Federal Aviation Administration
Challenges for Transforming Into a High-Performing Organization Gao ID: GAO-04-770T May 18, 2004Over the last two decades, FAA has experienced difficulties meeting the demands of the aviation industry while also attempting to operate efficiently and effectively. Now, as air traffic returns to pre- 9/11 levels, concerns have again arisen as to how prepared FAA may be to meet increasing demands for capacity, safety, and efficiency. FAA's air traffic control (ATC) modernization efforts are designed to enhance the national airspace system through the acquisition of a vast network of radar, navigation, and communication systems. Nine years have passed since Congress provided FAA with personnel and acquisition reforms. However, projects continue to experience cost, schedule and performance problems. FAA's Air Traffic Organization (ATO) is its most current reform effort. Expectations are that the ATO will bring a performance management approach to ATC modernization. This statement focuses on three main questions: (1) What are some of the major challenges and demands that confront FAA? (2) What is the status of FAA's implementation of reforms and/or procedural relief that Congress provided? and (3) What are some of the critical success factors that will enable FAA to become a highperforming organization?
A forecasted increase in air traffic coupled with budgetary constraints will challenge FAA's ability to meet current and evolving operational needs. The commercial aviation industry is still recovering from financial losses exceeding $20 billion over the past 3 years. Many airlines cut their operating expenses, but FAA's budget continued to rise. However, transportation tax receipts into the Airport and Airways Trust Fund, from which FAA draws the majority of its budget, have fallen by $2.0 billion (nearly 20 percent) since 1999 (in constant 2002 dollars). Cost-cutting and cost-control will need to be watchwords for FAA from this point forward. FAA has implemented many of the reforms authorized by Congress 9 years ago, but achieved mixed results. Despite personnel and acquisition reforms the agency contended were critical to modernizing the nation's air traffic control (ATC) system, systemic management issues continue to contribute to the cost overruns, schedule delays, and performance shortfalls. FAA's most current reform effort, the Air Traffic Organization (ATO) -- a new performance-based organization mandated by AIR-21 that is operating the ATC system is just now being put in place. To meet its new challenges, FAA must fundamentally transform itself into a high-performing organization. The key characteristics and capabilities of high-performing organizations fall into four themes: (1) a clear, well articulated, and compelling mission; (2) strategic use of partnerships; (3) focus on the needs of clients and customers; and (4) strategic management of people. FAA has taken some promising steps through its new ATO to restructure itself like high-performing organizations, but still faces significant and longstanding systemic management challenges. Even modest organizational and operational changes at FAA can be difficult and time consuming.
GAO-04-770T, Federal Aviation Administration: Challenges for Transforming Into a High-Performing Organization
This is the accessible text file for GAO report number GAO-04-770T
entitled 'Federal Aviation Administration: Challenges for Transforming
Into a High-Performing Organization' which was released on May 18,
2004.
This text file was formatted by the U.S. General Accounting Office
(GAO) to be accessible to users with visual impairments, as part of a
longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Testimony:
Before the Subcommittee on Aviation, Senate Committee on Commerce,
Science, and Transportation:
United States General Accounting Office:
GAO:
For Release on Delivery Expected at 9:30 a.m. EDT:
Tuesday, May 18, 2004:
Federal Aviation Administration:
Challenges for Transforming Into a High-Performing Organization:
Statement of JayEtta Z. Hecker, Director
Physical Infrastructure Team:
GAO-04-770T:
GAO Highlights:
Highlights of GAO-04-770T, a report to the Subcommittee on Aviation,
Senate Committee on Commerce, Science, and Transportation
Why GAO Did This Study:
Over the last two decades, FAA has experienced difficulties meeting the
demands of the aviation industry while also attempting to operate
efficiently and effectively. Now, as air traffic returns to pre-9/11
levels, concerns have again arisen as to how prepared FAA may be to
meet increasing demands for capacity, safety, and efficiency.
FAA‘s air traffic control (ATC) modernization efforts are designed to
enhance the national airspace system through the acquisition of a vast
network of radar, navigation, and communication systems. Nine years
have passed since Congress provided FAA with personnel and acquisition
reforms. However, projects continue to experience cost, schedule and
performance problems. FAA‘s Air Traffic Organization (ATO) is its most
current reform effort. Expectations are that the ATO will bring a
performance management approach to ATC modernization.
