MANAGEMENT’S DISCUSSION AND ANALYSIS

INSPECTOR GENERAL’S FY 2008
TOP MANAGEMENT CHALLENGES

The Department recognizes that Management Challenges are not issues that are easily solved. In many cases they require investments or upgrades to technology or substantial changes in long-standing procedures or program activities. To completely address a Management Challenge may take more than one fiscal year. Since, the OIG may refine the scope of the management challenge based on information that may become available during the year; it can be difficult to provide a context showing how far along the Department is in resolving a particular challenge. To provide perspective on the Department’s progress, we have provided a self assessment showing the achievements toward resolving the challenge as currently defined. The result is displayed via the Progress Meter icon. DOT hopes that this approach will provide perspective toward gauging the Department’s progress in resolving a management challenge.

1. Management Challenge: Continuing to Enhance Oversight to Ensure the Safety of an Aging Surface Transportation Infrastructure and Maximize the Return on Investments in Highway and Transit Infrastructure Projects.

- Targeting oversight actions to ensure the safety of tunnels and bridges

Recent tragic highway incidents underscore the need for FHWA to ensure that its oversight actions target tunnels and bridges that represent high-priority safety risk so that problems are identified, evaluated, and remediated in a timely and thorough manner.

Tunnels

Currently there are no national standards regarding the design, construction, inspection, operations and maintenance of highway tunnels in the Nation. The Federal Highway Administration (FHWA) and the American Association of State Highway Transportation Officials (AASHTO) are working together to provide guidelines and manuals for inspection, maintenance and management of tunnels. As an example, FHWA completed a two-day workshop on tunnel engineering in July that provide an opportunity to gather experts in tunnel ventilation, computer modeling, tunnel operation and response, and to formulate criteria for creation of a pilot program on tunnel fires. Short-term and long-term research, deployment and education programs are needed to assure the safety, reliability and efficiency of our highway tunnels. As such, there are a number of initiatives being considered or under development. In FY 2009, FHWA will develop a pilot program for computer modeling of fires in a tunnel. FHWA will also release a Highway Tunnel Design and Construction Manual that focuses on Construction, Inspection, Operation and Maintenance.

Following the collapse of a section of a suspended ceiling in the Central Artery Tunnel in Boston, the FHWA moved quickly to conduct an investigation of the collapse and to ensure safety of existing and new tunnels. FHWA issued a Technical Advisory to provide guidance and recommendations regarding the use and in-service inspection of adhesive anchors in sustained tension applications on all Federal-aid highway projects. Over the longer term, FHWA plans to develop a National Tunnel Inspection Program. An Advanced Notice of Proposed Rule Making (ANPRM) was drafted and is awaiting final signature before being published in the Federal Register. The development of the program will likely take from three to five years to completed beginning with the rulemaking process. Following the publication of a Final Rule, a Tunnel Inspection training program will be developed. In addition, FHWA and the AASHTO-20 Tunnels Committee members are coordinating efforts to conduct a domestic scan on Tunnel Management Practices in the near future. FHWA continues to work with AASHTO to advance tunnel technologies through research and other cooperative technology transfer efforts: These continuous efforts and exchanges ensure that tunnel owners have the option to use best available practices.

Bridges

FHWA continues to provide stewardship and oversight of the National Bridge Inspection Program and the Highway Bridge Program to assure compliance with applicable laws and regulations and the use of best practices in design, construction, inspection, and evaluation of highway structures. FHWA conducted National Bridge Inspection Standards (NBIS) compliance reviews in nearly every State, and provided States with reports of findings and recommendations.

Through risk assessments and in-depth reviews, FHWA has taken steps to minimize deficiencies in bridge load rating and posting practices. The load rating and posting is important on all bridges, so the scope of our efforts is not limited to structurally deficient bridges.

Out of 52 FHWA Division Offices, 47 completed their risk assessments on bridge load rating and posting by October 2007. The remaining 5 Divisions plan to complete their assessments during 2008. Twelve Divisions identified load rating and posting as high risks. These Divisions will respond by conducting in-depth reviews of load rating and posting practices during FY 2008 or FY 2009. Through the National Highway Institute FHWA initiated the development of a training course titled the Load and Resistance Factor Rating Method, based on an improved methodology for determining the load capacity of bridges. This course will be offered to State Departments of Transportation.

During 2008, FHWA initiated development of two additional standard NBI data reports to further assist in a data-driven approach to targeting our oversight activities. One of these reports identifies a list of bridges that may experience a change in operating rating due to a condition change that puts the bridge into a structurally deficient status. The other NBI data report, scheduled to be implemented by September 2008, will provide the Divisions a list of bridges that have been structurally deficient for the past ten years.

The revised FHWA Bridge Program Manual is still undergoing technical and legal review. It is a comprehensive document that requires an extensive multi-disciplinary review. A target date for completion will be established once the review is complete. Additional standard NBI data reports have been implemented to provide our bridge engineers with opportunities to make use of existing National Bridge Inventory data.

The FHWA Fiscal Management Information System (FMIS) was queried to determine if it is possible to develop detailed information regarding the obligation of Federal funds on structurally deficient bridges. However, the results could not be validated because of the way projects are established in FMIS. Both the FMIS and the NBI systems would have to be modified to accurately track obligation of Federal funds on structurally deficient bridges.

- Ensuring that major projects are completed in an efficient and cost efficient manner to maximize the return on Federal infrastructure investments

FHWA continues to play an important role in ensuring that Value Engineering (VE) is successfully integrated in the development and delivery of surface transportation programs and projects. In FY 2007, the State DOTs and the Office of Federal Lands Highway performed a total of 316 VE studies and achieved a significant cost savings of $1.972 billion on projects with an estimated construction cost of $24.81 billion. In addition, a total of $41.8 million was saved as the result of approved construction VE Change Proposals that were submitted by contractors.

To ensure the continued enhancement of program oversight and further promotion of VE in FY 2008 and beyond, several initiatives are planned or currently underway. The FHWA’s 2007 call for VE data was successfully expanded to request information on States’ current best practices in their VE Programs. Collaboration with the AASHTO VE Technical Committee continues to enhance the reporting requirements, and the FHWA will integrate the results of this collaboration into the FHWA’s upcoming 2008 call for VE data.

By the end of 2008, the FHWA will begin the rulemaking process to update the VE regulations. The intent of this rulemaking is to provide consistent language and terminology between the existing regulations and 23 United States Code Section 106, as amended by the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) and to supplement and expand the level of guidance currently provided with the regulation. The rule should promote more effective administrative practices and consistent application of the VE techniques by the states, thereby providing benefits to the delivery of the surface transportation program and increasing the potential for reducing project costs.

The OIG noted that FTA’s use of independent contractors to assist in oversight is a sound approach that could be replicated in other operating administrations. The project management oversight of transit infrastructure projects is primarily performed by outside project, financial, safety and procurement oversight consultants hired by FTA. The oversight contractors regularly monitor each major capital project, closely watching quality, scope, cost and schedule using the latest risk assessment methods. The agency provides its own oversight activities in addition to reviewing the contractors’ work. Vigilant oversight will be particularly important since FTA must continue to oversee Federally funded transit infrastructure projects throughout the Nation, while at the same time overseeing several large and complex New York City projects (four FTA projects and one FHWA project at World Trade Center have a Federal commitment of $4.4 billion, the $4.7 billion New York/Second Avenue Subway and the $7.3 billion Long Island Rail Road East Side Access) collectively costing about $16 billion. More recently, the oversight program has demonstrated its effectiveness on the Dulles Corridor Metrorail project, motivating the sponsor to control costs and eliminating the need for a Federal loan and line of credit.

2. Management Challenge: Addressing Long- and Short-Term Challenges for Operating, Maintaining, and Modernizing the National Airspace System

- Hiring and training nearly 15,000 controllers over the next 10 years

One of FAA’s challenges over the next ten years is hiring and training enough air traffic controllers to address the surge in retirements. The Agency has developed a strategy for this and continues to modify and improve it as needed. FAA’s new hires come largely from three sources: experienced military controllers, Collegiate Training Initiative (CTI) partner schools, and the general public. This year FAA has taken action in all three areas to greatly increase the qualified applicant pool and reduce the time and cost associated with hiring and training.

FAA currently offers a recruitment bonus of up to $20,000 to previous military controllers. This allows the Agency to attract individuals with previous controller experience, which reduces time and costs associated with training. FAA also offers relocation incentives and reassignment bonuses for current controllers and retention incentives for retirement-eligible controllers.

In 2007, FAA revised the CTI evaluation process and added nine new schools, bringing the new total to 31. In addition, it opened the program again for new schools to apply between February 5 and March 7, 2008. This will expand the base of approved CTI schools even more. Final approval and announcement of the additional new schools will be in September 2008. The expansion of this program will allow FAA to attract a large pool of qualified candidates with aviation-related college degrees.

During 2007, numerous public sector job announcements were issued throughout the country, resulting in about 25,000 applications. Nationwide job announcements continue to be issued in 2008 at a rate of about one per month, ensuring a continual flow of applicants for vacant controller positions.

The FAA has improved the selection process with centralized selection and placement (CSP) panels that convene regularly throughout the year in Oklahoma City. Here the Air Traffic Organization and the Office of Human Resources review referred applications and make selections. Each CSP takes place in a week and instant coordination and communication occurs with each of the respective stakeholders. Many applications are reviewed, resulting in hundreds of selections being made at each panel. The CSP panel compresses the selection process from several months to one week.

CSP selectees are invited to a Pre-employment Processing Center (PEPC) for the remainder of their processing PEPCs are a streamlined and highly effective initiative that compresses the pre-employment application and screening process into a week-long session by bringing candidates together in a centralized location that allows FAA to: 1) conduct job interviews, 2) finalize selections, 3) collect security information to initiate the clearance process, 4) conduct medical exams, drug testing, and psychological evaluations, and 5) process human resources paperwork. Traditionally, the pre-employment processing took up to six months or more. The FAA has been able to cut time and costs in hiring by implementing the PEPCs. Ten PEPCs were held in FY 2008.

The FAA continues to make significant progress in the validation of accurate facility-level staffing standards. As part of the 2008 Controller Workforce Plan, FAA included updated staffing ranges at the facility level for all 314 terminal and en route facilities. In 2007, FAA completed its efforts to revise the standards for tower cabs and en route centers. As a result of the updated tower and en route standards, FAA was able to use data from all tower and en route facilities as input to the staffing ranges. In addition, FAA has started updates to the TRACON staffing model and anticipates completion during the fall of 2008.

The FAA is increasingly using simulators to reduce time and costs associated with training new controllers. FAA awarded a contract for 24 Tower Simulation Systems (TSS) in December 2007. Installation of the TSS has begun in field facilities and the FAA Academy, with full installation to be completed in September 2009. The Agency has also installed additional En Route Training Simulation Systems at six Air Route Traffic Control Centers and the Academy to increase training capacity.

The Deployable Air Traffic Training System (DATTS) is the FAA’s newest simulation training initiative. DATTS is a portable commercial-off-the-shelf mobile air traffic control training system, designed for deployment of ‘just in time’ or ‘as needed’ training use. DATTS expands training and closes the trainee back-log. The DATTS will be installed and tested at various field facilities and the FAA Academy in the coming months.

