for an individual state or transit operator is relative to their size and resources.



                        Page 2                                                                        GAO/T-RCED/AIMD-97-86
                         cost containment, we believe that the agency can do more to share states’
                         best practices in this area to promote more effective and efficient use of
                         limited federal and state highway dollars and control cost growth that can
                         adversely impact the funding for other projects. Furthermore, financing
                         large transportation projects has become increasingly complicated as the
                         transportation community has become more active in seeking financing
                         through bonds, local contributions, and innovative federal financing, such
                         as loans. We found that costs on the projects we reviewed continue to
                         grow, and FHWA and FTA need to help ensure that the projects are able to
                         secure firm commitments for all of the funding needed to finance them. If
                         not, the federal, state, and/or local stakeholders could be asked to pay
                         more for the projects or their timely completion could be jeopardized.

                     •   The Intelligent Transportation System (ITS) is a collection of computer and
                         telecommunications systems intended to improve surface transportation
                         safety and efficiency. After 7 years and $1.3 billion in federal funding, DOT’s
                         vision for widespread deployment has not been realized. This is due to a
                         number of obstacles, including a lack of technical expertise and
                         knowledge about ITS among state and local officials, a lack of data
                         demonstrating the benefits of ITS technologies, and limited funding
                         available for ITS in light of other investment priorities. In its fiscal year
                         1998 budget, DOT is proposing to focus federal funds on deploying ITSs.
                         However, before DOT can aggressively pursue widespread deployment it
                         must help state and local officials overcome these obstacles.

                     •   In prior testimony before this Subcommittee, we stated that DOT could
                         potentially save millions of dollars by taking advantage of opportunities to
                         consolidate and/or “colocate” its surface transportation field structure.
                         Over 2 years have passed, and DOT has done little to take advantage of
                         these opportunities.

Other Major Issues   •   Other major issues that DOT and the Congress must address include the
                         long-term financing of FAA, the continuing financial problems of Amtrak,
                         and the Coast Guard’s ability to measure its effectiveness in drug
                         interdiction. FAA could face potential funding shortfalls totaling several
                         billion dollars over the next 5 years. However, this shortfall could be
                         mitigated to some extent if FAA improves its productivity. The Congress
                         has recognized the funding problems confronting FAA, which are
                         exacerbated by the need to finance safety and security improvements and
                         air traffic control modernization. The congressionally created National
                         Civil Aviation Review Commission is tasked with reporting to the




                         Page 3                                                   GAO/T-RCED/AIMD-97-86
                          Secretary of Transportation later this year on how best to finance FAA.

                      •   Our recent work on Amtrak shows that the corporation is still in a very
                          precarious financial position and remains heavily dependent on federal
                          support to meet its operating and capital needs. Amtrak’s fiscal year 1997
                          operating losses could be as high as $786 million. While the corporation’s
                          goal is to eliminate the need for federal operating support by 2002, it is
                          likely that Amtrak will continue to require federal financial support—both
                          operating and capital—beyond that time.

                      •   In its fiscal year 1998 budget request, the Administration is asking for
                          $389 million related to the Coast Guard’s drug interdiction efforts, a
                          $53 million increase over 1997 levels. Identifying ways to measure the
                          effectiveness of the Coast Guard’s operations in this area is inherently
                          difficult. To measure its effectiveness, the Coast Guard must separate the
                          impact of its actions from those taken by other drug enforcement
                          agencies. In order to accomplish this, the Coast Guard must develop a way
                          to compare the amount of drugs seized or deterred against a measure of
                          supply, which becomes problematic. The Coast Guard has started to take
                          actions to address these difficulties and implement the requirements of the
                          Government Performance and Results Act, but it is too soon to determine
                          their effectiveness.


                          We will now discuss these issues in greater detail.


                          Improving the safety and security of our aviation and surface
Safety and Security       transportation systems is of paramount importance, but budget
Issues                    constraints will make this a tremendous challenge.


Aviation Safety and       Over the years, we have issued numerous reports and testimonies that
Security                  identified shortcomings in FAA’s aviation safety and security programs.2
                          These shortcomings include insufficient training of FAA safety inspectors,
                          inaccurate and incomplete aviation safety databases, and vulnerabilities in
                          our aviation security systems. We have reported that targeting inspection


                          2
                           See, for example, Aviation Safety: New Airlines Illustrate Long-Standing Problems in FAA’s Inspection
                          Program (GAO/RCED-97-2, Oct. 17, 1996); Aviation Safety: Data Problems Threaten FAA Strides on
                          Safety Analysis System (GAO/AIMD-95-27, Feb. 8, 1995); Aviation Security: Additional Actions Needed
                          to Meet Domestic and International Challenges (GAO/RCED-94-38, Jan. 27, 1994); and Aviation
                          Security: Technology’s Role in Addressing Vulnerabilities (GAO/T-RCED/NSIAD-96-262, Sept. 19,
                          1996).



                          Page 4                                                                   GAO/T-RCED/AIMD-97-86
resources is important because of the magnitude of FAA’s inspection
responsibilities. For example, as early as 1987, we identified the need for
FAA to develop criteria for targeting safety inspections to those areas that
have characteristics possibly indicating safety problems—especially new
entrant and commuter airlines and aging aircraft. FAA also needs to
improve its Safety Performance Analysis System, a system being
developed to integrate and analyze information within other databases, so
that it contains reliable information that can be used by inspectors and
managers to target the areas of greatest risk to safety.

In the area of aviation security, we have highlighted a number of
vulnerabilities that exist within the nation’s air transportation system for
checked and carry-on baggage, mail, and cargo. We have also raised
concerns about unauthorized individuals’ gaining access to critical parts of
an airport and the potential use of sophisticated weapons, such as
surface-to-air missiles, against commercial aircraft. We have stressed the
need for a mix of technology and procedures to improve security. FAA has
agreed with the majority of our recommendations and is taking action on
many of them.

As a result of the May 1996 crash of ValuJet Flight 592, in which 110 people
were killed, the FAA Administrator, on June 18, 1996, commissioned a
90-day study of the agency’s safety programs. On September 16, 1996, FAA
issued its report, which contained six broad and 31 specific
recommendations.3 The report calls for improvements in a number of
areas, including the certification of new airlines and FAA’s inspection
activities. FAA developed a plan for implementing these recommendations,
including identifying the responsible person and key milestones for these
efforts. According to FAA, over one-third of the key milestones have been
met. The remaining recommendations are to be implemented between
now and 1999.

Moreover, on July 25, 1996, in the wake of the crash of TWA Flight 800, in
which another 230 people perished, the President formed the White House
Commission on Aviation Safety and Security (the Gore Commission) to
study and develop a strategy for improving aviation safety and security,
including the ATC modernization. Its February 12, 1997, final report to the
President contained over 50 recommendations on a wide variety of
aviation issues, including improving aviation safety, modernizing the ATC
system, ensuring security for travelers, and compassionately responding to


3
 FAA 90 Day Safety Review (Sept. 16, 1996).



Page 5                                                 GAO/T-RCED/AIMD-97-86
families who have been affected by aviation disasters.4 In addition, the
Congress has eliminated FAA’s role of promoting the aviation industry and
clarified that FAA’s highest priority is safety. Furthermore, the
administration requested and the Congress appropriated supplemental
1997 funds to improve aviation security by installing explosives detection
equipment and assigning bomb-sniffing dog teams to a number of major
airports. In its fiscal year 1998 budget proposal, the administration is
requesting additional funds to further improve safety and security,
including hiring more inspectors and providing them with additional
training.

For air safety, the Commission set a goal of cutting the airline accident
rate by 80 percent over the next 10 years. To help achieve this goal, the
President announced that the National Aeronautics and Space
Administration (NASA) will dedicate up to a half billion dollars in its
research and development budget over the next 5 years to focus on
aviation safety. One of the Commission’s key recommendations is that
cost considerations alone should not be the only, nor the primary, factor in
making policy and rulemaking decisions concerning aviation safety and
security. It is important to recognize, however, that this change could
result in significant cost increases for relatively modest increases in the
safety margin.

Overall, we believe that the Commission’s recommendations are a good
start toward an evolutionary process of reaching agreement on the goals
and objectives for improving our aviation safety and security systems.
However, the Commission’s final report does not fully address what the
cost will be or who should pay for implementing the recommendations.
For example, in the security area, the Commission recommended that the
federal government devote $100 million annually to meet security capital
requirements—leaving the issue of how to fund the remaining security
costs to the National Civil Aviation Review Commission. These remaining
costs are estimated to be in the billions of dollars.

To help ensure implementation of its recommendations, the Commission
recommended that the Secretary of Transportation report annually on
their status and that the President hold DOT and FAA leaders accountable
for implementing them. The same rigors should be applied to ensure the
implementation of other recommendations, such as those contained in
FAA’s 90-day safety review. Reporting annually on the progress of



4
  Final Report to President Clinton, White House Commission on Aviation Safety and Security (Feb. 12,
1997).



Page 6                                                                   GAO/T-RCED/AIMD-97-86
                                   implementing all safety and security recommendations will allow for
                                   comprehensive congressional oversight as well as a mechanism for
                                   determining funding trade-offs and prioritization. Keys to the successful
                                   implementation of these recommendations are stable leadership at the
                                   Department and FAA and adequate funding. We have expressed concern
                                   over the years about the instability and uncertainty caused by the frequent
                                   turnover of FAA Administrators. In addition, if FAA’s funding issue is not
                                   resolved, resources may not be available to implement improvements
                                   recommended by the various studies.

                                   On the basis of recommendations made in an initial report by the Gore
                                   Commission (dated Sept. 1996), the Congress appropriated $144.2 million
                                   for FAA to purchase and install advanced explosives detection equipment
                                   at U.S. airports and an additional $21 million for explosives detection
                                   research. At your request, we are examining the status of FAA’s actions. To
                                   date, we have found that FAA has started purchasing the equipment that the
                                   Secretary has directed be acquired and deployed by December 1997. To
                                   expedite the process, FAA has been awarding most contracts for equipment
                                   and related services on a noncompetitive basis and plans to ask for a
                                   waiver from preparing a number of planning documents required under
                                   the agency’s procurement system. In conjunction with airlines and
                                   airports, FAA has also drafted a plan specifying which airlines and airports
                                   are to receive the equipment.


Surface Transportation             The use of seat belts, the safety of large trucks in general and, more
Safety                             specifically, Mexican trucks coming into the United States; and railroad
                                   safety are all important surface transportation safety issues. We have
                                   completed or have under way a number of studies concerning these
                                   issues.

Reducing Fatalities and Injuries   Traffic accidents annually result in over 40,000 deaths and over
Caused by Highway Traffic          $130 billion in costs to society. Each year, about 20,000 of the people who
Accidents                          die and another 600,000 people who are injured were not using safety
                                   belts. As we reported in January 1996, increasing the use of safety belts is
                                   the most effective way to lower the nation’s death toll from highway
                                   accidents.5 NHTSA estimates that 10,000 deaths, 200,000 injuries, and
                                   $20 billion in societal costs could be avoided annually if all occupants of
                                   motor vehicles wore safety belts. To date, every state except New
                                   Hampshire has enacted laws requiring the use of safety belts; however, the

                                   5
                                    Motor Vehicle Safety: Comprehensive State Programs Offer Best Opportunity for Increasing Use of
                                   Safety Belts (GAO/RCED-96-24, Jan. 3, 1996).



                                   Page 7                                                                 GAO/T-RCED/AIMD-97-86
                              coverage of these laws may not include all vehicle occupants and may be
                              limited to certain types of vehicles.

                              According to NHTSA, in 1996 the use of safety belts among states ranged
                              from a low of 43 percent to a high of 87 percent. The most successful
                              states in increasing safety belt use generally have comprehensive
                              programs that include primary enforcement laws, visible and aggressive
                              enforcement, and active public information and education programs. In
                              particular, 11 states have primary enforcement laws which permit officials
                              to enforce safety belt requirements independent of other traffic safety
                              laws. In contrast, under secondary enforcement laws enforcement of
                              safety belt requirements can only occur when other traffic safety laws are
                              also being enforced. Of the 10 states we reviewed for our 1996 report, the 3
                              states with primary enforcement laws averaged rates of belt use about
                              20 percent higher than the states with secondary enforcement laws.

