Cruising Altitude

May 15, 2002

By George Cahlink

"I think the world of Jane Garvey, and she has changed the way the place functions, but there are still real questions and problems at FAA," says a senior staff member with the Aviation Subcommittee of the Senate Commerce, Science and Transportation Committee. Garvey says managing any agency requires focusing on a handful of agencywide "corporate" goals, because organizations with numerous priorities lack focus and often fail. Garvey says her goals are to ensure safety, security and efficiency in air travel. "I think it's very important that we have a corporate view. We are trying to move toward the view that we are all invested in this and that if the system is operating well, we're all a part of it," she says. A key weakness in the agency's ability to manage for results is its failure to clearly link dollars to agency goals. Maillett says the agency lacks an organized process for making funding decisions. Recent internal reviews have found that "significant chunks" of FAA funding go to programs that are not clearly aligned with agency goals, according to John Hennigan, the FAA's deputy chief financial officer. He says the agency's budget process focuses on outputs, not outcomes, and usually doesn't require managers to submit performance data until after budgets are set. "Given that, how can performance drive the budget?" Hennigan asks. Garvey has struggled with the FAA's financial failings, but she has had more success in altering the agency's approach to air traffic modernization, a sweeping overhaul of computers, radar systems and other sensors at air traffic control sites nationwide. In the past, the agency relied on piecemeal upgrades of those systems, which created an air traffic system that was neither uniform nor fully modernized. "The FAA was not unique. Like the Defense Department, we had often approached modernization in a very large and grand way, and it was challenging and difficult to implement," Garvey says. Indeed, a 10-year, $10 billion air traffic modernization plan first announced in 1981 had yielded little success, while ringing up billions of dollars in bills, by the end of the 1990s. Along with freeing the FAA from acquisition rules, Congress also exempted the agency from federal personnel regulations. The most significant change is a pay-for-performance system that now covers more than 75 percent of the agency's workforce. Employees still get annual raises, but other pay increases are tied to performance as opposed to length of service. Most FAA employees are eligible for two additional raises: an increase of as much as 1.8 percent if they are considered among the agency's top contributors, and an agencywide increase of 1 percent if organizational goals are met. Executives, meanwhile, receive the governmentwide pay raise, but only are eligible for bonuses based on achieving agencywide goals. Parent department: Transportation

The FAA raises the bar on technology and labor relations but fails to get financial and rule-making improvements off the ground.

ederal Aviation Administrator Jane Garvey made one of the toughest decisions of her five-year tenure last December. Before the Sept. 11 terrorist attacks, Garvey had planned to award about $1 million in bonuses to the FAA's top executives for meeting performance goals. But she reversed her decision following the four deadly hijackings. "Given what the country had been through, given what industry had been through, it did not seem appropriate to take those bonuses," says Garvey.

The FAA's personnel system is different from those of many federal agencies because the agency is exempt from governmentwide personnel rules. Top FAA managers, the equivalent of Senior Executive Service members elsewhere, forgo raises based on length of service and instead can receive cash bonuses of up to 25 percent of their annual salaries if they achieve their performance goals.

Garvey says deciding to withhold bonuses was difficult because executives had put in long hours since Sept. 11 to get the air traffic system up and running again. In a Dec.13 letter announcing her decision, Garvey praised executives for responding "magnificently" after the attacks, but said she and other agency workers would always ask what more could have been done to prevent them. The money reserved for bonuses went to some of the FAA's large, unplanned security costs, she said.

The decision to withhold bonuses and instead spend the money on improving security illustrates Garvey's style. Her results-oriented approach and political smarts have earned her wide praise from Congress, industry and labor for the way she manages the agency and its 49,000 employees. "Jane Garvey is very focused on results, and that can be threatening to executives who have built their careers on working hard," says Ruth Leverenz, the FAA's assistant administrator for regional and center operations. "Now the questions are, 'Did you get it done?' and 'Does it make a difference?'"

