A corporation’s first duty is to its shareholders ratherthan to the American people.Why George Bush’s FAA Outsourcing May Cost YouBy Cliff Montgomery – June 16th, 2007On May 18, 2007, the Inspector General of the U.S. Transportation Department released a telling report on the FAA’s outsourcing of its flight service stations to private contractors.Such government outsourcing is controversial, as the private contractors’ first duty is to its shareholders rather than to the American people.Those who believe in government outsourcing insist there can only be wondrous savings and innovation from following their notions. But Transportation’s Inspector General (IG) isn’t so sure; in fact, the IG study found several possible problems with FAA’s current outsourcing program.We quote from the May report below:“This report presents the interim results of our audit of the controls implemented by the Federal Aviation Administration (FAA) over its conversion of flight service stations to contract operations. The objectives of our audit were to assess whether FAA had implemented effective plans and controls to(1) transition flight service stations to contract operations,(2) achieve anticipated savings, and(3) ensure that the operational needs of users continue to be met.”On February 1, 2005, FAA awarded a 5-year, fixed-price incentive contract (with 5 additional option years) to Lockheed Martin to operate the Agency’s 58 flight service stations in the continental United States, Puerto Rico, and Hawaii.”The contract, worth about $1.8 billion, represents one of the largest non-defense outsourcing of services in the Federal Government. FAA anticipates that by contracting out flight service facilities, it will save $2.2 billion over the 10-year life of the agreement.”On October 4, 2005, Lockheed Martin took over operations at the 58 flight service stations.”FAA’s anticipated savings are based on the difference between the Agency’s projected costs of operating the flight service stations versus the 10-year cost of the Lockheed Martin contract. These savings are expected to be achieved through a series of changes to reorganize flight service stations operations and modernize facilities and equipment.”We found that FAA has implemented effective controls over the initial transition of flight service stations to contract operations. These controls include contractual performance measures that require the contractor to achieve acceptable levels of operational performance and service, as well as internal mechanisms that oversee the operational and financial aspects of the program.”We also found that the Agency is using these controls to monitor contract flight service stations and, in some cases, is penalizing the contractor for poor performance.”It is uncertain, however, if the controls put in place by FAA will be sufficient to ensure that anticipated savings are achieved during the next and most critical phase of the transition.”In February, the contractor began actions to complete, test, and implement FS-21 and to consolidate the existing 58 sites into 3 hub and 16 refurbished locations–all within a 6-month time-frame.”There are significant, inherent risks associated with this phase of the transition, and any slips in that schedule could affect the anticipated savings. For instance:• FAA and the contractor are facing an extremely aggressive consolidation schedule.“According to the contractor’s transition plan, the consolidation involves opening the 3 hub facilities, transferring operations at 42 closing sites, and refurbishing the 16 continuing sites with new equipment. This is planned to occur during a 6-month period, which started in February 2007 and will end in July 2007.• The consolidation depends upon the contractor completing and deploying FS-21, and Lockheed Martin has already experienced delays in implementing it.“According to FAA officials, the current deployment schedule for FS-21 already includes a 10-month delay that Lockheed Martin experienced during development, and they believe an additional 6-week delay is possible. Further delays in implementing FS-21 could have a cascading effect on consolidation plans.• FS-21 requires digital capabilities and, per the contract terms, must interface with FAA’s Telecommunications Infrastructure (FTI) Network.“To meet this requirement, FAA is installing digital connections between Lockheed Martin hub facilities and certain closing and continuing flight service stations. While FAA has begun installing these connections, any delays or problems with installation could hamper testing and operation of FS-21, possibly delaying the transition.• A critical tool that could assist FAA in monitoring this transition–a variance report comparing actual first year costs to estimates–was only recently completed.“This tool will allow FAA to compare its baseline estimate of savings to actual costs, determine the reasons for shortfalls, and allow for adjustment to ensure that savings are realized.”The variance report is critical because it will provide FAA management with its first opportunity to evaluate projections of its outsourcing efforts in areas such as operational costs, technical operations, and actual savings.”This is particularly important during the next phase of the transition when delays in consolidation could have cascading effects on expected future savings.”Like what you’re reading so far? 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How Necessary Laws Are Killed These Days
Lawmakers generally only fight to protect the things they care about – and all too often, that just doesn’t include the lives of most of their constituents.
