A just-released report by the Department of Transportation’s Inspector General predicted that Lockheed Martin’s aggressive consolidation schedule could lead to problems.
The report is the result of an audit undertaken to see if the FAA had implemented effective controls to transition FSS to Lockheed Martin, achieve anticipated savings, and ensure that the operational needs of users continue to be met.
The contract, worth about $1.8 billion, is one of the largest non-defense outsourcings of services by the federal government. FAA estimates initially pegged the savings at $2.2 billion over the 10-year life of the agreement. That figure has since been downsized to $1.7 billion.
The savings are expected to be seen through the consolidation of 58 FSS into three hub facilities and 16 stand-alone facilities; deploying FS21, a single, nationwide operating system that will allow flight service specialists to file flight plans, access aeronautical and weather information, and provide other information to pilots for any airport in the country; and reducing staff from approximately 1,900 to about 1,000 employees.
The audit found that the FAA implemented effective controls over the initial transition of FSS to contract operations. “These controls include contractual performance measures that require the contractor to achieve acceptable levels of operational performance and service as well as internal mechanisms that oversee the operational and financial aspects of the program,” according to the report.
It is uncertain, however, if the controls put in place by FAA will be sufficient to ensure that anticipated savings are achieved during the next and most critical phase of the transition. “In February, the contractor began actions to complete, test, and implement FS21 and to consolidate the existing 58 sites into three hub and 16 refurbished locations — all within a six-month time frame. There are significant, inherent risks associated with this phase of the transition, and any slips in that schedule could affect the anticipated savings,” the IG’s report said.
The consolidation depends upon the contractor completing and deploying FS21, but Lockheed Martin has already experienced delays in implementing it, according to the report. According to FAA officials, the current deployment schedule for FS21 already includes a 10-month delay that Lockheed Martin experienced during development, and they believe an additional six-week delay is possible. “Further delays in implementing FS21 could have a cascading effect on consolidation plans,” the report states.
Schedule delays could expose the contractor, FAA — or both — to additional costs, such as extending existing leases at some locations and maintaining legacy systems. While the ultimate responsibility for delays will depend upon the party responsible for the delay, it is likely that FAA would bear some portion of the total costs, which would impact the overall anticipated savings.
The FAA is already facing possible reductions to savings as Lockheed Martin is requesting nearly $177 million in equitable adjustments to the contract. Most of that adjustment ($147 million) is based on the company’s claim that it was not provided with the correct labor rates when it submitted its bid.
Customer service also could suffer.
“We also found that better controls are needed to ensure that the operational needs of users continue to be met. Specifically, we found that staffing levels at outsourced facilities were lower than what the contractor anticipated, resulting in some users being routed to adjacent facilities that did not have adequate local knowledge needed by those users.”
For example, one flight service facility supervisor noted that calls at the San Diego FSS were off-loaded last summer to the Albuquerque FSS due to staff shortages. However, this overloaded the Albuquerque facility and required Albuquerque’s calls to be sent to the Fort Worth FSS and Fort Worth’s calls to be transferred to facilities in the east.
“While we found that call off-loading provides users with flight services in a timelier manner, some users noted that they do not always receive adequate local knowledge when they are off-loaded to an adjacent facility,” the IG’s report states. “This issue should be corrected when the consolidation is complete and FS21 is implemented at all continuing and hub locations.
“However, we are concerned that any delays in the next phase of transition could cause further degradation in services as facilities scheduled to close remain open longer than planned and call off-loading is used more and more often as a stop-gap measure to short staffing,” it continues. “This could be even more pronounced if attrition among flight specialists continues to increase. In our opinion, Lockheed Martin needs to develop contingency plans to ensure that services meet user needs should there be delays in consolidation during the next phase of the transition. Those plans should be reviewed by FAA for feasibility.”
FAA also needs better controls for monitoring contractor staffing and plans for ensuring that flight service specialists are properly trained and certified to meet user demand, according to the report.
Finally, the FAA does not have a system for monitoring customer service that is independent of Lockheed Martin, according to the report. “Such a system is important to independently verify the quality and level of services provided during this transition and after consolidation,” it states.
One step the FAA has taken is to require Lockheed Martin to establish contingency plans to maintain services should there be delays in consolidation during the next phase of the transition and establish a website link (independent of the contractor) for monitoring customer service.
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