Garvey, a former Massachusetts teacher, became the state's deputy commissioner for public works and head of Boston's Logan Airport after working on Michael Dukakis' second gubernatorial campaign. Since taking over as FAA administrator in August 1997, she has made a decided difference. She has scaled back the FAA's long-delayed and over-budget air traffic modernization plans in favor of smaller efforts with faster payoffs; improved financial management systems; and set clear corporate goals. Arguably, Garvey's greatest achievements have been political. She successfully negotiated a five-year, $1 billion contract with the agency's powerful air traffic controllers union in 1998. Not only did the deal put to rest lingering acrimony from the 1981 firing of thousands of air traffic controllers by President Reagan, but it also softened labor's concerns about modernization. "We went from a combative relationship to a collaborative relationship," says John Carr, president of the National Air Traffic Controllers Association (NATCA).

Garvey has also made progress on the industry side. By meeting regularly with smaller regional air carriers, airport executives and general aviation leaders, she has quieted charges from industry that only the concerns of large commercial air carriers matter to the agency. "She has set an example from the top that there are multiple customers and all their views need to be considered," says Debby McElroy, head of the Regional Airline Association in Washington.

Garvey has had the advantage of being the FAA's first chief with a fixed, five-year term, which began in 1997 and ends in August. Previous administrators were political appointees who seemed to depart from the FAA as regularly as flights from Chicago's O'Hare airport. The Bush administration has yet to name Garvey's replacement.

Despite having a strong manager at the helm, the FAA still faces internal management challenges, including:

Improving an inefficient rule-making system.
Implementing an agencywide cost-accounting system.
Creating a new performance-based organization to oversee air traffic control.
Addressing pay-parity concerns from air traffic control managers.

Management shortcomings are not the only problems confronting the agency. Prior to Sept. 11, an excessive number of flights was overwhelming the nation's air traffic system. Delays seemed more common than on-time arrivals. Nearly 2 million passengers fly through U.S. airspace every day. Despite a post-Sept. 11 decline in flights, the agency expects the number of airline passengers and cargo to return to its previous levels within two years. By 2010, an additional 1 million passengers will be flying daily. On top of that, the FAA must work with the new Transportation Security Administration to develop and implement tougher security measures.

Corporate FAA

Those overarching goals are spelled out in a strategic plan that the agency crafts every five years with input from senior managers and aviation industry leaders. The agency develops more narrowly defined goals each year and draws up detailed lists of projects that are vital to meeting those goals. For example, the FAA's strategic plan calls for reducing aviation fatality rates by 80 percent. In order to meet that target, the agency's 2001 corporate goals focus on reducing aviation accident rates. More specifically, the plan says corporate projects, such as the wider use of satellite-based global positioning systems and partnerships with the aviation industry to collect and share safety data, will help reduce aviation-related fatalities.

Louise Maillett, acting assistant administrator for policy, planning and international aviation, says the agency tracks the progress of goals in monthly performance reports filed by the FAA's major operating divisions. For example, the Air Traffic Services Division prepares monthly reports on on-time flight arrivals as one measure of efficiency. In addition, Maillett says, the agency ranks key technology projects as red, yellow or green, based on how well they are meeting their schedules. It also uses a milestone system to track these projects.

Garvey has emphasized safety by creating high-profile offices to target areas of concern. Last spring, after noting the steady increase in incursions, accidents or near misses on runways, Garvey created the Office of Runway Safety to deal with the problem. Over the past year, the office has pinpointed the hot spots where incursions occur most frequently and has worked with local airport operators to improve lighting and post more signs along runways. Runway safety officials also have consulted air traffic controllers to find better ways to direct the flow of ground traffic. Ultimately, says William Davis, who heads the office, the FAA wants to eliminate all runway deaths.

Monte Belger, the FAA's deputy administrator, says the agency is well-equipped to manage for results because its corporate goals are linked to a host of detailed performance measures. Still, he says, the challenge is making sure managers and workers in the field understand headquarters' goals. "The goals are there, but they don't quite permeate the organization yet," he says.