The FAA continues to use operations per controller as a baseline metric to measure controller productivity. This metric is tracked at the system level to provide a comprehensive view of terminal and en route operations. Due to decreasing levels of air traffic in recent years and the net increases to the controller workforce, the operations per controller metric for FY 2009 is projected to be 16 percent lower than FY 2000. This recent downward trend clearly indicates that FAA is proactively meeting the challenge of the air traffic controller retirement wave.

- Keeping existing modernization projects on track

FAA has created and implemented mitigation strategies to comprehensively address the need to keep modernization projects on track. Implementation of executive and management reviews and wide-ranging processes have resulted in positive, measurable, and dramatic changes in how FAA manages modernization projects.

A major earned value management (EVM) effort has been initiated across the agency. For all newly approved Information Technology (IT) investments that have current year development, maintenance and enhancement funding equal to or greater than $10 million, the FAA applies the EVM project management tool. These programs are also required to track and measure program performance in accordance with Earned Value Management Systems (ANS/EIA STD-78 EVMS) guidelines. By applying this project management tool, the FAA ensures optimum project planning and control by effectively integrating the project scope of work with cost, schedule, and performance elements. The FAA is more than fifty percent of the way to full EVM implementation.

The agency is also transforming the way it manages acquisitions with the implementation of an objective measurement system to evaluate program performance. In conjunction with EVM processes, the FAA has implemented a series of 21 program reporting metrics. A comprehensive Red/Yellow/Green assessment of program performance is available through a combination of Financial, Schedule, Technical, Resources, External Interest metrics as well as the program manager’s overall assessment.

FAA continues efforts to enhance its accountability and improve performance reporting. Among other initiatives, the Capital Investment Plan will now include baseline history for programs selected for acquisition performance measurement. In addition, standard operating procedures are being developed to address Program Planning, Baseline Management, and Program Performance Reporting. These processes and procedures will ensure continuity, discipline, and consistency in the way programs are planned, managed, and reviewed at all levels within FAA. In addition, Post-Implementation Reviews are routinely conducted and results reported to senior FAA management.

- Reducing cost, schedule, and technical risk with NextGen

The development and execution of NextGen is the most complex, high-risk undertaking FAA has ever attempted and will require multibillion dollar investments from the Federal Government and airspace users. NextGen implementation is led by the recently appointed Senior Vice President for NextGen and Operations Planning, in cooperation with the NextGen Management Board and NextGen Review Board. The Senior Vice President for NextGen and Operations Planning is supported by the NextGen Integration and Implementation Office. This office is structured to successfully implement NextGen by carefully monitoring the cost, schedule and technical risks.

During FY 2008, the NextGen Integration and Implementation Office took steps to acquire the necessary expertise to make NextGen a reality. The former Operational Evolution Partnership office and FAA’s chief systems engineers were brought together into the NextGen Integration and Implementation Office and FAA initiated recruitment actions for the NextGen solution set and integration managers and support staff. In addition, FAA entered into an agreement with the National Academy of Public Administration (NAPA) to conduct a workforce needs analysis to identify the competencies needed for all segments of our NextGen workforce and to define strategies to obtain this expertise. A final report, Identifying the Workforce to Respond to a National Imperative – The Next Generation Air Transportation System, was delivered in September 2008. The report contains recommendations on acquisition workforce strategies, strategies to acquire and retain acquisition workforce competencies, and NextGen implementation challenges.

The FAA’s NextGen Implementation Plan, which details FAA’s efforts to transform the National Airspace System using 21st century technologies, was published in June 2008. Even with this plan, NextGen is not without complex engineering, integration, and human factors issues. FAA continues to develop the enterprise architecture roadmap to attain the operational capabilities and improvements envisioned with NextGen. The FAA is also directing efforts to develop the critical path and risk matrix for NextGen to help mitigate engineering and integration issues, and to identify best practices in system integration for complex enterprises.

It is widely accepted that Earned Value Management (EVM) is the best project control technique for early detection of project performance variances. The FAA’s Acquisition Management System (AMS) requires all organizations responsible for major capital investment programs that involve development, modernization, or enhancement to develop and implement an EVM system.

NextGen’s transformational programs, such as Automatic Dependent Surveillance – Broadcast and System Wide Information Management have already implemented EVM. We expect Data Communications and NAS Voice Switch to follow suit once final investment decisions are made and approved program baselines are established. Other enabling activities within the NextGen portfolio are still in the planning stages of FAA’s standard lifecycle work breakdown structure (i.e., concept development and feasibility studies, etc.), where EVM is less useful as a project control technique.

To compliment the AMS, FAA is also looking at best practices to apply research and systems analysis and a technology readiness level framework to 1) facilitate the development of new technology and applications to meet approved service needs and 2) transition mature technologies through research and systems analysis to solution implementation.

- Maintaining FAA’s aging air traffic control facilities

Today there are over 500 terminal and en route air traffic control systems and facilities located throughout the country. Both the number and locations of the Air Traffic Control systems and facilities currently in use were driven by available technology. In preparation for the transition to the NextGen Air Transportation System, an estimated 400 legacy systems and facilities will need to be replaced or modernized.

In FY 2008, FAA spent more than $300 million for the repair, modernization, and replacement of its air traffic control facilities. These projects involve replacement of obsolete infrastructure, asbestos and mold abatement, repair of roof leaks, and plumbing improvements. Examples of these initiatives include:

• Mold remediation projects were completed at 29 facilities, including the Air Traffic Control Tower at Chicago O’Hare. An additional 18 mold remediation projects are planned for FY 2009. In FY 2009, we will complete 15 status mold inspections as part of the ARTCC duct inspection process.
• Major asbestos abatement projects at nine ARTCCs. To date, one construction contract has been awarded with the remaining projects in the engineering or procurement phases.
• Replacement of obsolete electrical and mechanical equipment as well as the installation of fire detection/protection systems in operations support and administrative areas.
• Mitigation of operational risks associated with mission critical physical plant infrastructure failure modes at all ARTCCs.
• Alignment of unmanned facility infrastructure survey data with a passenger-focused facility impact database. The database is used to establish a risk reduction methodology to deliver projects that maximize the protection of NAS capacity in the minimum time.

A key attribute of NextGen is a geographic independent service delivery model. Air traffic services can be provided without the constraints associated with legacy surveillance and communications infrastructure. Moving forward, FAA will begin to provide networked services allowing for greater flexibility and service resilience. With these changes, opportunities will arise that allow us to transition to a more optimal allocation of services to facilities and to remove outdated infrastructure from the NAS.

In FY 2008, FAA continued ongoing analysis of requirements for NextGen facilities. As part of the analysis, FAA is evaluating several aspects related to future operations and facilities, including the transition of new operational requirements, physical security, and workforce impact. The analysis includes consideration of existing en route and terminal facilities and how operational changes and technology advancements will change airspace assignment and facility requirements.

The analysis is being conducted as part of the Concept and Requirements Definition (CRD) phase of the Acquisition Management System process to support an Initial Investment Analysis Readiness Decision, which is anticipated in February 2009.

- Properly accounting for capital investment projects

Following extensive corrective actions undertaken during FY 2007, FAA continued to standardize and improve its processes for monitoring and accounting for capital investment projects. These initiatives are described in the Capitalization Program Management Plan (PMP), approved January 2008, which has been used to guide the Capitalization Program. FAA has made significant progress against the PMP. The activities identified in the PMP have been substantially completed, with ongoing clean up and routine processing tasks on target to be completed by September 30.

The FAA identified and implemented process improvements to existing policy, procedures, business processes, and systems. The process improvement activities addressed the auditors’ Notification of Findings and Recommendations as well as the lessons learned from the intensive clean-up activities undertaken during FY 2007.

During FY 2008, the FAA developed a financial manual that documents the capitalization policies and procedures and continues to conduct staff training to further communicate policy, process and procedure changes. FAA also implemented a quality assurance review checklist and process to ensure accurate financial treatment of capital projects and related assets. A National Program Capitalization Team was established to document and communicate decisions about capital programs to ensure timely and accurate capitalization of assets. In addition, 30 positions have been added throughout the organization to enhance capitalization efforts.

The FAA continues to develop and implement process improvements, including a regional quality assurance process and standardized FAA capitalization processes in headquarters and the three regional service areas. We have implemented standardized business processes and quality reviews that have resulted in FAA processing approximately 67 percent of assets within 65 days in FY 2008. Version 2 of the Capitalization Program Management Plan (PMP 2.0) has been developed, which will guide the agency through the next phase of capitalization process improvements and standardization in FY 2009.

3. Management Challenge: Developing a Plan to Address the Highway and Transit Funding Issues in the Next Reauthorization

- Facing a near-term funding crisis in the Highway Trust Fund

Given the current constraints in the Federal budget, the Department has undertaken several initiatives to encourage more effective and efficient use of existing revenue sources and the development of additional sources of revenue. The importance of these efforts was reinforced in September as the Department instituted emergency measures to deal with an expected shortfall in the Highway Account of the Federal Highway Trust Fund (HTF). Although Congress passed legislation, which the President subsequently signed, providing the Highway Trust Fund with $8 billion from the General Fund to avoid the shortfall, these funds provide only temporary relief. The HTF will remain vulnerable to shortfalls as long as it continues to rely on fuel taxes as its primary source of revenue.

The Department has encouraged Federal, state and local lawmakers to reduce the wasteful effects of political and special purpose spending, including earmarks and to apply benefit-cost analysis and other economic measures to transportation spending to ensure that priorities are being funded. The Department has encouraged the development and deployment of technological innovations that help States and local authorities use existing infrastructure more effectively. Significantly, the Department’s congestion pricing initiatives have facilitated the innovative use of advanced tolling technologies to more effectively manage congestion in metropolitan areas. Not only does better management of existing resources reduce investment needs, but pricing also creates dedicated and sustainable sources of revenue, which offer a promising alternative to declining fuel taxes. The groundbreaking Urban Partnership Agreements, for instance, emphasize utilization of tolling and pricing as a remedy to worsening urban congestion.

The Department has also encouraged states and local authorities to leverage existing public resources to attract substantial co-investment from the private sector. The Department has employed several programs in these efforts, including the private activity bonds program, FHWA’s Transportation Infrastructure Finance and Innovation Act (TIFIA) and interstate tolling programs, and pilot programs such as the FTA’s Public-Private Partnerships Program and the FHWA’s Corridors of the Future program. Over the last few years, these programs have attracted billions of dollars in private co-investment for our Nation’s transportation infrastructure.

