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United States Government Accountability Office:

GAO: 

Report to the Chairman, Subcommittee on Aviation, Committee on 
Transportation and Infrastructure, House of Representatives:

March 2006:

Aviation Security:

Progress Made to Set Up Program Using Private-Sector Airport Screeners, 
but More Work Remains:

GAO-06-166:

GAO Highlights: 

Highlights of GAO-06-166, a report to the Chairman, Subcommittee on 
Aviation, Committee on Transportation and Infrastructure, House of 
Representatives.

Why GAO Did This Study: 

In November 2004, as required by law, the Transportation Security 
Administration (TSA) began allowing all commercial airports to apply to 
use private screeners in lieu of federal screeners as part of its 
Screening Partnership Program (SPP). GAO’s prior work found that 
airports and potential private screening contractors had concerns about 
the SPP, including whether they would be liable in the event of a 
terrorist attack and how roles and responsibilities would be divided 
among TSA airport staff and private screening contractors. This report 
addresses TSA’s efforts to (1) provide liability protection to private 
screening contractors and airports and address other SPP stakeholder 
concerns; (2) achieve cost-savings through the SPP; and (3) establish 
performance goals and measures for the SPP.

What GAO Found: 

DHS and Congress have begun to address whether liability protection may 
be offered to current and prospective private screening contractors and 
airports using private screeners. DHS has already provided some 
liability protection to three of the four current private screening 
contractors. However, DHS officials stated that they cannot provide 
additional coverage, which would render contractors virtually immune 
from all pertinent claims, because TSA has not finalized performance 
standards that would allow DHS to determine if contractors will perform 
as intended—a criterion that must be satisfied before providing such 
additional protection. Recently enacted legislation shields airports 
from virtually all liability resulting from the negligence or 
wrongdoing committed by a private screening company or its employees. 
TSA has also taken action to improve the screener hiring process by 
granting contractors and TSA airport officials more input and 
flexibility in the hiring process. Additionally, TSA has defined the 
roles and responsibilities for SPP stakeholders—TSA airport staff and 
private screening contractors, among others—in its August 2005 SPP 
transition plan. However, the details in this plan have not been shared 
with private screening contractors, and all four contractors we 
interviewed were unclear about TSA staff roles and responsibilities at 
the airports they served.

TSA has stated that the SPP will operate at a cost that is competitive 
with equivalent federal operations and will achieve cost-savings where 
possible. Over the last 3 years, TSA has awarded cost-reimbursement 
contracts with an award fee component for screening services at four of 
the five airports currently using private screeners. The award fee is 
based, in part, on contractor cost-savings. However, opportunities for 
TSA cost-savings may be limited because under the cost-reimbursement 
contracts TSA bears most of the cost risk—the risk of paying more than 
it expected. TSA plans to shift more cost risk to contractors by 
competitively awarding fixed-price-award fee contracts for screening 
services at the four smallest airports that will participate in the 
SPP. TSA also plans to competitively award fixed-price contracts for 
screening services at larger airports, but stated that they cannot do 
so for up to 2 years—when officials believe that screening costs at 
larger airports will be better known. 

TSA has developed performance goals and has begun drafting related 
measures and targets to assess the performance of private screening 
contractors under the SPP in the areas of security, customer service, 
costs, workforce management, and innovation. For example, one of the 
measures would require contractors to ensure that new hires receive 
required training. TSA’s related target for this measure is that 100 
percent of new hires will complete required training. These same 
measures and targets will also be used by DHS to assess whether to 
award full liability coverage under the SAFETY Act. TSA officials 
stated that DHS must approve the draft performance measures and targets 
before they can be finalized. As of January 2006, DHS had not yet 
completed its review.

What GAO Recommends: 

GAO is recommending that the Department of Homeland Security (DHS) 
direct TSA to document and communicate roles and responsibilities for 
managing screener operations under the SPP, and establish a time frame 
for finalizing the SPP performance measures and targets.  

DHS reviewed a draft of this report and generally concurred with GAO’s 
findings and recommendations. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-06-166]. 

[End of Section]

Contents:

Letter:

Results in Brief:

Background:

DHS and Congress Have Begun to Address Liability Protection Issue at 
Airports Using Private Screeners, but Stakeholder Concerns about 
Liability and Other Program Issues Remain:

TSA Provides Some Incentives to Contractors to Achieve Cost-Savings and 
Plans to Shift More Cost Risk to Contractors at Larger Airports in 1 to 
2 Years:

Performance Goals and Measures Developed by TSA to Assess SPP 
Contractors Have Not Been Approved by DHS:

Conclusions:

Recommendations for Executive Action:

Agency Comments and Our Evaluation:

Appendix I: Scope and Methodology:

Appendix II: Comments from the Department of Homeland Security:

Appendix III: GAO Contact and Staff Acknowledgments:

Related GAO Reports:

Tables:

Table 1: Airports That Participated in the 2-Year Private Screener 
Pilot Program:

Table 2: Non-Pilot Program Airports That Applied to Use Private 
Screeners to Conduct Screening Operations from November 2004 through 
January 2006:

Table 3: Type of Contract and Contract Amount for the Four Private 
Screening Contractors for the Period November 19, 2004, through May 18, 
2006:

Table 4: TSA Performance Measures for Evaluating SPP Contractors:

Abbreviations:

ATSA: Aviation and Transportation Security Act; 
DHS: Department of Homeland Security; 
FAR: Federal Acquisition Regulation;
FSD: Federal security director; 
GPRA: Government Performance Results Act; 
SAFETY Act Support of Anti-terrorism by Fostering Effective 
Technologies Act; 
SPP: Screening Partnership Program; 
TIP: threat image projection; 
TSA: Transportation Security Administration:

United States Government Accountability Office:
Washington, DC 20548:

March 31, 2006:

The Honorable John L. Mica: 
Chairman: 
Subcommittee on Aviation: 
Committee on Transportation and Infrastructure: 
House of Representatives:

Dear Mr. Chairman:

The Aviation and Transportation Security Act (ATSA), enacted after the 
terrorist attacks of 2001, required the federal government to take over 
the job of screening airline passengers and their checked baggage from 
the private sector.[Footnote 1] Among other things, ATSA further 
required that the Transportation Security Administration (TSA) initiate 
a 2-year security screening pilot program at up to five commercial U.S. 
airports. The purpose of this pilot program, as defined by TSA, was to 
test the feasibility of utilizing private-sector screeners to screen 
passengers and their checked baggage in a post-9/11 environment, by 
allowing private-sector screeners--hired and managed by private 
screening companies under contract to TSA--to provide screening 
services in lieu of federal screeners at selected airports, with TSA 
oversight. The pilot program ran from November 2002 to November 2004. 
During that time, four private screening contractors served the five 
pilot program airports (one contractor served two airports).

In November 2004, as the private screener pilot program concluded, ATSA 
required that TSA begin allowing all commercial airports to apply to 
TSA to transition from a federal to a private screener workforce. To 
support this effort, TSA created the Screening Partnership Program 
(SPP) to allow all commercial airports an opportunity to apply to TSA 
for permission to use qualified private screening contractors and 
private-sector screeners. Currently, the four contractors that 
participated in the private screener pilot program are under contract 
to TSA to provide screening services at the five airports they have 
already been serving, and all five airports that participated in the 
pilot program have applied and been accepted to participate in the SPP. 
In February 2006, TSA competitively awarded a new contract for 
screening services for one of the five pilot program airports. Also, 
during the 16 months since the SPP was initiated, two additional 
airports have applied to the SPP. TSA approved one of these airport's 
application and in December 2005 awarded a contract to a private 
screening contractor--a contractor currently providing screening 
services at two of the five pilot program airports--that enabled this 
airport to transition from federal to private screeners in February 
2006. The other airport withdrew its application.

In November 2004, we reported on TSA's preliminary efforts to allow 
airports to apply to use private screening contractors to perform 
passenger and checked baggage screening services through the SPP, and 
how private screening contractors would compete to provide those 
services. We reported that key stakeholders we interviewed--private 
screening contractors, airport operators, and aviation associations-- 
were concerned about several aspects of the program. Specifically, 
stakeholders expressed concerns about liability protection--whether and 
to what extent private screening contractors and airports would be 
liable in the event that threat objects or weapons were not detected at 
passenger screening checkpoints or in checked baggage, leading to a 
terrorist incident. At issue was whether the Support Anti-terrorism by 
Fostering Effective Technologies Act of 2002 (the SAFETY Act) would 
offer private screening contractors and airport operators federal 
protection from potential lawsuits arising out of or resulting from 
aviation-related acts of terrorism.[Footnote 2] These stakeholders also 
were concerned about the degree of management control they would have 
over various aspects of screening services, including how roles and 
responsibilities would be divided among Federal Security Directors 
(FSD)[Footnote 3] and their staff and private screening contractor 
managers and staff.[Footnote 4]

In this report, we address (1) TSA's and the Department of Homeland 
Security's efforts to determine whether and how liability protection 
will be provided to private screening contractors and airports that 
participate in the SPP, and actions taken on other stakeholder concerns 
related to participation in the SPP; (2) how TSA has determined it will 
achieve cost-savings goals for screener operations through the SPP, 
specifically with respect to the choice of contract used, and contract 
terms; and (3) TSA's progress in developing and implementing 
performance goals, measures, and targets to assess the performance of 
the private screening contractors who will participate in the SPP.

To satisfy our objectives, we analyzed documentation related to TSA's 
SPP and the 2-year private screener pilot program that preceded the SPP 
and interviewed various officials. Specifically, we interviewed 24 
federal aviation officials within the Department of Homeland Security 
(DHS) and TSA, including FSDs at seven airports (the five pilot program 
airports and two airports that applied to participate in the SPP, 
namely, Elko Regional Airport in Elko, Nevada, and Sioux Falls Regional 
Airport in Sioux Falls, South Dakota); airport operators at all five 
airports with private screeners and the private screening contractors 
at these airports; officials with the two airports that have applied to 
participate in the SPP; officials with two aviation associations that 
represent hundreds of airports, including many large commercial 
airports; and a major liability insurance provider. To determine how 
TSA responded to stakeholder concerns about liability protection and 
other issues related to participation in the SPP, we reviewed SPP 
program guidance developed for airports, the SAFETY Act, and related 
documents obtained from DHS. Additionally, we reviewed ATSA provisions 
related to the SPP and our related reports, and interviewed DHS 
officials about the SAFETY Act's applicability to the SPP. To assess 
the status of TSA's efforts to achieve cost-savings in screener 
operations through the SPP, we reviewed the contracts and pilot program 
extension contracts TSA executed with the current private screening 
contractors, TSA's contracting policies and guidance, and the Federal 
Acquisition Regulation. We also reviewed an independent consultant's 
study prepared for TSA that evaluated the costs of screening at 15 
airports, including all 5 pilot program airports. In addition, we 
interviewed TSA officials about their choice of contract type to award 
for the SPP. To assess TSA's progress in developing and implementing 
performance goals and measures to assess the performance of the private 
screening contractors that participate in the SPP, we reviewed TSA's 
draft performance quality assurance surveillance and award fee plan for 
the SPP. We also reviewed our work on the Government Performance and 
Results Act (GPRA) and on TSA's private sector screening pilot program 
and its efforts to implement the SPP. We also interviewed TSA officials 
about their efforts to develop performance goals, measures, and targets 
for the SPP. Additional information on our scope and methodology is 
contained in appendix I.

We conducted our work from March 2005 through March 2006 in accordance 
with generally accepted government auditing standards.

Results in Brief:

DHS and Congress have begun to address whether and how liability 
protection may be offered to three of the four current private 
screening contractors (the fourth has not applied for coverage) and 
airports, at airports where private screeners are used. Specifically, 
DHS has provided contractors with some of the liability protections 
available under the SAFETY Act, including a limit on the damages a 
plaintiff may recover to the extent of the contractor's insurance 
coverage.[Footnote 5] DHS SAFETY Act officials stated that the 
department cannot provide the most extensive level of protection 
available under the SAFETY Act, rendering contractors virtually immune 
from all pertinent claims, because DHS cannot ascertain whether 
contractors are performing as intended--a criteria that the SAFETY Act 
requires before awarding such coverage. DHS officials stated they could 
not determine this because---as we discuss below---TSA has not yet 
finalized a standard of performance that would serve as the basis for 
DHS's evaluation. While none of the private screening contractors we 
interviewed stated that the lack of this additional coverage would 
preclude their participation in the SPP, all four stated that some form 
of SAFETY Act coverage was an essential supplement to their commercial 
liability insurance policies. Regarding airport liability under the 
SPP, Congress has granted airports legal protection from lawsuits. 
Specifically, under the fiscal year 2006 DHS Appropriations Act, 
airport operators are shielded from virtually all liability resulting 
from the negligence or wrongdoing committed by a private screening 
company, its employees, or federal screeners. On an additional issue of 
concern to stakeholders--the screener hiring process--TSA has made an 
effort to improve this process by granting contractors and FSDs more 
input and flexibility in the process, such as providing two options for 
assessing screener candidates and conducting more frequent screener 
assessments. Although TSA made improvements to the hiring process, 
however, some stakeholders, as well as FSDs at airports with federal 
screeners, remain concerned about the timing of the assessments and the 
length of time the assessment process takes. Stakeholders also 
expressed concern about the roles and responsibilities of federal and 
private-sector staff at airports using private screeners. TSA has since 
defined roles for FSDs, their staff, and private screening contractors, 
among others, in its August 2005 SPP transition plan, though TSA has 
not communicated to or shared the details of the plan with private 
screening contractors. TSA headquarters officials stated that they 
presumed that FSDs had communicated this information to private 
screening contractors. Furthermore, TSA officials stated that they 
communicated stakeholder roles in the SPP's June 2004 guidance. 
However, our review of the guidance found that it did not clearly 
delineate the roles and responsibilities of TSA airport staff and the 
private screening contractors. For example, the guidance did not 
provide any information on the roles and responsibilities of some TSA 
airport staff, such as screening managers and training coordinators, or 
clarify how their roles and responsibilities would differ from those of 
the private screening contractors. Additionally, the four private 
screening contractors we interviewed stated that the roles of TSA staff 
had not been clearly defined, and 18 of 25 FSDs we interviewed in the 
past, as well as an independent consulting firm hired by TSA to assess 
the pilot program, have concurred.[Footnote 6] According to our 
standards for internal controls, agency management should ensure there 
are adequate means of communicating with external stakeholders on 
issues that may have a significant impact on the agency's ability to 
achieve its goals. By not sharing detailed information on the roles and 
authorities described in the SPP transition plan with private screening 
contractors, TSA may be missing an opportunity to support the effective 
performance and management of essential functions related to the 
screening process. TSA officials stated that they plan to clearly 
delineate roles and responsibilities of the FSD, FSD staff, and private 
screening contractors in future SPP contracts.