                              Much attention in recent months has been focused on the potential danger
                              surrounding the deployment of a car’s air bags onto small adult drivers
                              and children riding in the front seat. While air bags have saved more than
                              1,700 lives, NHTSA has attributed 61 deaths in low-speed crashes to air bags.
                              In response to this hazard, NHTSA initiated a public information campaign
                              aimed at having infants and children ride in the rear. NHTSA has also
                              undertaken a series of regulatory initiatives to address the adverse side
                              effects of airbags. Among other things, NHTSA has issued a final rule
                              regarding improved labeling on new vehicles and child restraints, and a
                              proposed rule designed to ensure that vehicle manufacturers can reduce
                              the power at which airbags inflate. In addition, NHTSA is conducting
                              research into developing “smart” air bags that would use sensors to
                              automatically adjust the deployment speed to the size of the occupant. In
                              recent congressional hearings on how NHTSA can best reduce the danger of
                              air bags for children and small adults, safety experts emphasized that the
                              most effective way to reduce deaths and serious injuries from traffic
                              accidents is to increase the use of safety belts by drivers and passengers.

Need to Improve Large Truck   Large trucks are vital for our nation’s commerce, yet thousands of people
Safety                        die each year in accidents involving trucks. Although the rate of fatal
                              accidents involving large trucks has decreased substantially from 4.3 fatal
                              accidents per 100 million miles in 1982 to 2.5 fatal accidents per
                              100 million miles in 1995, this change primarily reflects the increase in the
                              miles that trucks are driving. In reality, the number of accidents and
                              fatalities only slightly declined from 4,650 fatal accidents involving trucks
                              with 5,230 deaths in 1982 to 4,450 such accidents with 4,900 deaths in 1995.



                              Page 8                                                 GAO/T-RCED/AIMD-97-86
                           State and industry officials have told us that much of the improvement in
                           truck safety can be attributed to FHWA’s Motor Carrier Safety Assistance
                           Program (MCSAP), which provides matching grants for states to conduct
                           (1) roadside inspections of trucks and their drivers, (2) compliance
                           reviews of trucking firms’ operations, and (3) other truck safety
                           enforcement programs. MCSAP also helps states collect and report truck
                           accident and enforcement data to FHWA’s SafetyNet database, which is
                           essential for using performance-based standards to assess a trucking
                           firm’s safety.6 In MCSAP’s early years, FHWA used funding to shift
                           responsibility for roadside inspections of trucks to the states. As a result,
                           the number of roadside inspections increased from 33,000 in 1982 to
                           almost 2 million in 1996.

                           We are currently examining FHWA’s truck safety program to identify
                           cost-effective ways to further reduce fatal accidents involving trucks. Our
                           preliminary findings show that FHWA has the primary responsibility for
                           conducting compliance reviews, although states performed about
                           40 percent of the compliance reviews in 1996. While several states have
                           developed active compliance review programs, other states are only
                           beginning to perform compliance reviews, and 13 states do not perform
                           any. Opportunities may exist to use MCSAP funding to encourage states to
                           assume a larger role in performing compliance reviews, as was the case
                           for roadside inspections.

                           To improve its targeting of trucking firms for roadside inspections and
                           compliance reviews, FHWA is beginning to implement performance-based
                           standards. Truck accident and inspection data that states provide to the
                           SafetyNet database are essential for assessing a carrier’s performance.
                           States have improved both the quality and timeliness of their reporting.
                           For example, they increased the percentage of truck accidents reported to
                           SafetyNet from 14 percent in fiscal year 1992 to about 60 percent in fiscal
                           year 1995. Opportunities may exist to share information among states that
                           would enable some states to overcome institutional or procedural barriers
                           and further improve their reporting.

Safety of Mexican Trucks   Currently, trucks from Mexico enter the U.S. through 4 border states (i.e.,
                           Texas, New Mexico, Arizona, and California) and are limited to operating
                           in designated areas in the U.S. called commercial zones (generally, areas
                           between 3 and 20 miles from U.S. border towns’ northern limits).
                           However, the North American Free Trade Agreement (NAFTA) calls for

                           6
                            SafetyNet is an electronic database that incorporates truck accident, roadside inspection, and other
                           enforcement data that is used by FHWA and the states to better identify trucking firms with safety
                           problems for compliance reviews and other enforcement actions.



                           Page 9                                                                    GAO/T-RCED/AIMD-97-86
allowing U.S. and Mexican trucks to eventually operate throughout both
countries. In February 1996, we reported that many trucks from Mexico,
operating in the U.S. commercial zones, were not meeting U.S. safety
standards and that the four U.S. border states’ readiness for enforcement
varied significantly.7 With nearly 12,000 trucks from Mexico crossing daily
into the border states, we need to be assured that these trucks are safe.
NAFTA’s timetable for international access called for U.S. and Mexican
trucks to be able to operate in each country’s border states as of
December 18, 1995. But, on that date, the U.S. Secretary of Transportation
delayed this from happening, because of safety and security concerns
regarding Mexican trucks. The delay is still in effect. The next milestone in
NAFTA is the provision allowing full access in both countries starting on
January 1, 2000.

We are conducting a follow-on review of the status of inspection and
enforcement activities of Mexican trucks in 3 of the border states.8 While
we have not completed our work, we would like to share our preliminary
findings with you. State and federal truck inspectors at the border told us
that trucks have become safer, based on data such as fewer safety
violations being given per truck. However these views are anecdotal. After
more than 1 year of intensified truck inspections, it remains unclear as to
whether trucks from Mexico are becoming safer. From January through
November 1996, federal and state officials carried out more than 20,000
inspections of trucks entering from Mexico, resulting in about 45 percent
of the vehicles being placed out of service for serious safety violations.
The data show no consistent trend, downward or otherwise. Moreover,
45 percent compares unfavorably to the 28 percent out-of-service rate for
U.S. trucks inspected across the United States. On the other hand, state
and federal truck inspectors we interviewed believe that Mexican
operators are upgrading their trucks to make them safer. Also, according
to industry experts, most Mexican trucks at the border are involved in
short-haul operations only and they believe that newer and presumably
safer trucks will be used for long-haul operations further into the United
States.

The three border states have more than doubled the number of truck
inspectors at the major border crossings and now have 83 inspectors,
compared to 39 a year ago. Also, DOT has approved the placement of 13


7
Commercial Trucking: Safety and Infrastructure Issues Under the North American Free Trade
Agreement (GAO/RCED-96-61, Feb. 29, 1996).
8
 Because Mexican trucks entering the border state of New Mexico comprised about one percent of all
northbound truck crossings, we did not include New Mexico in our review.



Page 10                                                                GAO/T-RCED/AIMD-97-86
                    federal safety inspectors on the border for a two-year period. California,
                    with about 24 percent of the overall Mexican truck traffic, has opened two
                    large permanent inspection facilities, where it tries to inspect every truck
                    entering from Mexico at least once every 3 months. However, neither
                    Texas nor Arizona, which admit about three-quarters of the overall
                    Mexican truck traffic, has built any permanent inspection facilities at
                    border locations. State officials told us that a lack of space at urban border
                    crossings and their view of NAFTA as a national issue that should be paid
                    for with federal funds are among the reasons they have not built any
                    inspection facilities.

                    DOT has a number of initiatives under way aimed at ensuring the safety of
                    Mexican trucks crossing the border. They include providing some
                    additional funds to border states for more truck inspections, running
                    educational campaigns on U.S. safety standards, and training truck
                    inspectors in Mexico. Enforcing safety standards for unsafe Mexican
                    trucks is hampered, however, because DOT’s strategy does not include
                    helping border states develop results-oriented truck inspection strategies.
                    DOT has also not actively worked with other federal and state agencies,
                    such as the U.S. Customs Service, to build truck inspection facilities on the
                    border.

Rail Safety         In the area of rail safety, we are currently examining whether new
                    initiatives within the Federal Railroad Administration (FRA) will improve
                    safety on the nation’s rail lines. From 1976 through 1995, the rail industry’s
                    accident rate per million train miles declined by 70 percent. Similarly, the
                    industry’s injury rate per million train miles declined by about 74 percent
                    during the same period. Although these improvements are commendable,
                    a continued focus on safety is needed, since improvements in the accident
                    rate have slowed substantially since 1987, and over 1,000 people are still
                    killed annually at grade crossings or while trespassing on railroad
                    property. We are reviewing these trends in detail and assessing FRA’s
                    initiatives to improving safety on the nation’s rail lines. Under these
                    initiatives, FRA works with other federal agencies, railroad management,
                    labor, and the states to implement methods that will reduce grade-crossing
                    accidents, expedite the promulgation of important safety regulations, and
                    secure railroads’ compliance with existing safety rules.


                    Our work has shown that DOT needs to improve its management of
Management Issues   aviation, highway, and transit programs to ensure that limited funds are
                    effectively and efficiently used. We have identified some underlying causes



                    Page 11                                                 GAO/T-RCED/AIMD-97-86
                         for the numerous cost, schedule, and performance problems experienced
                         by FAA’s ATC modernization program. In addition, major surface
                         transportation projects, costing hundreds of millions to billions of dollars
                         each, are continuing to incur cost increases, experience delays, and have
                         difficulties acquiring needed funding commitments. Consequently, the
                         federal, state, and local stakeholders could be asked to pay for more of
                         these costs or the projects’ completion could be jeopardized.


Air Traffic Control      FAA is in the midst of a multibillion dollar, mission-critical capital
Modernization Problems   investment program to modernize its aging ATC system. Begun in 1981, this
                         effort involves the acquisition of a vast network of radars and automated
                         data processing, navigation, and communications equipment. FAA
                         estimates that the cost of modernizing the system will total $34 billion
                         through 2003, of which $21 billion represents software-intensive computer
                         systems. The Congress has already appropriated about $23 billion of the
                         $34 billion investment.

                         Over the years, we have reported that ATC modernization projects have
                         experienced substantial cost overruns, lengthy delays, and significant
                         shortfalls in performance that have affected FAA’s ability to deliver systems
                         as promised. We have identified numerous causes for these problems,
                         including technical difficulties, management problems, and the lack of
                         continuity in FAA’s top management. Because of the size, complexity, cost,
                         and problem-plagued past of the ATC modernization, we designated it as a
                         high-risk information technology initiative in 1995 and again in 1997.9

                         The framework for effectively addressing the modernization’s problems is
                         grounded in management practices followed by leading public sector and
                         private sector organizations and embodied in the Clinger-Cohen Act of
                         1996 (P.L. 104-106). Among its provisions, the act emphasizes the
                         involvement of senior executives in decisions about information
                         management, the development and implementation of systems
                         architectures, and the institution of discipline in such areas as investment
                         management and system development and acquisition. FAA views its new
                         Acquisition Management System, established last year, as a rational
                         approach to acquisitions.

                         In addition, because ATC modernization is critical to aviation safety and
                         offers cost savings to users of the national airspace and FAA, the Gore

                         9
                         High-Risk Series: An Overview (GAO/HR-95-1, Feb. 1995); and High-Risk Series: Information
                         Management and Technology (GAO/HR-97-9, Feb. 1997).



                         Page 12                                                                GAO/T-RCED/AIMD-97-86
                                Commission recommended that FAA accelerate its program by 7 years or
                                more so that the new ATC architecture is operational by 2005. However, we
                                have some concerns about how realistic that goal may be.

ATC Modernization Lacks a       FAA’s ATC modernization program consists of hundreds of interrelated,
Complete Systems Architecture   interdependent systems that need to be defined as part of a complete
                                systems architecture. Simply stated, a systems architecture is a blueprint
                                to guide and constrain the development and evolution (i.e., maintenance)
                                of a collection of related systems. It consists of two principal
                                components—a “logical” architecture and a “technical” architecture. The
                                logical architecture includes a high-level description of the organization’s
                                mission, functional requirements, information requirements, systems,
                                information flows, and interfaces. It is the means for ensuring that systems
                                support business needs. The technical architecture details the specific
                                information technology and communications standards and approaches
                                that will be used to build systems’ hardware, software, communications,
                                data management, and security elements. It ensures that systems
                                interoperate effectively and efficiently.