The public-private partnerships (PPPs) facilitated through these programs are not divestitures of public transportation assets, but rather contractual arrangements whereby the private sector agrees to perform multiple elements of a public project, including design, construction, financing and/or long-term operations and maintenance. The public sector retains ownership of the facilities and ongoing responsibilities with respect to security, safety and other important functions. In addition, the public sector typically retains monitoring and oversight responsibilities to ensure that private operators are complying with the detailed performance specifications that are specified in the PPP contracts. Breaches by a private operator generally lead to penalties, and ultimately to the termination of the PPP contract and forfeiture by the private partner of its rights with respect to the facility. Because of the financial incentives created for the private sector to satisfy customers, and because the private sector assumes significant amounts of project risk in PPPs, including risks associated with cost overruns and schedule delays, the Department believes that taxpayers may well have less exposure to risks in a PPP than they do when the public sector employs traditional approaches to project funding and delivery. The Department is developing explanations of how risks are managed and how risks can be mitigated through careful negotiation of PPP contractual provisions.

- Demand for more investment and rapid cost escalation will increase the pressure to expand highway funding

The amount needed to offset the effects of inflation in highway construction and maintenance costs has soared dramatically in recent years. The increases have substantially reduced the purchasing power of highway construction funds and have led some state planners to cancel or delay projects. The Inspector General urged DOT to pursue innovative uses of funding to counter this price escalation.

Reducing recurring and non-recurring congestion, improving day-to-day operations, enhancing freight management, better emergency management, deployment of new technologies – these are all ways that FHWA works to maximize the benefit of the Federal investment in highways. In addition, DOT works actively to leverage that investment by encouraging and facilitating a broad range of financing options available within current law. SAFETEA-LU provided innovative changes to stimulate needed private investment such as eligibility for private activity bonds, additional flexibility to use tolling to finance infrastructure improvements, and broader Transportation Infrastructure Finance and Innovation Act and State Infrastructure Banks loan policies.

DOT’s Urban Partnership program, an element of the Transportation Secretary’s National Strategy to Reduce Congestion (Congestion Initiative), provided an incentive for a number of large metropolitan areas to undertake meaningful pricing efforts as part of a comprehensive strategy to reduce congestion. A relatively small amount of Federal funding, along with a pledge of technical assistance, was enough to encourage adoption of broad congestion pricing programs. Up to this time, most congestion pricing was small scale and limited to a specific facility.

FHWA supports efforts to move innovative methods into mainstream use, providing education, best practices and technical support.

• A tolling and pricing opportunities website provides information about the tolling and pricing programs available under Title 23 of the United States Code and invites Expressions of Interest from States and/or other public entities. The site also provides key contacts and links to resources related to tolling and pricing that can be used to support an initiative. Through this site, agencies can understand the tolling and pricing opportunities that now exist and can communicate with FHWA in order to assist them in effectively applying for tolling and pricing authority or funding.
• A Public Private Partnership (PPP) website contains information to facilitate and encourage more widespread use of PPPs. Expanding the private sector role allows the public agencies to tap private sector technical, management and financial resources in new ways to achieve certain public agency objectives such as greater cost and schedule certainty, supplementing in-house staff, innovative technology applications, specialized expertise or access to private capital.
• An Innovative Finance website highlights programs to meet the increasing gap between transportation capital needs and available resources, without direct increases in Federal grant funding. During the past decade, at least $29.1 billion in innovative finance projects have been advanced, which were supported by $8.6 billion in Federal-aid funding. On average, for each Federal dollar invested in an innovative finance project, $3.40 of construction investment was enabled, which compares quite favorably to the ratio of $1.25 to $1.00 for every dollar invested in the traditional grant program. DOT continues to work actively with partners to make innovative tools such as TIFIA assistance, State Infrastructure Banks, and private activity bonds more widely accessible.

In addition to its ongoing activities under current authorities, the DOT has also developed a comprehensive proposal (Reform Proposal) for reforming the Federal surface transportation program subsequent to the expiration of the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). The Reform Proposal incorporates provisions that would encourage states and metro areas to explore innovative transportation financing mechanisms. Specific provisions in this area include (1) allowing jurisdictions to toll Interstates and other major highways (while conditioning their use of toll revenues), (2) expanding the use of public private partnerships, (3) broadening the availability of TIFIA credit assistance, (4) removing the volume cap on private activity bonds and making them more flexible; and (5) allowing jurisdictions greater flexibility to create and use state infrastructure banks.

Beyond its current programs, DOT has also included provisions in its surface transportation Reform Proposal to encourage states and metro areas to explore innovative transportation financing mechanisms. Specific provisions in this area include (1) allowing jurisdictions to toll Interstates and other major highways (while conditioning their use of toll revenues), (2) expanding the use of public private partnerships, (3) broadening the availability of TIFIA credit assistance, (4) removing the volume cap on private activity bonds and making them more flexible, and (5) allowing jurisdictions greater flexibility to create and use state infrastructure banks.

- Developing a comprehensive Highway funding framework quickly

In addition to its provisions regarding innovative finance, the DOT’s Reform Proposal provides a comprehensive vision of a clarified Federal role in surface transportation. The Reform Proposal reflects the Administration’s strongly-held beliefs on the long-term inability of the gas tax and the current Federal programmatic structure to adequately respond to America’s transportation, economic, energy, and environmental policy goals. It provides an investment strategy and regulatory framework for Federal surface transportation investments and outlines programmatic, financial, and regulatory reforms that a surface transportation authorization bill might include. These reforms would focus substantial Federal funding on projects of national interest; give state and local officials greater flexibility and private-sector financing options to tackle urban congestion; ensure that government invests tax dollars effectively, and continue to focus on safety. In addition to grant programs, the proposal would encourage pricing and the leveraging of Federal funding and provide for greater accountability with more effective decision making and performance measurement.

In deference to the prerogatives of both Congress and the next Administration, the Reform Proposal does not recommend funding levels, whether in the aggregate or for individual programs. However, it does suggest approximate ratios for distribution of overall funding (regardless of its cumulative level) between various programs.

4. Management Challenge: Reducing Congestion in America’s Transportation System

The Department is pursuing a national strategy to reduce congestion across all modes of transportation. Congestion limits economic growth, wastes billions of gallons or fuel, and costs billions of dollars in lost productivity each year. This will likely remain a prominent challenge for the Department for some time, particularly with regard to air travel. FAA and FHWA are the focal points in the Department for addressing these challenges.

- Reducing delays, improving airline customer service and meeting the anticipated demand for air travel in the near term

Reducing Delays

The FAA continues to work at reducing delays and meeting the anticipated demand for air travel. Implementation of the Next Generation Air Transportation System (NextGen) is the long term solution to increasing capacity of the National Airspace System. In the meantime, FAA and the Department of Transportation have implemented a number of initiatives to reduce delays in the near term.

• New York Aviation Rulemaking Committee (ARC). The ARC was formed in September 2007 to explore operational improvements, market-based mechanisms, and other options for addressing airspace congestion and flight delays in the New York metro-area. It provided recommendations to the Secretary of Transportation in December 2007. Please find the final report summarizing the ARC discussions at: http://www.faa.gov/library/reports/media/NY ARC Final Report.pdf.
• John F. Kennedy (JFK) International Airport Schedule Reduction and Temporary Order. The FAA convened a scheduling reduction meeting for JFK Airport in October 2007 to address the problem of severe congestion and delays. The FAA was successful in meeting with air carriers operating at the airport and securing flight schedule reductions and the re-timing of peak period flights. As a result of this meeting, FAA issued an order in January 2008 to codify these agreements and cap operations at the airport at 81 scheduled operations per hour. The cap on operations addresses the congestion and delay that peaked in summer 2007. The order became effective in March 2008 and will expire upon the effective date of the final congestion management rule in December.
• Newark Liberty International Airport Schedule Reduction and Temporary Order. The airlines serving Newark agreed with FAA’s request to reduce their schedules during peak periods and shift to operations to off-peak periods. These and other measures adopted at Newark will prevent carriers from simply shifting the congestion from JFK to Newark. The FAA issued an order codifying these schedule agreements in May 2008. The order limits scheduled operations to 81 per hour. The order became effective in June 2008 and will be replaced by the congestion management rule when it becomes effective in December.
• The JFK and Newark Orders also provided for opportunities to increase airline competition at these congested airports, though auctions at new and returned operating authorizations. The FAA expanded the slot auctions to cover a percentage of existing slots, at LaGuardia, JFK and Newark. Consumers will realize the benefits of more competition and a more national use of slots.
• New York Area Operational Improvements. Thirty percent of commercial air traffic passes through the New York airspace, where a substantial number of daily delays begin. FAA is redesigning airspace in the region, which affects airports in New York, New Jersey, and Pennsylvania, in order to improve traffic flow. The U.S. military worked with FAA to make some of its airspace available for civilian airliners during the peak holiday travel periods in FY 2008. The use of the military airspace was so successful in mitigating congestion over the Thanksgiving and Christmas holidays in 2007 and the July 4th weekend this summer that FAA is working with the Department of Defense (DOD) to ensure that military airspace will be available for civilian use during future holidays.

Improving Customer Service

The Department took several steps in FY 2008 to ensure the airlines provided adequate customer service to their passengers, especially when flights are delayed. For instance, the Department’s Aviation Enforcement Office investigated unrealistic scheduling by the large airlines, targeting chronically delayed flights. During 2007 and 2008, the numbers of such flights were dramatically reduced. In 2008 the Aviation Enforcement Office began applying a somewhat more rigorous set of criteria during its review. Even with the more rigorous criteria, there were only 71 chronically delayed flights during the second quarter of 2008 versus 129 in the second quarter of 2007.

The Department formed a Tarmac Delay Task Force to study past delays, review existing and other promising practices, and develop model contingency plans that airlines and airports can tailor to their unique operating environments to mitigate the impact of lengthy ground delays on consumers. The task force has held six meetings and the last meeting is scheduled for November 12, 2008. At the last meeting, Task Force members will vote on whether to recommend the model contingency planning document to the Secretary.

DOT published an Advance Notice of Proposed Rule Making in the Federal Register earlier this year that will enhance airline passenger protections by: (1) requiring carrier contingency plans for lengthy tarmac delays; (2) requiring carriers to respond to consumer problems, including making information available for filing a complaint with the carrier; (3) deeming scheduling a chronically delayed flight to be unfair; (4) requiring publication of delay data; (5) requiring carriers to publish complaint data; (6) requiring on-time performance reporting for international flights; and (7) requiring carriers to self-audit their customer service plan. The next step would be issuance of a Notice of Proposed Rulemaking (NPRM) seeking comments on any proposals the Department decides to advance, which will likely occur this fall.

The Aviation Enforcement Office has conducted on-site enforcement investigations of five large airlines this fiscal year to evaluate their compliance with consumer protection requirements. DOT has pursued enforcement action against carriers for failure to provide consumers, upon request, the on-time arrival percentage of a flight as required by existing rules. Cease and desist orders assessing civil penalties have been issued against four different carriers (Hawaiian, JetBlue, Delta and U.S. Airways).

- Keeping planned infrastructure and airspace projects on schedule to relieve congestion and delays

New runways and runway extensions provide significant capacity increases. Since fiscal year 2000, fifteen new airfield projects have opened at the 35 busiest airports. The progress of each Operational Evolution Partnership (OEP) runway and/or taxiway project is monitored by a team comprised of representatives from key FAA organizations and outside stakeholders. The team is responsible for ensuring that the runway and/or taxiway project is commissioned on schedule with all necessary equipment and airspace procedures in place to achieve the full operational capability of the airfield project. The team provides quarterly updates to the NextGen Management Board, which is chaired by the FAA Deputy Administrator. Any issues relating to the runway project are discussed, assigned to an executive to resolve, and tracked by the integration team to ensure resolution.

