Aviation Security
Cost Estimates Related to TSA Funding of Checked Baggage Screening Systems at Los Angeles and Ontario Airports Gao ID: GAO-07-445 March 30, 2007To meet the mandate to screen all checked baggage for explosives by December 31, 2003, the Transportation Security Administration (TSA) placed minivan-sized explosive detection systems (EDS) and other screening equipment in airport lobbies. However, these interim lobby solutions have caused operational inefficiencies, in part because they require a large number of screeners. According to TSA, in-line baggage screening--where EDS machines are integrated with an airport's baggage conveyor system--can be a more cost-effective and efficient alternative to lobby-based, stand-alone equipment. For example, in-line systems can increase the efficiency of airport, airline, and TSA operations, and lower costs by reducing the number of screeners. Moreover, in-line explosive detection systems can enhance security because they reduce congestion in airport lobbies, thus removing a potential target for terrorists. However, installing in-line systems can have large up-front costs, related to the need for airport modifications. To help defray these costs, in 2003, Congress authorized TSA to reimburse airports up to 75 percent of the cost to install these systems by entering "letter of intent" (LOI) agreements. An LOI, though not a binding commitment of federal funding, represents TSA's intent to provide the agreed-upon funds in future years if the agency receives sufficient appropriations to cover the agreement. TSA has issued eight letters of intent to help defray the costs of installing in-line systems at nine airports as of February 2007, but none since February 2004. In September 2003, TSA and the City of Los Angeles signed an LOI and an attached memorandum of agreement (LOI/MOA) in which TSA agreed to pay an amount not to exceed 75 percent of the agreed upon estimated total project cost of $341 million (about $256 million) to install in-line checked baggage screening systems at both Los Angeles (LAX) and Ontario (ONT) International Airports. However, in December 2003, officials from the City of Los Angeles' airport authority--Los Angeles World Airports (LAWA)--informed TSA that aspects of the design concept were infeasible and that additional construction modifications would be needed. LAWA subsequently submitted a revised cost estimate to TSA in April 2005 and requested that TSA amend the LOI/MOA to increase the federal reimbursement by about $122 million. TSA has not amended the LOI to provide for additional reimbursements; however, as of February 2007, TSA had obligated the $256 million for the City of Los Angeles LOI/MOA in accordance with the schedule agreed to in the LOI and had reimbursed LAWA for about $26 million in expenses. Senate Report 109-273 directs us to review the reasons for the differences between the original 2003 cost estimate and the revised 2005 cost estimate submitted by LAWA. In response and as agreed with committee offices, we identified the key factors that contributed to the differences between the two cost estimates. On January 23, 2007, we briefed staff of the Senate Subcommittee on Homeland Security, Committee on Appropriations, on the results of our work.
A key reason for the difference between the 2003 total project cost estimate and the revised 2005 estimate to install in-line baggage screening systems at LAX and ONT was that the 2003 estimate was developed at an early stage in the design process and was therefore based on preliminary data and assumptions that were subject to change. Consequently, the estimate did not adequately foresee some of the costs of retrofitting new systems into existing buildings or allow for sufficient space for the EDS machines, baggage inspection rooms, and conveyor belts. LAWA officials stated that they were under a tight timeframe to apply for the LOI because TSA had told them that federal funding was limited and that 17 other airports were competing for the funding. The 2003 total project cost estimate used concepts and construction estimates developed in about 12 weeks by Boeing, TSA's contractor. According to TSA and LAWA officials, both TSA and Los Angeles signed the LOI/MOA knowing the preliminary nature of the cost estimate. According to construction industry guidance, an estimate's accuracy depends on the quality of information known about the project at the time the estimate is prepared. The 2003 estimate was made at the "concept development" stage where the final project cost can be expected to range from 50 percent under to 100 percent over the estimated cost, according to this guidance. The 2005 revised estimate was made at the "design development" stage where the range of the final project cost estimate can be expected to be more accurate--from 20 percent under to 30 percent over the estimated cost. In December 2003, LAWA presented TSA with a summary of inadequacies it had found in the original Boeing concept and the associated potential cost and scheduling impacts. LAWA then began an engineering study to update the in-line system concepts at LAX and ONT, the results of which it presented to TSA in September 2004. TSA reviewed these updated concepts and determined that they would meet its performance requirements; however, TSA's review did not address cost issues. LAWA used these updated concepts to develop its 2005 estimate, which was based on more definitive information about terminal design requirements than the 2003 estimate. According to LAWA, new construction and excavation included in the 2005 designs increased the estimated costs. Among the design changes, LAWA determined that the placement of EDS machines in the 2003 concepts was infeasible in five of nine of the LAX terminals and both ONT terminals. In addition, the 2005 estimate included 20 additional baggage inspection rooms, 9 rooms for on-screen resolution of EDS alarms, and 10 computer rooms at LAX and ONT terminals. The 2005 estimate also included over $11 million in computer networking costs and costs associated with on-screen resolution of EDS alarms, which the 2003 estimate did not foresee. TSA also highlighted two additional factors that caused differences between the two estimates--cost increases due to the delay in beginning construction of the project and the escalation of construction costs between 2003 and 2005. LAWA also determined that TSA's contractor and subcontractor made a mathematical error in the 2003 concept development estimate: construction costs were only included for one of the two baggage screening facilities and neither of the connected tunnels at ONT. TSA officials told us in January 2007 they were not able to substantiate this error.