This statement focuses on three main questions: (1) What are some of
the major challenges and demands that confront FAA? (2) What is the
status of FAA‘s implementation of reforms and/or procedural relief that
Congress provided? and (3) What are some of the critical success
factors that will enable FAA to become a high-performing organization?
What GAO Found:
A forecasted increase in air traffic coupled with budgetary constraints
will challenge FAA‘s ability to meet current and evolving operational
needs. The commercial aviation industry is still recovering from
financial losses exceeding $20 billion over the past 3 years. Many
airlines cut their operating expenses, but FAA‘s budget continued to
rise (see figure). However, transportation tax receipts into the
Airport and Airways Trust Fund, from which FAA draws the majority of
its budget, have fallen by $2.0 billion (nearly 20 percent) since 1999
(in constant 2002 dollars). Cost-cutting and cost-control will need to
be watchwords for FAA from this point forward.
FAA has implemented many of the reforms authorized by Congress 9 years
ago, but achieved mixed results. Despite personnel and acquisition
reforms the agency contended were critical to modernizing the nation‘s
air traffic control (ATC) system, systemic management issues continue
to contribute to the cost overruns, schedule delays, and performance
shortfalls. FAA‘s most current reform effort, the Air Traffic
Organization (ATO) -- a new performance-based organization mandated by
AIR-21 that is operating the ATC system – is just now being put in
place.
To meet its new challenges, FAA must fundamentally transform itself
into a high-performing organization. The key characteristics and
capabilities of high-performing organizations fall into four themes:
(1) a clear, well articulated, and compelling mission; (2) strategic
use of partnerships; (3) focus on the needs of clients and customers;
and (4) strategic management of people. FAA has taken some promising
steps through its new ATO to restructure itself like high-performing
organizations, but still faces significant and longstanding systemic
management challenges. Even modest organizational and operational
changes at FAA can be difficult and time consuming.
What GAO Recommends:
GAO is making no recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-04-770T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact JayEtta Z. Hecker at
(202) 512-2834 or HeckerJ@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
We appreciate the opportunity to participate in today's hearing to
discuss the challenges that FAA faces both in the immediate environment
and over the next decade. We all recall that in the summer of 2000, the
air traffic control system lacked the capacity to handle demand
efficiently, and flight delays produced near-gridlock conditions at
several U.S. airports. A combination of factors --the downturn in
travel caused by the general economic slowdown, SARS, and of course the
crises instigated by the events of 9/11 - reduced traffic significantly
and reduced pressure on the air traffic control system.
Passenger traffic and airline operations are slowly returning to
previous levels, making this an appropriate time to re-examine the
status of nation's aviation leadership and infrastructure and its
preparations for the future of air transport over the next decade.
FAA's budget request for 2005 provides a starting point from which to
review the agency's direction.
My statement today focuses on three main questions: (1) What are some
of the major challenges and demands that confront FAA? (2) What is the
status of FAA's implementation of reforms and/or procedural relief that
Congress provided? And (3) What are some of the critical success
factors that will enable FAA to become a high-performing organization?
Our statement is based on our past reports on ATC modernization and
airline competition work--updated to reflect important milestones and
recent interviews with key stakeholders in the aviation community,
including several current and former FAA officials. We performed our
work in accordance with generally accepted government auditing
standards.
In summary:
Significant external and internal demands will challenge FAA's ability
to meet current operational needs and require it to adapt to meet the
evolving needs of the aviation industry. The commercial aviation
industry is still recovering from financial losses exceeding $20
billion over the past 3 years. The downturn in travel has affected the
Airport and Airways Trust Fund, from which FAA draws the majority of
its budget. Transportation tax receipts into the Trust Fund fell by a
total of $2.0 billion (19.6 percent) between 1999 and 2003. The overall
condition of the Federal budget adds more pressure on FAA's budget.
Taken together, cost-cutting and cost-control need to be watchwords for
FAA from this point forward. To meet the demands of the aviation
industry for safe, secure, and efficient operations and for additional
capacity to meet forecasted growth, FAA will need to continue to
improve its management controls. Traditionally, FAA's ability to
operate efficiently and effectively - particularly regarding its air
traffic control modernization projects --have been hampered by
inadequate management of information technology and financial
management controls.
Nine years have passed since Congress provided FAA with the personnel
and acquisition reforms the agency contended were critical to
successfully modernizing the nation's air traffic control (ATC) system.
Despite these reforms, systemic management issues, including inadequate
management controls and human capital issues continue to contribute to
the cost overruns, schedule delays, and performance shortfalls that
FAA's major ATC projects have consistently experienced in the past.