In June 2008, a new center taxiway was opened at Los Angeles International Airport and in September, Chicago O’Hare commissioned a 2,856-foot runway extension. Three additional runways will open at Chicago O’Hare, Washington Dulles and Seattle-Tacoma in November 2008. With these three projects, the agency and local communities will deliver to the NAS the potential to accommodate an additional 245,000 airport operations per year.

In addition, there are four other airfield projects at major airports (runways at Philadelphia and Charlotte, and taxiways at Dallas-Ft. Worth and Boston) under construction. These projects will be commissioned by 2010 and will provide the associated airports with the combined potential to accommodate an additional 80,000 annual operations, which will further reduce delays and improve efficiency.

To meet additional near-term needs, the FAA and local stakeholders will continue to pursue new airfield infrastructure to provide significant capacity, efficiency, and safety improvements. Currently, there are environmental impact studies for proposed runway extensions at Fort Lauderdale International Airport and Portland International Airport, as well as an airfield reconfiguration at Philadelphia International Airport. Houston’s Bush Intercontinental Airport is expected to begin the environmental process this year to examine alternatives to increase runway capacity. Salt Lake City International Airport is expected to begin an environmental study within the next few years to examine the impact of a runway extension.

Meeting the future capacity needs of the nation’s airports will require innovative approaches, as well as continued emphasis on airport expansion and technological improvements. The FAA’s report, Capacity Needs of the National Airspace System: 2007-2025 identifies fifteen metropolitan areas that will experience significant population gains and economic growth resulting in additional capacity needs by 2025. Within these fifteen metropolitan areas the FAA must promote regional planning; monitor aviation infrastructure investment; and identify additional airports with potential to accommodate future demand. The FAA and local communities are currently focusing on eight of these metropolitan areas which contain fourteen major airports. These airports are expected to have the greatest capacity shortfalls. The FAA is working with these airports to develop potential solutions to address these future capacity shortfalls and expects to have initial results by the end of 2008.

The FAA continues to monitor the progress of airspace redesign projects as near-term commitments in the NextGen Implementation Plan. In the past year, FAA has made progress on critical projects that increase routes, as well as reduce airspace complexity and restrictions, departure delays, and taxi, flying times, and distance.

In December 2007, the first elements of the New York/New Jersey/Philadelphia Metropolitan Area Airspace Redesign were implemented. The new dispersal headings at Newark-Liberty and Philadelphia International airports have decreased departure delays by as much as twenty percent. For New York, the initial dispersal headings have provided up to 20 percent reduction in departure delays, when headings are in use, at Philadelphia and Newark.

In April 2008, five new south departure routes were opened as part of the Chicago Airspace Project. These new routes will work in conjunction with the airfield improvements at Chicago O’Hare to significantly decrease delays. In Chicago, the on-time departure improvements were observed after the new southbound routes were put in place in April 2008.

The NextGen Implementation Plan also describes new ways of designing and managing airspace that could be implemented within the next decade. The NextGen Management Board, NextGen Review Board, and NextGen Integration and Implementation Office are all focused on gaining shared commitment and moving to implementation.

- Leading Stakeholders

The Department acknowledges the need to leverage its available tools to influence stakeholder decisions on infrastructure improvement. Indeed, the critical need to move from a tax-based transportation model to a user pay model and the concomitant need to have a level playing field for private and public sector investors in transportation infrastructure represent significant policy change. The Nation can no longer afford to rely almost exclusively on Federal fuel taxes to fund our transportation infrastructure.

Accordingly, the Department has repeatedly testified before Congress on all aspects of this issue, delivered speeches on the topic to key stakeholders across all modes and across the country, launched public web sites and The Secretary’s blog to keep stakeholders up-to-date on recent developments and has supported its public outreach effort with a series of seminars on the topic to educate and inform DOT employees.

- Developing innovative funding solutions for infrastructure needs

Any sustainable response to traffic congestion must accomplish two general objectives: making efficient use of existing transportation infrastructure and adding capacity where needed. DOT has strongly endorsed the use of innovative finance – including public-private partnerships (PPPs) – accomplish both ends. There are more than 20 major PPPs in various stages of procurement in the US, including several managed lanes projects which will incorporate pricing and reduce congestion; many of these projects would likely not be financially viable under more traditional public procurement approaches.

The Department has supported innovative finance and PPPs in a number of ways. DOT’s congestion pricing initiatives have facilitated the innovative use of advanced tolling technologies, which allow metropolitan areas to both more effectively manage congestion and to generate associated revenues. The Department has encouraged states and local authorities to leverage existing public resources to attract substantial co-investment from the private sector. The Department has employed several programs in these efforts, including the private activity bonds program, FHWA’s TIFIA and interstate tolling programs, and pilot programs such as the FTA’s Public-Private Partnerships Program and the FHWA’s Corridors of the Future program. Over the last few years, these programs have attracted billions of dollars in private co-investment for our Nation’s transportation infrastructure.

Beyond its current programs, DOT’s surface transportation Reform Proposal would encourage states and metro areas to explore innovative transportation financing mechanisms. Specific provisions in this area include (1) allowing jurisdictions to toll Interstates and other major highways (while conditioning their use of toll revenues), (2) expanding the use of public private partnerships, (3) broadening the availability of TIFIA credit assistance, (4) removing the volume cap on private activity bonds and making them more flexible, and (5) allowing jurisdictions greater flexibility to create and use state infrastructure banks.

It is important to note that the public-private partnerships facilitated through DOT’s existing programs and supported within the Department’s Reform Proposal are not divestitures of public transportation assets, but rather contractual arrangements whereby the private sector agrees to perform multiple elements of a public project, including design, construction, financing and/or long-term operations and maintenance. The public sector retains ownership of the facilities and ongoing responsibilities with respect to security, safety and other important functions. In addition, the public sector typically retains monitoring and oversight responsibilities to ensure that private operators are complying with the detailed performance specifications that are specified in the PPP contracts. Breaches by a private operator generally lead to penalties, and ultimately to the termination of the PPP contract and forfeiture by the private partner of its rights with respect to the facility. Because of the financial incentives created for the private sector to satisfy customers, and because the private sector assumes significant amounts of project risk in PPPs, including risks associated with cost overruns and schedule delays, the Department believes that taxpayers may well have less exposure to risks in a PPP than they do when the public sector employs traditional approaches to project funding and delivery. The Department is working on literature explaining how risks are managed in PPP programs and how PPP risks can be mitigated through careful negotiation of contractual provisions.

5. Management Challenge: Improving Oversight and Strengthening Enforcement of Surface Safety Programs

Over the last several years, Congress has provided increased funding to enhance surface transportation safety programs, particularly under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). Over the last 21 years, the Department has helped reduce the rate of highway fatalities per 100 million total vehicle miles traveled by about 45 percent (from 2.51 in 1986 to 1.37 in 2007). Still, 41,059 people were killed on our Nation’s highways in 2007. The Department has set an ambitious goal of reducing the highway fatality rate to 1.0 by 2011. However, finding ways to reach this goal is a significant challenge for the Department.

- Improving motor carrier safety with more complete information on vehicle crashes and stronger enforcement against repeat violators

The DOT IG challenged FMCSA to train the states on reporting nonfatal crashes and ensure that all states are assessed by the end of FY 2008. The FMCSA aggressively responded by performing site reviews using federal staff and contractor support to improve the number of state assessments from the 15 reported in the OIG audit to 42 state assessments completed as of June 2008. To improve the overall quality of crash statistics, FMCSA established new data upload criteria which required states to satisfy additional data quality requirements. A concerted effort of testing, piloting, and training resulted in 29 states meeting the more challenging criteria despite early projections that only 12 states would qualify. Crash data completeness improved to 98 percent, and crash reporting time decreased by 17 percent, increasing inspection and crash data accuracy. The FMCSA strengthened its repeat violator policy by requiring its inspectors to treat carriers responsible for any acute or critical violations found during subsequent compliance reviews as repeat offenders, regardless of their ability to pay fines.

- Closely monitoring Mexican motor carriers operating throughout the United States under the Department’s demonstration project

On September 6, 2007, the Department initiated a 1-year demonstration project to permit up to 100 Mexico-domiciled and 100 U.S. motor carriers to operate beyond the commercial zones along the United States–Mexico border. The demonstration project was subsequently extended for two additional years. The FMCSA addressed the needs with coordinated, site-specific plans for checking trucks and drivers participating in the demonstration project. This required coordinating inspections and driver checks with state partners and U.S. Customs and Border Protection, resulting in the development of 25 port-of-entry specific plans. Nearly 100 percent of the licenses of Mexican drivers crossing the border were validated to ensure that all Mexican drivers participating in the project are properly credentialed and licensed. Also, inspectors verified that each commercial motor vehicle crossing our southern border displays decals denoting recent safety inspections. The FMCSA tracks the out of service (OOS) rates of carriers in the demonstration project, just as all U.S. carriers’ OOS rates are tracked. The vehicle and driver OOS rates are a metric used by FMCSA to monitor compliance with commercial vehicle safety regulations by motor carriers operating in the United States. These rates reveal that Mexican domiciled trucks and drivers participating in the demonstration project have established compliance rates equal to or better than U.S. trucks and drivers.

- Countering Fraud in the Commercial Driver’s License program

Over the past six years, the DOT IG and FMCSA carried out commercial drivers license (CDL) fraud-related investigations of corrupt third-party examiners in 26 states resulting in prosecutions in 20 states. On April 9, 2008, a notice of proposed rule making was published in the Federal Register which proposed to tighten regulatory controls over CDL learner’s permits, strengthen requirements for proving that CDL applicants are in the United States legally, and improve detection and prevention of fraudulent testing and licensing.

The FMCSA performed in-depth reviews of 15 state CDL programs in 2008 to verify that testing and licensing procedures were effective, that policies and procedures complied with existing laws, and that State practices were not susceptible to fraud. Recommendations were made to the states to improve the CDL program’s integrity.

The FMCSA is working closely with our state partners in multiple initiatives with CDL Program Improvement grants to reduce fraud within the national CDL program. The FMCSA awarded grant funds to multiple States to increase overt and covert monitoring of third party and State examiners. The Agency also awarded grants to automate the CDL knowledge and skills testing process, thereby reducing the risk of both applicant and examiner fraud. The automated systems, which randomly generate test questions from a large sample, minimize the opportunity for applicants to predict the specific questions they will ask. Furthermore, this process posts the knowledge test results directly to the driver record, thereby reducing the chance for examiners to fraudulently change applicant test scores.