                                FAA has been effective thus far in developing the logical component of a
                                systems architecture, commonly called the National Airspace System
                                architecture. However, FAA is missing the technical component, and we do
                                not see a coordinated effort under way to produce one for the entire
                                modernization program. Of course, just having a complete systems
                                architecture is not enough. To be effective, the architecture must also be
                                enforced consistently, meaning that systems must comply with the
                                architecture and that any architectural deviations must be justified. At FAA,
                                such architectural enforcement is not occurring.

                                FAA’s failure to define and enforce a complete ATC systems architecture has
                                permitted incompatibilities among existing systems and will continue to
                                do so for future systems. While this does not mean that ATC systems
                                cannot work together safely, it does mean that working together costs
                                more (for development and maintenance) than it should and that overall
                                efficiency is less than optimal. To fill these voids, our February 1997 report
                                recommends that FAA establish an effective management structure for
                                developing and enforcing a complete systems architecture.10

ATC Modernization Lacks         Effectively managing an investment portfolio requires reliable cost
Reliable Cost Information       information on each investment. Without reliable cost information, the

                                10
                                 Air Traffic Control: Complete and Enforced Architecture Needed for FAA Systems Modernization
                                (GAO/AIMD-97-30, Feb. 3, 1997).



                                Page 13                                                              GAO/T-RCED/AIMD-97-86
                               likelihood of poor investment decisions is increased appreciably not only
                               when a project is initiated but also throughout its life cycle. Such a
                               situation is unacceptable when making small investments, but it is
                               especially egregious when making multimillion- or billion-dollar
                               investments in mission-critical ATC systems.

                               We have no confidence that FAA’s ATC projects’ actual or estimated costs
                               are accurate. Our concerns with estimated costs are grounded in FAA’s
                               weak processes for deriving these estimates. In fact, of the six processes
                               (e.g., data collection and feedback on actual performance) that experts say
                               should be institutionalized by organizations that build or acquire
                               software-intensive systems, FAA only partially satisfies one and is
                               completely lacking in the other five. The result is cost estimates that are
                               not analytically derived and supported. Compounding these weaknesses is
                               FAA’s practice of presenting estimates as precise, point estimates, rather
                               than presenting a cost range that explicitly describes the inherent
                               uncertainty and risk involved. Our concerns also extend to the
                               accumulation and reporting of ATC projects’ actual costs, and to FAA’s lack
                               of a cost accounting capability. In lieu of one, FAA relies on an assortment
                               of accounting and financial management systems, but these systems do
                               not capture all relevant costs, such as those associated with FAA’s internal
                               project management. Our January 1997 report recommends that FAA take
                               actions to correct these problems.11 As required by the Federal Aviation
                               Reauthorization Act of 1996, FAA is planning to implement a cost
                               accounting system.

ATC Modernization’s Software   Software is the most expensive and complex component of today’s
Acquisition Capability Is      computer systems. It is also the component that is the source of most
Immature                       system development problems. The quality of software is determined
                               largely by the quality of the processes involved in developing or acquiring,
                               and maintaining it. Carnegie Mellon University’s Software Engineering
                               Institute (SEI), recognized for its expertise in software processes, has
                               developed models and methods that define and determine the maturity of
                               an organization’s software processes. Together, they provide a logical
                               framework for determining a baseline of an organization’s strengths and
                               weaknesses and providing a structured plan for incremental improvement.

                               We are currently evaluating FAA’s software acquisition processes and the
                               steps under way or planned to improve them. Our preliminary results
                               show some strengths but more weaknesses. In fact, FAA does not fully

                               11
                                 Air Traffic Control: Improved Cost Information Needed to Make Billion-Dollar Modernization
                               Investment Decisions (GAO/AIMD-97-20, Jan. 22, 1997).



                               Page 14                                                                 GAO/T-RCED/AIMD-97-86
                               satisfy any of the key areas necessary to achieve a repeatable level of
                               maturity in its processes, rendering them ad hoc, and sometimes chaotic.
                               On SEI’s process maturity scale of 1 through 5, FAA is at the lowest level
                               and is at great risk of not delivering software on time and within budget
                               that performs as intended. Additionally, FAA lacks an effective
                               management approach for improving its software acquisition processes. In
                               particular, it has not assigned the responsibility for improvement to an
                               organizational entity that has budgetary or organizational authority over
                               the product teams that are acquiring software, and it does not yet have an
                               effective plan to properly focus and coordinate improvement initiatives
                               and measure progress. As a result, years of activity in this area have
                               yielded little in the way of improvements to processes. We plan to make
                               recommendations in these areas.

FAA’s Organizational Culture   In August 1996, we reported to this Subcommittee that an underlying
Hinders Acquisition            cause of FAA’s ATC acquisition problems is its organizational culture—the
                               beliefs, values, and attitudes shared by an organization’s members, which
                               affect their behavior and the behavior of the organization as a whole.12 We
                               found that FAA’s acquisitions were impaired when employees acted in ways
                               that did not reflect a strong commitment to mission focus, accountability,
                               coordination, and adaptability. For example, we reported that installations
                               of new terminal Doppler weather and airport surveillance radars were
                               delayed when the project offices did not coordinate with field offices to
                               ensure that sites suitable for installing these systems had been acquired.
                               We recommended that FAA develop a comprehensive strategy for cultural
                               change that (1) addresses specific responsibilities and performance
                               measures for all stakeholders throughout FAA and (2) provides the
                               incentives needed to promote the desired behaviors and achieve
                               agencywide cultural change.

                               In line with our recommendation, FAA established the Office of Business
                               Management within the Office of the Associate Administrator for Research
                               and Acquisitions to broadly define the proper framework for cultural
                               reform. This office plans to develop a strategic vision and business goals
                               for FAA’s acquisition efforts, create a planning process, manage goal
                               attainment, and develop performance measures to gauge progress in
                               implementing change. Also, FAA’s Research and Acquisitions unit is
                               monitoring its progress in effecting cultural change through staff surveys.
                               The challenge facing FAA in changing its culture is finding ways to broaden
                               its efforts to include stakeholders from across the agency.

                               12
                                Aviation Acquisition: A Comprehensive Strategy Is Needed for Cultural Change at FAA
                               (GAO/RCED-96-159, Aug. 22, 1996).



                               Page 15                                                               GAO/T-RCED/AIMD-97-86
Observations on Gore         The Gore Commission found that “it is critical to our global leadership in
Commission’s Proposals for   civil aviation to finance an accelerated modernization” of the ATC system.
Accelerating ATC             New technology such as satellite-based navigation offers significant cost
Modernization                savings for users of the ATC system and for FAA. The Gore Commission
                             recommended that all elements of the agency’s planned ATC architecture
                             should be fully operational by 2005 rather than 2012 and beyond, which is
                             FAA’s current timetable.


                             While it would provide tremendous benefits to move up the completion of
                             the modernization effort by 7 years, we have some concerns about FAA’s
                             ability to achieve that goal. First, the challenges encountered in acquiring
                             new ATC technology have to be recognized. Although the Gore Commission
                             states that new ATC technology to meet FAA’s requirements is available “off
                             the shelf,” FAA has found that significant development efforts have been
                             needed for virtually all major acquisitions over the past decade. As
                             recently as this past year, for example, new major contracts for two key
                             components of the modernization effort—the Standard Terminal
                             Automation Replacement System (STARS) and the Wide Area Augmentation
                             System (WAAS)13—called for considerable development efforts that are not
                             scheduled for completion until after the year 2000. As noted in many of
                             our reports, FAA has frequently found it difficult to meet the technical and
                             managerial challenges associated with developing and fielding modern ATC
                             equipment. (Further information on the status of these and other ATC
                             acquisitions that are central to FAA’s modernization effort is provided in
                             appendixes I, II and III.)

                             Second, modernizing the system at an accelerated rate could prove to be
                             inconsistent with the principles of its new acquisition management system,
                             established on April 1, 1996, in response to legislation freeing the agency
                             from most federal procurement laws and regulations.14 The system calls
                             for the agency to go through a disciplined process of defining its mission
                             needs, analyzing alternative technological and operational approaches to
                             meeting those needs, and selecting only the most cost-effective solutions.
                             Until FAA goes through that analytical and decisionmaking process, it is
                             premature to predict what new technology should be acquired. In
                             developing the ATC architecture, FAA made certain assumptions about its
                             future needs for technology upgrades and additional capabilities.
                             However, when looking 5 or more years into the future, it is difficult for


                             13
                               The wide area system will use commercial communications satellites to augment GPS’ signals in the
                             airspace between and around airports to aid civil aircraft in navigating air routes and landing.
                             14
                               P.L. 104-50, section 348.



                             Page 16                                                                 GAO/T-RCED/AIMD-97-86
                               FAA to predict mission needs and the likely advances in technology with
                               any degree of certainty.

                               As discussed later in this testimony, there are also significant funding
                               implications associated with accelerating the modernization program.


Surface Transportation         Let me turn for a moment to DOT’s management of major surface
Programs                       transportation programs. Our work has focused on the need for
                               management attention in three areas: (1) cost control and committed
                               financing to cover all potential costs for large-dollar surface transportation
                               projects; (2) federal leadership that provides incentives to assist states and
                               localities to overcome barriers to deploying the Intelligent Transportation
                               System (ITS); and (3) an organizational structure that balances improving
                               programs’ delivery of services with ensuring the least cost to the taxpayer.

Cost Control of Large-Dollar   The nation’s highways and bridges are vital to our economy and national
Highway Projects Could         defense. It is essential that highway and bridge projects be well managed
Improve                        because of limited resources available to build and maintain them.
                               Because large-dollar projects generally take longer to build and usually
                               have more significant environmental and community impacts than the
                               majority of federal-aid highway projects, they have a greater potential to
                               experience substantial cost increases and lengthy construction delays.
                               These cost increases can potentially overwhelm other highway projects
                               and erode the already limited funds available to meet highway needs
                               overall. Effective project management to contain costs can help ensure
                               that cost growth resulting from delays and other factors is minimized and
                               that transportation investment dollars are spent wisely and efficiently.

                               As discussed in our recently issued report on managing the costs of
                               large-dollar highway projects, cost containment is not an explicit statutory
                               or regulatory goal of FHWA’s oversight.15 As such, FHWA has done little to
                               ensure cost containment is an integral part of the states’ project
                               management. FHWA influences the cost-effectiveness of projects by its
                               review and approval of design and construction plans and through daily
                               interaction with state departments of transportation. FHWA’s project
                               approval process consists of a series of incremental actions that occur
                               over the period of years required to plan, design, and build a project. FHWA
                               approves the estimated cost of a large-dollar project in segments, when
                               those project segments are ready for construction, rather than agreeing to

                               15
                                Transportation Infrastructure: Managing the Costs of Large-Dollar Highway Projects
                               (GAO/RCED-97-47, Feb. 28, 1997).



                               Page 17                                                                GAO/T-RCED/AIMD-97-86
                              the total cost of the project from the outset. So, by the time FHWA approves
                              the cost of a large-dollar project, a public investment decision may have
                              effectively been made because substantial funds will have already been
                              spent on designing the project and acquiring property, and much of any
                              increase in the project’s estimated costs will have already occurred.

                              While many factors can cause costs to increase, we found several that
                              worked together to increase costs beyond the initial estimates for projects
                              in the six states we describe in our February 1997 report: (1) initial
                              estimates are preliminary and not designed to be reliable predictors of a
                              project’s cost, (2) initial estimates are modified to reflect more detailed
                              plans and specifications as a project is designed, and (3) a project’s costs
                              are affected by, among other things, inflation and changes in scope to
                              accommodate economic development that occurs over time as a project is
                              designed and built. Finding that some states were using good cost
                              management practices, we recommended that FHWA be proactive in
                              evaluating and disseminating states’ best practices so that all states could
                              benefit from their use.