* Personnel reforms addressed three broad areas: (1) compensation and
performance management, (2) workforce management, and (3) labor and
employee relations. FAA has taken steps to implement a number of
reforms in each of the three areas.[Footnote 1] For example, in the
area of labor and employee relations, FAA implemented initiatives
establishing new partnership forums for union and nonunion employees
and a new model work environment program.[Footnote 2] However, in
February 2003, we found that the agency had not fully incorporated
elements that are important to effective human capital management,
including data collection and analysis, performance goals and measures,
and establishing links between reform goals and program goals.
* As part of its procurement reforms, FAA introduced a new acquisition
management system in 1996 to reduce the time and cost to deploy new
products and services. To FAA's credit, our work has shown improvements
in the agency's oversight of investment risk, tracking key information
from the investment selection process in a management information
system, and implementation of guidance for validating costs, benefits,
and risks. However, in estimating the costs of new projects, FAA has
not yet incorporated actual costs from developing related systems.
Moreover, the agency has not yet implemented processes for evaluating
projects after implementation in order to identify lessons learned and
improve the investment management process. These weaknesses have
impeded FAA's ability to manage its investments effectively and make
sound decisions about continuing, modifying, or canceling projects.
* FAA's Air Traffic Organization (ATO) is one of its most current
reform effort. Under the leadership of a Chief Operating Officer, the
ATO is a new performance-based organization that is operating the ATC
system. While the ATO holds promise for laying the foundation for much
needed and overdue organizational change, progress has been slow, and
the office still faces significant challenges to implementing reform:
To meet the challenges of the 21st century, FAA must fundamentally
transform itself to become a high-performing organization. Our work has
shown that high-performing organizations have adopted management
controls, processes, practices, and systems that are consistent with
prevailing best practices and contribute to concrete organizational
results. Specifically, the key characteristics and capabilities of
high-performing organizations fall into four themes (1) a clear, well
articulated, and compelling mission; (2) strategic use of partnerships;
(3) focus on the needs of clients and customers; and (4) strategic
management of people. To facilitate the transformation of federal
agencies to high performing organizations, we have also recommended
that agencies apply the Chief Operating Officer concept to provide
long-term attention and focus on management issues and transformational
change. FAA has begun implementing this concept. While FAA has taken
some promising steps through its new ATO to restructure itself in a
manner consistent with high-performing organizations, the agency still
faces significant and longstanding systemic management challenges which
must be overcome if it is to meet the demands and match the pace of
ongoing changes in the aviation industry and transform itself into a
world-class organization. Our work for more than two decades has shown
that even modest organizational and operational changes at FAA can be
difficult and time consuming, which underscores the difficult road
ahead for FAA's leadership.
Significant External and Internal Demands Will Challenge FAA's Current
and Evolving Operations:
FAA faces significant demands that will challenge its ability to
operate both in the current environment and in what it expects to
encounter in the coming decade. With the industry still attempting to
recover from the most tumultuous period in its history, FAA's funding
is constrained by lowered Airports and Airways Trust Fund receipts and
increased pressure on the contribution from the General Fund. To meet
its current and future operational challenges, FAA is facing demands
for greater efficiency and accountability. And it goes without saying
that FAA must continue to meet demands for maintaining safety
standards.
The U.S. Commercial Aviation Industry Is Still Recovering From
Unprecedented Financial Chaos:
Since 2001, the U.S. airline industry has confronted financial losses
of previously unseen proportions. Between 2001 and 2003, the airline
industry reported losses in excess of $20 billion. A number of factors
- including the economic slowdown, a shift in business travel buying
behavior, and the aftermath of the September 11, 2001 terrorist
attacks--contributed to these losses by reducing passenger and cargo
volumes and depressing fares. The industry has reported smaller losses
since 2001, but still may not generate net profits for 2004.
To improve their financial position, many airlines cut costs by various
means, notably by reducing labor expenditures and by decreasing
capacity through cutting flight frequencies, using smaller aircraft, or
eliminating service to some communities. According to data from the
Bureau of Transportation Statistics, large U.S. air carriers cut their
operating expenses by $7.8 billion from 2000 through 2002. The drop in
total large air carrier operating expenses stands in sharp contrast to
increases in FAA's budget. (See Figure 1.):
Figure 1: Changes in Air Carrier Operating Expenses Compared to Changes
in FAA Budget, 1998 - 2003 (nominal dollars, indexed to 100):
[See PDF for image]
[End of figure]
Budgetary Pressure on FAA Will Increase Over Time:
FAA's budget - which has increased from $9 billion in 1998 to $14
billion in 2004 --will be under pressure for the foreseeable future.