Additionally, FMCSA has awarded grant funding to the American Association of Motor Vehicle Administrators (AAMVA) to operate the Fraud Early Warning System, which communicates potential fraud occurrences among the states. This includes information about stolen license documents, CDLs issued based on fraudulent activity, and other sensitive information. Also in partnership with AAMVA, FMCSA has initiated a Fraudulent Document Recognition (FDR) training program that will provide states with hands-on instruction and expertise in identifying potentially fraudulent identity and eligibility documents. The FDR project is funded in coordination with the National Highway Traffic Safety Administration (NHTSA).

- Resolving hours of service rules for commercial drivers

In response to a decision of the U.S. Court of Appeals for the District of Columbia Circuit, FMCSA published on December 17, 2007, an Interim Final Rule (IFR) regarding hours of service (HOS) for truck drivers. The IFR retains the HOS provisions allowing 11 hours of driving time within a 14-hour, non-extendable window from the start of the workday, following 10 consecutive hours off duty. The IFR also allows motor carriers and drivers to restart calculations of the weekly on-duty time limits after the driver has at least 34 consecutive hours off duty. The IFR was developed after new data showed that safety levels have been maintained since the 11-hour driving limit and 34-hour restart were first implemented in 2003. The IFR specifically addressed concerns expressed by the D.C. Circuit Court in its 2007 decision. On December 19, 2007, Public Citizen, Citizens for Reliable and Safe Highways, Parents Against Tired Truckers, Advocates for Highway and Auto Safety, and the International Brotherhood of Teamsters, requested that the D.C. Circuit Court enforce its mandate, invalidate the IFR, and order the Agency to rewrite the HOS rules to limit driving time to 10 hours and eliminate the 34-hour restart. On January 23, 2008, the D.C. Circuit denied Petitioners’ motion to enforce the court’s orders.

In the IFR, the Agency stated, “FMCSA is fully committed to issuing a final rule in 2008” (72 FR 71247). Approximately 880 comments were received in response to the IFR. In general, industry comments were supportive of the IFR. The two HOS provisions which were, in effect, upheld by the Court (the 14-hour and sleeper-berth provisions) are not supported by the industry, but those provisions were not addressed in the IFR. Public safety advocacy groups again expressed strong opposition to the reinstated provisions because, in general, they do not believe that the reinstated provisions allow drivers adequate rest time to avoid driving while fatigued.

The FMCSA has completed its analysis of the comments received in response to the IFR, and prepared a final rule, with the intent of publishing it in 2008. The Final Rule is currently under Departmental Review.

- Improving State accountability in programs for reducing alcohol-impaired driving

In 2007, alcohol-related fatalities remained at 41 percent (17,036) of all traffic fatalities (41,059). Practically speaking, no significant improvement in the safety target can be achieved unless alcohol-related fatalities drop dramatically, and the States are the linchpin in achieving this drop.

NHTSA is the lead Federal agency responsible for reducing alcohol-impaired driving. SAFETEA-LU authorized $555 million in funding for State alcohol-impaired driving incentive grants. In 2007, an estimated 12,998 people were killed in alcohol-impaired driving crashes.

Evaluations of our current efforts to counter alcohol-impaired driving found that NHTSA must ensure that States establish and report better performance measures to assess how well they are using Federal funding to counter impaired driving. State performance plans generally contain measures on activities, such as the number of sobriety checkpoints conducted, or on the overall performance goal of reducing the alcohol-impaired fatality rate. However, the plans usually do not address performance of key strategies, such as sustained enforcement of laws, effective prosecution, and full application of available sanctions. Better information is needed on the degree to which States are implementing these key strategies; without it, NHTSA will not be able to determine which programs need to be strengthened.

NHTSA and the Governor’s Highway Safety Association (GHSA) recently completed the development of a consensus list of State performance measures that will be used to help States and NHTSA measure progress in a variety of safety areas, including impaired driving. States will report their performance on these measures in their annual highway safety plans (HSPs) and annual reports. These reports will be used by NHTSA and States to determine if progress is being made. The consensus list includes both outcome and activity measures. These measures will be included in State FY 2010 HSPs. In addition, NHTSA and GHSA agreed to study the possibility of adding a measure involving a survey of attitude and awareness of impaired driving. Following are the State performance measures aimed at reducing impaired driving, and the proposed survey measure.

State Performance Measures

Type	Performance Measure
FY 2010 State Performance Measures
Outcome	Number of fatalities involving a driver or motorcycle operator with a BAC of .08 and above.
Activity	Number of impaired driving arrests made during grant-funded enforcement activities.
Proposed State Measure
Survey	Self reported attitude, awareness, and behavior regarding impaired driving, laws, penalties, and enforcement.

These measures were released in September 2008 and NHTSA will be working with the States to incorporate them into the FY 2010 Highway Safety Plans.

- Further reducing railroad collisions and fatalities through more safety oversight

Over the past 10 years, significant progress has been made in reducing collisions and fatalities at highway-rail grade crossings. The number of such collisions fell by 31 percent from the end of 1996 to its end-of-2006 total of just over 2,900. FRA’s grade crossing safety oversight activities have contributed to this progress. However, these grade crossing collisions continue to claim over 300 lives each year. FRA pursued a number of activities in FY 2008 to address this issue.

The Agency continues to perform accident/incident reporting audits for compliance with the reporting requirements of Title 49 Code of Regulations Part 225 (49 CFR Part 225) on each of the eight Class I railroads on a recurring basis every 3 years. Each of FRA’s eight regions will audit the Class II and commuter railroads within their geographical territories on a recurring basis every 5 years. (Note: the Surface Transportation Board categorizes the railroads according to their annual operating revenues. The Class Is have operating revenues in excess of $350 million; Class IIs range from $28 million to $350 million; and Class IIIs are below $28 million. Currently, there are eight Class Is and approximately 30 Class II railroads.)

FRA investigates a number of crossing collisions annually. In May 2005, FRA issued a Safety Advisory (Safety Advisory 2005-03) to facilitate improved cooperation in the investigation of collisions at highway-rail grade crossings. This Safety Advisory reiterated the responsibility of the railroads to: properly report any accident involving grade crossing signal failure; properly maintain records relating to credible reports of grade crossing warning system malfunctions; properly preserve the data from all locomotive-mounted recording devices following highway-rail grade crossing collisions; and fully cooperate with local law enforcement authorities during their investigations of such accidents. FRA’s position is that with our limited resources, we investigate collisions that meet our standard protocol, and will investigate others as circumstances warrant.

Secretary Peters submitted to Congress in February 2007 the Bush Administration’s rail safety reauthorization bill, introduced by request as H.R. 1516 and S. 918. The bill was passed as H.R. 2095 in October 2008. The bill has significant safety requirements including implementation of Positive Train Control which will prevent collisions and over speed derailments. The bill reforms hours of service requirements for train and engine crews and signal maintainers that will reduce fatigue related accidents. The bill also mandates rulemakings that are likely to be significant for conductor certification and bridge inspections. Grade crossing safety will be improved through a provision that requires that the National Crossing Inventory be made current and thereby updated on a regular basis by States and railroads. Better data would help identify the Nation’s most hazardous crossings and assist in finding the best strategies for further reducing casualties at crossings.

In March 2005, FRA began working with Louisiana in developing a statewide highway-rail grade crossing safety action plan. Louisiana consistently ranks among the top five States nationally with the highest number of grade crossing collisions and fatalities. The State’s action plan focuses on reducing vehicle-train collisions at grade crossings where multiple incidents have occurred. In June 2008, in part as a result of efforts to create the action plan, the Louisiana Department of Transportation and Development announced an agreement with Kansas City Southern Railway Company to make safety improvements at 300 public grade crossings. Over five years, more than $16 million will be invested to upgrade warning devices, replace cross-buck signage, and close redundant crossings. FRA is now working with Texas and Illinois to develop similar State-specific action plans, which may be completed by the end of 2008. Arizona completed a rail safety and security plan in 2007 that incorporated crossing safety as well.

6. Management Challenge: Continuing to Make a Safe Aviation System Safer

- Taking proactive steps to improve runway safety in light of recent serious incidents

Reducing the risk of runway incursions is one of FAA’s top priorities. Reducing runway incursions lessens the probability of accidents that potentially involve fatalities, injuries, and significant property damage. The definition of a runway incursion was changed in October 2007 to “any occurrence at an airport involving the incorrect presence of an aircraft, vehicle or person on the protected area of a surface designated for the landing and takeoff of aircraft.” This definition has also been adopted by the International Civil Aviation Organization (ICAO). Before it was developed, countries around the world used at least 20 different definitions for a runway incursion. With its adoption, the worldwide aviation community now has a single runway incursion definition, which will help in the search to determine common factors that contribute to these incidents.

Surface Safety Technology Implementation

In FY 2008, FAA continued the Runway Status Lights (RWSL) program which reduces the likelihood of runway accidents. In June 2008, FAA announced that RWSL would be installed at 22 airports by 2011.

The Airport Surface Detection Equipment Model X (ASDE-X), a runway safety tool developed to aid in preventing surface collisions and reducing critical Category A and B runway incursions is currently installed at 17 airports. Additionally, FAA is considering the use of low-cost, commercially available radar surveillance systems that would reduce the risk of runway incursions at certain small and medium-sized airports. FAA issued a request for proposals in September 2008 inviting industry offers of candidate low-cost ground surveillance products at six additional pilot airports. Lower traffic levels and less complex operations at these airports allow ground operations to be safely conducted through visual and voice communication between controllers and pilots.

A low-cost ground surveillance system (LCGS) would further reduce the risk of ground incidents or accidents, especially during periods of low visibility. The LCGS will provide the basic infrastructure upon which additional runway safety applications such as Runway Status Lights (RWSL) and Surface Movement Guidance and Control Systems (SMGCS) can be built.

A draft of the National Runway Safety Plan has been drafted and will be published by the end of 2008.

Safety Promotion, Outreach, and Awareness

While pilots have traditionally acquired information about what runway or taxiway they are on by looking out their windshield, FAA is making it easier for pilots to have an invaluable electronic tool in the cockpit. It provides a moving map display with “own ship position”—changing and improving runway safety the way Global Positioning System (GPS) has changed the way we safely navigate our cars. Proposals to participate in the test program have been sent to industry for a program evaluation and are expected to begin during the next twelve months and continuing for several years.

FAA and industry leaders in August 2007 identified short-term steps to improve runway safety. These Call to Action initiatives focused on improved procedures, increased training for airport and airline personnel, and enhanced airport markings, lighting and signage.

• FAA has completed runway safety reviews at 20 initial ‘call to action’ airports based on runway incursion data and wrong runway departure data resulting in more than 100 short-term and numerous mid- and long-term initiatives. Most of the short-term initiatives identified have been completed.
• Seventy-five of the busiest airports enhanced their runway markings and the remaining smaller certificated airports must complete the marking enhancements by December 2009 or 2010, depending on their size.
• FAA issued an Advisory Circular on March 31, 2008 strongly recommending that certificated airports require annual driver training for all with access to the movement area. FAA has initiated rulemaking to require this annual driver training program at certificated airports.
• FAA conducted a review of air traffic procedures that could contribute to runway incursions. The first procedure change, explicit taxi clearances, was implemented in May, and the second change, waiting until all runways are crossed along the taxi route before issuing the takeoff clearance was implemented on August 11, 2008. The third change, requiring specific runway crossing clearances for each runway along the taxi route, may be implemented by December 2008. These new procedures address several National Transportation Safety Board aviation safety recommendations.
• In July, at Chicago O’Hare International Airport, a voluntary reporting system for air traffic controllers was launched. The reporting system known as ATSAP (Air Traffic Safety Action Program) encourages a culture of non-retributive open communications about incidents and potential problems.
• The proposed Runway Safety Council, a joint FAA-industry group, will address root causes including human factors and accountability issues. The first meeting occurred on October 29, 2008.