TSA has documented its intention that the SPP will operate at a cost 
that is competitive with equivalent federal operations and will achieve 
cost-savings where possible. TSA's cost reimbursement-based contracts 
for screening services at four of the five airports currently using 
private screeners provide some cost incentives in the form of an award 
fee tied in part to the contractor's ability to achieve cost 
efficiencies and innovations. TSA could shift more cost risk from the 
government to the contractors, as federal acquisition policy suggests, 
by competitively awarding a different type of contract--specifically, a 
fixed-price contract--which provides for a price based on the 
contractor's cost experience and is not subject to any adjustment. To 
this end, TSA is in the process of awarding or planning to award fixed- 
price contracts to the contractors that will provide screening services 
at three of the four smallest airports that will participate in the SPP 
(and has already done so at the forth airport on a non-competitive 
basis). TSA officials stated that they cannot award this type of 
contract for screening services at larger airports for another 1 to 2 
years because they stated that they do not know the costs of screening 
at these airports. Officials stated that TSA would therefore be at 
greater risk of awarding a fixed-price contract for a higher cost than 
might actually be incurred. TSA officials acknowledged that TSA had 
already identified and collected some cost and performance data on 
passenger and checked baggage screening operations at 15 airports with 
private and federal screeners, including all five pilot airports, and 
completed a study in 2004 that estimated how much TSA spent for 
screening operations at each of the five pilot screening program 
airports. However, they stated that additional cost information based 
on the actual costs of participating in the SPP is needed for larger 
airports because the SPP contracts differ from the pilot and extension 
contracts that TSA previously awarded. For example, the SPP contracts 
will allow for contractors to recommend and, if approved, implement 
innovations, and to select among options for assessing screener 
candidates and training screeners. TSA officials said that it would be 
difficult for prospective SPP contractors for larger airports to 
accurately estimate the costs of providing screening services for a 
fixed-price contract. As a result, TSA plans to continue using cost- 
reimbursement contracts for screening services at the two largest 
airports for up to 2 additional years in order to determine estimated 
costs under the SPP contracts.

TSA developed performance goals and began drafting related measures and 
targets to assess the performance of private screening contractors 
under the SPP in the areas of security, customer service, costs, 
workforce management, and innovation. However, DHS, which is currently 
reviewing the performance goals, measures, and targets developed by 
TSA, has not yet completed its review nor set a time frame for doing 
so. According to TSA's draft quality assurance and award fee plan for 
the SPP, 14 separate performance measures have been established and 
performance targets--a tangible objective against which actual 
achievement will be compared--have been developed for 10 of the 14 
measures. For example, 1 of the 14 measures would require contractors 
to ensure that new hires receive required training before assuming 
screener duties. TSA's related target for this measure is that 100 
percent of new hires will receive required training. TSA officials 
stated that contractors will be required to meet the performance 
targets set by TSA specific to the airports they serve. Working with 
these airports, TSA stated that it has already established a baseline 
describing how federal screeners or private screening contractors have 
actually performed at individual airports, and these baseline data are 
being used to set performance targets for each airport. Officials 
further stated that TSA is considering providing financial incentives 
to contractors for a limited time in an effort to move their airports 
to meet TSA's baseline performance level. In March 2005, TSA officials 
stated that they had recently submitted the performance goals, 
measures, and targets to DHS. However, as of January 30, 2006, DHS had 
not yet approved the SPP performance metrics, and had not set a 
deadline for doing so. We asked TSA and DHS officials which office 
within DHS was responsible for approving these performance metrics, but 
the officials were not able to provide us with this information. Until 
these goals, measures and targets are approved by DHS, TSA will not be 
able to implement performance measures to evaluate private screening 
contractors under the SPP. Further, these same measures and targets 
will be used by DHS to determine whether to award private screening 
contractors with certification status, the highest level of liability 
protection available under the SAFETY Act. Until the SPP measures and 
targets are finalized, DHS officials stated that they cannot determine 
whether contractors will perform as intended--a criterion that must be 
satisfied before awarding certification status.

To help address stakeholder concerns, we are recommending that the 
Secretary of DHS direct the Assistant Secretary, TSA, to formally 
document and communicate to federal and private-sector stakeholders the 
roles and responsibilities for managing screener operations under the 
SPP. In addition, to help ensure the completion of a performance 
management framework for the SPP and to promote accountability of SPP 
contractors for achieving desired program outcomes, we recommend that 
the Secretary of DHS establish a time frame for completing its review 
of the performance goals, measures, and targets for the SPP so that TSA 
may apply them at the earliest possible opportunity.

We provided a draft copy of this report to DHS for review. DHS, in its 
written comments, generally concurred with our findings and 
recommendations and stated that efforts to implement our 
recommendations will help to develop a more effective, efficient, and 
economical administration of TSA's SPP. The full text of DHS's comments 
is included in appendix II.

Background:

Statutory Provisions Related to SPP:

ATSA was enacted on November 19, 2001, in response to the September 11, 
2001, terrorist attacks. ATSA established the TSA and charged it with 
responsibility for strengthening security in all modes of 
transportation, including aviation. One of the most significant changes 
mandated by ATSA was the shift from the use of private-sector screeners 
to perform airport screening operations to the use of federal 
screeners. Prior to ATSA, passenger and checked baggage screening had 
been performed by private screening companies under contract to 
airlines. ATSA required TSA to create a federal workforce to assume the 
job of conducting passenger and checked baggage screening at commercial 
airports. The federal workforce was to be in place by November 2002. At 
the same time, ATSA mandated that TSA establish a 2-year pilot program 
using qualified private screening companies to screen passengers and 
checked baggage, with TSA oversight.[Footnote 7] Pursuant to section 
108 of ATSA, TSA selected five airports, one from each airport security 
category, to participate in the pilot program.[Footnote 8] TSA also 
competitively selected four contractors (one contractor serves two 
airports) to conduct screening at the pilot airports. Table 1 lists the 
airports and private screening contractors that participated in the 
pilot program.

Table 1: Airports That Participated in the 2-Year Private Screener 
Pilot Program:

Airport and location: San Francisco International, Calif; 
Security category: X; 
Contractor: Covenant Aviation Security.

Airport and location: Kansas City International, Mo; 
Security category: I; 
Contractor: FirstLine Transportation Security.

Airport and location: Greater Rochester International, N.Y; 
Security category: II; 
Contractor: McNeil Security International.

Airport and location: Jackson Hole Airport, Wyo; 
Security category: III; 
Contractor: Jackson Hole Airport Board.

Airport and location: Tupelo Airport, Miss; 
Security category: IV; 
Contractor: Covenant Aviation Security. 

Source: TSA.

[End of table]

Section 108 further permitted the more than 400 commercial airports 
using federal passenger and checked baggage screeners to apply to TSA 
to use private rather than federal screeners at the conclusion of the 
pilot.[Footnote 9] Beginning on November 19, 2004, all commercial 
airports with federal security screening became eligible to apply to 
opt-out of using federal screeners through the newly established SPP. 
An airport operator may submit to TSA an application to have the 
screening of passengers and checked baggage at an airport be carried 
out by the screening personnel of a qualified private screening 
company, under a contract entered into between the private screening 
contractor and TSA. In addition to assessing airport applications for 
using private screeners, as part of the SPP, TSA plans to select 
qualified private screening companies that apply and meet ATSA and TSA 
requirements to conduct screening, including airports that seek to 
apply to serve as the private screening contractor.

The five airports selected to participate in the pilot program have 
applied and been accepted to the SPP. TSA awarded, on a non-competitive 
basis, new extension contracts (that replaced the original pilot 
program contracts) to the incumbent private screening contractors at 
the five pilot program airports effective November 19, 2004. The 
contracts enable the four private screening contractors to continue 
performing screening operations through May 18, 2006.[Footnote 10] As 
in the original pilot program contracts, the new contracts require 
private screening contractors to adhere to several ATSA provisions, 
including that:

* the level of screening services and protection provided at the 
airport under the contract will be equal to or greater than the level 
that would be provided at the airport by federal government personnel;

* the private screening company be owned and controlled by a citizen of 
the United States;

* the private screening company, at a minimum, meet employment 
standards, compensation and benefits rates, and performance 
requirements that apply to federal screeners; and:

* all private screener candidates meet the same minimum qualifications 
as federal screeners, including U.S. citizenship (or being a national 
of the United States), high school diploma or equivalent, English 
proficiency, and pass a criminal background check.

TSA will make the final decision to approve any application submitted 
for participation in the SPP and reserves the right to consider airport 
specific threat intelligence and an airport's record of compliance with 
security regulations and security requirements to determine the timing 
of any transition to private screening. TSA may also impose a delay on 
when an airport can transition to private screening based on such 
factors as peak travel season and the total cost of providing screening 
services at an airport.

Applicants to the SPP as of January 2006:

During the period November 2004 through January 2006, 7 out of the more 
than 400 commercial airports had applied to participate in the SPP. In 
addition to the five airports that participated in the pilot program, 
as of January 30, 2006, two additional airports that did not 
participate in the pilot program had applied to use private screeners-
-Elko Regional Airport in Nevada and Sioux Falls Regional Airport in 
South Dakota.[Footnote 11] However, after discussions with TSA 
officials, Elko Regional Airport submitted a letter to TSA on September 
30, 2005, seeking to withdraw its application on the grounds that the 
City of Elko could not qualify as a private screening company, thereby 
mooting its intention that the airport would serve as the 
contractor.[Footnote 12] On October 17, 2005, TSA replied back to Elko, 
acknowledging Elko's withdrawal of its application to participate in 
the SPP. Table 2 provides information on the two airports that applied 
to the SPP, as of January 2006.

Table 2: Non-Pilot Program Airports That Applied to Use Private 
Screeners to Conduct Screening Operations from November 2004 through 
January 2006:

Selected airport characteristics; Elko Regional Airport; 
Security category: III; 
Screeners authorized in FY 2005[A]: 17; 
Application date: November 2004;
Reason for applying: To act as provider of private screening services 
to achieve cost-savings and staff efficiencies;
Status of application: Application withdrawn.

Selected airport characteristics; Sioux Falls Regional Airport.
Security category: II;
Screeners authorized in FY 2005[A]: 37;
Application date: April 2005;
Reason for applying: To have a private screening company provide 
screening services to enhance customer service;
Status of application: Application approved and contract awarded. 

Source: TSA.

[A] The number of screeners authorized is based on full-time 
equivalents (FTE). One FTE is equal to 1 work year or 2,080 non- 
overtime hours.

[End of table]

We did not attempt to identify the reasons that only 7 of more than 400 
commercial airports that were eligible to participate in the SPP had 
submitted an application. However, in our November 2004 report on the 
SPP, we reported that of the 26 airport operators we interviewed, 20 
said their airport would not apply to participate in the SPP in the 
first year of the program, 5 were uncertain whether to apply for the 
2004 cycle, and 1 said his airport planned to apply, but only for its 
international passenger terminal.[Footnote 13] Among the 20, 16 said 
they were satisfied with federal screeners or did not see any benefit 
to applying to participate in the SPP and 13 cited concerns about 
airport liability in the event of a terrorist attack.[Footnote 14]

In May 2005, TSA approved the SPP application for the Sioux Falls 
airport, and in December 2005, TSA awarded a contract for passenger and 
checked baggage screening services at Sioux Falls to a private 
screening contractor. In February 2006, this award enabled Sioux Falls 
airport to transition from TSA federal screeners to private screeners 
employed by the contractor. According to the contractor, it will use 30 
FTEs, 7 less than TSA's screener allocation for Sioux Falls airport, 
without compromising security or customer service. The contractor 
expects to achieve operational efficiencies and cost savings for its 
screening operations at this airport due to the reduction in 
FTEs.[Footnote 15]

In addition, during February 2006, TSA awarded a contract to a private 
screening contractor at one of the five pilot program 
airports.[Footnote 16] TSA is in the process of awarding contracts to 
the remaining four airports that applied to use private screeners. As 
of February 28, 2006, TSA received proposals from private screening 
companies for the Greater Rochester International, Tupelo, Kansas City, 
and San Francisco International airports. TSA also released the request 
for proposals for San Francisco International airport.