Over the past 10 years, FAA has received on average approximately 80
percent of its annual funding from the Airports and Airways Trust Fund
(Trust Fund), which derives its receipts from taxes and fees levied on
airlines and passengers.[Footnote 3] The downturn in passenger travel,
accompanied by decreases in average yields, has resulted in lowered
receipts into the Trust Fund. On average, domestic yields have fallen
since 2000, and are at their lowest levels since 1987. As a result, the
total amount of transportation taxes that were remitted to the Trust
Fund declined by $2.0 billion (19.6 percent) between fiscal years 1999
and 2003 (in 2002 dollars).
Contributions from the General Fund have averaged about 20 percent of
FAA's budget since 1994, but total Federal spending is under increasing
stress because of growing budget deficits. According to the March 2004
analysis from the Congressional Budget Office, the Federal deficit
under the President's fiscal 2005 budget will be $358 billion.
Clearly, a major challenge for FAA both now and into the future will be
cost-cutting and cost control.
* Operating costs represent over half of FAA's budget. For 2005, the
Administration has requested $7.8 billion for Operations. Because
salaries and benefits make up 73 percent of that total, restraining the
growth in operations spending will be extremely difficult, even with
improvements in workforce productivity.
* Capital expenses (i.e., the Facilities and Equipment account)
represent less than 20 percent of FAA's budget, but virtually none of
the projects requested for funding for 2005 is expected to generate any
savings in the Operations account.
* Funds for airports' capital development have more than doubled since
1998, rising from $1.6 billion (18.3 percent of the total) to a
requested $3.5 billion (25.1 percent of the total) in 2005. Current
funding levels are sufficient to cover much of the estimated cost of
planned capital development. However, building new runways is not
always a practicable way to increase capacity. FAA must decide how to
increase capacity and service, as well as improve system efficiency and
safety.
Financial Pressure Adds Premium to Improving Management Controls:
FAA's ability to operate efficiently and effectively - particularly
regarding its air traffic control modernization projects --have been
hampered over time by inadequate management of information technology
and financial management controls. FAA's ATC modernization projects
have consistently experienced cost, schedule, and performance problems
that we and others have attributed to systemic management issues.
The effect has been extraordinary cost growth and a persistent failure
to deploy systems. FAA initially estimated that its ATC modernization
efforts could be completed over 10 years at a cost of $12 billion. Two
decades and $35 billion later, FAA still has not completed key
projects, and expects to need another $16 billion thru 2007, for a
total cost of $51 billion. GAO has kept major FAA modernization systems
on the watch list of high-risk federal programs since 1995.
We believe that, in the current budget environment, cost growth and
schedule problems with ongoing modernization efforts can have serious
negative consequences: postponed benefits, costly interim systems,
other systems not being funded, or a reduction in the number of units
purchased.
Forecasts of Future Aviation Activity Add Further Demands for Immediate
Improvements in FAA Operations:
FAA recognizes that future U.S. air transport activity will likely
place significant demands on its ability to keep the system operating.
FAA's most recent forecasts project significant increases in overall
system activity by 2015. Along with increased movements of aircraft and
passengers comes an increased workload for FAA, as well as demands for
more efficient operations and/or an expansion of capacity. (See Table
1).
Table 1: Forecasted Increase in Commercial Air Passengers, Operations,
and FAA Workload:
Industry activity measure: Enplanements (millions);
2003: 641.4;
2015 (est.): 1057.6;
Percent change: 65.0.
Industry activity measure: Large carrier fleet;
2003: 4,090;
2015 (est.): 5,732;
Percent change: 40.1.
Industry activity measure: Regional carrier fleet;
2003: 2,672;
2015 (est.): 4,303;
Percent change: 61.0.
FAA workload measure: Instrument operations (millions);
2003: 26.3;
2015 (est.): 36.8;
Percent change: 39.9.
FAA workload measure: Commercial instrument flight rule aircraft
handled at Air Route Traffic Control Centers (millions);
2003: 31.9;
2015 (est.): 44.9;
Percent change: 40.8.
Source: FAA.
