Management flaws cited for cost hikes on screener hiring contract

A long-awaited report on the Transportation Security Administration's hiring of airport screeners after 9/11 found that management problems at the agency contributed to a seven-fold increase in contract costs.

Congress created TSA in response to the terrorist attacks and required it to hire tens of thousands of airport screeners within a year. The report, from the Homeland Security Department's inspector general, acknowledged that the task was a daunting one: "As a brand new agency, TSA did not have the staff or infrastructure necessary to plan and manage actions and contracts," it stated.

The agency had to hire an estimated 30,000 screeners, and had to do so quickly. To meet that deadline, TSA turned to NCS Pearson, a government contractor based in Arlington, Va., in early 2002. The company is now called Pearson Government Solutions.

TSA originally agreed on a contract ceiling of $104 million. TSA and NCS Pearson planned on using the company's existing office space to screen potential employees around the country. According to the report, within a month of awarding the contract, TSA instead asked Pearson to work in "temporary assessment centers," which often were hotels and expensive resorts.

That change was one of the key reasons for a new contract ceiling of $741 million - more than seven times higher than the original figure.

"TSA did not specifically select the location of the temporary assessment centers, but was aware of the selection process, as well as the selected hotels, and expressed no concern regarding the use of resorts and other high-cost temporary assessment center locations," the IG report stated. Ultimately, about 150 temporary assessment centers were chosen.

A travel agency helped NCS Pearson select the hotel sites. One, the four-star Wyndham Peaks Resort in Telluride, Colo., cost the agency $1.7 million, or almost $40,000 per person hired at the site. TSA paperwork shows the Wyndham was picked based on its availability and high-speed Internet connectivity.

"Without any apparent analysis of the cost impact, TSA dramatically changed its recruitment approach and directed the contractor to establish approximately 150 temporary assessment centers," the report said.

Other shifts also increased costs, including higher than anticipated applicant rejection rates and a tighter time frame, the report said.

A prior audit performed by the Defense Contract Audit Agency, which focused only on costs, identified almost $300 million in "deficient," or potentially improper, costs. TSA in December 2004 agreed to pay NCS Pearson $741 million, which was the contract's ceiling price and $144 million less than the company had billed the agency.

The report did not examine Pearson's performance, which had been called into question by articles in The Washington Post reporting thousands of dollars spent on Starbucks coffee and luxury hotels.

The IG noted that some aspects of the NCS Pearson contract are still being investigated.

Eileen Rivera, spokeswoman for Pearson Government Solutions, said the report reinforces what the company has been saying for the past three and a half years - that TSA decisions about what they wanted from the contract led to significant cost increases.

"I think this report tells the truth," Rivera said. The company also holds contracts with other federal agencies, including the Education, Labor and Health and Human Services departments.

In August, Lee Kair, then-assistant administrator for acquisition at TSA, told Government Executive in an e-mail that TSA does not believe the contract was mismanaged but rather that "the contract environment was fluid." Estimates on the requirements for screeners initially were underestimated, he said.

Barry Piatt, spokesman for Sen. Byron Dorgan, D-N.D., said, "Costs were overrun because nobody at TSA cared about it. This new report shows the responsibility . . . was not just with NCS Pearson, but it was with TSA, [which] said, 'Go out and spend whatever you need, and call us when you're done.' "

In its official response to the Homeland Security report, TSA noted the management changes it has made since the Pearson contract was initiated. The acquisition office has grown significantly, from two people to 94. TSA also has developed a variety of acquisition management policies designed to improve contract oversight.