Balancing the Books

In 2004, FAA managers will have to begin including performance plans in their budget requests. For example, if an airway facilities manager, who oversees airport systems and FAA installations, wants more funding, he'll need to show how that money will be used to produce more on-time arrivals and departures. In short, budgets must be linked to goals. "That's the ideal state we want-where we have performance measures and can see why people are or are not getting things done," says Hennigan.

Creating an agencywide cost-accounting system is critical to performance-based budgeting. But thus far, the FAA hasn't been able to fully integrate its cost-accounting system with its labor-distribution system, or with the Transportation Department's financial management systems. A cost-accounting system would allow the FAA to track the efficiency of its operations and compare costs across the agency.

In 1996, Congress ordered the agency to install a cost-accounting system by 2001. So far, the agency is tracking about 70 percent of its spending. According to Garvey, "Cost accounting as an end in and of itself is meaningless. The challenge is how you use the information that you have to make good management decisions."

The Transportation Department's inspector general found in a January report, "2001 Status Assessment of Cost Accounting System and Practices," that the FAA "continues to make progress" in implementing cost accounting. At the same time, the IG warned that the system must be better integrated with the agency's labor distribution system, which tracks worker hours, and with the agency's other financial management tools. Lax controls in the FAA's labor distribution system allow air traffic controllers to override the computer system that tracks employee arrival and departure times. This means that controllers can enter into the system whatever hours they want. The agency still is negotiating with labor unions over the way this system works. The IG also told the agency to develop a handbook on cost-accounting procedures and establish measures to ensure data integrity and system security.

The FAA received a clean audit opinion from the Transportation IG for fiscal 2001 after receiving a qualified opinion in fiscal 2000. The agency missed the mark for 2000 because it couldn't adequately track property and equipment. To get the clean 2001 audit, the FAA developed a work-around solution-a fixed-asset management system at headquarters that incorporates data on quality controls and filters information that comes in from the field. That system is not integrated with the agencywide financial management system, however, and outside auditors continue to cite it as a major flaw in the agency's bookkeeping processes.

Garvey says a clean audit is critical if the FAA wants more money from Congress. "You can work really hard and round the clock, as people did, to establish a clean audit. But maintaining that and having it set up in a way that it's automated and something you can rely on is very challenging," she adds.

One of the key tools in maintaining a clean audit will be a new financial accounting system, known as Delphi, which will be used throughout the Transportation Department. The computerized system, which will replace a 20-year-old accounting system that requires manual entries and offers few analytical tools, should be in place by November. Delphi will be based on successful commercial accounting systems and will not only perform bookkeeping tasks, but also will offer more advanced software to analyze financial trends.

All Or Nothing

In 1998, the FAA announced a new program, known as Free Flight, which sought an incremental modernization of air traffic control. Garvey says it's modeled after NASA's "build a little, test a little" method of developing technology. Under Free Flight, the FAA plans to spend $837 million from fiscal 1998 to fiscal 2007 to develop, field and sustain five technology systems for air traffic controllers that will improve the flow of air traffic. Thus far, the project is on budget.

"The Free Flight Program is a comparatively well-managed effort due in part to its limited nature and 'build a little, test a little and deploy a little approach,'" Transportation's inspector general wrote in a December 2001 assessment. However, the IG warned that Free Flight's more complex information technology tools have been difficult and costly to develop and have shown only limited success. Congress has supported the FAA's mod-ernization program. In 1996, lawmakers gave the agency broad authority to operate outside most federal acquisition rules. As a result, the FAA was able to buy 22 central computers in just 18 months to monitor flight plans and radar data at its air traffic centers. Under the old procurement system, dozens of companies would have bid for the work, and the FAA would have spent months reviewing their proposals before awarding a contract. Freed from federal buying rules, the FAA streamlined its selection process. Instead of issuing a formal request for proposals, the agency initially sought more general submissions from contractors. Within weeks of receiving them, the agency chose a handful of contractors to prepare more detailed bids. The FAA has been a leader in developing and using this rapid selection process. A 1999 report by consulting firm Booz Allen Hamilton found acquisition reforms cut the time it took to award contracts in half.

