NextGen FAA Contracts Are $4.2 Billion Over Budget, GAO Says

More than one-third of the 30 contracts critical to building a new U.S. air-traffic system are over budget and half are delayed, a government audit concluded.

Eleven of the 30 contracts underpinning the so-called NextGen system exceed projected costs by a total of $4.2 billion, according to a Government Accountability Office report released today. Fifteen of the contracts are behind schedule by an average of four years, the GAO report said.

“These challenges, if they persist, will impede the implementation of NextGen, especially in light of the interdependencies among many acquisition programs, where cost increases or delays in one program can affect the costs and schedules of other programs,” the agency said in the report.

The U.S. Federal Aviation Administration is moving from a radar-based system of tracking aircraft to one using global- positioning satellites. The NextGen system should reduce aircraft fuel consumption and emissions while improving safety, according to the agency. It will cost the government, airlines and other aircraft owners as much as $42 billion by 2025, the agency estimates.

Most of the cost increases identified in the report occurred before 2007, Brie Sachse, the FAA’s spokeswoman, said in an e-mail. From 2007 through 2011, the agency held cost increases on NextGen contracts to no more than 1.6 percent, Sachse said.

Cost Estimation

“The FAA has adopted a majority of the GAO’s cost estimation best practices, and looks forward to reviewing the GAO’s recently released scheduling best practices,” Sachse said.

In 2009, the GAO took the FAA off its “high-risk” list of government agencies because it had improved management of large contracts. Recent issues with agency contracts “have renewed concerns about the agency’s ability to manage complex multi- billion-dollar procurement programs,” the GAO said in the report.

The Wide-Area Augmentation System, which makes the position information from GPS accurate to within a few meters, is costing the FAA $3 billion, three times higher than initial estimates, the GAO said. It has also taken 14 years longer to complete than the FAA planned, the auditing agency said.

WAAS is being built by a consortium of Raytheon Co. (RTN), Tetra Tech Inc. and Lockheed Martin Corp. (LMT)

Flight Information Systems

The Standard Terminal Automation Replacement System, the computers that display flight information to controllers handling aircraft near airports, was $1.8 billion more expensive than projected, the GAO said. The system, which was built by Raytheon, was completed in 2007, almost two years late.

The contract for Automated Dependent Surveillance- Broadcast, a backbone of the NextGen system, is $44 million more than the $1.7 billion cost estimate, a 3 percent increase, the GAO said. It’s scheduled to be completed in 2014 and is on track, according to the report.

ADS-B is a network of ground stations and computers that will monitor radio transmissions from the thousands of planes in the air, allowing controllers to know where the aircraft are located. Under this new system, each aircraft will use GPS to determine its own position and broadcast that once a second, a more accurate way of tracking planes than radar. The lead contractor is ITT Corp. (ITT)

An update to the computers that monitor high-altitude air traffic, the En-route Automation Modernization program built by Lockheed, is $330 million, or 15 percent, over budget, according to the report. It is almost four years behind schedule.

Cost Overruns

Some of the cost overruns, including for the Standard Terminal Automation Replacement System and the En-route Automation Modernization program, have been reported previously by the FAA, the GAO and in the press. The GAO surveyed the status of the contracts at the request of Congress.

The FAA didn’t follow best practices for estimating costs of ADS-B and three other programs that the GAO analyzed in depth, according to the report.

Delays and cost increases occur for several reasons, according to GAO. The FAA adds unanticipated requirements to programs, controllers and other users of new systems are not sufficiently involved in development, the complexity of software development is underestimated, and unanticipated events such as funding cuts occur, the GAO said.

While some of the programs are completed already or not directly related to NextGen, delays also may slow NextGen because air-traffic programs are so interconnected, according to the report.

To contact the reporter on this story: Alan Levin in Washington at alevin24@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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