TSA also approved 34 private screening companies for listing on a 
qualified vendors list, which identifies that these companies are 
eligible to perform passenger and checked baggage screening services in 
the SPP.

Overview of TSA Budget for SPP:

DHS's fiscal year 2006 appropriations provides nearly $2.54 billion to 
fund the screener workforce--about $2.4 billion for federal passenger 
and checked baggage screener full-time equivalents[Footnote 17] and an 
additional $139.6 million to pay for screening contractors at the five 
pilot program airports. In accordance with its appropriations, TSA 
plans to fund the SPP from the same budget line item as federal 
screening operations to provide flexibility on the number of airports 
that can participate in the program. In this manner, the costs for 
contracts with private screening contractors are to be funded by the 
cost of the federal operations that are being displaced.

Overview of the SAFETY Act:

The SAFETY Act, enacted as part of the Homeland Security Act of 2002, 
offers liability and other protections to sellers of qualified anti- 
terrorism technologies.[Footnote 18] According to DHS, services, such 
as screening services, are eligible to receive liability protection 
under the SAFETY Act if designated as qualified anti-terrorism 
technologies, thus limiting liability risks for the private screening 
contractor and its subcontractors, suppliers, vendors, and 
customers.[Footnote 19] SAFETY Act protection pertains to "claims 
arising out of, relating to, or resulting from an act of terrorism" 
where qualified anti-terrorism technologies have been 
deployed.[Footnote 20] According to DHS, the SAFETY Act reflects the 
intent of Congress to ensure that the threat of liability does not 
deter the potential manufacturers or sellers of anti-terrorism 
technologies from developing and commercializing technologies that 
could significantly reduce the risks or mitigate the effects of large- 
scale acts of terrorism.[Footnote 21] The SAFETY Act does not offer 
indemnification (compensation for losses incurred) to sellers of 
qualified anti-terrorism technology but rather limits, and in some 
instances may completely bar, claims brought against sellers of anti- 
terrorism technologies that have been deployed in defense against or 
response or recovery from a terrorist incident.[Footnote 22] If a 
seller of a potential anti-terrorism technology wishes to be awarded 
SAFETY Act protections, the seller must formally apply to the 
department using the forms provided by DHS, furnish the entire 
requisite supporting data and information, and successfully demonstrate 
compliance with the act's requirements.

Types of Contracts Awarded by TSA:

TSA awarded one of two types of contracts for extending contractor 
performance at the five pilot program airports. Both these types of 
contracts were awarded on a non-competitive basis to the private 
screening contractors. TSA awarded the first type of contract--cost- 
plus-award-fee contracts (a type of cost-reimbursement contract)--to 
the four private screening contractors providing screening services at 
four of the five pilot program airports. These contracts, which are 
generally used when the costs are not known, provide for payment of 
allowable incurred costs, to the extent prescribed in the contract. A 
cost-plus-award-fee contract provides for a fee consisting of (1) a 
base amount that is a percentage of the estimated cost fixed at 
inception of the contract and (2) an award amount that the contractor 
may earn in whole or in part during the contract period and that is 
sufficient to provide motivation for excellence in such areas as 
quality, timeliness, technical ingenuity, and cost-effective 
management. The actual award amount is based upon an evaluation by TSA 
compared against criteria spelled out in the contract. This 
determination and the methodology for determining the award fee are 
unilateral decisions made solely at the discretion of the government.

TSA awarded the second type of contract--a fixed-price-award-fee 
contract--to one private screening contractor. This type of contract is 
generally used when the requirements are reasonably known and a 
reasonable basis for firm pricing by the contractor exits. A fixed- 
price award fee contract establishes a fixed price (including normal 
profit) for the effort, which will be paid for satisfactory contract 
performance, and an award fee. The award fee earned (if any) will be 
paid in addition to that fixed-price based on periodic evaluations of 
the contractor's performance against an award-fee plan. TSA awarded a 
fixed-price-award-fee contract to a private screening contractor at 
Tupelo airport, a security category IV airport, the smallest airport.

According to the Federal Acquisition Regulation (FAR), which generally 
governs federal government procurement activities, the negotiation of 
contract type and price (or estimated cost and fee) should result in 
reasonable contractor risk and provide the contractor with the greatest 
incentive for efficient and economical performance.[Footnote 23]A firm- 
fixed-price contract, which best utilizes the basic profit motive of a 
business enterprise, shall be used when the contractor risk involved is 
minimal or can be predicted with an acceptable degree of certainty. The 
FAR provides that when a reasonable basis for firm pricing does not 
exist, other contract types (such as cost reimbursement) should be 
considered, and negotiations should be directed toward selecting a 
contract type that will appropriately tie profit to contractor 
performance.[Footnote 24] As a service continues to be contracted over 
time, however, and after experience provides a basis for firmer 
pricing, the FAR advises that cost risk should shift to the contractor 
and a fixed-price contract should be considered.[Footnote 25] The FAR 
specifically states that contracting officers should avoid protracted 
use of a cost-reimbursement contract after experience provides a basis 
for firmer pricing. Additionally, under the FAA acquisition policy 
followed by TSA, "[t]he use of fixed-price contracts is strongly 
encouraged whenever appropriate."[Footnote 26]

DHS and Congress Have Begun to Address Liability Protection Issue at 
Airports Using Private Screeners, but Stakeholder Concerns about 
Liability and Other Program Issues Remain:

DHS awarded some of the liability protections available under the 
SAFETY Act to three of the four private screening contractors that 
applied for it and stated that it will decide the status of future 
applications on a case-by-case basis in accordance with criteria 
described in the act. However, DHS cannot award the most extensive 
level of protection under the SAFETY Act, certification status, until 
it can determine whether contractors will perform as intended--a 
criterion that must be satisfied before awarding such coverage. DHS 
officials stated that DHS has not been able to award SAFETY Act 
certification status to contractors because TSA has not yet finalized 
performance standards for assessing whether contractors have performed 
as intended. While all four current screening contractors we 
interviewed stated that SAFETY Act protection was important, they did 
not state that they would be unwilling to participate in the SPP 
without certification under the SAFETY Act. For example, one contractor 
said it had too much time and money invested in providing private 
screening services to not participate in the SPP. Congress has since 
granted legal protection from lawsuits to all airports where TSA 
conducts or oversees passenger and checked baggage screening. 
Specifically, the fiscal year 2006 DHS appropriations act shields 
airports from, among other things, virtually all liability related to 
negligence or wrongdoing by private screening contractors, their 
employees, or federal screeners. In addition, TSA made an effort to 
improve the screener hiring process by granting contractors and FSDs 
more input and flexibility in the hiring process, though some 
contractors, as well as FSDs at airports with federal screeners, remain 
concerned about the timing of the assessments and the length of time 
the assessment process takes. TSA has also taken steps to clarify SPP 
roles and responsibilities between federal and private sectors, but the 
four private screening contractors we interviewed still had questions 
about the roles and responsibilities of TSA staff at the airports they 
served.

DHS Has Provided SAFETY Act Protection to Three of the Four Current 
Private Screening Contractors and Will Decide Future Coverage on a Case-
by-Case Basis:

Officials at DHS' Science and Technology Division stated that all anti- 
terrorism technologies submitted to the department for protection under 
the SAFETY Act are evaluated--including screener services--on a case- 
by-case basis, in accordance with the criteria defined by the act's two-
tiered protection status, as follows:

Designation status. Designation status protects a seller of anti- 
terrorism technology in the event the technology fails to thwart an act 
of terrorism by limiting the type and amount of damages a plaintiff may 
recover such that a seller's potential liability cannot exceed the 
amount of insurance coverage maintained by the seller.[Footnote 27] To 
receive designation status, anti-terrorism technologies, including 
screening services, must be evaluated by DHS against the seven criteria 
set out in the SAFETY Act: (1) prior U.S. government use or 
demonstrated substantial utility and effectiveness; (2) availability of 
the technology for immediate deployment in public and private settings; 
(3) existence of extraordinarily large or unquantifiable risk of 
exposing the seller or other provider of such anti-terrorism technology 
to potential liability; (4) substantial likelihood that the technology 
will not be deployed unless the risk management protections of the 
SAFETY Act (limited liability) are conferred; (5) the magnitude of risk 
to the public if the technology is not deployed; (6) evaluation of all 
scientific studies that can be feasibly conducted to assess the 
capability of the technology to substantially reduce risks of harm; and 
(7) anti-terrorism technology that would be effective in facilitating 
the defense against acts of terrorism, including technologies that 
prevent, defeat or respond to such acts.[Footnote 28]

Certification status. Once designated, qualified anti-terrorism 
technologies become eligible for certification under the SAFETY Act, 
which gives the seller the legal status of a government contractor and 
renders the seller virtually immune from any claims that might arise in 
the event the technology fails to thwart an act of terrorism, provided 
the seller does not act fraudulently or with willful misconduct in 
submitting information to DHS.[Footnote 29] To certify, DHS must 
determine if the qualified anti-terrorism technology will (1) perform 
as intended, (2) conform to the seller's specifications, and (3) be 
safe for use as intended. Certification status cannot be awarded unless 
these three criteria have been met. DHS places certified anti-terrorism 
technologies and services on an Approved Product List for Homeland 
Security.[Footnote 30]

DHS determined that the four private screening contractors serving the 
five pilot program airports were eligible for SAFETY Act protection. 
Once this determination was made, after November 2004, three of the 
four current private screening contractors applied for and were 
provided designation status under the SAFETY Act.[Footnote 31] 
Contractors that apply to the SPP in the future are to be evaluated 
individually, as their applications to the program are processed. TSA 
awarded a contract for private screening services at Sioux Falls and 
Jackson Hole airports. The status of SAFETY Act coverage for these 
airports, if the contractors apply for coverage, will be determined at 
a later point in time.

Contractors' Concerns about Liability Not Yet Resolved:

As of January 2006, one issue pertaining to how the SAFETY Act would be 
applied to contractors remained unresolved and is a cause for concern 
for one of the four contractors we interviewed. Specifically, DHS 
officials stated that they have not been able to award SAFETY Act 
certification status to contractors because TSA has not yet finalized 
performance standards for assessing whether contractors have performed 
as intended. DHS SAFETY Act officials stated that once TSA finalizes 
its performance standards, the contractors that previously received 
designation status may submit an application for SAFETY Act 
certification. The application is to include evidence demonstrating 
that they are meeting the TSA-defined performance standards. DHS will 
evaluate the material submitted by the applicant against the TSA 
standards. According to DHS officials, assuming the applicant is able 
to demonstrate that it is performing as TSA intends, there should be no 
impediment to granting certification. When the three contractors that 
already have SAFETY Act designation status were asked to comment on 
whether they would continue to participate in the SPP without 
certification status, two contractors told us they would. One of these 
two contractors said it had too much time and money invested in 
providing private screening services to not participate in the SPP. The 
third contractor said that its company's $50 million in general 
liability insurance coverage excludes acts of terrorism,[Footnote 32] 
thus the company believed it "would remain exposed to serious liability 
concerns related to terrorist threats [or] risks." This contractor did 
not, however, explicitly state that it would not participate in the SPP 
going forward, if certification status were not awarded.

In general, contractors may offset potential liability arising from 
acts of terrorism by purchasing commercially available liability 
insurance.[Footnote 33] Two of the four private screening contractors 
currently under contract to TSA purchased insurance policies that 
protect them from acts of terrorism. Both contractors stated that their 
policies were inadequate to cover the liability resulting from a major 
terrorism attack and that SAFETY Act protection was, therefore, 
additionally necessary to provide protection to the 
contractor.[Footnote 34] As to the importance of SAFETY Act protection 
to potential future participants in the SPP, in November 2004, we 
reported that five of six prospective SPP private screening contractors 
we interviewed--those not currently serving airports--stated that the 
issue of whether they would receive liability protection was important 
and would greatly affect whether they would participate in the SPP if 
selected by TSA as a qualified contractor.[Footnote 35] In addition, 
officials with two aviation associations representing hundreds of 
airports, whom we interviewed, stated that their members believed that 
SAFETY Act protection--both designation and certification--was 
necessary for contractors to participate in the SPP.