[End of table]
Evidence of FAA's inability to meet system capacity demands already
exists from the experience at Chicago O'Hare earlier this year. To
reduce flight delays, FAA asked American Airlines and United Airlines
to reduce their peak scheduled operations by 7.5 percent by June 10. As
Secretary Mineta has already recognized, unless system capacity
expands, the nation will face "—more and more O'Hares as [the] economy
continues to grow, and as new technology and competition bring even
greater demand." It seems clear, however, that FAA's Operational
Evolution Plan[Footnote 4], a few additional runways, and updating more
controller workstations with the Standard Terminal Automation
Replacement System (STARS)[Footnote 5] are not the answer to the
system's need for capacity. We cannot pave our way to the year 2025.
Despite Personnel and Acquisition Reforms, Systematic Management Issues
Continue to Impede ATC Modernization:
Over the years, systematic management issues, including inadequate
management controls and human capital issues have contributed to the
cost overruns, schedule delays, and performance shortfalls that FAA has
consistently experienced in acquiring its major ATC modernization
systems. Historically, some of the major factors impeding ATC
acquisitions included an ineffective budget process and an inability to
provide good cost and schedule estimates. A number of cultural problems
including widely diffused responsibility and accountability,
inadequate coordination, and poor contract management/oversight also
slowed the progress of individual projects. Problems within FAA's
acquisition and procurement processes included an inability to obligate
and spend appropriate funds in a timely manner, a complicated
procurement and acquisition cycle, failure to field systems in a timely
fashion, and an inability to field current technology systems. FAA
lacked a means to strategically analyze and control requirements, and
good cost and schedule estimates were often not effectively developed
and integrated into acquisition plans. To address many of these issues,
Congress passed legislation in 1995 exempting FAA from many of the
existing Federal personnel and procurement laws and regulations and
directed the agency to develop and implement new acquisition and
personnel systems. More recently, in 2000, the Congress and the
administration together provided for a new oversight and management
structure and a new air traffic organization to bring the benefits of
performance management to ATC modernization.
FAA Has Taken Steps to Implement Human Capital Strategies, but Further
Efforts are Needed:
According to FAA, burdensome government-wide human capital rules
impeded its ability to hire, train, and deploy personnel and thereby
hampered its capacity to manage ATC modernization projects efficiently.
In response to these concerns, Congress granted FAA broad exemptions
from federal personnel laws and directed the agency to develop and
implement a new personnel management system.
* Human capital reforms: Following the human capital exemptions granted
by Congress in 1995, FAA initiated reforms in three primary areas:
compensation and performance management, workforce management, and
labor and employee relations. In the area of compensation and
performance management, FAA introduced two initiatives--a new, more
flexible pay system in which compensation levels are set within broad
ranges, called pay bands, and a new performance management system
intended to improve employees' performance through more frequent
feedback with no summary rating. Both new systems required an exemption
from laws governing federal civilian personnel management found in
title 5 of the United States Code. In the area of workforce management,
FAA implemented a number of initiatives in 1996 through the
establishment of agency-wide flexibilities for hiring and training
employees. In the area of labor and employee relations, FAA established
partnership forums for union and nonunion employees and a new model
work environment program. Other human capital initiatives have included
restructuring FAA's organizational culture and implementing means to
provide sustained leadership.
* Organizational culture: FAA issued an organizational culture
framework in 1997 that attempted to address some of the vertical
"stovepipes" that conflicted with the horizontal structure of ATC
acquisition team operations. A key piece of this framework included the
establishment of integrated product teams in an attempt to improve
collaboration among technical experts and users. Moreover, integrated
teams have not worked as intended. For example, competing priorities
between two key organizations that were part of the Wide Area
Augmentation System's integrated team ultimately negated its
effectiveness and undermined its ability to meet the agency's goals for
the system.
* Sustained leadership: Until former Administrator Garvey completed her
5-year term in 2002,[Footnote 6] FAA had been hampered by a lack of
sustained leadership at FAA was also problematic.[Footnote 7] During
the first 10 years of the ATC modernization effort, the agency had
seven different Administrators and Acting Administrators, whose average
tenure was less than 2 years. Such frequent turnover at the top
contributed to an agency culture that focused on short-term
initiatives, avoided accountability, and resisted fundamental
improvements to the acquisition process. .
Nine years have passed since the agency received broad exemptions from
laws governing federal civilian personnel management. While FAA has
taken a number of steps since personnel reforms were implemented, it is
not clear whether and to what extent these flexibilities have helped
FAA to more effectively manage its workforce and achieve its mission.
