TSA faces $3 billion funding shortfall

The Transportation Security Administration is mismanaging its contracts and faces a $3 billion funding shortfall over the next two years, according the Department of Transportation's inspector general.

Testifying before the Senate Transportation subcommittee on aviation, Inspector General Kenneth Mead said Wednesday that the agency's operating costs are expected to exceed the passenger security fees for fiscal 2003 and 2004. The agency's budget will require a large infusion of cash from the general fund.

"This comes at a time when the General Fund is already strained to pay for vastly increased fiscal needs throughout the government... These costs are hitting at the very time much of the industry is in extreme financial distress," Mead said.

TSA's effort to put federal screeners at every U.S. airport exceeded its original contract by nearly $600 million.

The scope of work performed by prime contractor Pearson Government Solutions expanded significantly as Pearson and the agency struggled to meet a congressional mandate to federalize airport screeners, who check and monitor passengers and baggage, in less than nine months, TSA and Pearson officials said.

Mead said that the TSA contract, which called for Pearson to recruit and hire federal airport screeners from March to December 2002, had an initial price tag of $104 million. But the contract reached an estimated $700 million by the time it expired - a 573 percent increase.

Mead's testimony expanded upon information contained in a Jan. 21 report report issued by his office

The report, "DoT's Top Management Challenges," said the new agency "faces significant challenges in providing effective security in a way that avoids waste of taxpayer dollars." The report cites the Pearson contract as an example of a significant cost growth.

Mead testified that the Defense Contract Audit Agency has questioned more than $124 million out of almost $620 million audited, and that the TSA had reviewed a Pearson subcontractor and determined that out of $18 million in expenses, "between $6 million and $9 million ... appear to be attributed to wasteful and abusive spending practices."

He said questions also have been raised regarding the Boeing Co.'s $1.37 billion contract to install explosives detection systems in 438 airports around the country.

Of the $700 million cost incurred hiring airport screeners, roughly half went to Pearson and half to its subcontractors, Pearson officials said.

Before the hearing, officials with both TSA and Pearson defended their performance, saying the number of employees the agency needed to hire and the amount of work grew enormously beyond what was anticipated.

Congress, which passed the law mandating a federal screener work force in November 2001, gave the agency little time to plan the first-of-its-kind effort before it awarded the contract.

"There was no blueprint for this," said Mac Curtis, the president of Pearson. "We had immovable deadlines."

Pearson Government Solutions, formerly known as NCS Pearson, is a subsidiary of Pearson Inc., a provider of applications, services and technologies for education, commercial and government customers based in Eden Prairie, Minn. Pearson Inc. is part of Pearson plc, the British media and education company.

The TSA award was seen as a real coup for the company, which previously had a low profile among government information technology providers.

Curtis said the project scope changed dramatically after Pearson won the contract in March 2001. For instance, the company had proposed establishing 10 regional assessment centers to perform applicant screening. TSA radically changed that, telling Pearson to set up more than 150 localized centers across the country.

Also, the screener work force grew from an estimated 30,000 people when the hiring began to almost 60,000 by the Nov. 19 deadline.

Curtis also said that TSA, starting from scratch as a new agency in December 2001, successfully hired the federal screeners and reconfigured airports for heightened security as required by Congress.

"People are going to say, 'What the hell happened here?'" he said. "But something that's gotten lost now is that [TSA] met its first two mandates; 12 months ago there were 13 employees in TSA."

Brian Turmail, a TSA spokesman, said as the project went on, the agency learned several lessons that changed the scope of the work.

"When we selected Pearson, we were working on a very rough estimate of the number of employees we would need," he said. "The original tasking was for 30,000 screeners over a 32-week period. [But] we hired more than 56,000 screeners, and the time was significantly compressed" to about 14 weeks.

Other changes cropped up that affected the project, Turmail said. For instance, the original contract required a call center to address questions, but it was limited in scope and hours of operation.

"The call center ultimately had 2,200 [operators] on call 24x7 ... and they were very, very busy," he said. "There were more than 2 million applicants, and [it seems as if] they all called with a question."

Chip Mather, co-founder of Acquisition Solutions Inc., Chantilly, Va., said it's easy in hindsight to overlook the agency's achievement.

"You have to give a nod to the fact that they had a monumental task," he said. Acquisition Solutions, a procurement consulting company, helped TSA craft the enterprisewide infrastructure contract awarded to Unisys Corp. in August. "When I worked with them on the [Information Technology Managed Services] vehicle, they were the hardest-working civil servants I ever worked with," Mather said.

At its creation, TSA was given significant acquisition flexibility that other federal agencies don't have, Mather said.

Curtis also rejected complaints, reported Jan. 27 in Washington Technology, that Pearson was slow in paying subcontractors on the project. One subcontractor, Gargoyle Protection Consulting Group LLC, alleged that Pearson had offered only partial payment for its work.

Curtis said Pearson paid all subcontractor invoices and expenses that were approved under government procurement rules and covered by the subcontracts. He showed Washington Technology binders filled with copies of receipts submitted by Gargoyle, which had been marked up during internal review to identify disallowed expenses, including upgrades to car rentals, bar bills, family members at meals, even $100-plus laundry bills.

Attempts to contact Gargoyle President Scott McCulloch were unsuccessful.

The Defense Contract Audit Agency is conducting an audit of the contract, Curtis said, and he is confident it will find Pearson correctly handled payments.