GAO-07-445, Aviation Security: Cost Estimates Related to TSA Funding of Checked Baggage Screening Systems at Los Angeles and Ontario Airports
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
March 2007:
Aviation Security:
Cost Estimates Related to TSA Funding of Checked Baggage Screening
Systems at Los Angeles and Ontario Airports:
GAO-07-445:
Contents:
Letter:
Summary of Findings:
Scope and Methodology:
Agency Comments and Our Evaluation:
Appendix I: GAO Contact and Staff Acknowledgments:
Appendix II: Briefing Slides:
Appendix III: Comments from Los Angeles World Airports:
Abbreviations:
DHS: Department of Homeland Security:
EDS: explosive detection system:
GAO: Government Accountability Office:
LAWA: Los Angeles World Airports:
LAX: Los Angeles International Airport:
LOI: letter of intent:
LOI/MOA: letter of intent/memorandum of agreement:
MOA: memorandum of agreement:
ONT: Ontario International Airport:
TSA: Transportation Security Administration:
United States Government Accountability Office:
Washington, DC 20548:
March 30, 2007:
The Honorable Robert C. Byrd:
Chairman:
The Honorable Thad Cochran:
Ranking Minority Member:
Subcommittee on Homeland Security:
Committee on Appropriations:
United States Senate:
The Honorable David E. Price:
Chairman:
The Honorable Harold Rogers:
Ranking Minority Member:
Subcommittee on Homeland Security:
Committee on Appropriations:
House of Representatives:
To meet the mandate to screen all checked baggage for explosives by
December 31, 2003, the Transportation Security Administration (TSA)
placed minivan-sized explosive detection systems (EDS) and other
screening equipment in airport lobbies.[Footnote 1] However, these
interim lobby solutions have caused operational inefficiencies, in part
because they require a large number of screeners. According to TSA, in-
line baggage screening--where EDS machines are integrated with an
airport's baggage conveyor system--can be a more cost-effective and
efficient alternative to lobby-based, stand-alone equipment. For
example, in-line systems can increase the efficiency of airport,
airline, and TSA operations, and lower costs by reducing the number of
screeners. Moreover, in-line explosive detection systems can enhance
security because they reduce congestion in airport lobbies, thus
removing a potential target for terrorists.
However, installing in-line systems can have large up-front costs,
related to the need for airport modifications. To help defray these
costs, in 2003, Congress authorized TSA to reimburse airports up to 75
percent of the cost to install these systems by entering "letter of
intent" (LOI) agreements.[Footnote 2] An LOI, though not a binding
commitment of federal funding, represents TSA's intent to provide the
agreed-upon funds in future years if the agency receives sufficient
appropriations to cover the agreement.
TSA has issued eight letters of intent to help defray the costs of
installing in-line systems at nine airports as of February 2007, but
none since February 2004. In September 2003, TSA and the City of Los
Angeles signed an LOI and an attached memorandum of agreement (LOI/MOA)
in which TSA agreed to pay an amount not to exceed 75 percent of the
agreed upon estimated total project cost of $341 million (about $256
million) to install in-line checked baggage screening systems at both
Los Angeles (LAX) and Ontario (ONT) International Airports. However, in
December 2003, officials from the City of Los Angeles' airport
authority--Los Angeles World Airports (LAWA)--informed TSA that aspects
of the design concept were infeasible and that additional construction
modifications would be needed. LAWA subsequently submitted a revised
cost estimate to TSA in April 2005 and requested that TSA amend the
LOI/MOA to increase the federal reimbursement by about $122 million.
TSA has not amended the LOI to provide for additional reimbursements;
however, as of February 2007, TSA had obligated the $256 million for
the City of Los Angeles LOI/MOA in accordance with the schedule agreed
to in the LOI and had reimbursed LAWA for about $26 million in
expenses.
Senate Report 109-273 directs us to review the reasons for the
differences between the original 2003 cost estimate and the revised
2005 cost estimate submitted by LAWA.[Footnote 3] In response and as
agreed with committee offices,[Footnote 4] we identified the key
factors that contributed to the differences between the two cost
estimates. On January 23, 2007, we briefed staff of the Senate
Subcommittee on Homeland Security, Committee on Appropriations, on the
results of our work (see app. II).
Summary of Findings:
A key reason for the difference between the 2003 total project cost
estimate and the revised 2005 estimate to install in-line baggage
screening systems at LAX and ONT was that the 2003 estimate was
developed at an early stage in the design process and was therefore
based on preliminary data and assumptions that were subject to change.
Consequently, the estimate did not adequately foresee some of the costs
of retrofitting new systems into existing buildings or allow for
sufficient space for the EDS machines, baggage inspection rooms, and
conveyor belts. LAWA officials stated that they were under a tight
timeframe to apply for the LOI because TSA had told them that federal
funding was limited and that 17 other airports were competing for the
funding. The 2003 total project cost estimate used concepts and
construction estimates developed in about 12 weeks by Boeing, TSA's
contractor. LAWA relied on designs and estimates developed by Boeing
and its subcontractors to determine the total project cost estimate
because the company had expertise in integrating EDS equipment into
airports. According to TSA and LAWA officials, both TSA and Los Angeles
signed the LOI/MOA knowing the preliminary nature of the cost estimate.
According to construction industry guidance, an estimate's accuracy
depends on the quality of information known about the project at the
time the estimate is prepared.[Footnote 5] The 2003 estimate was made
at the "concept development" stage where the final project cost can be
expected to range from 50 percent under to 100 percent over the
estimated cost, according to this guidance. The 2005 revised estimate
was made at the "design development" stage where the range of the final
project cost estimate can be expected to be more accurate--from 20
percent under to 30 percent over the estimated cost.
In December 2003, LAWA presented TSA with a summary of inadequacies it
had found in the original Boeing concept and the associated potential
cost and scheduling impacts. LAWA then began an engineering study to
update the in-line system concepts at LAX and ONT, the results of which
it presented to TSA in September 2004. TSA reviewed these updated
concepts and determined that they would meet its performance
requirements; however, TSA's review did not address cost issues. LAWA
used these updated concepts to develop its 2005 estimate, which was
based on more definitive information about terminal design requirements
than the 2003 estimate. According to LAWA, new construction and
excavation included in the 2005 designs increased the estimated costs.
Among the design changes, LAWA determined that the placement of EDS
machines in the 2003 concepts was infeasible in five of nine of the LAX
terminals and both ONT terminals. In addition, the 2005 estimate
included 20 additional baggage inspection rooms, 9 rooms for on-screen
resolution of EDS alarms, and 10 computer rooms at LAX and ONT
terminals. The 2005 estimate also included over $11 million in computer
networking costs and costs associated with on-screen resolution of EDS
alarms, which the 2003 estimate did not foresee. TSA also highlighted
two additional factors that caused differences between the two
estimates--cost increases due to the delay in beginning construction of
the project and the escalation of construction costs between 2003 and
2005. LAWA also determined that TSA's contractor and subcontractor made
a mathematical error in the 2003 concept development estimate:
construction costs were only included for one of the two baggage
screening facilities and neither of the connected tunnels at ONT. TSA
officials told us in January 2007 they were not able to substantiate
this error.
