GAO challenges cost of FAA STARS program

The General Accounting Office is questioning the reliability of the Federal Aviation Administration's life-cycle cost estimate for STARS, the Standard Terminal Automation Replacement System, which is intended to replace some outdated air traffic control equipment.

When it was awarded to Raytheon Co. in September 1996, the estimated value of the STARS contract was $952 million, according to Input Inc., a Chantilly, Va. market research firm.

The FAA now estimates the remaining program costs to total about $2.54 billion from fiscal 2004 through 2030, the GAO report said, including $153 million annually in 2004 through 2008 to finish development and deployment.

But the new price tag is based on Raytheon's proposals and projects, which include the cost of major modifications to the project. The agency itself "has not yet independently analyzed these proposals and projects as its guidance directs and therefore does not know whether the development cost estimate of $153 million is reliable," according to the report.

The government watchdog agency also criticized the FAA for stating these cost estimates as point values, rather than ranges. As a result, "the estimates may imply more certainty than is appropriate," the report said. "Moreover ... the use of point values limits disclosure of the program's investment risks."

The GAO recommended that the FAA establish a performance measurement baseline, which would include negotiating all authorized, unpriced work within three months; conduct an integrated baseline review of any major contract modifications within six months; and prepare its own rigorous life-cycle cost estimate, including a risk assessment.

Rep. Ellen Tauscher, D-Calif., who initiated GAO report, also asked whether the program falls under the termination provisions in public law as an acquisition that is more than 50 percent over its cost goal or behind schedule. The GAO concluded that STARS cannot be terminated under the law's provisions because the acquisition was approved about six months before, and the contract signed one month before the law was enacted.

Click here to link to a PDF of the GAO report