The agency did not initially define clear links between reform goals
and program goals, making it difficult to fully assess the impacts of
personnel reform. FAA has not yet fully implemented all of its human
capital initiatives and continues to face a number of key challenges
with regard to personnel issues. In our February 2003 report, we found
that the agency had not fully incorporated elements that are important
to effective human capital management into its overall reform effort,
including data collection and analysis and establishing concrete
performance goals and measures. Currently, the agency is still working
to implement tools to keep accurate cost and workforce data. The new
Air Traffic Organization has announced plans for establishing cost
accounting and labor distribution systems, but they are not yet in
place. More comprehensive cost accounting systems and improved labor
distribution systems are necessary to maximize workforce productivity
and to plan for anticipated controller retirements. More broadly,
taking a more strategic approach to reform will allow the agency to
better evaluate the effects of human capital initiatives, which it sees
as essential to its ATC modernization effort.
ATC Projects Continue to Experience Cost, Schedule, and Performance
Problems:
FAA established its current acquisition management system (AMS) in 1996
following acquisition reform. The agency has reported taking steps to
overseeing investment risk and capturing key information from the
investment selection process in a management information system. It has
also implemented guidance for validating costs, benefits, and risks.
FAA has also taken steps to improve the management of its ATC
modernization efforts. For example, it implemented an incremental,
"build a little, test a little" approach that improved its management
by providing for mid-course corrections and thus helping FAA to avoid
costly late-stage changes. In the area of management controls, FAA has
(1) developed a blueprint for modernization (systems architecture) to
manage the development of ATC systems; (2) established processes for
selecting and controlling information technology investments, (3)
introduced an integrated framework for improving software and system
acquisition processes, and (4) improved its cost-estimating and cost-
accounting practices. Nonetheless, ATC modernization efforts continue
to experience cost, schedule, and performance problems.
FAA is not yet incorporating actual costs from related system
development efforts in its processes for estimating the costs of new
projects. Further, the agency has not yet fully implemented processes
for evaluating projects after implementation in order to identify
lessons learned and improve the investment management process. Reliable
cost and schedule estimates are essential to addressing some of the
ongoing problems with ATC acquisitions.
In addition to controlling cost and schedule overruns, FAA needs to
take concrete steps to identify and eliminate redundancies in the
National Airspace System (NAS). FAA must review its long-term ATC
modernization priorities to assess their relative importance and
feasibility in light of current economic constraints, security
requirements, and other issues. The ongoing challenges facing air
traffic control modernization efforts led Congress and the
administration to create a new oversight and management structure
through the new Air Traffic Organization (ATO) in order to bring the
benefits of performance management to ATC modernization.
Progress in Establishing the New Air Traffic Organization Has Been
Slow:
The ATO was created by an executive order in 2000 to operate the air
traffic control system. In the same year, Congress enacted legislation
establishing the Air Traffic Services Subcommittee, a five-member board
to oversee the ATO and a chief operating officer to manage the
organization. The ATO was designed to bring a performance management
approach to ATC modernization efforts.
The Air Traffic Services Subcommittee has made some initial efforts
with regard to the establishment of the ATO. They have taken steps to
focus on the structure of the ATC system, including reviewing and
approving performance metrics for the ATO, establishing a budget, and
approving three large procurements that FAA initiated.
However, progress in establishing the organization has been slow, given
that FAA received the mandate to establish the ATO nearly four years
ago. FAA encountered difficulties finding a qualified candidate to take
the position of chief operating officer, and did not fill the vacancy
until June 2003. The final executive positions for the organization
including the Vice-Presidents of Safety and Communications were just
filled last month.
Key tasks for the ATO will include organizational restructuring,
implementing effective financial management and cost-accounting
systems, evaluating day-to-day business practices, and fostering growth
with efficiency. Rapidly changing technology, limited financial
resources, and the critical importance of meeting client needs will
present significant challenges in order for the ATO to truly evolve
into a high performing organization.
FAA's Future Success Hinges on Several Critical Success Factors:
To successfully meet the challenges of the 21st century, FAA must
fundamentally transform its people, processes, technology, and
environment to build a high-performing organization. Our work has shown
that high-performing organizations have adopted management controls,
processes, practices, and systems that are consistent with prevailing
best practices and contribute to concrete organizational results.