Further, according to LAWA, system redesigns were required because
TSA's guidance on in-line baggage screening systems changed between the
2003 and 2005 estimates, leading to higher estimates. Because few in-
line systems were in use at the time of the September 2003 LOI/MOA,
only limited information on the capabilities of the in-line EDS
machines, including actual bags screened per hour and false alarm
rates, was available for modeling the systems. In June 2006, TSA
produced the Recommended Security Guidelines for Airport Planning,
Design and Construction to guide future construction of in-line checked
baggage screening systems based on its past experiences. TSA also
expects to release more detailed guidelines for in-line system planning
and design in a few months.
The LOI/MOA affords TSA flexibility to amend the agreement to account
for changed circumstances. However, under the terms agreed to in the
LOI/MOA, TSA has no obligation to amend the LOI/MOA or to reimburse the
City of Los Angeles for any additional costs beyond those agreed to in
the LOI/MOA, and TSA officials have stated that the agency does not
have plans for such reimbursement.
Scope and Methodology:
To review key factors that contributed to the differences between the
2003 and 2005 cost estimates, we reviewed TSA and LAWA documents used
in developing the cost estimates, including design plans, reports,
briefings, and emails. We interviewed officials from TSA and LAWA, as
well as TSA contractors and other relevant officials who participated
in the cost-estimation process to learn about the factors that
contributed to the increased estimate of the cost of in-line checked
baggage screening systems at LAX and ONT. We visited LAX and ONT to
obtain a first-hand perspective of the modifications needed to install
the in-line EDS systems at both airports. Additionally, we examined
industry guidance on estimating costs for construction projects. We did
not independently verify the 2003 or 2005 cost estimates.
We conducted our work in accordance with generally accepted government
auditing standards from October 2006 through March 2007.
Agency Comments and Our Evaluation:
We provided a draft of this report to LAWA and the Department of
Homeland Security (DHS) for review and comment. LAWA provided written
comments which we have included in their entirety in appendix III. DHS
provided no written comments. TSA provided e-mail comments. In
addition, LAWA and TSA provided technical comments concerning facts in
the report which we incorporated as appropriate.
In its March 8, 2007, comments, LAWA wrote that it believes the draft
did not paint an accurate or complete picture of the facts. In general,
LAWA raised three points: (1) TSA has the authority to revise the LOI
to reflect accurate cost figures and explicitly anticipated doing so
during the LOI/MOA development process, (2) the report fails to assign
specific responsibility for initial designs and any errors, as directed
by the Report of the Senate Appropriations Committee, and (3) the
report does not recognize that LAWA responded to TSA urgency in
completing the agreements and, as a result, used preliminary design and
cost estimates as the basis for entering into the LOI/MOA.
We do not agree with LAWA's comments. With respect to its first point,
it is true that the LOI/MOA agreements afford TSA flexibility to amend
the agreements to account for changed circumstances. As stated in our
report, however, under the terms of the LOI/MOA and in accordance with
the law, TSA is under no obligation to amend the LOI/MOA or to
reimburse LAWA for any costs beyond those agreed upon in the LOI/MOA.
To date, as noted in our report, TSA has not indicated any intent to
amend the LOI/MOA agreements to provide LAWA with additional funding
for this project.
LAWA states that it did not believe it would be held financially
responsible for increases in eligible and allowable costs due to
reasons beyond its control. When subsequent estimates revealed that the
project costs would exceed the LOI/MOA-estimated amount, LAWA requested
an amendment to the LOI to receive a 75 percent federal reimbursement
of the $485 million revised estimate.
LAWA also commented that a senior TSA official provided written
assurances that the agency "would have the opportunity to cover an
increase in costs due to design changes" and referenced an April 2004 e-
mail from a TSA official to LAWA in support of this assertion. LAWA
noted that it relied on this and other assurances from TSA, "reinforced
in various discussions," at the time it concluded the LOI/MOA process.
While the April 2004 e-mail cited above did note that LAWA would not
"be held to estimates that do not prove to be right on the mark," this
particular statement was made at least seven months after TSA and LAWA
had concluded the LOI/MOA process and entered into the agreements.
Furthermore, the MOA clearly provides that the agreement signed by both
parties constitutes the "complete integration of all understandings
between the parties." More generally, it provides that any prior,
contemporaneous, or subsequent changes, whether written or oral, have
no force or effect, and that any changes or modifications to the MOA
must be in writing, signed by the TSA Contracting Officer, and duly
executed by the City of Los Angeles to have such force or effect.
Neither LAWA nor TSA presented any documentation suggesting that steps
prescribed in the MOA had been (or were anticipated to be) taken to
amend the LOI/MOA with respect to the reimbursable amount.
LAWA also stated that the report does not reflect the extensive and
protracted discussions LAWA had with TSA, leaving the impression that
LAWA simply presented a new set of design concepts to TSA in September
2004. Our objective in this report, as agreed with congressional
offices, was to identify the key factors that contributed to the
differences between the 2003 and the 2005 cost estimates. As such, we
reported that LAWA reported the findings of its engineering study in
September 2004 and that TSA approved the concepts. We believe this
statement sufficiently demonstrates the agreement between TSA and LAWA
on the revised designs.
In its second point, LAWA suggests that the GAO report avoids assigning
responsibility to TSA or its contractors and, as a result, "failed to
answer the Senate Committee's direction to provide a detailed
explanation of the reasons for any differences the original estimate,
including identification of and the party responsible for any material
mistakes, omissions, and infeasible design concepts in the original
estimate."
