FAA Fails to Properly Monitor Contracting, U.S. Auditor Says

The U.S. Federal Aviation Administration isn’t properly monitoring costs and potential ethical violations in contracts related to improvements in the nation’s air-traffic systems, an audit found.

Practices for selecting and overseeing contracts awarded since 2010 for work related to the so-called NextGen project are “not sufficient,” the Department of Transportation’s Inspector General said in a report released today.

The seven contracts examined, awarded to companies including Boeing Co. (BA), CSSI Inc., ITT Corp. (ITT) and General Dynamics Corp. (GD), are valued at as much as $7.3 billion, the largest cumulative award in FAA history, according to the report. The contracts are for technical and professional support of new systems to let the FAA track aircraft using satellite navigation instead of radar.

The agency didn’t verify labor rates charged in five of seven contracts, according to the report. The FAA overestimated the labor hours required, the auditors found.

“Weaknesses in its monitoring tools and critical acquisition data errors further impede FAA’s ability to ensure it does not overpay for professional and technical services,” the IG said in the report.

While the FAA was supposed to monitor the contracts for conflicts of interest, the agency was unaware that one contractor hired to perform upkeep was also involved in a $1.8 billion NextGen acquisition on the same system, the audit found.

“The FAA has strong management controls in place with enhanced oversight to ensure that the System Engineering 2020 contract program provides an efficient and cost-effective means to support NextGen implementation,” the agency said in a statement.

The agency, in a Jan. 20 letter attached to the audit, said it had made steady improvements in the contract process that “were not captured” in 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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