DHS Appropriations Act Addresses Airports' Concerns about Liability 
Exposure Issue:

The status of SAFETY Act coverage for airports, and liability coverage 
in general for airports using private screeners, differs from coverage 
for contractors. While DHS has determined that contractors performing 
screening services are eligible to receive liability protection under 
the SAFETY Act, the department has not determined whether airports that 
do not perform screening services are eligible for liability coverage 
under the act. In October 2005, however, Congress enacted legislation 
that granted airports legal protection from lawsuits. Specifically, 
section 547 of the Department of Homeland Security Appropriations Act, 
2006, shields airport operators from virtually all liability relating 
to the airport operator's decision on whether or not to apply to opt- 
out of using federal screening, and any acts of negligence, gross 
negligence, or intentional wrongdoing by either a qualified private 
screening company under contract to DHS, its employees, or by a federal 
screener.[Footnote 36] Prior to the enactment of this act, three of the 
seven airport operators we interviewed expressed concerns about whether 
the government would extend liability protection to them.[Footnote 37] 
They were concerned that if a security incident arose that resulted in 
litigation, they may become a party to a lawsuit. Officials with two 
aviation associations, whom we also interviewed at that time, also 
expressed concerns about airport liability. After the enactment of the 
2006 appropriations act, one of the three airport operators that had 
expressed concerns about liability told us that the protection 
available under section 547 of the act had addressed its concerns about 
its airport's liability. A second airport operator that we contacted 
after enactment of section 547 had not yet reviewed the provision and 
stated that it could not confirm whether its airport would be protected 
from liability.[Footnote 38]

TSA Granted Private Screening Contractors Flexibility in Hiring 
Process, but Contractor Concerns Remain:

TSA made an effort to improve the screener hiring process by granting 
contractors and FSDs more input and flexibility in the hiring process, 
including more frequent assessments of screener candidates and two 
options for performing these assessments. Prior to November 2004, TSA 
had scheduled candidate assessment forums on a regional basis 1 to 2 
times a year to evaluate a pool of candidates interested in screener 
positions. At that time, private screening contractors, like FSDs at 
airports with federal screeners, had to rely on TSA to authorize the 
hiring of screeners and establish candidate assessment forums--a 
process that could take several months.[Footnote 39] Beginning in 
November 2004, as part of the contract extensions, TSA began requiring 
the pilot program private screening contractors to submit annual hiring 
plans to TSA for review, indicating their anticipated screener staffing 
needs. The intention was to use this information to plan for more 
frequent and timely screener assessments conducted regionally and 
locally--up to 6 times a year. Despite TSA's planned increase in the 
frequency of assessments, private screening contractors, as well as 
FSDs at airports with federal screeners, remain concerned about their 
inability to conduct hiring on an as needed basis because TSA still 
controls the scheduling of assessment forums.[Footnote 40] One 
contractor, for example, stated that despite the scheduling of more 
frequent assessment forums, it still could not fully implement its 
hiring plan because the assessments did not necessarily coincide with 
its hiring periods.

In response to contractor concerns about the candidate assessment 
process, in November 2004, TSA began allowing private screening 
contractors two options for evaluating screener candidates:[Footnote 41]

* Option 1: Contractors may draw screener candidates from a pool 
developed by a private company under contract with TSA, which is 
responsible for assessing potential screener candidates. This company 
administers a computer-based aptitude test, mental and physical tests, 
and conducts background checks at regional assessment centers. The 
contractor is under no obligation to accept these applicants.

* Option 2: Contractors may use TSA's assessment company for the 
aptitude test alone, and develop and implement additional assessment 
activities on their own, provided they meet ATSA requirements and TSA 
guidance.[Footnote 42]

According to TSA officials, all four private screening contractors have 
selected from these two options for hiring screeners. The contractors' 
views about the hiring process were mixed. For example, one contractor 
we interviewed said that because TSA has allowed it to conduct its own 
assessments, the length of the entire assessment process has been 
reduced from several months to 2 weeks. This contractor, which was 
using option two, is now conducting key parts of the assessment 
process. According to this contractor, its use of option two has 
resulted in a more efficient, effective, and significantly less costly 
process. A second contractor using option two stated that it had 
established a new hire recruitment, assessment, and training program. 
According to this contractor, its use of option two has resulted in its 
ability to identify more qualified screener candidates, improve 
screener retention, and fill screener vacancies on an as needed basis. 
However, the other two contractors remained concerned about the length 
of time the assessment process lasts. One of these contractors stated 
that the duration of the process was still so long that potential 
screeners found other jobs first and dropped out of consideration. This 
contractor, which was using option two, proposed using FSD staff to 
conduct the assessments to streamline and shorten the assessment 
process.[Footnote 43] According to TSA officials, TSA did not accept 
this suggestion because TSA's Office of Human Resources determined it 
would have been too costly to allow FSD staff to conduct the 
assessments. TSA officials stated that they offered the contractor the 
same assessment options that are available to all airports with federal 
screeners. Officials further stated that they will continue to examine 
all aspects of the assessment process in an effort to offer greater 
efficiency and flexibility in screener hiring for both federal and 
contract screeners.

TSA Has Taken Steps to Clarify SPP Roles and Responsibilities between 
Federal and Private Sectors, but Questions about Division of Labor 
Remain:

While TSA has defined the roles and responsibilities for FSDs, FSD 
staff, and private screening contractors, among others, in its August 
2005 SPP transition plan, the details contained in this plan have not 
been communicated to or shared with private screening 
contractors.[Footnote 44] TSA and SPP procurement officials stated that 
they consider the transition plan to be an internal document that TSA 
does not intend to distribute outside of the agency. However, officials 
stated that the information on roles and responsibilities under the SPP 
would be available to prospective private screening contractors as part 
of the SPP contracting process. Additionally, TSA SPP officials stated 
that they presumed that FSDs had communicated this information to the 
current private screening contractors. Further, TSA officials stated 
that TSA's June 2004 guidance on the SPP provides information on roles 
and responsibilities of SPP stakeholders. However, our review of the 
guidance found that it did not clearly delineate the roles and 
responsibilities of TSA airport staff and the private screening 
contractors. For example, the guidance did not include any information 
on the roles and responsibilities of some TSA airport staff, such as 
screening managers and training coordinators, and did not clarify how 
their roles and responsibilities would differ from those of the private 
screening contractors. Additionally, the four private screening 
contractors we interviewed had questions about the roles and 
responsibilities of TSA staff at the airports they served, including 
screening managers and stated that, in their view, TSA had not clearly 
defined the roles and responsibilities of TSA staff at airports 
participating in the SPP.[Footnote 45] When asked whether FSD and FSD 
staff roles and responsibilities were clear, one contractor stated that 
he did not believe that TSA had recognized that the roles of training 
managers and screening managers at airports using federal or private 
screeners are different. A second contractor stated that, in his view, 
TSA had not standardized the roles and responsibilities of TSA airport 
staff across the five airports currently using private screeners. 
Similarly, a third contractor stated that TSA roles and 
responsibilities need to be more well-defined, particularly the role of 
FSD airport staff and TSA local contract staff. Finally, the fourth 
contractor stated that the separation of roles and responsibilities has 
been a major challenge on a daily basis in part because TSA staff at 
screening checkpoints assert control and impose operational changes at 
the checkpoints--tasks that the contractor believes it is responsible 
for, rather than TSA staff. This contractor identified the need for TSA 
to clearly define the roles of the various stakeholders involved in the 
SPP and to establish guidelines on TSA's oversight and regulatory 
responsibilities at airports participating in the SPP.

In September 2005, in reporting on the ability of FSDs to address 
airport security needs, we stated that TSA airport stakeholders 
(including airport operators)[Footnote 46] at some of the airports we 
visited stated that the FSD's role was not sufficiently clear, and at 
least one stakeholder at every airport we visited said such information 
had never been communicated to them.[Footnote 47] We recommended that 
DHS direct TSA to communicate the authority of the FSD position, as 
warranted, to FSDs and all airport stakeholders. In response, TSA 
agreed to update the role of the FSD and communicate this information 
to airport stakeholders. As of December 2005, however, TSA had not yet 
implemented this recommendation, but stated that the matter is being 
considered by a TSA steering committee. In addition, a consulting firm 
that evaluated the private screening pilot program in April 2004 
recommended that TSA clearly delineate the roles and responsibilities 
among federal and private screening managers and their staff and 
include this information in its contracts with the private screening 
contractors. Based on our review of the June 2004 guidance on the SPP 
and the contracts awarded to the current private screening contractors 
in November 2004, TSA had not included this information. TSA officials 
stated that they plan to clearly delineate roles and responsibilities 
of the FSD, FSD staff, and private screening contractors in the 
forthcoming SPP contracts.

According to our standards for internal controls, agency management 
should ensure there are adequate means of communicating with external 
stakeholders on issues that may have a significant impact on the 
agency's ability to achieve its goals.[Footnote 48] By not sharing 
detailed information on roles, responsibilities, and authorities 
described in the SPP transition plan with all FSDs and private 
screening contractors, TSA may be missing an opportunity to support the 
effective performance and management of essential functions related to 
the screening process. Additionally, without clear and specific 
information on roles and responsibilities under the SPP, it may be 
difficult for prospective SPP contractors to develop an informed 
estimate of the costs of providing screener services.

TSA Provides Some Incentives to Contractors to Achieve Cost-Savings and 
Plans to Shift More Cost Risk to Contractors at Larger Airports in 1 to 
2 Years:

Through its contracts, TSA offers the private screening contractors 
some incentives to decrease costs. Specifically, TSA's cost 
reimbursement contracts for screening services at four of the five 
airports currently using private screeners provide some incentives in 
the form of an award fee tied in part to the contractor's ability to 
achieve cost efficiencies and innovations. However, despite TSA's use 
of cost-savings as a basis for a portion of the award fees, 
opportunities for government cost-savings may be limited because under 
the cost-reimbursement contracts the government bears most of the cost 
risk--the risk of paying more than it expected. TSA plans to shift more 
cost risk to contractors by competitively awarding fixed-price-award 
fee contracts for screening services at the four smallest airports that 
will participate in the SPP. TSA officials said they also plan to 
competitively award fixed-price contracts for screening services at 
larger airports, but will not do so for another 1 to 2 years--when they 
believe that screening costs at larger airports will be better known.

TSA Plans to Transition from Cost-Reimbursement to Fixed-Priced 
Contracts, but Stated That an Additional 1 to 2 Years Was Needed to Do 
So at Larger Airports:

TSA expects that the SPP will operate at a cost that is competitive 
with equivalent federal operations and will achieve cost-savings, where 
possible. However, opportunities for cost savings are somewhat limited 
because of various requirements that contractors must meet in 
performing the contract. Specifically, under ATSA, private screening 
companies must provide compensation and other benefits to contract 
screeners at a level not less than that provided to federal 
screeners.[Footnote 49] Further, the contracts require that contractors 
ensure that security checkpoints are staffed in accordance with TSA's 
standard operating procedures and other government requirements and 
that the screeners have the qualifications and training established by 
the government. While these government airport security standards must 
be met, TSA has structured its existing contracts to provide some 
incentives to contractors for cost savings. Specifically, over the last 
3 years, TSA has awarded cost-reimbursement contracts with an award fee 
component for screening services at four of the five airports currently 
using private screeners.[Footnote 50] These contracts provide for 
payment of allowable incurred costs, to the extent prescribed in the 
contract (typically up to a specified cost ceiling). In addition, the 
government also agrees to award a separate amount (base fee) fixed at 
inception of the contract and an award amount (award fee) that the 
contractor may earn in whole or in part during performance that is 
sufficient to provide motivation for excellence in such areas as 
quality, technical approach, and cost-effective management. The amount 
of the award fee to be paid is determined by the government's 
judgmental evaluation of the contractor's performance in terms of the 
criteria stated in the contract.

Because cost-savings and contract management account for 20 percent of 
the award fee determination for the current screening services 
contracts, these contracts do provide some incentive for contractor 
cost efficiency. Specifically, the award fee plan establishes the 
expectation that contractors will provide screening services with cost 
efficiencies and innovation, while meeting the security standards, 
mission objectives, and compensation levels required by ATSA and TSA, 
respectively.[Footnote 51] These cost and contract management factors 
include:

* Overtime/personnel costs--evaluates the contractor's ability to 
control overtime and personnel costs.

* Innovation/continuous improvement--evaluates the contractor's ability 
to build on previous experiences/accomplishments and utilize innovative 
approaches, techniques and tools.

* Other direct/indirect cost[Footnote 52]--evaluates the contractor's 
ability to control direct labor cost and overtime costs and its ability 
to effectively manage its subcontract costs through use of competition 
to the greatest extent practicable and through documented cost analysis 
substantiating the reasonableness of subcontract costs. Indirect cost 
control evaluates the contractor's ability to control its indirect 
costs.[Footnote 53]

Despite TSA's use of cost-savings as a basis for a portion of the award 
fees, opportunities for government cost-savings may be limited in part 
because under the cost-reimbursement contracts the government bears 
most of the cost risk--the risk of paying more than it expected. 
Specifically, under cost-reimbursement contracts, the government must 
reimburse the contractor for all allowable costs as provided in the 
contract. TSA plans to shift most cost risk to its contractors by 
moving to a fixed-price-award fee contract in the next 1 to 2 years. A 
fixed-price type of contract places upon the contractor the maximum 
risk and full responsibility for all costs and resulting profit or 
loss, providing maximum incentive for the contractor to control costs 
and perform efficiently. Further, in a competitive environment, pricing 
by contractors for a fixed-price contract would be subject to 
marketplace pressures that would provide incentives for the contractor 
to control costs and reduce prices in order to win the contract. The 
award fee component of a fixed-price contract is used to motivate the 
contractor by relating the amount of profit or fee payable under the 
contract to the contractor's performance in the areas of operations, 
management, contract compliance, and human resources. Because the 
contract is fixed-priced, the award fee portion does not assess cost 
management.

TSA has awarded a fixed-price-award-fee contract to the contractor 
providing screening services at the smallest of the five airports using 
private screeners, while the contracts for screening services for the 
other four airports remain as cost-reimbursement contracts. TSA 
officials stated that the fixed-price contract was awarded for the one 
airport (on a noncompetitive basis) because costs there were considered 
predictable and therefore a reasonable basis for firm pricing by the 
contractor existed. Table 3 provides information on TSA's contracts 
with current private screening contractors.