The objective of the report, as agreed with the appropriate
congressional offices in accordance with our Congressional Protocols,
was to identify factors contributing to differences between the
estimates. To the extent appropriate, we identified the roles and
responsibilities of the various parties. Specifically, we noted that
Boeing produced the conceptual designs that served as the basis for the
2003 estimate agreed to in the LOI/MOA. We noted that these designs had
been developed at an early stage of the design process, which assumes
costs that can differ greatly from final project costs. The report also
states that LAWA had determined that Boeing had made a mathematical
error in the Ontario estimate. Further, we determined that both TSA and
LAWA had signed the LOI/MOA knowing of the preliminary nature of the
cost estimate. Finally, as referenced in our scope and methodology and
as agreed with the congressional offices, in identifying factors
associated with the estimates, we did not independently verify the 2003
or 2005 cost estimates.
In its third point, LAWA suggests the report does not recognize that
LAWA responded to TSA urgency in completing the agreements and, as a
result, used preliminary design and cost estimates as the basis for
entering into the LOI/MOA.
The report notes that "LAWA officials stated that they were under a
tight timeframe because TSA had told them that federal funding was
limited and 17 other airports were competing for the funding." We
identified this as a factor associated with the preliminary nature of
the 2003 estimate. LAWA also commented that it was essentially required
to accept the Boeing design and cost estimates. The report states that
TSA and LAWA used the Boeing estimate to provide the basis for the
estimate agreed to in the September 2003 LOI/MOA. Neither TSA nor LAWA
provided evidence suggesting that TSA had required LAWA to accept the
Boeing design and cost estimates.
In its e-mail comments, TSA stated that concept development for in-line
solutions at all of the airports with LOIs was a collaborative effort
between TSA and the respective airport entity. TSA further stated that
most of the LOI estimates were developed early in the concept
development phase. We incorporated a comment into the report to
acknowledge that TSA viewed the development of the concepts as a
partnership; however, we did not review concept development at other
airports.
In its comments, TSA also states that there were only two changes in
its guidance between 2003 and 2005. The first was the addition of the
use of On-Screen Alarm Resolution Protocol during the alarm resolution
process, which TSA acknowledged required redesign and associated cost
increases. The second was the increase in the baggage throughput number
per EDS which led to the deletion of 13 EDS machines from the quantity
estimated in the 2003 concepts. According to TSA, this would have a
significant impact on lowering the overall project cost, which would be
supported by decreasing required space, baggage handling system
infrastructure (generally up to $4 million per machine on average) and
associated electrical, mechanical, data and other infrastructure.
In its comments, TSA described two additional factors that caused
differences between the two estimates--cost increases due to the delay
in beginning construction of the project and the escalation of
construction costs between 2003 and 2005. We incorporated this comment
into the report.
Finally, TSA stated in its comments that it had reviewed the
mathematical error LAWA determined Boeing made in the 2003 concept for
ONT, and had not been able to validate that the error had been made. In
our report we acknowledge that TSA was not able to substantiate the
error.
We will send copies of this report to the Secretary of Homeland
Security and the Assistant Secretary, Transportation Security
Administration, and interested congressional committees. We will send a
copy of the report to LAWA and will also make copies available to
others upon request. In addition, the report will be available at no
charge on GAO's Web site at http://www.gao.gov. If you have any
questions or need additional information, please contact me at (202)
512-2757 or goldenkoffr@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. Key contributors to this report are acknowledged
in appendix I.
Signed by:
Robert Goldenkoff:
Acting Director:
Homeland Security and Justice Issues:
[End of section]
Appendix I: GAO Contact and Staff Acknowledgments:
GAO Contact:
Robert Goldenkoff (202) 512-2757:
Acknowledgments:
In addition to the contact named above, Charles Bausell, Kevin Copping,
Kimberly Cutright, Glenn Davis, Terrell Dorn, Maria Edelstein, Richard
Hung, Julian King, Brian Lipman, Thomas Lombardi, Amanda Miller, and
Linda Miller made key contributions to this report.
[End of section]
Appendix II: Briefing Slides:
Review of Cost Estimates for Installing Baggage Screening Systems at
Los Angeles and Ontario Airports:
Briefing for Congressional Committees:
Introduction:
Pursuant to 49 U.S.C. § 44901(d), all checked baggage at U.S. airports
was to be screened using explosive detection systems by December 31,
2003.
We have reported that, according to the Transportation Security
Administration's (TSA) analysis, in-line baggage screening-where
explosive detection systems (EDS) are integrated with an airport's
baggage conveyor equipment-can be more cost-effective compared to
placing EDS machines in airport lobbies.[Footnote 6]
However, installing in-line EDS systems can involve large up-front
costs.
To help defray the cost of installing in-line baggage screening
systems, in 2003, Congress authorized TSA to reimburse airports up to
75 percent of the systems' cost by issuing "letters of intent"
(LOI).[Footnote 7]
An LOI, though not a binding commitment of federal funding, represents
TSA's intent to provide funds in future years if they are appropriated
by Congress. TSA has signed 8 letter of intent agreements for the
installation of in-line checked baggage screening systems at 9 airports
(one LOI covered both LAX and ONT).
In September 2003, TSA and the City of Los Angeles signed a LOI and an
attached memorandum of agreement (MOA) to help fund the installation of
in-line checked baggage screening systems at Los Angeles (LAX) and
Ontario (ONT) International Airports.
Under the LOI/MOA, TSA agreed to pay for 75 percent of the estimated
total project cost of $341 million (about $256 million).
In April 2005, the City of Los Angeles' airport authority-Los Angeles
World Airports (LAWA)-submitted to TSA a revised cost estimate of $485
million and requested that the LOI/MOA be amended to increase the
federal reimbursement to about $378 million to reflect increased
estimated total project costs.
Objectives:
Senate Report 109-273 directs GAO to review the differences between the
original 2003 cost estimate and LAWA's revised 2005 cost
estimates.[Footnote 8]
As agreed with committee offices, GAO identified the key factors that
contributed to the differences in the two estimates.
Scope and Methodology:
To address the objective, we:
* reviewed key TSA and LAWA documents used in developing the cost
estimates, including design plans, reports, briefings, and emails;
* interviewed TSA, LAWA, and other officials who participated in the
cost-estimation process;
* visited LAX and ONT to obtain a first hand perspective of the
modifications needed to install the in-line EDS Systems at both
airports; and:
* reviewed industry guidance on estimating costs for construction
projects.