Specifically, the key characteristics and capabilities of high-
performing organizations fall into four themes as follows:
* A clear, well-articulated, and compelling mission. High-performing
organizations have a clear, well-articulated, and compelling mission,
strategic goals to achieve it and a performance management system that
aligns with these goals to show employees how their performance can
contribute to overall organizational results. FAA has taken its first
steps toward creating a performance management system by aligning its
goals and budgetary resources through its Flight Plan--blueprint for
action for fiscal year 2004 through 2008--and its fiscal year 2005
budget submission. In addition, the new ATO has published both its
vision and mission statement.
Our past work has found that FAA's ability to acquire new ATC
modernization systems has been hampered by its organizational culture,
including employee behaviors that did not reflect a strong commitment
to mission focus. Given the central role that FAA's employees will play
in achieving these performance goals and overall agency results, it is
critical for them to both embrace and implement the agency's mission in
the course of their daily work. In addition, our work has found
regularly communicating a clear and consistent message about the
importance of fulfilling the organization's mission helps engage
employees, clients, customers, partners, and other stakeholders in
achieving higher performance.
* Strategic use of partnerships. Since the federal government is
increasingly reliant on partners to achieve its outcomes, becoming a
high-performing organization requires that federal agencies
effectively manage relationships with other organizations outside of
their direct control. FAA is currently working to forge strategic
partnerships with its external customers in a number of ways. For
example, the agency recently announced a program to create "express
lanes in the sky" to reduce air traffic delays this spring and summer
and is in the early stages of working with selected federal partners to
develop a long-term plan for the national aerospace system (2025) and
to leverage federal research funds to conduct mutually beneficial
research. In addition, FAA has ongoing partnerships with the aviation
community to assess and address flight safety issues (e.g., development
of technology to prevent fuel tank explosions and to reduce the
potential for aircraft wiring problems through development of a "smart
circuit breaker").
However, our past work has shown that forging strategic partnerships
with organizations outside of FAA can be difficult and time-consuming.
For example, FAA's efforts to establish voluntary data sharing
agreements with airlines--Flight Operational Quality Assurance Program
(FOQA)--spanned more than a decade, due in part, to tremendous
resistance from aviation community stakeholders who formed a rare
alliance to oppose several of FAA's proposals. In addition, when
attempting to increase airport capacity (e.g., new runways), FAA and
airport operators have frequently faced opposition from the residents
of surrounding communities and environmental groups. Residents are
often concerned about the potential for increases in airport noise, air
pollutant emissions, and traffic congestion.
* Focus on needs of clients and customers. Serving the needs of clients
and customers involves identifying their needs, striving to meet them,
measuring performance, and publicly reporting on progress to help
assure appropriate transparency and accountability. To better serve the
needs of its clients and customers, FAA published Flight Plan, which
provides a vehicle for identifying needs, measuring performance, and
publicly reporting progress. Flight Plan includes performance goals in
the areas of safety, greater capacity, international leadership, and
organizational excellence, which are linked to the agency's budget and
progress monitored through a Web-based tracking system.
However, over the years, FAA's efforts to meet client and customer
needs have not always been successful, and some have had a long lasting
negative impact. FAA has had particular difficulty fielding new ATC
modernization systems within cost, schedule and performance goals to
meet the needs of the aviation community. Agency promises to deliver
new capabilities to airlines via improvements to the ATC system led
some airlines to install expensive equipment in their aircraft to
position themselves to benefit from expected FAA services; however,
when the agency failed to deliver on those promises, participating air
carriers were left with equipment that they could not use--no return on
their investment. In addition, shifting agency priorities have made it
difficult for the aviation industry to anticipate future requirements
and plan for them in a cost-effective manner (e.g., providing air
carriers with adequate lead time to purchase new equipment and airframe
manufacturers with lead time to incorporate changes into new commercial
airplane designs). Furthermore, the absence of a full-functioning cost-
accounting system makes it difficult for FAA to assess the actual cost
of providing services to users of the National Airspace System.
* Strategic management of people. Most high-performing organizations
have strong, charismatic, visionary, and sustained leadership, the
capability to identify what skills and competencies the employees and
the organization need, and other key characteristics including
effective recruiting, comprehensive training and development,
retention of high-performing employees, and a streamlined hiring
process. Toward this end, FAA has hired a Chief Operating Officer (COO)
to stand up its new ATO. Our work on high-performing organizations has
recommended use of the COO concept to facilitate transformational
change in federal agencies and to provide long-term attention and focus
on management issues. Furthermore, FAA has placed 78 percent of its
workforce under a pay-for-performance system[Footnote 8] and
implemented a training approach for its acquisition workforce which
reflects four of the six elements used by leading organizations to
deliver training effectively.[Footnote 9] However, it is too soon to
know the extent to which these elements of effective training will be
incorporated into the new ATO. Finally, FAA is currently conducting an
Activity Value Analysis, a bottoms-up effort to establish a baseline of
ATO headquarters activities and their value to stakeholders. The
results of this analysis are intended to help FAA's leadership target
cost-cutting and cost savings efforts.