Cost and Financing Concerns   The Central Artery/Tunnel project, in Boston, Massachusetts, estimated to
Remain for the Central        cost $10.4 billion, is one of the largest and most expensive highway
Artery/Tunnel Project         construction projects ever undertaken. It has advanced further in the last
                              year than at any other time in its history. With the Ted Williams Tunnel
                              open to traffic and construction of the underground Central Artery well
                              under way, the project is about 85 percent designed and 25 percent
                              constructed. About $8 billion of the $10.4 billion in contracts are either
                              complete or awarded. The project’s most recent finance plan was issued in
                              September 1996. This plan was followed in December 1996 with a report
                              by consultants on the feasibility of various options for financing the state’s
                              share of completing and operating the project.

                              Massachusetts reports that the project’s costs have stabilized, the risk of
                              further cost increases is minimal, and financing options are available to
                              meet funding shortfalls. The state has made progress in the past year by
                              putting strategies in place designed to meet the aggressive cost
                              containment goals for the design and construction phases of the project
                              and by moving forward with legislation to implement the
                              recommendations of the state’s Secretary of Transportation based on the
                              financing strategies in the consultants’ feasibility study. However, on the
                              basis of our ongoing work, we remain concerned that (1) the project’s
                              costs have increased and assumptions about cost savings to offset those
                              increases and keep the overall cost estimate at $10.4 billion may be



                              Page 18                                                 GAO/T-RCED/AIMD-97-86
optimistic, and (2) while Massachusetts has begun taking action on the
recommended financing strategies, it may not be enough to meet funding
shortfalls.

The project’s $10.4 billion cost estimate depends on a number of
assumptions, including meeting the cost containment goals established for
the project as well as the reasonableness of potential savings used to
offset cost increases. The project established an aggressive overall goal in
1995 that construction contract changes would not exceed 10.7 percent of
the estimated value of the contracts. However, our analysis shows that the
project has not met that goal for awarded contracts, as the forecast
changes for these contracts averaged 16 to 19 percent as of November 30,
1996. With 64 construction contracts awarded and 49 construction
contracts still unawarded, it may be difficult to keep changes down
sufficiently to meet the 10.7 percent goal. The September 1996 finance
plan describes other cost increases since the February 1996 finance plan,
including $80 million related to projectwide support and $25 million for
additional right-of-way costs. However, the finance plan also shows cost
savings to offset identified cost increases, such as a $15 million reduction
in one of the project’s tunnel designs, to maintain the project cost at
$10.4 billion.

The largest overall savings—$600 million—comes from the project’s
Owner-Controlled Insurance Program consisting of six separate insurance
policies, including workers’ compensation and general liability. Since
December 1994, the estimated cost of the insurance program has
decreased from $748 million to $148 million. These savings assume a
scenario below what is usually used by the industry, justified, according to
project officials, on the project’s low claims and accident rates for the last
three years. However, the project is beginning 6 years of underground
tunneling in the congested downtown area that will entail numerous and
intricate construction challenges. For example, the project will burrow
close to buildings and subway tunnels often with only a few feet to spare.
While the project cites an excellent safety record to date, with these
inherent construction risks, the insurance savings may not be realized.

Our analysis of the state’s feasibility study identifies two shortfalls
between the project’s obligation requirements and the funding sources
identified to date: (1) an interim funding gap of $1.7 billion to $2.3 billion
during the fiscal year 1998 through 2002 period and (2) a total funding gap
of $100 million to $700 million between fiscal years 1998 and 2005. These
two gaps differ because, according to the study, the project’s costs will



Page 19                                                 GAO/T-RCED/AIMD-97-86
    outweigh identified sources of funding each year between fiscal years 1998
    and 2002; conversely, financing will exceed costs in each of the last 3 years
    of the project from fiscal year 2003 through 2005, resulting in a $1.6 billion
    surplus during that period. The study proposes a strategy of state
    borrowing to cover both funding shortfalls, including (1) a contribution
    from the Massachusetts Turnpike Authority, based on revenue bonds
    backed by toll increases, which the state has recommended total $1
    billion—$700 million in the short term and $300 million upon completion
    of the Central Artery portion of the project, and (2) issuance of short-term
    “grant anticipation notes”, to be repaid with future federal highway
    apportionments. We have concerns that these financing strategies may not
    be sufficient to meet the shortfalls. For example:

•   There may be an additional demand on the Massachusetts Turnpike
    Authority. The project has already counted on funding from a $400 million
    state contribution authorized in 1995, which the state’s 5-year capital plan
    identifies as a contribution from the Authority. The Authority has not yet
    made this contribution and it would be in addition to the recommended
    $1 billion contribution.

•   While the financial markets will ultimately decide whether using grant
    anticipation notes to leverage future federal funds is feasible, a number of
    challenges need to be overcome. There is limited precedent for borrowing
    funds in this manner, particularly in the amount—$1 billion or
    more—suggested by the state. Furthermore, since the feasibility study
    assumes only $675 million in federal funds dedicated to the project during
    the surplus fiscal years from 2003 through 2005, the state may have to use
    federal funds to pay off the grant anticipation notes beyond the project’s
    scheduled completion in fiscal year 2005, and beyond the likely duration of
    the next highway authorization bill.

•   The $1.6 billion “surplus” between fiscal years 2003 and 2005 may be
    smaller than reported. Nearly $1 billion of this surplus is savings from the
    insurance program and “air rights” revenues—proceeds the state expects
    to receive from the development of property acquired for the project. The
    project has reflected $722 million in insurance proceeds as a credit to the
    cost of the project in fiscal year 2005. However, even if its assumptions
    about the cost of the insurance program are realized, the project does not
    expect to receive these proceeds until the insurance program ends in 2018,
    and the amount of the proceeds is based on accruing interest through that
    time. The state will realize proceeds from development of air rights and, by
    federal law, can use those proceeds for transportation-related purposes.



    Page 20                                                 GAO/T-RCED/AIMD-97-86
                                 However, around half the property expected to be available will not be
                                 ready for development until late 2004. As such, Massachusetts may not
                                 realize much of the financial benefits from the sale of air rights until after
                                 2005.

                                 Funding shortfalls will grow if the costs of the project increase or if
                                 federal funds under the next authorization are less than expected. If
                                 shortfalls grow, or if surpluses are not available as expected, the state will
                                 likely have to incur additional debt over a longer period of time to meet
                                 the project’s financing needs. This may require Massachusetts to devote a
                                 substantial portion of its federal and state transportation funds to the
                                 Central Artery/Tunnel project for several years after the facility is
                                 completed and carrying traffic.

BART: Critical Decisions Still   The Bay Area Rapid Transit District (BART) intends to spend over $1.1
on Hold                          billion, including $750 million in federal funds, to extend mass transit
                                 service to the San Francisco International Airport. Since last year, we and
                                 the Congress have voiced several concerns about the financing of the
                                 project. As we reported in August 1996, BART has taken a number of steps
                                 that have improved the project’s financing, including (1) escalating certain
                                 costs to better account for inflation; (2) improving its borrowing program
                                 by identifying secondary sources of collateral and gaining a needed change
                                 in state law; and (3) identifying additional funds should they become
                                 necessary to finance the project, including joint development revenues,
                                 advertising, concessions, and parking fees.16 In November 1996, the
                                 Federal Transit Administration (FTA) informed both the House and Senate
                                 Appropriations Subcommittees that it was satisfied with the project’s
                                 financing and that a full-funding grant agreement could be awarded. The
                                 grant agreement will establish a ceiling for the federal government’s
                                 commitment, subject to the annual appropriations process.

                                 While BART has improved the project’s financing overall, its November 1996
                                 finance plan still includes optimistic assumptions about the annual level of
                                 federal funding to be received under FTA’s New Starts Program. The
                                 November plan specifies federal funding of $110 million in fiscal year 2000,
                                 $160 million in fiscal year 2001, $150 million in fiscal year 2002, and
                                 $108 million in fiscal year 2003. These compare to annual funding levels of
                                 between $110 million to $120 million that BART had included in previous
                                 finance plans and that FTA had criticized as optimistic. BART’s request for
                                 funding of $160 million in fiscal year 2001 would, for example, represent
                                 20 percent of the $760 million in FTA’s current annual budget for the New

                                 16
                                   BART Airport Extension Update (GAO/RCED-96-246R, Aug. 30, 1996).



                                 Page 21                                                              GAO/T-RCED/AIMD-97-86
Starts Program. A slower rate of annual federal funding than assumed
would have the effect of increasing BART’s financing costs, which BART
currently estimates to be $40 million.

In addition, your subcommittee expressed other concerns about the
project’s financing in your January 7, 1997, letter to FTA and FAA. Among
your key concerns were whether (1) BART’s use of a surcharge at the
airport station constituted an improper diversion of airport funds and
(2) BART is required to pay the airport rent for using a station built with
airport revenues. On February 11, 1997, the agencies responded to you.
The response states that DOT will ensure that any implemented surcharge
will comply with applicable laws but does not definitively conclude
whether the proposed airport station surcharge constitutes revenue
diversion. Because this surcharge is part of the project’s overall finance
plan, it is important that DOT make a decision on whether it is a revenue
diversion. Concerning the second issue, FAA has not yet determined the
appropriateness of the airport’s plan for BART’s free use of airport property.
FAA has issued for comment a proposed policy statement addressing,
among other things, whether airports may charge transit agencies less
than commercial rates for the use of airport property for public transit
facilities. In the proposed policy statement, FAA takes the view that
airports may charge publicly owned transit systems below market rates for
the use of airport property for facilities necessary for the transportation of
passengers, visitors, and employees to and from the airport, given the
significant benefits that can be achieved through such public transit. FAA
also specifically requested comments on whether some compensation
from the use of airport property should be required. The comment period
for this policy statement closed on February 18, 1997.

DOT’s response concluded that the project is at a critical juncture and that
BART’s construction needs to proceed in parallel with the airport’s ongoing
construction of its light rail system because the two systems will share the
same structure. The airport’s light rail system is designed to move
passengers throughout the airport. According to the airport’s Director of
Finance, the airport plans to award the initial construction contracts for
the BART station in March 1997 and all such contracts by the end of
June 1997. He said that without a full-funding grant agreement, there is no
guarantee that BART will come into the airport. If it does not, he stated, the
airport will have to decide whether to incorporate BART into the light rail
system or build a less expensive structure for light rail only. He noted that
building a structure solely for light rail could have the effect of designing




Page 22                                                 GAO/T-RCED/AIMD-97-86
                                    BART out of the airport altogether. The airport has not yet made a decision
                                    on how to proceed if there is no full-funding grant agreement.

Los Angeles Red Line’s Costs        The Los Angeles Red Line Project, a 23.4-mile heavy rail subway system, is
and Schedule Still Increasing       facing cost increases as well as financing uncertainties associated with
                                    funding shortfalls and the long-term financial capacity of the Los Angeles
                                    County Metropolitan Transit Authority (MTA), the project manager. The
                                    project currently consists of three segments, two of which are complete or
                                    near completion. The third segment involves the design and construction
                                    of three extensions to North Hollywood, East Side, and Mid City.

                                    According to January 1997 estimates by MTA, the Red Line project will cost
                                    $6.1 billion, or about 12 percent ($651 million) above the $5.5 billion
                                    estimated in grant agreements. The $6.1 billion includes $192 million to
                                    reconfigure a portion of the tunnel planned for the Mid City extension
                                    needed to avoid concentrations of hydrogen sulfide gas in the tunnel.
                                    Because the $192 million estimate represents one of three options being
                                    considered to address the problem, costs could increase on the basis of
                                    MTA’s final decision, due in August 1997.17 The project’s costs could
                                    increase further based on the outcome of pending lawsuits against MTA
                                    filed by retailers affected by ground settlement along Hollywood
                                    Boulevard and from the construction contractor that was fired by MTA for
                                    inadequate construction techniques.

                                    MTA currently plans to fund $3.4 billion of the $6.1 billion with federal
                                    funds. The federal funds anticipated, which are subject to annual
                                    appropriations, include $2.8 billion from three full-funding grant
                                    agreements, $500 million from other federal programs, and $100 million
                                    that MTA plans to request above the current federal commitment for
                                    segment three as part of the reauthorization of ISTEA.

