Wednesday, August 03, 2005
A Damning Report – The Incredible Disappearing Savings
It is conventional contracting wisdom that actual savings never reach projections. Contracting Flight Service to Lockheed Martin was supposed to result in savings of $2.2 billion over ten years. But within a couple months, that figure fell to $1.7 billion. The GAO has recently issued a report that reduces the savings even further to $1.2 billion.
Projected savings from the contract has fallen by over 40%, even before the contract has begun. And the FAA has yet to add the expected additional services to the contract.
You can read the full report here, but allow us to point out some highlights:
- 80% of the savings won’t accrue until 2011 and beyond. This means that only $241 million in savings is going to be realized in the first five years of the contract, about $48 million per year.
- Two reports in 1997 indicated that $80 million in annual savings could have resulted from a consolidation of the nine regional offices. The FAA never acted on these recommendations (although a few changes have begun).
Here we have support for what controllers have been saying all along; when it comes to what is wrong with the current ATC system, it’s not so much the bottom of the organization where the service is provided to the public, but mid- and upper-level management structures. Yet in very Dilbert-like fashion, the bottom is where the FAA has chosen to start fixing things.
The report has other disappointing words for Mr. Boyer of the AOPA, who seems to think that the FSS contract is a significant step in producing the savings needed to protect his pet FAA projects and agenda, current and proposed, from being examined for ‘efficiencies.’ Particularly, keeping the fee-for-service concept deep under lock and key. According to the report, the FSS contract to LM and other lesser measures to date “…do little to constrain cost growth and materially improve [FAA Air Traffic] operations funding outlook over the next 5 years.”
Should the report become a roadmap for ATC, the implications are immense; for the FAA to reach a financially responsible position, action will have to be taken that could materially and negatively impact general aviation. Such adoption seems more likely than similar reports that emerged in the past since we now have in place an FAA executive team that seems most willing to move in such directions.
We will continue to peruse and revisit the report, posting on additional points of interest.
Projected savings from the contract has fallen by over 40%, even before the contract has begun. And the FAA has yet to add the expected additional services to the contract.
You can read the full report here, but allow us to point out some highlights:
- 80% of the savings won’t accrue until 2011 and beyond. This means that only $241 million in savings is going to be realized in the first five years of the contract, about $48 million per year.
- Two reports in 1997 indicated that $80 million in annual savings could have resulted from a consolidation of the nine regional offices. The FAA never acted on these recommendations (although a few changes have begun).
Here we have support for what controllers have been saying all along; when it comes to what is wrong with the current ATC system, it’s not so much the bottom of the organization where the service is provided to the public, but mid- and upper-level management structures. Yet in very Dilbert-like fashion, the bottom is where the FAA has chosen to start fixing things.
The report has other disappointing words for Mr. Boyer of the AOPA, who seems to think that the FSS contract is a significant step in producing the savings needed to protect his pet FAA projects and agenda, current and proposed, from being examined for ‘efficiencies.’ Particularly, keeping the fee-for-service concept deep under lock and key. According to the report, the FSS contract to LM and other lesser measures to date “…do little to constrain cost growth and materially improve [FAA Air Traffic] operations funding outlook over the next 5 years.”
Should the report become a roadmap for ATC, the implications are immense; for the FAA to reach a financially responsible position, action will have to be taken that could materially and negatively impact general aviation. Such adoption seems more likely than similar reports that emerged in the past since we now have in place an FAA executive team that seems most willing to move in such directions.
We will continue to peruse and revisit the report, posting on additional points of interest.
# posted by Skywise @ 9:12 PM 