We did not independently verify the 2003 or 2005 cost estimates for
installing the in-line EDS systems or the reasonableness/adequacy of
the designs.
We conducted our work in accordance with generally accepted government
auditing standards from October 2006 through March 2007.
Results in Brief:
The rise in the estimate between 2003 and 2005 was primarily related to
the fact that the 2003 estimate was developed at an early stage in the
design process and was therefore based on preliminary data and
assumptions that were subject to change.
LAWA officials stated that they were under a tight timeframe to apply
for the LOI because TSA had told them that federal funding was limited
and that 17 other airports were competing for the funding.
The 2003 estimate did not adequately foresee some of the costs of
retrofitting new systems into existing buildings.
Further, TSA's guidance on in-line baggage screening systems changed
between the 2003 and 2005 estimates, which contributed to changes in
terminal designs and related cost estimates.
According to TSA and LAWA officials, both TSA and Los Angeles signed
the LOI/MOA knowing the preliminary nature of the cost estimate.
The LOI/MOA affords TSA the flexibility to amend the agreements to
account for changed circumstances. However, under the terms agreed to
in the LOI/MOA, TSA has no obligation to amend the LOI/MOA or to
reimburse Los Angeles for any costs beyond those agreed to in the LOI/
MOA and does not have plans to do so.
Background:
In-line EDS systems are advantageous because they can:
Increase the efficiency airport, airline, and TSA operations.
Lower costs by reducing the number of transportation security officers
required to screen checked baggage.
Move screening equipment out of airport lobbies where it causes
overcrowding, creating a potential target for terrorists.
[See PDF for image]
Source: GAO:
In-line EDS systems are integrated with airports' baggage-handling
conveyor systems.
[End of figure]
TSA and LAWA initiated discussions about in-line solutions for LAX and
ONT in January 2003 in order to replace stand-alone EDS machines in the
airports' lobbies.
LAWA used concepts and construction estimates developed by TSA's
contractor, Boeing, for the LAX and ONT in-line baggage screening
systems because of Boeing's and its subcontractors' expertise in
integrating explosive detection systems into airports.
TSA reported that concepts for LAX and ONT were developed through a
partnership between LAWA and the agency.
Boeing's 2003 cost estimate consisted of $260 million for LAX and $24
million for ONT. LAWA and TSA agreed to add another $57 million (or 20
percent) for estimated administrative expenses for a total project cost
of $341 million.
In December 2003, LAWA presented TSA with a summary of inadequacies it
had found in the original concepts, and the associated potential cost
and scheduling impacts.
In April 2005, LAWA submitted a revised cost estimate to TSA based on
TSA approved concepts from a September 2004 LAWA engineering study.
This revised cost estimate included a request that TSA amend the LOI/
MOA to increase the federal reimbursement by about $122 million, a sum
that would raise the total federal reimbursement to about $378
million.[Footnote 9]
As of February 2007, TSA has obligated $256 million in accordance with
the schedule set forth in the LOI/MOA for Los Angeles. As of October
2006, TSA had reimbursed LAWA for about $26 million in expenses from
the total amount obligated.
Development of the 2003 Estimate:
LAWA officials stated that they were under a tight timeframe to apply
for the LOI because TSA told them that federal funding was limited and
that 17 other airports were competing for the funding.
TSA's Boeing contracting team spent about 12 weeks from January to
April 2003 to develop initial drawings (known as concept development
drawings) and construction cost estimates. Between April and September
2003, TSA and LAWA negotiated the addition of administrative and
contingency costs to the estimate.
TSA's in-line system design guidance was evolving while the estimate
was being developed, requiring frequent changes to the conceptual
drawings.
Accuracy of Cost Estimates Depends on Completeness and Maturity of
Information:
The accuracy of an estimate depends on the quality of information known
about the project at the time the estimate is being prepared.
The 2003 estimate was made at the "concept development" stage where the
final project cost can be expected to range from 50 percent under to
100 percent over the estimated cost based on construction industry
guidance.[Footnote 10]
The 2005 estimate was made at the "design development" stage where the
final project cost can be expected to range from 20 percent under to 30
percent over the estimated cost. (See fig. 1.)
Figure 1: 2003 Estimate Was Conducted at an Early Stage of the Design
Process:
[See PDF for image]
Source: GAO analysis based on Construction Industry Institute,
Improving Early Estimates Research Team, Improving Early Estimates:
Best Practices Guide (September 1998).
[End of figure]
The Use of Preliminary Information Limited the Precision of the 2003
Estimate:
Due to the preliminary information on which it was based, the 2003
estimate did not foresee some of the challenges of retrofitting new
systems into existing buildings and did not include space for various
screening operations.
LAWA determined that the 2003 concepts for each terminal did not allow
for sufficient space for the EDS machines, conveyor belts, and the
construction of baggage inspection rooms, rooms for computer monitors
for on-screen resolution of EDS alarms and rooms for computer routers
and servers.
LAWA determined that the placement of EDS machines in the 2003 concepts
needed to be changed in five of the nine terminals at LAX and both ONT
terminals.
The 2005 Estimate Was Based on More Definitive Information:
The revised 2005 estimate was based on concepts approved by TSA in 2004
which included more definitive information about terminal design
requirements than the 2003 estimate.
The 2005 estimate designs included new construction and excavation,
leading to cost estimate increases.
The 2005 estimate included the incorporation of 20 additional baggage
inspection rooms, 9 on-screen resolution rooms and 10 computer rooms at
LAX and ONT terminals.
The 2005 estimate included over $11 million in networking costs and
costs associated with on-screen resolution of EDS alarms.
TSA also highlighted two additional factors that impacted the estimates-
cost increases due to the delay in beginning construction of the
project and the escalation of construction costs between 2003 and 2005.
In 2004, LAWA determined that Boeing had made a mathematical error in
the 2003 concept development estimate: construction costs were only
included for one of the two baggage screening facilities and neither
connecting tunnel at ONT. In January 2007, TSA officials told us that
they were not able to substantiate the mathematical error in the 2003
concept development estimate.