- Ensuring consistency and accuracy in reporting and addressing controller operational errors

To address this challenge, FAA will continue to focus on the development and implementation of an automated software prototype that will depict Air Traffic Control separation conformance in the Terminal environment nationwide. The Traffic Analysis and Review Program, TARP, will apply separation logic to targets; identify where applicable separation standards are not being maintained; and highlight incidents for further investigation.

Originally TARP implementation was scheduled to be complete at all applicable terminal and en route facilities by December of 2011. However, in March FAA announced the acceleration of the TARP deployment schedule. The TARP audit tool implementation will now be complete at all applicable terminal facilities by December 2009. The en route environment currently has the Operational Error Detection Program that identifies potential losses of separation. Therefore, the TARP implementation strategy was modified to first focus on the area with the greatest need, the terminal environment.

The FAA has developed an additional tool that complements TARP, the Continuous Data Recording Player Plus (CDRPP). CDRPP has TARP-like separation detection logic, playback functions and near real-time data access. CDRPP will be used to review and automatically investigate potential losses of separation between aircraft initiated by traditional methods. The FAA will formally deploy CDRPP to all applicable terminal facilities by October 2008.

The En Route and Oceanic Services Unit will continue to remain focused on reducing risk in the National Airspace System through effective performance management. For FY 2009 En Route and Oceanic facilities will develop and implement strategies which address the primary causal factors found in their operational errors, creating a safety culture within the facility, and ensuring the quality of on-the-job training and that weather information is properly disseminated.

In addition to these initiatives En Route and Oceanic Services will continue daily monitoring of performance, and will pursue procedural development to enhance the safety of NAS operations. En Route and Oceanic Services will also continue their communication and awareness strategies, including bi-weekly quality assurance and training telephone conference calls, a weekly quality assurance newsletter, and an annual quality assurance and training conference.

To ensure consistency and accuracy in reporting and addressing controller operational errors, in FY 2008 FAA began providing briefings to operational field air traffic personnel to emphasize the joint goals of the agency towards safety and efficiency. A significant element of the briefing addresses the need and responsibility for air traffic personnel to fully report all losses of separation for both operational errors and pilot deviations. The briefing includes discussion of the need to accurately capture the casual factors during investigation of every loss of separation. These briefings were presented to most large terminal facilities and some of their associated en route facilities by the end of March 2008.

The FAA is also ensuring more complete and accurate reporting of losses of separation through random audits of recorded radar data. Each month, the Air Traffic Organization’s (ATO) Safety Office selects approximately fifteen terminal radar facilities and directs them to review two hours of radar data for dates and times specified by the Safety office. In addition, FAA requires approximately three of these facilities to forward their radar data for the selected periods to ATO Safety for a second, independent review of separation. En Route and Oceanic Services facilities continue to use the audit process in FAA Order 7210.56.

- Strengthening risk-based oversight systems for air carriers, external repair facilities, and aircraft manufacturers

The FAA continues to strengthen its risk-based oversight system and has expanded the Air Transportation Oversight System (ATOS) to 107 certificate management teams, FAA teams that oversee the nation’s Title 14 Code of Federal Regulations (14 CFR) part 121 air carriers.

This system-safety and risk-based process ensures that FAA executes the agency’s responsibilities to determine the continuing operational safety of Title 14 CFR part 121 air carriers. About a third of the inspector workforce is assigned to ATOS certificate management teams. The remainder of the safety oversight workforce will begin using risk-based oversight processes in 2012 when FAA deploys these systems to other certificate holders such as Title 14 CFR part 135 air carriers and part 145 repair stations.

FAA continues to train the inspector workforce in risk-based management. New risk–based training courses have been developed to teach inspectors how to use the redesigned ATOS process and tools. As of April 2008, all inspectors currently using ATOS (approximately 1,600) have taken the training. No inspector is allowed to perform ATOS work assignments until completing the training.

In September 2005, FAA launched the enhanced repair station and air carrier oversight system. This risk-based oversight system standardizes the approach for surveillance of certificated repair stations and noncertificated facilities contracted to perform maintenance for air carriers. It also provides for the continuous assessment and prioritization of each repair station and noncertificated repair facility and provides a method of targeting areas of high risk. While FAA has completed an update of the order which contains all of the standards and requirements safety inspectors use daily, we are continuing a review of the order for needed harmonization with the latest practices and surveillance of repair stations and air carrier outsourced maintenance providers. This revision to the order is expected to be released as completed and finalized in June 2009.

FAA continues to effectively oversee manufacturers’ compliance with the aviation safety regulations. In the interest of safety and effective resource allocation, a risk management model is used to identify critical impact indicators that serve to categorize facilities according to their potential for producing nonconforming products and parts.

In June 2008, FAA revised draft guidance to manufacturers to include a process that evaluates and selects suppliers based on their capability to perform all manufacturing activities, inspections, and tests necessary to meet the specified requirements. The FAA expects this guidance to be incorporated in Advisory Circular 21-20 by September 2009. New risk indicators were also developed in June 2008 to be used by FAA manufacturing inspectors that emphasize the manufacturers’ use of flight-critical parts suppliers. Risk indicators, used by FAA manufacturing inspectors to reduce the level of subjectivity in evaluating manufacturers so that inspectors’ risk assessments are more consistent, were revised in January 2008.

New guidance will be published in March 2009 to require FAA manufacturing inspectors to review a manufacturer’s prior audits of suppliers as part of the inspectors’ analysis of risk and determination of resource targeting. Content for a revised manufacturing inspector training course was finalized in September 2008.

- Maintaining a sufficient number of inspectors

In March 2008, the Aviation Safety Organization (AVS) provided to Congress a 10-year Aviation Safety Workforce Plan. This plan ensures that an adequate safety staff is maintained to address oversight needs and addresses inspector attrition and anticipated changes in the aviation industry. The plan also addresses competencies and skills required within the AVS workforce to stay abreast of new technologies and to meet growing industry demands for service. As of August, AVS had hired a net increase of 143 positions, 85 of which are Aviation Safety Inspectors (ASI), putting us on target to meet the planned end-of-year staffing level.

The FAA has also established recruitment plans to fill our most critical occupations. The agency’s Office of Human Resources Management continues to cultivate relationships and partnerships with the industry, professional organizations, and the educational communities to ensure positive publicity for the agency in order to enhance recruiting opportunities. We have implemented the newly revised qualification standards for the ASI occupation. Business and Interpersonal Competencies have been added to the Automated Staffing and Application Process for ASIs. This addition will help to determine whether applicants possess the necessary competencies and personal qualities to successfully perform the ASI duties and to support the organization’s safety mission.

FAA concurred with the recommendations in the Aviation Safety Inspector Staffing Standards Study prepared by the National Research Council of the National Academies to create a new staffing model and to expand the model to include the entire safety critical workforce. For most of FY 2008, the staffing model that is inclusive of the entire AVS safety critical workforce is in the discovery phase. Based on current activities including scheduled requirements gathering, AVS will implement the Aircraft Certification inspector workforce component by December 2008 and the Flight Standards inspector workforce component by October 2009. Plans to add other workforce components to the staffing model will be determined once the requirements have been defined and established for other AVS technical workforce occupations.

- Strengthening oversight of the Airman Medical Certification program

The Airman Medical Certification Program is a critical safety program through which the FAA ensures that pilots are medically qualified and fit to pilot aircraft in the National Airspace System. Each year FAA processes approximately 460,000 airman medical certificate applications. After completing FAA training, physicians in private practice are designated as Aviation Medical Examiners (AME). The FAA currently has approximately 4,500 AMEs designated to examine and evaluate airmen to determine whether they meet Title 14 CFR Part 67 airman medical standards. To properly discharge the duties associated with their responsibilities, AMEs must have detailed knowledge and understanding of FAA rules, regulations, policies, and procedures related to pilot medical standards and the certification process.

Due to advancements in medicine, including improved diagnoses and treatments, and the aging pilot population, the medical cases FAA must review have become considerably more complex. As a result, the medical certification of pilots requires more analysis and time. FAA has hired additional personnel, including physicians, program analysts and program assistants, in the Regional Aerospace Medicine Divisions and at the Civil Aeromedical Institute in Oklahoma City, Oklahoma.

FAA took several steps this year to improve its oversight of aviation medical examiners. The Agency:

• Hired a senior program analyst to coordinate development of policies, procedures, and training;
• Hired one additional analyst in each Regional Aerospace Medicine Division;
• Developed new AME oversight policies, procedures and training; and
• Developed a schedule for conducting at least 150 site visits per year.

To address concerns raised in a recent congressional hearing about FAA handling of falsified pilot medical certificates, the Office of Aerospace Medicine revised FAA Form 8500-8, Application for Airmen Medical Certificate, to obtain more information from applicants. Applicants will be asked whether they are receiving disability benefits from the Federal Government or any other sources. If an applicant responds affirmatively to this question, examiners will follow-up with the applicant to ascertain the nature of their disability and determine whether the medical issues related to their disability may disqualify them from being a pilot. FAA began distribution of the form in September 2008.

In April 2008, FAA completed a modification of AME training to emphasize the importance of thoroughness in medical examinations, obtaining good patient histories, and of correlating the findings from those examinations and histories. The issue of falsification will also be addressed at future AME seminars and other AME training.

7. Strengthening the Protection of Information Technology Resources, Including the Critical Air Traffic Control System

- Enhancing air traffic control system security and continuity planning

The National Airspace System of the United States is one of the most complex aviation systems in the world—consisting of thousands of people, procedures, facilities, and equipment—that enable safe and expeditious air travel in the U.S. and over large portions of the world’s oceans. Successful operation of the NAS relies on a system that continuously tracks the position, routes of flight, and movement of aircraft. ATC control activities are geographically distributed among Air Route Traffic Control Centers (ARTCC) which are responsible for many thousands of square miles of airspace. The ARTCCs control aircraft from the time they depart terminal airspace (or in certain cases airports) to the time they arrive at another airport or terminal’s airspace. Centers may also “pick up” aircraft that are already airborne and integrate them into the system. The need for protection of this information processing system cannot be overstated.

The FAA has experience dealing with partial and full outages of the information system at ARTCC. Today, in the event of a loss of a single ARTCC, adjacent Centers can assume some of the workload of the failed ARTCC through procedures and existing automation system capability. To further enhance this “backup” capability, the FAA is working to implement a system security and business continuity solution to ensure recovery of as close to 100 percent of a lost ARTCC’s ability, should an outage of a single ARTCC occur. The approach is to establish a “spare” ARTCC at the FAA’s William J. Hughes Technical Center (WJHTC) to assume control functions in the event of an outage in any one of the Centers. While this approach may slightly reduce the overall performance of the overall NAS, this will enable the FAA to maintain operations and capacity during the outage.