Table 3: Type of Contract and Contract Amount for the Four Private 
Screening Contractors for the Period November 19, 2004, through May 18, 
2006:

Private screening contractor: Covenant Aviation Security; 
Type of contract: Cost-plus-award-fee: [Check]; 
Type of contract: Fixed-price-award- fee: [Empty];  
Contract amount[A]: Base Year[B]: $79,423,995; 
Contract amount[A]: Option period[C]: $58,354,170; 
Airport security category: X.

Private screening contractor: Covenant Aviation Security; 
Type of contract: Cost-plus-award-fee: [Empty]; 
Type of contract: Fixed-price- award-fee: [Check]; 
Contract amount[A]: Base Year[B]: $698,005; 
Contract amount[A]: Option period[C]: $506,168; 
Airport security category: IV.

Private screening contractor: FirstLine Transportation Security; 
Type of contract: Cost-plus-award-fee: [Check}; 
Type of contract: Fixed-price- award-fee: [Empty]; 
Contract amount[A]: Base Year[B]: $34,574,108; 
Contract amount[A]: Option period[C]: $25,933,623; 
Airport security category: I.

Private screening contractor: McNeil Security International; 
Type of contract: Cost-plus-award-fee: [Check]; 
Type of contract: Fixed-price-award- fee: [Empty]; 
Contract amount[A]: Base Year[B]: $8,983,957; 
Contract amount[A]: Option period[C]: $6,793,001; 
Airport security category: II.

Private screening contractor: Jackson Hole Airport Board; 
Type of contract: Cost-plus-award-fee: [Check]; 
Type of contract: Fixed-price-award- fee: [Empty]; 
Contract amount[A]: Base Year[B]: $3,601,457; 
Contract amount[A]: Option period[C]: $2,484,297; 
Airport security category: III. 

Source: TSA.

[A] The contract amounts include base fees and potential award fees and 
are estimated amounts, not actual costs incurred under the cost-plus 
award fee contracts.

[B] The base year is the first year of the contract.

[C] The option period is for year 2-5 of the contract.

[End of table]

TSA officials stated that as of February 2006, TSA had awarded, was 
planning to award, or was in the process of awarding, additional fixed- 
price contracts on a competitive basis for screening services at three 
other small airports (categories II, III, and IV) under the 
SPP.[Footnote 54] TSA officials acknowledged that cost-reimbursement 
contracts place most of the cost risk on the government, rather than 
the contractor, but said the agency would not award fixed-price 
contracts for screening services at the two larger airports using 
private screening contractors for another 1 to 2 years. TSA officials 
stated that they would not award fixed-price contracts to these 
contractors because they did not know the costs of screening at the 
larger airports, where they believe costs are variable, and therefore 
they believe that TSA would be at greater risk of awarding a contract 
for a higher cost than might actually be necessary.[Footnote 55] TSA 
officials acknowledged that TSA already had, through an independent 
cost-data study, identified and collected some cost and performance 
data on passengers and checked baggage screening operations at 15 
airports with private and federal screeners, including four category X 
and four category I airports and all five pilot program 
airports.[Footnote 56] This study, which was completed in October 2004, 
looked in particular at cost drivers--factors that contribute to 
overall expenses.[Footnote 57] Moreover, an April 2004 study[Footnote 
58]conducted for TSA by a consulting firm estimated how much TSA spent 
for screening operations at each of the five pilot program airports-- 
including contract payments as well as costs borne by TSA--and compared 
the results with estimates of how much TSA would have spent had it 
actually conducted the screening operations at those airports.

TSA officials stated that the cost information identified in these two 
studies provided useful data to help determine the costs of screening 
at airports currently using private screeners, but said additional 
information is needed to assist in transitioning to fixed-price 
contracts for screening services at larger airports. Specifically, TSA 
officials stated that additional cost information based on the actual 
costs of participating in the SPP is needed for the larger airports 
because the SPP contracts differ in two key ways from the pilot and 
extension contracts that TSA previously awarded. First, the SPP 
contracts will include specific performance measures and targets that 
the contractors must meet. Second, the contracts will allow for 
contractors to recommend and, if approved, implement innovations, and 
to select among options for assessing screener candidates and training 
screeners. The officials stated that it would therefore be difficult 
for prospective SPP contractors for the larger airports to accurately 
estimate the costs of providing screening services for a fixed-price 
contract for larger airports. As a result, TSA officials stated that 
they needed up to 2 additional years to determine estimated costs in 
order to potentially transition to fixed-price contracts, and therefore 
would continue using cost-reimbursement contracts with the largest 
airports (categories X and I) for that period.[Footnote 59] By using 
competitive bidding procedures to award fixed-price contracts to 
qualified firms, as TSA contemplates, TSA will also help to bring 
marketplace pressures to bear on competitors' proposed costs and fees 
or prices and could enable TSA to maximize contractors' incentives to 
control costs and ensure that the contractor, rather than the 
government, will bear more of the cost risk associated with performance 
of private screening operations.

Performance Goals and Measures Developed by TSA to Assess SPP 
Contractors Have Not Been Approved by DHS:

TSA Has Developed Performance Measures to Evaluate Security, Cost, 
Innovation, and Other Facets of Contractor Performance under the SPP, 
but DHS Has Not Approved These Measures:

TSA has developed performance goals and draft measures and targets to 
assess the performance of private screening contractors under the SPP, 
but DHS has not yet approved them or established a time frame for doing 
so.[Footnote 60] Until DHS approves these measures, TSA cannot finalize 
and implement them to assess performance. Performance goals are 
measurable objectives against which actual achievement can be compared. 
Performance measures are the yardsticks to assess an agency's success 
in meeting performance goals, while a performance target is a desired 
level of performance expressed as a tangible, measurable objective, 
against which actual achievement will be compared. Together, these 
performance metrics are used to assess an agency's progress toward 
achieving the results expected. We reported in April 2004 that without 
data to assess the performance of private screening operations, TSA and 
airport operators have limited information from which to plan for the 
possible transition of airports from a federal screening system to a 
private system. In our November 2004 report, we stated that TSA had 
begun drafting performance measures for this purpose. In the current 
contracts that TSA awarded to the four private screening contractors, 
TSA established an award fee process to motivate contractor 
performance.[Footnote 61] These contracts were modified in February and 
March 2005 to implement the award fee process.

TSA's draft quality assurance surveillance and award fee plan for the 
SPP, dated October 2005, identifies the performance measures TSA plans 
to use to assess the performance of private screening contractors 
against TSA's major goals for the program.[Footnote 62] According to 
TSA, the five goals for the SPP in the areas of security, customer 
service, costs, workforce management, and innovation, are:

* Ensure security.

* Provide world class customer service.

* Implement cost efficiencies.

* Respect the screening workforce.

* Create a partnership that leverages strengths of the private and 
public sector.

TSA's draft quality assurance surveillance and award fee plan for the 
SPP includes planned performance measures in 14 areas that are to be 
applied to all private screening companies that participate in the SPP. 
These performance measures, in addition to an innovation measure, are 
to be used to determine the award fee provided to contractors that 
participate in the SPP.[Footnote 63] Table 4 describes the performance 
measures.

Table 4: TSA Performance Measures for Evaluating SPP Contractors:

Performance measure: 1. Maintenance; 
Description: Equipment, property, and materials are well kept and 
operational; 
Performance target: 95% of inspected equipment, property, or materials 
are well kept, operational, and recorded.

Performance measure: 2. Reporting; 
Description: Reports and notifications are accurate and submitted in a 
timely fashion; 
Performance target: 95% of the reports submitted within 5 days of the 
due date.

Performance measure: 3. FSD evaluation; 
Description: Contractor supports the FSD in ensuring an efficient, 
effective, and responsive operation; 
Performance target: Score of 50 or above out of a total possible 100 
points.

Performance measure: 4. Demonstrate compliance with pre-transition 
activities; 
Description: Contractor complies with pre-transition tasks, such as 
completing recruiting activities, providing preferential treatment for 
federal screeners, and completing assessments of screener candidates; 
Performance target: 100% compliance.

Performance measure: 5. Demonstrate compliance with transition 
activities; 
Description: Contractor complies with transition tasks, such as 
verifying that all equipment is fully functioning and ensuring that 
screeners completed all required on-the-job training; 
Performance target: 100% compliance.

Performance measure: 6. Assessment; 
Description: All persons designated to be deployed as screeners meet 
all statutory requirements for employment; 
Performance target: 100% of screener personnel employed meet statutory 
assessment requirements.

Performance measure: 7. Credentialing; 
Description: All persons meet TSA specified requirements for 
employment; 
Performance target: 100% of contractor personnel meet credentialing 
requirements for employment.

Performance measure: 8. New hire training; 
Description: New hires receive the required training before assuming 
screening responsibilities; 
Performance target: 100% of new hires meet required training before 
assuming screening responsibilities.

Performance measure: 9. Recurrent training; 
Description: Screeners must meet the minimum requirement of 3 hours of 
training per screener, per week, averaged over a calendar quarter; 
Performance target: 100% of screeners meet recurrent training 
requirements.

Performance measure: 10. Remedial training; 
Description: Screeners receive a minimum of 3 hours of remediation, 
provided by the contractor, for failing a national or local covert test 
(unannounced, undercover test); 
Performance target: 100% of screeners who fail a covert test meet 
remedial training requirements.

Performance measure: 11. Passenger screening Threat Image Projection 
(TIP) detection; 
Description: TIP systems project images of threat objects on an x-ray 
screen during actual operations and records whether screeners identify 
threat objects; 
Performance target: Target to be set by TSA.

Performance measure: 12. Passenger screening TIP false alarm rate; 
Description: Measure of the rate of recognition of objects incorrectly 
detected during TIP testing; 
Performance target: Target to be set by TSA.

Performance measure: 13. Screener recertification pass rate (first 
attempt); 
Description: Measure of the percent of screeners passing, on their 
first attempt, TSA's annual screener recertification test, which 
assesses, among other things, screeners' ability to perform TSA's 
passenger and checked baggage screening standard operating procedures; 
Performance target: Target to be set by TSA.

Performance measure: 14. Customer satisfaction; 
Description: Measure of performance on TSA's customer satisfaction 
surveys, which measure customer service and public confidence 
associated with TSA's aviation screening functions; 
Performance target: Target to be set by TSA. 

Source: TSA.

[A] TIP projects images of threat objects on an x-ray screen during 
actual operations and records whether screeners identify threat objects.

[End of table]

TSA established draft performance targets for 10 of the 14 measures, 
which all SPP contractors will be required to meet. TSA officials said 
individual contractors that are accepted as SPP participants in the 
future will be required to meet TSA's performance targets for the 
remaining four measures--passenger screening threat image projection 
(TIP) detection rate; passenger screening TIP false alarm rate; 
screener recertification pass rates; and customer satisfaction. The 
performance indicators for the four measures for which targets have not 
yet been set by TSA are to be specific to each airport participating in 
the SPP. TSA stated that it has established baseline data for these 
four performance measures describing how federal screeners or private 
screening contractors have actually performed at individual airports, 
over time, as well as an overall average of performance. Using the 
baseline data as a starting point, performance targets would then be 
set for each airport. For example, if a baseline shows that 
historically, all airports met the performance measure for screener 
recertification pass rates 70 percent of the time, TSA would set the 
target measure at or above 70 percent. TSA officials stated that they 
are currently working to identify incentives to encourage better 
results at airports that have historically not met TSA's performance 
standards for passenger and checked baggage screening. TSA is 
considering providing financial incentives for a limited time in an 
effort to quickly move its airports to meet TSA's baseline level of 
performance.

TSA officials stated that DHS must approve the draft performance goals, 
measures, and targets before they can be finalized, but as of January 
2006, DHS had not yet done so, and had not set a deadline for doing so. 
We asked TSA and DHS officials which office within DHS was responsible 
for approving these performance metrics, but the officials were not 
able to provide us with the information. Until the draft performance 
measures are finalized by DHS, TSA will not be able to implement its 
performance measures for the SPP. According to our standards for 
internal controls, agencies must have systems in place for measuring, 
reporting, and monitoring program performance.[Footnote 64] In 
addition, as we have reported in our prior work on the importance of 
using the Government Performance Results Act (GPRA) to assist with 
oversight and decision making, credible performance information is 
essential for the Congress and the executive branch to accurately 
assess agencies' progress toward achieving their goals.[Footnote 65] 
Further, the draft measures and targets TSA developed for the SPP will 
also be used by DHS to determine whether to award private screening 
contractors certification status under the SAFETY Act. Until the SPP 
measures and targets are finalized, DHS officials stated that they 
cannot determine whether contractors will perform as intended--criteria 
that must be satisfied before awarding certification status.