Table 1: Estimated Costs for LAX and ONT Terminals-2003 and 2005:
Terminal 1 (LAX);
2003 LOI/MOA estimate (dollars in millions): $42.9;
2005 estimate (dollars in millions): $108.8[1];
Rise is estimate cost (dollars in millions): $35.1 (48 percent);
Design changes/key reasons for estimate increase based on GAO review of
LAWA documentation:
* 2003 concept envisioned separate screening areas for each terminal;
* 2004 LAWA review determined the concept for terminal 1 was
infeasible;
* 2005 LAWA design consolidated the screening area in one new building
between the terminals.
Terminal 2(LAX);
2003 LOI/MOA estimate (dollars in millions): $30.1;
2005 estimate (dollars in millions): [Empty];
Rise is estimate cost (dollars in millions): [Empty];
Design changes/key reasons for estimate increase based on GAO review of
LAWA documentation:
* 2003 concept envisioned separate screening areas for each terminal;
* 2004 LAWA review determined the concept for terminal 1 was
infeasible;
* 2005 LAWA design consolidated the screening area in one new building
between the terminals.
Terminal 3(LAX);
2003 LOI/MOA estimate (dollars in millions): $45.0;
2005 estimate (dollars in millions): $50.8;
Rise is estimate cost (dollars in millions): $5.8 (13 percent);
Design changes/key reasons for estimate increase based on GAO review of
LAWA documentation:
* 2005 LAWA review determined that terminal would need to be modified
to accommodate the EDS machines and conveyor belts;
* 2005 LAWA review also determined electrical upgrades were needed to
accommodate EDS power requirements;
* 2005 LAWA design modifications included the construction of a
structure for new baggage inspection and screening rooms.
Terminal 4 (LAX);
2003 LOI/MOA estimate (dollars in millions): $21.0;
2005 estimate (dollars in millions): $52.6;
Rise is estimate cost (dollars in millions): $31.6 (150 percent);
Design changes/key reasons for estimate increase based on GAO review of
LAWA documentation:
* 2003 concept envisioned above ground and elevated EDS machine
location;
* 2004 LAWA review determined that space constraints and construction
disruptions made the 2003 concept infeasible;
* 2005 design envisioned constructing a building below ground level to
accommodate the required EDS machines. This excavation required
constructing tunnels and reinforcing the roof of the building to
support the tarmac.
Terminal 5 (LAX):
2003 LOI/MOA estimate (dollars in millions): $18.0;
2005 estimate (dollars in millions): $40.2;
Rise is estimate cost (dollars in millions): $22.2 (123 percent);
Design changes/key reasons for estimate increase based on GAO review of
LAWA documentation:
* 2005 design included additional control software needed to integrate
baggage handling system;
* 2005 design extended roofing to cover baggage handling system;
* 2005 design included construction of new baggage inspection and
screening rooms;
* LAWA believes that the 2003 estimate for the conveyor system was
substantially low and inconsistent with estimates for similar LAX
terminals.
Terminal 6 (LAX);
2003 LOI/MOA estimate (dollars in millions): $37.8;
2005 estimate (dollars in millions): $46.0;
Rise is estimate cost (dollars in millions): $8.2 (22 percent);
Design changes/key reasons for estimate increase based on GAO review of
LAWA documentation:
* 2005 designs include additional space to accommodate the baggage
screening system;
* Baggage system control room added in 2005 designs.
Terminal 7 (LAX);
2003 LOI/MOA estimate (dollars in millions): $17.8;
2005 estimate (dollars in millions): $32.5;
Rise is estimate cost (dollars in millions): $14.7 (82 percent);
Design changes/key reasons for estimate increase based on GAO review of
LAWA documentation:
* For the 2005 design, LAWA determined that the terminal building would
need to be expanded to accommodate required EDS machines;
* 2005 design included construction of new baggage inspection and
screening rooms;
* LAWA believes that the 2003 estimate for the conveyor system was
substantially low and inconsistent with estimates for similar LAX
terminals.
Terminal 8 (LAX);
2003 LOI/MOA estimate (dollars in millions): $6.3;
2005 estimate (dollars in millions): $17.2;
Rise is estimate cost (dollars in millions): $11.0 (174 percent);
Design changes/key reasons for estimate increase based on GAO review of
LAWA documentation:
* 2004 LAWA review determined that the 2003 concept was infeasible
because of space constraints;
* 2005 design included modification and demolition work on the terminal
building;
* 2005 design incorporated the construction of a baggage inspection
room and an addition to the terminal building to accommodate the EDS
machines;
* LAWA believes that the 2003 estimate for the conveyor system was
substantially low and inconsistent with estimates for similar LAX
terminals.
Tom Bradley International;
2003 LOI/MOA estimate (dollars in millions): $91.2;
2005 estimate (dollars in millions): $91.8;
Rise is estimate cost (dollars in millions): $0.6 (1 percent);
Design changes/key reasons for estimate increase based on GAO review of
LAWA documentation:
* 2005 design included new buildings to accommodate a second baggage
inspection room and EDS machines for re-screening checked baggage from
international flights.
ONT;
2003 LOI/MOA estimate (dollars in millions): $28.5;
2005 estimate (dollars in millions): $53.3;
Rise is estimate cost (dollars in millions): $24.8 (87 percent);
Design changes/key reasons for estimate increase based on GAO review of
LAWA documentation:
* 2003 concept development estimate drawings envisioned constructing a
below ground checked baggage screening facility, including conveyor
tunnels for both terminals;
* In 2004, LAWA determined that Boeing had made a mathematical error in
the 2003 concept development estimate: construction costs were only
included for one of the two baggage screening facilities and neither
connecting tunnel. In January 2007, TSA officials told us that they
were not able to substantiate this error;
* The 2005 design envisioned construction an above ground EDS facility
at each terminal.
Source: GAO analysis of LAWA data.
[1] Number reflects the total cost for terminals 1 and 2.