                                    However, the additional $100 million federal contribution will not be
                                    sufficient to address the project’s funding shortfall. The project currently
                                    has an estimated shortfall of $335 million resulting from federal, state, and
                                    local commitments that may not be realized:

                                •   In fiscal years 1995, 1996, and 1997, the Congress did not provide for the
                                    annual commitments identified in the grant agreements, resulting in a
                                    funding shortfall of $184 million. MTA officials told us that if they continue
                                    to receive half or less of the yearly commitment in the grant agreements,


                                    17
                                      The three alignment options being considered range in cost from $167 million to $279 million.



                                    Page 23                                                                   GAO/T-RCED/AIMD-97-86
    the federal shortfall could reach $580 million or more by 2002.

•   As we reported in May 1996, the California state legislature diverted
    $50 million in funds slated for MTA’s bus operations.18 Because the
    legislature specified that the shortfall could not affect the bus program,
    MTA transferred $50 million to bus operations that had been committed to
    the Red Line project.

•   Some of MTA’s local revenue commitments may also not be realized. While
    the City of Los Angeles plans to honor its commitment to fund $200 million
    toward the completion of segment three, MTA will no longer require the
    City to fund $65 million of the cost increase on segment two resulting from
    the collapse of Hollywood Boulevard into the subway tunnel.
    Furthermore, MTA does not expect to receive $36 million of the $75 million
    in estimated revenues from assessments levied on retail properties
    adjacent to planned stations because some retail property owners oppose
    the assessment.

    Additional problems could further impact MTA’s ability to finance the Red
    Line and other transportation projects. First, projected local sales tax
    revenues have declined, resulting in $400 million less in revenues than
    expected through 2010. Second, in October 1996, the bus riders union (and
    others) and MTA entered into an agreement that requires MTA to—among
    other things—expand its bus service.19 MTA has estimated that
    implementing the agreement will cost $480 million through 2010. Finally, if
    MTA realizes its projected federal shortfall of $580 million, MTA’s overall
    funding shortfall could reach $1.5 billion for all of its projects, which may
    affect its funding commitments to both the Red Line and the Alameda
    Corridor Project, which I will discuss in the next section. MTA is
    reevaluating its existing funding commitments and plans to report to its
    Board of Directors in June 1997 on a revised financial plan, which would
    include recommendations on how to meet its commitments.

    On January 6, 1997, FTA took a number of steps to address MTA’s funding
    shortfall, including requiring MTA to develop a recovery plan and hiring a
    financial management consultant to review and report on MTA’s financial



    18
     Los Angeles Red Line: Financing Decisions Could Affect This and Other Los Angeles County Rail
    Capital Projects (GAO/RCED-96-147, May 14, 1996).
    19
      The agreement also requires MTA to freeze the general base fare at $1.35 and offer an $11 weekly bus
    pass, both for 2 years, and add 102 more buses and 50 more limited-service vehicles to the street over
    the next 2 years.



    Page 24                                                                  GAO/T-RCED/AIMD-97-86
                              capacity.20 MTA’s recovery plan, which impacts only segment three,
                              assumes annual federal funding of $100 million and proposes a transfer of
                              $300 million in flexible federal funds from the high-occupancy-vehicle
                              program to the rail program. Additionally, the plan proposes a 2-year delay
                              and $69.3 million increase for the East Side extension and a 10-year delay
                              and $192 million increase for Mid City.

                              The increased budgets and delayed schedules outlined in MTA’s recovery
                              plan would require that FTA and MTA renegotiate the full-funding grant
                              agreement for segment three. MTA’s recovery plan assumes that the
                              $261 million budget increase for segment three will be paid from local
                              funds, as we mentioned earlier. MTA officials have subsequently told us that
                              they plan to seek $100 million in additional federal funding for segment
                              three in the reauthorization of ISTEA.21 According to MTA officials, the
                              delays to Mid City are due to technical problems that could justify
                              additional federal funding. However, FTA officials told us that they will use
                              their analysis of MTA’s recovery plan, along with the financial management
                              consultant’s report, to assist them in assessing MTA’s financial capacity to
                              fund the Red Line Project.

Financing Issues Unresolved   Financing uncertainties could also be an issue for the Alameda Corridor
for the Alameda Corridor      intermodal project, a 20-mile freight rail corridor that the cities of Los
Project                       Angeles and Long Beach plan to construct from their respective ports to
                              central rail yards near downtown Los Angeles. When completed in 2001,
                              the project will consolidate all rail traffic into a new rail corridor, increase
                              trains’ average speed from 10 to about 40 mph, and reduce much of the
                              existing congestion in the corridor caused by nearly 200 grade crossings.
                              These upgrades are also intended to accommodate the continued growth
                              in commercial trade flowing into the ports from Pacific Rim nations.

                              As of February 1997, about 5 percent of the project had been constructed,
                              and the total estimated cost is expected to be about $2 billion. The project
                              will be paid for using federal, state, and local funds, as well as revenue
                              bonds issued by the Alameda Corridor Transportation Authority. Over
                              $850 million in funding for the project has been secured: $407 million from
                              the ports to purchase the right-of-way for the new rail line, $400 million
                              from the federal government in the form of a direct loan, and an additional
                              $47 million in federal grants. As for the remaining funds, about
                              $711 million is to come from revenue bonds that will be issued in 1998 by
                              the Alameda Corridor Transportation Authority; about $347 million from

                              20
                                The financial management consultant must submit his report to FTA no later than March 31, 1997.
                              21
                                MTA also plans to request $100 million for further extensions to the current project.



                              Page 25                                                                    GAO/T-RCED/AIMD-97-86
the Los Angeles County MTA; and about $60.5 million, from the state.
Although the state funds appear to be secure, it is unclear if the project
will receive the full-funding commitment from MTA or be able to raise the
$711 million in revenue bonds.

Project officials state that MTA’s ability to meet its funding commitment is
uncertain. Although MTA has identified a bond, secured by a local sales tax,
as the potential source for funding its commitment to the project, these
tax revenues are projected to decline. In addition, a bond rating agency
stated that the Alameda Corridor Transportation Authority’s bond would
likely be investment grade, but the agency cited several factors that could
affect the project’s ability to secure the $711 million needed. First, the
project has asked the Internal Revenue Service to allow it to issue
tax-exempt revenue bonds—a ruling that would make the bonds more
attractive in bond markets and reduce the project’s overall level of debt.
Project officials estimated that without this tax-exempt status, they would
have to issue more than $800 million in bonds to meet the same level of
debt financing. Second, a bond rating agency stated that its assessment of
the risk associated with the project’s ability to repay the bonds will affect
the project’s credit rating and the interest rate of the bonds, influencing
their attractiveness to investors. Current risk factors include the capacity
of the prime contractors to complete a complex construction project
within the estimated costs; the potential diversion of funds from the ports
to the cities of Los Angeles and Long Beach; and the potential for further
litigation by two smaller cities that will be affected by the project’s
construction.

The potential diversion of funds is important because between 1992 and
1994, the state allowed Los Angeles and Long Beach to divert $90 million
from their ports to the cities’ general funds, causing a bond rating
company to lower the bond rating of the Port of Long Beach. The ports are
required to repay 40 percent of the principal and interest associated with
the revenue bonds as well as the federal loan. (The railroads are
responsible for the remaining 60 percent.)

According to a project official, the project will use the $400 million federal
loan to pay for engineering, design, and initial construction costs. Federal
officials stated that the federal loan will improve the project’s credit rating
both by decreasing the revenue bonds needed and serving as a general
sign of federal commitment to the project. The federal loan is subordinate
to the revenue bonds, which means the revenue bonds will be paid off first




Page 26                                                  GAO/T-RCED/AIMD-97-86
                                if funding is limited, thus increasing the attractiveness of the revenue
                                bonds to investors but posing a greater risk to the federal government.

                                FHWA officials have cited the Alameda Corridor’s federal loan as a
                                precedent for future financing efforts. Officials noted that FHWA used the
                                project as a model in the agency’s effort this year to create the new
                                $100 million Transportation Infrastructure Credit Program. The program is
                                intended to leverage federal funds and provide credit to assist nationally
                                significant projects, particularly large multimodal, revenue-generating
                                projects. However, since the Alameda Corridor project is in its early
                                stages, there are a number of unanswered questions concerning the risk to
                                the federal government if other funding sources are not realized and the
                                success of this type of federal loan at leveraging other funding.

Federal Commitment to Transit   As of February 1997, FTA had signed full-funding grant agreements with 13
Capital Funding Is Mortgaging   projects, and two additional projects, including BART’s airport extension,
Future “New Starts” Funds       had agreements pending. The outstanding commitments on these 15
                                projects totaled about $3.75 billion. These projects are generally in the
                                final design or the construction phase when they request federal funding
                                commitments through a full-funding grant agreement under FTA’s New
                                Starts Program.

                                Although the authorization period for FTA’s New Starts Program ends in
                                October 1997, FTA is allowed to make contingent commitments to projects
                                with full-funding grant agreements beyond the authorization period. The
                                ceiling for these commitments is determined by combining the remaining
                                unobligated authorization under ISTEA—$1.7 billion as of October 1,
                                1996—with one-half of the estimated remaining unobligated balance in the
                                mass transit account of the Highway Trust Fund at the end of the
                                authorization period—$2.8 billion as of October 1, 1996.22 This provided
                                FTA with sufficient authority to cover commitments made or planned for
                                the 15 projects with or projected to have full-funding grant agreements.

                                By using this commitment authority, the FTA has essentially mortgaged
                                future federal New Starts funds because it will take until 2003 to fulfill
                                existing and pending full-funding grant agreements if the Congress
                                continues to fund these projects at about the same level provided over the
                                last few years—about $800 million. Assuming no increase, it is unlikely
                                that new projects would be able to compete for federal New Starts funds
                                until that time; at the beginning of the fiscal year, there were 11 projects

                                22
                                  In addition, ISTEA specified that commitments to BART’s airport extension program be made from
                                the entire unobligated balance of the mass transit account.



                                Page 27                                                               GAO/T-RCED/AIMD-97-86
                         that were nearing the stage in the investment cycle at which projects
                         request such federal funding.23 This also raises a number of questions
                         regarding existing commitments. For example, will other full-funding grant
                         agreements, like the one for the Los Angeles Red Line project, be subject
                         to renegotiation for increased costs or delays? It appears that increased
                         funding, if requested, for ongoing projects may not be possible given
                         existing commitments. Furthermore, extending the deadline for existing
                         projects commits federal funds for those projects further into the future,
                         narrowing the possibility that new projects will be funded. Given that
                         funds may not be available under the New Starts Program, it may be a
                         signal to state and local governments that they need to look for less costly
                         alternatives to meet their transportation needs or build them without
                         federal capital assistance.


Issues Concerning ITS’   Established by ISTEA in 1991, DOT’s ITS program has received federal
Deployment               funding totaling $1.3 billion to advance the use of computer and
                         telecommunications technology that will enhance the safety and efficiency
                         of surface transportation. We reported to this Subcommittee last week on
                         the progress states and localities had made in deploying ITS and identified
                         options the federal government could consider to facilitate deployment.24
                         Although the program envisioned widespread deployment of an integrated
                         multimodal ITS, this vision has not been realized for several reasons. First,
                         the ITS national architecture was not completed until July 1996, and a
                         5-year effort to develop technical standards is planned for completion in
                         2001. The ITS architecture and technical standards, which define ITS
                         components and how they will work together, are prerequisites to
                         large-scale integrated deployment of ITSs. In addition, the lack of
                         knowledge of systems integration among state and local officials,
                         insufficient data documenting the cost-effectiveness of ITS in solving
                         transportation problems, and competing priorities for limited
                         transportation dollars will further constrain widespread deployment of ITS.