Conclusions:

Since initiating the SPP in November 2004, DHS and TSA have taken steps 
to develop a legal, contractual, and programmatic framework that 
enables the private sector to provide passenger and checked baggage 
screening services, with federal oversight in place to help ensure that 
security and screener performance is consistent and comparable at 
airports, whether federal or private screeners are used. As of January 
2006, only 7 of over 400 airports that were eligible to apply to 
participate in the SPP had submitted an application. While we did not 
attempt to identify the reasons for the small number of applicants to 
the SPP, a contributing factor may be airports' concerns about 
liability. In November 2004, we reported that half of the airport 
operators we interviewed (13 of 26) were concerned about airport 
liability in the event that a private screener failed to detect a 
threat object that led to a terrorist incident. Aviation associations 
that represent hundreds of airports have also identified liability as a 
major concern among airports. Although Congress' recent effort to 
shield airports from liability in the fiscal year 2006 DHS 
appropriations act may address this concern, there have been no 
additional applicants since the act was passed. Furthermore, by 
extending a level of federal liability protection through the SAFETY 
Act to current private screening contractors, DHS has laid the 
groundwork for future contractors to potentially receive comparable 
protection. Ongoing concerns among prospective participants in the SPP 
regarding the availability of the most extensive level of protection 
under the SAFETY Act--certification--may be alleviated once TSA 
finalizes a standard of performance for private screening contractors 
that DHS can utilize to determine if contractors have demonstrated that 
they will perform as intended.

As TSA moves forward with implementing the SPP, several opportunities 
exist for strengthening the management and oversight of the program. 
First, SPP applicants need clear information on what their roles and 
responsibilities are to be at airports where a privatized screener 
workforce operates with federal oversight. The absence of such guidance 
may affect the ability of responsible officials to effectively and 
efficiently manage screening checkpoints and the screener program in 
general. Additionally, without clear and specific information on roles 
and responsibilities of private screening contractors under the SPP, it 
may be difficult for prospective SPP contractors to develop an informed 
estimate of their personnel needs and associated costs under the SPP-- 
information that is needed for the competitive bidding process.

Second, in addition to concerns about liability protection, airports in 
the past expressed concerns about the degree of management control they 
would have over various aspects of screening services. Since then, TSA 
has provided additional operational flexibilities to private screening 
contractors, such as granting contractors and FSDs more input and 
flexibility in the screener hiring process. Contractors have reported 
efficiencies they have achieved as a result of these flexibilities, 
including using fewer screeners than authorized by TSA. Although steps 
have been taken to address concerns regarding airports' liability and 
the need for contractors to have additional management control over 
various aspects of screening services, only two additional airports, in 
addition to the five pilot program airports, applied to participate in 
the SPP. We believe that identifying the underlying reasons for the 
small number of applicants to the SPP may be helpful to TSA and others 
in assessing what, if any, changes may be needed to the program.

Third, while TSA is not required to adhere to the Federal Acquisition 
Regulation with respect to contracting practices, it has acknowledged 
the advantages of fixed-price contracts in situations where costs are 
reasonably understood. To this end, TSA has begun the contract award 
process for the four smaller airports using a fixed-price type of 
contract. TSA has decided to continue to use cost-plus-award-fee 
contracts rather than fixed-price contracts with private screening 
contractors providing services at the larger airports for at least an 
additional 1 to 2 years so that it can continue to collect information 
on the costs of screening operations at these airports. Using fixed- 
price contracts, as TSA plans to do, would result in the contractors 
assuming substantial cost responsibility from the government related to 
screener operations and help ensure that private screening contractors 
deliver the most cost-effective services, while ensuring that TSA and 
ATSA requirements related to maintaining airport security are met. The 
use of competitively awarded fixed-price contracts should provide a 
built-in incentive for contractors to identify cost-saving 
opportunities and innovations, which in turn may help reduce costs of 
screening contracts at the larger airports using private screeners. TSA 
could make these cost-savings opportunities available to airports with 
federal screeners, as appropriate, thereby transferring the 
efficiencies identified by the private sector to the federal government.

Finally, until DHS approves the performance goals, measures, and 
targets for the SPP, it will not have a mechanism in place beyond the 
ongoing contracts for assessing the performance of private screening 
contractors. Without these performance goals, measures, and targets it 
may be difficult for TSA to identify areas of screener operations that 
contractors may be able to improve.

Recommendations for Executive Action:

To strengthen its administration of the SPP and to help address 
stakeholder concerns, we recommend that the Secretary of DHS direct the 
Assistant Secretary, TSA, to take the following actions:

* Formally document and communicate with all FSDs, current private 
screening contractors, and entities that apply to the SPP, the roles 
and responsibilities of all stakeholders that participate in the SPP, 
pertaining to the management and deployment of screening services.

To help ensure the completion of a performance management framework for 
the SPP so that TSA can assess SPP contractors and to promote 
accountability of SPP contractors for achieving desired program 
outcomes, we recommend that the Secretary of the Department of Homeland 
Security take the following action:

* Establish a time frame for completing its review of the performance 
goals, measures, and targets for the SPP so that TSA may apply them at 
the earliest possible opportunity.

Agency Comments and Our Evaluation:

We provided a draft of this report to DHS and TSA for review and 
comment. On March 10, 2006, we received written comments on the draft 
report, which are reproduced in full in appendix II. DHS generally 
concurred with the findings and recommendations in the report, and 
stated that efforts to implement our recommendations will help them 
develop a more effective, efficient, and economical administration of 
TSA's SPP. With regard to our recommendation that TSA formally document 
and communicate with all FSDs, current private screening contractors, 
and entities that apply to the SPP, the roles and responsibilities of 
all stakeholders that participate in the SPP pertaining to the 
management and deployment of screening services, DHS identified steps 
that TSA is taking to this end. Specifically, DHS stated that TSA 
updated its SPP transition plan, which, among other things, further 
clarifies the relationships among the FSD, FSD staff, and private 
screening contractors, and other stakeholders as they relate to SPP 
program management. DHS also stated that TSA has assembled a transition 
team to work closely with SPP stakeholders to foster awareness and 
ensure communication regarding the roles and responsibilities of all 
involved parties working under the SPP. TSA's successful implementation 
of these ongoing efforts should address the concerns we raised 
regarding documenting and communicating roles and responsibilities 
under the SPP.

In addition, regarding our recommendation that DHS establish a time 
frame for completing its review of the performance goals, measures and 
targets for the SPP so that TSA may apply them at the earliest possible 
opportunity, DHS stated that TSA had established performance metrics 
and had provided it to DHS for its review. However, DHS did not specify 
a time frame for completing its review. We continue to believe that it 
is important for DHS to establish a time frame for completing its 
review of the performance goals, measures, and targets for the SPP. 
Without these performance metrics, TSA will not have a mechanism in 
place beyond the ongoing contracts for assessing the performance of 
private screening contractors. Further, until performance metrics are 
finalized, it remains unlikely that DHS will award such contractors 
certification under the SAFETY Act.

DHS also provided updated information on the status of the SPP, which 
we incorporated where appropriate.

As agreed with your office, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 7 days 
from the date of this report. At that time, we will send copies of this 
report to the Secretary of the Department of Homeland Security and the 
Administrator of the Transportation Security Administration and 
interested congressional committees. We will also make copies available 
to others upon request. In addition, the report will be made available 
at no charge on GAO's Web site at [Hyperlink, http://www.gao.gov].

If you or your staff have any questions about this report, please 
contact me at (202) 512-3404 or berrickc@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff that made major 
contributions to this report are listed in appendix IV.

Sincerely yours, 

Singed By:

Cathleen A. Berrick: 
Director: 
Homeland Security and Justice Issues:

[End of section]

Appendix I: Scope and Methodology:

To assess the Transportation Security Administration's (TSA) efforts to 
implement the Screening Partnership Program (SPP), we analyzed (1) the 
status of federal efforts to determine whether and to what extent 
liability protection will be provided to private screening contractors 
and airports, and actions taken on other stakeholder concerns related 
to participation in the SPP; (2) how TSA has determined it will achieve 
cost-savings goals for screener operations through the SPP, 
specifically through choice of contract used and contract terms; and 
(3) TSA's progress in developing and implementing performance goals, 
measures, and targets to assess the performance of the private 
screening contractors who will be participating in the SPP.

To assess the status of federal efforts to determine whether and to 
what extent liability protection should be provided to private 
screening contractors and airports, and actions taken on other 
stakeholder concerns related to participation in the SPP, we reviewed 
Department of Homeland Security (DHS) and TSA documentation on the 
Support of Anti-terrorism by Fostering Effective Technologies Act 
(SAFETY Act) and the SPP. Specifically, we reviewed DHS guidance posted 
on its Web site related to the SAFETY Act and other DHS documentation 
on this act. We also reviewed TSA's written responses to stakeholders 
frequently asked questions about the SPP, including information on 
liability protection; TSA's transition plan for the SPP, which 
documents internal guidance on transitioning an airport from a federal 
screener workforce to a private screener workforce; TSA's 
communications plan for the SPP; airport applications to the SPP; and 
other guidance-related materials TSA developed for airports and private-
screening contractors. Additionally, we reviewed relevant legislation, 
such as Aviation and Transportation Security Act and the SAFETY Act, 
our prior reports that addressed issues related to the SPP and the use 
of private sector screeners, and testimony at congressional hearing on 
the SPP. Further, we interviewed DHS officials regarding the SAFETY Act 
and TSA headquarters officials responsible for implementing the SPP to 
determine efforts underway to address stakeholder concerns regarding 
the SPP. We also conducted semi-structured telephone interviews with 
the four private screening contractors currently providing passenger 
and checked baggage screening services, the airport directors at the 
seven airports that applied to participate in the SPP (the five pilot 
program airports and two airports that applied to participate in the 
SPP, namely, Elko Regional Airport in Elko, Nevada and Sioux Falls 
Regional Airport in Sioux Falls, South Dakota), and the federal 
security directors (FSD) at each of these airports to obtain their 
views on TSA's efforts to implement the SPP and to address stakeholders 
concerns. Finally, we interviewed officials from two aviation 
associations--the American Association of Airport Executives and the 
Airports Council International, and a major liability insurance 
provider--to obtain information on the type of insurance available to 
private screening contractors.

To assess the status of TSA's efforts to achieve cost-savings in 
screener operations through the SPP, specifically with respect to the 
choice of contract used, and contract terms, we reviewed TSA's 
contracts for screening services for the four contractors currently 
providing passenger and checked baggage screening services. We did not 
review the contracts that TSA awarded in early 2006 to two contractors 
to provide private screening services in the SPP. Additionally, we 
reviewed TSA's acquisition policies and procedures, the Federal 
Acquisition Regulation, and the Federal Aviation Administration's 
acquisition management system, to identify standards and guidance for 
contracting practices of TSA and the federal government. Further, we 
reviewed TSA's transition plan and other SPP guidance to identify TSA's 
current and planned approaches for identifying screening program costs. 
We also reviewed TSA's activity-based costing study that assessed the 
cost of passenger and checked baggage screening operations at 15 
airports, including the 5 that participated in the 2-year pilot program 
using private screeners. We determined that the results of the activity-
based costing study were sufficiently reliable for the purpose of our 
review. Finally, to gather perspectives on opportunities for cost-
savings under the SPP, we interviewed TSA SPP and contracting 
officials, the four contractors currently providing screening services, 
the seven airport directors who applied to the SPP and the FSDs at 
these airports, and representatives of the American Association of 
Airport Executives and the Airports Council International. We did not 
review TSA's actual determination of the amount of contractor award 
fee. Nor did we review the conduct of TSA's performance evaluation 
boards or fee determining official in evaluating contractor performance 
against award fee criteria (including cost-savings) and determining the 
amount of the contractors' award fee. However, we did verify that TSA 
had evaluated contractor performance (including cost-savings) in making 
award fee determinations.

To assess TSA's progress in developing and implementing performance 
goals, measures, and targets to assess the performance of the private 
screening contractors who will be participating in the SPP, we reviewed 
the terms of TSA's award fee process specified in the current contracts 
and TSA's draft quality assurance surveillance and award fee plan. We 
also reviewed TSA's June 2004 guidance on the SPP, other guidance- 
related material TSA developed for private screening contractors and 
airports regarding the SPP, TSA's contracts for the private screening 
contractors currently providing screening services, TSA testimony at 
congressional hearings, and our prior reports that addressed issues 
related to the SPP and the use of private-sector screeners. A listing 
of our prior reports is contained in appendix IV. Additionally, we 
interviewed TSA headquarters officials responsible for the SPP.

We performed our work from March 2005 through March 2006 in accordance 
with generally accepted government auditing standards.

[End of section]

Appendix II: Comments from the Department of Homeland Security: 

U.S. Department of Homeland Security: 
Washington, DC 20528:

Homeland Security:

March 10, 2006:

Ms. Cathleen A. Berrick:
Director: 
Homeland Security and Justice Issues: 
U.S. Government Accountability Office:
441 G Street, NW: 
Washington, DC 20548:

Dear Ms. Berrick:

Thank you for the opportunity to comment on the draft report GAO-06-
166, "Aviation Security: Progress Made to Set Up Program Using Private 
Sector Airport Screeners, but More Work Remains." The Department of 
Homeland Security (DHS) concurs with the recommendations and 
appreciates the time and resources that the GAO has devoted to this 
important review. The findings and recommendations in this report will 
aid in the development of a more effective, efficient, and economical 
administration of TSA's Screening Partnership Program (SPP).