The FAA’s WJHTC serves as the national scientific test facility for the FAA. The Center was assigned the task of conducting a detailed impact analysis to determine how technical services would be affected by the loss of an ARTCC and the resultant activation of a spare ARTCC. The WJHTC was at the forefront of the development of the recover strategy. Tests and demonstrations were conducted throughout 2007 and 2008. At the completion of each test and demonstration, resource concerns were identified and addressed and a business continuity solution developed.

The WJHTC has been outfitted with most of the equipment and connectivity necessary to deliver air traffic services for any of the contiguous U.S. Air Traffic Control Centers. This excess capacity will allow for the rerouting of voice communications and surveillance signals from an affected center to the spare center. Having additional capacity will greatly reduce the time and effort required to reconstruct the air/ground and surveillance communications infrastructure.

In addition to the development of the above business continuity strategy, several activities have taken place to identify and test for unauthorized software changes in fielded systems to assess the integrity of the existing NAS portfolio of systems and equipment. The FAA conducted a review of major systems, beginning with en route and oceanic/offshore operational facilities. The purpose was to determine the prevalence of undocumented system modifications to the national system baselines. Site visits have been conducted at 24 operational facilities collecting data on 16 major en route and oceanic/offshore systems. Analysis determined that there was a less than 10 percent deviation from the documented baselines. None of the modifications were of a malicious nature.

- Testing and strengthening the information system security program at DOT Headquarters

In FY 2008 DOT has undertaken several initiatives to test and strengthen the Departmental information systems security program specifically meeting tougher Federal Government security standards, correcting identified security deficiencies, and securing its IT infrastructure, all at a time of heightened vulnerability.

During FY 2008 the DOT Information Assurance and Privacy Management Office (IAPMO) has advanced and matured the DOT Information Assurance and Privacy Program to increase the reliability, integrity, confidentiality, availability, and non-repudiation of DOT information and information systems.

The Department has ensured that their General Support Systems and Major Applications are properly categorized, certified and accredited in accordance with National Institute of Standards and Technology (NIST) standards. DOT Operating Administrations (OAs) properly categorize their systems for confidentiality, integrity and availability and have worked to provide proper implementation of NIST required minimum security control protections consistent with risk and budget. For reporting and tracking security deficiencies or weaknesses identified during certification reviews, the Department has transitioned to the Cyber Security Asset and Management (CSAM) tool that allows the Department and OAs to prioritize, monitor, manage and remediate the Plan of Action and Milestones (POA&M) for those identified security deficiencies or weaknesses. Additionally, the Department has drafted a POA&M policy and is developing a POA&M guide that can be used with CSAM for an effective remediation framework.

During fiscal year 2008 the Department has implemented Network Admission Control (NAC) processes and procedures to ensure that computers connected to Departmental networks are in compliance with DOT security policies (for remote users). In order for a user to connect to the network, their computer must be running an anti-virus application that is supported by the CISCO NAC and their antivirus definitions must be current.

Additional initiatives that the Department has undertaken during FY 2008 to strengthen the DOT information systems security program include:

• Consolidating all security monitoring and reporting under the Cyber Security Management Center.
• Aligning Departmental information systems security policies to Federal Information Processing Standard 200 and the National Institute of Standards and Technology Special Publication 800-53.
• Aggressively pursuing the implementation of all mandated Office of Management and Budget Information Systems Security Line of Business initiatives.
• Implementing several network hardening initiatives in 5 critical focus areas to improve access control, policy enforcement, and monitoring of DOT information systems.
• Utilizing Secure Elements Class 5 to validate for security configuration compliance for the Federal Desktop Core Configuration requirements.
• Utilizing SPAM and Anti-Virus filtering at all Secure Mail Transfer Protocol gateways.

- Ensuring the timeliness of data recording and protection of personally identifiable information when interfacing with non-Federal systems

In FY 2008 DOT has undertaken initiatives to ensure the protection of Personally Identifiable Information (PII) when interfacing with non-Federal systems. These efforts have focused on the compliance requirements associated with OMB M 07-16, Safeguarding Against and Responding to the Breach of Personally Identifiable Information. DOT policy requires encryption of all PII in transit.

Additionally, the Department is working closely with other agencies to share ideas and resources for managing and protecting PII, increasing user awareness of responsibilities for protecting the Department’s PII data assets, and incorporating Government best practices.

The Department acknowledges that protecting PII when interfacing with non-Federal systems remains a formidable challenge. Work is underway to validate system interconnections and matching agreements to ensure that the proper administrative, technical, and physical safeguards are implemented and provide adequate safeguards to protect the confidentiality, integrity, and availability of PII. The validation process will be completed by July 30, 2009.

- Continuing to enhance oversight of information technology investments

In early FY 2008 DOT finalized both the Earned Value Management (EVM) and IT Program Rebaselining policies. These comprehensive policies will allow DOT to benefit from additional management oversight across the IT investment portfolio since this guidance provides a framework for comprehensive planning, proper baseline maintenance, and earned value analysis which combined provide a formula for increased visibility into individual investment performance and enhances overall portfolio management.

In addition, DOT has strengthened its review of monthly performance data associated with the Department’s major IT investments. This enhanced analysis provides additional management oversight specific to key data—such as variance analysis (actual vs. planned), performance trend analysis, performance forecasting, and corrective action planning—which lead to earlier recognition of potential issues making them easier, and often less costly, to correct.

In addition, DOT piloted a Health of Investments (HOI) reporting and analysis tool to provide greater transparency and a common set of criteria for all major IT investments. HOI is designed to rank investments based on key portfolio and program management factors thereby assigning an overall health, or risk indicator.

DOT has focused in FY 2008 on improving IT governance both at the Department and Operating Administration (OA) level. Business cases for IT investments are reviewed by the applicable OA Investment Review Board (OA IRB). The Department IRB reconvened in April and is scheduled to meet on a quarterly basis. The CIO Council continues to meet on a monthly basis, while the Capital Planning and Investment Control (CPIC) subcommittee generally meets bi-monthly. The collective work of these governance boards helps to strengthen oversight of IT investments across DOT.

There is significant work underway to achieve full EVM implementation, based on the American National Standards Institute/Electronic Industries Association (ANSI/EIA) 748 compliance (across 32 program management criteria), for the Department by December 2009. A DOT EVM Plan of Action and Milestones is in place and is updated quarterly. DOT is also meeting individually with each OA to discuss EVM implementation progress within their OA. These discussions are then brought to the EVM Working Group, which meets monthly, to identify best practices and share lessons learned. In addition, the DOT CIO requires a quarterly EVM self-assessment from each OA CIO. Supplemental policies addressing operational analysis, EVM baseline planning, Baseline Change Control, and integrated baseline reviews are in various stages of development.

8. Management Challenge: Managing Acquisition and Contract Operations More Effectively to Obtain Quality Goods and Services at Reasonable Prices

- Increasing incurred-cost audits of procurement contracts to reduce unallowable charges

Acquisition Policy Letter (APL) 2008-06 was issued on April 24, 2008 by the Office of the Senior Procurement Executive (OSPE) for the purpose of establishing a Departmental plan for assuring incurred-cost audits are obtained and audit report recommendations are resolved in a timely manner. The policy letter requires Operating Administration (OA) Chief Contracting Officers to (1) take action to revise their current FY 2008 contract audit plan to identify planned contract audits not implemented during FY 2007 or FY 2008 and included in FY 2009 audit plans and to resolve any pending audit finding with questioned costs by November 20, 2008. They are also required to update and resolve the list of DCAA-reported unresolved questioned costs that are more than 6 months old as of October 2006 and report any costs recovered to the OSPE. Additionally, quarterly status reports are to be submitted to address audit hours used, resolved and unresolved questioned costs, and whether justifications have been placed in the contract files where audits were not requested.

The OSPE continues to work with DCAA, the Operating Administrations, and the Office of Inspector General to find better methods for obtaining contract audit services.

FAA was given separate contract authority in 1996 and therefore the authority to implement its own procurement policies. The agency, however, pursues acquisition policies similar to OST’s on many issues, including this one. FAA continues to emphasize incurred cost audits through a centralized audit program. For FY 2008, the Agency provided $1.6 million to fund a central interagency agreement with the Defense Contract Audit Agency (DCAA) to order incurred cost type and other required audits for procurement contracts. An interagency agreement was executed in February 2008.

FAA has also established an FY 2008 performance goal to require audits of cost-reimbursable contracts of $100 million or more in value. The Contracting Oversight Team, using the PRISM database, identified 86 cost-reimbursable type contracts each with a total estimated potential value of $100 million or more. For FY 2008, FAA issued audit requests for 43 contracts, deferred audits for 15 contracts per DCAA planning, and determined audits were not required for 28 contracts, accounting for 86 contracts. Overall, FAA has issued audit requests for 155 contracts including incurred and other type audits. The Contracting Oversight Team, under the Acquisition Policy and Contracting Office, manages the central DCAA audit process and issues audit requests, maintains the audit database, and acts as a liaison with DCAA Headquarters and Branch offices.

The FAA also utilizes the National Acquisition Evaluation Program (NAEP) which provides oversight and evaluation of FAA acquisitions management practices. In FY 2008, the NAEP conducted reviews for the Southern, Southwest, Northwest, and Eastern Regional Contracts Offices, and two Headquarters Contracts Groups. The NAEP reviews include an evaluation of the appropriate use of DCAA audits for procurement contracts.

- Developing strategies for the future acquisition workforce

The Acquisition Workforce Career Development Program policy issued in November 2006 provides the framework for implementing OFPP Policy Letter 05-01 and establishes procedures to be used by DOT Operating Administrations in implementing this program. The Acquisition Workforce Career Development Program is applicable to those positions and career fields defined as the acquisition workforce. The DOT acquisition workforce is defined to include all positions in the General Schedule Contracting Series (GS-1102); all warranted Contracting Officers regardless of General Schedule series with authority to obligate funds above the micro-purchase threshold; all positions in the GS-1105 Purchasing Series; Contracting Officer Technical Representatives (COTRs), or equivalent positions; Project and Program Managers, as identified by the Chief Acquisition Officer (CAO); and other positions designated by the CAO as performing significant acquisition-related functions.

FAA employees are exempt from this program under P.L. 104-50. However, FAA will provide its affected employees with substantially similar training and education requirements to maintain mobility.

During 2007, DOT contracting employees participated in the government-wide Contracting Workforce Competencies Survey sponsored by the Federal Acquisition Institute. The results of the survey will be used to ensure that appropriate development opportunities are provided to the contracting workforce. A follow-up survey to include Program and Project Managers and COTRs planned for August 2008 should add to the information used in making strategic human capital decisions regarding the acquisition workforce.