                         DOT’s fiscal year 1998 budget includes $250 million for ITS and proposes to
                         focus the federal funds on deploying it. However, our review has shown
                         that federal leadership in providing nonfinancial and financial incentives
                         to overcome barriers may be needed to facilitate further deployment. The
                         nonfinancial incentives that the federal government can offer include


                         23
                           FTA has requested $634 million for fiscal year 1998. If appropriated at this level, it could exacerbate
                         the situation.
                         24
                          Urban Transportation: Challenges to Widespread Deployment of Intelligent Transportation Systems
                         (GAO/RCED-97-74, Feb. 27, 1997).



                         Page 28                                                                      GAO/T-RCED/AIMD-97-86
                           providing technical assistance and training to state and local officials,
                           disseminating information on the costs and benefits of ITS efforts, and
                           completing the development of technical standards in a timely manner.

                           Our interviews with transportation officials in 10 of the nation’s largest
                           urban areas revealed a wide variety of opinions on the appropriate federal
                           role for funding ITS’ deployment. Officials in six urban areas stated that
                           federal funding of $1 billion each year would be needed to achieve
                           widespread deployment of ITS technologies. They added that in light of
                           other pressing transportation priorities, additional investments in ITS might
                           not occur without substantial federal financial assistance. In contrast,
                           officials from four other urban areas opposed a large-scale federal-aid
                           program because they do not want additional federal funding categories.
                           Some of these officials also said that such a program could drive
                           unnecessary investments in ITS, as decisionmakers chased ITS capital
                           money, even though another solution might have been more cost-effective.
                           In the absence of a large federal program, officials from 5 of the 10 urban
                           areas supported a smaller-scale federal seed program. They said that such
                           a program could be used to fund experimental ITS applications, promote
                           better working relationships among key agencies, or support information
                           systems for travellers. The current limitations to deploying ITS in urban
                           areas, as well as budgetary constraints, are considerations for this
                           Subcommittee as you consider DOT’s fiscal year 1998 request for the ITS
                           program.


Few Budgetary Savings      In testimony before this Subcommittee in February 1995, we stated that
Have Occurred Through      opportunities existed for budgetary savings from the proposed
Surface Field Office       consolidation of DOT’s five surface operating administrations into one by,
                           among other things, consolidating the extensive field office structure—161
Consolidation/Colocation   offices at that time.25 We also suggested that if the departmental
                           reorganization did not occur, there still might be opportunities to
                           streamline the field structure through colocation. We noted that
                           colocation can reduce such administrative costs as reception, printing,
                           mailing, and copying. We cited Denver, Colorado, as an example of an
                           opportunity for colocation because DOT’s modal agencies have seven field
                           offices in the metropolitan area.

                           Since that time, the overall departmental reorganization is no longer on
                           the table, and DOT is not currently examining options for consolidating its

                           25
                            Surface Transportation: Reorganization, Program Restructuring, and Budget Issues
                           (GAO/T-RCED-95-103, Feb. 13, 1995).



                           Page 29                                                                GAO/T-RCED/AIMD-97-86
                     surface field office structure. However, DOT has established a Colocation
                     Task Force to identify opportunities for its modal agencies, including FAA
                     and the Coast Guard, to colocate field offices within a metropolitan area to
                     improve the delivery of services by providing “one-stop shopping” for
                     customers and reduce overhead costs. The task force has initially
                     identified 160 field offices that could be colocated into 60 locations. The
                     results of its initial evaluation of these offices is due this summer and will
                     be reviewed by the Secretary’s Management Council.

                     The task force is using lease expiration dates for existing office space or
                     the date of completion of new office space as a trigger for its assessment
                     of specific locations. Decisions will be made on the actual extent of
                     colocation based on these specific assessments. One colocation occurred
                     recently when the NHTSA office in Hanover, Maryland, moved in with
                     FHWA’s regional office in Baltimore. Another colocation under
                     consideration is in Kansas City, Missouri, because the new FAA regional
                     center is scheduled to open there in 1998. DOT is currently assessing the
                     costs and benefits of housing all DOT field staff in that area in the new
                     regional center. Issues of concern include lease costs in downtown office
                     buildings that are higher than those currently paid in suburban locations
                     and the possibility that customers of FHWA, FRA, FTA, and NHTSA may not all
                     be located nearby.

                     DOT   officials told us that their efforts are currently focused on service
                     delivery and customer satisfaction and that this focus may result in
                     increasing the costs of the field structure. For example, recently
                     established metropolitan field offices established to better serve urban
                     customers in New York, Philadelphia, Chicago, and Los Angeles will cost
                     more money rather than save it because FHWA, in particular, does not have
                     field offices in these cities, and the new offices will be in addition to
                     existing FHWA field offices. However, while their focus has been on
                     improved service delivery, DOT officials have taken actions to reduce costs.
                     For example, they explained that they have closed seven small FRA
                     inspection offices and 5 Inspector General locations because staff, while
                     still located in each of these areas, are using either telecommuting centers
                     or their residences as a base of operations. Furthermore, FHWA has
                     consolidated financial, personnel, and data processing support among its
                     nine regions rather than have that support in each region.


                     In addition to the safety and security and management issues facing DOT,
Other Major Issues   there are three other areas we would like to discuss—financing FAA,



                     Page 30                                                 GAO/T-RCED/AIMD-97-86
                Amtrak’s financial condition, and the effectiveness of the Coast Guard’s
                drug interdiction efforts.


Financing FAA   One of the most critical issues confronting DOT and the Congress is how to
                adequately fund FAA to meet its mission over the long term. The Congress
                has recognized the seriousness of FAA’s long-term financing problems and
                directed that, among other things, an independent assessment of FAA’s
                financial requirements be completed and that the National Civil Aviation
                Review Commission be created to recommend to the Secretary of
                Transportation by August 1997 how best to finance the agency in light of,
                among other things, the independent assessment.26 Additionally, the
                Congress required that we assess (1) how ATC costs are allocated between
                FAA and DOD and (2) airport capital needs, and that we report to the
                Congress by April 1997. We are also required to report to the Commission
                so it can use the results of our work in its assessment.

                It will take some time for the Commission to complete its work and the
                Congress and the administration to assess it. Until then, we will not know
                the full extent of FAA’s financing problems and how they could be
                addressed. However, FAA has included some estimates of the magnitude of
                the problem in its fiscal year 1998 budget submission. FAA projects about a
                $9 billion shortfall between its existing requirements and projected
                funding levels through 2002, as illustrated in the following table.




                26
                  Under the Federal Aviation Reauthorization Act of 1996, after receiving the national commission’s
                report, the Secretary of Transportation is required to consult with the Secretary of Treasury and report
                to the Congress by October 1997 on the Secretary’s recommendations for funding the aviation system
                through the year 2002.



                Page 31                                                                    GAO/T-RCED/AIMD-97-86
Table 1: FAA’s Projected Budget
Shortfall, 1998-2002              Dollars in billions
                                                                    FAA’s estimated         FAA’s projected           FAA’s budget
                                  Fiscal year                         requirementsa                budgetb                shortfall
                                  1998                                           $ 8.46                 $ 8.46                    $0
                                  1999                                           10.82                    8.68                  2.14
                                  2000                                           11.22                    8.91                  2.31
                                  2001                                           11.32                    9.15                  2.17
                                  2002                                           11.50                    9.39                  2.11
                                  Total                                        $ 53.32                 $ 44.59                 $ 8.73
                                  Source: FAA and the President’s 1998 budget.
                                  a
                                    Requirements for fiscal year 1998 are requested budget authority in the President’s 1998
                                  budget. Requirements for fiscal years 1999-2002 are FAA’s estimates.
                                  b
                                  Budget estimates for fiscal years 1998-2002 come from the President’s 1998 budget.



                                  A significant amount of the $9 billion shortfall would occur in FAA’s
                                  operations account. The shortfall in this account is primarily attributable
                                  to increases in safety staffing, including new controllers, flight standards
                                  inspectors, certification personnel, and field maintenance technicians.
                                  Higher employee salaries and health care expenses also contribute to FAA’s
                                  estimated gap in funding. The remainder is primarily due to increased
                                  facility and equipment requirements needed to transition to free flight (a
                                  system of air traffic control where pilots choose their own routes, rather
                                  than having it specified by FAA) and improve airport security. The growth
                                  in FAA’s requirements for facilities and equipment translates to a
                                  38-percent increase in 1999 over the 1998 requested level.

                                  FAA officials estimate that this $9 billion potential shortfall could increase
                                  by an additional $4 billion as the agency tries to address the Gore
                                  Commission recommendations to accelerate modernization of the
                                  National Airspace System. This increase will be reflected in the facilities
                                  and equipment account. FAA expects to have a complete estimate of these
                                  costs later this year.

                                  While we do not disagree that FAA faces significant financial problems, we
                                  cannot quantify how severe the problems will be. We do know that FAA’s
                                  analysis presumes that the agency will not realize any productivity
                                  gains—through technological advances, new operational concepts, or
                                  other initiatives—that will enable it to reduce its controller or




                                  Page 32                                                                 GAO/T-RCED/AIMD-97-86
                     noncontroller workforces or prevent operating costs from growing at the
                     projected rate of 7 percent annually.


Amtrak’s Financial   Over the last several years, we have issued a number of reports and
Condition            testified several times on Amtrak’s financial condition, and we continue to
                     monitor Amtrak’s efforts to address its financial problems.27 Amtrak’s
                     passenger rail service has never been profitable and, through fiscal year
                     1997, the federal government has provided Amtrak over $19 billion for
                     operating and capital expenses. In response to continually growing losses
                     and a widening gap between operating deficits and federal subsidies,
                     Amtrak developed strategic business plans in 1995.28 These plans, which
                     have been revised several times, were designed to increase revenues and
                     control cost growth and, at the same time, eliminate Amtrak’s need for
                     federal operating subsidies by 2002.

                     Our preliminary assessment of Amtrak’s financial condition is that, despite
                     some gains, the corporation is still in a very precarious position. It remains
                     heavily dependent on federal support to meet its operating and capital
                     needs. Although actions taken by Amtrak through its business plans have
                     helped reduce its net losses, the corporation has struggled to reach
                     operating loss targets. As a result, greater than expected losses have made
                     it difficult for Amtrak to continue its path toward eliminating federal
                     operating support. While Amtrak narrowed the gap between its operating
                     deficit and the federal operating subsidy in fiscal year 1995, this gap grew
                     again in fiscal year 1996. In fiscal year 1996, the net loss was $764 million,
                     and the gap between the operating deficit and federal operating support
                     was $82 million.

                     In part to make up the operating and capital shortfalls, Amtrak has
                     borrowed heavily since 1993. From fiscal years 1993 to 1996, Amtrak’s
                     debt and capital lease obligations nearly doubled—from about
                     $527 million to about $987 million (in 1996 dollars). These debt levels do
                     not include an additional $1 billion expected to be incurred beginning in
                     1999 to finance 18 high-speed train sets and related maintenance facilities
                     for the Northeast Corridor and the acquisition of new locomotives.

                     27
                      Amtrak’s Strategic Business Plan: Progress to Date (GAO/RCED-96-187, July 24, 1996); Northeast Rail
                     Corridor: Information on Users, Funding Sources, and Expenditures (GAO/RCED-96-144, June 27,
                     1996); Amtrak: Early Progress Made in Implementing Strategic Business Plan, but Obstacles Remain
                     (GAO/T-RCED-95-227, June 16, 1995); Intercity Passenger Rail: Financial and Operating Conditions
                     Threaten Amtrak’s Long-Term Viability (GAO/RCED-95-71, Feb. 6, 1995).
                     28
                      Net loss is defined as total revenues minus total expenses. Operating deficit is the same as net loss,
                     except non-cash items (such as depreciation) are excluded from total expenses.



                     Page 33                                                                     GAO/T-RCED/AIMD-97-86
It is important to note that Amtrak’s increased debt levels could limit the
use of federal operating support to cover future operating deficits. In fact,
over the last 4 years, interest expenses have tripled—from $20.6 million in
fiscal year 1993 to $60.2 million in fiscal year 1996. Since Amtrak pays
interest from federal operating assistance and principal from federal
capital grants, this increase has also absorbed more of the federal
operating subsidy each year. Between fiscal years 1993 and 1996, the
percentage of federal operating subsidies accounted for by interest
payments has increased from 6 percent to 21 percent. As Amtrak assumes
more debt to acquire equipment, the interest payments are likely to
continue to consume an increasing portion of federal operating subsidies.