Since GAO's last review in November 2004, the SPP has made significant 
advances in program goals and objectives. On December 16, 2005, TSA 
awarded a performance-based task order to Covenant Aviation Security, 
LLC at the Sioux Falls, South Dakota airport, to conduct private 
security screening operations. Covenant Aviation Security received its 
certificate of full operating capability on February 12, 2006. On 
February 2, 2006, TSA also awarded the Jackson Hole Airport Board a 
performance-based task order to conduct private security screening 
operations, after a successful competition for the contract. On March 
1, 2006, Jackson Hole Airport Board received its new certificate of 
full operating capability. The move from federal to private security 
screening by Sioux Falls is particularly noteworthy as it represents 
the first airport to make this transition outside of the five airports 
participating in the original pilot program mandated by title 49 of the 
United States Code, section 44919. The Jackson Hole airport is one of 
the five original SPP airports. TSA is now in the process of awarding 
task orders to the remaining four SPP airports.

Regarding the use of private contractors, TSA has determined that the 
most appropriate contract types are either: (1) cost-plus-award-fee 
(CPAF) and cost-plus-fixed-fee (CPFF), or (2) fixed-price-award-fee 
(FPAF) and CPFF. The specific combination used will be determined on an 
airport-by-airport basis, considering such factors as size, airport 
category, and transition requirements.

The performance-based task orders for both Sioux Falls and Jackson Hole 
utilize FPAF/CPFF contracts. In these instances, the FPAF vehicle was 
determined to be in the best interests of the government to support the 
Full Operation Capability Screening Services portion of the scope of 
work, and the CPFF vehicle for the remaining line items, including pre-
transition/transition phases, assessments, and other direct costs. The 
FPAF vehicle also was used because the requirements are sufficiently 
defined to allow the contractor to make a realistic determination of 
cost and risk. This will encourage high contract performance in the 
areas of training, on-boarding, and screening services. There will also 
be a semi-annual award fee which will provide a continual incentive for 
improvement and excellence by the contractor.

GAO Recommendation 1: To strengthen its administration of the Screening 
Partnership Program (SPP) and to help address stakeholder concerns, we 
recommend that the Secretary of DHS direct the Assistant Secretary, 
TSA, to take the following actions:

Formally document and communicate with all Federal Security Directors 
(FSDs), current private screening contractors, and entities that apply 
to the SPP, the roles and responsibilities of all stakeholders that 
participate in the SPP, pertaining to the management and deployment of 
screening services.

Concur. TSA will continue to fully implement this recommendation, 
incorporating the stakeholder roles and responsibilities as part of 
best business practices. In the fall of 2004, an integrated working 
team created the "Screening Partnership Program Master Transition 
Toolkit." The toolkit provides guidance for transitioning an airport's 
checkpoint and baggage screening functions from federal to private 
operations, maintaining security standards during the transition, and 
minimizing adverse customer impact. The toolkit, currently in its third 
version (latest issue August 2005), was updated most recently to 
incorporate feedback and lessons learned from stakeholders. The 
toolkit further clarifies the relationships among the FSD, FSD staff, 
private screening contractors, and other stakeholders as they relate to 
SPP program management, and provides targeted guidance to the FSDs 
along these lines.

In addition, TSA has assembled a transition tear to work closely with 
stakeholders to foster awareness and ensure communication regarding the 
roles and responsibilities of all involved parties working under the 
SPP. Finally, as part of ongoing outreach efforts, the SPP staff 
provides stakeholder presentations, and the FSDs meet with stakeholders 
on a regular basis.

GAO Recommendation 2: To help ensure the completion of a performance 
management framework for the SPP, so that TSA can assess SPP 
contractors, and to promote accountability of SPP contractors for 
achieving desired program outcomes, we recommend that the Secretary of 
DHS take the following action:

Establish a time frame for completing its review of the performance 
goals, measures, and targets for the SPP so that TSA may apply them at 
the earliest possible opportunity.

Concur. TSA has established a set of 14 performance requirements and 
standards and provided them to the Department for review. TSA will 
comply with all Departmental guidance regarding performance activities.

The Department and TSA's goal is to transition federal security 
screening operations to private contractors as expeditiously as 
possible, while maintaining security standards and minimizing any 
adverse impacts to the traveling public.

Sincerely, 

Signed By:

Steven J. Pecinovsky:
Director: 
Departmental GAO/OIG Liaison Office:

[End of section]

Appendix III: GAO Contact and Staff Acknowledgments:

GAO Contact:

Cathleen A. Berrick (202) 512-3404:

Acknowledgments:

In addition to the contact named above, David Alexander, C. Jenna 
Battcher, Chuck Bausell, Amy Bernstein, David Hooper, Lara Laufer, 
Thomas Lombardi, Hugh C. Pacquette, Lisa Shibata, Maria Strudwick, and 
Adam Vodraska made key contributions to this report.

[End of section]

Related GAO Reports:

Aviation Security: Significant Management Challenges May Adversely 
Affect Implementation of the Transportation Security Administration's 
Secure Flight Program. GAO-06-374T. Washington, D.C.: February 9, 2006.

Aviation Security: Federal Air Marshal Service Could Benefit from 
Improved Planning and Controls. GAO-06-203. Washington, D.C.: November 
28, 2005.

Aviation Security: Federal Action Needed to Strengthen Domestic Air 
Cargo Security. GAO-06-76. Washington, D.C.: October 17, 2005.

Transportation Security Administration: More Clarity on the Authority 
of Federal Security Directors Is Needed. GAO-05-935. Washington, D.C.: 
September 23, 2005.

Aviation Security: Flight and Cabin Crew Member Security Training 
Strengthened, but Better Planning and Internal Controls Needed. GAO-05- 
781. Washington, D.C.: September 6, 2005.

Aviation Security: Transportation Security Administration Did Not Fully 
Disclose Uses of Personal Information During Secure Flight Program 
Testing in Initial Privacy Notes, but Has Recently Taken Steps to More 
Fully Inform the Public. GAO-05-864R. Washington, D.C.: July 22, 2005.

Aviation Security: Better Planning Needed to Optimize Deployment of 
Checked Baggage Screening Systems. GAO-05-896T. Washington, D.C.: July 
13, 2005.

Aviation Security: TSA Screener Training and Performance Measurement 
Strengthened, but More Work Remains. GAO-05-457. Washington, D.C.: May 
2, 2005.

Aviation Security: Secure Flight Development and Testing Under Way, but 
Risks Should Be Managed as System Is Further Developed. GAO-05-356. 
Washington, D.C.: March 28, 2005.

Aviation Security: Systematic Planning Needed to Optimize the 
Deployment of Checked Baggage Screening Systems. GAO-05-365. 
Washington, D.C.: March 15, 2005.

Aviation Security: Measures for Testing the Impact of Using Commercial 
Data for the Secure Flight Program. GAO-05-324. Washington, D.C.: 
February 23, 2005.

Transportation Security: Systematic Planning Needed to Optimize 
Resources. GAO-05-357T. Washington, D.C.: February 15, 2005.

Aviation Security: Preliminary Observations on TSA's Progress to Allow 
Airports to Use Private Passenger and Baggage Screening Services. GAO- 
05-126. Washington, D.C.: November 19, 2004.

General Aviation Security: Increased Federal Oversight Is Needed, but 
Continued Partnership with the Private Sector Is Critical to Long-Term 
Success. GAO-05-144. Washington, D.C.: November 10, 2004.

Aviation Security: Further Steps Needed to Strengthen the Security of 
Commercial Airport Perimeters and Access Controls. GAO-04-728. 
Washington, D.C.: June 4, 2004.

Transportation Security Administration: High-Level Attention Needed to 
Strengthen Acquisition Function. GAO-04-544. Washington, D.C.: May 28, 
2004.

Aviation Security: Challenges in Using Biometric Technologies. GAO-04- 
785T. Washington, D.C.: May 19, 2004.

Nonproliferation: Further Improvements Needed in U.S. Efforts to 
Counter Threats from Man-Portable Air Defense Systems. GAO-04-519. 
Washington, D.C.: May 13, 2004.

Aviation Security: Private Screening Contractors Have Little 
Flexibility to Implement Innovative Approaches. GAO-04-505T. 
Washington, D.C.: April 22, 2004.

Aviation Security: Improvement Still Needed in Federal Aviation 
Security Efforts. GAO-04-592T. Washington, D.C.: March 30, 2004.

Aviation Security: Challenges Delay Implementation of Computer- 
Assisted Passenger Prescreening System. GAO-04-504T. Washington, D.C.: 
March 17, 2004.

Aviation Security: Factors Could Limit the Effectiveness of the 
Transportation Security Administration's Efforts to Secure Aerial 
Advertising Operations. GAO-04-499R. Washington, D.C.: March 5, 2004.

Aviation Security: Computer-Assisted Passenger Prescreening System 
Faces Significant Implementation Challenges. GAO-04-385. Washington, 
D.C.: February 13, 2004.

Aviation Security: Challenges Exist in Stabilizing and Enhancing 
Passenger and Baggage Screening Operations. GAO-04-440T. Washington, 
D.C.: February 12, 2004.

The Department of Homeland Security Needs to Fully Adopt a Knowledge- 
based Approach to Its Counter-MANPADS Development Program. GAO-04-341R. 
Washington, D.C.: January 30, 2004.

Aviation Security: Efforts to Measure Effectiveness and Strengthen 
Security Programs. GAO-04-285T. Washington, D.C.: November 20, 2003.

Aviation Security: Federal Air Marshal Service Is Addressing Challenges 
of Its Expanded Mission and Workforce, but Additional Actions Needed. 
GAO-04-242. Washington, D.C.: November 19, 2003.

Aviation Security: Efforts to Measure Effectiveness and Address 
Challenges. GAO-04-232T. Washington, D.C.: November 5, 2003.

Airport Passenger Screening: Preliminary Observations on Progress Made 
and Challenges Remaining. GAO-03-1173. Washington, D.C.: September 24, 
2003.

Aviation Security: Progress Since September 11, 2001, and the 
Challenges Ahead. GAO-03-1150T. Washington, D.C.: September 9, 2003.

Transportation Security: Federal Action Needed to Enhance Security 
Efforts. GAO-03-1154T. Washington, D.C.: September 9, 2003.

Transportation Security: Federal Action Needed to Help Address Security 
Challenges. GAO-03-843. Washington, D.C.: June 30, 2003.

Federal Aviation Administration: Reauthorization Provides Opportunities 
to Address Key Agency Challenges. GAO-03-653T. Washington, D.C.: April 
10, 2003.

Transportation Security: Post-September 11th Initiatives and Long-Term 
Challenges. GAO-03-616T. Washington, D.C.: April 1, 2003.

Airport Finance: Past Funding Levels May Not Be Sufficient to Cover 
Airports Planned Capital Development. GAO-03-497T. Washington, D.C.: 
February 25, 2003.

Transportation Security Administration: Action and Plan to Build a 
Results-Oriented Culture. GAO-03-190. Washington, D.C.: January 17, 
2003.

Aviation Safety: Undeclared Air Shipments of Dangerous Goods and DOT's 
Enforcement Approach. GAO-03-22. Washington, D.C.: January 10, 2003.

Aviation Security: Vulnerabilities and Potential Improvements for the 
Air Cargo System. GAO-03-344. Washington, D.C.: December 20, 2002.

Aviation Security: Vulnerability of Commercial Aviation to Attacks by 
Terrorists Using Dangerous Goods. GAO-03-30C. Washington, D.C.: 
December 3, 2002.

Aviation Security: Registered Traveler Program Policy and 
Implementation Issues. GAO-03-253. Washington, D.C.: November 22, 2002.

Airport Finance: Using Airport Grant Funds for Security Projects Has 
Affected Some Development Projects. GAO-03-27. Washington, D.C.: 
October 15, 2002.

Commercial Aviation: Financial Condition and Industry Responses Affect 
Competition. GAO-03-171T. Washington, D.C.: October 2, 2002.

Aviation Security: Transportation Security Administration Faces 
Immediate and Long-Term Challenges. GAO-02-971T. Washington, D.C.: July 
25, 2002.

Aviation Security: Information Concerning the Arming of Commercial 
Pilots. GAO-02-822R. Washington, D.C.: June 28, 2002.

Aviation Security: Vulnerabilities in, and Alternatives for, Preboard 
Screening Security Operations. GAO-01-1171T. Washington, D.C.: 
September 25, 2001.

Aviation Security: Weaknesses in Airport Security and Options for 
Assigning Screening Responsibilities. GAO-01-1165T. Washington, D.C.: 
September 21, 2001.

Homeland Security: A Framework for Addressing the Nation's Efforts. GAO-
01-1158T. Washington, D.C.: September 21, 2001.

Aviation Security: Terrorist Acts Demonstrate Urgent Need to Improve 
Security at the Nation's Airports. GAO-01-1162T. Washington, D.C.: 
September 20, 2001.

Aviation Security: Terrorist Acts Illustrate Severe Weaknesses in 
Aviation Security. GAO-01-1166T. Washington, D.C.: September 20, 2001.

FOOTNOTES

[1] Pub. L. No. 107-71, 115 Stat. 597 (2001).

[2] Pub. L. No. 107-296, §§ 861-65, 116 Stat. 2135, 2238-42 (2002); 6 
C.F.R. §§ 25.1-25.9 (2005).

[3] FSDs are the ranking TSA authorities responsible for leading and 
coordinating TSA security activities at the nation's more than 440 
commercial airports.

[4] GAO, Aviation Security: Preliminary Observations on TSA's Progress 
to Allow Airports to Use Private Passenger and Baggage Screening 
Services, GAO-05-126 (Washington, D.C.: Nov. 19, 2004). 

[5] The SAFETY Act does not provide insurance; rather, sellers are 
required to purchase liability insurance from the commercial market in 
an amount determined by DHS.

