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Highlights

To enhance the capacity and safety of the national airspace system, the Federal Aviation Administration (FAA), within the Department of Transportation, is acquiring 74 Standard Terminal Automation Replacement Systems (STARS). STARS will replace some outdated air traffic control equipment. Since 1996, when FAA initiated this major computer hardware and software acquisition, the scope and estimated costs of STARS have changed many times. FAA now estimates that STARS's remaining costs will total about $2.54 billion. GAO was asked to assess the reliability of FAA's life-cycle cost estimate for STARS, determine the impact of STARS's estimated costs on future FAA budgets, and identify any alternatives to STARS that FAA is considering. GAO based its analysis on published FAA cost data and the guidance FAA uses for managing major acquisitions.

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Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Transportation 1. To improve FAA's management of STARS and of subsequent terminal modernization programs and to provide the Congress with more reliable information for overseeing these programs, the Secretary of Transportation should direct the FAA Administrator to follow the agency's guidance for managing major acquisition systems by establishing, maintaining, and controlling an accurate, valid, and current performance measurement baseline, which would include negotiating all authorized, unpriced work within 3 months.
Closed - Implemented
The STARS program office has established and maintained a measurable program cost and schedule baseline, including reporting monthly Earned Value Management (EVM) cost and schedule variance status. At the contract level, the STARS program office has incorporated EVM reporting requirements and implemented Firmed Fixed Price with milestone based payments whenever possible for the prime vendor. Individual contract changes are now tracked and negotiated for incorporation into the contract baselines within 3 months.
Department of Transportation 2. To improve FAA's management of STARS and of subsequent terminal modernization programs and to provide the Congress with more reliable information for overseeing these programs, the Secretary of Transportation should direct the FAA Administrator to follow the agency's guidance for managing major acquisition systems by conducting an integrated baseline review of any major contract modifications within 6 months.
Closed - Not Implemented
FAA completed contract modification in January 2005. However, the agency determined that no integrated baseline review of the contract was needed (as GAO recommended and FAA had previously agreed with) because the contract was structured as mostly firm fixed price and time and materials.
Department of Transportation 3. To improve FAA's management of STARS and of subsequent terminal modernization programs and to provide the Congress with more reliable information for overseeing these programs, the Secretary of Transportation should direct the FAA Administrator to follow the agency's guidance for managing major acquisition systems by preparing a rigorous life-cycle cost estimate, including a risk assessment, in accordance with the Acquisition System Toolset's guidance and identifying the level of uncertainty inherent in the estimate.
Closed - Implemented
FAA reported that independent cost estimates and risk assessments have been completed in support of the Terminal Automation Modernization Replacement JRC, which is scheduled for June 2005.

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