Implementation of its strategic business plans, including reducing some
routes and services, cutting management positions, and raising fares,
appears to have helped improve Amtrak’s financial condition. However,
planned net loss targets have frequently been missed. To illustrate,
Amtrak’s plans for fiscal years 1995 and 1996 included actions to reduce
the net losses by $195 million—from about $834 million in fiscal year 1994
to $639 million in fiscal year 1996. However, actual net losses for this
period were about $127 million more than Amtrak had planned. Amtrak’s
fiscal year 1997 net losses are expected to be even higher than those for
fiscal year 1996. Largely as a result of increased costs from postponed
route and service actions, Amtrak’s planned year-end net loss has been
revised upward to $762 million from the originally projected $726 million.
Furthermore, Amtrak projects that its net loss could be as high as
$786 million if unanticipated expenses and revenue shortfalls should
occur.

Amtrak’s goal of eliminating federal operating subsidies by 2002 is heavily
dependent on capital investment. Such investment—the modernizing of
property, plant, and equipment—will not only help Amtrak to retain
revenues by improving the quality of service but will potentially increase
revenues by attracting new riders. Amtrak’s capital investment needs are
great, both to replace and modernize the current physical assets and to
complete new projects such as high-speed rail service in the Northeast
Corridor. For example, in May 1996, FRA and Amtrak estimated that about
$2 billion would be needed over the next 3 to 5 years to recapitalize the
south end of the corridor and preserve its ability to operate in the
near-term at existing service levels. FRA and Amtrak estimate that up to
$6.7 billion may be needed over the next 20 years to recapitalize the entire
corridor and make improvements targeted to respond to high-priority




Page 34                                                 GAO/T-RCED/AIMD-97-86
                         opportunities for growth. Finally, Amtrak estimates an additional
                         $1.4 billion will be needed to complete the high-speed rail project.

                         Our ongoing work indicates that Amtrak has made some progress in
                         addressing capital needs, but the going has been slow, and in some cases,
                         Amtrak may be facing significant future costs. For example, in
                         October 1996 about 53 percent of Amtrak’s active fleet of 1,600 cars
                         averaged 20 years old or more and were at or approaching the end of their
                         useful life. It is safe to assume that as this equipment continues to age, it
                         will be subject to more frequent failure and require more expensive
                         repairs.

                         Finally, Amtrak will continue to find it difficult to take those actions
                         necessary to further reduce its costs. For example, Amtrak has been
                         unsuccessful in negotiating productivity improvements with labor. Such
                         improvements were expected to save about $26 million in fiscal year 1995
                         and another $79 million in fiscal year 1996. According to an Amtrak
                         official, over the last 2 years Amtrak has not aggressively pursued
                         negotiations with labor unions over productivity improvements. And
                         Amtrak’s ability to make route and service adjustments remains an
                         outstanding issue.

                         Amtrak’s financial future has been staked on its ability to eliminate federal
                         operating support by 2002 by increasing revenues, controlling costs, and
                         providing customers with high-quality service. Although its strategic plans
                         have helped reduce operating losses, Amtrak continues to face significant
                         challenges in accomplishing this goal, and it is likely that Amtrak will
                         continue to require federal financial support—both operating and
                         capital—beyond that time frame.


Coast Guard’s Antidrug   In its fiscal year 1998 budget request, the administration is asking for
Efforts                  $389 million for operations related to the Coast Guard’s drug interdiction
                         efforts, a $53 million increase over 1997 levels. Mr. Chairman, late last
                         year, you and Representative Porter asked us to assess the Coast Guard’s
                         progress in developing an approach to drug interdiction that conforms
                         with the principles of the Government Performance and Results Act
                         (GPRA).29 We plan to report to you later this month, but we would like to
                         share our preliminary findings.



                         29
                           P.L. 103-62.



                         Page 35                                                 GAO/T-RCED/AIMD-97-86
GPRA  calls for federal agencies to pay more attention to the results of their
programs, a departure from focusing on such measures as staffing and
activity levels. GPRA requires agencies to (1) develop results-oriented
performance goals, (2) identify ways to achieve them, and (3) disclose key
factors that could keep them from meeting their goals. The Coast Guard
has made a start at meeting these requirements for its drug interdiction
efforts, but Coast Guard officials acknowledge they must overcome
obstacles in all three areas if they are to be in compliance by 1999, when
the act’s requirements become fully effective.30

Thus far, the Coast Guard has defined its performance goal as “reducing
the amount of illegal drugs entering the country through maritime routes
by 25 percent over five years.” The preliminary goal represents a start
toward conformance with GPRA in that it covers the required time (5 years)
and is results-oriented. It remains to be seen, however, whether this goal
can be effectively measured. Simply reporting the amount of drugs seized
or deterred is not enough. Gauging effectiveness means comparing such
information against a measure of supply—how much smugglers tried to
ship or how much still got through. The Coast Guard’s approach calls for
making such comparisons, but the illegal nature of drug trafficking makes
obtaining reliable estimates of supply difficult. An interagency effort
sponsored by the Office of National Drug Control Policy has made some
progress in developing estimates on the amount of cocaine entering the
United States. According to Coast Guard officials, a similar effort is under
way for estimating heroin traffic.

A related obstacle is the difficulty of separating the impact of the many
agencies involved in drug control. For example, a decrease in the amount
of drugs entering the United States through maritime routes could also be
the result of greater efforts to control drugs in the source country, better
intelligence from other U.S. agencies, or lower domestic demand due to
agencies’ efforts to reduce it.

Coast Guard officials indicated that reducing the amount of illegal drugs
entering the United States via maritime routes largely depends on
resources. They expect that additional resources will allow a higher
“contact rate” with ships and planes in targeted areas, which in turn will



30
 GPRA requires agencies to develop a strategic plan by the end of fiscal year 1997 and a performance
plan by the end of fiscal year 1999. The strategic plan identifies long-term goals and describes how the
agency intends to meet them; the performance plan provides the linkage between the strategic goals
and what managers and employees do day-to-day, including specific performance goals and
performance measures.



Page 36                                                                    GAO/T-RCED/AIMD-97-86
provide greater deterrence.31 In the complex world of drug control efforts,
however, a key obstacle for the Coast Guard is establishing a clear case
that spending these additional resources can effectively contribute to the
Office of National Drug Control Policy’s mission of reducing drug use and
its consequences. In this regard, a recent study conducted by the Office
sounded a cautionary note. The study concluded that the effect of greater
expenditures in the “transit zone” where the Coast Guard’s efforts are
currently concentrated does not seem significant enough to affect U.S.
drug use.32 It suggested considering whether the investment of a similar
level of resources elsewhere in the drug strategy might produce more
benefits. However, the study is hardly the last word on the issue. It has a
number of methodological limitations, and Coast Guard officials point out
that a small investment in the transit zone (about 1.6 percent of the total
federal budget at the time of the study) would produce an 11-percent
reduction (90 metric tons) in drug traffic.

Coast Guard officials acknowledge that factors other than funding affect
their success in stopping maritime drug smuggling. One factor is the large
geographic area that must be covered. Unlike in the Caribbean, where
specific paths for smuggling have been identified, in the eastern Pacific
Ocean, the large area makes deterrence and interdiction more difficult.
Another factor is smugglers’ increasing technological sophistication. For
example, by using global positioning system technology to set airdrop
coordinates prior to departure, smugglers can reduce radio
communications, making it harder for the Coast Guard to detect them. To
comply with GPRA, the Coast Guard may need to identify such factors.


This concludes our prepared statement. We will be happy to respond to
any questions that you or other Members of the Subcommittee may have.




31
  The Coast Guard defines “contact rate” as the frequency of contact with maritime traffic in targeted
areas. According to Coast Guard officials, the agency currently has a contact rate of 12 percent, which
they believe deters or interdicts 29 percent of the smugglers using maritime routes. They believe that a
contact rate of 40 percent will deter or stop smugglers in 90 percent of the cases in high-risk areas. The
amount of resources needed to raise the contact rate to 40 percent is unknown.
32
 The National Drug Control Strategy, 1996: Program, Resources, and Evaluation, Office of National
Drug Control Policy (Washington, D. C.: Apr. 1996), pp. 48-51. The transit zone where the Coast
Guard’s efforts are concentrated includes the Caribbean Sea, the Gulf of Mexico, Central America,
Mexico, and the Eastern Pacific.


Page 37                                                                     GAO/T-RCED/AIMD-97-86
Appendix I

Ongoing Air Traffic Control Modernization
Projects: Status and Issues

               For several major modernization projects, the Federal Aviation
               Administration (FAA) has made progress in fielding equipment. For
               example, about 6 months ago we reported on FAA’s effectiveness in
               acquiring an interim replacement for its Display Complex Channel (DCC),
               an aging system that was the subject of much media attention because of
               outages at a Chicago air traffic control (ATC) facility.1 At that time, we
               concluded that FAA was on course to deliver this system, known as DCC
               Rehost, or DCCR, on time and within its budget. Since then, FAA has
               installed and is operating DCCR at the first site (Chicago) ahead of
               schedule, and it has reported that DCCR is $3 million under its budget.

               We see several reasons why this acquisition has enjoyed so much success
               when others have been so problematic. First, this acquisition was
               relatively small, involving comparatively little in the way of new software
               development, and equipment delivery was relatively quick. Second, it was
               well defined. That is, most of its requirements were embedded in the
               existing DCC and thus were well understood and primarily involved
               transferring these functions to new hardware. Third, the project
               management team instilled discipline into its acquisition strategy. For
               example, it defined and followed structured risk management and quality
               assurance programs, both of which are invaluable in systems development
               and acquisition. As such, it was a sharp departure from past ATC projects,
               like the Advanced Automation System (AAS), which were very large,
               scheduled for delivery years in the future, characterized by poorly
               understood and poorly controlled requirements, and managed without
               discipline.

               In addition, since we testified last March, FAA has commissioned 11
               Terminal Doppler Weather Radars, bringing the total commissioned to 22
               of the 45 systems planned. Of the 23 remaining systems, 18 are expected to
               be commissioned by the end of July 1997, and 5 are designated for storage
               until the agency resolves problems acquiring needed parcels of land. After
               8 years of delays, in early 1996 FAA commissioned the first of 40 planned
               long-range radars—called Air Route Surveillance Radar-4s. Since last year,
               FAA has commissioned 12 additional radars. According to the current
               plans, all but seven of the remaining radars will be commissioned by
               February 1998, though the dates have yet to be determined because FAA
               needs to resolve environmental concerns at one site and scheduling issues
               at six others. Since last year, FAA has commissioned 13 additional Voice



               1
               Air Traffic Control: Good Progress on Interim Replacement for Outage-Plagued System, but Risks Can
               Be Further Reduced (GAO/AIMD-97-2, Oct. 17, 1996).



               Page 38                                                               GAO/T-RCED/AIMD-97-86
                     Appendix I
                     Ongoing Air Traffic Control Modernization
                     Projects: Status and Issues




                     Switching and Control Systems, completing the commissioning of all 21
                     systems.

                     FAA continues to work on the Display System Replacement (DSR) project,
                     which will provide controllers in en route ATC facilities2 with new work
                     stations. According to FAA, the cost remains at about $1 billion, and the
                     schedule still calls for making the system operational at the first site by
                     October 1998. DSR work stations are in full production, and all equipment
                     needed for operations at the first site—Seattle—was delivered 8 months
                     early. FAA’s testing of the system software is scheduled to be completed in
                     mid-March 1997. Currently, FAA foresees no major problems with software.

                     For the major acquisitions we track, however, most will not be completely
                     fielded until the year 2000 and beyond (see app. II). In addition, costs for 8
                     projects increased, resulting in a total of $194 million in additional costs.
                     Details on certain key acquisitions are provided in appendix III.