[6] See GAO, Transportation Security Administration: More Clarity on 
the Authority of Federal Security Directors Is Needed, GAO-05-935 
(Washington, D.C.: Sept. 23, 2005). 

[7] The 2-year pilot concluded on November 18, 2004. For purposes of 
this report, we refer to these five airports as the pilot program 
airports. 

[8] TSA classifies the over 400 commercial airports in the United 
States into one of five security risk categories (X, I, II, III, and 
IV) based on various factors, such as the total number of takeoffs and 
landings annually, the extent to which passengers are screened at the 
airport, and other special security considerations. In general, 
category X airports have the largest number of passenger boardings and 
category IV airports have the smallest. 

[9] ATSA codified the requirements that TSA institute a pilot program 
at 49 U.S.C. § 44919 and that an opt-out option be available under the 
SPP at § 44920. 

[10] The base period of these new contracts expired on September 30, 
2005; an option period was exercised by TSA to extend them through May 
18, 2006. 

[11] Elko Regional Airport applied with the intention of serving 
directly as a private screening contractor. Sioux Falls Regional 
Airport applied to have screening carried out separately by a private 
screening contractor. 

[12] TSA interprets "private screening company," as utilized in 49 
U.S.C. § 44920, to exclude public companies that do not possess the 
attributes of a private company or corporation and that are not 
independent from the city or county in which it operates. TSA officials 
stated that under this interpretation, affiliates established by 
airports to provide private screening services cannot compete for and 
obtain screening contracts let by TSA if TSA determines that they do 
not possess the above attributes. TSA officials also stated that 
whether or not an airport qualifies as a private screening company 
depends upon a case-by-case factual analysis as well as the application 
of state law.

[13] The 26 airport operators we interviewed do not include the 7 
airport operators that applied to participate in the SPP.

[14] GAO-05-126.

[15] We did not verify that the contractor is actually using seven 
fewer FTEs than TSA's screener allocation for Sioux Falls. 

[16] At the time we interviewed this contractor, TSA had not awarded 
the contract to conduct private screening in the SPP. Thus, the 
contractor's responses are based on its experiences prior to this 
contract award.

[17] A statute caps the number of full-time equivalent screeners 
available to TSA at 45,000. See Pub. No. 109-90, 119 Stat. 2064, 2070 
(2005). According to TSA, this cap does not include screeners at the 
five pilot program airports.

[18] Aside from its liability protections, the SAFETY Act limits the 
types of damages available to a plaintiff and establishes the venue in 
which a plaintiff may raise such claims. 

[19] The amount of liability will be capped at an amount equal to the 
level of insurance DHS requires the service contractor to purchase. 

[20] DHS only recognizes an anti-terrorism technology as a "qualified 
antiterrorism technology" if designated under the SAFETY Act, which 
requires that DHS evaluate the technology against criteria set out in § 
862 (b) the act. 

[21] The SAFETY Act defines "act of terrorism" as an unlawful act 
causing harm to a person, property or entity in the United States (or, 
in the case of a domestic U.S. air carrier, in or outside the U.S.) by 
using or attempting to use instrumentalities, weapons or other methods 
designed or intended to cause mass destruction, injury or other loss to 
citizens or institutions of the United States. 

[22] According to DHS, the SAFETY Act does not limit liability for harm 
caused by anti-terrorism technologies when no act of terrorism has 
occurred. 

[23] FAR, 48 C.F.R. § 16.103. TSA is exempt from the FAR and most 
acquisition laws. Instead, ATSA directed TSA to adopt the Federal 
Aviation Administration's acquisition management system and authorized 
TSA to modify it as appropriate. 49 U.S.C. § 114(o) (Supp. II 2002). 
The FAA's management system, which establishes policy, processes, and 
guidance for all aspects of the acquisition life cycle, and authorized 
TSA to modify it as appropriate. See 49 U.S.C. § 114(o). The 
acquisition laws from which FAA is exempt are listed at 49 U.S.C. § 
40110(d)(2). While TSA is exempt from the FAR, the FAR provides useful 
guidance for our analysis of TSA's contracting approach. The SPP 
transition plan states that the criteria contained in FAR, and the size 
of the airport choosing to apply to use private screeners, dictate the 
type of contract vehicle.

[24] FAR, 48 C.F.R. § 16.103(b).

[25] FAR, 48 C.F.R. §§ 16.103(c), 16.104(d).

[26] FAA Acquisition Management System policy 3.2.4.2.

[27] Qualifying for protection under the SAFETY Act requires that the 
seller obtain liability insurance at a level determined by DHS to 
satisfy otherwise compensable third-party claims but that would not 
exceed the maximum amount of liability insurance reasonably available 
from private sources at prices and terms that will not unreasonably 
distort the sale price of the seller's antiterrorism technology. The 
SAFETY Act does not provide insurance; rather, sellers are required to 
purchase liability insurance from the commercial market in an amount 
determined by DHS.

[28] According to DHS, the department applies the criteria flexibly, 
assigning different weights depending on the circumstances, and may 
consider additional relevant facts if necessary. 

[29] The United States Supreme Court, in Boyle v United Technologies 
Corp., 487 U.S. 500 (1987), articulated the "government contractor 
defense," which, in general and in certain circumstances, shields 
government contractors from liability for design defects in equipment 
if (1) the United States approved reasonably precise specifications, 
(2) the equipment conformed to those specifications, and (3) the 
supplier warned the United States about dangers in the use of the 
equipment known to the supplier but not to the United States. The 
SAFETY Act essentially codifies and makes applicable the government 
contractor defense to sellers of certified qualified anti-terrorism 
technologies that have been deployed in defense against or response or 
recovery from and act of terrorism and from which claims that result or 
may result in loss to the seller arise. 

[30] Technologies and services designated for protection pursuant to 
this evaluation become known as "qualified anti-terrorism 
technologies." Only qualified anti-terrorism technologies are eligible 
for certification.

[31] One of the four current private screening contractors--Jackson 
Hole Airport Board--has not applied for SAFETY Act protection. 

[32] This policy reportedly excludes acts of terrorism, such as "any 
act of 
one or more persons, whether or not agents of a sovereign power, for 
political or terrorist purposes and whether the loss or damage 
therefrom is accidental or intentional."

[33] According to TSA, the premiums paid for insurance are considered 
an allowable cost for reimbursement under the contracts, assuming the 
costs are reasonable and allocable in accordance with TSA cost 
principles. 

[34] The two contractors purchased insurance without the protections of 
the SAFETY Act or the promise of indemnification at the time of 
purchase. 

[35] According to TSA, the premiums paid for insurance are considered 
an allowable cost for reimbursement under the contracts, assuming the 
costs are reasonable and allocable in accordance with TSA cost 
principles.

[36] Codified at 49 U.S.C. § 44920(g). This provision does not relieve 
an airport operator from liability for its own acts or omissions 
related to its security responsibilities. 

[37] The seven airports include the five airports that participated in 
the pilot program and the two airports that applied to the SPP, but did 
not participate in the pilot program. One of the two airports that did 
not participate in the pilot program, Elko Regional Airport, has since 
withdrawn its application to the SPP. 

[38] We did not ask the third airport operator whether the 2006 
appropriations act had addressed its concerns about liability because 
it had withdrawn its application.

[39] At these forums, screener candidates undergo a credentialing 
process consisting of a series of physical and mental exams, drug 
tests, and a preliminary background check, among other things. 

[40] Concerns about the screener hiring process are shared by some FSDs 
at airports using federal screeners. In our September 2005 report on 
the ability of FSDs to address airport security needs, we reported that 
most of the 25 FSDs interviewed were satisfied with TSA's hiring 
process, which provided more options for FSDs to be involved in hiring 
screeners, and most stated that the hiring process in place was better 
than the centralized process that existed previously. Nevertheless, 7 
of the 25 FSDs said they were not satisfied because, among other 
things, the hiring process continues to take too long. See our report 
GAO-05-935. 

[41] TSA officials said they are working on two additional options for 
contractors to assess screener candidates and will notify contractors 
when the options are available so that contractors may submit a 
proposal to change the option they selected. 

[42] These guidelines describe working conditions that passenger and 
checked baggage screeners must be willing and able to function in, 
physical requirements of the job (lifting heavy objects, for example), 
and a requirement that applicants successfully complete a background 
investigation. 

[43] At the time we interviewed the contractors, the remaining 
contractor was using option one. 

[44] TSA provided an early draft of the transition plan to the FSD and 
FSD staff at four of the five pilot program airports. 

[45] Screening managers at airports with federal screeners are 
responsible for (1) managing screener operations; (2) ensuring quality 
and consistency of screening procedures; (3) scheduling screening 
personnel to screening operations; (4) managing overall screening work 
force issues; (5) managing external relationships; and (6) interpreting 
technical aspects of TSA policies, regulations, and directives. 

[46] Airport stakeholders interviewed for this report were airport 
managers, airport law enforcement, station managers representing air 
carriers, and FBI airport liaison airports, among others. 

[47] GAO-05-935. 

[48] GAO, Standards for Internal Control in the Federal Government, 
GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). 

[49] Pub. L. No. 107-71, § 108, codified at 49 U.S.C. § 44919(f) 
(screening pilot program) and 49 U.S.C. § 44920(c) (opt-out program).

[50] All five contracts awarded to private screening contractors to 
date were awarded and extended as part of the original private screener 
pilot program, not as part of the SPP. 

[51] According to TSA, contractors must ensure that security 
checkpoints are staffed in accordance with TSA's standard operating 
procedures and other government requirements, and that screeners meet 
government qualifications and training requirements.

[52] Indirect costs include the contractor's overhead costs.

[53] An additional contract management factor not listed above is the 
contractor's compliance with the contract's terms and conditions.

[54] The draft SPP contracts for Jackson Hole airport (category III) 
and Sioux Falls (category II) airport state that TSA will award a 
combination cost-plus-fixed-fee and fixed-price-award-fee contract for 
these airports. Specifically, the pre-transition and transition phases, 
such as screener assessments, leasing, travel, consumables, uniforms, 
and other direct costs will be performed under the cost-plus-fixed-fee 
portion of the contract. Once the SPP contractors have attained full 
operational capability--full transition to private-sector screeners-- 
the screening services will be performed under a fixed-price award fee 
contract. In December 2005, TSA awarded such a contract to a private 
screening contractor to provide screening services at Sioux Falls 
airport. On February 5, 2006, the contractor received a certificate of 
full operational capability from TSA.

[55] TSA officials stated, however, that they are considering adding 
some fixed-price line items to the new cost-reimbursement contracts 
that will be awarded at the two larger airports. 

[56] TSA plans to gather cost data at up to 15 additional airports with 
federal screeners, but no deadline has been set. These airports could 
be, but are not necessarily, future SPP participants. Additionally, 
TSA's SPP transition plan indicates that TSA has developed a model they 
plan to use to estimate the federal costs of screening at specific 
airports for comparison purposes. The costs included in this model are 
the federal costs associated with those tasks that the private 
contractor would perform at a specific airport, such as screener labor 
costs, including overtime; and uniforms, consumables, recruiting, 
assessment, credentialing, training, and workers compensation. The data 
for this model will be obtained from TSA's Office of Budget and 
Performance for each specific airport that applies to participate in 
the SPP.

[57] The cost drivers included in the study were redundant screenings, 
equipment availability, absenteeism, and training effectiveness. 
According to TSA, redundant screening occurs when a passenger undergoes 
secondary screening but does not possess a prohibited item. Reducing 
the number of redundant screenings will improve screening capacity and 
lower the cost of the passenger screening process. Equipment 
availability is the availability of screening machines. Screening 
cannot work effectively when a machine is down or not working 
efficiently. High absenteeism is a major cost driver; it requires TSA 
to employ a larger work force than would otherwise be required. 
Training effectiveness is characterized by mission focus, content, and 
minimum standards of the amount of time each employee must devote to 
it. Effective training results in high prohibited item detection rates, 
according to TSA.

[58] Private Screening Operations Performance Evaluation Report, 
Summary Report; Transportation Security Administration; April 16, 2004.

[59] The contracts with the current four private screening contractors 
expire in May 2006, after which TSA intends to competitively award new 
cost-plus-award-fee contracts at the larger airports.

[60] TSA officials stated that these same performance goals and 
measures would be used to assess overall SPP program management as 
well. 

[61] TSA awarded the contracts to the four private screening 
contractors in November 2004. The contractors were extended in November 
2005 for an additional 6 months, in accordance with the terms of the 
contracts. 

[62] In March 2005, TSA officials said they had recently submitted SPP 
performance measures to DHS. TSA officials were not able to provide the 
date the performance measures were submitted to DHS. 

[63] As part of TSA's draft award fee plan for the private screening 
contractors that participate in the SPP, there is an award fee pool 
available for optional contractor-provided innovation submissions. 
Specifically, the contractor may submit innovative ideas that will 
improve security effectiveness, cost-efficiency, or customer 
satisfaction through the development of screener innovation submissions 
under the contract. The plan states that contractor submissions will be 
evaluated on a recurring basis by the airport FSD and submitted to the 
SPP program management office on a bi-annual basis. 

[64] GAO/AIMD-00-21.3.1.

[65] GAO, Managing for Results: Using GPRA to Assist Oversight and 
Decisionmaking, GAO-01-872T (Washington, D.C.: June 2001).

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