The Acquisition Career Management Information System (ACMIS) is the government-wide database containing information on the Federal acquisition workforce in civilian agencies and is used to identify training needs and to support strategic human capital plans and decisions. The actual size of DOT’s Acquisition Workforce is expected to become easier to gauge with the inclusion of key acquisition roles (Program and Project Managers and COTRs) into ACMIS. The challenge is that these positions do not comprise one or more specific government position classification series. These roles may be performed by professionals in many series and are frequently time-limited. That is, individuals may take on acquisition management responsibilities related to their normal duties for months or years for a specific initiative and terminate acquisition duties when the initiative is completed or the professional moves to a new position. For these and other reasons, DOT is currently refining the identification of such positions. By the end of calendar 2008, more authoritative data on these acquisition professionals should be available.

- Fostering high ethical standards throughout the Department and its contracting programs to maintain the public trust

This year, the Department instituted an annual training program for acquisition and grants management personnel that concentrates specifically on ethics and contracting matters. This training supplements required annual ethics training. During June and July 2008, initial training sessions were held in the Office of the Secretary (OST). Also, training sessions were provided for senior management in September 2008. In future years, annual training will include both live sessions as well as written and on-line training.

Personnel from the Operating Administrations who are tasked with training their own acquisition and financial assistance management staff attended ‘train-the trainer’ sessions sponsored by OST in June 2008. These individuals are conducting training sessions throughout their own organizations, including field organizations, with the goal of completing initial training by the end of calendar year 2008.

The FAA uses an integrated and comprehensive approach in the development and delivery of procurement ethics training. Training modules for 2008 included: Getting What you Pay for on Services Contracts; Organizational Conflicts of Interest; Procurement Integrity; and Personal Services. Current laws, regulations, and case studies of noncompliance are highlighted.

Live training sessions have been conducted at FAA Headquarters and the FAA Centers. DVDs of the presentations with voice over discussion will be produced for those unable to attend sessions in person. Close to 100 percent of Contracting Officers, Contract Specialists, Contracting Officers Technical Representatives (COTRs) and many other employees that deal with acquisitions have received training provided by FAA’s Office of General Counsel. In total, approximately 2,100 acquisition and program personnel were trained.

The purpose of this training is to provide continuing reinforcement of ethics and contracting standards that promote the integrity of acquisition and grants management processes throughout DOT. The target audience for this training includes contracting officers, contracting officer technical representatives, program and project managers, procurement and other acquisition specialists, personnel who participate in cooperative agreement and grant matters, legal support personnel, and personnel who supervise acquisition matters.

- Enhancing oversight on Federal-Aid Highway construction projects to prevent abuse in contractor quality control programs

FHWA conducts assessments to better identify existing gaps that have the potential to introduce risk into the acceptance and payment process for construction and materials. Assessments completed to date include 22 detailed state highway program reviews, a national program review of quality assurance programs and a nationwide assessment to quantify the state of quality assurance systems which has been used to establish a benchmark to track our efforts to improve in this area. In addition, FHWA sponsors training through the National Highway Institute and the FHWA Resource Center. These courses are delivered across the U.S. and focused on elements of effective quality assurance specifications. FHWA also developed advanced tools that will allow states to better evaluate and manage risks within their quality assurance programs.

9. Management Challenge: Reforming Intercity Passenger Rail

- Improving Amtrak’s cost-effectiveness to sustain its financial progress

At the urging of the FRA, Amtrak has taken many steps to address these areas over the past few years. As a result of a combination of programs focusing on diverse aspects of corporate operations and its intensive efforts at revenue management—the company is relatively more stable financially that it was five years ago. Nevertheless, Amtrak’s reliance on public subsidies has grown over time, with a Federal appropriation of $1.325 billion in 2008.

Three measures sum up the extent of Amtrak’s relative progress. First, between 2002 and 2007, Amtrak’s passenger-miles per operating employee increased by 22 percent, far outstripping the similar productivity measure for the Class I freight railroads (revenue ton-miles per employee up 10 percent in the same period). Second, and also between 2002 and 2007, the net cash used in operating activities per passenger mile decreased by 27 percent on a constant dollar basis. As Amtrak’s essential purpose is the provision of intercity passenger transportation, the corporate cash flow per passenger-mile is the purest accounting measure of the net year-by-year efficiency.

Increased FRA Oversight

FRA in recent years has markedly expanded the capabilities of its Office of Passenger and Freight Programs, which oversees Amtrak activities, related to the $1.3 billion in grant funds that the Department awards Amtrak annually. FRA reconstituted that office, recruited a new Director, established clearer lines of authority through two passenger divisions—the Intercity Passenger Rail Analysis Division and the Program Implementation Division—and augmented its staff in all disciplines. These improvements have enabled the office to conduct comprehensive, multi-disciplinary reviews of Amtrak Management’s proposals and requests. It has also improved FRA’s understanding of the details of Amtrak’s operational and corporate performance through a number of initiatives, such as: (1) specification and analysis of the most detailed on-time performance data ever provided by Amtrak to the FRA, (2) new concepts for the presentation and interpretation of traffic, revenue, expense, and corporate result data, and (3) a new, straightforward definition of ‘State of Good Repair’ that provides a benchmark for Federal/State/regional long-term planning of investments in Amtrak’s most important asset, the Northeast Corridor main line.

In addition, the FRA conducts quarterly reviews of Amtrak’s capital program, with civil and mechanical engineers scrutinizing infrastructure and equipment programs; as well as reviews of reprogramming and advance purchase proposals, in an effort to improve efficiency and cost-effectiveness. The FY 2008 Appropriations Act provided funding to FRA for intensified oversight of the capital programs. To this end, FRA is currently developing a statement of work for detailed engineering review of salient topics in infrastructure investment.

In the crucial area of financial reporting and management practices, FRA, the Department’s Volpe National Transportation Systems Center (Volpe Center), and Amtrak are jointly developing a new methodology for calculating avoidable and fully-allocated costs by route. This methodology will underpin a substantially upgraded route costing model that Amtrak can implement in FY 2009. Building on a meticulously detailed review of Amtrak’s route-by-route cost accounting systems, the new model will significantly improve the transparency and accuracy of Amtrak’s financial reporting by route and business line. It will also provide valuable input to possible future strategic planning and network review processes that Amtrak or the Department may undertake, and will help to refine Amtrak’s ability to negotiate cost-reimbursement contracts with States for the provision of passenger services in keeping with the Administration’s Principles.¹

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1. These principles, announced by former Transportation Secretary Norman Y. Mineta in 2002, are as follows:
   1. Establish a long-term partnership between States and the Federal Government to support intercity passenger rail;
   2. Require that Amtrak transition to a pure operating company;
   3. Create a system driven by sound economics;
   4. Introduce carefully managed competition to provide higher quality rail services at reasonable prices; and
   5. Create an effective public partnership, after a reasonable transition, to manage the capital assets of the Northeast Corridor.

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- Overcoming challenges to improving Amtrak’s on-time performance

The FRA has taken proactive steps to improve Amtrak’s on-time performance (OTP). These steps are exhaustively described in FRA’s three OTP reports to Congress which are available at http://www.fra.dot.gov/us/content/1996. Some report highlights include:

• As the Secretary of Transportation’s representative on the Amtrak Board, FRA Administrator Joseph H. Boardman has repeatedly emphasized to the Board that OTP is essential to the Corporation’s service quality, public image, traffic and revenue levels, operating economy, and financial performance.
• Administrator Boardman has added Amtrak OTP to the regular agenda of his annual safety meetings with senior executives from each of the Class I Railroads. At those meetings, the Administrator emphasizes the criticality of the issue and FRA’s commitment to take a more active role in monitoring progress.
• On April 16, 2008, Secretary of Transportation Mary E. Peters and Administrator Boardman held a meeting among the Class I railroads’ top executives, the Amtrak CEO, and Amtrak’s Board of Directors in Pueblo, Colorado. At this first-ever executive level meeting, Secretary Peters specifically requested that Amtrak and the Class Is identify one Amtrak route on each major host railroad to develop an action plan (Performance Improvement Plan or PIP) for removing delays and improving OTP. Amtrak and the freight railroads have designated specific routes for PIPs and begun the process of OTP improvement.
• As a part of the FY 2007 Grant Agreement with Amtrak, FRA required Amtrak to submit a Southeast Corridor Performance Improvement Plan to identify strategies that would enable Amtrak to reach an OTP target of over 75 percent for the Auto Train, Silver Service, Palmetto, Carolinian, and Piedmont. Amtrak and CSX presented the Southeast Corridor Performance Improvement Plan on November 8, 2007. Results thus far are encouraging. In FY 2008, CSX freight train interference delays affecting the Southeast Corridor long distance trains have fallen to about three minutes per 100 train miles. Furthermore, the Auto Train’s endpoint OTP is up to 80.5 percent from 15 percent prior to the PIP, and the OTP of other long distance trains on this corridor has increased to 53.8 percent from 33 percent the previous year.
• In reporting to Congress on OTP, FRA thoroughly assessed alternative measures of performance and developed specific route-by-route goals for OTP that set a more stringent standard than that advanced by Amtrak itself.

- Reauthorizing Amtrak to facilitate reform

While Congress has not implemented the Administration’s full proposal for reforming intercity passenger rail service in the United States, one of the key principles has been incorporated in recent law. Specifically, the FY 2008 Appropriations Act included $30 million for a Federal / State Capital program to support the needs of intercity passenger rail service. The FY 2009 President’s Budget included funding for this program.

This new grant program recognizes that most publicly supported transportation in the U.S. is undertaken through a partnership between the Federal Government and the States. This model, which has worked well for generations for highways and transit and airports, places the States, and in certain cases their subdivisions, at the forefront of planning and decision-making. States best understand their mobility needs and connectivity requirements through statewide and metropolitan area intermodal and multimodal transportation planning funded, in part, by the U.S. Department of Transportation. (Integration of the improvements under this program with statewide transportation planning was required by appropriations language.)

FRA expects that this model will also work for intercity passenger rail. Several States have chosen to invest in intercity passenger rail service provided by Amtrak as part of strategies to meet their passenger mobility needs. Between 1996 and 2006, ridership on intercity passenger rail routes that benefit from State support grew by 88 percent. Over that same time period, ridership on Amtrak routes not supported by States increased by only 17 percent. State involvement in planning and decision-making for intercity passenger rail service identifies where mobility requirements justify public investment. An excellent example can be found in Washington State, which has invested in intercity passenger rail from Portland, OR, through Seattle, to Vancouver, B.C. in order to relieve highway travel on the congested I-5 corridor. Similarly, the state of Illinois has made financial commitments that have effectively doubled the number of State-supported trains operated by Amtrak on three routes.

Past experience shows active State engagement in planning and decision-making helps ensure that infrastructure components, such as stations, provide connectivity to other forms of transportation, which support intermodalism within the State. For example, in North Carolina, the State has undertaken the redevelopment of its intercity passenger rail stations and transformed them into multi-modal transportation centers serving the mobility needs of the surrounding communities.

In discussions with interested States, FRA has found that the greatest single impediment to implementing intercity passenger rail development is the lack of a Federal/State partnership, similar to that which exists for highways and transit, for investing in the capital needs of intercity passenger rail. This partnership will play a critical role in the future evolution of this important mode of transportation.