[End of table]
Changes in TSA Guidance and Evolving Technologies Contributed to Rise
in Estimate:
According to LAWA, changes in TSA guidance on in-line system designs
after the LOI/MOA was signed necessitated system redesigns.
Because few in-line systems were in use at the time of the LOI/MOA,
limited information on the capabilities of the in-line EDS machines,
including actual bags screened per hour and false alarm rates, was
available for modeling the systems.
In June 2006, TSA produced Recommended Security Guidelines for Airport
Planning, Design and Construction to guide future construction of in-
line checked baggage screening systems. TSA also expects to release
more detailed guidelines for in-line system planning and design in a
few months.
Concluding Observations:
The rise in the estimate between 2003 and 2005 was primarily related to
the fact that the 2003 estimate was developed at an early stage in the
design process and was therefore based on preliminary data and
assumptions that were subject to change.
According to TSA and LAWA officials, both TSA and Los Angeles signed
the LOI/MOA knowing the preliminary nature of the cost estimate.
The LOI/ MOA affords TSA flexibility to amend the agreements to account
for changed circumstances. However, under the terms agreed to in the
LOI/MOA, TSA has no obligation to amend the LOI/MOA or to reimburse Los
Angeles for any additional costs beyond those agreed to in the LOI/MOA
and does not have plans to do so.
Time Line of Key Events from the 2003 and 2005 Cost Estimates:
[See PDF for image]
Source: GAO analysis of TSA and LAWA data.
[End of figure]
[End of section]
Appendix III: Comments from Los Angeles World Airports:
Los Angeles World Airports:
March 8, 2007:
By electronic mail: goldenkoffr@gao.gov
Mr. Robert Goldenkoff:
Acting Director:
Homeland Security and Justice:
United States Government Accountability Office:
441 G Street, N.W.
Washington, D.C. 20548:
Dear Mr. Goldenkoff,
This letter provides the comments of Los Angeles World Airports 9LAWA)
on the February 2007 Draft Report entitled "Aviation Security: Cost
Estimates Related to TSA Funding of Checked Baggage Screening Systems
at Los Angeles and Ontario Airports" (Report). We thank you for the
opportunity to review the draft and to discuss our views on this
matter.
In three respects, we believe the Report does not paint an accurate or
complete picture of the facts.
1. TSA has the authority to revise the LOI to reflect accurate cost
figures and explicitly anticipated doing so during the LOI/MOA
development process, but has failed to meet that expectation to correct
reimbursement levels for LAWA.
Despite contemporaneous assurances made by TSA to adjust the LOI/MOA
and provide additional reimbursements based on the anticipated need for
future design modifications, the Report only states, at page 4, that
"TSA has no obligation to reimburse the City of Los Angeles for any
additional costs beyond those agreed to in the LOI/MOA, and TSA
officials stated that the agency does not have plans for such
reimbursements."
TSA explicitly incorporated in the LOI the ability to make an
adjustment to reflect additional costs, anticipating the need for a
correction. The LOI states, at pages 1-2 (emphasis added):
The TSA may, from time to time, following consultation with the City,
amend this LOI and the MOA to adjust the payment schedule, and such
adjustments may be made by the TSA when occasioned by changes in the
actual allowable costs of the Project, the the actual time to complete
the Project, in actual or estimated future obligating authority, or
otherwise, when determined at the Administrator's discretion to be in
the best interests of the United States.
LAWA considered this provision important, because TSA and LAWA agreed
that the LOI cost estimates were developed from preliminary designs--
prepared by TSA's own contractor and subcontractor--that were likely to
change, including as a result of subsequent TSA changes to guidelines
in baggage system design requirements. Indeed, TSA has since exercised
this authority by amending the LOI/MOA to reflect changes in timing and
scope of the project.
Moreover, in 2004 a senior TSA official provided written assurances to
LAWA that TSA would have an opportunity to cover an increase in costs
due to design changes. In an April 22, 2004 e-mail provided to GAO, the
TSA official stated:
We really do understand that as designs get fleshed-out and actual bids
come in, there will have to be some adjustments made to the MOA. Please
do not feel as if you'll be left holding the bag or be held to
estimates that do not prove to be right on the mark.
There will be many reasons to "adjust." As we get into construction,
we'll again be dealing with "puts and takes." Since we're talking
reimbursement of allowable costs (not firm-fixed-price), we'll have the
opportunity on the back-end to reconcile (FY06-07).
LAWA relied on this and other assurances from TSA, reinforced in
various discussions, at the time it concluded the LOI/MOA process.
The Report also does not reflect the subsequent extensive and
protracted discussions LAWA has with TSA, leaving the impression that
LAWA simply presented a new set of design concepts to TSA in September
2004. In fact, TSA and LAWA worked extensively over several months,
culminating in its submission of an engineering study in September
2004, which TSA approved later that month. LAWA used these updates, TSA-
approved concepts for reimbursement in 2006[Footnote 11]
LAWA appropriately requested an amendment to the LOI to receive the
statutory required 75% federal reimbursement of the $485 million
(without inflation) that TSA has deemed actual eligible and allowable
costs of the project, an increase of $107.25 million in revised coss
estimates were agreed to by TSA and based on TSA-approved final designs
and guidelines revised by TSA with substantial input from LAWA.
The Report recognizes that both TSA and LAWA assumed design cost
estimates were preliminary, which gives meaning to the highlighted text
of the LOI quoted above. The agreement LAWA and other airport sponsors
entered with TSA was based on receiving reimbursement of 75% of
eligible and allowable project costs, as mandated by Congress. LAWA did
not believe it would be held financially responsible for an increase in
eligible and allowable costs due to reasons beyond its control. Having
received assurances from TSA, it moved forward and expects ultimately
to be reimbursed for those costs.
2. The Report fails to assign specific responsibility for initial
designs and many errors, as directed by Senate Committee language.
The Report avoids assigning responsibility to the TSA, Boeing, its
contractor, or Turner, its subcontractor, even where doing so is highly
relevant to the equities in LAWA's request for additional
reimbursement. GAO thus has failed to answer the Senate Committee's
direction to "provide a detailed explanation of the reasons for any
differences from the original estimate, including identification of and
the party responsible for any material mistakes, omissions, and
infeasible design concepts in the original estimate."
