August 18,2005

Senators seek to hold FAA accountable for contracting reform

WASHINGTON – Two senators have asked the head of the Federal AviationAdministration (FAA) for more information about the agency’s effort to place stricter controls onits service contracts.

“Support service contracts at the FAA represent over $1 billion in taxpayer funds andshould be scrutinized to ensure that every dollar is spent as intended and not subject to fraud,waste or abuse,” said Sens. Chuck Grassley and Tom Coburn in a letter sent this week to FAA Administrator Marion Blakey.

Grassley and Coburn have been working with the Inspector General for the Department of Transportation to prompt contracting reforms at the FAA after receiving a complaint from anFAA whistleblower about contracting practices.

The text of Grassley and Coburn’s letter follows here.

August 17, 2005

The Honorable Marion C. Blakey
Federal Aviation Administration
800 Independence Avenue, SW
Washington, DC 20591

Dear Ms. Blakey:

As members of the United States Senate and as Chairman of the Committee on Financeand Subcommittee on Federal Financial Management, Government Information, andInternational Security, it is our duty under the Constitution to conduct oversight into the actionsof Executive branch agencies and how appropriated funds are spent. Recently, we beganexamining contracting practices at the Federal Aviation Administration (FAA) after a complaintwas brought to our attention regarding allegations of possible fraud, waste, and abuse of taxpayerdollars.

In response to these allegations, we have been working closely with the Office of theInspector General for the Department of Transportation (OIG) and periodically copying youroffice when we have requested further reviews. During the course of our review and that of theOIG, a number of questions have arisen regarding policies, procedures, and the administration ofprocurement efforts at the FAA following acquisition reform instituted nearly a decade ago.

The FAA faced a major hurdle in 1995 as it worked to modernize the nation's air trafficcontrol system. Congress, responding to concerns about the FAA's ability to complete thismodernization, provided the FAA with an exemption from existing Federal procurement lawsand regulations, including the Federal Acquisition Regulations (FAR). The purpose of thisexemption, as stated by the FAA, was to create "an acquisition system that provides for moretimely and cost-effective acquisition reform." Further, the FAA stated "the focus of acquisitionreform was on mission accomplishment, rather than compliance with rules and processes."

While these two goals were the original intent of procurement reform, a May 2005 reportby the OIG shows that major acquisitions at the FAA are experiencing cost growth, scheduledelays, and performance shortfalls. Further, in April of 2005, Inspector General Meade testifiedthat he had "several significant concerns" regarding the use of multiple award support servicecontracts by the FAA. According to the OIG, these contracts faced many problems, including: alack of clarity, a lack of centralized controls, and a lack of disparity between contractors and thatof FAA employees. If these concerns are valid, the reforms that were instituted in granting theFAA an exemption from procurement laws seem to have been left on the side of the road.

It has come to our attention that, in an effort to address the concerns raised by both theOIG and our offices, you recently distributed an internal memorandum that outlined variouscontracting reforms and discussed the need for stricter controls over service contracts.

Specifically, your memorandum outlined a number of contracting reforms. First, the FAA willnow require competitive bidding on all support service contracts with a value of $1 million ormore, in addition to requiring support service contract review by the Deputy Administrator.Second, the FAA's Chief Financial Officer (CFO) will provide oversight of all support servicecontracts and personally sign off on any contract over $10 million. Finally, you are directing theAcquisition Executive to institute mandatory training on program integrity for all FAA programsofficials.

Taken as a whole these reforms present an opportunity for the FAA to exercise greaterfinancial and managerial control over support service contracts. However, there are significantdifferences between "recommending" reforms and "implementing" reforms.

Support service contracts at the FAA represent over $1 billion in taxpayer funds andshould be scrutinized to ensure that every dollar is spent as intended and not subject to fraud,waste or abuse. In light of the OIG's concerns, the ongoing nature of our review, and the recentmemorandum distributed, we request that the FAA provide our staffs with a detailed briefing todiscuss FAA acquisition reform. More specifically, please be prepared to:

(1) Discuss why the FAA failed to conduct a follow-up evaluation of FAA acquisition reformafter 1999 when the FAA's own review stated "the agency is probably four years away fromdetermining whether acquisition reform has truly been successful."

(2) Provide an update regarding multiple award support service contracts, including the numberof outstanding contracts, value of these contracts, as well as the number of contractors that arecurrently working for the FAA under these contracts.

(3) Provide an update as to the number of employees that have voluntarily left the FAA to seekemployment with contractors operating under any multiple award support service contract.

(4) Provide an update regarding the various reforms that were outlined in your memorandumdated August 11, 2005, including a detailed timeline for the implementation of these reforms.

(5) Provide an update as to the FAA's cooperation with the OIG and DCAA during the course ofthe audits and reviews we have requested by these entities.

We thank you in advance for your assistance in this matter and request that your staffcoordinate with our offices no later than August 24, 2005 to schedule a briefing.


Charles E. Grassley
United States Senator
Chairman, Committee on Finance

Tom Coburn, M.D.
United States Senator
Chairman, Homeland Security/Government Affairs Subcommittee
on Federal Financial Management

cc: The Honorable Kenneth M. Mead
Inspector General
United States Department of Transportation
400 7th St. S.W., Room 9210
Washington, D.C. 20590