                     In September 1996, FAA contracted with Raytheon Corporation to develop,
Standard Terminal    produce, and implement the Standard Terminal Automation Replacement
Automation           System (STARS). This project is designed to replace 15- to 25-year-old
Replacement System   computers, controller work stations, and related equipment at about 170
                     FAA terminal ATC facilities between December 1998 and February 2005. FAA
                     currently estimates that STARS will cost about $2.2 billion, including
                     $940 million for facilities and equipment and about $1.3 billion to operate
                     and maintain the system over its life.

                     FAA’s cost estimate for STARS has the potential to grow by as much as
                     $500 million, according to a September 1996 analysis that projected future
                     operations and maintenance costs. On the basis of more current
                     information, project officials told us that there may be some minor cost
                     growth but they could not provide us with an updated estimate or detailed
                     support for their views. FAA will also incur costs to make STARS operational.
                     FAA expects to spend at least $18 million to get about 50 facilities ready to
                     accept STARS equipment. This estimate is expected to grow as FAA develops
                     cost estimates for site preparation of the 120 remaining facilities.

                     Regarding the STARS schedule, we found that it is attainable only if FAA
                     successfully mitigates certain risks. For example, FAA has yet to secure all
                     stakeholders’ commitment to the schedule. The schedule anticipates that

                     2
                      The primary role of the en route centers is to direct traffic in air routes outside of terminals’ airspace
                     and throughout the national airspace.



                     Page 39                                                                       GAO/T-RCED/AIMD-97-86
                     Appendix I
                     Ongoing Air Traffic Control Modernization
                     Projects: Status and Issues




                     the contractor will install and deploy most STARS equipment with support
                     and oversight provided by FAA’s Airway Facilities Service. However, the
                     Airway Facilities Service at the regional level has not agreed to the
                     installation plan because it is still uncertain of its role. Furthermore, the
                     workforce’s union has not been briefed on the plan and is concerned
                     about its effect on their members’ job security. Also, FAA must resolve
                     scheduling conflicts between STARS and other modernization efforts. For
                     example, the original schedule for deploying STARS at the first 45 sites
                     presented 12 potential conflicts where equipment was due to be delivered
                     during facility renovation or replacement.

                     Additionally, if FAA and its contractor experience difficulties in software
                     development, STARS’ implementation—particularly at the three facilities
                     targeted for operating it before fiscal year 2000—will likely be delayed. FAA
                     and Raytheon expect to use commercial off-the-shelf computer hardware
                     and some previously developed software for STARS. However, a software
                     development effort is still required. FAA does not expect to complete
                     testing of the initial STARS’ software until September, 1998, and the full
                     software until July, 1999. As recently as December 1996, FAA and Raytheon
                     were discussing how the system would provide specific functions and
                     what functions would be needed. These discussions resulted in agreement
                     on 28 outstanding issues. Overall, FAA estimates that some 140,000 lines of
                     new code will need to be written. For example, some 2,000 lines of new
                     code are needed to fulfill safety requirements such as warning controllers
                     when aircraft are not maintaining proper separation or minimum safe
                     altitudes.

                     FAA is aware that these risks must be mitigated and has begun several
                     initiatives. While such actions are encouraging, it is too early to tell how
                     effective they will be.


                     FAA faces important planning, technical, and funding issues in augmenting
The Global           the Global Positioning System (GPS)3 for civil aviation purposes. Within the
Positioning System   past year, FAA has established a team and developed a road map for
                     managing the development and implementation of the agency’s Wide Area
                     Augmentation System (WAAS). The agency also addressed problems with
                     contractor performance by terminating the original contract for
                     procurement of the WAAS and immediately signing another.



                     3
                      GPS satellites transmit radio signals that allow properly equipped air, land, and sea users to calculate
                     the time and their position and speed anywhere above the earth’s surface and in any condition.



                     Page 40                                                                     GAO/T-RCED/AIMD-97-86
Appendix I
Ongoing Air Traffic Control Modernization
Projects: Status and Issues




For the Local Area Augmentation System (LAAS), which will enable GPS to
be used for the most demanding precision approaches, FAA has signed two
contracts for system development activities.4 It has not, however,
completed schedule and cost estimates for the LAAS, as we recommended
in 1995, because the agency has not decided whether it will fully fund the
development, procurement, and maintenance of this system.5 The agency
may turn these responsibilities over to individual airports. FAA expects to
complete an investment analysis by mid-1997 to determine how LAAS
should be financed.

FAA’s plans for LAAS need to be definitive as soon as possible for two major
reasons. First, as emphasized by the Air Transport Association at a
congressional hearing on November 30, 1995, the timing of the agency’s
efforts will impact the production of GPS avionics and the retrofitting of
aircraft. Second, these plans will also clarify when FAA could expect to
begin decommissioning its instrument landing systems (ILS), for which FAA
spends substantial resources for operation and maintenance. We reported
last year that some 120 ILSs are over 20 years old and experience twice the
number of outages as expected under current design standards.6 If FAA
shifts to airports the responsibility for acquiring LAAS, FAA will be in the
position of maintaining the existing ILSs until the airports decide to install
LAAS.


Recent events have confirmed our long-standing concerns about technical
issues that put FAA’s schedule for augmenting GPS at risk. In 1994, in
response to recommendations from government and industry groups, FAA
accelerated its schedule from 2000 to 1997 for civil aircraft to be able to
use the augmented GPS domestically as a “primary means” of
navigation—in other words, not relying on other navigation aids. In 1995,
we reported that FAA would probably not meet the 1997 milestone. Delays
were realized this past year when FAA announced that the WAAS would not
provide this primary means capability until late 1998 at the earliest. The
delays occurred because (1) FAA underestimated the technical challenges
involved in achieving the performance requirements for the system’s
availability, accuracy, and integrity and (2) the initial contract for WAAS
was terminated when FAA became convinced that the contractor could not
achieve cost, schedule, and performance goals.

4
 The local system will use ground-based communications equipment to augment the signals in the
airspace around airports so that aircraft can land in the worst weather conditions.
5
 National Airspace System: Comprehensive FAA Plan for Global Positioning System Is Needed
(GAO/RCED-95-26, May 10, 1995).
6
 Global Positioning System Augmentations (GAO/RCED-96-74R, Feb. 6, 1996).



Page 41                                                                GAO/T-RCED/AIMD-97-86
Appendix I
Ongoing Air Traffic Control Modernization
Projects: Status and Issues




Funding has also become a significant issue for both WAAS and LAAS. In
1995, we reported that FAA had not yet developed information on the
funding required to implement the WAAS. In early 1996, FAA approved a cost
baseline for WAAS: $556 million in facility and equipment costs and
$9 million in operations and maintenance costs. However, by mid-1996 FAA
officials began expressing concern about the agency’s ability to keep costs
within those baselines. Recent interviews with agency officials and
internal documents point to the potential for substantial increases in cost
estimates. FAA is now reevaluating its cost baselines and expects to issue a
revised baseline this spring. Regarding LAAS, funding concerns have been
the primary reason why FAA has considered turning over the responsibility
for acquisitions and maintenance to individual airports. As noted above,
FAA expects to make a decision on LAAS’ financing later this year.




Page 42                                                GAO/T-RCED/AIMD-97-86
Appendix II

Status of FAA’S Major Modernization
Projects


                                   Last-site implementation                 Number of operational systems
                                     Year                                                  Commissioned
                               Original                1997     Years   Planned             Since            Current
Major projects                 estimate            estimate   delayed                        2/96              total


Aeronautical Data Link            1998                 TBD       N/A     20 DLAPs/               3                 57
(ADL)                                                                      57 TDLSa
                                                          b         b
Air Route Surveillance            1991                                    40 radars            13                  13
Radar-4 (ARSR-4)
Airport Surface Detection         1990                1999         9      38 radars              6                 26
Equipment-3 (ASDE-3)
Airport Surveillance Radar-9      1992                1998         6     120 radars              9               111
(ASR-9)
Automated Surface                 1997                2001         4       574 units           87                133
Observing System (ASOS)c
Enroute                           2000d               2000       N/A     21 systems              0                  0
Automation—Display
System Replacement (DSR)
Integrated Terminal               2000                2003         3     34 systems              0                  0
Weather System (ITWS)
Mode Select                       1993                1999         6    144 systemse           34                  71
                                      f
Oceanic Automation                                    2000       N/A      3 systems              0                  0
Program (OAP)
                                      f
Operational Supportability                            2001       N/A     61 systems              0                  0
and Implementation System
(OASIS)
                                      f                   g
Terminal Air Traffic Control                                     N/Ag             N/A         N/A                N/A
Automation (TATCA)
Terminal                          2003                2005h        2    171 systems              0                  0
Automation—STARS
                                                          f
Terminal Doppler Weather          1998                           N/A      45 radars            11                  22
Radar (TDWR)
Terminal Radar Digitize,           N/A                2004       N/A     112 radarsi             0                  0
Replace and Establish
(TRDRE)
                                                          j
Tower Automation Program          2000                           N/A           TBD            N/A                N/A
Voice Switching and Control       1992                1997         5        21 unitsk          13                  21
System (VSCS)
Weather and Radar                  N/Al               2000       N/A        21 units             0                  0
Processor (WARP)
Wide Area Augmentation            2001                2001m      N/A       1 system              0                  0
System (WAAS)

                                                                                            (Table notes on next page)




                                         Page 43                                           GAO/T-RCED/AIMD-97-86
Appendix II
Status of FAA’S Major Modernization
Projects




Legend
N/A = Not applicable.
TBD = To be determined.
a
  TDLS is the Tower Data Link Services. TDLS I (Predeparture Clearance/Flight Data Input Output)
has been commissioned at all 57 sites. TDLS II (Digital-Automatic Terminal Information Service)
has been installed at 42 sites and commissioned at 23 additional sites. DLAP is the data link
applications processor, which will interface between the National Airspace Data Interchange
Network II and Host Interface Device/NAS Local Area Network.
b
 The delay of the last-site implementation date is currently 6 years. The last-site implementation
date has not been determined because of environmental issues at Ajo, Ariz.
c
  ASOS is one of three systems under the Automated Weather Observing System (AWOS) project,
which also includes the Data Acquisition System (ADAS). AWOS achieved first-site
implementation in 1989, and FAA has since commissioned 198 of the 200 AWOSs ordered.
d
 The date reflects the current estimate for the DSR project, initiated as part of the June 1994
restructuring of the Advanced Automation System into three distinct areas—en route, terminal,
and tower automation.
e
  Included in the total are the 11 additional Mode-S units that have been purchased under the
Interim Support Plan.
f
    The last-site implementation date is indefinite.
g
 This project has been integrated into Air Traffic Management (ATM) which contains
multisegmented projects. TATCA’s functionality is contained within the Traffic Flow Management
Functionality Development/Deployment project and the ATC Functionality
Development/Deployment project.
h
    The date reflects the revised baselined schedule for STARS.
i
The ASR-11 procurement, as part of the TRDRE program, provides 46 operational systems and 2
preproduction units to replace ASR-7s and equipment used at sites taken over from the
Department of Defense. Future procurement requirements to either replace or upgrade the
ASR-8s and provide for new establishments may increase the quantity from 48 to 112 systems but
are still being evaluated and are pending approval.
j
    The project is currently under review.
k
 The schedule reflects the first phase of the project, when systems are scheduled to be installed
in existing en route controller work stations. The last-site implementation date for the second
phase of the project, when the system will interface with the DSR, is estimated in 2000.
l
    The project has been restructured into three stages since we reported on it in 1994.
m
 The date reflects the final stage or end-state of WAAS (E-WAAS), when it is scheduled to serve
as a sole system for air navigation and landing guidance. Initial WAAS (I-WAAS) is scheduled to
allow civil aircraft to use GPS domestically as a primary means of navigation in late 1998.




Page 44                                                                     GAO/T-RCED/AIMD-97-86
Appendix III

Summary of Costs and Schedules for FAA’S
Major Modernization Projects




               Page 45            GAO/T-RCED/AIMD-97-86
Appendix III
Summary of Costs and Schedules for FAA’S
Major Modernization Projects




Page 46                                    GAO/T-RCED/AIMD-97-86
           Appendix III
           Summary of Costs and Schedules for FAA’S
           Major Modernization Projects




(340644)   Page 47                                    GAO/T-RCED/AIMD-97-86
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