"The reforms allow you to maintain competition, but now you only compete the companies that have a legitimate shot at winning the work," says Dennis DeGaetano, deputy associate administrator for research and acquisition.

Despite improvements in FAA buying, significant technological hurdles remain. The Standard Terminal Automation Replacement System (STARS), a key air traffic control computer and display monitor for controllers at 170 FAA sites and more than 100 military installations, has been beset by delays and cost overruns. A revised schedule calls for the $1.4 billion system to be installed at all FAA sites by 2008 and at military sites by 2009-almost four years behind its original schedule and more than $500 million over budget. But even that schedule might not be met. "Deploying STARS within cost and schedule remains at risk," Transportation's IG said in the July 3 "Status Report on the Standard Terminal Automation Replacement System."

The FAA is taking steps to link its modernization plan with efforts to reduce air traffic congestion. The agency predicts congestion will increase more than 30 percent by 2010. Last summer, the FAA unveiled its National Airspace System Operational Evolution Plan, which calls for spending $11.5 billion by 2010 to build runways, redesign air space and buy technologies (including a second phase of Free Flight tools) to eliminate congestion at the busiest airports.

This year, the FAA will create a performance-based organization (PBO) that will merge air traffic operations with the agency's research, development and acquisition operations. The Clinton administration created PBOs to give agency executives greater freedom in managing their operations. In exchange for freedom from federal rules, PBO managers are held to higher performance standards and expected to operate more like private sector executives. A chief operations officer will oversee the PBO, and employees will be judged on how well the air traffic control system functions.

Paybacks

The personnel reforms spurred negotiations between the FAA and the National Air Traffic Controllers Association, which represents the agency's nearly 18,000 air traffic controllers. The negotiations led to a five-year, $1 billion labor agreement in 1998. The deal not only raised pay for air traffic controllers-base salaries, which ranged from $66,100 to $86,000 in 1998, rose to $81,700 to $126,400 in 2001-but also established a system in which controllers at the busiest airports are paid more than those at smaller airports.

Additionally, the FAA agreed to give controllers a greater role in developing and reviewing new air traffic control systems before they are installed.

Air traffic control managers say the agency has achieved labor peace at the cost of alienating managers. "The pay raise was long overdue, but they took it out of management's hide," says John Fisher, an air traffic control manager in Jacksonville, Fla., who heads the Federal Managers Association's FAA organization. Eliminating management positions paid for the salary hike, according to Fisher. He says the quality of air traffic operations is declining because more than 500 air traffic management positions have been cut since 1998. What's more, says Fisher, the ratio of controllers to supervisors has increased from 7-to-1 to 10-to-1.

Air traffic managers say they need to be paid on par with controllers. In 1998, the FAA agreed that air traffic managers in the field would get raises comparable to those negotiated with the union, but the raises did not extend to air traffic control supervisors at headquarters and regional offices. As a result, a manager moving from a regional office to the field often makes only a few thousand dollars more than some controllers.

Managers say controllers' increasing clout at the bargaining table makes them more difficult to supervise. Managers say concessions in the NATCA contract have made it harder to discipline controllers for technical violations, such as failing to keep planes far enough apart as they prepare to land. Contractual requirements for daily training and required breaks mean many controllers spend less than half their time directing traffic, according to one manager.

Controllers even have flexed their muscle in the design of new technologies, such as STARS. The computers and monitors are retrofitted with 1960s- and 1970s-style knobs and keyboards because controllers feel comfortable with them. The trade journal Aviation Daily last year ranked NATCA chief John Carr the second-most powerful person in aviation, ahead of Garvey and Transportation Secretary Norman Mineta.

Garvey is aware that many managers say she has ceded too much power to controllers, but she insists such trade-offs are necessary to solve the agency's problems, be they technological, financial or human. "On the balance, what we gained far outweighs any of the negatives," she says.

Federal Aviation Administration

Created: 1958

Mission: To ensure the safety, security and efficiency of the nation's civil aviation system.

Top official: Jane Garvey