Despite FAA's efforts to date, our past work has found the agency's
strategic management of human capital lacking. For example,
organizational culture issues at FAA (e.g., its vertical, stovepiped
structure) have discouraged collaboration among technical experts and
users of the ATC system and contributed to the agency's inability to
deliver new ATC systems within cost, schedule and performance goals.
One of the most significant early challenges facing the ATO will be
negotiating a new contract with air traffic controllers, which is due
to expire in September 2005. The DOT IG has repeatedly noted that
despite the importance of controllers' jobs, that FAA simply cannot
sustain the continued salary cost growth for this workforce, which rose
from an average salary of $72,000 in 1998 to $106,000 in 2003. Given
the inextricable link between FAA's operating costs and its controller
workforce, striking an acceptable balance between controllers' contract
demands and controlling spiraling operating costs will be a strong
determinant of the ATO's credibility both within FAA and across the
aviation industry.
While FAA has taken some promising steps through its new ATO to
restructure itself in a manner consistent with high-performing
organizations, the agency still faces significant and longstanding
systemic management challenges. These challenges must be overcome if
FAA is to keep pace with ongoing changes in the aviation industry and
transform itself into a world-class organization. Our work for more
than two decades has shown that even modest organizational,
operational, and technological changes at FAA can be difficult and time
consuming, all of which underscores the difficult road ahead for FAA
and its new ATO.
This concludes my statement. I would be pleased to respond to any
questions that you or other Members of the Subcommittee may have at
this time.
For further information on this testimony, please contact JayEtta
Hecker at (202) 512-2834 or by e-mail at heckerj@gao.gov. Individuals
making key contributions to this testimony include Samantha Goodman,
Steven Martin, Beverly Norwood, and Alwynne Wilbur.
FOOTNOTES
[1] FAA's Modernization Efforts--Past, Present, and Future
(GAO-04-227T): October 30, 2003.
[2] Human Capital Management: FAA's Reform Effort Requires a More
Strategic Approach, GAO-03-156, February 2003.
[3] The Trust Fund was established by the Airport and Airway Revenue
Act of 1970 (P.L. 91-258) to help fund the development of a nationwide
airport and airway system and to fund FAA investments in air traffic
control facilities. It provides all of the funding for the Airport
Improvement Program, which provides grants for construction and safety
projects at airports; the Facilities and Equipment account that funds
technological improvements to the air traffic control system; and a
Research, Engineering, and Development account, which supports aviation
safety, mobility, and environmental goals. In fiscal year 2002, the
Trust Fund provided 79 percent of the funding for FAA Operations, which
represented almost 50 percent of Trust Fund expenditures. The Trust
Fund is supported by 10 dedicated excise taxes. In fiscal year 2002,
the Trust Fund received about $10 billion in revenue from these taxes
and interest.
[4] The Operational Evolution Plan is an ongoing 10-year plan developed
by the FAA to increase the capacity and efficiency of the national
airspace system, while enhancing safety and security.
[5] STARS will replace controller workstations with new color displays,
processors, and computer software at FAA and DOD terminal air traffic
control facilities--within 5 to 50 nautical miles of an airport.
[6] To provide FAA's ATC modernization efforts with needed direction
and stability, the Congress established a 5-year term for the FAA
Administrator in 1994. Former Administrator Garvey was the first to
complete a term of this length in 2002.
[7] Congress established a 5-year term for the FAA Administrator in
1994.
[8] Inspector General, U.S. Department of Transportation, Key Issues
for the Federal Aviation Administration's FY 2005 Budget, CC-2004-038
(April 22, 2004).
[9] To deliver training effectively, leading organizations' training
approaches generally include six elements: (1) prioritize initiatives
most important to the agency; (2) demonstrate top-level commitment and
provide resources; (3) identify those who need training on specific
initiatives and set training requirements; (4) tailor training to meet
the needs of the workforce; (5) track training to ensure it reaches the
right people; and (6) measure effectiveness of training. GAO found that
FAA's acquisition organization has highly developed processes for
elements 1, 2, 4, and 5.