Most obvious, is the Report's treatment of the "mathematical error at
ONT." in failing to account for two terminals at that airport and
neither of the connecting tunnels. Although the Report states that the
TSA "was not able to substantiate this error," significant issues
contributing to the error should have been evident upon close
inspection of the documents. GAO performed no independent verification
of TSA or LAWA numbers, the omission of these facilities is readily
apparent from the documents that Boeing submitted, and the former
Boeing project manager responsible for development of the estimates
confirmed the error.
In addition, TSA's statement, in a footnote on slide 8, that "a LAWA
contractor provided Boeing with baggage handling concept designed for
LAW and ONT," is simply untrue. Turner, a subcontractor, to TSA's
contractor Boeing, provided this information to Boeing in 2003. LAWA
later hired Turner , in 2004, to assist on this project, but only after
Turner was no longer working for TSA and Boeing. Turner was not an LAWA
contractor, but a TSA subcontractor to Boeing, and thus did not act of
behalf of LAWA in any capacity to determine the initial design and cad
cost estimates. LAWA relied on these estimates because there was not
enough time to make an independent assessment that would have
identified the errors, omissions, and fact critical to the question of
accountability.
In determining whether, as a matter of public policy, the TSA or LAWA
should shoulder the financial burden of the increase in allowable
costs, it is important to determine the proportionate amount of costs
due to TSA, its contractor, Boeing, its subcontractor Turner LAWA, or
the inherent and inevitable inadequacies of preliminary design
concepts. Although table 1 breaks down the revision in cost estimates
per airport and terminal, the Report refrains from assigning
responsibility to any party, and does not attempt to determine what
portion of the increase in costs was due to any particular error or
design change.
3. The Report does not recognize that LAWA responded to TSA urgency in
completing the agreements, resulting in the use of preliminary design
and cost estimates open to future revisions.
The Report does not convey the critical fact that LAWA operated under
TSA direction that time was of the essence to complete the LOI/MOA.
LAWA's statement that it was under a tight time frame to apply for the
LOI is fact. TSA's push to conclude the LOI/MOA as son as practicable
is supported by e-mail correspondence between TSA and LAWA before the
LOI/MOA was signed.
Given this time pressure, LAWA essentially was required to accept the
Boeing design and cost estimates and did not have sufficient
opportunity to conduct a thorough and detailed review. That the design
of such a complicated and complex project may well take years and
cannot be expected to be completed within the short time frame provided
is confirmed but the publication, in 2006, of the TSA Design and
Construction Guidelines referred to in the Report. These Guidelines
were based in substantial part on input received from LAWA and LAWA
consultants during the design development period at LAX and ONT from
2003 to 2005, some of whom are listed as contributors to the
Guidelines.
Conclusion:
In summary, this Report fails to reflect, fully and clearly, the
context in which LAWA has sought the LOI/MOA cost adjustment.
Specifically, in determining the original cost figures for inclusion in
the LOI/MOA, responding to TSA's urgency, LAWA was forced to rely on
the designs and cost estimates submitted to it by TSA's contractor and
subcontractor, but with the mutual understanding that those costs would
be adjusted later. Shortly after the LOI/MOA was signed, LAWA
determined that cost estimates were based on errors, omissions, and
infeasible design concepts, and promptly notified TSA. LAWA then worked
with TSA over many months to revise these designs, not only to address
identified problems, but also to follow changes in TSA design
requirements. The increased cost estimates are based on TSA-approved
final designs and TSA determinations of eligible and allowable costs.
Throughout this entire period, LAWA acted responsibly and in good faith
to comply with TSA guidelines. As provided in the LOI/MOA and
anticipated during discussions with TSA, LAWA seeks Federal
reimbursement only of its Congressionally-mandated share of these
eligible and allowable costs.
Again, we appreciate the opportunity to provide our views on the
report.
Sincerely,
Signed by:
Alan I. Rothenberg, President:
Board of Airport Commissioners:
Signed by:
Samson Mengistu:
Acting Executive Director:
[End of section]
FOOTNOTES
[1] See 49 U.S.C. § 44901(d).
[2] See Consolidated Appropriations Resolution, 2003, Pub. L. No. 108-
7, § 367, 117 Stat. 11, 423-24. See also 49 U.S.C. § 44923.
[3] See S. Rep. No. 109-273, at 44 (2006) (accompanying H.R. 5441, as
passed by the Senate; subsequently enacted into law as the Department
of Homeland Security Appropriations Act, 2007, Pub. L. No. 109-295, 120
Stat. 1355 (2006)).
[4] Our Congressional Protocols state that GAO will work with the
majority and minority of the designated committee to clarify the scope
of work, reporting objectives, and time frames.
[5] Improving Early Estimates Research Team, Improving Early Estimates:
Best Practices Guide, Construction Industry Institute, September 1998.
[6] GAO, Aviation Security: Systematic Planning Needed to Optimize the
Deployment of Checked Baggage Screening Systems, GAO-05-365
(Washington, D.C.: Mar.15, 2005).
[7] See Consolidated Appropriations Resolution, 2003, Pub. L. No. 108-
7, § 367, 117 Stat. 11, 423-24. See also 49 U.S.C. § 44923.
[8] See S. Rep. No. 109-273, at 44 (2006) (accompanying H.R. 5441, as
passed by the Senate; subsequently enacted into law as the Department
of Homeland Security Appropriations Act, 2007, Pub. L. No. 109-295, 120
Stat. 1355 (2006)).
[9] In comments on a draft of this report, LAWA wrote that it requested
75 percent federal reimbursement of the $485 million, an increase of
around $107 million. This amount differs from the almost $122 million
it requested in its April 19, 2005, letter to TSA.
[10] Construction Industry Institute, Improving Early Estimates
Research Team, Improving Early Estimates: Best Practices Guide
(September 1998).
[11] While the corrected designs reflected a significant increase in
costs, they also reduced the number of EDS machines needed at LAX and
ONT by 15, providing a substantial cost savings for TSA of
approximately $45 million.
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